ÿWPCÕ  … %Vb\ 0(d8Œw@Ä4UNf 0lu 0Dá 0J% 0To 0^à ! 0h) # ‘ 0rœ 0| 0†Š 0 1u  0dU >yB)·DCà AM#U*p𕍠B= D3ZX¤å 0@‰Év~ßvÓ] AO0Æ 0DE D/‰ B¸ X- ù-($¡¡c:\wpwin60\template\opn.wpt …e†r‚‡:eˆ‰DŠ‹DŒÓ€—DÒ ¼¼Ø'ì(ÖÃ9 Z ‹6Times New Roman Regular3|x—((3úÝ$¤¤Ý ƒ!ÝÝ  Ýà  àòòÚ  Ú0Ú  Úóó(#Ã$òòÚ  Ú0Ú  Úóó2 ÿÿ0Indent1Ô2ÔÔ3  Ô2" ÿÿ0Indent2à0 àÔ2ÔÔ3  Ô2, ÿÿ0Indent3à0 àà0 àÔ2ÔÔ3  Ô26 ÿÿ0Indent4à0 àà0 àà0 àÔ2ÔÔ3  Ô˜HP LaserJet 4Si/4SiMX PS 600dpiPSCRIPTÈÚØÚÚØÈÚ0nLLÎ2@ ÿÿ0Indent5à0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2J ÿÿ0Indent6à0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2T ÿÿ0Indent7à0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2^ ÿÿ0Indent8à0 àà0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô  ÿÿ?AGMSYaioIndent0I.A.1.a.(1)(a)i)a)P ÿÿ8Mac DefaultMac DefaultÓ ` °šXÓ< Œ 9p`(&Times New Roman% Line 7 d####7Border 1dd€-$Cþÿ << Gÿÿ< Œ 9p`(Arial Ý ƒ!ÝÑ  ÑÑ#€d#ÑÔ€"ÔÝ  ÝÔ€&ÔÔ€&ÔÓ  Óò òÔ YYY ÔFILEDÔ€&XÔÌÌApril€25,€1997ÌÌCecil€W.€CrowsonÌAppellate€Court€ClerkÔ  Ôó ó ‹Ý ƒ!ÝÑ#€d#ÑÔ€"ÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  Ý€€The€plaintiffs€in€this€case€are€Baptist€Hospital,€East€Tennessee€Children's€Hospital,ÏErlanger€Medical€Center,€Fort€Sanders€Regional€Medical€Center,€Holston€Valley€Hospital€&ÏMedical€Center,€Johnson€City€Medical€Center€Hospital,€Le€Bonheur€Children's€Medical€Center,ÏMaury€Regional€Hospital,€Methodist€Hospitals€of€Memphis,€Regional€Medical€Center€of€Memphis,ÏSt.€Mary's€Medical€Center,€and€Vanderbilt€University€Medical€Center.€€Hereinafter€the€plaintiffsÏshall€be€referred€to€as€ð ðthe€Hospitals.ððÌ d))))'ÿÿdxd NÝ ƒ!ÝÑ#€d#ÑÔ€"ÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  Ý€€The€ð ðReimbursement€Methodology€Clauseðð€provided€that€ð ðthis€facility:€.€.€.€Agrees€toÏuse€the€same€method€of€reimbursement€for€Title€XIX€that€is€used€for€Title€XVIII,€Medicare.€€Ì šÝ ƒ!ÝÑ#€d#ÑÔ€"ÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  Ý€€The€conflict€clause€provided:€ð ðIf€any€part€of€this€agreement€is€found€to€be€in€conflict€withÏany€Federal€or€State€laws€or€regulations€having€equal€weight€of€law,€or€if€any€part€is€placed€inÏconflict€by€amendment€of€such€laws,€this€agreement€is€so€amended.ððÌ("ÿÿ$££Ò  ÒÒ  Ò Ý ƒ!ÝÑ#€d#ÑÔ€"ÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  Ý€€(alterations€in€original)€In€their€brief,€the€Hospitals€refer€to€this€provision€as€theÏreimbursement€methodology€clause.ÌPtPtHHÚ(ÿáÿâùFG(üHHÚ(d'hStyl{WP}01•ÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃà Ãà Ãà Ãà Ãà ÃÃÃÃÃÃÃÃÃÃÃÐ ÐÐHHÐÐ  ÐÐ2ÐÐÿÿ¸æ$ÿÐÐHHÐÐÐÐÐÐÐÐ  ÐÐ ÐÐ ÐÑÑÑGenevaÑÑ ÑÑ € ÑÑ<Px–ÈÑÒÒÒ443!