Why Hawaii’s Unlicensed Elder Care Industry Is Out Of Control

UPDATED. Lawmakers have introduced a bill with the backing of the industry and some elderly-rights groups but the measure faces a long road to passage.
By Nathan Eagle /

Story updated 12:51 p.m., 1/23/2019

A growing number of long-term care facilities for the elderly and disabled have “gone rogue,” operating in the shadows without a license or state oversight, according to industry representatives, state lawmakers and health officials.

Inspectors have been denied entry into homes, there have been allegations of deaths linked to the transfer of patients to illegal facilities and an underground pipeline of referrals has persisted with high headhunter fees, they said.

Care home operators, case managers, industry regulators and others filled a conference room Monday at the Capitol for a tense briefing about the consumer protection, fairness and enforcement issues that these unregulated facilities present.

Rep. John Mizuno, chair of the Health and Human Services Committee, said he and health officials have crafted a bill that they hope cracks down on the problem.

“We cannot lose any more kupuna,” he said. “No one else dies. That’s it.”

Rep. John MIzuno, right, and Rep. Bert Kobayashi listened to representatives of the long-term care industry during a briefing on unlicensed facilities.

Cory Lum/Civil Beat

The situation has gotten to the point that some health officials are worried that Hawaii’s rapidly aging population may end up with unsafe options for their care.

“If the Legislature is unable to stop this trend, more licensed facilities will drop out and this will place more seniors at risk,” said John McDermott, who has served as Hawaii’s long-term care ombudsman since 1998.

Mizuno, working with the Department of Health and the Attorney General’s office, introduced House Bill 1911 last week as a solution. The measure would give state health officials more authority to investigate unlicensed care facilities, establish fines for violations and make it illegal for health care providers to refer patients to unlicensed homes.

Case managers and care home operators, concerned in part about leveling the playing field, said it is as important to shut down the unlicensed facilities as it is the underground “pipeline” that’s transferring patients to so-called aging-in-place homes.

Lolita Ching, a case manager based in Waipahu, said nearly 300 care facilities have voluntarily closed over the past 30 months. But many are still in operation, she said, just without a state license or certificate.

She and several others in the industry shared anecdotal stories about Medicaid patients being transferred out of homes in exchange for clients who can afford to pay out of pocket at much higher rates. Three people are feared to have died due to “transfer trauma,” she said.

Mizuno said the names must be kept confidential due to pending investigations by the state Attorney General’s office, which has sent out letters and worked with health department inspectors to shut down the unlicensed homes.

The department’s Office of Health Care Assurance, headed by Keith Ridley, handles licensing and inspections for 1,699 facilities that provide 12,657 beds.

Ridley said the latest figures he has received show that in 2016, there were 76 homes that closed with no reason and in 2017, there were 74 that closed with no reason.

There is a big concern, he said, with the “very small but growing number” of caregivers who appear to be opening unlicensed homes.

John McDermott, the state long-term care ombudsman, was applauded by care home operators and others after telling the House Health and Human Services Committee that the state must bring unlicensed facilities into compliance with the law.

Cory Lum/Civil Beat

His office has had “mixed results” in addressing the problem, he said. Some facilities have been shut down but a few refused to allow health inspectors to enter to determine if the home was licensed.

Ridley told Mizuno and the two committee members who joined him at the briefing, Reps. Bert Kobayashi and Lei Learmont, that his office wants to respond to complaints within five days but that means either pulling inspectors off of other duties, which could delay other survey work, or getting more funding for additional inspectors.

Advocates for aging-in-place facilities, such as Maile Harada of Maile Case Management, one of the first nurses to be involved with this model in Hawaii, have said that delays in the licensing process have pushed caregivers in this direction.

Proponents have said the unlicensed homes maintain a high standard of care and are not illegal because the clients are told upfront that they are renters who are receiving home care services.

Unlicensed and licensed care home operators have been sentenced in the past for elder abuse, including fatal incidents.

But critics, such as McDermott, point at the list of regulations unlicensed facilities do not have to follow, including: annual inspections, staffing requirements, criminal background checks, building and fire code requirements, substitute caregiver requirements, resident rights requirements, CPR certification, TB clearance, reading and speaking English requirements, housing design and self-preservation requirements, confidentiality requirements, medical records requirements, billing and financial record requirements, medication pass requirements (especially regarding the use of anti-psychotic medications), and the right of the resident to access the services of the long-term care ombudsman when the resident or responsible person needs an advocate and doesn’t know where to turn.

“You are totally on your own, exchanging all those consumer protections for an unenforceable promise to do a good job,” McDermott said.

Keith Ridley, who heads the state Office of Health Care Assurance, said a few of his inspectors have been denied entry into a home while trying to determine if the facility was licensed.

Cory Lum/Civil Beat

He said he agrees with the licensed care operators who have described aging-in-place homes as unfair competition.

“Why would a caregiver subject herself and her family to annual inspections, the ombudsman dropping in unannounced, having to pay for all the requirements and costs of running a licensed business if they can drop out of the regulatory system and call herself or himself an aging-in-place home and get away with it? What message are we sending to all those caregivers following the rules?”

Mizuno tried last year to address the issue but was unsuccessful. One bill never received a hearing and another was indefinitely deferred by the Human Services and Health committees, which were separate at the time but have since been merged into one committee that he now chairs. Its members include Mizuno, Kobayashi, Learmont, Della Au Belatti and Andria Tupola.

Update The bill, which is scheduled for a hearing Thursday morning, faces a tough road ahead. It has to get through three committees before a final vote by the full House, at which point it would cross over to the Senate if approved.

The measure’s first stop is Mizuno’s committee, then it would go to the Consumer Protection Committee, chaired by Rep. Roy Takumi, followed by the Finance Committee, chaired by Rep. Sylvia Luke, who is one of 10 co-sponsors of the bill.

“What message are we sending to all those caregivers following the rules?” — Long-term care ombudsman John McDermott

The bill gives the health department the option of investigating complaints and says it “may request access to the location indicated in the report” or go to court for a search warrant to investigate the location “between the hours of sunrise and sunset.”

The measure mandates action by the department if its investigation confirms someone is operating a facility without a license or certificate. At that point, the bill says the department has “right of entry” and can resolve the matter “in an informal fashion” or through court.

The bill leaves blank the amounts for penalties. When Mizuno said the fines could be $25,000 or even $50,000, care home representatives said that would not be enough to deter unlicensed facilities that could be bringing in $50,000 a month with 10 clients.

The measure also makes it “unlawful for a certified or licensed health care provider or certified or licensed care facility to knowingly refer or transfer patients to an uncertified or unlicensed care facility” and gives the department the authority to enforce the law.

While Mizuno has support from some elderly rights groups and the industry, which operates numerous facilities in his Kalihi district, he has yet to secure the backing of AARP, which has been a potent lobbying force in the past.

AARP Advocacy Director Kerry Komatsubara said he wants to talk to all the parties involved first.

“Our concern is how we get to the bottom of this,” he said. “These are grave concerns and alarming accusations. How do you come to a fair resolution? How do we avoid unintended consequences?”

Mizuno said he and his supporters “will fight as long as it takes.”

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