Two major players in medical care and insurance in Hawaiʻi are joining forces. The state's largest insurance provider, Hawaiʻi Medical Service Association, and major health care system Hawaiʻi Pacific Health have announced plans to formalize their partnership.
1. A new nonprofit parent organization called One Health Hawaii
HMSA President Dr. Mark Mugiishi explained that it’s an effort to make health care more affordable and accessible.
“An integrated entity under a common parent that believes in affordability and access will allow us the opportunity to bring a lot of fundamental changes to the way health care is delivered,” he said Wednesday.
It would mean that the controversial insurance practice of “prior authorization” – when health care providers need approval from insurers before delivering medical services or medications – may no longer be an issue for HPH patients.
HPH President Ray Vara said that the partnership will alleviate administrative burdens on both HPH and HMSA and that it could result in billions of dollars of cost savings over several years, which they plan to invest in three different buckets: lowering insurance rates, reinvesting into the state’s health care system like adding more specialty doctors on neighbor islands, and funding social determinants of health such as education and workforce development.
Vara did not anticipate layoffs at HPH and HMSA if the partnership goes through, although it will result in the consolidation of administrative services.
“When you live in dynamic organizations like we live in, attrition will frankly allow us the opportunity to do that,” he said.
“We do not envision any reduction in force or anything associated with [that]. We believe we'll be able to garner all the economic value through attrition over time in a very coordinated, structured way.”
2. How many patients could this affect?
Over 750,000 people in the state use HMSA as their insurer. HMSA is also part of the nationwide Blue Cross Blue Shield Association.
Hawaiʻi Pacific Health reports that it has about 70 locations statewide, including its four flagship hospitals: Pali Momi, Straub Benioff and Kapiʻolani on Oʻahu, and Wilcox on Kauaʻi. HPH employs about 1,800 physicians and reports about 32,000 patient admissions a year.
3. Health care providers outside of HPH will be able to participate
What will the partnership mean for HMSA patients who seek care from providers outside of HPH? Mugiishi said that the new partnership would be an open system, meaning providers outside of HPH will be able to participate.
“At HMSA, we know we pay one-third of our dollars to Queen’s, one-third of our dollars to independent providers, and one-third of our dollars to Hawai‘i Pacific Health,” he said.
“There is no universe in the world that where we can say, ‘Well, we'll just take two-thirds of them and not have them anymore.’ We need all of them. We need 100% of the providers to come along. We want our members to be able to see the doctor of their choice, to go to the facility of their choice.”
There will be requirements for those care providers outside of HPH participating in the care models that result in reduced prior authorizations, Mugiishi added. Health care providers will also have to follow a model of care where they are reimbursed based on outcomes, rather than a fee-for-service model.
“The days of a transactional relationship where you have a visit, you get paid this amount of money for that visit – we want that to be over. We want it to be outcome-based, like you generate value for this patient for health care. Then you will get paid,” he said.
“The way that this organization is structured, there will have to be appropriate firewalls between the different contracting entities of the providers, but we'll all be based on value.”
4. Other providers are concerned about the impacts
Queen’s Health Systems opposed the proposed partnership. The system’s mix of patients includes more vulnerable populations like those who use Medicaid and Medicare or are uninsured. It’s the patients on private health insurance who support the system’s critical services.
Queen’s President Jason Chang explained that if HPH becomes HMSA’s preferred network, it could push away those commercial patients.
“That preferred network, having things like no copays, which are different from everybody else, having no authorizations, which would be different from everybody else, and then no denials on the backend, which would be different from everybody else, would advantage patients to go to the new entity,” he said.
Chang worried that could make Queen’s a safety net hospital, which would impact its ability to provide services.
“If 5% of our commercial business were to shift, it's approximately $50 million of impact,” he said.
“Think about these core services and these critical services. Critical services are those safety net services like behavioral health care and trauma. If you can't support some of those programs, I think hard decisions have to be made.”
That shift in client share is an issue the Hawaiʻi Medical Association, which represents physicians in Hawaiʻi, is also concerned about.
“Physicians worry about reduced competition over time, fewer choices for both patients and physicians, shifts in commercial patients that leave safety net providers, and health systems carrying a disproportionate Medicaid burden,” said HMA President Dr. Nadine Tenn Salle, plus, “increased consolidation pressures on independent and rural practices that may unintentionally be the straw that breaks the camel's back for many private practices in our rural communities or neighbor islands, which will expand what are already existing health care deserts.”
The Hawaiʻi Nurses’ Association was also concerned about what this partnership would mean for their union contracts with HPH.
HNA President Rosalee Agas-Yuu described the effort put into the deals from union members, some of which resulted in strikes at Wilcox Medical Center on Kauaʻi and at Kapiʻolani Medical Center for Women & Children on Oʻahu – both of which fall under HPH.
“ We fought hard for our contracts,” she said. “We're starting to have conversations with HPH asking, ‘OK, where's our workers going to be?’ Because we're going to be living on this island. How is it going to affect us?”
5. The proposed partnership will require regulatory approval
HPH and HMSA will need to complete several regulatory steps before the partnership is finalized – including approval from state agencies, the Federal Trade Commission, and the U.S. Department of Justice.
Jamie Godwin, a senior analyst on hospital costs at KFF, a nonpartisan health policy research, polling and news organization, explained that regulators will be looking to see if the partnership is anti-competitive.
“The analysis for this very quickly gets very complicated,” he said.
“The economists at the FTC will take a look at proprietary claims data from the merging parties. They'll take a look at competitors in the area. They'll look at financial information and do a lot of modeling to try to predict what the outcomes might be and whether there could be harm to patients or employers in the form of anti-competitive high prices or unfair practices such as steering patients to a preferred provider group or health system.”
He added that it is less common to see integration between health plans and hospitals, so research on the outcomes of these types of partnerships isn’t available.
“We have seen some health systems, for example, implementing health plans, and we have seen a few other examples of this, but because it's such a recent phenomenon, the research is still kind of catching up,” Godwin said.
On the state government side, the State Health Planning and Development Agency, led by Dr. Jack Lewin, will be overseeing the regulatory process. State Attorney General Anne Lopez and state Insurance Commissioner Scott Saiki will also be involved.
HMSA and HPH have created a website for the public to learn more about the proposed partnership.
Hawaiʻi Public Radio exists to serve all of Hawai’i, and it’s the people of Hawai’i who keep us independent and strong. Help keep us strong to serve you in the future. Donate today.
