Senate Standing Committee on Commerce and Consumer Protection

Good morning everyone. We are convening the Joint Committee on Consumer Protection and Commerce and the Senate Committee on Commerce and Consumer Protection. It is Tuesday, January 13, 2026 at 9:00am in Conference Room 411. We have convened this conference, this info briefing today to discuss the proposed partnership merger. It's been called a lot of different things.

I think we don't know exactly what it's going to be, but some kind of relationship between HPH and HMSA.

It is certainly of concern for this Committee and the Senate Committee as well, if I can speak for them, that this may have profound consequences on the healthcare landscape for Hawaii, especially given the prominence of HMSA and HPH in our medical community.

Whether those effects are good for the consumer or bad for the consumer are kind of yet to be seen. We are still waiting for more details to come out on the proposed partnership and I think that will impact how the community and this Committee, these committees, view such a partnership.

But we're here today to discuss the information that we have and try to bring to light more information to the public. We're going to be doing this info briefing in kind of two parts. We have some government departments here.

I want them to give us sort of a more general overview of what kind of the landscape we're looking at. I don't want them to comment directly on the proposal itself.

What I'd like the government guys to do is to give us overviews on more general topics, what is antitrust, what is a certificate of need, and so on and so forth.

I think that the general public, myself included, needs a little more education on exactly what we're looking at in the landscape, what kind of things are being considered, what kind of issues might be out there and not saying that they are necessarily present here.

Then the government, regulators and everyone will leave so we can have a discussion with HPH, HMSA, Queens and everyone else here from the healthcare industry to get their perspectives on the situation and their reactions to it and the potential pitfalls and the potential benefits that the situation may bring. So with that, sorry, we're going to.

Normally we do a lot of questions because of the number of presenters we have. I'm going to try to limit the questions to two periods of time so all the government guys will go first. We'll allow questions for the government departments, they'll leave.

I want to allow all of the healthcare insurers and providers to go second and then we'll save our questions for the end. Our time is a little limited and we had more people RSBP for this thing than I. Than I thought. Thank you all for showing up.

But I want to try to keep the presentations to five to seven minutes if we can. I've got a little light up timer here that will bust you if you go a little too long. So try to keep it under control. And you know, we'll try to do the same on our side too. Members, no questions on.

Please try not to ask the government guys specific questions about this proposed partnership. Otherwise we might have to stop you for that. All right. You want to say something?

Yeah. No. Thank you for convening the the briefing. I think this is a really significant issue of public concern.

And again, to begin, we're asking the government regulators to come in to explain the scope and jurisdiction that they are responsible for so that the legislators who are trying to understand what's happening here know which faces they need to be working with when it comes to public input and ongoing discussion about the way forward.

So was your idea. Thank you on behalf of the Senate Members for your invitation and convening this joint briefing. Appreciate you folks being here.

All right, we have. The first person is actually on Zoom. The AG's office will be briefly kind of telling us about antitrust. Is he, is he online? Yes, I'm here.

There you are. Okay, go ahead. Okay. Chairs, Vice Chairs and Members of the Committees. Good morning. My name is Rod Kimura with the Attorney General's Office. Let me give you a brief overview. The term antitrust laws refers to certain laws enacted to protect competition. You might ask.

Well, I protect competition well, because competition lowers prices through price competition. It encourages innovation through product differentiation and improvements. It gives consumers more choices because we all have different tastes and preferences. And we also want to prevent concentrations of economic power that might harm the markets. There are three often mentioned antitrust laws, but there are more.

The three are the Sherman Act enacted in 1890, the Clayton Antitrust Act enacted in 1914, and. And the Federal Trade Commission Act enacted in 1914 as well. Well, let me note that the need for these laws actually may have gone back as far back as 1776 when Adam Smith wrote the Wealth of Nations.

And let me paraphrase a passage in his book. The interest of dealers is always in some respects different from and even opposite to that of the public. To narrow the competition is always the interest of dealers.

We must always be against the narrowing of competition which can serve to only enable the dealers by raising their profits above what they would naturally be. I'm not saying that everybody who is out there is doing this, but that was the concern being expressed about when people get together.

Now the Sherman Act does two things, makes two things illegal agreements which unreasonably restrained trade and monopolization. Examples of agreements which unreasonably restrained trade would be price fixing agreements, bid rigging agreements or agreements to divide and allocate the market according to territory or customers. Monopolization.

That provision basically seeks to prevent a firm from acquiring monopoly power through anti competitive means that harm rivals or maintaining monopoly power using improper means such as exclusionary conduct. Let me pause by saying having a monopoly in and of itself is not bad.

I mean, if you're the sole supplier of a product and there's no one else out there who can compete against you, then you're a monopolist and that's okay. The second law is the Clayton Antitrust Law Act. And of particular importance is that this law was designed to stop anti competitive behavior before it causes harm.

So particular interest would be the law that prevents a merger and acquisition where the effect of the merger and acquisition may be to substantially lessen competition or tend to create a monopoly.

The third law is the Federal Trade Commission Act which besides establishing the Federal Trade Commission, it has provision which prevents or prohibits unfair methods of competition and unfair or deceptive acts or practices. This law is intended to basically cover matters which may not fit neatly into the Sherman Act or the Clayton Act.

Now the three laws I mentioned, federal laws, there are state law counterparts in Chapter 480. And the Hawaii law basically tracks the federal law. And this is important because the federal case law aids in the application, interpretation and enforcement of Hawaii state law.

So you always want to have a level of unity with the federal law as much as possible. Now since this hearing is focusing on the alliance of two companies, let me just focus on that particular law which is relating to mergers and acquisitions. Two well known types of mergers are horizontal mergers and vertical mergers.

Now for both of These mergers, Section 7 of the Clayton Act prohibits or seeks to stop these mergers. Where in any line of commerce or any activity affecting commerce in any section of the country. The effect may be to substantially lessen competition or tend to create a monopoly.

A horizontal merger occurs when two competing companies coming together and what's the harm? We lose the head competition between these two companies and consumers lose out in that instance. Vertical merger example would be where two companies are in different stages of a supply chain and they form a new entity.

There may be very valid reasons for doing that, such as they want to reduce their dependency on external suppliers or distributors. They want to enhance their operational efficiency, they want to improve product quality or delivery speed, or they want to lower costs or economies of scale. And sometimes there may be reasons which can harm competition.

So what I've given you up to this point is a very, very highly simplified explanation of the antitrust laws. And beneath this surface is a web of very complex analyses such that I have been in a continuous state of learning for years. Let me pause here.

I can try and give you a hypothetical and that will help to spur your thoughts as you go into the hearing.

Listening to the speakers, I think we're. Okay, Rod, unless you think that hypothetical is necessary. Also, your timer did not go off, so a management Next up we have DCCA and the Insurance Commissioner.

Good morning. Chair Keol Kolole, Chair Matayoshi, Vice Chair Grandinetti Members of the Committee, I'm Nadine Ando. I'm the Director of the Department of Commerce and Consumer Affairs. Also present with me this morning are Deputy Director Dean Hazama, Insurance Commissioner Scott. Seiki, and Chief Deputy of Insurance Division Jerry Bump.

So thank you for the opportunity to appear before you today and provide the Department's perspective on the proposed partnership between. HPH, Hawaii Pacific Health and HMSA. As Director, I oversee regulate several regulatory boards and divisions, including the Insurance Division, which is led by the Insurance Commissioner.

My remarks today will focus on the Department's regulatory role and oversight framework rather than on the business merits of the partnership. HMSA is the state's largest health insurer and plays a central role in Hawaii's healthcare system. As such, any significant initiative involving HMSA understandably draws public and legislative interests.

The Department shares that interest, particularly as it relates to consumer protection, market stability, and regulatory compliance. From a regulatory standpoint, partnerships between insurers and healthcare providers can take many forms. Some may offer opportunities for improved coordination of care or efficiencies in service delivery. Others may raise important questions about costs, competition, governance and long term system impacts.

Our role is not to presume outcomes, but to ensure that any insurer related activity complies with Hawaii law and serves the public interest. When the Insurance Division reviews a matter involving health insurers, several core considerations guide their work. First, consumer impact.

This includes potential effects on access to care, quality of services, affordability of premiums, and continuity of coverage for HMSA members. Second, rates and costs.

If a partnership affects insurer costs or network structures, those impacts may appear in future rate filings, all of which are subject to regulatory review to ensure that they are not excessive, inadequate, or unfairly discriminatory. Third, market Considerations.

While antitrust enforcement rests with other authorities, and we just heard from the AG's office, the Insurance Division considers whether the insurer's activities may affect competition or consumer choice within the insurance marketplace. Fourth, financial solvency and governance.

The Insurance Division evaluates whether insurer assets are being used appropriately, whether financial commitments are prudent, and whether governance structures remain aligned with HMSA's obligations to its Members. It is also important to note that oversight of a partnership such as this may involve multiple state and federal agencies. Depending on its structure.

The Department coordinates with other regulators as appropriate, while respecting jurisdictional boundaries. At this time, the Department continues to monitor developments related to the HMSA and HPH proposed partnership. If regulatory filings, approvals or disclosures are required under Hawaii law, they will be reviewed carefully and independently by the Insurance Division.

In closing, the Department appreciates the Legislature's interest in this matter. We remain committed to transparency, sound regulation and protecting the interest of Hawaii's consumers. Thank you for this opportunity to testify.

Commissioner, did you have any further remarks or combined Diewich, do you have any comments?

Okay. Aloha Chairs other Committee Members. I'm Kenny Fink with the Department of Health, the State Health Planning Development Agency. SHIPD is an independent agency that has statutory responsibility for access to affordable, high quality healthcare and is also responsible for managing their certificate of need program.

Dr. Jack Lewin, I cannot see if he's present, is the administrator of that agency and it would be his purview to comment if there would be any certificate of need or other implications from a Department of Health perspective. Our regulatory role would be quite limited.

