WPCo# V~n!..v 8,6^FԚe !HHvqjdAӂQI8!qRѝmWx,(;fh\H󨉇bC@?"^^)|QAaee IMcJ8M>gd& Ct]g%QAld'VˈU@ 5;!Hbc9U@n@Ti@Ar҆ E}Dž10O.Cر:]ғGRVAPRz\#0?<)]EV/Jr[Ɣu͘D~׊̎w^ I=`Ҏ@;x؂NvZ.Oz5"!O:xra`H8+S`>*KJj[̵Ƭz,|z {]Gߕ6>)rN>VXz(Uojsbrkܡ9ZhFPkyl˧:^M"o:o>8Y*# LU:W % 0w4 0  p 0Dx  j^4/ AQU:LU:!U: lFU:U:yU:a/U: U:! BA!^! 0D$" 0Dh" 0D"" D/"" B# D3<#HP LaserJet 4SiHPPCL5MS,,,,,,0nLl,  AZ"Arial RegularX(`zZ$TRY,3' Letter3'3' Letter3'T  O EP HQ ER DS eT EV tW X Y DZ [ D\ ] D^ +_ +` a Db c Dd +e f g Ӏq u[%3|xq ((2m$ zZ!TRX3' Letter3'3'*Avery 5165 Full Sheet3'T   4XX   0    m$  4XX   1    OnJanuary1,1994,TennesseeinstitutedtheTennCareprogram,whichmade  substantialchangesintheprovisionofhealthcareservicestoMedicaidrecipients.UnderTennCare,healthcareprovidersarenolongerreimbursedundertheprospectivepaymentmethodologyatissueinthiscase;providersarenowpaidbymanagedcareorganizationsratherthanbytheState.TheplaintiffsclaimsinthiscasearelimitedtotheperiodpriortotheimplementationoftheTennCareprogram.(#$  0    ]$  4XX   3    Theconflictclauseprovided: Ifanypartofthisagreementisfoundtobeinconflictwith  anyFederalorStatelawsorregulationshavingequalweightoflaw,orifanypartisplacedinconflictbyamendmentofsuchlaws,thisagreementissoamended.  {$  4FXX=ieXdd=   1    OnJanuary1,1994,TennesseeinstitutedtheTennCareprogram,whichmade  substantialchangesintheprovisionofhealthcareservicestoMedicaidrecipients.UnderTennCare,healthcareprovidersarenolongerreimbursedundertheprospectivepaymentmethodologyatissueinthiscase;providersarenowpaidbymanagedcareorganizationsratherthanbytheState.TheplaintiffsclaimsinthiscasearelimitedtotheperiodpriortotheimplementationoftheTennCareprogram. T ]$  4XX   2    Thereimbursementmethodologyclauseprovidedthat thisfacility:...[a]greestouse  thesamemethodofreimbursementforTitleXIXthatisusedforTitleXVIII,Medicare. % ]$  4XX   4    AsofJanuary1995,theDepartmentofFinance&Administrationwassubstitutedforthe  DepartmentofHealthasthesinglestateagency.!"#$&C<< C,  AZ"Arial Regular  {$  4FXX=ieXdd=   2    Thereimbursementmethodologyclauseprovidedthat thisfacility:...[a]greestouse  thesamemethodofreimbursementforTitleXIXthatisusedforTitleXVIII,Medicare.,  AZ"Arial Regular  {$  4FXX=ieXdd=   3    Theconflictclauseprovided: Ifanypartofthisagreementisfoundtobeinconflictwith  anyFederalorStatelawsorregulationshavingequalweightoflaw,orifanypartisplacedinconflictbyamendmentofsuchlaws,thisagreementissoamended.,  AZ"Arial Regular b {$  4FXX=ieXdd=   4    AsofJanuary1995,theDepartmentofFinance&Administrationwassubstitutedforthe  DepartmentofHealthasthesinglestateagency.,  AZ"Arial Regular  ]$  4XX   1    OnJanuary1,1994,TennesseeinstitutedtheTennCareprogram,whichmade  