#4ÒÒ$ *$ÒÒ$*$ÒÒ ÿKK ÒÒ  Geneva ÒÒ  Geneva ÒÓ.,ÓÓÓÓ6ÓÓ ÓßßßßßßßßßßßßßßßßßßÑGenevaÑÑ ÑÒ  h HD: Geneva ÒÒ  h HD: Geneva Ò€-‚ƒCþÿ<< CÿÿƒLevel 1Level 2Level 3Level 4Level 5($$””ò òÚ  Ú1Ú  Úó ó„„'÷ÿ dxdüÿP PdÝ ƒ!ÝÔ . ÔÔ€"ÔÝ  ݛԀ"¼ÔÑ€ÑÑ7€ƒ^XXdìdÈ7ÑÑ  ÑÑ\R AØ'\ÑœÞ ÞÌBAPTIST›€HOSPITAL,€ET€AL.,à à)Ìà àPlaintiffs/Appellees,à àà à)à àAppeal€No.Ìà àà àà àà àà àà à)à à01„A„01„9610„BC„00465̜ـ€ÙßR€%'$A1-j|%n` ç `€€@ÿRß›v.à àà àà àà àà àà à)Ìà àà àà àà àà àà à)à àTN€Claims€No.ÌTENNESSEE€DEPARTMENT€OFà à)à à404692ÌHEALTH,à àà àà àà àà à)Ìà àDefendant/Appellant.à àà à)ÌÌÌÓ  ÓCOURT€OF€APPEALS€OF€TENNESSEEÌÌMIDDLE€SECTION€AT€NASHVILLEÌÌÌAPPEAL€FROM€THE€TENNESSEE€CLAIMS€COMMISSIONÌÌMIDDLE€DIVISION€AT€NASHVILLE,€TENNESSEEÌÌÌTHE€HONORABLE€W.R.€BAKER,€COMMISSIONERÌÓ  ÓÌÌCHARLES€W.€BURSONÌAttorney€General€and€ReporterÌÌSUE€A.€SHELDONÌAssistant€Attorney€GeneralÌCordell€Hull€Building,€2nd€FloorÌ426€5th€Avenue,€NorthÌNashville,€Tennessee€37243„0499Ìà àATTORNEYS€FOR€DEFENDANTS/APPELLANTSÌÌWILLIAM€B.€HUBBARDÌWeed,€Hubbard,€Berry€&€DoughtyÌThird€National€Financial€CenterÌ424€Church€Street,€Suite€2900ÌNashville,€Tennessee€37219ÌÌSANFORD€E.€PITLERÌELIZABETH€A.€McFALLÌBennett€&€BigelowÌ1111€Third€Avenue,€Suite€1580ÌSeattle,€Washington,€98101Ìà àATTORNEYS€FOR€PLAINTIFFS/APPELLEESÌÌ€ÌÌÓ  ÓREVERSED€AND€REMANDEDÌÌÌÓ  ÓSAMUEL€L.€LEWIS,€JUDGEÌòòÓ  ÓÓ ` °§XÓÔ€"„ÔOPINIONóóÌÌÓ€ÓÓ  ÓÔ€"¼Ôà àThis€is€an€appeal€by€defendants/appellants,€the€Tennessee€Department€ofÏHealth€and€the€Tennessee€Department€of€Finance€and€Administration€(ð ðtheÏStateðð),€from€a€decision€of€the€Tennessee€Claims€Commission€(ð ðthe€Commissionðð)Ïdenying€the€State's€motion€to€dismiss€plaintiff/appellee's€claim.× ƒ( ××  ×€€The€facts€out€ofÏwhich€this€matter€arose€are€as€follows.ÌÌà àThe€State€entered€into€provider€agreements€with€the€Hospitals€for€theÏprovision€of€health€care€to€Medicaid€recipients.€€From€1€October€1983€to€31ÏDecember€1993,€the€State€reimbursed€the€Hospitals€using€a€prospective€paymentÏmethodology,€i.e,€the€Hospitals€received€a€fixed€dollar€amount€for€every€day€aÏpatient€spent€in€the€hospital.€€Effective€1€July€1989,€the€State€began€limiting€theÏHospitals'€reimbursement.€€Once€a€patient€had€spent€twenty€days€as€an€inpatientÏduring€the€State's€fiscal€year,€the€State€only€paid€sixty€percent€of€the€fixed€rateÏfor€the€twenty„first€day€and€every€day€thereafter.ÌÌà àIn€1990,€Congress€passed€a€law€regarding€the€reimbursement€of€MedicaidÏproviders.€€Effective€1€July€1991,€federal€legislation€prohibited€states€fromÏimposing€day€and€dollar€limits€on€the€reimbursement€of€hospitals€for€servicesÏprovided€to€infant€Medicaid€eligibles€and€Medicaid€eligible€children€in€hospitalsÏserving€a€disproportionate€share€of€low€income€patients€with€special€needs.