Dr. Katie Min was 36 when she took over her father\u2019s primary care practice in the Queen\u2019s Physicians Office Building in Honolulu\u2019s Punchbowl neighborhood in 2022. Min\u2019s father had taken the practice over from his father, who had started it in the 1940s.<\/p>\n
Now after three generations, Min says the multigenerational practice is facing an existential financial threat after the state\u2019s largest insurer gave her 60 days\u2019 notice that it was radically changing its reimbursement model for primary care doctors. <\/p>\n
Starting on July 1, the insurer will stop paying a set monthly fee for each patient under a doctor\u2019s care and revert to the way it paid doctors a decade ago: fees for individual services rendered. While some doctors preferred the older model, the rapid change to a system many had already adapted to is destabilizing \u2014 particularly for smaller practices operating on thin margins already. <\/p>\n
Min estimates she\u2019ll lose at least $50,000 annually for her practice, which will put her practice on the ropes financially when factoring in another big blow that came in late 2025, although she says she\u2019s determined to find a solution.<\/p>\n
\u201cSome of these patients have been cared for by my family for 50 years,\u201d she said. \u201cI\u2019m honestly getting a little tearful about it.\u201d <\/p>\n
Regardless, the announcement has sent shock waves through the medical community, particularly among those on the front lines of treating patients \u2014 primary care doctors who are already in alarmingly short supply<\/a>, particularly on neighbor islands. <\/p>\n The payment model that HMSA is changing was hailed as a smashing success just a few months ago, as HMSA and hospital giant Hawai\u02bbi Pacific Health rolled out a major proposal to transform the state\u2019s healthcare system through a partnership called One Health Hawai\u02bbi.<\/p>\n In fact, Hawai\u02bbi Pacific Health has said One Health would expand the current payment model throughout One Health\u2019s provider network. Hawai\u02bbi Pacific Health has also pointed to its doctors\u2019 group, which Min belongs to, as a case study of how the payment model works well, keeping patients healthy and doctors happy.<\/p>\n HMSA is now changing that. <\/p>\n In the balance for residents is access to primary care doctors for hundreds of thousands of HMSA members. The insurer says a main goal is to improve access to care. Doctors are leery.<\/p>\n One of the state\u2019s top medical officials said he\u2019s gotten more than 100 calls from doctors alarmed by HMSA\u2019s announcement. The president of Hawai\u02bbi\u2019s doctors\u2019 association calls it a major change with short notice. <\/p>\n Min says she doesn\u2019t know what to do. She says it\u2019s not about wanting to make a lot of money, but simply wanting to treat patients and perpetuate the medical practice started by her grandfather. <\/p>\n \u201cI don\u2019t want to seem like all I care about is money,\u201d she said. \u201cIf I did, I wouldn\u2019t be a primary care doctor. I would have gone into radiology.\u201d<\/p>\n HMSA has little choice, says Jenny Smith, HMSA\u2019s president and chief operating officer. <\/p>\n The health care landscape has changed dramatically in the decade since the insurer started its so-called \u201cpayment transformation\u201d program a decade ago, Smith said. It includes a payment model in which doctors receive monthly allowances for treating patients, plus bonuses for meeting performance milestones. The payment transformation model simply isn\u2019t working. <\/p>\n She said the change has nothing to do with the One Health proposal. Hawai\u02bbi Pacific Health declined interview requests for this article and instead issued a statement saying its primary care physicians have already demonstrated the benefits of value-based care and they \u201c\u2026 believe this approach is the future of healthcare.\u201d <\/p>\n Smith also said HMSA had been in talks with leaders of doctors\u2019 groups about the change for more than a year, so doctors shouldn\u2019t be caught off guard.<\/p>\n Despite a big investment in primary care by HMSA, Smith said, access to primary care doctors has declined since the Covid-19 pandemic, leading patients to seek treatment in more expensive emergency rooms and urgent care clinics. In addition, she said, the allowance-based payment model has produced data gaps that make it hard for HMSA to track outcomes and deal with regulatory compliance issues.<\/p>\n The bottom line, Smith said, is this is a critical issue for the insurer. Under the payment model, HMSA has been paying more in medical claims than it brings in through revenue from members and employers. As a result, HMSA has had to draw from investment income to make ends meet. <\/p>\n \u2018Community Is Going To Feel The Shock\u2019<\/p>\n The announcement comes at a pivotal time. The One Health deal would create a vertically integrated health system with two of Hawai\u02bbi health care\u2019s major players and have at its core the very payment model that HMSA is now ditching.