Wellmont Health System v. Tennessee Health Facilities Commission

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
October 9, 2003 Session

WELLMONT HEALTH SYSTEM v. TENNESSEE HEALTH FACILITIES
COMMISSION, ET AL.

Appeal from the Chancery Court for Davidson County
No. 02-1220-II Carol L. McCoy, Chancellor

No. M2002-03074-COA-R3-CV - Filed January 29, 2004

Administrative Law Judge vacated Certificate of Need, which had been granted by Tennessee Health
Facilities Commission, on grounds of conflict of interest of a Commission member and erroneous
information set forth in application for Certificate of Need. Chancery Court affirmed. We affirm,
holding that the vote of a Commission member with a conflict of interest is void ab initio.
Commission member with conflict of interest had an affirmative duty pursuant to Rules of Tennessee
Health Facilities Commission 0720-1-.02(1) to not only disclose the conflict but to recuse himself.
Adverse party’s failure to raise the conflict was not a waiver for there can be no waiver of the
public’s interest in having all votes of the Commission take place without members who have a
conflict.

Tenn. R. App. P. 3; Appeal as of right; Judgment of the Chancery Court
Affirmed, Modified and Remanded

FRANK G. CLEMENT , JR., J., delivered the opinion of the court, in which WILLIAM B. CAIN and
PATRICIA J. COTTRELL, JJ, joined.

Gary C. Shockley and Brigid M. Carpenter, Nashville, Tennessee, for the appellant, Wellmont
Health System.

G. Brian Jackson, David L. Johnson, and Gayle Malone, Jr., Nashville, Tennessee, for the appellee,
Mountain States Health Alliance.

Reid A. Brogden and Sue Ann Sheldon, Nashville, Tennessee, for the appellee, Tennessee Health
Facilities Commission.

OPINION

This appeal hinges on two key issues: whether Tennessee Health Facilities Commission
members who have a conflict of interest in the matters at issue have an affirmative duty to recuse
themselves in proceedings before the Commission, and whether a conflict of interest is waived when
no party to the proceedings raises an objection before the Commission to the alleged conflict of one
of its members.1

Facts and Procedural History

The appellant, Wellmont Health System (Wellmont), is a not-for-profit hospital system which
owns and operates five hospitals and related facilities. These facilities are located in Northeast
Tennessee and Southwest Virginia. Appellee, Mountain States Health Alliance (Mountain States),
is also a not-for-profit hospital system that owns and operates six hospitals in the same region.

On July 13, 2000 Wellmont applied for a Certificate of Need to build and operate a for-profit
hospital in Johnson City, Washington County, Tennessee. The proposed facility would be an acute
care facility providing emergency care, obstetrics, inpatient and outpatient surgery, intensive care,
mobile magnetic resonance imaging, and cardiac catheterization. In its application, Wellmont
asserted that additional hospital capacity is needed in Washington County based on reports showing
emergency room waits, delays in scheduling surgical and diagnostic procedures and the
unavailability of hospital beds.

The application process required that Wellmont project future hospital bed needs in
Washington County along with other factors. Mountain States contends that the “very heart of
Wellmont’s application” is the claim that 527 beds would be needed in Washington County by 2004
and that this statement is false and misleading along with other claims in the application.2 The
discrepancies were acknowledged in the testimony of Wellmont’s corporate representative who
acknowledged that the following corrections needed to be made to the projections for 2004: 24,503
hospital admissions as opposed to the incorrect figure of 32,095; 102,913 hospital patient days as
opposed to 134,799; 7,204 observation days as opposed to 9,436; 402 hospital beds as opposed to
527; and that instead of a 106 bed shortage, there would be a surplus of beds. Mountain States also
asserts that Wellmont understated the number of licensed beds as 421, when the correct number was
564 and that Wellmont’s asserted need of 106 additional hospital beds was based on false and
misleading information. Mountain States asserts that such erroneous information was the basis for
the Commission’s determination that additional beds were needed, and thus the reason the
Commission approved Wellmont’s Certificate of Need.