€€42ÏU.S.C.€ðð€1396a(s)(2),(3)€(ð ðOBRA€'90").€€On€8€August€1995,€the€Hospitals€filed€aÏcomplaint€with€the€Commission.€€The€Hospitals€alleged€that€the€State€breached€theÏreimbursement€methodology€clause× ƒ+ ××  ×€of€the€provider€agreements.€€Specifically,Ïthe€Hospitals€claimed€the€conflict€clause× ƒ, ××  ×€found€in€the€provider€agreements€causedÏOBRA€'90€to€amend€the€reimbursement€methodology€clause€and€the€StateÏbreached€the€provider€agreements€when€it€continued€to€restrict€the€Hospitals'Ïreimbursement.€€The€Hospitals€claimed€approximately€twelve€million€dollars€inÏdamages.ÌÌà àThe€State€responded€to€the€complaint€by€filing€a€motion€to€dismiss.€€TheÏmotion€alleged€the€Hospitals€failed€to€state€a€claim,€the€Commission€lackedÏjurisdiction,€and€the€State€was€immune.€€The€Commission€dismissed€the€Hospitals'Ïclaim€for€attorney's€fees,€but€denied€the€rest€of€the€State's€motion.€€TheÏCommission€held€it€had€subject€matter€jurisdiction€and€the€Hospitals€had€statedÏgrounds€for€which€it€could€grant€relief.ÌÌà àOn€14€October€1996,€the€State€filed€a€motion€requesting€permission€to€fileÏan€interlocutory€appeal€pursuant€to€Rule€9€of€the€Tennessee€Rules€of€AppellateÍProcedure.€€The€motion€explained€the€State€had€also€filed€a€ð ðPetition€forÏInterlocutory€Reviewðð€pursuant€to€Rule€12€of€the€Tennessee€Rules€of€AppellateÏProcedure€in€this€court€because€ð ð[t]he€question€of€whether€proceedings€for€reviewÏof€an€interlocutory€order€of€the€Claims€Commission€are€properly€commencedÏunder€Tenn.€R.€App.€Proc.€9€or€12(II)€appears€somewhat€unsettled.ðð€€TheÏCommission€granted€the€motion€after€finding€that€ð ðan€interlocutory€appeal€willÏresult€in€a€net€reduction€in€the€duration€and€expense€of€the€litigation€if€theÏchallenged€order€be€reversed.ðð€€The€Commission€also€held€Rule€12(II)€did€notÏapply€to€its€decisions.ÌÌà àOn€29€October€1996,€the€Hospitals€filed€an€objection€to€the€Rule€12€petitionÏfor€review.€€The€Hospitals€claimed€the€appropriate€rule€was€nine,€not€twelve,€butÏalso€argued€the€State€had€failed€to€meet€the€requirements€of€a€Rule€9Ïinterlocutory€appeal.€€On€1€November€1996,€this€court€entered€an€orderÏreserving€judgment€on€the€Hospitals'€objection€until€after€oral€argument.€€TheÏHospitals€later€withdrew€their€objection.ÌÌà àOn€26€November€1996,€the€Hospitals€filed€a€response€in€support€of€theÏState's€Rule€9€application.€€In€December,€this€court€entered€an€order€regardingÏthe€Rule€9€application.€€This€court€stated:€ð ðIt€is,€therefore,€ordered€that€judgmentÏon€the€Tenn.