LIHU‘E — After months of negotiations, Hawai‘i Medical Services Association and Hawai‘i Pacific Health announced Wednesday that they have reached a three-year contract agreement that will go into effect Feb. 11, 2011. HPH is the largest private hospital group in
LIHU‘E — After months of negotiations, Hawai‘i Medical Services Association and Hawai‘i Pacific Health announced Wednesday that they have reached a three-year contract agreement that will go into effect Feb. 11, 2011.
HPH is the largest private hospital group in the state and includes not-for-profit Wilcox Memorial Hospital, as well as Straub Clinic and Hospital, Pali Momi Medical Center, and Kapi‘olani Medical Center for Women and Children.
“It will take some time to finalize the specific details, but we are pleased that the contract focuses on reimbursements based on positive patient outcomes,” said Kathy Clark, president and CEO of Wilcox.
Elisa Yadao, HMSA VP of community affairs, declined to comment about the dispute over the 85 percent base reimbursement rate under the “positive patient outcome” system. HPH had argued that under such a model, the base rate would have to be increased to allow for the initial additions to staff and technology.
In a prepared statement, HMSA President and CEO Robert Hiam said, “Our agreement with Hawaii Pacific Health furthers our efforts to create a payment system that ties financial incentives to improved quality and delivery of care and positive patient outcomes.
“We believe that transitioning 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,” he said.
Clark also called the agreement a step in the right direction for creating a sustainable health care model for Hawai‘i. “Under this new contract, the hospitals of Hawai‘i Pacific Health can continue its initiative, Changing Health Care in Hawai‘i, which aims to bend the curve of rising health care costs through chronic disease management and preventive medicine.”
In a letter distributed to employers by HMSA earlier this month, the insurer had warned that negotiations had reached a critical point, and HPH was likely to end its participation in HMSA’s provider network. “Hawai‘i Pacific Health is demanding an increase in reimbursement levels that is extravagant, unreasonable and unfair,” the letter said, “and would result in significantly higher health plan rates.”
On Oct. 16, Clark said Wilcox had provided $22.5 million in care and services not covered by insurance last year alone, data provided by HMSA showed Wilcox to be among the lowest-cost hospitals in Hawai‘i, and HPH’s proposed increases were intended to help hospitals keep pace with inflation.
“Our negotiations were always about fair reimbursement that allows us to operate in the black and continue investing in our physicians, staff, facilities and technology so our patients receive the highest quality care,” Clark said. “We believe we have achieved this goal with our new agreement with HMSA.”
The news of the agreement came only days after HMSA’s Oct. 22 announcement that it has filed documents with the State Insurance Division requesting a rate increase averaging 14.8 percent for large employer groups. The provider insures approximately 97 groups and 680,278 members.
“The rate request is necessary to cover rising health care costs – particularly hospital costs – and to move HMSA toward a break even operation,” Steve Van Ribbink, HMSA executive vice president and chief financial officer, said in a press release.
HMSA says costs continue to outpace rate increases, resulting in an operating loss of $29.86 million year-to-date and a total of $289.8 million over the last five years. The non-profit insurer had chosen to take losses rather than pass along “excessive increases” in operating costs to members, it says. At the end of September, HMSA had a health plan reserve of $356 million.
“The HMSA reserve is used to protect members from financial losses and community health emergencies, like a disease outbreak or natural disaster,” Van Ribbink said. “It is also used to fund important health initiatives that affect members and the community at large.”
If HMSA’s request is approved, higher rates will go into effect in January 2011.
