A Closer Look at the 2021 Legislative Session in Tennessee

Morgan:  Welcome to PointByPoint. This is Waller's Chief Business Development Officer and the host of the podcast, Morgan Ribeiro. On today's episode, I am joined by Catie Lane Bailey, an attorney and policy advisor on Waller's government relations team. For a bit of background. Catie Lane is a registered lobbyist and represents clients on legislative and public policy matters before the Tennessee General Assembly, local governments and various state and local agencies.

We've recently wrapped up the 2021 legislative session in Tennessee, and I've asked Catie Lane to join me today to inform our listeners who live and work in the state about the big changes that we should all be aware of and watching.

Catie Lane:  Thanks for having me.

Morgan:  So while the legislature championed several of its own initiatives, a key focus of the 2021 legislative session centered on passing Gov. Bill Lee's legislative agenda, which was outlined in his State of the State address back in February. And his 2021 key administration bills focus on reducing crime, supporting strong families and getting Tennessee's economy back up to speed particularly in the wake of the COVID pandemic. So can you tell us more specifically about the legislation that was passed to really target his key goals and his focus areas?

Catie Lane:  Sure. So in the State of the State, the Governor prioritized his initiatives in these categories: supporting Tennessee families, serving Tennessee heroes, strengthening Tennessee businesses and workforce, building safe neighborhoods and addressing foreign influence on college campuses.

In each of those categories, you had the Foster Youth Reach Act, which provides higher education support for youths aging out of the foster care system, through a pilot outreach program. Temporary Assistance for Needy Families proposal, which supports families in need by reforming the TANF program to promote economic mobility and improved outcomes for recipients.

He proposed and passed the STRONG Act Expansion, which expands tuition reimbursement to include technical certificates and Master's programs. This is for members of the armed services. The National Guard Reemployment Act ensures Tennessee National Guard members retain employment after returning from active state duty.

And then the volunteer firefighter reimbursement, which provides $600 payments to volunteer firefighters who complete 40 hours of in-service training.

 Under strengthening Tennessee businesses and workforce, his administration proposed and passed the Tennessee Apprenticeship Act, which expands access and improves the quality of apprenticeship programs in Tennessee by registering apprenticeships through the state, rather than the federal government.

There was the Business Supports and Taxation, which permits the deduction of state business relief payments from the state's franchise and excise tax.

And then there was the Entertainment Tax Credit, which creates a sales and use tax exemption and a franchise and excise tax credit for film production in Tennessee.

Under building safe neighborhoods, the administration introduced and passed Constitutional Carry, which allows law-abiding citizens to carry a handgun without a permit while enhancing penalties for firearm theft.

 There was the Re-entry for Success Act, which improves outcomes for formerly incarcerated individuals by an increase in transparency in the parole process and enhancing practices that support success post-release and there was the Alternatives to Incarceration, which expands treatment services and community-based supervision for offenders as alternatives to incarceration.

Finally, there was the Transparency in Foreign Investment Act, which requires greater transparency. For any foreign investment activity on college campuses.

One thing I did want to mention was the special legislative session that addressed urgent issues facing Tennessee students and teachers as a result of COVID-19. Specifically, the special legislative session passed legislation on accountability, learning loss, literacy and teacher pay. 

Morgan:  Great,  busy legislative session and the General Assembly also passed a $ 42.6 billion balanced debt-free budget, the largest in Tennessee's state history.

I know there are a lot of line items in that budget. Are there, specific or larger chunks of dollars that are allocated to certain areas?  Where will that funding go across the state?

Catie Lane:  If we were to go through every line item of the state budget, we would be here for probably the duration of the hour. So I'm just going to hit a couple of high points that I think are really significant and moving our state forward.

$71 million went to fully fund the state share of the BEP for K-12 education and for those who are not familiar, the BEP is actually the state's K-12 education funding plan.

