In re: Islands Hospice, Inc. v. Malama Ola Health Services LLC

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Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
20-JUN-2024
08:14 AM
Dkt. 108 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI‘I

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

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CIVIL NO. 17-1-2117)

SUMMARY DISPOSITION ORDER
(By: Nakasone, Presiding Judge, McCullen, J., and Circuit Court
Judge Kawashima, in place of Leonard, Acting Chief Judge,
Hiraoka, Wadsworth and Guidry, JJ., recused)

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-
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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

1 Under Hawaii Revised Statutes (HRS) Chapter 323D, entitled
"Health Planning and Resources Development and Health Care Cost Control," the
Agency is charged with promoting accessibility to "quality health care
services at reasonable cost." HRS § 323D-12(a)(1) (2010). The Agency
reviews applications for Certificates of Need, which are required for any
entity seeking to, inter alia, "develop" or "initiate" health care services.
HRS § 323D-43(a)(1) (2010).
2 The Honorable Keith K. Hiraoka presided.
3 HRS § 91-9 (2012), entitled "Contested cases; notice; hearing;
records," applies to contested case hearings, and provides in pertinent part:

(a) Subject to section 91-8.5, in any contested case, all
parties shall be afforded an opportunity for hearing after
reasonable notice.

(b) [(setting forth required contents for the hearing
notice)]

. . . .

(e) For the purpose of agency decisions, the record shall
include:

(1) All pleadings, motions, intermediate rulings;

(2) Evidence received or considered, including oral
testimony, exhibits, and a statement of matters
officially noticed;

(3) Offers of proof and rulings thereon;

(4) Proposed findings and exceptions;

(5) Report of the officer who presided at the
hearing;

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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

(6) Staff memoranda submitted to members of the
agency in connection with their consideration
of the case.

(f) It shall not be necessary to transcribe the record
unless requested for purposes of rehearing or court review.

(g) No matters outside the record shall be considered by
the agency in making its decision except as provided
herein.
4 HAR Chapter 11-186, entitled "Certificate of Need Program,"
contains the pertinent agency rules. HAR § 11-186-5, which sets forth
"[s]tandard categories of health care services," does not list "Supportive
Care"; but pertinently lists "[h]ospice" within the "Special Services"
category under subsection (4)(H).
5 HRS § 323D-43 (2010), entitled "Certificates of need," provides
in pertinent part:

(b) No certificate of need shall be issued unless the
state agency has determined that:

(1) There is a public need for the facility or the
service; and

(2) The cost of the facility or service will not be
unreasonable in the light of the benefits it will
provide and its impact on health care costs.

(c) The state agency may adopt criteria for certificate
of need review which are consistent with this section.
Such criteria may include but are not limited to need,
cost, quality, accessibility, availability, and
acceptability.

Each decision of the state agency to issue a
certificate of need shall . . . be consistent with the
state health services and facilities plan [(State Plan)] in
effect under section 323D-15. . . .

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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

6 HRS § 323D-44 (2010), entitled "Applications for certificates of
need," sets forth a 90-day period of agency review for Certificate of Need
applications as follows:

(a) An applicant for a certificate of need shall file an
application with the state agency. . . .

Each application shall include a statement evaluating
the facility's or service's probable impact on health care
costs and providing additional data as required by rule.
The statement shall include cost projections for at least
the first and third years after its approval.

. . . When the state agency determines that the application
is complete, the period for agency review described in
subsection (b) shall begin, and the state agency shall
transmit the completed application to the appropriate
subarea councils, the review panel, the statewide council,
appropriate individuals, and appropriate public agencies. .
. .

(b) The state agency shall issue a decision on the
application within ninety days after the beginning of the
period for agency review . . . .

7 HRS § 323D-45 (2010) is entitled "Subarea council, review panel,
and statewide council recommendations for issuance or denial of certificates
of need." This section contains the review process for Certificates of Need
by the subarea council, review panel, and statewide council, which consists
of hearing argument and evidence at public meetings, making a recommendation
to the Agency, and keeping "a record of the meeting," as follows:

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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

(a) Except for an administrative review as provided in
section 323D-44.5, . . . the state agency shall refer every
application for a certificate of need to the appropriate
subarea council or councils, the review panel, and the
statewide council. The subarea council and the review
panel shall consider all relevant data and information
submitted by the state agency, subarea councils, other
areawide or local bodies, and the applicant, and may
request from them additional data and information. The
review panel shall consider each application at a public
meeting and shall submit its recommendations with findings
to the statewide council. The statewide council shall
consider the recommendation of the review panel at a public
meeting and shall submit its recommendations to the state
agency within such time as the state agency prescribes.
The statewide council and the review panel may join
together to hear or consider simultaneously information
related to an application for a certificate of need.

