The 2019 Hawaii State of Reform Health Policy conference on Jan. 15 provided an update on Hawaii’s efforts to transform health care.

Based on the theory that rising health costs are largely due to the incentive under fee-for-service to deliver unnecessary care, Medicare is pushing “value-based” payment as a replacement for fee-for-service. This means pushing insurance risk onto providers in the form of capitation for primary care, so that doctors make more money by delivering less presumably unnecessary care, and hopefully only care that has “value.”

HMSA has put all primary care doctors here on capitated payment since 2017. To counter unwanted “value-based” incentives to skimp on necessary care and avoid taking on sicker, more socially disadvantaged patients who may cost more, both Medicare and HMSA are requiring doctors to report detailed data for quality measures and risk adjustment, so that doctors can be paid more for higher-risk patients.

To its credit, HMSA has put considerable effort into communicating with primary care doctors during implementation of its capitation model and tweaking policy in response to feedback.

However, even superb implementation begs the question of whether or not the transformation actually leads to better care and lower cost (improved value).

There never was evidence that Hawaii’s primary care doctors were delivering unnecessary care due to fee-for-service, and we had low utilization of care compared to the mainland before these reforms. Pay-for-quality further incentivizes avoiding care of socially disadvantaged patients, and risk adjustment is notoriously complex and difficult to do fairly, so there is little confidence that risk adjustment formulas will be fair. Risk adjustment also leads to widespread gaming of documentation to make patients appear as sick as possible. “Value-based” payment requires higher administrative overhead for both the payer (Medicare or HMSA) and for the doctor’s office.

So how is “value-based” payment working out in Hawaii? HMSA reports about 80 percent of capitated primary care practices are showing savings and earning bonuses for meeting quality goals.

Doctors like caring for patients without worrying about which billable services are being used and the flexibility to provide care via telephone and MyChart, instead of tying payment exclusively to office visits.

However, they don’t like the administrative burdens of detailed documentation and data reporting, and there are serious problems with attribution (figuring out which doctor should get the capitation payment when several doctors are involved). Clinics and groups with many sicker, more socially disadvantaged patients are reluctant to take on capitation risk, because they don’t trust risk adjustment formulas.

Hawaii is facing a worsening physician shortage. The uncertainties in payment under capitation, and the complexity and burdens of the model are discouraging doctors from going into primary care, worse on the neighbor islands.

Both capitation and our physician shortage push doctors to overload their practices, leaving less time for each patient. The time and effort required by physicians and their office staff to deal with documentation and data reporting can lead to inadequate time to listen to patient concerns, leading to diagnostic errors and failures in quality of care, even if the practice is performing well in those limited aspects of care being measured.

Data from Hawaii Pacific Health before and after capitation shows fewer patient visits per primary care doctor, a very slight reduction in avoidable emergency room visits and hospitalizations, a slight increase in specialist referrals, and overall not much difference in volume of care. Where are the savings supposed to come from if the model requires higher overhead but is not finding unnecessary care that can be eliminated?

HMSA premiums and Medicaid costs continue to rise much faster than inflation. The administrative cost of “value-based” payment apparently exceeds any savings, so no “value” has yet been achieved.

Stephen Kemble, M.D., is a psychiatrist and former Hawaii Health Authority member.