$250 million went to a trust fund to assist K-12 families who are facing significant mental health issues in the wake of COVID-19, $100 million for local government infrastructure grants, $24 million for rural opportunity site grants, $ 37.9 million to fully fund Tenncare growth.

$100 million, one-time increase in broadband deployment to underserved or unserved areas through grants and tax credits and $21.1 million non-recurring to the rural development fund to assist with site development, community asset improvements, marketing, strategic planning, downtown revitalization and technical assistance.

Morgan:  As you mentioned earlier, one of Governor Lee's top priorities since taking office has been criminal justice reform centered on improving outcomes for formerly incarcerated individuals. Can you tell us more about that?

Catie Lane:  It's something he campaigned on and it's something that has been on his legislative initiatives since day one. One of the efforts addressed this by increasing transparency in the parole process - enhancing practices that support success post-release and expanding treatment services and community-based supervision for offenders as alternatives to incarceration.

Morgan:  So my next question is a bit of a technical topic, but one of the final bills passed prior to adjournment involves a compromise - two competing proposals seeking to bypass the Chancery Court in Nashville as a venue for constitutional challenges to state law. So in simple terms, can you explain what this means?

Catie Lane:  One of the most challenging parts of my job is describing what the legislature does in simple terms. So I will do my best, and this was a hot topic for the legislature. Oftentimes one chamber pursuing one version of legislation and the other chamber pursuing a very different version of the legislation.

In this instance, the Senate passed a version of this legislation on a 27-6 vote, which establishes a new chancery court composed of three judges elected statewide. In contrast, the House actually passed legislation by a 68-23 vote to create a special Court of Appeals, compromised of three judges who would stand for retention elections. Following extensive negotiations within the conference committee that was appointed by the speakers of each chamber, the Senate withdrew its demand on electing statewide judges and the chambers reached an agreement to instead modify the existing judicial process relative to constitutional challenges and redistricting matters pursuant to the adopted compromise. The chancellor who receives a legal challenge of constitutional or redistricting matters will be joined by two other chancellors from the remaining two grand divisions to preside over the case.

Morgan:  We do a lot of work as a firm here at Waller in the healthcare services and provider sector. A bill was passed that modifies the state's certificate of need, or CON requirements, for healthcare. What are some of the big changes that were a part of that legislation?

Catie Lane:  They'll make several changes to the existing law, including exempting more healthcare providers from needing to apply while keeping most of the current CON requirements for outpatient diagnostic centers and ambulatory surgery centers intact. Many of the changes are in response to the opioid crisis and COVID-19 public health emergencies.

So the new bill actually aims to streamline the process, reduce the types of providers that must apply and increase access to certain health care services in the state. However, the bill also makes some progress toward the goal of some in the General Assembly to further deregulate the CON process following in the footsteps of some states that have eliminated CON laws altogether.

Morgan:  So part of the legislation outlines some providers that will now be exempt from the certificate of need laws. So can you maybe talk more specifically about some of those who will no longer have to go through that process to expand services?

Catie Lane:  Sure. The group of newly exempted healthcare providers and services include mental health hospitals, recuperation centers and hospital-run outpatient treatment centers for opioid addiction. Additionally home health agencies, serving children and adolescents and home health and residential hospice agencies operated by healthcare research institutions.

Morgan:  And then what about acute care hospitals, existing hospitals? Are they able to now increase the number of beds without a new CON?

Catie Lane:  Existing hospitals can increase their number of beds without a new CON, but they cannot add beds for new types of services not previously provided. Hospitals cannot add additional beds at satellite locations. The bill does create an exemption for all CON requirements and economically distressed counties that do not already have a facility.

Morgan:  And then the new bill does exempt more providers. And while it does that, it's also increasing certain fees. Can you highlight some of the fees that will increase?