All we would do is license healthcare facilities and it's not immediate clear if there would be an impact to our licensure. But that would be the role of the Department of Health in any process. If there was one at all. So I'd need to defer to SHIPD to comment on its responsibilities.

And Jack Lewin, who's the head of SHIPD, is introducing the Governor at a different event right now. He's going to try to be online. Is Jack online yet? No. Okay. Well, since you're here too, can you kind of briefly explain what a certificate of need is? Or do you.

Do you feel or would you rather defer to him just kind of on generally?

Sure. First, let me disclose should have already begun with my wife will soon be employed by Queens and I was previously employed by HMSA, so I just wanted to make that disclosure.

I would feel more comfortable deferring to SHIPD again because they are an independent agency Regarding certificate of need, as a general matter, not knowing any of the specific details, it is possible that the change of ownership of a facility could trigger a certificate of certificate of need requirements.

But I would really would prefer to defer to Dr. Lewin, who's more knowledgeable about the state certificate of need requirements.

Are you able to kind of tell us what SHIPD is or what their role is in our state more generally?

So SHIPD at 1.0 was staffed at about 60 employees, and it's currently about 6. So where it had a significant role as being a leading policy arm with a state healthcare plan and a state facilities plan that was really the lead entity for informing health policy throughout the state. Over the years, their role has diminished.

However, they've continued to maintain their certificate of need program. The certificate of need program is. Should. There be certain types of services or change in services, they might be subject to getting approval to be able to establish those new services. So that is what their civic need program entails.

Okay, what I'd like to do, since we're stalling for a little bit of time for Jack to get on, why don't we ask some questions? Or I'll open it up to questions for any of the government agencies. If Jack does jump on, we'll switch over to him and then we can continue.

Does anyone have any questions for the government agencies so far?

Grab. People don't have. Thank you, Chair. It's for the Department, I think.

DCC.

Nadine. Yes. Thank you. You mentioned. I know this. We're asking general, not specific. You mentioned what you look at when. When analyzing mergers or, you know, partnerships. And you mentioned is there a different analysis when it's a merger between two corporations like Hawaiian Airlines and Alaska versus two nonprofit organizations?

For purposes of what we were asked to comment on this morning, I think it would be more appropriate to direct the question to the Insurance Division with regard to the specifics in terms of their analysis and the concerns depending on the nature of the transaction.

I mean, at this point, we understand it to be described as a proposed partnership as opposed to a merger, which would be. Different legal aspects would govern that, but we don't know the specifics. But I can ask the Insurance Division if they have any particular comments they'd like to make.

In answer to your question, generally a merger is treated differently than a partnership.

For your analysis. Yes. I mean, just as a legal proposition. But, you know, part of it is we don't know all the specifics to fully understand what the concepts are, what the particular terms are in Order to appreciate, you know, more specifically what kind of concerns we might have.

Okay.

Well, so to follow up, I believe the question was related to the difference between a partnership or merger of private corporate entities versus nonprofits.

And I, you know, that's why I was suggesting that. Because this involves issues that would be presented for the Insurance Division to analyze. In terms of its impact on consumers. That's why I'm directing it to Insurance Division. If there's a particular, specific difference that. Would be involved in their analysis.

Yeah. I have a question. Sorry. Wait, wait. Should we pull up the Insurance Division, then? To answer the question? Yeah. Which is what I'm suggesting.

Well, I think it would be triggered by either a rate filing or a complaint from a consumer, or we could do a suzponte analysis. But at this point, I'm not sure if there's going to. If there really would be a distinction between the two, because the analysis on our part would be the same.

So if I may, just to make sure I understand what's going on here, it's not necessarily the. The nature of the entities or even the transaction that would trigger your review. It's merely the fact that this market is regulated. And so, and so the difference here is that the. The rates require approval by your office.

We're in charge of rate. Rate review. The Attorney General's office will be in charge of the structural review.

Okay.

Structural reorganization.

I took over.

Your question is that.

Yes. So I apologize. I was late by. Saw part of the Attorney General's presentation.

Is the Attorney General.

Rod, are you still on?

Because he was talking.

Okay. What I heard a little bit about was monopolies. Are you. Can you get your video back on or. Yes, I'm here. Okay, sounds good. Sounds good. So. And I apologize. I missed the beginning part. I only watched part of your at in the monitor at my office. Did you analyze whether or not.

Because it seems to me this isn't an actual merger in the legal terms, which is like Alaska and Hawaiian, where one basically takes over the other. I mean, that's what my memory of corporate law. One takes over the other is what a merger is. This sounds more to me like a consolidation of administrative procedures.

Is there a different legal analysis for that kind of partnership where there is this consolidation of administrative procedures and not an actual legal.

Merger?

Chair Matthiyoshi.

I'm not sure if I can delve into. This. Yeah, if you don't feel comfortable, then I wouldn't. That is sort of toeing the line a little.

But I think generally what Senator San Buenaventura is asking is, is there a difference between an actual merger or just maybe what you would qualify as a partial merger of certain functions rather than the whole? Is the legal analysis different between.

When looking at those two situations. Generally speaking, you know, you're looking at the combining of two companies. There are some nuances that might be in there, but it's not uncommon for two companies to get together and create a parent company above them. That can happen in some instances.

I'm not sure if that's exactly what they're going to do here.

The details are still. Sketchy.

I don't want him to comment directly. On.

I want to know whether or not they did any kind of analysis. That I think might be going beyond.

Because they've said they don't want to comment on that at this time, just because of. The. So I.

Apologize.

I didn't hear that part.

Okay, so if you're not willing to comment on that, that's fine, but I'm just gonna. Refrain. Okay, I'm just gonna. Refrain. Thank. You.

You're. Welcome.

Thank you, Rod. Anyone else have questions for our government guys?

Wait, this time. No. I have a question for DCCA Director, if you can. Okay, so apart from the Insurance Commission analysis, which you went through, or it might be connected, which is why. I'm asking you to. Clarify. You know, the four things you mentioned were. The one of them was financial solvency. Is that an Insurance Commission question?

And are we referring to the financial solvency of the organizations involved, or were you commenting to, you know, the marketplace more broadly, similarly to how the certificate of need program operates?

Under my understanding, which is the reason why you have a certificate of need process, is to make sure that that services provided in the healthcare context will not be significantly, or whatever, the standard will not be diminished, thereby limiting access to those services to the community based off of activity in the market.

That's why you have a certificate of need. We're a small island community. We need to make sure that we maintain services. And so if there's some sort of marketplace disruption that causes services to be lost, that's my understanding why we have that process.

So when you're mentioning it in the DCCA context, are you pointing to a separate but perhaps parallel.

Solvency within the.

Department? That's right. Or are you just talking about the financial solvency of the entities.

Involved? Right. It is Insurance Division. This was a concern, and these are things that the Insurance Division will focus. On. So it is, in that regard, limited to what the Insurance Division would. Be looking at in terms of any. Kind of financial impact on the solvency of these.

Entities. So of the entities in the market or of the entities involved in.

The. I believe that it involves the entities involved in the transaction just from the insurance context.

So if I could defer. Thank. You. Right. So when it comes to solvency, the Insurance Division is responsible for maintaining what's called risk based capital standards, which basically requires an insurance company to maintain a cushion. Right. So it's pretty much a guarantee that they can pay claims.

So RBC levels are, you know, it's a universal, it's a national standard and we maintain them in our office as. Well. The. So if with respect to this transaction, which we don't know how it's structured, the RBC analysis will focus on the insurer, which is. Hmse. So it's specific to the.

Applicant. Yes. Okay. That's the.

Answer. Thank. You. Anyone new? Otherwise, I've got a question and we can move back Department of Health actually. So I don't want to comment specifically on the situation, but generally, are there HIPAA or data sharing concerns for patients? When a proposed partnership between two, either two hospitals, an insurer and a hospital.

When two healthcare entities get together and propose to share certain services, are there any data concerns for patient privacy that we should be concerned.

About? HIPAA has a number of provisions to allow data sharing without getting explicit patient authorization prior to that disclosure, typically between a provider and a payer. That's a transaction that needs to occur and that is one that is allowed. Oftentimes a business associate agreement may need to occur between two parties to permit the data sharing.

I would imagine that in any such relationship the appropriate measures would occur to allow the appropriate sharing of patient.

Information.

Are there any required safeguards that are in place there that we should know. About? As general, if they are covered entities under HIPAA, which would occur if they meet certain conditions, such as electronic transfer of certain patient or Member information, they are subject to the required protection. Of protected health or information. Okay.

Okay, thank.

You. Who enforces. HIPAA? Actually, it's the US Department of Health and Human Services, Office of Civil.

Rights.

The federal.

Government. Thank. You. Thank you. I think you want to have another. Question. Do you have another. One? I. Did. For DCCA. You mentioned in your presentation that your. You would be. Our DCCA would be concerned with.

Government. Federal.

With the consumers, I guess, of HMSA, perhaps the hospital, but there would be potentially other consumers who might be impacted, for instance of different hospitals who might also submit claims. And I think maybe the concern.

And again, it's hard to talk about this generally and not specifically, but would the analysis apply to consumers of services in general are just consumers of the individual entities? So that's kind of my question.

It's also tied into would DCCA at all be concerned with the staffing and staff that's affected, whether it's staff of either entity or even positions or professionals they contract?

Is that too far outside of your. Purview? When we were talking, when we. Asked to participate in this info briefing, it was really specifically with regard to the impact and the impact given the entities involved are specifically would be coming within Insurance Divisions purview.

You know, we have other divisions that deal with in general consumer protection or to the extent we have any licensing issues of professionals, you know, but which we also regulate with our Regulated Industries Complaints Office. But on a broader scale, as you're raising sort of impact on generally on the community, on employment issues for staff.

