Hawaii’s Health Care Systems Propose New Partnership

Hawaii’s two major health care providers revealed a plan on Wednesday aimed at enhancing coordination, affordability, and access within the state’s health care system. However, they clarified that this initiative is not a merger but rather a partnership designed to maintain their existing operations.

The Hawaii Medical Services Association (HMSA) and Hawaii Pacific Health (HPH) are proposing to unite under a new parent organization, provisionally named One Health Hawaii, while continuing to function independently as legal affiliates.

“These two local organizations will consolidate under a new parent company, but each will operate similarly to how other businesses do in the community,” said Ray Vara, President and CEO of Hawaii Pacific Health, during a press conference.

This proposal comes at a time when Hawaii is grappling with escalating health care costs, labor shortages, and concerns surrounding the long-term viability of its health care landscape. HMSA covers over 750,000 residents in Hawaii, while HPH runs significant facilities, including Kapiolani Women’s and Children’s Medical Center and Straub Medical Center.

The organizations stressed that their partnership would be more open compared to Kaiser Permanente’s closed network, which typically limits members to their facilities. “This proposed system is open. We need all providers to participate,” emphasized HMSA CEO Mark Mugiishi.

Mugiishi stated that patients would retain the freedom to choose their physicians and treatment locations, even those not associated with HPH. “We want our members to have the option of seeing the doctor or going to the facility of their preference,” he remarked.

He also noted that HMSA’s current spending is broadly distributed among various local providers. “Currently, we allocate a third of every dollar to Queen’s, another third to independent providers, and the remaining third to Hawaii Pacific Health,” he explained. “You can’t just take away a significant portion and expect to function—everyone is necessary.”

Vara mentioned that the idea for this initiative arose from serious concerns about how health care impacts living costs in Hawaii. He stated, “Today is exciting, but it comes from a deeply rooted understanding: we have a real affordability issue here.” He linked the rising costs to population decline, particularly among younger families. “Thousands leave Hawaii each year because living expenses are too high,” he added.

He raised the alarm about health care being a significant factor in the broader affordability challenge. “As someone in the industry, I worry about its sustainability over time,” Vara continued.

Vara shared a personal experience regarding care coordination issues involving his daughter, who faced a lengthy wait for essential medical equipment after doctors placed the order. “That was my daughter, and I’m deeply connected to the system—I became a victim of it,” he said, urging the need to prevent such delays.

The proposal outlines that HMSA and HPH would operate as affiliates of the newly established nonprofit entity, One Health Hawaii. According to Vara, this plan will undergo comprehensive regulatory scrutiny.

He noted, “This will involve a review by several state agencies, including attorneys general, insurance commissioners, and federal regulators. Federal approval could take from six months to over 18 months.” Mugiishi emphasized that the organizations have been focused on improving health for Hawaii residents for 87 years but recognized that challenges are mounting.

Access to health care is becoming increasingly complex, with long wait times and greater out-of-pocket expenses making it tough for patients. “The time for change is now,” Mugiishi said, pointing out that many health care systems have faltered because they failed to adapt.

He suggested an integrated structure could facilitate the shift from fee-for-service to value-based care. “We want to focus on outcomes, creating value for patients and practices,” he explained.

Mugiishi reiterated that HMSA and HPH are not merging; they will remain distinct entities. “There’s a parent company guiding strategy,” he clarified.

The announcement drew immediate pushback from Queen’s Health Systems, Hawaii’s largest provider. CEO Jason Chan expressed concerns, stating, “Queen’s has been the most vocal opponent to this proposal,” indicating that they believe it could foster anti-competitive conditions.

He warned that despite claims of an open network, conditions could lead to more significant costs or limit access to other doctors. “We’ve quantified that a 5% shift in our commercial business could result in a $50 million impact,” he said, cautioning that financial losses could lead to tough decisions about critical services.

The Hawaii Nurses Association, representing about 4,000 healthcare workers statewide, seeks clarification on how the proposed changes could affect both employees and patients. “We want to ensure our voices are heard,” said Rosalie Agas Yu, the union president, highlighting concerns from nurses within various systems.

She underscored the importance of community involvement and information sharing, emphasizing, “We need to make sure that what is put in place benefits our community.” She also pointed out recent nurse strikes related to staffing shortages and expressed worries about how contracts may be impacted.

HMSA and HPH leaders noted that the proposal still requires regulatory approval and community input before any immediate changes to coverage or operations occur. While proponents argue that the partnership could help stabilize Hawaii’s health care system amidst rising costs, critics fear it may centralize influence and negatively affect competition.

As the regulatory review unfolds, state officials, health providers, unions, and patients will be watching closely to see how the proposal develops and if it truly can deliver on promises of improved affordability without curbing choices.