1
Additional issues are presented and are set forth later in the opinion but the two set forth above control the
outco me o f this appeal.

2
W ellmont acknowledged the error explaining that its consultant transposed two numbers which reported the
admissions from neighboring Sullivan County to Washington County such that 8,186 was reported as the number of
admissions instead of 1,816 w hich wa s the correct numbe r of admission s. Con sequently, total W ashington County
admissions were overstated for 1998 and projected adm issions in future years were also “infected” with the error in the
Certificate of Need application.

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 On October 25, 2000 the Commission held its hearing on Wellmont’s application for the
Certificate of Need. Physicians and lay persons testified. During this meeting and before the
Commission’s vote, the mathematical error in Wellmont’s application was disclosed. Mountain
States characterized Wellmont’s error as “a huge mistake.” Wellmont acknowledged that it had
made a mistake but countered arguing that some of the beds were “paper beds” which were not
available for patients. Wellmont’s counsel further argued that licensed but unused beds at North
Side Hospital, owned by Mountain States, should not be considered. Mountain States countered,
arguing that licensed beds at North Side must be counted. Wellmont rebutted Mountain States’
argument showing that Mountain States had submitted a Certificate of Need application in January
2000 which indicated a need for 497 beds, a figure which Wellmont asserts is close to its figure even
with the error.

After taking evidence and hearing arguments of counsel, the Commission voted granting
Wellmont’s application for the Certificate of Need. Of the ten members participating, five
commission members voted to approve Wellmont’s Certificate of Need and four voted to deny the
Certificate of Need. The chairperson abstained. Commissioner Charles Mann, who is alleged to
have a conflict of interest, voted with the majority in favor of granting the Certificate of Need.

On November 21, 2000 Mountain States initiated a contested case proceeding by its appeal
pursuant to Tenn. Code Ann. § 68-11-109(a) charging that the information contained in Wellmont’s
application is “misleading, inaccurate and incomplete,” that the new hospital is contrary to the
“goals, objectives, criteria and standards” of the State Health Plan, and that Wellmont’s new hospital
is unnecessary, not feasible and “will not lead to the orderly development of health care.” Absent
from the petition, Wellmont asserts, is an allegation of a conflict of interest by Mann under
Commission Rule 0720-1-.02, any procedural irregularity as to the proceedings before the
Commission, or any error which formed the basis for the Commission to issue the Certificate of
Need to Wellmont.

On March 13, 2001, Mountain States filed a Motion for Stay in the proceedings before the
Administrative Law Judge in which it alleged a conflict of interest by Mann under Rule 0720-1-.02.
Mountain States sought the stay so that it could conduct discovery as to whether Mann had a conflict
of interest that would have precluded him from participating in the proceedings and vote before the
Commission. On April 24, 2001, Administrative Law Judge Ralph Christian denied the Motion for
Stay on the basis that his review of the matter was de novo pursuant to Tenn. Code Ann. § 68-11-
109.3

3
Following the adverse ruling by Administrative Law Judge Ralph Christian denying the Motion for Stay on
the basis his review was de novo pursuant to T enn. C ode Ann. § 68-1 1-10 9, M ountain States petitioned the Davidson
County Chancery Court to review the Administrative Judge’s refusal of the stay of proceedings under the UAP A and the
Administrative Law Judge’s refusal to decide w hether the Co mmission had lawfully acted to approve W ellmont’s
Certificate of Need application. Alternatively, Mountain States also requested a writ of certiorari and a ruling that the
Certificate of Need was null and void because of Mann’s participation in the proceeding. Further, Mountain States
sought a writ of supersedeas under Tenn. Code Ann. § 27-9-106 to stay further proceedings by the THFC until the
(continued...)

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 Mountain States also filed a motion for summary judgment requesting that the Certificate of
Need issued to Wellmont be vacated because the application contained information that was false,
misleading and erroneous and the Certificate of Need was null and void because of Commissioner
Mann’s participation in the proceedings despite his conflict of interest. Mountain States argued that
Commissioner Mann’s conflict of interest was critical to the outcome of the hearing for he
participated in the discussion, he made the motion to approve Wellmont’s Certificate of Need and
he cast what became the deciding vote to approve the Certificate of Need.

