Talk Story: Michael Gold, President and CEO of HMSA

For the past four years, Gold has led HMSA through a dramatic transformation in the healthcare industry. We ask him about the insurance company’s plans to fundamentally change how it pays physicians.

Q: HMSA is about to embark on a new way to pay physicians. What’s wrong with the existing system?

A: If you get paid per visit, as physicians traditionally are, the way you would organize your practice – the way all these practices are organized – is you would sit in one place and have people flow past you like an assembly line. You can see the most patients that way. This is why physicians don’t make house calls, why they sometimes don’t answer phone calls at night or send emails. They don’t get paid
for that. To make the most money, you’ve got to be in front of the patient; so, you sit in one place and funnel patients past you. But that’s not the best way to handle patients if you want to make sure they get the best possible care.

Q: How will the new system be different?

We’ve launched a payment transformation program where we no longer pay primary care physicians only for seeing patients in their offices. Instead, based on what they’ve received in payment from us for the last three years, we pay them an overall fee, which they can use to handle their patients in the way they see fit. There are also incentives for doing the right thing, for giving quality care and making sure the right tests are done and the right results come back from those tests. So they’re also paid for quality or, as we now say, performance. But that base fee, which is the majority of what they’re paid, allows them to do this in whatever way they think is best.

Q: How will this affect the way they practice medicine?

For example, we have a pediatrician on the Windward Side who has teenage patients. Teenage patients often don’t show up
for their visits. Now, she goes where they are. She’s going to Starbucks. She’s texting them, because kids don’t even do email anymore, they just text. This new payment system lets the physicians organize their practices in a way that best services their patients. And it takes away the poorly aligned incentive to see as many patients as possible in their offices. It frees them from that. This, to us, has a lot of promise.

Q: How far along is this new payment system?

We have a pilot program that started in April. We have currently 100 physicians in the pro- gram, covering roughly 100,000 members. We’re using the pilot program to find out what works and what doesn’t, and will redesign the

“WHATEVER WE PAY OUT AFFECTS WHAT WE CHARGE IN PREMIUMS. IF WE PAY OUT LESS, WE CHARGE LESS IN PREMIUMS. WE TRY TO BREAK EVEN; THAT’S OUR GOAL.”

 program along the way. The intent is, when we get to Jan. 1, 2017, we will start to move our entire network of primary care physicians and all of our patient network into that model in stages. By the end of 2017, they’ll all be in the program.

Q: How did you design this system?


It took a while to get there. Over a year ago, we had what we called a blue ribbon panel – we’re not very creative in our naming – of the top healthcare pol- icy people in the country. They met with us for a couple of days, after we had done quite a bit of research, to go over the model we’ve rolled out. The program is based on that, and on extensive meetings with local healthcare professions – with physicians, hospitals, nonphysician extended providers of health care, mental health people. We designed this program with great, enthusiastic input from the physician population. Then, we used the blue ribbon panel to look at the program and give us other ideas. That’s how we got to where we are.

Q: Do any physicians oppose the change?

There are groups who are scared, who have a problem with it. And there are ones who volunteered to go in the pilot, but, once they went in, they had a hard time making the transition. Remember, you’re asking physicians to change their whole business practice. So, they’re enthusiastic about doing it, but when they get down to the implementation, it’s hard. It’s hard to change anything like that. But they are responding. They are changing. That’s what this pilot project is all about: How do we help them do that?

Q: Are there places on the Mainland where they’ve rolled this out further than in Hawaii?

No. There’s nobody even close. I think one reason is that Hawaii is a unique place. I don’t want to sound trite, but we’re an island. If you want health care here, it’s not like you’re in Kansas City and you can go to someplace else in Missouri. We’re a defined geographical area.

Also, the physicians and the other parts of the provider system in Hawaii – and I think this is true for all small areas – have a different feeling about their community than someone practicing in Los Angeles, New York or Miami. And with Hawaii, it’s even more different. We really do look after each other.

Q: Is this just about primary care physicians?

We’re having a second session of our blue ribbon panel at the end of September. The primary care physician is the key, but now we’re going to start talking about how to bring the specialists and the hospitals into a payment model that rewards them for doing the right thing. That’s the next phase. We’re working on that now. We’re going to take our research results to our blue ribbon panel and, just as we did with this pilot, get their input, modify the program, start rolling it out, talk to the hospitals and specialists about it, and start tailoring it so that, in 2018 or whenever we can, we start rolling out this total program to transform the way we pay for health care.

Q: Will the new payment system change HMSA’s bottom line?

In the long run, it doesn’t change our bottom line. Because, whatever we pay out affects what we charge
in premiums. If we pay out less, we charge less in premiums. We try to break even; that’s our goal. But I really do believe this will cut the cost of care, and those savings will be passed on almost immediately to the businesses and individuals that pay the premiums. That improves the bottom line of the entire health care system, but particularly for the employers who pay most of the costs. That’s important. This will improve the care patients get, and it will also improve the long- term costs.