If it's a merger, I mean, that's really beyond, I think what we would be addressing.

So specifically our participation in this info briefing was directed at Insurance Division and how they would be looking at, if there is anything for them to review and analyze, depending on what the structure of the transaction is that would impact their purview under insurance. So I hope that answers your.

Question.

I'll just add something really quickly. I think that the chairs did a really good job in crafting this agenda because this meeting covers the three major points that I think the public and the Legislature are going to be concerned about.

So first is the structure of this, of this proposal, which is something that will be reviewed by the Attorney General's office. The second is the continuation of services and facilities which is what is under the jurisdiction of the Department of Health and SHIPD through the con process. And third is rate impact on, on the, on the public.

And that is within the Insurance Division's jurisdiction. So these three are. These are the three major topics that I think are going to be the focus of this going forward.

Thank. You.

Last call for Jack. Lewin.

Okay. His reservation expired. We're going to take a brief. Any other further questions? Otherwise, we'll take a brief recess to allow the government guys to go back to.

All right, reconvening. We've got a really fun lineup for everybody today. I'd like to remind the Committee Members we're going to try to hold our questions to the end but they're going to be anxious to ask questions. So, I want to ask everyone else to keep their presentations to five to seven minutes.

I will visibly leave this over here if you see that flashing rainbow colors that means to kind of wrap it up or I'll remind you myself if we need it. First up, we've got HMSA and HPH, but I'll let you guys decide which order you go. You do not have to share the five to seven minutes.

Should—just so we don't have to share the five to seven minutes?

You each have five. Very generous here.

Feeling that generosity already, Mr. Chair. So, chairs, Vice Chair, Committee Members. Thanks so much for having me and allowed us an opportunity to share the work that we're doing.

Also, I'd like to thank you for allowing the regulators to speak first. I think that sets a, a nice tone for things. We, we have not made any regulatory findings yet at this—or filings yet at the state level or the federal level—and look forward to going through that process as appropriate.

So, I'm going to talk a little bit about the what and the why and I'm going to let Dr. Mobishi talk about the impact on consumers. So, let me start with the why. I don't have to tell you that affordability is the greatest challenge that our community faces. You know the statistics as well as I do.

It's a challenge to keep our young people here. 23 out of the last 25 years, we've had negative out migration. And, and that's, that's a challenge. Healthcare itself is—and by the way, that out migration issue is personal to me. And I've got four sons, they're adults, they are out of college, they're working.

I've got two daughters in law, I got two grandchildren. I want them home and they want to come home and that's a challenge. And while healthcare is not the single largest contributor to that, you know what those are as well as I do. It's certainly a factor. It's a factor nationally.

Right now, healthcare represents about 20% of the GDP and growing. At the current rate, relative to all the things that make up the GDP, it'll be 38% by the year 2050. We will have long since bankrupted the country.

As you all know, the entire country was shut down for weeks recently on the backs of the affordability of health care. And so, that's not unique to the national picture. It's certainly true here in Hawaii. Every health system in the state, I believe, lost money last year. Both of our major insurers lost money last year.

It is an unsustainable system as it exists. It's the challenge for people to continue as community members to endure what have been double digit plus increases in the cost of health care during the course of the year.

And our intent is to bend that cost curve, bring that down to a more normalized CPI rate for the entire state, not just those who are part of this proposed affiliation and vertical integration, if you will. There's been a lot of talk about, about merger—or not a merger. It is legally not a merger.

What we are designing is maintaining the integrity of the two existing organizations, Hawaii Pacific Health and HMSA, installing a new parent company that would sit above that as a not-for-profit organization named One Health Hawaii, with the sole intent of beginning to bend that cost curve as well as enable a number of other investments, which I will talk about in a second.

Both entities would continue to operate independently.

They would maintain having their own boards that would report to a newly formed parent board. One Health Hawaii would be co-led by Dr. Mobishi, she and myself. Again, it will be not for profit.

And the intent is to design a system in which Hawaii Pacific Health would continue to work with each of the respective payers in the community. HMSA would continue to work with all the respective providers in the community. There were questions about data.

There are firewalls that will be created that protect that data from inappropriately flowing between those two organizations. And so, the Hawaii Pacific Health folks would never see the reimbursement data to other, other providers that is provided by HMSA, and vice versa. HMSA would never see the reimbursement information coming from other payers.

And so, it is designed to keep the integrity of those two systems. But what we are able to do is create value on creation through the consolidation of administration and eliminate administrative burden that exists between those two that can allow us to invest into the community through that value creation.

Over a period of 10 years, we expect that to be in excess of $2 billion. And the way that would be reinvested back into the community would be in three key buckets.

One is through bending the cost curve, lowering the rate of increase to a more normalized rate more consistent with CPI for the entire basis of the membership of HMSA, not just those who are members that have chosen Hawaii Pacific Health as a provider. That's the first bucket.

The second bucket, invest in the rest of the ecosystem, making sure that we've got statewide specialty care available in our most vulnerable communities and investing in new initiatives from within the ecosystem and investing in other providers and payers to enable them to bolt on to what we've created, bringing value-based care to the people of Hawaii.

Our end state goal of creating a healthier community is where we can get to a place where an empty hospital bed is more valuable than an occupied hospital bed, not just for those patients who exist within the integrated system, but for those patients who throughout the entire healthcare ecosystem and throughout all of our communities.

And the last bucket—the first bucket, bend the cost curve. Second, cost—okay, I'm out. Last statement. Second is reinvesting in the healthcare ecosystem. And the third is investing in upstream activities that truly create healthier communities—affordable housing, K through 12 education, workforce development, and things of the like. Thank you. I'll turn it over to Doctor. Thank you. I'm colorblind.

Thank you very much, Chairs and Vice Chair, Committee—Committee Members. What I wanted to spend my time sharing is how grateful I am to be able to talk to CPN and CPC because much of the value of this partnership is going to accrue to the consumer, which is exactly who you're trying to protect.

So, what, how—how and why does a system where the payer and the provider are aligned and the dollar that is invested in healthcare is directly used to pay for that healthcare in an integrated system, why does that accrue value? Well, first of all, incentives are aligned. Care, the finance, and the delivery are aligned.

That's number one. Number two, care is coordinated. So, currently, we have multiple different systems of coordinating care, and every healthcare provider, every payer, they have their own care coordination system.

This will align it into one where as a consumer, as a person, you'll have one that saves money on the administrative side and it's a better experience for the patient consumer because they have one voice that they're listening to. The third is investments are made in the right place; they're made to benefit the consumer.

Right now, we have a payer perspective, we have a provider perspective. The investments are made based on the perspective of the entities. In an integrated entity, they're made for the benefit of the consumer, for the person. So, through all of those things, those are the ways that you will benefit the consumer.

And this type of integrated entity will create an additional choice. You heard the Attorney General talk about the importance of choice in the market for consumers. There's an additional choice. There's an integrated choice.

You still have an open system of care where you can go to any provider you want, you can go to your own doctor that you have now, or you have another choice—there's an integrated choice. And by the way, that integrated choice will be made available to every provider to be part of it.

This is intended to invite Queen's, independent providers, Castle. All the people in this room, please be part of this value-based system. We would welcome all of them because in that way we actually take the ecosystem of health care delivery in Hawaii and make it better for the person. And when I say consumer, that's broadly speaking.

It means individual people, and it means small businesses and it means large employers. Everybody who is a purchaser of healthcare will ultimately benefit from this partnership.

Thank you. All right, Queen's.

Chairs, thank you. Vice Chair, Committee Members, thank you for giving me the opportunity.

I'm Jason Chang, I'm the President CEO of the Queen's Health Systems and Queen's is opposed to this merger because I think what you're hearing from HMSA and HPH is just a small piece of the whole story that this is a huge topic, and the monumental implications are very real.

So, if the commercials sound too good to be true, I urge you to believe that they are too good to be true. So, there are clearly some intended consequences and outcomes that would come from this.

I think you've heard some of those aspirational goals, but there are some very real dangerous, unintended consequences from such a major realignment of healthcare in Hawaii. So, you've heard the sales pitch that that healthcare is broken, it's unsustainable, that we have to change it.

I think the reference to the GDP, that's a, it's a national healthcare narrative and so, why is actually one of the lowest cost utilization states in the nation. So, we're actually doing a very good job taking care of patients that need to be taken care of.

I think that there's stuff that we still have to do very clearly, but we're doing a better job than anywhere else. You've heard that the merger allows for lower cost, improved access, improved quality. All of these are things that we've been working on with HMSA and we've achieved some really good success.

One Health Hawaii says that they need the merger to accomplish lowering costs, access quality, but they also need Queen's and everyone else to participate in an open model. So, that open model, meaning reducing our revenue, it means reducing and limiting our services. And I'm going to call this an appendage relationship. So, it's a separate contract.

So, to be part of this new network, we have to play by new rules. And financially, it benefits One Health Hawaii, not any of the others that participate. So, where does the $2 billion come from? It's at the expense of other health systems? Is it at the expense of the community physicians?

And it's for the enrichment of the new entity. So, we continue. We conducted a statewide poll of the Hawaii residents, and the people told us that they want measured improvement versus major overhaul.

One Health Hawaii is more of an experiment and an experiment that's based on hypotheticals and it's too risky to try in a small market of 1.4 million people. You've heard the reference to $2 billion savings. So, 10 years, $200 million a year, and since we're already the lowest cost, lowest utilization state, these savings come from jobs.

It comes from cutting services, it comes from taking away care from people, it comes from taking away revenue from your providers. So, you've heard HPH say that it could possibly—couldn't possibly—shift all the 700,000 HMSA members, and that's a fact.

Keep in mind that HPH does not provide services like behavioral healthcare, transplant, trauma, advanced stroke, some of the very advanced cancer care. What they can do is shift healthier patients—patients that don't cost HMSA as much money.