€R.€App.€P.€9€application€for€permission€to€appeal€be€reserved€untilÏoral€argument€of€the€Tenn.€R.€App.€P.€12€petition€for€review.€€In€the€event€theÏTenn.€R.€App.€P.€9€application€is€granted,€the€briefs€and€arguments€of€the€partiesÏon€the€merits€of€the€Tenn.€R.€App.€P.€12€application€will€be€considered€in€theÏTenn.€R.€App.€P.€9€appeal.ððÌÌà àò òI.à àBasis€of€Appealó óÌÌà àà àò òA.à àWhich€Rule€Applies?ó óÌÌà àThe€State€initially€filed€a€Rule€12€petition€for€review€citing€part€II€of€RuleÏ12.€€It€then€filed€a€Rule€9€application€for€permission€to€appeal.€€It€is€the€opinionÏof€this€court€that€the€appropriate€basis€for€appeal€given€the€procedural€history€ofÏthis€case€is€Rule€12(II).€€Rule€12(I)€applies€when:€1)€the€agency€is€subject€to€theÏUniform€Administrative€Procedures€Act€(ð ðUAPAðð)€and€2)€a€party€must€appeal€aÏdecision€of€the€agency€directly€to€the€court€of€appeals.€€Part€II€applies€when€onlyÏthe€second€factor€exists.€€It€is€the€opinion€of€this€court€that€Rule12(II)€appliesÏbecause€the€Commission€is€not€subject€to€the€UAPA€and€its€orders€are€directlyÏappealable€to€the€court€of€appeals.€€ÌÌà àUnfortunately,€there€is€no€clear€statement€as€to€whether€the€Commission€isÏsubject€to€the€UAPA.€€In€fact,€the€parties€appear€to€have€assumed€this€aspect€ofÏtheir€case.€€Nevertheless,€this€court€finds€no€fault€in€the€assumption.€€To€explain,Ïthe€provisions€of€Title€9,€chapter€8,€parts€3€and€4€establish€the€Commission,€setÏout€its€powers€and€jurisdiction,€and€dictate€certain€procedural€requirements.€€òòò òSeeóóó óÏTenn.€Code€Ann.€ðððð9„8„301,€„305,€„307,€„403€(1992€&€Supp.€1996).€€TheÏprovisions€of€the€UAPA€€do€essentially€the€same€things€for€those€agencies€toÏwhich€the€provisions€apply.€€Thus,€it€seems€that€had€the€General€AssemblyÏintended€the€provisions€of€the€UAPA€to€apply€to€the€Commission€it€would€notÏhave€gone€to€such€great€lengths€to€throughly€describe€the€powers,€jurisdiction,Ïand€procedures€of€the€Commission€in€a€separate€title.€€Moreover,€a€finding€thatÏthe€Commission€is€subject€to€the€UAPA€would€create€a€great€deal€of€conflictÏbetween€the€statutes€€involving€the€Commission€and€the€statutes€of€the€UAPA.€ÏCourts€should€avoid€reading€€statutes€in€ways€ð ðwhich€would€operate€to€impair,Ífrustrate,€or€defeat€the€object€of€the€statute.ðð€€òòò òFirst€Nat'l€Bank€of€MemphisÏv.€McCanlessóóó ó,€186€Tenn.€1,€9,€207€S.W.2d€1007,€1010€(1948).€€Application€ofÏthe€UAPA€to€the€Commission€would€essentially€destroy€the€need€for€a€majority€ofÏthe€statutes€regulating€the€activities€of€the€Commission.€€It€is€the€opinion€of€thisÏcourt€that€the€Commission€is€not€subject€to€the€provisions€of€the€UAPA.