Mountain States presented evidence which established that Commissioner Mann is the
principal owner, officer and director of Specialty Surgical Instruments (SSI) and that SSI sells
surgical instruments to hospitals and other health care providers in Tennessee. More specific to this
case, Mountain States presented evidence that SSI sold approximately $465,000 to Wellmont from
fiscal year 1997 through June 6, 2001, and alleged that Mann would likely sell even more equipment
to Wellmont if another hospital were opened. Mountain States also introduced evidence showing
that SSI sold $158,000 to Mountain States in the year 2000, bringing the total sales by SSI to more
than one-half million dollars for the period.

The Administrative Law Judge granted Mountain States’ motion for summary judgment on
both grounds and vacated the Certificate of Need that had been granted to Wellmont. Though she
found that both grounds were valid to support a grant of summary judgment, Judge Morgan held that
the conflict of interest issue is “entirely dispositive of the issue of whether summary judgment should
be granted.”

Wellmont filed a petition in the Davidson County Chancery Court seeking judicial review
of the Administrative Law Judge’s ruling asserting that the Administrative Law Judge erred in
finding that Mann had an improper conflict of interest, that Mountain States waived the right to
assert the conflict of interest, and that the Administrative Law Judge erred in finding that the
Commission based its vote on false, inaccurate and misleading information in Wellmont’s
application. The Chancellor affirmed the Administrative Law Judge’s ruling, finding that Mann had
a conflict of interest and was under an affirmative duty to disclose the conflict and recuse himself
from the proceedings resulting in the vote being void ab initio. The Chancellor also vacated that
portion of the prior ruling in which the Chancellor had held that Mountain States had waived the

3
(...continued)
Chancery C ourt co uld rev iew the m atter which was opp osed by the C omm ission and W ellmont.

On June 11, 2001 , the Chancery Court denied the motion for a stay on grounds that the Chancery Court did not
have subject matter jurisdiction and that even if the court did have jurisdiction, Mountain States had “waived its right
to challenge participation by Commissioner Mann in the proceeding of October 25, 2000, by its failure to raise that issue
at an appropriate time.” Mo unta in Sta tes Health Allian ce v. Tenn essee Health Facilities Co mm ission, et al. No. 01-1475-
III(II) (Davidson County Chancery Co urt June 5, 2001). Mountain States appealed the Chancellor’s ruling to this Court,
but while the appeal was pending the Administrative Law Judge granted summary judgment in favor of Mountain States
and this Court dismissed the appeal as moot because of the Administrative Law Judge’s ruling.

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conflict of interest by not raising it in earlier administrative proceedings. The Chancellor also
affirmed the Administrative Law Judge’s ruling that the Certificate of Need was based on “false,
incorrect, or misleading” information and should be vacated.

Standard of Review

Under the Tennessee Uniform Administrative Procedures Act (UAPA), the reviewing court
may reverse or modify the decision if the rights of the petitioner have been prejudiced because the
administrative findings, inferences, conclusions or decisions are:

(1) In violation of constitutional or statutory provisions;
(2) In excess of statutory authority of the agency;
(3) Made upon unlawful procedure;
(4) Arbitrary or capricious or characterized by abuse of discretion or clearly
unwarranted exercise of discretion; or
(5) Unsupported by evidence which is both substantial and material in the light
of the entire record.
In determining the substantiality of evidence, the court shall take into account
whatever in the record fairly detracts from its weight, but the court shall not
substitute its judgment for that of the agency as to the weight of the evidence on
questions of fact.

Tenn. Code Ann. § 4-5-322(h).