And if I take care of the healthier patients, of course, my cost would be lower, and I look like the lower cost provider too. But that's not comprehensive care; that's not investing in the services that the state needs.

HMSA said that one third of its revenue, the money goes to Queen's, a third of it goes to EPH, a third of it goes to the rest of the providers distributed.

If I care for lower cost, lower utilization patients, then my margin on that one third is significantly better than my population were sicker if they had more social issues, if they had more chronic disease. So, what you hear from One Health Wise is sales pitch.

What will actually happen if the merger is loud is an erosion of a sustainable health system in Hawaii. And yes, we need to make improvements, but steady improvements, not the major overhaul. So, what happens if One Health Hawaii begins to fail, if it doesn't do what it's intended to do, saving the $2 billion?

They have to make business decisions and those could be self-serving. So, one move is to shift commercially covered patients from other providers to their health system, HPH. Second could be reducing the number of Medicare patients that they cover.

So, HMSA's loss in Medicare is over $100 million. And if a shrewd business person came in here and said, look, let's just cut out the Medicare business and cut our losses, that would mean that they're abandoning the kupuna. So, again, too much risk if things don't go as planned. So, what is the alternative?

My proposition is that all health systems and all providers partner equally to first address the Medicare population, which is where the biggest challenge is. What we do is we enter into a risk bearing entity that focus on Medicare populations that are of the highest risk, using the greatest number of resources and better manage their care together, avoid commercial populations altogether because this protects our community from the risk of shifting commercial business or shifting sicker patients to other health systems.

We're truly protecting the consumer, and I encourage, I highly encourage, you to scrutinize this proposed merger. Take time to uncover all of the facts. The urgency that you hear is artificial. There is no urgency.

The stakes are really too great and the risk of opening Pandora's box is that it can't be undone. So, healthcare community is just too important.

So, thank you.

Senator. Sure. For the. The rest of the presenters, I'd just like to. To point out I didn't want to interrupt anyone, but the Senate rules, and I'm sure the House rules prohibit the impugning of the intent of other testifiers in an official proceeding. There were lots of factual statements made.

We will continue to have a dialogue on this. This is complicated stuff and I think we were on a line where we're getting pretty close.

So as we go forward, I would like to remind all of the participants that the legislative rules again, prohibit the impugning of the intent of other Members of this proceeding that are going to be participating. Creative. Thank you.

Excuse me, chairs. Can I ask that.

So wait one second. Yeah, yeah. Please introduce yourself too. I also, when Queens was going, you used the word merger a whole bunch. I know that we don't know the exact relationship yet because there have not been any official filings, but I do want to be careful about that since it is a legal term of art, too.

I don't know what you want to call it, though. I mean, honestly, without knowing, it's tough to. Affiliation, please. Affiliation. Maybe partnership, some kind of word like that. If we could, we could hear their lawyers panicking. That's why. All right, next up, we've got Castle. I'm sorry. Kaiser. Kaiser.

Yes, Good morning. Yeah, good morning. Good morning. Chair Matayoshi, Chair Kehoeoka, Lole and Members of the Committee really appreciate being here this morning. Ed Chan, President for Kaiser Permanente Hawaii, and I thank you for the opportunity to present in this morning's briefing. Let me share some prepared remarks.

You know, I think it goes without saying the health and well being of Hawaii people is and will always be Kaiser Permanente's highest priority. Since our founding in 1945, more than 65 years in Hawaii, Kaiser Permanente has been honored to care for Hawaii's people as a nonprofit and integrated health plan, medical group and care delivery system.

We also share some concerns that have been expressed by the healthcare community. And we also want to recognize that innovative solutions and enhanced partnerships may be necessary for the sustainability of our healthcare ecosystem here in Hawaii as a whole. As nonprofit health organizations, we have a shared responsibility to support the health of Hawaii's people.

And we must work together to protect the state's fragile healthcare ecosystem. Kaiser Permanente has pioneered integrated care. Our value based model, rooted in our mission to improve health and give back to the communities we serve, is a proven health care model here in Hawaii. And for more than 12.6 million Members across the country.

There have been some comparisons between the proposed partners partnership and Kaiser Permanente. Let me share a little bit more about Kaiser Permanente's integrated value based Care model. Kaiser Permanente Integrated Care and coverage model was pioneered over 80 years ago and has been serving the people of Hawaii for more than 65 years.

Our approach has always been aligned incentives across health insurance, hospital and clinic care and the doctors and other providers caring for our Members. This keeps the patient at the center while ensuring that health care remains accessible and affordable to all in the community. Our physicians are the Hawaii Permanente Medical Group or hpmg.

Not employees of the health plan, not employees of the health or hospital system. So they are empowered to provide the care that all patients need when they need it without unnecessary pre authorization delays. In fact, in 20204 out of 15 million referral requests made in the entire Kaiser Permanente system, Kaiser Permanente denied less than 1%.

That's because as a single medical group, Hawaii Permanente Medical Group, every Permanente physician is aligned up front with caring for the entire patient population regardless of their insurance type, Medicare or Medicaid.

No matter what level of care a patient needs, primary care specialist, referral, surgery and procedures, diagnostic labs and imaging, behavioral health or pharmacy, it is all aligned and managed under a single medical record, electronic medical record.

In a small island state with limited resources, every system also consider the impact of their decisions on the entire spectrum of healthcare providers, health systems and supporting infrastructure. We partner with community hospitals and specialists statewide because collaboration strengthens access to care for everyone in the community, not just our Members.

And we remain committed to working together with our healthcare partners across Hawaii to strengthen our state's healthcare system for generations to come. Thank you for allowing me this time today.

Thank you. I just want to remind everyone to say your name and organization you're from even though I'm calling you up by organization. Castle.

Good morning and thank you Chairs, Vice Chairs, all the Committee Members for taking the time today to hear from a collective group of healthcare organizations this morning. My name is Chase Alberg. I serve as the President and CEO of Adams Health Castle over in Kailua.

For over 60 years, Adventist Health Castle has had the sacred mission of serving the 140,000 people that reside on that reside on windward Oahu as the only acute care hospital.

I appreciate the chance to share a provider perspective as you consider how the proposed HMSA and Hawaii Pacific Health Affiliation could shape the future of healthcare in our state.

As publicly communicated, the proposed HMSA HPH affiliation is intended to reduce the total cost of care, increase access to health care services Reinvest health care dollars back into Hawaii and local communities.

These are goals that are that resonate deeply across the entire healthcare ecosystem that we live in and align with what patients, providers and policymakers all want to see. At Adventist Health Castle we have strongly support these objectives and importantly we have been actively advancing them, particularly in the past five years.

Expanding access at the right level of care Significant investment into primary and urgent care to ensure that patients receive timely and appropriate and cost effective care Focused efforts to reduce unnecessary emergency Department utilization. We are now able to actually get you into a primary care provider in under three days. We want to keep care close to home.

Recruitment of new specialists and expansion of services is vastly critical for all the people of Hawaii. Increased accreditations that allow patients to receive a higher level of care locally rather than traveling further and also driving measurable quality outcomes.

Adventist Health Castle has achieved CMS five star ratings for the past five or three years and leapfrog a this past year, making us one of the highest quality and safety organizations in the state when it comes to healthcare. This demonstrates that high quality and cost stewardship can coexist.

As conversations continue about how this affiliation could shape the healthcare landscape, we believe it is important to preserve several core principles that ultimately benefit patients and communities. First off is healthy competition. Right. A balanced and competitive market keeps patients, not healthcare systems or payers, at the center of decision making. It encourages innovation, service improvement and cost discipline.

Second, it keeps open and timely access to care. Patients should be able to access the right care at the right time regardless of how health system affiliation or payer status. Streamlined access supports better outcomes and reduces delays in treatment. Aligned incentives is the third Payment and system incentives should reinforce preventative care, efficient care delivery and cost containment.

When those incentives are aligned correctly, providers and systems are better positioned to deliver sustainable high value care. While we are still in the early stages of discussion and have limited information on how participation in One Healthy Hawaii will take place, we share many of the same concerns that have been shared today already.

What we have seen in the past is the market leverage dictates payer contracts and the incentives in them. Cost, quality and access is much less seldom taken into consideration. This makes it difficult to get a competitive payer contract that meets the needs of our community.

Like I mentioned before, Evans Health Castle is the state's top performing quality hospital and we have not received any additional dollars for driving that cost and quality.

Castle Health Group, of which Adventist health Castle owns 50% of, in coordination with a multitude of independent physicians, is the state's top performing physician organization when it comes to cost and quality, but yet they have not been allowed to receive shared savings dollars through our contracts.

For some of us as independent providers, the surrounding discussion of the affiliation makes it seem like we could be inconsequential in the decisions that are made. That decision on how this moves forward is extremely consequential. If it is not managed correctly, independent providers could feel the heaviest of impacts.

The ripple effect through the community could be incredibly painful. Adventist Health Castle is the largest private employer on Windward Oahu. Risk of decreased payments or driving profitable services to other facilities has an economic impact as well as a healthcare impact for our community.

Our residents would be at risk of having to spend more time and money with the loss of services close to home. Our goal is to make sure that there is a long term sustainable health care system in Hawaii. Ensure that any evolution of Hawaii's health care system continues to prioritize affordability, access, quality and support the community.

We appreciate the Legislature's role in helping maintain that balance today.

Thank you.

We have HMA by Zoom.

Mark you online.

No, I'm going to be speaking on behalf of H and A. Please go ahead, introduce yourself, please. I will, but let me just thank the chairs as well as the Vice Chairs and the Members of the Committee for just having the opportunity for Hawaii Medical association to speak for the record.

My name is nadine tensal and I am the President of Hawaii Medical Association For Full Disclosure. As a practicing clinician in the community, I have both informal as well as formal relationships with both Hawaii Pacific Health as well as Queen's Medical center, but Hawaii Medical Association.