substantialchangesintheprovisionofhealthcareservicestoMedicaidrecipients.UnderTennCare,healthcareprovidersarenolongerreimbursedundertheprospectivepaymentmethodologyatissueinthiscase;providersarenowpaidbymanagedcareorganizationsratherthanbytheState.TheplaintiffsclaimsinthiscasearelimitedtotheperiodpriortotheimplementationoftheTennCareprogram.,  AZ"Arial Regular  ]$  4XX   3    Theconflictclauseprovided: Ifanypartofthisagreementisfoundtobeinconflictwith  anyFederalorStatelawsorregulationshavingequalweightoflaw,orifanypartisplacedinconflictbyamendmentofsuchlaws,thisagreementissoamended.,  AZ"Arial Regular % ]$  4XX   4    AsofJanuary1995,theDepartmentofFinance&Administrationwassubstitutedforthe  DepartmentofHealthasthesinglestateagency.,  AZ"Arial Regular ""  XXXX XX   Ad FILEDXX   December7,1998CecilW.CrowsonAppellateCourtClerkdAh ,cAZ"Arial Regular dLevel 1Level 2Level 3Level 4Level 5(3$ !  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($$   1  ((' dxdP Pd 'dxd zZ!TRX3' Letter3'3'*Avery 5165 Full Sheet3'T   ݚ4W TR[A' LegalYX3' LetterA' Legal3' LetterTћW   7XXdXXd7   T =ieXXdd=T "*US \\ (:!&)* S S W W W TR[A'Legal RedX3' LetterA' Legal3'*Avery 5165 Full SheetTќW q q q g g r)<,(j 8` `@E ` 8ttxP,  rq g g q t)>.*jx` `@E` 8ttxP tߛq @PPDINTHESUPREMECOURTOFTENNESSEE@rr)DATNASHVILLES S    <      D   FORPUBLICATION    <      D   Filed: 򀀀e M November30M e f December7f ,1998T$T$MT$   BAPTISTHOSPITAL;EAST@##/D) H@  TENNESSEECHILDREN'S@##/D) .&  HOSPITAL;ERLANGERMEDICAL@##/D)   CENTER;FORTSANDERS@##/D)   REGIONALMEDICALCENTER;@##/D)  TennesseeClaimsCommission   HOLSTONVALLEYHOSPITALAND@##/D)   MEDICALCENTER;JOHNSONCITY@##/D)   MEDICALCENTERHOSPITAL;@##/D)  LEBONHEURCHILDREN'SMEDICAL@##/D) xp CENTER;MAURYREGIONAL@##/D) ^V HOSPITAL;METHODISTHOSPITALS@##/D) D< OFMEMPHIS;REGIONALMEDICAL@##/D) *" CENTEROFMEMPHIS;SAINT@##/D)  MARY'SMEDICALCENTER;AND@##/D)  Hon.W.R.Baker,Commissioner  VANDERBILTUNIVERSITYMEDICAL@##/D)  CENTER,@##/D)  @##/D) PLAINTIFFS/APPELLANTS,@##/D)  @##/D)v.@##/D) Z R @##/D)TENNESSEEDEPARTMENTOF@##/D) &" HEALTH,ANDTENNESSEE@##/D)  No.01S019711BC00249  # DEPARTMENTOFFINANCE@##/D) #  ANDADMINISTRATION,@##/D) $! @##/D) DEFENDANTS/APPELLEES.@##/D) &# FORCLAIMANT/APPELLANT:   D FORRESPONDENT/APPELLEE: <*4#' WilliamB.Hubbard <      D JohnKnoxWalkup ,%) Nashville  <      D AttorneyGeneralandReporter ,%* SanfordE.Pitler <      D SueA.Sheldon .', ElizabethA.McFall <      D AssistantAttorneyGeneral /(- Seattle,Washington     D Nashville 0~). O N N O @ss)D }XXOPINION #XX}D#Ԉ 5-3 P COURTOFAPPEALSP AFFIRMEDASMODIFIED  CT$HOLDER,J.  