Judicial review of an agency's action follows the narrow, statutorily defined standard
contained in Tenn. Code Ann. 4-5-322(h) rather than the broad standard of review used in other
civil appeals. Wayne County v. Tennessee Solid Waste Disposal Control Bd., 756 S.W.2d 274, 279
-280 (Tenn. Ct. App. 1988) (citing CF Indus. v. Tennessee Pub. Serv. Comm'n, 599 S.W.2d 536, 540
(Tenn. 1980)); Metropolitan Gov't of Nashville v. Shacklett, 554 S.W.2d 601, 604 (Tenn. 1977);
DePriest v. Puett, 669 S.W.2d 669, 673 (Tenn. Ct. App. 1985), cert. denied, 469 U.S. 1034, 105
S.Ct. 505, 83 L.Ed. 2d 397 reh. denied, 469 U.S. 1181, 105 S.Ct. 942, 83 L.Ed.2d 954 (1985).

The scope of review by this court is the same as the trial court; review the findings of fact
by an administrative agency upon the standard of substantial and material evidence. Gluck v. Civil
Serv. Comm'n, 15 S.W. 3d 486, 490 (Tenn. Ct. App. 1999) (citing De Priest v. Puett, 669 S.W.2d
669 (Tenn. Ct. App. 1984)). What amounts to "substantial and material" evidence under Tenn. Code
Ann. § 4-5-322(h) is understood to require “something less than a preponderance of the evidence,
(citations omitted) but more than a scintilla or glimmer." Gluck at 490 (citing Wayne County v.
Tennessee Solid Waste Disposal Control Bd., 756 S.W. 2d 274, 280 (Tenn. Ct. App. 1988)).

While this court may consider evidence in the record that detracts from its weight, the court
is not allowed to substitute its judgment for that of the agency concerning the weight of the evidence.
Gluck at 490 (citing Tenn. Code Ann. § 4-5-322(h); Pace v. Garbage Disposal Dist., 390 S.W.2d

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461, 463 (Tenn. Ct. App. 1965). The evidence before the tribunal must be such relevant evidence
as a reasonable mind might accept as adequate to support a rational conclusion and such as to furnish
a reasonably sound basis for the action under consideration. Gluck at 490 (citing Pace at 463).

Conclusions of law are subject to de novo review on appeal without any presumption of
correctness. Niziol v. Lockheed Martin Energy Sys., Inc., 8 S.W.3d 622, 624 (Tenn.1999); Nutt v.
Champion Int'l Corp., 980 S.W.2d 365, 367 (Tenn.1998). Issues of statutory construction are solely
questions of law. Bryant v. Genco Stamping & Mfg. Co., 33 S.W.3d 761, 765 (Tenn. 2000); Hardin
v. Royal & Sunalliance Ins., 104 S.W.3d 501, 503 (Tenn. 2003).

Analysis

Wellmont asserts that Mountain States’ failure to raise the issue of whether Commissioner
Mann had a conflict of interest constitutes a waiver of the right to raise the conflict on appeal.
Raising the conflict at this late date is described by Wellmont as an “ace in the hole strategy”– that
is, a conflict ignored by Mountain States when Mountain States thought Commissioner Mann may
vote against Wellmont’s Certificate of Need application, but raised once the vote did not go in
Mountain States’ favor.

Conversely, Mountain States argues that under the Commission’s Rule 0720-1-.02(1), a
party’s waiver of the conflict of interest is immaterial because the Commission member has an
affirmative duty to disclose the conflict and to recuse himself/herself. Further, Mountain States
argues that the administrative agency’s position on this rule is, in essence, one of zero tolerance and
that “courts must give great deference and weight to an agency’s interpretation of its own rules”
quoting Quaker Oats Co. v. Jackson, 745 S.W. 2d 269, 272 (Tenn. 1988); Profill Dev., Inc. v. Dills,
960 S.W. 2d 17, 27 (Tenn. Ct. App. 1997).