It represents the physicians across Hawaii across the health systems, whether it be private, urban, rural and across the full spectrum of the patients that physicians serve. This includes those insured by commercial plans, Medicaid and Medicare. HMA is not here this afternoon to support or oppose the proposed affiliation between Hawaii Pacific Health or hmsa.

It's our role today to be more specific and far more limited. We're here to articulate questions that physicians across Hawaii are asking and to explain why these questions matter to healthcare access, equity and sustainability, particularly for our most vulnerable patients. Physicians broadly agree that Hawaii's healthcare system is under strain and that improvement is necessary.

What physicians are questioning is whether there's sufficient transparency at this stage to responsibly evaluate the impact a vertically aligned insurance provider model will have. Across multiple physician forums, the message has been consistent and clear that we have more questions than we have answers.

These questions include how decisions affecting access and site of care will be made how physician input will be incorporated into the governance, which safeguards are enforceable rather than aspirational and what mechanisms exist if unintended consequences emerge.

From the physician's perspective, policy or regulatory comfort should not come before clarity, particularly in a small and highly concentrated healthcare market like Hawaii.

A central theme that is raised by physicians are concerns about the vulnerable populations and this includes the Medicaid beneficiaries, Medicaid beneficiaries and the elderly, the children with complex medical needs, neighbor island residents and patients who rely on the safety net hospitals for access. Physicians are not asking whether these populations will be cared for. They will be.

The question physicians are asking is where the responsibility will ultimately reside. Specifically, physicians want to understand whether a vertically aligned model could gradually concentrate higher cost and higher complexity patients within the safety safety net systems, shifting the role of other institutions from a shared responsibility to selective participation.

In Hawaii, safety net hospitals are not peripheral, they are foundational. Any structural change that alters how risk is distributed across the system has very real implications with regard to access and sustainability. Pediatric care has been raised frequently not because it is the only concern, but because it illustrates a broader issue.

Hawaii Pacific Health operates the state's pediatric tertiary hospital and nearly all the pediatric subspecialty capacity. Physicians are asking how a vertically aligned model will protect equitable access for children across all insurance types, preserve referral pathways for physicians outside a single system, and ensure that utilization and contracting decisions do not inadvertently constrain care.

Pediatrics is merely an example of what will happen when critical services are highly concentrated and redundancy is limited, a reality that applies to other specialties that rely upon, such as our elderly, our disabled and other adult medically complex patients. Physicians from the neighbor islands have raised particular practical concerns.

Today, complex care often requires transport to Oahu, which carries added cost, delay, family disruption and coordination burden. Physicians are asking whether a vertically aligned model would increase reliance on Inter Island transport, the shift of financial and operational burden toward the safety net hospitals and further centralized specialty services rather than strengthening local capacity. These questions are not ideological.

They are grounded in day to day clinical practice in a geographically isolated state. Physicians have also heard comparisons to mainland integrated systems and they are cautioning us to know that Hawaii is different materially because of our isolation, our limited provider redundancy and our high market concentration and our reliance on Inter Island transport.

Physicians do not believe mainland analogies can substitute for Hawaii specific analysis and safeguards.

That's been five minutes.

If you could start to wrap up. I will and finally, we want to know what improvements could be made now regardless of the affiliation, administrative simplification, the moving away from prior authorization. But I think the take home message would be that physicians are not resisting change. They're looking for clarity before commitment.

And they would like to encourage the Legislature to continue to, to ask detailed Hawaii specific questions that examines the impact on our most vulnerable patients, not only here in Oahu but across the state and to include physicians such as Hawaii Medical association in the conversation so that we can translate not just the legal and the business implication, but how this translates to practical patient, not customer, patient care.

Thank you very much for the opportunity for speaking to the Committee and I welcome any question.

Thank you. We've got two more speakers, UHA and hmaa. UHA is first.

If they're here.

I thought it would be last being you. Thank you, thank you Committee Members and thank you chair for tackling this very complex issue. Just have a few more comments. Uh, health insurance. We were, I'm sorry, my name is Howard Lee.

I'm the President and CEO for UHA Health Insurance and I been in the insurance business for about 30 years when we were founded in 1996 by physician group out of the University of Hawaii. So we really emphasize the ability to allow doctors to practice in a way that will help our Members.

We represent about 2,000 employer groups here in Hawaii that provides health insurance to 60,000 employees here in Hawaii. So we're not the largest, but I don't think we're insignificant. And they, they rely on us to best manage their premium dollars and to provide them something that is competition, that we can compete in the market.

So that I think that's really important. And then the 60,000 Members that we serve, we're responsible to make sure that they can have access to all the hospitals here in Hawaii. If they cannot have access to any one hospital, then it becomes very difficult to us to survive in the marketplace. So those are biggest concern.

I would say that we welcome discussion on how to improve the health care system. Of course, allowing doctors to do what they do best. And we have to have hospitals that Queens and HPH that is going to remain healthy here in Hawaii.

If one of them is sick or fails, it means that's going to cost more money to all of us because we do support each other in times when, you know, maybe we're not doing so well. Queens is not going so well.

So we do have these partnerships that in a way that we help each other survive in this marketplace. So that's all I wanted to say thank you for your time and the job tasks that you have ahead of you will be very challenging.

Thank you. Thank you.

LesSep.

HMAA should be here in person.

Thank you.

Chair and Vice Chair Committee Members My name is Paul Kaiser and I'm currently the President of Hawaii Western Management Group and I'm speaking on behalf of Hawaii Medical Assurance association, hmaa by way of background, HMAA is a small kamaaina group health insurer who has been providing employers in Hawaii with an option for health benefit plans for their employees and covered dependents for over 35 years.

Since we did not receive the request to present until yesterday, our presentation is brief and limited.

However, the following points are noted trying to address whether the proposed transaction involving HMSA and HPH is likely to advance the public interest in affordable competitive health care in Hawaii or whether it will further entrench market power and accelerate cost growth port worn by employers, workers and taxpayers.

Based on Hawaii's historical experience, based on economic principles and public financial disclosures, the conclusion appears straightforward. The transaction presents a substantial and foreseeable risk of increased health care costs, with the clearest direct financial beneficiaries being senior executors and governance insiders, not patients or purchasers of healthcare. Based on this, let me expand on six key points.

First, market concentration predictably increases prices in competitive healthcare markets. If a provider's pricing is too high, insurers obtain the ability to exclude that provider from network providers from preferred networks. When providers consolidate, that discipline disappears. A dominant system can condition access to essential hospitals on acceptance of system wide pricing, eliminating meaningful negotiation.

Second, Hawaii has already experienced this outcome. Over the 25 past years, health care costs in Hawaii have increased by more than 300%, far exceeding General inflation and wage growth over and above the cost of new procedures and medications. This increase closely tracks with provider consolidation, including the acquisition of previously independent hospitals, clinics and physician practices.

Once those facilities were consolidated, insurers were compelled to accept material or higher reimbursement rates to preserve network adequacy, and premiums rose accordingly. 3. The proposed transaction Removes a Critical Remaining Safeguard Today, one of the last remaining structural checks on price escalation in Hawaii is the separation between a dominant insured and the dominant provider systems.

That separation preserves arm length, negotiation and competing incentives. The proposed transaction would significantly weaken or eliminate that check by aligning payer and provider interest within a single organizational structure. When prices, utilization and premiums are determined internally rather than through negotiation, cost discipline predictably declines.

Also, Executive compensation public disclosures make clear that senior executives Already received compensation packages with large portions tied to performance incentives that reward organizational scale, complexity and strategic integration. For example, public disclosure. Disclosure the President and Chief Executive officer of HMASA received. Okay, I'm gonna. That's where we're gonna. Okay, yeah, yeah. We don't want. I'll skip that.

Thank you. Thank you. Intentions do not overcome structural incentives. The issue before regulators is not whether the parties assert good intentions. Regulatory review exists precisely because market structure, incentives, not intent, determine outcomes. Once consolidation increases leverage and reduces competition, price increases can occur gradually, internally and without clear accountability.

Voluntary commitments are difficult to monitor, difficult to enforce, and often expire as leadership and circumstances change. Lastly, Hawaii faces irreversible risk. This transaction represents a one way door. If approved, it would extremely difficult to unwind. Even if premiums rise and competition deteriorates.

Hawaii's small and geographically isolated market offers no realistic alternative networks to absorb pricing errors or failed integration. So with that, absent extraordinary and enforceable protections, the proposed transaction should be treated as high risk to healthcare affordability in Hawaii. Therefore, based on the above points, HMA currently opposes this potential transaction. Thank you for the opportunity to present.

Thank you. All right, that's all the presenters we have. We're going to open up to questions in a.

In a second. I just want to.

There's kind of a push and pull here, right? We want, as a Committee, as a Legislature, as consumer protection chairs, we want lower costs for consumers. I think everyone in this room will agree on that.

I think the fear that some of us in this room have is that the potential long term effects might be a reduction, whether intended or not, in providers in services, and that may necessarily lead to an increase in costs in the long run. Not saying it's going to happen, but I think that is the push and pull.

So I can see the desire to control healthcare costs by every single speaker that came up here today. But I think when we're looking at the totality of the situation, we need to be looking also at the long term effects which could be good or could be potentially very bad.

So with that, I'll open it up to questions.

House side first. Anyone have questions?

Reppiwamoto. Thank you. I think this is for Mr. Vera regarding your testimony. Thank you. You started by saying that this is not a merger. And so I don't know these terms of art as referenced by the Committee chair.

If it's a term of art, then we can say merger, we can say partnership, we can say affiliation, because it's all a term of art to you. What's the difference when you distance yourself from the term merger, what's the difference to you between a merger and whatever it is you're calling this?

Thanks for the question, representative. First, I'll leave the legal basis for merger versus not merger to the attorneys to express during the regulatory process.