T8L16 V V  @,D OPINION    WegrantedthisappealtodeterminewhethertheTennesseeclaimscommissionhassubjectmatterjurisdictionovertheplaintiffschallengetocertainMedicaidreimbursementspaidtothembytheState.Uponreview,weholdthattheTennesseeclaimscommissionlackssubjectmatterjurisdictionoverthiscase.BecausetheplaintiffschallengeisbaseduponanassertionthataX sX Y SY tateMedicaidregulationisinvalidunderfederallaw,theTennesseeDepartmentofHealthwastheagencywithsubjectmatterjurisdictionoverthiscaseQ ,Q pursuanttoTenn.CodeAnn.45223oftheUniformAdministrativeProceduresAct("UAPA").S S     BACKGROUND    TheStateenteredinto MedicalAssistanceParticipationAgreements(MedicaidTitleXIXProgram)forInpatientandOutpatientHospitalServices( provideragreements)withtheplaintiffs("hospitals")fortheprovisionofhealthcareservicestoMedicaidrecipients.ThosehospitalsparticipatingintheMedicaidprogramwerereimbursedunderaprospectivepaymentmethodologyestablishedinrulesoftheDepartmentofHealth.HospitalswerereimbursedunderthissystemfromOctober1,1983,toDecember31,1993.S ^  ^ ^ ^ S S  S  #  1       +$(  Undertheprospectivepaymentmethodology,eachhospitalwaspaidaperdiemrateforMedicaidpatients.Thereweretwoprimarycomponentstotheperdiemrate,an operatingcomponentanda passthroughcomponent.Each @28+0 hospitalsoperatingandpassthroughcomponentswerecalculatedbaseduponfinancialdatacontainedinthehospitalsannual costreportfiledwiththeState.EffectiveJuly1,1989,theDepartmentofHealthimplementedTenn.Comp.R.&Regs.ch.1200135.08whichprovided,inpertinentpart,thatafteraMedicaidpatienthadbeenahospitalinpatientfortwenty(20)days,thehospitalsperdiemratewouldbereducedforeachsubsequentday(over20)byreducingthe operatingcomponentto60%;thisruledidnotaffectthepassthroughcomponentofthehospitalsperdiemrate. In1990,CongresspassedlegislationprohibitingstatesfromimposingdayanddollarlimitsonMedicaidreimbursementforhealthcareprovidedtoinfantsandchildrenbyhospitalsservingadisproportionateshareoflowincomepatientswithspecialneeds.42U.S.C.1396(a)(s)(2),(3)("OBRA'90").TheeffectivedateofthislegislationwasJuly1,1991. OnAugust8,1995,thehospitalsfiledacomplaintwiththeclaimscommissionallegingbreachofcontract.ThecomplaintallegedthattheStatebreachedthe reimbursementmethodologyclauseS S S S  #  2      ׀oftheprovideragreements. (!$ Thehospitalsarguedthatthe conflictclauseS _  _ _  _ S S  S  #  3      ׀foundintheprovideragreements *#& causedOBRA'90toamendthereimbursementmethodologyclause.ThehospitalsarguedthatthereducedpaymentprovidedforunderRule1200135.08forinpatientstayslongerthantwentydaysbreachedtheprovideragreementsbyplacingdayanddollarlimitationsonservicesrenderedto (2 +. MedicaidcoveredinfantsandchildreninviolationofOBRA90.ThehospitalsallegedthattheyareentitledtoadditionalMedicaidreimbursementasaresult. TheStatefiledamotiontodismissarguing,inpertinentpart,thattheclaimscommissionlackedsubjectmatterjurisdiction.TheStatecontendedthatthehospitalsclaimwasachallengetothevalidityofa` s` a Sa tateMedicaidregulationandwasnotabreachofcontractaction.TheStatearguedthatonlytheDepartmentofHealthmayadjudicatecaseschallengingthevalidityofab