This issue was addressed recently in Methodist Healthcare-Jackson Hospital v. Jackson-
Madison County General Hospital District, et al., No. M2002-01655-COA-R3-CV, 2003 WL
21202577 (Tenn. Ct. App. May 22, 2003) (Application for Permission to Appeal Denied by Supreme
Court, Oct. 27, 2003).4 Methodist Healthcare also involved a similar alleged conflict of
Commissioner Charles Mann. The rule at issue, Commission Rule 0720-1-.02(1), provides:

CONFLICTS OF INTEREST

(1) Members. If any matter before the Commission involves any project,
transaction, or relationship in which a member or their associated institution
or business has a direct or a conflicting interest, the member shall make known

4
This case was initially captioned M ethodist Healthcare-Jackson Hospital v. Jackson -Madison County General
Hospital District. The nam e of the plaintiff has been changed to Jackson T ennessee H ospital Co., LLC. because
Methodist Healthcare-Jackson Hospital was acquired by Jackson Tennessee Hospital Co., LLC . We will refer to this
case by its original caption for the prior opinion is filed under the original caption.

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 to the Commission that interest and recuse himself/herself from the
deliberation and vote, and join the general public during the proceedings.

(emphasis added)

In its application of Commission Rule 0720-1-.02(1), the Methodist Healthcare court stated:

To reiterate, Commission Rule 0720-1-.02(1) provides that a Commission
member with a defined conflict of interest "shall make known to the Commission that
interest and recuse himself/herself from the deliberation and vote, and join the general
public during the proceedings." (emphasis added). By the plain and mandatory
language of Commission Rule 0720-1-.02(1), it is evident that Commissioner Mann
had an affirmative duty to inform the Commission of his conflict of interest and recuse
himself from the deliberation and vote on Methodist's application.

Id. at *13.

Applying Commission Rule 0720-1-.02(1), the Methodist Healthcare court found that
Commissioner Mann “had an affirmative duty to inform the Commission of his conflict of interest
and thereby recuse himself from the vote and proceedings” and that “Jackson-Madison’s failure to
petition the Commission for recusal did not constitute a waiver.”5 Id. at *14. Ironically, the court’s

5
Unlike the argument in this case, Methodist Healthcare-Jackson Hospital had argued that Tenn. Cod e. Ann.
§ 4-5-302 (the UAPA), not Commission Rule 0720-1-.02(1), controlled the determination of whether Charles Mann had
an affirmative duty to raise the conflict and recuse himself or whether the hospital which opposed the issuance of the
Certificate of Need was req uired to raise the con flict. While acknowledging that the statute and the Co mmission R ule
both provided a means for disqualifying a Commission member, the Court found that the two were not inconsistent and
that the Commission Rule was controlling under the circumstances of that case which, as stated above, are very similar
to the facts in this case. The Court’s analysis in Methodist of the contrast between the statute and Comm ission Rule and
its application is helpful here:

T.C.A. § 4-5-30 2 pr ovid es only that an aggrieved party "may" petition for disqualification of a
Commission member upon know ledge of the existing or alleged conflict. U nlike Comm ission R ule
0720-1-.02(1), T.C .A. § 4 -5-30 2 do es not mand ate action on beha lf of the aggrieved party through
inclusion of the term "shall." Commission Rule 0720-1-.02(1) does not conflict with this statute, but
rather simply goes one step further in placing the affirmative burden on the Commission member
possessing the alleged or potential conflict of interest to reveal said conflict to the administrative
agency and to recuse himself from the vote and proceedings. We find no conflict with T.C .A. §
4-5-302, as this statute mandates disqualification of any Commission member with a conflict of
interest similar in m agnitud e to the conflict inv olved in this case. Both the statute and the rule require
disqualification based on conflict of interest, Commission Rule 0720-1-.02(1) simply places the
mandatory duty of disclosure and recusal on the Commission member--the party best suited to realize
whether such co nflict exists.

Methodist Healthcare-Jackson Hospital v. Jackson-M adiso n Coun ty Ge nera l Hospital D istrict, et al., No. M2002-
01655-COA-R3-CV, 2003 WL 21202577 (Tenn. Ct. App. May 22, 2003) at *13 .

