In re: FWH, by and through Aloha Nursing Rehab Centre v. Department of Human Services

• Court: Hawaii Supreme Court
• Decided: August 20, 2025
• Docket: SCWC-18-0000678
• Status: Published

Opinion

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Electronically Filed Supreme Court SCWC-XX-XXXXXXX 20-AUG-2025 07:56 AM Dkt. 24 SO

SCWC-XX-XXXXXXX

IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

In re FWH, by and through ALOHA NURSING REHAB CENTRE, Petitioner/Appellant-Appellant,

vs.

DEPARTMENT OF HUMAN SERVICES, STATE OF HAWAIʻI, Respondent/Appellee-Appellee.

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-XX-XXXXXXX; CASE NO. 1CC171002013)

SUMMARY DISPOSITION ORDER (By: Recktenwald, C.J., McKenna, Eddins, Ginoza, and Devens, JJ.)

This appeal arises from Aloha Nursing Rehab Centre’s

(Aloha) request for a hearing with the Department of Human

Services (DHS) Administrative Appeals Office (AAO) and request

for reimbursement from DHS.

Based on DHS’ Medicaid eligibility determination, Aloha

accepted FWH as a facility resident. Aloha provided services to

FWH for eight years. Aloha later found out that FWH did not *** NOT FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER ***

qualify for Medicaid because he had too much money in a

California bank account. DHS ended his Medicaid and stopped

paying Aloha.

Aloha worked to clear the California account, and DHS

retroactively reinstated FWH’s Medicaid – but not all the way

back to when DHS first ended benefits. Fourteen months were not

covered by Medicaid, DHS said.

Aloha requested reimbursement from DHS for the fourteen

months of services provided. DHS refused.

Aloha appealed. The AAO denied its appeal. Because it was

not FWH’s “authorized representative,” AAO said, the nursing

facility lacked standing. And its appeal was too late.

Recently In re FT by and through Aloha Nursing Rehab Ctr.

v. Dep’t of Hum. Svcs., ____P.3d____, 2025 WL 2125219 (Haw. July

29, 2025), held that skilled nursing facilities have a

constitutionally-protected property interest in reimbursement

for Medicaid-related services provided in reliance on DHS

eligibility determinations. Thus, “[w]here an individual

receiving Medicaid benefits does not have an authorized

representative willing or able to appeal an adverse agency

decision, a skilled nursing facility providing care to the

person must receive notice, and the opportunity to appeal a DHS

Medicaid eligibility determination.” Id. at *4.

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We hold that, based on In re FT, Aloha has the right to

notice and the opportunity to be heard. We vacate the ICA’s

judgment and remand for a hearing on the merits.

I.

In May 2004, DHS Med-Quest approved FWH’s application for

Medicaid. Aloha, a nursing home specializing in skilled nursing

and hospice care, admitted FWH as a resident in June 2004. At

the time, FWH’s sister was his power of attorney. She would

step in to make decisions on his behalf if he became

incapacitated.

In March 2012, FWH’s doctor determined that FWH became

incapacitated. That same week, Aloha found out that FWH’s

sister (his power of attorney) had recently died.

On April 1, 2012, DHS ended Medicaid benefits and stopped

In July 2012, Aloha filed a petition asking the court to

find FWH incapacitated and appoint the Office of the Public

Guardian (OPG) as his guardian. The court found FWH

incapacitated and appointed him a guardian.

Sometime in 2013, FWH’s guardian submitted a Medicaid

application to DHS. DHS denied the application because FWH had

$8,169.48 in a California bank account. Those funds made him

too wealthy to receive Medicaid.

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Aloha worked with a California attorney to release the

funds so FWH could qualify again. FWH’s guardian re-applied for

Medicaid on his behalf.

In February 2014, DHS retroactively granted FWH Medicaid

benefits as of July 1, 2013. FWH remained covered until his

death in June 2014.

In April 2016, Aloha asked DHS to reimburse it for

$93,379.18 in services provided to FWH during the fourteen

months DHS did not pay FWH’s benefits.

DHS denied the reimbursement request. DHS explained that

it ended FWH’s Medicaid because FWH had money in a California

bank account that made him ineligible for Medicaid.

Aloha claimed that it never received notice of this

Medicaid termination. Aloha requested a hearing with the AAO

challenging that action. The AAO denied the hearing request.

Aloha appealed the AAO’s denial to the Circuit Court of the

First Circuit. DHS moved to dismiss. It argued Aloha did not

have standing to appeal termination of Medicaid benefits per

Hawaiʻi Revised Statutes (HRS) § 346-12 (2015) and Hawaiʻi

Administrative Rules (HAR) § 17-1703.1-3 (eff. 2013). The

circuit court denied DHS’ motion to dismiss and remanded for the

AAO to address the narrow issue of whether Aloha had standing to

request an administrative hearing.

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Aloha filed a revised claim with the AAO, and the AAO held

a hearing to address the question of standing. The AAO hearing

officer determined that because Aloha was not an “applicant or

recipient” per HRS § 346-12, it did not have a right to a

hearing per HAR § 17-1703.1-3. It also was not entitled to

notice of DHS’ termination of FWH’s benefits per HAR § 17-

1703.1-2 (eff. 2013).

Aloha appealed to the circuit court again. The circuit

court affirmed the AAO’s decision. It determined that Aloha

lacked standing under HRS § 346-12. And even if third-party

standing applied, Aloha failed to meet the third-party standing

test.

Aloha appealed to the ICA. The ICA agreed with the circuit

court that Aloha lacked standing per HRS § 346-12. The ICA also

affirmed the circuit court’s holding that third-party standing

was unavailable under HRS § 346-12, and inapplicable to Aloha.

On cert, Aloha argues that it has standing under HRS § 346-

12, and third-party standing.

II.

Based on In re FT, we hold that Aloha was entitled to

notice and the opportunity to be heard. 2025 WL 2125219, at *4.

Aloha provided services to FWH from June 2004 (after FWH

was approved for Medicaid) until his death in 2014. No other

party was willing or able to appeal DHS’ eligibility decision.

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Thus, we hold that Aloha has a constitutionally-protected

property interest in services provided to FWH, and is entitled

to an administrative hearing on the merits.

III.

We vacate both the ICA’s May 16, 2024 judgment and the

circuit court’s August 1, 2018 “Order Affirming Administrative

Hearing Decision Dated November 20, 2017” and judgment. We

remand for a new administrative hearing on the merits of FWH’s

Medicaid eligibility from April 2012 to June 2013.

DATED: Honolulu, Hawai‘i, August 20, 2025.

Thomas E. Bush /s/ Mark E. Recktenwald for petitioner /s/ Sabrina S. McKenna Lili A. Young (James W. Walther on the briefs) /s/ Todd W. Eddins for respondent /s/ Lisa M. Ginoza

/s/ Vladimir P. Devens