Islands Hospice, Inc. v. Malama Ola Health Servs.

1

IN THE MATTER OF ISLANDS HOSPICE, INC., Appellant-Appellant, v. MALAMA OLA HEALTH SERVICES LLC; STATE HEALTH PLANNING AND DEVELOPMENT AGENCY, Appellees-Appellees, and JOHN DOES 1-10, JANE DOES 1-10, DOE GOVERNMENTAL UNITS 1-10, AND DOE ENTITIES 1-10, Appellees

No. CAAP-18-0000594

Intermediate Court of Appeals of Hawaii

June 20, 2024

NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Appeal from the Circuit Court of the First Circuit (Civil No 17-1-2117)

On the briefs:

Claire Wong Black for Appellant-Appellant Islands Hospice, Inc.

Regan M. Iwao for Appellee-Appellee Malama Ola Health Services, LLC

Angela A. Tokuda Deputy Attorney General for Appellee-Appellee State Health Planning & Development Agency

Nakasone, Presiding Judge, McCullen, J., and Circuit Court Judge Kawashima, in place of Leonard, Acting Chief Judge Hiraoka, Wadsworth and Guidry, JJ., recused

SUMMARY DISPOSITION ORDER

This secondary appeal arises out of a challenge brought by an existing hospice care provider, Appellant-Appellant Islands Hospice, Inc. (Islands Hospice), against the Appellee-Appellee State Health Planning and Development Agency's (Agency) approval of a new hospice care provider, Appellee- Appellee Malama Ola Health Services LLC's (Malama Ola) application for a Certificate of Need to provide services.^[1]

Islands Hospice appeals from the July 23, 2018 "Order; Notice of Entry" (Order) and September 21, 2018 "Final Judgment" (Judgment) filed and entered by the Circuit Court of the First Circuit (Circuit Court).^[2]

On appeal, Islands Hospice contends the Circuit Court erred in affirming the Agency's October 10, 2017 "Decision on the Merits" (Decision) approving Malama Ola's Certificate of Need application because: (1) the Agency violated HRS § 91-9^[3] by considering "off-record evidence" and failing to "create a record of the evidence received and considered"; (2) Malama Ola's application improperly relied "on speculation regarding the need for Supportive Care," which is not a health care service requiring a Certificate of Need under Hawai'i Administrative Rules (HAR) § 11-186-5;^[4] (3) the Agency violated HRS § 323D-43 (2010)^[5] because it did not rely upon "actual utilization data or a need methodology that is reliable, probative, and substantial, as required by the State Plan"; and (4) the Agency clearly erred in determining "there was no good cause for reconsideration of the Decision."

Upon careful review of the record and the briefs submitted by the parties and having given due consideration to the arguments advanced and the issues raised, we resolve Islands Hospice's contentions as follows, and affirm.

On May 4, 2017, Malama Ola filed a Certificate of Need application under HRS § 323D-44,^[6] seeking to establish hospice services on O'ahu. In this case, the multi-layered agency review process for Certificates of Need set forth in HRS § 323D-45(a)^[7] was conducted through public meetings by the Oahuwide Certificate of Need Review Committee as the "subarea council" set forth in the statute; the "CON Review Panel" (Certificate of Need Review Panel) as the statutory "review panel"; and the Statewide Health Coordinating Council (Statewide Council).

On July 7, 2017, the Oahuwide Certificate of Need Review Committee reviewed Malama Ola's application at a public meeting and recommended disapproval of the Certificate of Need because Malama Ola met only four out of the six Certificate of Need criteria.^[8] On July 27, 2017, the Statewide Council reviewed Malama Ola's application at a public meeting, and recommended conditional approval pending submission of a line-of-credit verification from the bank, and cash flow projections for the first three years.

The Agency's Decision noted that on August 31, 2017, Malama Ola submitted "additional information/ modifications to its application[.]"

On September 8, 2017, the Certificate of Need Review Panel conducted its review of Malama Ola's application and recommended approval on October 4, 2017, finding that all six criteria were met.

On October 10, 2017, the Agency issued the Decision approving Malama Ola's Certificate of Need application to provide hospice services on Oahu.

On October 24, 2017, Islands Hospice and other existing hospice providers requested a "public hearing" for reconsideration of the Decision.

On December 8, 2017, the Agency's Reconsideration Committee held a public meeting to determine whether good cause had been shown to convene a "public hearing" for reconsideration of the Decision under HAR § 11-186-82.^[9] On December 22, 2017, the Reconsideration Committee denied Islands Hospice's request, issuing a "Written Explanation for Denial of Requests for Reconsideration Hearing" (Denial of Reconsideration).