Catie Lane:  Hospitals will see the most dramatic increases in annual fees. Hospitals would have to pay up to $5,000 in annual fees up from the annual cap of $300. Likewise, ambulatory surgery centers and outpatient diagnostic centers will have to pay $2,000, up from $100- a 1900% increase. Hospice services, home health services and non-residential substitution-based treatment centers for opiate addiction all face increases, too. However, the fees are not increased for a residential hospice birthing center, mental health, residential treatment facility, or intellectual disability institutional rehabilitation facility.

Morgan:  And then lastly, I know the bill authorizes the establishment of a hospital without a CON in certain limited circumstances. So I know we talked about economically distressed areas, but can you speak more specifically to a hospital that would not have to obtain a CON. What are those limited circumstances?

 Catie Lane:  The bill authorizes the establishment of a hospital without a CON in very limited circumstances, as you mentioned, including that the hospital was previously licensed or another hospital was previously licensed at the proposal location. The hospital must be located in a county with a population of less than 49,000. And the last date of operations at the former entity must have been no more than 15 years prior to the date on which the parties seeking to establish the hospital submits information. Additionally, hospitals may move small distances without restarting the CON process. The bill did not eliminate the requirement for a freestanding emergency department to obtain a CON. That was considered for elimination in 2019, but added a requirement for a hospital's satellite inpatient facilities to obtain the CON. The new exemption for hospitals to operate a non-residential substitution-based opioid treatment center requires the program to be certified and located on the hospital's campus.

Lastly, the new legislation creates an official requirement that outpatient diagnostic centers become accredited by the American College of Radiology. And it adds an annual reporting requirement for individuals who perform cardiac catheterization, open heart surgery, organ transplantation, operation of a burn unit, operation of neonatal ICU, home health services or hospice services.

Obviously, this was a pretty significant piece of legislation with lots of other changes, but these are the highlights.

Morgan:  Yeah, I think it's really going to impact the way that healthcare businesses think about their strategy for expansion and providing services in their markets.

I know we do a lot of work as a firm. The Certificate of Needs - we have offices in some states that don't have certificate needs, and then, other states where it is required and the laws are different in each state. I know it's long been discussed in Tennessee about completely eliminating it and we're not quite there yet, but this is certainly a big adjustment.

And I know there's a lot of details in this and we'll probably take some time for some of our clients to get up to speed on exactly how it can impact the way that they work and the future. Are there other changes that impact the core of Waller's clients as we look at the legislation that was passed this past session. Is there anything else that was really a key focus this past legislative session?

Catie Lane:  My thought through this initially - if we were to talk through like the state budget, if we were to talk through every piece of legislation that could or might impact Waller clients, again, we would probably talk through the majority of the roughly 1,700 bills that were introduced because there's just such a breadth of topics considered and discussed at the legislature, but I tried to really focus on the most significant legislation that would really result in the most significant changes for our clients. And I was really able to identify one specific piece of legislation that was actually worked on by Waller among other stakeholder groups that makes very significant revisions it to the pharmacy benefits and pharmacy benefits managers process. And that was Senate Bill 1617, and the House Companion Bill 1398. And so I'm going to give just an overview, a high-level overview of the legislation. I'm not touching on all of the details because it is so technical and detailed in nature. But maybe you and I can discuss perhaps a blog post forthcoming or something of that nature that will outline more specific details.

In essence, the bill prohibits health insurance issuers, managed health insurance issuers, pharmacy benefits managers, or other third-party payers from reimbursing a 340B entity for pharmacy-dispensed drugs at a rate lower than the rate paid for the same drug by national drug code number to pharmacies that are not 340B entities. This legislation requires a PBM or a covered entity to base the calculation on any co-insurance or deductible, but not co-payment for a prescription drug or device on the allowed amount of the drug or the device for the purposes of the legislation allowed amount was defined to be the cost of a prescription drug or device after applying all pharmacy benefit managers, benefits manager or covered entity discounts.

