Dr. Katie Min is facing a financial crisis at her family’s primary care practice in Honolulu. In 2022, at age 36, she took over the practice her grandfather started in the 1940s. Now, after three generations, the practice faces an existential threat after Hawaii’s largest insurer, HMSA, gave her 60 days’ notice of a radical change to its reimbursement model.
Starting July 1, HMSA will stop paying a fixed monthly fee per patient and revert to fee-for-service payments. While some doctors prefer the older model, the abrupt shift destabilises smaller practices operating on thin margins. Min estimates she will lose at least $50,000 annually, putting her practice at risk. “Some of these patients have been cared for by my family for 50 years,” she said. “I’m honestly getting a little tearful about it.”
Shockwaves Through the Medical Community
The announcement has sent shockwaves through the medical community, especially among primary care doctors already in short supply. The payment model HMSA is changing was hailed as a success just months ago, as HMSA and Hawaii Pacific Health rolled out a major proposal to transform healthcare through a partnership called One Health Hawaii. Hawaii Pacific Health had said One Health would expand the current payment model throughout its provider network and pointed to its doctors’ group, which Min belongs to, as a case study of how the model works.
Now HMSA is changing that. The insurer says a main goal is to improve access to care, but doctors are wary. One of the state’s top medical officials said he has received more than 100 calls from alarmed doctors. The president of Hawaii’s doctors’ association calls it a major change with short notice. “I don’t want to seem like all I care about is money,” Min said. “If I did, I wouldn’t be a primary care doctor. I would have gone into radiology.”
Insurer’s Perspective
Jenny Smith, HMSA’s president and chief operating officer, says the insurer had little choice. The healthcare landscape has changed dramatically since HMSA started its “payment transformation” program a decade ago, which included monthly allowances plus bonuses for performance. Smith said the model isn’t working: access to primary care has declined since the pandemic, leading patients to expensive emergency rooms, and data gaps make it hard to track outcomes. HMSA has been paying more in claims than it brings in through revenue, forcing it to draw from investment income.
Smith said the change has nothing to do with the One Health proposal and that HMSA had been in talks with doctors’ group leaders for over a year, so doctors shouldn’t be caught off guard.
Impact on Independent Practices
Kaleo Correa, a nurse practitioner who runs Waimea Primary Care on Hawaii Island, says the change will create financial distress for independent practices, forcing some to close or sell out to larger players like Hawaii Pacific Health. “Its sole function is to create economic duress that destabilises independent practices prior to corporate consolidation,” she said.
Correa and Min are part of a doctors’ group affiliated with Hawaii Pacific Health but remain independent. Hawaii Pacific Health also operates a medical group with salaried employees, who are more insulated from the payment change. Correa said financially distressed doctors may feel pressured to seek employment with larger groups, bringing their patients along.
Smith said HMSA has no desire to destabilise doctors financially and has plans to mitigate impacts, including higher reimbursements for neighbor island doctors and a program to help with the transition.
Details of the Payment Model Change
Under the current model, HMSA pays providers a fixed amount per month, typically $20 to $40, for each patient, plus bonuses for performance milestones. After nearly a decade, HMSA will switch back to fee-for-service, paying doctors based on office visits. This model is central to One Health’s vision of “risk-sharing” and “value-based care,” but Smith says it isn’t working for HMSA.
Dr. Jack Lewin, who oversees Hawaii’s health care systems, said he has heard from at least 100 doctors about the change. “The primary care doctors are dying on the vine,” he said. Dr. Nadine Tenn Salle, president of the Hawaii Medical Association, said the abrupt change creates substantial challenges for independent practices, especially in pediatrics, primary care, and Neighbor Island communities.
Doctor’s Dilemma
Min not only faces a $50,000 to $75,000 annual loss but also a $35,000 drop in Medicare reimbursements from September. Some colleagues have moved to a concierge model, but Min says that would create a two-tiered system and cast patients adrift. She is considering scheduling more office visits or reducing overhead, but all changes take time. “Am I going to be able to pay my mortgage in July?” she wonders.
Min and Correa also perceive a lack of support from Hawaii Health Partners, their doctors’ group. Correa recorded a conversation where a representative acknowledged the financial stress but couldn’t answer why the change was so sudden. “There are going to be practices who probably have been in existence for generations that are no longer going to be in existence because of this shift,” the representative said.
Correa says the abrupt change amounts to bad faith and could benefit Hawaii Pacific Health ahead of the One Health deal. Smith denies any connection. For her part, Min is determined not to sell out. “I’m going to do everything I can to keep things afloat,” she said.
