Hawaii Pacific Health, the state’s largest health care provider, has reached a five-year agreement with Hawaii Medical Service Association that ties more than 50 percent of HMSA’s insurance reimbursements to and investments in HPH on the provider’s ability to achieve or exceed standards in improving quality of care, controlling costs and expanding access to care.

The agreement, which begins Jan. 1, 2014, expands the current 35-month contract between the two organizations that rewards HPH’s hospitals and physicians under HMSA’s pay-for-performance reimbursement model. HPH comprises four hospitals — Kapiolani Medical Center for Women & Children, Pali Momi Medical Center and Straub Clinic & Hospital on Oahu, and Wilcox Memorial Hospital on Kauai — as well as 49 outpatient clinics and service sites and more than 1,300 affiliated physicians.

"We’re all going to work together to bend the health care cost curve to slow down the rate of health care cost inflation," HMSA President and Chief Operating Officer Mike Gold said by phone.

HMSA, with 701,431 members, is the largest health insurer in Hawaii.

Ray Vara, president and CEO of operations at Hawaii Pacific Health, said the contract changes from a volume-based environment to being based on quality and value.

"We’re talking about the level of quality that is now being recognized," Vara said in a phone interview. "This is delivering the highest-quality care at the most reasonable cost. This is different from the managed care concept of the past, which was mostly just about low costs."

HMSA CEO Robert Hiam said in a statement that moving to this new payment model and away from simply paying for services based on volume and regardless of outcomes is "a vital part of creating an economically sustainable health care delivery system."

One major difference from the previous contract is that the two organizations agreed to share in any savings created or losses incurred.

"There’s a certain performance standard that HMSA and Hawaii Pacific Health have agreed to," Gold said.

"If Hawaii Pacific Health hits those standards or exceeds those standards, they receive a certain level of payment. If they don’t, their level of payment will be less than that."

The contract also is more performance-driven, with more demanding standards, and encompasses Hawaii Pacific Health hospitals and doctors under one unified contract.

Among the agreement’s objectives are for Hawaii Pacific Health to invest in care measures that will result in saving more lives, reducing hospital readmissions and improving patient safety; to build an infrastructure that will support more patients and provide better access to health care, including the MyHealthAdvantage online patient portal, as well as expand its primary care physician network; and provide more urgent care and extended-hours access to the community.

Gold said HMSA will make significant investments to help Hawaii Pacific Health reach those goals.

"The investment is the recognition by HMSA of Hawaii Pacific Health’s bold move," Gold said. "They’re going to need some investment of capital for improvements in technology and for hiring the personnel they need to succeed in their effort. Our level of investment is tied to how well they meet the performance standards of improving quality, mitigating cost increases and improving access to health care."

Hawaii Pacific Health serviced 90,000 HMSA members last year at its facilities statewide.

HMSA began implementing an early version of the pay-for-performance model about 10 years ago and now has such agreements in place with every hospital and health care provider in the state affiliated with HMSA.