Earlier this month, the state’s largest health insurer announced a major shakeup in Hawaiʻi’s health care landscape.
HMSA proposed a deal with Hawaiʻi Pacific Health that would create a new model similar to Kaiser Permanente’s managed care system.
HMSA and HPH maintain that the move is necessary since health care systems across the state are losing money.
The proposed partnership could have significant effects on Queen’s Health Systems.
The Conversation sat down with Queen's President and CEO Jason Chang to better understand the dynamics of the proposed partnership — and why he’s resisting it.
Interview highlights
On merger between HMSA and HPH
JASON CHANG: When you think about this model that's being presented by HPH and HMSA, there are some intended and unintended consequences. I think the intended ones are that they hope, and this is a hope, that they are going to bend the cost curve, lower costs, but they're also going to improve access and improve quality. But we've looked at national models where they've been vertical integration of the payer and the health care provider, and in every single one of those instances — in fact, the congressional hearing last week focused on this very thing — it's never been able to drive the cost down, and it's never been able to improve access. So when you think about Hawaiʻi being that very fragile, delicate health care system that's just barely balancing at any given day, you're going to try this massive experiment that's going to toss around all the health care players and pray that it's going to come out OK. I think that because of those services that we had talked about, Queen's sole providers, behavioral health care, trauma, transplant, stroke, some of the advanced cancer care, that's the stuff that we only provide for the state of Hawaiʻi. I call those critical services. And critical services require some of the other services, like orthopedics, cardiology, neurology, oncology, which tend to have a decent margin with them, and you take these core services, and the profit that you make allows you to invest back in these critical services. And if you jeopardize this whole model, then all of a sudden these critical services may have to go away. So you think about hospitals. Wahiawā General Hospital is one that came into Queen's, and over the course of their life, they used to deliver babies, they used to have a surgery program, they used to have a geriatric behavioral health program. They had a teaching — they used to rotate family practice doctors through and teach. And over time, those critical services got cut because of financial pressures. And when you think about, on a much larger scale, with HMSA starting to shift patients away from Queen's and other health care providers, everyone's going to have to figure out, like, well, what are we going to live without? What can we not do and not jeopardize the health care and the access to that health care for everybody in Hawaiʻi.
On vertical integration
CHANG: There's two narratives that are happening here, and so one of them is that HPH wants to create this new narrow network. But the other narrative is that HMSA has had financial challenges. They've lost money — that's public record — over the last several years, to the tune of hundred-plus millions of dollars a year. That is mostly from Medicare. So when you think about Medicare being the place that you're losing the most amount of money, how do you fix that? You need to go out, and you need to manage that population better. So there really is overutilization of services, mismanagement of chronic disease, using the emergency department when you don't necessarily need to, or having to travel from faraway places that doesn't have a health care service to Oʻahu. Those are all really expensive ways to take care of a person. So what needs to happen is managing that population better, which means geriatrics and primary care need to be involved. So what we're saying is, the vertical integration is excluding everybody else that needs to help you solve this financial problem. So if you vertically integrate with HPH, there's about 200 providers that can manage the Medicare population. I have 200 primary care providers. I have another 40 geriatricians, and then the rest, the other 400-plus are out there in the community as independents. And so by closing the door and saying that you guys are on this side of the fence and you can contract with us, it'll be an open network, but you have to play by our rules, makes us all a little suspicious about 'OK, then why and how would we help this new entity?' I think the reality is, when you say, 'OK, we have to save the expense, the wasted expense, in this model,' that means that you're going to stop rendering care. You're going to have to compromise something. And what that actually is, we can't get answered. That's part of why we're trying to figure out: What does the model actually focus on? Who's not going to get care? What kind of care is not going to be covered anymore? Where is that waste? Because the $2 billion that they tout over the 10 years, that's a lot of money, and we can't figure out on our calculator, how do you actually get all the different numbers to add up to $2 billion?
On the share of HMSA clients
CHANG: The commercial population has a margin on it, and when you put the whole payer mix book of business together, it all balances out. And Queen's, we're at breakeven, and we're exact, we're happy to be there at breakeven, and hospitals around the nation have been struggling just to get to breakeven. So we know that there's a national challenge ... we can't survive on the government payers. We rely on the commercial population, which is really the HMSA population. And that threat is that if 1% of our commercial population leaves Queen's, it represents $9 million, so you might say, 'Look, no big deal, we're just going to shift 5% of your commercial volume away.' That's $45 million, and that's a lot of money and a lot of services that are being subsidized by this balance payer mix. And in the world that's competitive, we say that as long as we're allowed to compete in a fair, open playing field, we'll recruit the best doctors, we'll provide the best services, we'll take care out to rural communities, and we'll compete for those patients. And those patients should have the right to pick where they want to go and get care. And if we are not providing a good product for the community, they absolutely have the right to say, 'Ok, we're not going to get our care at Queen's.’ And so that competition is really important. And when you vertically integrate, now, all of a sudden you're saying we have this new preferred network over here and everyone else can either play by our rules, or you're not going to be part of this network — and that's part of that risk. And so you start moving commercial volume away — you don't have that extra revenue to support those critical services that we talked about.
On concerns for private practicing physicians
CHANG: If you're an independent, private practice, community physician, and they start to move away a little bit of your commercial volume, because you're not willing to play by these new rules, you'll go bankrupt. You can't keep your practice alive. And so a lot of our legacy physicians in our community that many of you know and are taking care from — they're worried. And we want to be that voice. I feel like Queen's has to be that voice that at least advocates to our community and to our legislators and to the regulatory bodies who have to decide if this is good for Hawaiʻi or not, or is this too risky? Is it too much to do right now? That there's more implications, there's more people involved that are going to either go out of business or be impacted in some way that will definitely change, and maybe it's unintended, but will definitely change the health care landscape in Hawaiʻi.
This story aired on The Conversation on Jan. 28, 2026. The Conversation airs weekdays at 11 a.m. Hannah Kaʻiulani Coburn adapted this interview for the web.
