HMSA deal in Hawaii would shift insurers’ risk-sharing with hospitals

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Hawaii lawmakers have been weighing concerns and questions about a proposal by HMSA, the state’s largest health insurer, and Hawaii Pacific Health to create a new umbrella organization called One Health that backers say would fundamentally change how health care is delivered and funded. In mid-January, executives from HMSA and Hawaii Pacific Health met with members of the state House and Senate committees on consumer protection, where the pitch centered on “risk-sharing,” “value-based care” and efforts meant to “bend the cost curve.”

Sen. Jarrett Keohokalole, chair of the Senate Commerce and Consumer Protection Committee, said the presentation left him with more questions than answers. “It’s been a real challenge to understand,” Keohokalole said, describing how difficult the proposal has been to parse even for lawmakers used to reviewing detailed policy plans.

Doctors also raised worries about what they called a lack of specifics. The Queen’s Health Systems, which operates hospitals including The Queen’s Medical Center on Oʻahu and facilities on Hawaiʻi island and Molokaʻi, said the deal could threaten its ability to provide certain services.

The One Health concept would bring the state’s largest insurer and one of its biggest hospital companies together under a new structure, and leaders said it would affect the lives of about 760,000 Hawaii residents and their doctors. HMSA and Hawaii Pacific Health executives have said the plan would allow HMSA members to choose their own doctors and that the rate of rising insurance premiums would go down along with overall health care costs, while positioning the change as the alternative to an increasingly unsustainable system.

Hawaii Pacific Health CEO Ray Vara described the proposal as a major “180-degree turn in the way health care is delivered and funded,” arguing that the current system is “unsustainable.” In their account, the current trajectory is driven by financial strain at both the insurer and the provider side, with the proposal meant to address a breakdown that goes beyond minor adjustments.

The executives’ plan is based on expanding risk-sharing and value-based care beyond primary care. Under the current setup described by the proposal’s leaders, HMSA has moved away from pure “fee for service” for primary care doctors, instead negotiating multi-year contracts and paying physicians through monthly allowance models such as capitation. In that model, doctors are paid based on patient panels and then rely on quality metrics and related bonuses to meet targets, a system HMSA leaders say can drive better prevention while also carrying costs for administrative tracking and paperwork.

Vara and Dr. Mark Mugiishi said One Health would broaden those risk-sharing and value-based arrangements to more parts of the health-care system, including specialists and surgeons through what they called “global capitation.” They also pointed to a planned data-sharing system that they said would reduce administrative red tape and potentially reduce prior authorization needs, alongside “coordination of care” measures such as avoiding duplicated services and steering some outpatient surgeries from hospitals to less costly ambulatory surgical centers.

Other doctors said the current approach has already made practices harder to manage and that the plan risks extending those burdens. Dr. Nadine Tenn Salle, a pediatrician who represents doctors as president of the Hawaiʻi Medical Association, said her group had not taken a position on One Health but argued that HMSA’s monthly allowance-based model had led many physicians to report “increased administrative burden, uncompensated work, and rising stress,” contributing to workforce strain. An independent study cited in the reporting described physician dissatisfaction with the payment model and connected it to physician shortage pressures.

One physician, Dr. Curtis Takemoto-Gentile, said he cut ties with HMSA in January and moved to direct primary care, where patients pay a monthly fee. He described how HMSA’s quality-metric documentation requirements and administrative work affected his schedule and questioned why doctors would need to document measures like colonoscopies, mammograms and flu shots under a system he said he would otherwise support clinically.

Not all doctors shared the concerns. Dr. Dawn Miura, who has spent 35 years as a primary care doctor, said she believed the payment approach could work when contracts reduce friction for practices, including through help negotiated on behalf of doctors. Miura described having additional administrative steps in dealing with HMSA’s processes but also said she saw a benefit in the way Hawaii Health Partners negotiated under allowance-based budgets for doctors, including through “global capitation,” where providers can share in savings when they keep services within budget and split risk.

The reporting also highlighted concerns from hospitals about care access and service mix, particularly for patients who need high-cost, low-reimbursement treatments. Jason Chang, chief executive of The Queen’s Health Systems, said behavioral health is a loss area for Queen’s and that the system relies on more profitable “core services” such as cardiology, orthopedics, neurology, oncology, cancer care and surgery. Chang argued that One Health could encourage steering of certain referrals in a way that would reduce demand for services Queen’s needs to sustain its behavioral health and other programs.

Chang also said he worried that more physicians could feel pressure to move into the One Health risk-bearing structure for financial reasons, regardless of whether they would choose it otherwise. He raised additional concerns including the potential for medical students to be steered toward One Health participants over other hospitals, and he argued that over time the state could see a “degradation of these services that are important to the fragile people in Hawai‘i.”

Vara responded by saying Queen’s had turned down an offer to participate near the outset, which Chang said was confirmed, though Chang attributed the decision to the hospital’s predecessor leadership. The deal is still subject to regulatory review: it would need approval from the U.S. Department of Justice, and the state level would involve Dr. Jack Lewin, who leads Hawaii’s Department of Health Planning and Development Agency. Lewin declined to discuss the One Health deal specifically but said more generally that capitated monthly allowance payment models could be acceptable if they cover physicians’ costs and that, in his view, they generally do not.