New Study Reveals Hawaiʻi Doctors Struggling Under HMSA's Payment System

May 28, 2020

A new survey of Hawaii primary care providers reveals a majority are struggling to stay in business because of changes made to the way they’re compensated by the state’s largest insurer HMSA.

More than 80 percent of Hawaiʻi’s primary care providers believe HMSA’s system for paying doctors is putting physicians out of business. That’s according to a new study by the Mainland-based health policy nonprofit Aimed Alliance. 

“The big concerns are that the pay was too low and they felt this disincentivized them to practice medicine and that it was contributing to provider shortages that were already occuring in Hawaiʻi,” said Stacey Worthy, counsel for the organization.

The study, funded by the Atherton Foundation, surveyed 60 primary care providers in HMSA’s payment transformation program and found that more than 80 percent felt the program caused an increase in administrative tasks. This meant longer hours and increased cost to hire staff. 

“We found that it was causing financial stress on primary care providers and it is also increasing adminstirative costs, which trickle down the healh care system,” said Worthy. “In particular, those with practices of fewer than five providers were more than twice as likely to express that sentiment than those working in large practices, hospitals, or health systems.”  

While there has been anecdotal evidence suggesting the discontent among providers, this is the first independent study on the controversial payment model known as capitation or payment transformation.

Hilo family physician Michelle Mitchell says sheʻs not surprised by the studyʻs findings. 

“I think this is just confirming what we already know,” said Mitchell. “More and more physicians are leaving practice and leaving Hawaiʻi in general as a result. And I actually think these results not only confirm that but likely underestimate that.”

Heather Miyasato, HMSAʻs director of health finance and payment transformation, stands by the program. In an emailed statement, she said “we believe it creates long-term financial stability for participating PCPs and improved care coordination for the patients they treat.” 

Understanding Payment Transformation

HMSA launched its new compensation program for doctors five years ago. The program is part of a national movement to align health care costs with value instead of volume. The goal is to reduce medical expenses by capping the amount it gives primary care doctors for each patient.

Doctors have traditionally been reimbursed for the services they provide under a model known as “fee-for-service.” The physician provides a service like an annual check-up and HMSA pays the doctor. Now HMSA pre-pays primary care doctors with capped amounts per patient. 

Doctors get an average payment of $24 per patient each month. The more patients a doctor has, the more money he or she gets. Miyasato says this allows physicians the freedom to provide care in whatever way makes sense for the patient and provider.

Fewer visits mean lower costs, and if doctors cut costs, they can keep more of the HMSA payments. But doctors must also prove theyʻve used the dollars to meet quality care goals, which can be an administrative burden. 

Impact On Patient Care

More than half of the primary care providers surveyed by Aimed Alliance felt that payment transformation is harming the delivery of care to patients and forcing economic considerations into their delivery of care.

“They said that (payment transformation) was also creating incentives only for healthy patients,” said Worhty. “Since it can take a disproportionate amount of time to treat patients with more complex conditions. Theyʻre more likely to be referred to urgent and emergency rooms and that can be really expensive.”

More than 36 percent of those surveyed said they have referred patients to an urgent care clinic instead of treating them as a result of payment transformation. 

Financial Strain On Doctors

The studyʻs findings suggest lower rates have resulted in financial stress because of payment transformation, and doctors see few alternatives. More than 42 percent of Hawaiʻiʻs PCPs said that payment transformation has decreased their practiceʻs gross revenue. 

Nearly 85 percent said that electing not to participate in the HMSA network would not be financially feasible for their practice. About 600 primary care providers participate in HMSAʻs payment transformation program. They care for around 450,000 Hawaiʻi residents.    

Worsening Doctor Shortage

The study also highlights concerns Hawaiʻi providers have about payment transformation contributing to the worsening physician shortage. More than 80 percent of those surveyed by Aimed Alliance felt that payment transformation has worsened the PCP shortage in Hawaiʻi. 

According to the 2020 Physician Workforce Assessment, Hawaiʻiʻs doctor shortage is approaching 800 – with a third of that for primary care physicians – and the scarcity is growing. 

Nearly 65 percent of surveyed PCPs reported knowing a primary care practice that has closed because of payment transformation, particularly small and solo practitioners. Eighty percent of the surveyed PCPs said they would not recommend that someone entering the field of medicine come to Hawaiʻi to practice as a PCP. 

Area For Improvement

Hawaiʻi primary care providers were in near-unanimous agreement that there is significant room for improvement with the current HMSA payment model. Nearly 93 percent of providers surveyed believe payment transformation needs to be improved and nearly 70 percent believe that there is a role for fee-for-service payments to provide higher quality care.

Evaluating the impact of the changes brought by HMSAʻs payment transformation have been difficult because the state doesnʻt have the means to monitor the changes. Despite HMSAʻs large share of the stateʻs insurance market, the state insurance division says it lacks jurisdiction to monitor the latest payment system. 

The bulk of the feedback on payment transformation has come from HMSA, which has been administering its own survey of providers. Over the last two years, the data shows a majority of providers surveyed felt empowered to deliver high-quality care to patients and reported feeling successful under the program. Miyasato says HMSA expects an even higher satisfaction rate in its upcoming 2020 survey.

Trouble in Paradise May 2020 by HPR News on Scribd