sb c Sc tateMedicaidregulation. TheclaimscommissiondeniedtheState'smotiontodismiss.Theclaimscommissionconcludedthatthehospitals'claimwasforbreachofcontractandthattheclaimscommissionhadsubjectmatterjurisdictionoverallbreachofcontractactionsagainsttheState.TheStatesoughtaninterlocutoryappeal,whichwasgranted.TheCourtofAppealsreversedtheclaimscommissionholdingthattheprovideragreementsdidnotcreateacontractualobligationontheState.Theappellatecourtthereforeheldthattheclaimscommissionlackedjurisdictionanddismissedthecase.    ANALYSIS  *#& % ThehospitalsarguethatthisMedicaidreimbursementchallengeismerelyabreachofcontractaction.TheclaimscommissiongenerallyhasexclusivesubjectmatterjurisdictionoverallmonetaryclaimsagainsttheState.Tenn.CodeAnn.98307.Accordingly,thehospitalsarguethattheclaimscommissionhadsubjectmatterjurisdictioninthecasenowbeforeus.Wedisagree. 704 Ї FederallawmandatesthatstatesdesignateasinglestateagencyforadministrationofstateMedicaidplans.42U.S.C.S S 1396R aR (a)(5).S S TheTennesseeDepartmentofHealthwasdesignatedasthesinglestateagencyinchargeofadministeringtheMedicaidprogramduringtheperiodatissueinthiscase.S d d d d S S S  #  4      ׀   Tenn.CodeAnn.715101etseq.   Wehavereviewedthehospitals'complaintandtheentirerecordonappeal.Thehospitals'caseispremiseduponthecontentionthatTenn.Comp.R.&Regs.ch.1200135.08isinvalidbecausetheruleviolatesOBRA'90.Accordingly,thehospitals'claimisproperlyclassifiedasachallengetothevalidityofRule1200135.08. Claimschallengingthevalidityoforapplicabilityofastatute,rule,orordermustbebroughtpursuanttotheUAPA.SeeTenn.CodeAnn.45223(a) h` ( Anyaffectedpersonmaypetitionanagencyforadeclaratoryorderastothevalidityorapplicabilityofastatute,ruleororderwithintheprimaryjurisdictionof (#  theagency)(emphasisadded).TheDepartmentofHealthisan agencyundertheUAPA.Rule1200135.08isaDepartmentofHealthrule.Moreover,theDepartmentofHealthwasthesinglestateagencyinchargeofadministeringtheMedicaidprogramduringtheperiodinquestion.Accordingly,theS S hospitals'challengetothevalidityS S ofRule1200135.08shouldhavebeenbroughtbeforetheDepartmentofS S HealthpursuanttotheUAPA.S S   H0@),      CONCLUSION   . Thehospitals'claimwasbasedupontheinvalidationofaZ sZ [ S[ tateMedicaidregulation.Weholdthattheclaimscommissionlackssubjectmatterjurisdictiontoruleuponthevalidityofa\ s\ ] S] tateMedicaidregulation.Pursuanttotheauthoritiescitedabove,theDepartmentofHealthwastheagencywithsubjectmatterjurisdictionoverthehospitalsclaim. Thedecisionoftheappellatecourtisaffirmedasmodified,andthehospitals'complaintisdismissed.Costsofthisappealshallbetaxedagainsttheplaintiffhospitals,forwhichexecutionmayissueifnecessary.   <      D T$T$MT$ H!@    <      D JANICEM.HOLDER,JUSTICE Panel:  %! Anderson,C.J.BirchandBarker,JJ.Drowota,J.,NotParticipating