(b) At a public meeting in which a subarea council or the
review panel considers an application for a certificate of
need, any person shall have the right to be represented by
counsel and to present oral or written arguments and
evidence relevant to the application; any person directly
affected by the application may conduct reasonable
questioning of persons who make factual allegations
relevant to the application; any staff member of the state
agency may conduct reasonable questioning of persons who
make factual allegations relevant to the application; and a
record of the meeting shall be kept.

(Emphases added.)
8 The Oahuwide Certificate Review Committee set forth the six
Certificate of Need criteria as: (1) Relation to the State Health Services
and Facilities Plan; (2) Need and Accessibility; (3) Quality of Service/Care;
(4) Cost and Finances; (5) Relation to the Existing Health Care System;

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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

(6) Availability of Resources. This committee concluded that "Need and
Accessibility" was not met because "[t]he applicant has not demonstrated that
there is a current deficit in the supply of hospice services in the service
area nor has it demonstrated that there is likely to be a deficit in the near
future." It also concluded that "Cost and Finances" were not met because
"[t]he applicant has not demonstrated that sufficient working capital will be
available to ensure the project's financial feasibility until Medicare
certification is obtained."

9 HAR § 11-186-82(b) states:
(b) A request for a public hearing shall be deemed by the
committee to have shown good cause, if:

(1) It presents significant relevant information not
previously considered by the agency which, with

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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

reasonable diligence, could not have been presented
before the agency made its decision;

. . . .

(5) The decision of the administrator differs from the
recommendation of the statewide council.

(Emphases added.) HRS § 323D-47 provides that "good cause" is "shown" if,
inter alia, the request for a public hearing "presents significant, relevant
information not previously considered by the state agency[.]"

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"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

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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

10 The Agency record contains the minutes of the three public
meetings summarizing what transpired, retaining a list of those who
testified, and recording the votes of the committee members who recommended
approval or recommended disapproval of Malama Ola's application.

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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 proof
and has shown by a preponderance of the evidence that the
Proposal meets the criteria established in Section 11-186-
15, HAR.

Accordingly, the Agency hereby determines that,
pursuant to Chapter 323D-43(b), HRS:

(1) There is a public need for this service; and

(2) The cost of the service will not be
unreasonable in light of the benefits it will
provide and its impact on health care costs.

An appellate court must determine "whether the circuit
court was right or wrong in its decision by applying the
standards set forth in HRS § 91-14(g) 11 to the agency's
decision." North Shore, 150 Hawai‘i at 502-03, 506 P.3d at 166-
67 (footnote added) (citation omitted). We review the record of
an agency's decision to determine whether, inter alia, the
agency's findings are "[c]learly erroneous in view of the

11 Here, even though no contested case hearing was held, the denial
of the reconsideration hearing is reviewed as the appealable "final decision
and order" under HRS § 91-14, which provides for "[j]udicial review of
contested cases." See Kaleikini v. Thielen, 124 Hawai‘i 1, 26, 237 P.3d 1067,
1092 (2010) (holding that the denial of a request for a contested case
hearing "constituted a 'final decision and order'" qualifying for judicial
review under Chapter 91). HRS § 323D-48(a) (2010) provides for "[j]udicial
review of state agency decisions," and states that: "[a]ny person adversely
affected by a final decision of the [Agency] with respect to a certificate of
need . . . may appeal in the manner provided by chapter 91 to the circuit
court . . . ." A "decision on the merits" on a Certificate of Need
application "shall become final after there is an opportunity for any person
to request a public hearing for reconsideration . . . ." HAR § 11-186-70(c).

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reliable, probative, and substantial evidence on the whole
record[.]" Id. (quoting HRS § 91-14(g)(5)). Appellate review
on a secondary appeal "is further qualified by the principle
that the agency's decision carries a presumption of validity and
appellant has the heavy burden of making a convincing showing
that the decision is invalid." Id. at 503, 506 P.3d at 167
(cleaned up). "Courts review agency conclusions on mixed
questions of law and fact under the clear error standard." Id.
[A] mixed determination of law and fact is clearly
erroneous when (1) the record lacks substantial evidence to
support the finding or determination, or (2) despite
substantial evidence to support the finding or
determination, the appellate court is left with the
definite and firm conviction that a mistake has been made.