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conclusion was supported by the Order of the Administrative Law Judge in this case.6 Pertinent
portions of the Order that supported the foregoing conclusion in Methodist Healthcare are as follows:

Because a party that appears before the Commission may not be aware of a
Commissioner’s conflict of interest at the time of a vote that impacts that party’s
rights or pecuniary interests, this rule is self-executing in the contest [sic] of a conflict
of interest, placing upon each Commissioner an affirmative duty, regardless of
whether any party to the proceeding requests it, to disclose at the beginning of the
hearing a direct interest or conflict of interest7 in the matter, and recuse himself/herself
from further involvement in the Commission’s hearing on the matter, the
Commission’s deliberation on the CON and the Commission’s vote on the CON.

Because recusal in the context of a conflict of interest is an affirmative duty of the
Commission member himself/herself, and because all Commissioners who serve on
the Tennessee Health Facilities Commission serve to advance the public policy clearly
stated in T.C.A. § 68-11-103, the failure of any party to the proceeding to "object" to
a Commissioner's participation in the vote, prior to the vote, is immaterial. There can
be no "waiver" of the public's interest in having all votes of the Commission take
place without any member participating who has a conflict of interest in the outcome
of the vote.

Id. at *14. (emphasis added)

Based on Commission Rule 0720-1-.02(1) and the conclusion reached in Methodist
Healthcare, we too hold that there can be no "waiver" of the public's interest concerning this issue;
therefore, Mountain States’ failure to petition the Commission for recusal did not constitute a waiver
of the conflict of interest at issue.

The next issue raised by Wellmont reads, “Did the Chancellor err in affirming the
Administrative Law Judge when Mountain States failed to show the existence of any conflict of
interest on the part of any THFC Commissioner?”

The Administrative Law Judge found that Commissioner Mann had a conflict of interest. Our
review of that determination is narrower than in other civil appeals. When reviewing an agency's
factual determinations, unlike other civil appeals, courts should be less confident that their judgment
is preferable to that of the agency. Wayne County v. Tennessee Solid Waste Disposal Control Bd. 756
S.W.2d 274, 279-280 (Tenn. Ct. App. 1988), see also 2 C. Koch, Administrative Law and Practice

6
The Methodist Healthcare court quoted at len gth from the Order rendered by Administrative Law Judg e Blair
Scoville Mo rgan in this case. Relevant portions of that Order, as quoted in Methodist Healthcare, are set forth in this
opinion.

7
The Order is slightly misquoted in the op inion, it sho uld rea d: “direct interest o r a conflicting intere st”

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§ 9.4 (1985). Courts do not review the fact issues de novo and, therefore, do not substitute their
judgment for that of the agency as to the weight of the evidence, Humana of Tennessee v. Tennessee
Health Facilities Comm'n, 551 S.W.2d 664, 667 (Tenn.1977); Grubb v. Tennessee Civil Serv.
Comm'n, 731 S.W.2d 919, 922 (Tenn.Ct.App.1987), even when the evidence could support a different
result. Hughes v. Board of Comm'rs, 204 Tenn. 298, 305, 319 S.W.2d 481, 484 (1958).

Wellmont contends that the record does not establish that SSI and Commissioner Mann would
enjoy an increase in its future sales to Wellmont if a new hospital was built. Wellmont argues that it
was error for the Administrative Law Judge to infer that more sales would result and for the
Chancellor to likewise support such an inference. Such a finding, Wellmont contends, is not
supported by the evidence, making summary judgment improper.

Wellmont’s argument misses the point. If a disqualifying conflict of interest exists, it is not
necessary to prove a future benefit to the commissioner. The presumption that such a conflict of
interest may influence a decision is the basis for rules requiring recusal when a commissioner has a
disqualifying conflict of interest.

The record is clear that Commissioner Mann and/or SSI had a substantial relationship with
Wellmont during the four years leading up to the vote. Specifically, the record shows that SSI had
sales to Wellmont of approximately $456,810 from 1997 through June of 2001. The appellate court
in Methodist Healthcare affirmed the Administrative Law Judge’s finding that Mann had a
“disqualifying pecuniary conflict of interest” based on sales to Methodist of approximately $405,093,
which occurred prior to the vote. Methodist at * 12. The facts before us are not dissimilar to the
facts in Methodist Healthcare. Accordingly, we affirm the finding that Commissioner Mann had a
conflict of interest that disqualified him from participating and voting on Wellmont’s application for
a Certificate of Need.

