Does a landlord (Tennessee) have to return a security deposit on apartment to a tenant who has not fulfilled the 12 month contract due to medical conditions requiring admission to a nursing home, provide apt is left clean and without damage?

The purpose of a security deposit is to protect the landlord from damages left by the tenant. Those damages include cleanup, necessary repairs and unpaid rent.

If the tenant was forced to enter a nursing home, they still needed to provide notice. So if unit was left vacant and rent unpaid for a period the landlord could make a case that the security deposit was being used to cover unpaid rent. The landlord must satisfy local law in informing the tenant within the statutory set time a statement of how the deposit is being used.

Providing notice does not get someone out of a lease.
Neither does a medical condition, with notice or not.
The landlord gets to keep the deposit.

Worse, some heartless landlords will sue for the remaining months and keep the apartment vacant.
That is rare, because chances are they never get the money, even if they win, and they must make a good faith effort to rent the place, but not succeed.
They can't 'double dip.'

I will answer from a moral view point.
Where they a good tenant before? Paid rent on time? No trouble.

No the medical condition does not give them any legal rights out of a lease. But if you want to get some really bad, really bad PR treat them badly.

Good business sense is often doing the right moral thing, even if it is not the legal thing that is required.

So a good landlord would work with the family of the person to help get things moved out and cleaned.

But there is not a legal reason to do anything but require that the lease be honored.