The Hawaii Supreme Court reversed the lower courts’ rulings denying a nursing facility’s request for a hearing to challenge a decision terminating its resident’s Medicaid benefits. Nursing facilities have constitutionally protected property interests in compensation for services performed for residents in reliance on eligibility determinations by the Department of Human Services (DHS). In re FT, SCWC-18-0000677 (Haw. July 29, 2025).
In 2011, Aloha Nursing Rehab Center (Aloha Nursing), a skilled nursing facility, accepted FT as a permanent resident after Hawaii’s DHS determined that she was eligible for Medicaid. FT’s husband, who was her authorized representative, signed an agreement authorizing the release of information and payment of FT’s Medicaid benefits to Aloha Nursing. FT’s husband was declared incapacitated in 2012. The Office of Public Guardian (OPG) was appointed as his guardian.
In 2012, DHS terminated FT’s Medicaid benefits after determining that she had a house held in a revocable trust and was over the Medicaid income limit. Before the termination of her benefits, FT was declared incapacitated, and the OPG was in the process of being appointed as her guardian. Aloha Nursing was not notified that FT’s benefits had been terminated and only became aware of it because DHS ceased making payments to Aloha Nursing for her care. The OPG submitted a new application for Medicaid benefits on FT’s behalf, but it was denied. Aloha Nursing continued to provide care for FT until her death in 2014. The OPG did not appeal the eligibility determination.
From 2015 to 2016, Aloha Nursing unsuccessfully attempted to get assets from the trust as reimbursement for care it provided to FT between 2012 and 2014. In 2016, it contacted DHS requesting $121,831.99 in reimbursement, but DHS denied both the request and a request for consideration of its denial. Aloha Nursing unsuccessfully sought a hearing with the DHS Administrative Appeals Office (AAO). The circuit court and Intermediate Court of Appeals (ICA) affirmed the denial, ruling that Aloha Nursing lacked standing to challenge the Medicaid eligibility determination because it was not the resident or an authorized representative under section 346-12 of the Hawaii Revised Statutes. Aloha Nursing filed a petition for certiorari, which was granted by the Hawaii Supreme Court.
The Hawaii Supreme Court disagreed with the lower courts’ decisions. It ruled that although the applicable statute and DHS rules provide that only Medicaid applicants or recipients, or their authorized representatives, can challenge Medicaid eligibility decisions, nursing facilities have a constitutionally protected property interest in reimbursement for care provided to residents in reliance on DHS’s Medicaid eligibility determinations. This interest arises from DHS rules providing that DHS must reimburse nursing facilities for care provided to residents who are eligible for Medicaid benefits and begins when the notice of eligibility is issued.
Because Aloha Nursing had a protected property interest in payment for the Medicaid services it provided to FT in reliance on DHS’s initial eligibility determination, it had due process rights under article 1, section 5 of the Hawaii Constitution to notice of actions regarding her Medicaid eligibility that adversely affected its property interests and its appeal rights, as well as an opportunity to be heard. The court also held that nursing facilities have standing to appeal adverse eligibility determinations affecting residents admitted with Medicaid benefits because of their protected property interest in reimbursement and due process right to a contested case hearing. Accordingly, Aloha Nursing had standing to request a contested case hearing addressing the termination of FT’s Medicaid benefits. The court vacated the lower court judgments and remanded the case to the AAO for a hearing on the merits.
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