As a consequence of the foregoing ruling, we must now determine whether the participation
of Commissioner Mann voids only Commissioner Mann’s vote or the votes of all of the
commissioners and therefore the decision of the Commission. The conclusion of law set forth in the
Order of the Administrative Law Judge Granting Summary Judgment that is pertinent to this issue
reads:

8. The parties to this case are in agreement that Commissioner Mann cast the tie-
breaking vote that resulted in Wellmont’s [sic] being granted the requested CON.
Because Commissioner Mann failed in his affirmative duty to recuse himself from the
vote because of his conflict of interest, and his vote broke the tie in the Commission’s
delibrations, [sic] resulting in the granting of the CON to Wellmont, the entire vote
of the Commission is tainted and is void ab initio. Therefore, the CON granted to
Wellmont by the Commission, as such was the result of a tainted vote in violation of
the Commission’s own conflict of interest rule, as well as the stated public policy of
the Act, should be vacated. (emphasis added)

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 The foregoing conclusion of law clearly states that the Administrative Law Judge held that
the Certificate of Need was vacated. What is not clear is why, whether it was vacated because “his
(Mann’s) vote broke the tie” or because Commissioner Mann participated. In the Chancellor’s
Memorandum and Order she stated that the conflict of interest issue “provided a reasonably sound
basis for the ALJ’s holding that the Wellmont CON was void ab initio due to a conflict of interest.”
Moreover, the Chancellor upheld the decision of the Administrative Law Judge that Commissioner
Mann violated his duty to disclose his conflict of interest and recuse himself from deliberating and
voting on Wellmont’s application, and vacated the Wellmont Certificate of Need. However, the
Chancellor did not state whether she affirmed and vacated the Certificate of Need because “his vote
broke the tie” or because Commissioner Mann participated.

Conclusions of law are subject to our de novo review on appeal without any presumption of
correctness. Niziol v. Lockheed Martin Energy Sys., Inc., 8 S.W.3d 622, 624 (Tenn.1999); Nutt v.
Champion Int'l Corp., 980 S.W.2d 365, 367 (Tenn.1998). Therefore, we review the Chancellor’s
conclusion of law with no presumption of correctness or error. We begin our analysis of this issue
with the opinion in Methodist Healthcare in which this court held that “Mann’s participation in the
initial September 1998 vote approving Methodist’s CON application caused the vote [sic] be tainted
in violation of the Commission’s own conflict of interest rule, and therefore declare[d] said vote void
ab initio.” Id. at *14. (emphasis added) It is unclear whether the phrase “said vote” as used in
Methodist Healthcare refers to only Commissioner Mann’s vote or the vote of the commission. We
readily agree that Commissioner Mann’s vote is void ab initio, but should the votes of the other
Commissioners be deemed void.

Commissioner Mann indeed participated but did his participation, exclusive of his vote
“taint”, or stated another way, affect the outcome of the decision in favor of Wellmont. Without
Mann’s vote, Wellmont’s application did not receive a majority vote of the members present and
voting. Therefore, pursuant to the statute then in effect, the application of Wellmont was
disapproved. Tenn. Code Ann. § 68-11-108(f).8 If Commissioner Mann’s mere participation, in the
absence of proof that his participation affected the outcome of the proceedings, voids the vote of all
Commissioners, and thereby the decision of the Commission, we may be required to not only vacate
this decision, and remand it to the Commission for a new hearing, but other Commission decisions
when a commissioner with a conflict participates. Such may be the case even if the vote were eight
to one, with only the conflicted commissioner voting in opposition to the majority. We do not believe
this is the intent of the Commission Rule. To the contrary, we are of the opinion that the
“participation” contemplated in the Commission Rule requires an effect on the outcome of the
Commission’s decision. This conclusion is supported by the Commission Rule which does not
require the Commissioner to vacate the hearing room, only to “join the general public during the
proceedings.” Commission Rule 0720-1-.02(1). Accordingly, we hold that in the absence of proof
that the “participation” of the commissioner with the conflict, separate and apart from his/her vote,
affected the outcome of the commission’s decision, only the vote of the commissioner with the

