Primary healthcare providers are bracing for significant cutbacks due to two new payment policy changes by Hawaii’s largest insurer set to go into effect Tuesday.

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Hawaii Medical Service Association earlier this year stunned providers when it mandated they switch from fixed monthly “transformation” payments back to a traditional fee-for-service system, with only 60 days’ notice, by July 1.

That was too abrupt for many, and HMSA, after intervention from Gov. Josh Green, extended the deadline to January.

But four months shy of the new deadline, providers on the fixed system say HMSA has put forth two major changes that will hit them financially regardless by dropping a substantial portion of patients from their “panels,” or the roster of patients assigned to them.

The dropped patients will no longer be counted in per-patient monthly payments from HMSA.

As with the earlier announcement, they were given 60 days’ notice.

Starting Tuesday, patients who have not had a claim processed within the past 18 months will be dropped from their provider’s panel. Additionally, if a patient sees more than one primary-care provider during a calendar year, only the provider with the higher number of visits will be reimbursed.

HMSA, which insures more than 750,000 people statewide, calls this “claims-based attribution.”

The Hawaii Healthcare Task Force calls the latest move yet another “operationally impossible 60-day payment change to primary care” that will result in more clinic closures, while HMSA says it is seeking clearer data on patient care.

The upcoming changes have some doctors on edge, and those who have already been struggling are bracing for the worst.

“It’s a shake-up,” said Kaleo Correa, founder of Waimea Primary Care on Hawaii Island. “I can’t operate a business not knowing if we’re going to get paid or how to wrangle patients and make sure they don’t see other providers or how to even check for that.”

Hawaii Health Partners, a physician-led network of providers and affiliate of Hawai‘i Pacific Health, held town halls to answer questions about the changes, she said, but many remain unanswered.

HMSA says it is taking necessary steps to adjust to the times and is switching back to fee-for-service to more accurately capture access, utilization and performance data.

“HMSA is updating its Primary Care Payment Model to create a clearer, claims-based foundation for primary care while continuing to reward quality,” said Jenny Smith, HMSA president and chief operating officer, in a statement, noting the insurer extended the transition deadline in response to concerns from physicians and state leaders.

The insurer, meanwhile, is allowing healthcare practices that are ready to move sooner to make the transition in September.

“We are grateful that a majority of Oahu independent adult primary care providers chose to make the transition at the earlier Sept. 1 option,” said Smith, “reflecting their confidence in the path ahead.”

As incentive, HMSA is offering providers on the neighbor isles 15% more in payments after the transition back to fee-for-service in January. But if they switch sooner, in September, then they will get that 15% differential sooner.

Changing tide

Since the COVID-19 pandemic, HMSA said, patients have had 35% fewer visits with their primary care physicians, often referred to as PCPs, while use of urgent care and emergency rooms increased.

“The move to fee-for-service payments for primary care will result in higher numbers of claims being filed for services,” Smith said, “and this additional claims data will give us a clearer picture of the care members are receiving and a stronger foundation for future payment models.”

HMSA in January also announced plans to vertically integrate with Hawai‘i Pacific Health into a new nonprofit entity, One Health Hawai‘i, that is undergoing regulatory review by state and federal agencies.

One Health Hawai‘i, however, has publicly embraced the value-based model known as “payment transformation” that HMSA promoted heavily a decade ago. Under that model, providers receive an up-front, fixed amount, ranging from about $20 to $80 per patient per month, instead of being paid per service, regardless of how often a patient is seen.

At least one independent Hilo medical provider will be closing down soon, due in part to insurance policy changes and other challenges.

Hilo Family Medicine has informed its patients that it will be closing its office Sept. 30 after 27 years in business.

In a letter to patients, Drs. David Nakamura and Melanie Arakaki said “drastic changes” by a large insurance company would reduce their operating revenue and “make it impossible to continue to provide the service that you need and deserve.”

Both doctors said they would be working at the Hilo Benioff Medical Center Primary Care Clinic and that patients would need to register there for follow-up care with them.

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Hawaii Health Partners informed Correa, an advanced practice registered nurse, that some 450 patients would be dropped from her panel. She said that’s nearly 40% of the clinic’s patients covered by HMSA, equating to a loss of about $162,000 annually.

These challenges come as Hawaii experiences a longtime doctor shortage crisis, particularly among PCPs such as family doctors and internists who take care of routine checkups.

Patients report waiting anywhere from six to nine months to get an appointment with a PCP and longer for a specialist.

Questions remain

Dr. Katie Min, an independent physician in Honolulu, expects to lose at least 50 patients due to the changes but is unsure what the final numbers will be, based on the criteria.

“What’s a PCP and what’s not?” she queried.

The number could be higher, depending on what HMSA considers a PCP. Will HMSA, for instance, count another doctor who is seen more times for diabetes as a PCP? She is unsure how that is determined, as it can be complicated.

While she has seen most of her patients in the past 18 months, there are some who do not come in because they are in good health — and too busy.

Min, a third-generation doctor practicing out of the same office that her father and grandfather did, is nevertheless bracing for a much lower payment come September.

“We’re already frustrated with the fact that they’re cutting our income, essentially,” she said, “and we’re just told to make it work when it’s not like we’re operating at large margins here.”

Transition to the fee-for-service model means putting in more hours for more appointments and that patients will have to schedule appointments for matters currently managed over the phone. In addition to the patients dropped from her panel, she said quality payments for meeting goal posts, which are offered up-front under the value-based model, will instead be retroactive.

Correa is also questioning the numbers, as at least 177 of the 450 patient she’s been told will be dropped had been to the clinic for a visit in the past 18 months.

She also noted that hundreds of claims are sitting in a queue, some since February, waiting to be processed by HMSA, which could skew the data.

“There are some tremendous flaws in their algorithms,” she said. “So we’ve been corresponding with HMSA to please give us the data they’re going off of.”

Fears for rural care

In 2016, HMSA launched “payment transformation” in partnership with more than 100 PCPs that was touted as revolutionary.

The value-based Primary Care Payment Model that replaced the fee-for-service model was supposed to favor quantity over quality. Many providers did not like the switch.

Correa, however, built her clinic around the value-based model, which was heavily promoted by HMSA at the time. For the first five years, the clinic accepted only HMSA to streamline operations. She has since begun to accept other forms of insurance.

“While forcing us to go from transformation to fee-for-service, they have alluded that once they merge with Hawai‘i Pacific Health, they plan to switch back to payment transformation,” she said.

As Correa sees it, this shake-up will potentially strip tens of thousands of patients from independent healthcare providers, and these patients will be back on the market and refunneled to Hawai‘i Pacific Health’s preferred providers.

As more clinics close in rural areas such as hers, she fears more patients will have to fly to Honolulu for routine exams.

To her mind, HMSA is moving away from patients being able to choose their providers, whether it’s to get a second opinion or for other reasons, while making it more difficult for providers to add on new patients.

But HMSA says the move to fee-for-service for primary care is about getting “a clearer picture of the care members are receiving.”

“Patient attribution is intended to identify the primary care provider most involved in a member’s care,” said Smith in a statement. “Primary care providers who do not see a patient during an 18-month look-back period will not have that patient included in monthly per-member payments because HMSA believes a primary care physician should interact with their patient with at least that frequency to maintain care quality.”

This change, she added, supports “the original engagement intent” of the Primary Care Payment Model.

“Member coverage is unaffected by this change, and they may continue seeing any provider covered by their plan,” she said. “This transition provides a stronger foundation for the next generation of value-based care, which HMSA will continue to develop with Hawaii physicians to support quality, access, affordability, and a strong primary care network.”

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