€€InÏaddition,€decisions€of€the€Commission€are€directly€appealable€to€the€court€ofÏappeals€pursuant€to€Tennessee€Code€Annotated€section€9„8„403(a)(1).€€Thus,€aÏdecision€of€the€Commission€is€appealable€under€Rule€12(II).ÌÌà àà àò òB.à àDoes€Rule€12(II)€Include€Interlocutory€Appeals?ó óÌÌà àPursuant€to€Rule€12(II)€ð ð[r]eview€is€instituted€by€filing€a€petition€forÏreview€with€the€clerk€of€the€Court€of€Appeals€within€thirty€days€after€the€date€ofÏentry€of€the€administrative€order€appealed€from.ðð€€The€language€of€the€RuleÏ12(II)€does€not€in€any€way€limit€the€review€to€final€decisions.€€Thus,€it€is€theÏopinion€of€this€court€that€Rule€12(II)€includes€interlocutory€appeals.ÌÌà àà àò òC.à àStandard€of€Reviewó óÌÌà àThe€standard€of€review€in€this€case€is€governed€by€the€Tennessee€Rules€ofÏAppellate€Procedure.€€òòò òSeeóóó ó€Tenn.€Code€Ann.€ðð€9„8„403(a)(1)€(1992);€Tenn.€R.ÏApp.€P.€12(II)(h).€€This€court€reviews€the€Commission's€decisions€pursuant€toÏRule€13(d).€€That€is,€we€review€the€findings€of€fact€ð ðde€novo€upon€the€record€ofÏthe€[Commission],€accompanied€by€a€presumption€of€the€correctness€of€theÏfindings,€unless€the€preponderance€of€the€evidence€is€otherwise.ðð€€Tenn.€R.€App.ÏP.€13(d).€€No€presumption€€accompanies€questions€of€law.ÌÌà àò òII.à àIssues€Presented€for€Reviewó óÌÌà àThe€State€presented€two€issues€for€this€court€to€review.€€The€State's€firstÏissue€is€whether€the€Commission€erred€when€it€failed€to€find€that€it€lacked€subjectÏmatter€jurisdiction,€and€its€second€issue€is€whether€the€Commission€erred€in€notÏfinding€that€the€Hospitals'€complaint€failed€to€state€a€cause€of€action€upon€whichÏrelief€could€be€granted.€€We€address€these€issues€together.ÌÌà àThe€State€argues€the€complaint€failed€to€state€a€breach€of€contract€claimÏbecause€the€provision€relied€on€by€the€Hospitals€does€not€create€a€contractualÏobligation€on€the€part€of€the€State€and€because€the€conflict€clause€necessary€to€theÏHospitals'€theory€only€applies€when€there€is€a€conflict€between€the€provisions€ofÏthe€contract€and€state€or€federal€law,€not€when€there€is€a€conflict€between€stateÏand€federal€law.€€In€response,€the€Hospitals€argue€this€court€must€take€theirÏallegations€as€true.€€The€Hospitals€also€clarify€that€they€are€claiming€that€the€StateÏbreached€the€reimbursement€methodology€clause,€not€the€conflict€clause.ÌÌà àIt€is€the€opinion€of€this€court€that€both€parties€are€correct€in€certainÏrespects.€€First,€the€Hospitals€properly€state€the€standard€for€disposing€of€motionsÏto€dismiss.