Hawaii Medical Service Association is making a major change in the way it pays primary care doctors, and many physicians say the new system will hurt patient care.

The new system will reimburse physicians a fixed monthly rate for each patient in a practice, whether or not the patient visits the doctor.

The state’s largest health insurer began using the new system on a limited basis April 1. In 2017 the pilot program will replace HMSA’s current fee-for-service model, which reimburses doctors based on the number of patient visits and type of service.

HMSA said the change is necessary to improve the health of its 720,000 members. Nationally, the move to this new system — known as capitated payments — is being driven by the Affordable Care Act and the federal Medicare program in an effort to improve the overall health of the population and contain rising medical costs. HMSA reported operating losses in eight of the past 10 years. Most recently it posted a $27 million operating loss for 2015.

Better care

“We believe this program will lead the way to better care for communities across the state and the rest of the nation. One of the primary goals of this program is to reward doctors for improving the health and well-being of their patients,” said Mike Gold, HMSA’s president and chief executive officer, in an email. Gold said the insurer has worked with local doctors and patients as well as national experts to develop the program over the past year.

“Together, we’ve developed a program that will give our members more access and ways to connect with their doctors, an easier time getting involved in making health care decisions, and most importantly, it will strengthen the relationship between our members and their PCPs (primary care physicians),” Gold said.

Many Hawaii doctors say the change will inevitably hurt patient care and is already driving some physicians out of business.

“It’s a system that rewards physicians for not doing what they’re supposed to do, which is taking care of patients. The less you do, the more you get paid and the bigger your bonuses. It is crazy,” said Dr. Richard DeJournett, an HMSA diagnostic radiologist. “If you can’t get what you need for your own health care because someone else is looking after their bottom line and their profits, it’s going to hurt your care. It can’t do anything but hurt patient care.”

Aging patients

The new payment model comes as the state faces a shortage of primary care doctors and an aging population of baby boomers — the highest users of health care among adults — whose medical needs will naturally increase over time.

“We have now moved into the era where we are more likely to get that health care because we’re in our 60s and 70s and 80s,” DeJournett said. “The requirements are there to deliver the health care, but yet they want us to deliver it for less money. HMSA wants it to be all done for the same or cheaper. How do you do that?”

HMSA, which has about 3,000 doctors in its network, is calculating initial physician reimbursements based on the doctor’s average total payments for medical services over a period of three years. Eighty percent of that is paid as a fixed monthly base payment, which can increase over time based on the quality and value of care delivered. Doctors must earn the other 20 percent of their reimbursement by checking patients once a year to talk about their health and resources available.

Payments will range between $20 and $80 per patient per month, depending on the complexity of the patients in a practice, said Dr. Scott Miscovich, a Kaneohe primary care doctor who is part of the pilot program.

“The hazard exists that you would then throw out all your complicated patients, or someone who needs a lot of care,” he said. “A perfect patient panel would be really healthy patients that don’t ever come to your office.”

The payment model is meant to give doctors the flexibility to take care of their patients through mutually agreed-upon alternative methods like email, tele-health, phone calls and text messages, HMSA said. This will give doctors more time in the office with sicker patients, those with language barriers, or other needs.

Copays not changing

The change will not affect the amount patients pay to see their doctors, HMSA said.

“The entire American health care system now sees the need to shift from volume to value,” said HMSA consultant Dr. Ezekiel Emanuel, vice provost for global initiatives at the University of Pennsylvania’s Perelman School of Medicine and The Wharton School, in a statement. “This shift is only possible if we change payment from fee-for-service to rewarding value and quality. The change in payment that HMSA is embarking on is precisely meant to reward physicians for value-based care.

“By providing a capitated payment per patient with bonuses for quality and total cost of care, physicians can focus on treating patients and spending time with them, not seeing as many as possible and focusing only on interventions that are billable,” Emanuel said. “This should make physicians focus on their patients’ needs and doing the things we know enhance patients’ health.”

State Sen. Josh Green (D, Naalehu-Kailua-Kona), a Big Island emergency room doctor and head of the Hawaii Independent Physicians Association, said the new model could help if it gives doctors the flexibility to deal with patients online or over the phone.

“This program can be very good as long as the numbers pencil out correctly,” Green said. “That means a doctor who never was able to take two days off won’t have to see 30 people a day if we’re able to see 10 on the phone. The truth is we have to make sure the money’s there and it’s all totally honest. I’m personally still on the fence. The key, really, is making sure it’s totally fair to the doctors. Otherwise, if it puts too much pressure on the physicians, that could be translated to less care for patients.”

Bad track record

Moving away from a fee-for-service system to a capitated payment model has been unsuccessful in the past, with local medical groups suffering substantial losses, said Dr. Christopher Flanders, executive director of the Hawaii Medical Association, the trade group representing 1,900 doctors.

“It was tried before back in the HMO (health maintenance organization) days, and it didn’t work. Essentially what that’s doing is passing the risk of insurance from insurance companies to the physicians,” he said. “The way those things are set up, the less you do, the more you make. The physician has no control over how often a patient comes in, so if you’ve got somebody who’s a frequent visitor to your clinic, you’re going to be spending more money than you’re bringing in. That means that you can’t see more than a quarter of your patients every month.”

Dr. Mark Mugiishi, HMSA chief medical officer, said the company is open to improving the program based on physician feedback.

“The feedback we get from participants in this pilot will help us refine and improve our program.”

‘Paradigm shift’

Under HMSA’s plan, physicians who care for more complex patients with chronic diseases will be paid more than those who provide basic medical care. If doctors do not accept the capitated model, they can either choose to go nonpar with HMSA, meaning they will no longer be participating in the insurer’s network and would forgo payment bonuses, or accept the existing fee structure with no increases and performance payments.

“It’s going to be a tremendous transformation,” Miscovich said.

“This is a massive paradigm shift. It’s like walking into a dark room. It’s a big unknown.”

The changes to physician reimbursements are prompting some longtime doctors like Stephen Kemble to get out of medicine.

“If it weren’t for all these things, I probably would’ve continued part time … and practiced another five to 10, 15 years, but because of all these things I’m just getting out,” said Kemble, 69, a practicing psychiatrist for 40 years who will retire when his office lease expires next year.

“If you get a fixed amount per patient and you get a patient that has a serious illness that’s very expensive, then you get killed financially by one high-cost case. You’re bankrupt.”