But the fundamental issue is that both of the legal entities as they exist will remain intact and continue to function largely as they do today and come together to create the value under a new parent company.

I know that's repetitive of what I said earlier and what that does is create capacity for us to consolidate administrative infrastructure that exists both corporately and both entities and bring that together as one. Think about human resources, think about accounting, think about General counsel's office, marketing, all of those things where we have duplicative services.

Just to give you as an example, this is exactly what happened. When we created Hawaii Pacific Health on December 3rd of 2001, we had three Lego entities, Kapulani Health, Straub Clinic and Wilcox Health. We brought them together. At the time, when we brought them together, the administrative cost associated with that was 46%.

The combined administrative cost was 46% of the combined revenue at that time. Today that is about 26.5% of our combined revenue we have. That is what has created a sustainable system within Hawaii Pacific Health.

Further, there's a tremendous amount of duplication that happens between the two entities today, if you will, which again creates value when we begin to eliminate that. I should also say this combination, it doesn't consider any reshifting of patient traffic or patient traction and it doesn't consider any layoffs as a reduction in force.

Okay, but just if you take what happens on a daily basis with one patient, one patient gets discharged from the hospital, they have a case manager work alongside the provider and decide what they need post that discharge, rehab services, pharmaceuticals, imaging services, post acute care, long term care things and the like.

And then the health plan, not just hmsa, all health plans case manage that and determine whether or not that is appropriate care. The far majority of the time, the upper 90 plus percent of the time, they agree on that and then the patient gets what they need.

That small fraction where they disagree, what happens is they have discussions, the physicians help them understand, they have communications and the far majority of that remainder time, the patient gets what they need.

Wouldn't it be nice if we live in a world in an open system where you can go to any doctor, you can go to any hospital, you can go anywhere within the community and have one side of that transaction eliminated quite frankly, that is what happens at Kaiser. They don't have prior authorizations.

They don't have that duplicative administrative process. And what we're talking about is creating those kinds of efficiencies under that parent company. While allowing each entity, which is why it's not a merger, continue to exist independently. But eliminating that. What I can only describe as Administration, that is a product.

Of a lack of trust that can't be captured in a contract alone.

Thank you.

Same question. Go ahead.

Same question. Just in a very straightforward way. Representative. A merger means you go from two to one, you're going from two to three. So it actually increases choice. So that's why it's, you know, not only legally I think, but I'm not a lawyer, but just conceptually it's not a merger.

And Chair Matayoshi, if you don't mind, I just wanted to address your question in your opening comments for this Q and A period about whether this transaction. Would. Drive more people toward one place or not.

And I would say that there is good evidence in mature markets where there are vertically integrated systems in an open structure and we have lots of examples of that, where anywhere between 50 to 84% of the insured population gets their care outside of the integrated network in these open systems because they're all allowed to flourish, all the different provider entities.

I just wanted to address your question about that.

Okay, well certainly be coming back to that in a little bit. Senator.

Yes, I have a bunch of questions. Thank you. Okay, first up with Mr. Vara, please.

We're going to try to bounce back and forth.

Well, I want to ask, please, okay. And I know you want to sell us on this thing, but keep your answers short. Will you still be accepting like, HMM, HMAA insurance company, I mean insured patients?

Absolutely. The patients will continue to flow from all payers and all providers as they do today.

Okay, so I heard the scare, but what they're concerned about, but real life, okay, what consumers who have had face with the Alaska Hawaiian merger had faced question is going to be about billing? Because that is going to be the consolidation you folks are looking at.

Are consumers patients gonna have problems with their billing like we consumers of Hawaiian have had problems with atmos, I mean the billing transparency, are we gonna have delayed billing? Are we gonna have, are we gonna have to answer to both HMSA and HPHA regarding, regarding payments? Because that as legislators, that's what we get.

Those are the biggest complaints we're getting. We're getting delayed payments. We're getting how come my doctor isn't billing my insured company and why isn't my insurance company paying what they're supposed to? And what's your answer to that to consumers?

What should we expect as far as billing and transparency and whether or not we're going to have the kind of that we had when Atmos and when Alaska and Hawaii merged?

There should be no change in that experience from what they experience now and hopefully like any process, they'll see continuous improvement. But more importantly, what the consumers should see over time is a change in the rate of increase in which healthcare is costing them, which is first and foremost is part of this integration.

Okay, well realistically, I mean we had the insurance commissioner here, all of your rates have to go through him. And when at my last informational briefing and I'm going to ask Mogadishi this. HMSA has different premium rates depending upon different plans.

I'm expecting that those premium rates are going to be subject to the insurance commission just like HMAAS premium rates are going to be subject to the insurance commissioner regarding those. And so there are going to be any increases. This is going to be on YouTube. You folks are telling us costs are going to go down.

So we're not going to be expecting our premiums to go up.

Let me be clear then on a relative basis, over a period of time, not day one, but over a period of time, as the value creation is created, what we will see on a relative basis is a lower rate of increase that is closer to natural CPI versus the double digit increases that we see today.

I know employers who have experience today from HMSA and frankly other health plans in the state anywhere from 12 to 30% just in this plan year that we're just entering. And so yes, we expect as a result of this to be able to bend that cost curve and lower the rate of increase.

What you're not hearing me say is that we're going to lower the cost of health care because that's just not a practical reality. But we can change it to a more normalized consumer price index rate versus the double digits we see today.

Like I said, this is going to be on YouTube. We're going to hold it.

Want me to look at the camera and say thank you for the question. Senator, if I can just share on the rate increase question. So we've now had two consecutive years of double digit increases that have been approved by the insurance commissioner. So he's checked it, seen it's exactly what is required.

But even that was not enough because the health systems lost money in those same years where we were increasing by double digits and paying them. That, that, that is a clear sign that this current model doesn't work. And we need a different model where we can really together all of us address the rising cost of health care.

Let's go to Vice Chair.

Okay, thank you. I think my question is again for HMSA and HPH, maybe particularly Mr. Barra. So in previous public forums when that question around population patient shifting came up, you talked about it. You have no intent to do that. And it's a practical impossibility to shift all of those lower cost patients over to this system.

But we also heard in previous forums from Queens that even like a 5% shift could result in $45 million in losses. So those smaller shifts seem less of a practical impossibility. So what are the protections you plan to put in place?

And to kind of borrow from hma, which of those safeguards are actually enforceable and not just aspirational?

Yeah, great question, thank you. You did listen closely. Those are exactly the words I used. And I do understand that while some of the concerns are very personal and they're very emotional, I do believe that large scale shifting is a practical impossibility. Smaller levels just happen on a happen on a daily basis already.

Patients choose what providers they go to and they choose then what health system they work with. Those shifts will continue.

But the beauty of having this umbrella under a not for profit organization is any value creation gets reinvested into the well being of our community, consistent with the mission which is to create a healthier Hawaii for generations to come.

And so even if value creation happens and it puts some of our safety net facilities, of which I could argue almost all of our facilities in a different way are safety net facilities that would have to be part of that value creation, reinvested to make sure those services are continued and preserved.

And so the beauty of having this be a not for profit organization is allows us to do that, quite frankly, in a more sustainable, affordable way than it's capable of happening today.

Would it be possible to ask perspective on. Can I ask. Oh, second question. Ask Queens for your thoughts on that, please.

Yeah. So, you know, I think that your statistics are very real. So 1% shift of commercial market share represents $9 million to us. So sometimes it doesn't feel like it's a whole lot. 5% could go underneath the radar. It's $45 million. We categorize these as critical services.

There are certain services that Queen's provides that we will never stop. Behavioral health services, trauma, stroke, those type of services that the community always relies on Queen's to provide.

And so the concern is that the shifting of some of the core services because there are very lucrative services that provide the revenue to allow you to fulfill your mission. And if you start to impact those core services, you have to make some hard decisions about what kind of crisis.

So, you know, I think the Concern I have is hearing that it's impossible to stop some of that shifting from happening. Vertical alignment means that there are little things that can happen. One organization doesn't have to do authorizations and everyone else does. One has lower CO pays and everyone else has slightly higher CO pays.

It's the slow organic migration because patients will choose, they'll pick which one's the easier way, path of least resistance. And so it may not be a flip of a switch where things are starting to move patients in one direction, but it could be that gradual evolution.

That we're worried about.

Yeah, go ahead. That's actually one of my fears. We've heard a lot from HPH and HMSA that costs are not going to hopefully increase. Not that they're going to decrease, but that they're going to try to bend the cost curve.

And as they said, but I haven't heard whether they are going to be offering incentives in the form of reduced rates or reduced CO pays or reduced whatnot, reduced impact on the patient to go to an HPH hospital or facility rather than a Queen's hospital or facility.

So I would like some guarantee or some assurance from that side that those incentives are not going to be, I guess that the cost won't be different if they're going to HPH versus Queen's, the cost of the consumer.

We actually are starting that process now without any of this transaction happening.

What Hawaii needs is a high performing network which we believe there are many good facilities, both HPH and Queen's and Casel and independent doctors who are part of a high performing network who can perform in a way to quality and cost standards that deserve a better benefit product that you can sell to consumers because it will be more affordable.

So we're starting that now and the rules of joining the high performing network are going to be well established, clear, consistent across everyone and transaction or not transaction. That is our philosophy of our high performing network.

That was a long winded way of saying yes, you have a guarantee that a high performing network that we would form in any construct would have the same rules applicable to any provider.

Okay, so just to break it down to see kind of a yes or no, if a patient goes to Queen's versus hph, that cost to the consumer will be the same regardless if they're covered under hmsa.

If they're in a high performing network. Which Queen's is part of. We hope they will be. Yes, we will hope they will be. So during the process of getting this started, we don't currently have A high performing network. But because of our financial performance in the last two years, we decided we need one.

So we're in the process of starting one. And this, in this transaction, obviously our partner organization will be part of it. We want all the organizations to be part of it as well.

