Healthcare policy in Tennessee: 2011 Review

August 5, 2011 By Tom Lee
FBT Nashville Office Newsletter

Tennessee’s healthcare spending—more than $3.7 billion in state dollars annually—comprises nearly 40 percent of all state general fund expenditures, more than any other category except education.

That extraordinary level of government investment has two important implications for the entire industry.  First, the state is a material payor for healthcare services such as Medicaid and state employee benefits.  Second, the level of government expenditure, combined with the state’s regulatory power, shapes the remainder of the proprietary market.

The powerful one-two punch makes knowledge of Tennessee healthcare policy developments essential for anyone operating in Tennessee’s healthcare market.  And with that in mind, here are the important healthcare-related developments from the 2011 session of the General Assembly.

Medicaid funding of hospital services.  Medicaid services for Tennessee’s aged, blind, disabled, and poor are financed on a 70/30 federal-to-state ratio; for every dollar the state spends, the federal government pitches in $2.10.  With healthcare costs rising and state collections down, the state’s hospitals joined forces to ask legislators to pass a one-time assessment of hospital revenues, allowing the state to draw down additional federal funding for Medicaid patients.  2011 marked the second year hospitals asked lawmakers to pass the one-time assessment, leaving open a political—and financial—question:  How many more years can legislators pass a one-time assessment?

Tort reform.  While the subject is fully treated elsewhere in this issue, two particular changes bearing on the healthcare market merit further explanation.  Nursing home operators achieved a long-time public policy goal by convincing lawmakers to subject negligence claims against long-term care providers to the same standards as traditional malpractice claims against hospitals and physicians, which require pre-suit screening and expert testimony.  Mental health providers also should note that the non-economic damages caps for pain and suffering do not apply to expenses actually incurred for mental health treatment. 

Pain management clinics.  Pain management clinics have become increasingly popular in Tennessee—now, perhaps too much so.  In response to public claims of addiction and over-prescription of pain medications, the Legislature acted to bring such clinics under tighter state regulation.  Clinics now must be licensed by the Tennessee Board of Medical Examiners (in addition to the individual physician’s licensure), and will be subject to new regulations, currently being drafted by the Department of Health.

Covenants not to compete.  In response to recent decisions by the Tennessee Court of Appeals, the Legislature applied the time limits of the physician non-competition statute to employment contracts signed by nonphysician healthcare providers.  The effect will be to limit most noncompete agreements with nurses, therapists, physician assistants, etc., to a one-year maximum.

If you have questions about healthcare public policy in Tennessee, please contact Tom Lee at 615-251-5575 or