8
The statute was in effect when the Commission voted; however, it was repealed effective July 1, 2002.

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conflict shall be void ab initio. Therefore, we hold that the vote of Commissioner Mann is void ab
initio and that the votes of the other commissioners are valid.

Having made that determination, we must now determine whether to remand this matter to
the Commission for further proceedings or whether the decision of the commission concerning
Wellmont’s application for a Certificate of Need is final. The initial vote was five in favor of granting
the Certificate of Need and four in opposition. Having found that Commissioner Mann’s vote is void
ab initio, the vote is four to four which constitutes a tie vote. For an application to be approved it
must receive a majority of those commissioners present and voting. A tie vote is considered a denial
of the application.9 Accordingly, the decision of the Commission constituted a denial of Wellmont’s
application for a Certificate of Need. Tenn. Code Ann. § 68-11-108(e) provides that the
“commission’s decision to approve or deny an application shall be final and shall not be
reconsidered.” The Chairperson abstained. Having abstained, the Chairperson cannot now vote to
break the tie for such would violate the statute which provides that a commission’s decision to
approve or deny an application shall be final and shall not be reconsidered. See Methodist
Healthcare-Jackson Hosp. v. Jackson-Madison County General Hosp. Dist., 2003 WL 21202577, *8-
9 (Tenn. Ct. App. 2003) (holding that the statute does not distinguish between a vote and a decision),
citing Tenn. Code Ann. § 68-11-108(e). Accordingly, we find that the decision of the Commission
denying Wellmont’s application for a Certificate of Need is final and the matter cannot be remanded
to the Commission for the purpose of conducting another hearing on Wellmont’s application.
Therefore, we too vacate the Certificate of Need granted to Wellmont for the reasons set forth above.

The third and final issue presented by Wellmont reads, “Did the Chancellor err in affirming
the Administrative Law Judge when the inadvertent mathematical errors in Wellmont’s Certificate
of Need application were fully disclosed to the THFC prior to its vote to grant the Certificate of
Need?”

We have found that Commissioner Mann’s vote was void ab initio and the application of
Wellmont for a Certificate of Need was denied by a decision of the Commission. Moreover, we
found that the decision by the Commission denying Wellmont’s application is final and the decision
of the Commission cannot be reconsidered. Accordingly, we find the issue pertaining to the alleged
mathematical errors set forth in the application of Wellmont is pretermitted as being moot.

In Conclusion

Based upon the foregoing, we hold that (1) Commissioner Mann had an affirmative duty to
inform the Commission of his conflict of interest and to recuse himself; (2) that Mountain States’
failure to petition the Commission for recusal did not constitute a waiver; (3) that Commissioner

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Pursuant to Tenn. Code A nn. § 68-11-104(f)(4) “no action of the commission shall be effective unless such
action is concurred in by a m ajority of its members present and voting.” Pursuant to Tenn. Code Ann. § 68-11-104(f)(5)
“the action shall be considered disapproved” in the event o f a tie vote. The se statutes were in effect when the
Commission voted; however, they were repealed effective July 1, 2002.

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Mann's vote approving Wellmont’s application for a Certificate of Need was void ab initio; (4) that
the vote of the eligible commissioners voting was four to four, being a tie vote, which constitutes a
decision by the Commission denying Wellmont’s application for a Certificate of Need in Washington
County; and (5) the decision of the Commission is final and is not subject to reconsideration by the
Commission.

Accordingly, we modify and affirm the ruling of the Chancery Court for the reasons set forth
above. Costs are assessed against Wellmont Health System.

_______________________________
FRANK G. CLEMENT, JR., JUDGE

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