Hawaii’s healthcare crisis did not happen overnight. For decades, inadequate reimbursement — particularly from dominant insurer Hawaii Medical Service Association — has squeezed independent practices. Physicians left, practices closed or sold, and consolidation became a survival strategy.
HMSA helped create the giants — the large healthcare systems — that are now demanding even higher facility fees and reimbursements. These systems acquired practices, employed clinicians and accumulated market power. Care moved from lower-cost independent settings into increasingly expensive institutional structures. Administrative layers grew while Hawaii continued losing clinicians.
Now those giants risk driving one another into a financial hole: an insurer under pressure confronting health systems whose expansion and clinician-employment strategies require ever-growing revenue. Further consolidation may ultimately threaten the financial sustainability of the institutions involved.
Yet Gov. Josh Green has presented vertical integration as a potential way to preserve local control of Hawaii healthcare. The proposed HMSA-Hawai‘i Pacific Health relationship therefore deserves scrutiny. Getting bigger is not the same as getting better. The local giants we are being asked to preserve helped create this crisis in the first place by failing to adequately value and support the clinicians who actually deliver care.
Saturday’s Hawai‘i Health Workforce Summit offered an extraordinary opportunity to discuss this. Atul Gawande was the keynote speaker. His influential “The Cost Conundrum” article in The New Yorker helped focus national attention on physician financial incentives and fragmented care. But the reform era that followed left one enormous question insufficiently examined:
Who owns the system?
The Affordable Care Act restricted new physician-owned hospitals and encouraged new forms of coordinated delivery. Over the following years, physicians increasingly became employees while hospitals, insurers, pharmacy benefit managers (PBMs) and private equity accumulated enormous influence — often governed by people who never swore a Hippocratic Oath and whose fiduciary responsibilities may ultimately run to their organizations and investors.
We did not remove financial incentives from medicine. We changed who controls them.
That was the conversation I wish we had had with Dr. Gawande on Saturday. Perhaps the “Cost Conundrum” lesson from McAllen, Texas, was not that physicians had too much ownership. Perhaps the problem was badly designed incentives — whether those incentives belong to doctors, hospitals, insurers, PBMs or investors.
Ownership matters because ownership determines who controls healthcare dollars and who has a meaningful voice in governing care.
Gov. Green should also aggressively pursue correction of Hawaii’s Medicare Geographic Practice Cost Index (GPCI) and other reimbursement policies that fail to reflect the extraordinary cost of practicing here. His publicly discussed national ambitions to become a future secretary of health raise a fair question: Could Hawaii’s urgent fight for a higher GPCI ever be tempered by political ambitions in Washington? We cannot afford to wait another four years. Hawaii needed adequate geographic reimbursement years ago, and it cannot afford another year of delay.
Meanwhile, nearly $189 million in first-year federal Rural Health Transformation funding has arrived, part of a five-year initiative the state describes as approaching $1 billion. I question whether directing these funds through governors directly without legislative oversight could also have the political effect of dampening state-level gubernatorial criticism of the Trump administration. Regardless of intent, nearly $1 billion in public money demands extraordinary transparency.
Every major dollar should be publicly traceable: recipient, selection criteria, administrative expense, conflicts of interest and measurable outcomes. This money cannot simply enlarge the same structures that grew while our clinical workforce shrank.
Hawaii should use this moment to rebuild clinician ownership, independent practice and genuine physician governance — including clinician-led integrated networks.
We cannot solve a clinician shortage by underfunding clinicians. We cannot solve consolidation with more consolidation.
And we cannot preserve local healthcare merely by preserving local corporations that helped create the problems in the first place.
We must preserve the people who actually provide the care.
Dr. Stephanie Rose Yan is a Maui general, trauma and critical care surgeon, and healthcare advocate for strengthening Hawaii’s healthcare system.