Id. at 503, 506 P.3d at 167 (citation omitted).
Here, the Agency detailed its findings necessary to
support its mixed factual and legal conclusion that the need
criterion was met by the applicable preponderance of the
evidence standard of proof. This conclusion was not clear
error. See id. Islands Hospice does not point to any statute,
rule, or any language in the State Plan that requires the Agency
to base its decision on "actual utilization data" or "a need
methodology that is reliable, probative, and substantial[.]"
This argument goes to the weight of the evidence and Islands
Hospice's disagreement with how the Agency resolved conflicts in
testimony and submissions, which we do not second-guess on
appeal. See Sierra Club v. D.R. Horton-Schuler Homes, LLC,
136 Hawai‘i 505, 522, 364 P.3d 213, 230 (2015) ("A court
reviewing an agency's decision cannot 'consider the weight of
the evidence to ascertain whether it weighs in favor of the
administrative findings, or review the agency's finding of fact
by passing upon the credibility of witnesses or conflicts in
testimony, especially the finding of an expert agency in dealing

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with a specialized field.'") (citation omitted). Regarding the
State Plan, HRS § 323D-43 requires the Agency's decision on
Certificate of Need to "be consistent" with the State Plan.
Whether the Agency determined the need criterion in a manner
"consistent" with the State Plan is a mixed question of fact and
law for which the Agency must be accorded deference, given the
Agency's "expertise and experience in the particular field[.]"
See Dole Haw. Div.-Castle & Cooke, Inc. v. Ramil, 71 Haw. 419,
424, 794 P.2d 1115, 1118 (1990) ("Where both mixed questions of
fact and law are presented, deference will be given to the
agency's expertise and experience in the particular field and
the court should not substitute its own judgment for that of the
agency.") (citation omitted).
We conclude that the Agency's mixed determination of
law and fact that Malama Ola's Certificate of Need application
met the "Need and Accessibility" criterion was supported by
substantial evidence and was not clear error. See North Shore,
150 Hawai‘i at 503, 506 P.3d at 167.
(4) Islands Hospice argues that the December 22, 2017
Denial of Reconsideration was clearly erroneous because there
was good cause for reconsideration in light of "significant
relevant information" that the Agency had not previously
considered, i.e. a December 8, 2017 study done by Simione
Healthcare Consultants, LLC (Simione Consultants). This
argument is unpersuasive.
Here, the record reflects that the Reconsideration
Committee considered the "written requests for reconsideration,
the written testimony, exhibits, attachments and the
supplementary material submitted by the persons who made the
requests, and the oral testifiers at the good cause meeting."
These submissions were from four healthcare entities, including

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Islands Hospice and Simione Consultants. The Reconsideration
Committee concluded, following a December 8, 2017 public meeting
on the four entities' requests for reconsideration, that there
was no "good cause" shown under HRS § 323D-47, warranting a
public hearing for reconsideration. The Reconsideration
Committee's determination that "there was no significant,
relevant information presented, not previously considered" by
the Agency to constitute "good cause" under HRS § 323D-47, is a
mixed question of fact and law, which must be accorded
deference, and was not clear error. See Dole Haw. Div.-Castle &
Cooke, 71 Haw. at 424, 794 P.2d at 1118.
We conclude that Islands Hospice's contentions on
appeal are without merit, and the Circuit Court did not err in
affirming the Agency's Decision. See North Shore, 150 Hawai‘i at
502-03, 506 P.3d at 166-67.
For the foregoing reasons, we affirm the July 23, 2018
"Order; Notice of Entry" and the September 21, 2018 "Final
Judgment," both filed and entered in the Circuit Court of the
First Circuit.
DATED: Honolulu, Hawai‘i, June 20, 2024.
On the briefs:
/s/ Karen T. Nakasone
Claire Wong Black
Presiding Judge
for Appellant-Appellant
ISLANDS HOSPICE, INC.
/s/ Sonja M.P. McCullen
Associate Judge
Regan M. Iwao
for Appellee-Appellee
/s/ James S. Kawashima
MALAMA OLA HEALTH SERVICES,
Circuit Court Judge
LLC

Angela A. Tokuda
Deputy Attorney General
for Appellee-Appellee
STATE HEALTH PLANNING &
DEVELOPMENT AGENCY

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