So they'll have to join criteria, there'll be criteria. They'll have to join your network basically in order for HMSA patients to get equal treatment. Correct. Is that, are the terms of joining that network constrictive to what Queen's is currently experiencing when dealing with hmsa? No.

So they'll be the same terms as everyone as well, the same terms as now is what I'm wondering. Well, you're going to basically force them to join this network in order to get the same treatment as hph, which I'm not. Again, if it's lower for the consumer, that's a good thing.

But I'm wondering if there are any disadvantages between Queen's current situation and joining this new network that you have in order to get that equal.

The high performing network is value based, so the payments are based on value creation. So if you join the network you're saying we are interested in providing not just fee for service but terms you've heard before here. We would take shared savings, we would be paid for quality, those types of things. So there's value creation.

And if you agree that that's how you want to get paid, you'll be part of this high performing network and.

They'll be treated the same as HPH.

Treated exactly the same.

Okay, thank you.

I think this could, if you guys want to move to the front two. Chairs, it's healthy lifestyle to getting exercise by sitting farther away, you know, okay. Maybe it's Ray, maybe it's Mark.

The question about this 1% shift, we, we know that there's going to be a significant shift in the patient population in terms of who gets covered because of the Medicaid cuts.

In the next five to seven years the Department of Human Services anticipates at least 50,000 people will lose their Medicaid insurance and the most likely place that they will go thereafter to receive care are in emergency rooms which are not in the HPH network. Do you anticipate building out critical care? zero, except on Kauai, right? I guess.

Well the question is, does this affiliation anticipate the build out of new services like emergency services or mental health that we anticipate upwards of 50,000 people in the state of Hawaii. We will probably be accessing through emergency rooms or other mechanisms because they're going to lose their health insurance.

I'm anticipating that there will be Queen's patients and HMAA patients and Casel patients and HPH patients who will fall out of your, who will fall out of your patient population because they're going to get cut from Medicaid.

And it seems like the most likely place they will get care thereafter is in an emergency room, in most cases at a public hospital or at Queen's or at Castle in my district. And so we're talking about a shift in patient population.

So I'd like you guys to comment on how you're contemplating what's going to happen to those people.

Sure. I'm just going to make one comment about our HMSA Quest data and then Ray can talk about the network and that is that because maybe if you can. Yeah. HMSA covers more than half of the Quest patients in this population. So I would say our experience mirrors probably the experience the state will have.

Actually the amount of dollars that we pay in Quest are actually a little bit bigger to HPH because they take care of all the kids at Kapiolani and that's actually where most of the, where a large percentage of Quest Members reside. So yes, they will need to be part of the solution for Quest.

But I just wanted to correct. The. Suggestion that maybe they don't take care of Quest patients because they actually have most of our dollars go there.

Quest. Thanks, Dr. Moishi. Senator. I'm not sure I understood. So I want to be quick. All of our hospitals have emergency rooms. All of them are high volume Straub and Polymomi. Specifically Straub has some of the highest acuity. So the sickest patients show up at Straub. We have the state's only burn unit and we would.

There is no reason to suggest that any of that would stop. We're a not for profit organization. We take care of all patients who come in the door.

I might be getting the terminology mixed up, but I mean the thing that's coming to mind for me are mandatory holds.

Right, Mandatory holds. The MHS. Oh well, all those come, those come to our emergency rooms now and we evaluate them. Last year we did over 4,000.

Right. And then they go to Queens or they go to Castle on the island of Oahu. Correct. Right. And so my concern is, I mean this is sort of like a projected concern. So I'm asking for some latitude because this is not something that really impacts your transaction at all.

Except that if we're going to see an increase in those type of folks who are deteriorating because they're not getting regular care. We're talking about a shift in the patient mix. We are anticipating people that are receiving services right now through Medicaid to stay stable and to improve their situation, mental health or, or homeless.

Otherwise we know they're going to end up in the Queen's ER or they're going to end up in mandatory holds at Casel. And so I'm asking whether you're going to try and maintain your mix of that patient population by expanding out services in that area or not.

Well, in support of both the HMSA Members and the community at large, a determination if in fact we see that growing need continue to grow, I would anticipate One Health Hawaii through that reinvestment into the healthcare ecosystem would either provide support for Casel and Queen's to expand those services or we would enter into those services as a provider organization.

To me that would be the latter of the choices because frankly we don't have the skills, knowledge and capabilities to just as the same thing happens when complex pediatric cases show up in any of their emergency rooms. They show up or they end up at Capia line. Interesting fact.

Just for what I think folks should know, are you familiar with what hospital divert is? An emergency room goes on divert when they don't have the capacity to care for that patient or admit them if necessary. And the ambulance have to go to the hospitals that are open. It's tracked daily. We can see who's open, who's not.

There's only one hospital in the state of Hawaii that has never, this isn't an exaggeration, has never been on divert. That's Kapiolani. Because if there's a child in need, there's no place else for them to go.

So the impact of a safety net hospital, the services and certain services that other providers like Queen's and Castle and the neighbor island emergency room provide, we are very well aware of and we take that to heart.

And so the intent of One Health Hawaii is to create the capacity to preserve those most needed safety net services and make sure the underserved population are cared for.

Right. Well thank you for clarifying that. Cause I'm not trying to insinuate that's a great question. But we know that there's going to be a pretty significant change in the way people utilize services and it's going to be the most high cost services and the in all likelihood the sickest patients that cost the systems the most money.

And I just wanted to add that since we're a little, we strayed a little off topic, but it's a really big important topic about Medicaid redetermination and what that's going to mean for our care delivery system is the best way for us to address that is going to be making sure that we have good data sharing, integrated care for all of those people and that means provider, payer, government, all trying to get on a common platform, all trying to share ways that we can get the appropriate people redetermined so they do not fall off the Medicaid rules and we're in.

That's right.

Regardless of this or not. We want to do that. We want to invite all the providers in the room to be part of that, we want to invite government to be part of it. And let's attack this problem together.

If I could add one more element. You can. Afterwards though, I do want Queens to comment on that. We've been talking a lot about this network.

I want to hear their thoughts on it. And this is in the spirit of I'm on the record and it's going to be on YouTube. What you haven't heard us talk about in any forum and not here today is somehow how this is good for Hawaii Pacific Health or hmsa.

What you've heard us refer to is why this is good for Hawaii and sustainable healthcare services that bends the cost curve and provides high quality, accessible care for the people of Hawaii.

With that in mind, there is no marker of success in which there is a wounded queens, a wounded castle, a wounded HHSC and those providers that provide the most vulnerable services alongside Hawai'i Pacific Health in a safety net capacity.

Thank you.

Yep. So we have been in conversations about this preferred network and I think the one thing to keep in mind is that the first population that's going to address is the Medicare population. So reducing the cost, the overall cost for that population, that's right now the biggest drag on hmsa.

Eventually it'll move into the other populations and it'll take several years to do that. So I think, keep in mind when you think about commercial shift, we're focused on the commercial population, not the Medicare population. So yes, participate in this value based, high performing network.

But we're still concerned about what's going to happen with the manipulation of the commercial population.

Does it comfort you at all that they basically said that if you join their network you're going to be treated the same as hph. Does that make a difference in your. I think the proof is let's See what it actually looks like.

But if that happens, would that mean that, would that allay your concerns? Yeah, I think that, you know, again, going back to, you know what I think the solution actually is is that everyone participate in an equal way so that we're all equal partners.

And because technically if you have a vertically integrated system that the way you're going to find that $2 billion is you're going to reduce services, you're going to reduce cost. And so there is something that's going to come out of every provider, including the physicians, the community physicians themselves, independently.

It's just a matter of how much from each one of them that then translate. And so you're doing this work which is good. I think we eliminate waste. Absolutely.

But when it comes to having to pick what services you can't provide if it's dictated to you versus actually having your physicians come back and say like this is something that we should not be doing, that's two different things.

And so I think the detail will be really important.

Chair Takayama,

I have a question for Dr. Mogiishi. Dr.

Much of your remarks. As well. As others concentrated on the impact on consumers as well it should. But an important component of our healthcare systems are health providers. Physicians, as one of them yourself. As you are well aware, there is a severe shortage of physicians in Hawaii, particularly on the neighbor islands.

So I'm interested to know what impact this arrangement may have on physicians, particularly independent physicians. As alluded to by Jason Chang on the neighbor islands. Is this going to be at the expense of squeezing more efforts out of. Them. And less reimbursements or perhaps even greater reimbursements to keep them in business?

Yeah, absolutely. This would not be at the expense of independent physicians and certainly not the ones on the neighbor island. As you heard me articulate before. We spend. HMSA spends about 1/3 of its provider dollars on HPH, currently 1/3 on Queens, 1/3 on the independents. So we have to take care of that one third.

And in order to do so, admittedly because they are short, we need to increase their capabilities. So as we are moving into this value based world where we're going to pay people for value, it's very important that we give them the muscle to be able to participate in there.

We are currently in the process of bringing what's called an enabler into the market.

Enablers are third parties that give enhanced capabilities to providers so that they can perform better value, better cost, administrative simplification, changing, like as you, as you know, representative, I've Told you this before when we talked about pre auth where we're trying to modernize our pre auth, but we're getting 90% of our preauthorizations by fax from doctors.

We need to get them off of that and into electronic submission so we can do real time communication with them. Enablers would provide that technology so they can do that. And 100% we're going to invest in that.

And if we have the administrative savings that we can generate from One Health Hawaii, we can invest even more in increasing their capability. So the idea being that all boats rise with the tide rather than any one boat gets sunk into the ocean.

Thank you. Yes.

So Mark, I just want to make, I want to make sure that there's assurance that we do have the Hawaii Information Exchange which is not supposed to only be between HMSA and HPHA. Will, should this consolidation or affiliation be approved and go on.