On December 28, 2017, Islands Hospice appealed the Decision and Denial of Reconsideration to the Circuit Court. The Circuit Court entered the July 23, 2018 Order (7/23/18 Order) remanding the matter to the Agency under HRS § 91-14(g) to clarify whether it accepted or rejected the Statewide Council's "line of credit recommendation[,]" but affirming the Decision in all other respects.

On September 18, 2018, the Agency issued a Conditional Certification to Malama Ola pursuant to the 7/23/18 Order. The Circuit Court entered the September 21, 2018 Final Judgment, from which Islands Hospice timely appealed.

(1) Islands Hospice argues that the Agency violated HRS Chapter 91 (the Hawai'i Administrative Procedure Act (HAPA)), by "wrongly consider[ing] off-the-record evidence in violation of HRS § 91-9(g)[,]" and by "fail[ing] to maintain a whole record of the [Certificate of Need] application review proceedings for appellate review" under HRS §§ 91-9(e) and (f). Islands Hospice specifically argues that: the Agency's Decision stated that it "expressly considered the oral testimony submitted by the applicant and other affected persons"; the "oral testimony is entirely absent from the record" because the Agency "failed to transcribe any of the proceedings"; the Agency's "consideration of [such] oral testimony violates the HAPA's requirement that agency decisions be made on record evidence" under HRS § 91-9(g); and the lack of a "whole record" "prejudices an appealing party in its ability to challenge an agency decision." (Cleaned up.)

Malama Ola and the Agency argue that HRS Chapter 91 does not apply because: the Certificate of Need "application review process is not a 'contested case' proceeding" subject to HRS § 91-9; the Agency "did not conduct an 'agency hearing'" under HRS Chapter 91 before issuing its Decision; the "public meetings" by the advisory councils and panel "were not 'agency hearings' as defined by HRS Chapter 91"; and thus, the Agency "was not required to create or maintain a transcript of the oral testimonies submitted to the advisory councils/panels" that "merely made non-binding recommendations[.]" (Emphasis omitted.) These arguments have merit.

To determine whether HRS Chapter 91 and HRS § 91-9 apply requires statutory interpretation, which we review de novo. Keep the North Shore Country v. Bd. of Land & Nat. Res. (North Shore), 150 Hawai'i 486, 503, 506 P.3d 150, 167 (2022). "[W]here the statutory language is plain and unambiguous, our sole duty is to give effect to its plain and obvious meaning." Ocean Resort Villas Vacation Owners Ass'n v. Cnty. of Maui, 147 Hawai'i 544, 553, 465 P.3d 991, 1000 (2020) (citation omitted).

"Agency" is defined as a "state or county board, commission, department, or officer authorized by law to make rules or to adjudicate contested cases . . . ." HRS § 91-1 (2012 & 2017 Supp.). An "agency hearing" is a "hearing held by an agency immediately prior to a judicial review of a contested case as provided in section 91-14." Id. A "contested case" is a "proceeding in which the legal rights, duties, or privileges of specific parties are required by law to be determined after an opportunity for agency hearing." Id.

Here, the Oahuwide Certificate of Need Review Committee, the Statewide Council and the Certificate of Need Review Panel do not fall under the definition of "agency" pursuant to HRS § 91-1 because they do not "make rules" or "adjudicate contested cases." These entities are not agencies that hold "agency hearing[s]" under HRS Chapter 91, but rather, conduct "public meetings" prescribed by HRS § 323D-45 and make "recommendations" to the Agency. HRS § 323D-45 requires that "a record of the meeting shall be kept[,]" and the Agency did so here.^[10] Thus, the HRS § 91-9 record-keeping requirements for HRS Chapter 91 hearings did not apply to the public meetings in this case.

(2) and (3) Islands Hospice argues that the Agency's Decision erroneously concluded that Malama Ola met the "Need and Accessibility" criterion because the Agency's finding "was not based on actual utilization data or a need methodology that is reliable, probative, and substantial, as required by the State Plan"; and was "clearly erroneous given the overwhelming data and studies evidencing no need for an additional hospice provider in Honolulu."

The Agency made the following pertinent findings and conclusions on the "Need and Accessibility" criterion:

35. The Agency finds that the anticipated growth in demand for [Hawaii Medical Service Association]'s supportive care services will likely impair the current Hospice providers' ability to meet the need for Hospice services on Oahu.

36. The Agency finds that an additional Hospice provider is necessary to ensure that the need for Hospice services will be met.

37. The Agency finds that there is a need for the Proposal.

38. The Agency finds that the need and accessibility criteria have been met.

The applicant has met the requisite burden of

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