The cost and demand for quality health care have been rising, inexorably. To keep both from spiraling out of control, the state’s largest health care insurer, Hawaii Medical Service Association (HMSA), has been pursuing what it believes will be an important solution: Changing the way primary care physicians (PCPs) are paid. In 2016, HMSA began a pilot project to replace the traditional fee-for-service model with a monthly per-patient payment, along with extra money for the sickest patients and incentives to meet certain quality standards.

The steadily expanding program — now in the second year of a four-year transition — focuses on the front lines of primary care and aims to get doctors to improve their patients’ health while reducing the need for more office visits and unnecessary, expensive diagnostic tests.

One of the HMSA executives leading the charge, Dr. Mark Mugiishi, believes the program, called payment transformation (PT), can make a significant difference.

“Data from our first full year of the initiative shows better overall health for our members,” said Mugiishi, executive vice president and chief health officer for HMSA.

Others are unconvinced. In a June 3 commentary for the Star-Advertiser, Hawaii Medical Association (HMA) executives Jerry Van Meter and Christopher D. Flanders argued that PT will do little to reduce costs, but could devastate independent practitioners, especially those with a disproportionate number of patients with high-demand illnesses.

“An insurance plan relying on capitated payment to providers transfers risk from the insurer to the provider,” they said. “While insurance companies are set up to manage risk through volume monitored by a panel of actuaries, physician practices are not.”

Mugiishi said PT’s risk-adjustment feature, which pays doctors more for high-needs patients — up to $15 more per patient per month — would allow doctors to take fewer patients overall and still not lose money. Finding the right balance remains a work in progress, he acknowledged: “We don’t know if we’ve hit that sweet spot exactly right.”

Mugiishi noted that Medicare will adopt a similar program next year, and pointed to a July 2 article in the Journal of the American Medical Association (JAMA) by researchers who examined HMSA’s pilot program in-depth and found some quality improvements in its first year.

Mugiishi, 59, graduated from ‘Iolani School and studied medicine at Northwestern University in Chicago. He is associate chairman of the Department of Surgery at the John A. Burns School of Medicine, and was in clinical practice for nearly 30 years before joining HMSA.

Question: How do you respond to physicians’ complaints that HMSA’s payment transformation model is more about saving money than ensuring that patients get the best care available?

Answer: Moving to value-based reimbursement has always been about ensuring that patients have access to the best care. The program strives for the triple aim: quality, experience, affordability.

The first aspect of the triple aim is quality. This is first and foremost. The second aspect is patient experience. This is important, because there are many stakeholders in the health care system: doctors, employers, government, payers, etc. But the one whose experience matters most is the patient.

Finally, the last aspect of the triple aim is cost. I think we have reached the point where this should not be a surprise. As a state and as a nation, we know that health care costs are extraordinary, and we must make sure we get value out of each dollar that we spend. We believe that excellent primary care is the foundation of delivering on this triple aim. That’s why we have invested 20% more dollars in aggregate to our primary care physicians (PCPs) in this new model. We believe that this investment in PCPs will deliver quality and patient experience, and ultimately lower total health care costs by optimizing the health of our population.

Q: Why is PT necessary?

A: The old system of paying for volume of services (fee for service) was not working. Health-care costs were skyrocketing, and the results weren’t good. The population was becoming more unhealthy, despite doctors doing their best to provide high-quality care for patients. We needed a system to align incentives to pay for value and to allow doctors to care for patients in the ways they felt made the most sense — unconstrained by the payment model — including compensating doctors for caring for healthy patients to keep them healthy, to support the results that we really wanted: a healthier Hawaii.

The term “quadruple aim” was coined at the state Legislature to push for health equity across socioeconomic groups as well. PT addresses this as well because we aligned the payment structure of Quest (Hawaii’s Medicaid program) to be as good as our commercial (employer-sponsored) payments. In Hawaii and across the nation, these rates have historically been very lopsided. …

This initiative is unique to Hawaii as it was built by HMSA in collaboration with its physician community and stakeholders. We didn’t use a formula or template to build it.

Q: Is the physician shortage in Hawaii at a crisis point?

A: The primary care physician shortage is of grave concern and we must get ahead of it before it has serious ramifications on the health of our state. It’s important, however, to address this on two fronts. The first is definitely to recruit and retain more physicians. We are hoping this new way of compensating providers is helping in this regard, as we have been able to add 20% in aggregate to primary care payments, putting Hawaii’s PCPs well over the national median now for primary care physician payment.

We also are addressing physician burden. We reduced the number of quality measures that physicians must address to 14 (many previous programs had 30-60). We’ve invested millions of dollars to bring advanced technology into their offices without charge to allow them to manage their panels for quality; that hasn’t worked perfectly but we’re investing in it and trying to (improve) it. In 2019, we’ve invested money into their physician organizations to focus strictly on relieving administrative burden. These are all important.

But probably more important is this: We have to change the model of care so that our existing workforce, or even one that is growing only incrementally, can manage a larger number of patients if we are going to truly solve the shortage issue. This requires team-based care and population-based care. … The only way to create practice transformation is to align payment to this new PT model. With a monthly payment you can actually add extenders, you can add additional staff so that you work at the top of your license. This one’s a little sick, but not bad — my APRN (advanced practice registered nurse) can take care of that. This one’s really sick, I’m going to take care of that person. So then you can balance and take care of a larger number of patients.

Q: Another controversy erupted over the requirement to preauthorize higher-level tests and procedures. Has HMSA refined that process?

A: Yes, in multiple ways. We have awarded a multitude of “fast passes,” whereby providers who have shown ordering patterns that follow national standards are waived from the program. We also have waived any procedure that is deemed “urgent” by a provider from the process. When we began, 20-25% of all studies ordered were not meeting national standards of appropriateness. Currently, that number sits at about 8%. Quality also means right care, right time, right place, and we believe this program has significantly improved quality.

Q: What are the biggest health challenges facing Hawaii residents in the near future?

A: Affordability. The underlying issue that threatens our state is fixed and limited space, resources, and infrastructure, driving up costs and causing the talent that can help us solve it to leave for elsewhere. The general affordability issue limits resources that we can expend, addressing both health care delivery systems, as well upstream issues that affect health and well-being. This actually increases the prevalence and severity of chronic disease, which compounds the affordability issue, creating a vicious cycle.

Q: What’s one piece of advice you would give patients?

A: My advice to patients is to optimize their health, whatever it may currently be, go forward and not have buyer’s remorse about the past.