€€This€court€must€take€the€allegations€of€the€complaint€as€true€andÏconstrue€them€in€favor€of€the€plaintiff.€€òòò òPemberton€v.€American€DistilledÏSpirits€Co,óóó ó,€664€S.W.2d€690,€691€(Tenn.€1984).€€Second,€the€State€properlyÏargues€the€Hospitals€failed€to€state€a€cause€of€action€because€they€failed€to€allegeÏor€allege€a€set€of€facts€such€that€this€court€could€construe€that€the€providerÏagreements€included€a€contractual€obligation€which€the€State€breached.ÌÌà àThe€Hospitals€alleged€the€State's€reimbursement€method€violated€OBRAÍ'90.€€They€also€alleged€the€enactment€of€OBRA€'90€automatically€amended€theÏreimbursement€methodology€clause€to€include€the€provisions€of€OBRA€'90.€ÏFinally,€the€Hospitals€alleged€the€State's€violation€of€OBRA€'90€constituted€aÏbreach€of€contract.€€As€argued€by€the€Hospitals,€we€must€take€these€allegations€asÏtrue€and€construe€them€in€favor€of€the€Hospitals.€€Nevertheless,€we€must€concludeÏthey€fail€to€state€a€cause€of€action.€€The€problem€is€it€is€necessary€to€infer€fromÏthe€second€and€final€allegations€stated€above€that€the€reimbursement€methodologyÏclause€created€a€contractual€obligation€on€the€part€of€the€State.€€Unfortunately,€theÏHospitals'€complaint€and€the€clause€itself€does€not€support€this€inference.€€ToÏexplain,€the€complaint€states:ÌÓÓà8 àEach€Provider€Agreement€also€contains€the€following€provision:Ìà8 àà8 à[The€Hospital]€agrees€to€use€the€same€method€ofÏreimbursement€for€Title€XIX€that€is€used€for€TitleÏXVIII,€Medicare.Ìà8 àThe€foregoing€provision€is€referred€to€hereinafter€as€the€ð ðMedicareÏPayment€Clause.× ƒ. ××  ×ÌÌÓ€ÓThis€clause€creates€a€contractual€obligation€on€the€particular€hospital,€not€theÏState.€€It€is€the€opinion€of€this€court€that€the€Commission€erred€when€it€denied€theÏmotion€to€€dismiss€because€the€complaint€failed€to€allege€an€essential€element€ofÏthe€Hospitals'€breach€of€contract€claim.€€The€Hospitalsðð€complaint€did€not€includeÏany€other€claims.€€Thus,€the€Hospitals€failed€to€state€a€cause€of€action€and€theÏCommission€should€not€have€granted€the€motion.ÌÌà àTherefore,€it€results€that€the€decision€of€the€Tennessee€Claims€CommissionÏis€reversed,€and€the€case€is€remanded€to€the€œtrial€court›€for€œcollection€of€costs,€andÏto€the€Tennessee€Claims€Commission€for€any›€further€œproceedings€in€accordanceÏwith€this€opinion.›€€Costs€on€appeal€are€taxed€to€plaintiffs/appellees,€the€Hospitals.ÌÌÓÓÌÔ€"XÔà àà àà àà àà àà àà à________________________________€Ìà àà àà àà àà àà àà àSAMUEL€L.€LEWIS,€JUDGEÌÌÌCONCUR:ÌÌÌ_______________________________ÌHENRY€F.€TODD,€PRESIDINGÌà àJUDGE,€MIDDLE€SECTIONÌÌÌÌ_______________________________ÌBEN€H.€CANTRELL,€JUDGE