<\/p>\n Although different from other vertically integrated systems like Kaiser Permanente, the proposed One Health Hawai\u02bbi entity would nonetheless link the state\u2019s largest health insurer with one of its largest health care providers to create the state\u2019s dominant system.<\/p>\n Key to HMSA and Hawai\u02bbi Pacific Health\u2019s sales pitch for One Health is an idea that no doctors would be forced to join One Health in order to be part of HMSA\u2019s provider network. In addition, the pitch goes, HMSA members would still be able to choose their own doctors, even if the doctors weren\u2019t part of One Health, as long as the doctors were part of HMSA\u2019s provider network.<\/p>\n But one provider says the reality is that HMSA\u2019s payment model change will create so much financial distress for independent practices that some will have little choice but to close their practices or sell out to a large player like Hawai\u02bbi Pacific Health.<\/p>\n Kaleo Correa is a nurse practitioner who runs Waimea Primary Care on Hawai\u02bbi Island. Her practice cares for more than 1,800 patients, she said, about half of whom are Native Hawaiian. She\u2019s written a comprehensive critique of HMSA\u2019s change to its payment model.<\/p>\n \u201cIts sole function,\u201d she says, \u201cis to create economic duress that destabilizes independent practices prior to corporate consolidation.\u201d<\/p>\n Although Correa and Min are part of a doctors\u2019 group affiliated with Hawai\u02bbi Pacific Health, they, along with some of the others in the group, are independent. Hawai\u02bbi Pacific Health also operates Hawai\u02bbi Pacific Health Medical Group, which employs physicians who are salaried employees, generally working out of HPH clinics and hospitals, including Straub Benioff Medical Center, Kapi\u02bbolani Medical Center for Women & Children, Pali Momi Medical Center, and Wilcox Health on Kaua\u02bbi. <\/p>\n As salaried employees who don\u2019t have to cover rent, staff and other costs from insurance reimbursements, employed doctors are more insulated from the payment model change than independents who are merely part of HPH\u2019s doctors\u2019 group, which is called Hawai\u02bbi Health Partners.<\/p>\n Correa said financially distressed doctors may feel pressured to seek employment with \u2013 and bring their patients to \u2013 the Hawai\u02bbi Pacific Health Medical Group or another medical group, rather than staying on their own. <\/p>\n Smith said HMSA has no desire to destabilize doctors financially. Although she recently acknowledged during a Hawai\u02bbi Medical Association forum that \u201cWe\u2019re anticipating the community is going to feel the shock,\u201d Smith also said HMSA has plans to mitigate the impacts. Those include higher reimbursements for doctors on neighbor islands and a program to help those struggling to make the change.<\/p>\n One Health Envisions Using Model HMSA Is Ditching<\/p>\n The change upends HMSA\u2019s longstanding way of paying primary care doctors. Under the current model, HMSA pays providers a fixed amount per month, typically around $20 to $40, for each patient under the doctor\u2019s care. It doesn\u2019t matter if the patient visits the doctor every week or once a year; the doctor gets the same payment per patient per month, like a monthly allowance. <\/p>\n In addition, doctors can receive bonuses for reaching certain performance milestones, like making sure patients get regular mammograms and colonoscopies.<\/p>\n After using a capitation payment model for nearly a decade, HMSA plans to switch back to a fee-for-service model for primary care doctors.<\/p>\n This model is central to One Health\u2019s vision of \u201crisk-sharing\u201d and \u201cvalue-based care.\u201d The idea is to give doctors an incentive to keep patients healthy rather than churning them through needless office visits simply to rack up reimbursements.<\/p>\n In order to make ends meet under this so-called capitated payment model, doctors must have large panels of patients, typically around 1,500 to 2,000 or more under their care, while also dealing with the administrative burden of tracking value-based care performance metrics.<\/p>\n While some providers have complained about this payment model, Hawai\u02bbi Pacific Health has said it works, keeping doctors happy and patients healthy. In fact, One Health plans to use an expanded, \u201cglobal capitation\u201d model, which would apply not only to primary care doctors, but also to specialists. <\/p>\n As proof the concept will work, Hawai\u02bbi Pacific Health\u2019s chief executive, Ray Vara, has pointed to Hawai\u02bbi Health Partners<\/a>, HPH\u2019s doctors group, which Min and Correa are members of. <\/p>\n