Hawaii’s Proposed HMSA Merger Sparks Fears Over Doctor Shortages and Rising Costs

A proposed merger between Hawaii Medical Service Association (HMSA) and Hawaii Pacific Health has raised concerns over the impact of 'value-based' payment models. Kaiser doctors warn that these systems, pushed by HMSA for over 15 years, may worsen Hawaii’s doctor shortage while increasing costs for both providers and insurers.

The deal, announced in 2023, still awaits final regulatory approval, with no confirmed launch date as of early 2026.

HMSA has long championed 'value-based' payments, tying doctor compensation to patient outcomes and cost control. Yet critics argue the approach has failed to deliver meaningful improvements after 15 years. Instead, it has added layers of bureaucracy, forcing doctors to spend more time on paperwork and data reporting.

Under these models, physicians face pressure to avoid high-risk patients to protect their earnings. At the same time, they must 'up-code' diagnoses to meet risk-adjustment targets and quality metrics—creating a system where financial incentives clash with patient care. The bigger concern, however, is not over-treatment but a worsening doctor shortage, as administrative demands push clinicians away from practice. The proposed merger with Hawaii Pacific Health has intensified scrutiny. Some view it as a move by HMSA to expand its influence and double down on 'value-based' contracts. Yet the policy’s track record suggests it may deepen existing problems rather than solve them. Regulatory approval remains pending, leaving the timeline for the combined entity uncertain.

If approved, the merger would further embed 'value-based' payments in Hawaii’s healthcare system. Doctors would continue facing higher administrative costs and perverse incentives, while patients could struggle to access care. The outcome hinges on whether regulators address the model’s unintended consequences before finalising the deal.