As I mentioned at the beginning of this answer to this particular question, there are a lot of details and I have several pages of notes that we could talk about this particular piece of legislation. But when considering all that was passed as a whole, I think this is one of the most significant pieces that would really impact some of Waller's clients.

Another significant issue worth mentioning, in my opinion, is the Tennessee right-to-work amendments that will be on the ballot in Tennessee as a legislatively referred constitutional amendment on November 8, 2022.  To A "yes" vote supports amending the state constitution to add a new section to make it illegal for workplaces to require mandatory labor union membership for employees as a condition of employment. A "no" vote opposes this amendment while maintaining a similar law in the state statute.

Morgan:  I know I asked a similar question earlier about another piece of legislation, but I'm just curious, what was the driver behind the PBM legislation?

There's this ongoing tension and strain between insurers, since PBMs came onto the market and rebates became a pretty significant factor in covering the cost of drugs.

 There's a pretty big divide, I would say, and strain on the relationship between insurers and pretty much everybody else. So you have the hospital association, the pharmaceuticals association, you have these individual kinds of one-off 340B entities that are interested in this. And it's been this ongoing stress and tension about reimbursement for all things -for services, for pharmaceuticals, for use of facilities. And I think that this has become more popular in other states across the country and it's a trend that I think is picking up. I think a lot of legislators would like to see simplicity and transparency in that process. And I think that this is probably an attempt to move in that direction.

Yeah, that certainly makes sense. And you do hear more, I know, at the federal level, even all the discussion around 340B.  So I imagine that's now trickling down at the state level. What key issues were not resolved in this year's legislative session?

Catie Lane:  So for those of us who operate in this space, we've only been out of session for about two weeks. So to think about what may be coming next year gives me some sort of like anxiety through the roof. But in all seriousness, jokes aside, as we think about the biggest issue I think it's how the state and local governments are going to utilize the coronavirus state and local fiscal recovery funds.

And so as you think through the American rescue plan, which provides $350 billion in emergency funding for eligible state, local, territorial and tribal governments to respond to COVID-19 emergencies and bring back jobs and really infuse the economy. I think Tennessee is going to have to be very specific about how we utilize those funds.

I think there's a chance that the legislature may convene for a special session this fall to determine how those funds will be allocated once they've been released by the federal government. But that was the unspoken - and at times spoken - question at the legislature during 2021 that I think really will guide and be on everybody's mind throughout the remainder of 2021 and really going into 2022.

Morgan:  Anything else that you want to share with our audience?

 Catie Lane:  I always use this opportunity as really a shameless plug both for Waller and its government relations team. I've done this now for 15 years and I can say in all honesty with all certainty that legislative and regulatory changes that directly impact the course of business, really for all types of entities are happening all the time.

Again, if we were to look through the roughly 1,700 bills that were introduced to be considered during this legislative session - there's everything from environmental law to tax law, to education, to healthcare, certainly to economic and community development.  And I would say that Waller's government relations team has a history of providing a strong, experienced and effective lobbying force, both at the state legislature and the executive branch.

And then also, I think people don't realize that after the legislation goes into effect, then there is this regulatory process at the state agency level and for a number of clients, we actually work through the promulgation of the rules process as well just to make sure that those interests are protected as best they can.

And also that the process that's set in place to effectuate legislation that's been passed is done as efficiently and effectively as possible. I would just say if we can ever assist in making business in Tennessee easier for you, don't hesitate to reach out.  We tend to live by the adage that if you don't like the law change it.

Morgan:  I appreciate you providing a summary of that today. It sounds like it was a very active legislative session and hopefully you get an opportunity to breathe and not have to think too much about the 2022 legislative session. It's always on the radar. And I know there are things that we have clients or other businesses in the state that are pushing for things that sometimes it often takes a few legislative sessions to really see things go through.

 Thanks for your time today and always enjoy catching up.

Catie Lane:  Thank you, Morgan. I appreciate being on here.