Hawaii Medical Service Association and Hawaii Pacific Health have signed a contract that keeps the HPH hospital system in the insurer’s network of participating providers for the next three years.

The contract is retroactive to Feb. 1.

The contract focuses on payment for quality outcomes, known as a "pay-for-performance" reimbursement model, which will be implemented for the first time at HPH facilities — Straub Clinic & Hospital, Kapiolani Medical Center for Women & Children and Pali Momi Medical Center on Oahu; as well as Wilcox Memorial Hospital on the Garden Isle.

Negotiating a system that fundamentally changes the way the hospitals are paid — focusing on quality rather than quantity of services provided — has been difficult for both parties.

The agreement puts an end to the public dispute that was ignited when HMSA posted a notice late last year on its website to its 691,000 members warning that the members could pay more for medical services at HPH facilities if a new contract wasn’t reached by the end of January 2011.

The contract covers all inpatient and outpatient hospital services and focuses on measures in 10 areas including surgical complications, readmissions and nationally recognized best practices.

Increases in hospital payments are based on the performance measures. Over the term of the contract, the percentage of hospital payments tied to quality is expected to grow to 15 percent by 2014.