Will HPHA and HMSA still participate in the Hawaii Information Exchange so that Queens, hmi, other medical providers will be able to benefit from this data sharing?

Yeah, I mean I think in a mature state that would be great. Like currently the Hawaii Information Exchange does not exchange all the data that we need to actually make. I understand that, but hopefully we will make it more robust.

Whatever data platform allows us to create a value based world where their consumer patient is in the middle, we will use that and we will use it for everyone who wants to be part of it.

Okay, thank you.

Thank you. It's for Dr. Mugishi. Thank you. So you mentioned, well there'll be like almost $2 billion in savings and you also mentioned streamlining of pre authorization and you mentioned again with enablers, this third party contractor, but so could you. The savings I guess is going to be quite substantial.

Regarding pre authorization streamlining, you have pre existing I, you have similar relationships with other medical groups, providers.

Why couldn't you without I guess bringing them into this value based structure, why can't you just work out this trust relationship and forego more of the pre authorization screening and all of the obstacles that you're removing with hph, but can't you also remove them with all of these other institutions and save money?

I would say we've been trying to do that for, for as long as I've been an Executive at hmsa. And there's just a limitation in a transactional contractual relationship where the relationship you have with somebody is across the table and negotiating like what's in the best interest of two separate parties.

Data sharing is not easy getting agreement on exactly what you push back and forth to each other getting agreement on what the single source of truth is We've not been able to do any of those things and that's a very straightforward and simple reason why we haven't accomplished it up to now and if.

I may chair enablers the third party are these maybe out of are they foreign like resources where it's other people you're farming out this work so you're reducing staffing locally zero they do not.

Reduce staffing locally they come in to the system and they they are basically they bring a technology and process improvement platform to providers to make them compete in the value based chain so they can deliver more choice and value to consumers they do this across the country so that they you know we know who's good and who has a track record of doing it well and we've actually brought several to Hawaii and allowed them to meet with the different independent groups and they kind of have spoken in that there's one.

That a vast majority of the independent physician organizations have said, we like that one, we're ready to sign on the dotted line with them. And that's where we currently are with this.

You know, I guess Queen's. The reality is there's been a movement throughout the country really for the past, I don't know, decade or so towards more consolidation. And in fact, Queen's has sort of partnered with Kona Community Hospital, okay, and earlier, you've also taken over North Hawaii Community Hospital over in Waimea.

So it seems to me-- and so far the community has not complained. There has been concerns by medical providers that with these types of consolidations continuing that they're going to be squeezed out. Like, on my side of the island, Pacific Surgical Associates feel like they're being squeezed out by Hilo Medical Center.

Okay, but that's a governmental entity. Knowing that-- I mean, Queen's is already participating in some of these sort of mergers already, at least on my island. Don't you think you'd be-- it seems to me it's an eventuality.

I don't necessarily like it because I see independent medical providers like the surgeons over on my side of the island feel like they're being squeezed out by the bigger entities, but why won't you consider an affiliation with HMSA? Because it seems to me it is like an eventuality.

Yeah. So there's a bunch of questions in there and I think maybe start with, we are open to an affiliation. I think that that's what we propose, and it started off as, would we be interested or could we participate in a three-party affiliation?

I think that the answer was that they are already going down the road of the vertical integration and we would like for you to participate as an appendage relationship opposed to actually being an equal partner in this.

I do worry that in that scenario there's other partners like HHSC and Castle and Kuakini and others that are not part of it too. Because I do believe in order to bend the cost curve and improve care, you need all the providers and, primarily, primary care, not necessarily specialty care. Primary care can drive a lot of that.

I will go back and say that we have acquired Wahiawa General Hospital. We've acquired Kahi Mohala in the last couple years. And in both cases, those hospitals came to Queen's and said, look, we're going to close, we're going to go bankrupt, and we're going to leave. These are things that are important to us.

So we work really closely with the community to figure out, is that something we want to do, and how do we do it in a sustainable way? Wahiawa, as it stood, was going to be a lost leader for us unless we found a way to make it sustainable, and we have.

So we're preserving the beds and the services, emergency services, in the Central Oahu area, and they-- actually, the community has been grateful. Their affiliation with Kahi Mohala was because ADA behavioral health beds were going to go away.

And when they went out to a national RFP and they came back-- and whoever responded said that they're going to fundamentally change the type of behavioral healthcare they're going to serve on that campus. They came back to us and said, would Queen's be still interested? And we said yes. Losing 88 behavioral health beds would be catastrophic.

And so I think the nature of those relationships are different than trying to create something that just is market share. These are critical services and typically areas and services, service lines, that are not as desirable. The relationship with Kona is to create something sustainable. So behavioral-- or acute care hospital in Kona needs to expand.

The state is subsidizing it somewhere in the range of $40, $45 million a year. It doesn't have specialty care, so 38% of the patients, they leave the island to get things like MRIs, simple things, surgeries, advanced care.

And so, can we take our provider base and send it over there to help keep patients on island and do it in a way that it reduces the amount the state has to subsidize Kona Community Hospital? That's the reason why we call that a public-private partnership.

And then I think the last part is that as we've grown, our medical group, our employed medical group, is just about 700, a little over that now. And we have not gone out to any providers and recruited them to join the Queen's medical group.

These have all been independents who decided that they want to do their care at Queen's, they couldn't survive in private practice, and they wanted to be part of something that was more sustainable.

COVID was really the catalyst that really moved this quickly because a lot of physicians in private practice struggled and felt like we need to align with somebody, and I think, you know, Ray would say the same thing about HPH, that independent private practice physicians, even if they're in a group, small group of seven physicians, are not as sustainable and there's high risk in that. So affiliation just seems to be the way that doctors want to go.

Okay.

So I've got a bit of an open-ended question for HPH and HMSA. We saw your website that you came out with. Respectfully, it's a lot of rainbows and butterflies. We don't have a lot of details at this time, but it seems like only good things coming from this.

I would like your more critical feedback though on what kind of problems could potentially arise from this from your perspective and what kind of safeguards you are going to put in place to ensure that those do not happen.

I'll just start by saying I think you heard the obvious concern that providers are-- other providers that are not in the system are worried that they will be either excluded or treated as second-class citizens. And I think that would be a pitfall that would make this entire affiliation partnership difficult to generate the value that we'd like it to because the whole intent of this is to raise all boats with the tide and to have everybody come on this value-based journey.

The initial relationship with Hawaii Pacific Health is a catalyst to create the infrastructure by which we now have momentum because we've been stuck without momentum for as long--like I said--as long as I've been in.

The transactional relationship of payer and provider have made us not move and that's why we've had double-digit increases. That's why people go, I can't get an appointment. That's why people say, I don't have access on this island. Because we're not synergized together.

We're not talking together as a big health ecosystem. So the biggest risk is that we don't bring everybody along, and then therefore, the whole ecosystem is not unified in this task. And all I can give right now, being that we're building this, is my work. That is the intent. That's what we're going to do.

I have good relationships with everybody in this room, and I'm saying, that is what we are going to do. And I'm going to do it with them. There are certain reasons why we can't, like, actually make them all merge together and then partner with them. You're an attorney, Mr. Chair; you know what those reasons are, but this is a catalyst to start that conversation in earnest.

Mr. Chair, I appreciate the question. It's actually one that I think about every minute of every day as we contemplate this. I've been doing this for over 30 years at the CEO level, and there is no doubt in my mind I've got much less view out the front windshield than I do the rear windshield at this point.

And this is going to be the most difficult thing professionally that I embark on during the course of my career. I recognize that. And so the greatest risk points from my standpoint first are failure to execute, failure to look in the mirror and recognize the commitments and the promises that we made to this community and not have the guts or the will to actually execute upon it with that in mind.

Second, just as Dr. Mugiishi said, not to bring the other providers and other payers into the fold. Well, I think we will create value through billions of dollars through internal administrative savings. Not without-- it will not be on the backs of independent providers or other hospital providers. It will not be through reductions in force.

It'll be through the administrative duplication that already exists today that, frankly, in my mind serves very little purpose other than as an element of lack of trust between the entities. That's where that's derived from.

So failure to bring everybody else into the fold to make the greatest impact for the people of Hawaii will be one of the greatest risk points. Now I have-- I'm sorry. One of the-- one of the things that hasn't been talked about is when we looked across this continuum of how to get to where we're headed, one of those was, let's create a risk-based entity and invite other providers in.

Some of the other providers in this room said no. They didn't want to be part of it. And Dr. Mugiishi said, and some of the providers who have spoken at this podium today, have said no and said no. And we said we can't wait to find the right solution.

And then we looked at, could we do such a risk-based entity between the two of us. And we said, it doesn't create enough value creation unless we're willing to go the whole way and create a vertically integrated system. That's how we landed where we're at today is because there is a sense of urgency to this. There is a sense of urgency. Sorry.

It's okay. I wanted you to just outline what kind of promises that you're making now, that if you did not fulfill them, would result in failure of this idea.

First and foremost is create-- bend the cost curve, create a more affordable environment in the future for the people of Hawaii, to create a more sustainable healthcare system for the people of Hawaii. We know that there have-- we've seen what's happened to Wahiawa. We saw the position that Kahi Mohala was in.

We see where the neighbor island facilities are at. And I'll give you one example of what we're talking about here in this reinvestment in the community. Right now, I get calls every single day saying, why don't you put a neurologist or a cardiologist on Maui? I don't own the hospital there.

I don't have a network of providers there. It doesn't make sense when I think about the use of the limited resources that we have. So we say no. We create One Health Hawaii and suddenly we're aligned with HMSA, which have 50% of the commercial market share.

Suddenly then, it makes a lot of sense for One Health Hawaii, not necessarily Hawaii Pacific Health, but One Health Hawaii, to invest in and making sure that there's neurologic care or cardiac care there so that people don't have to get on airplanes every single day. Another example, we've talked about Kona Community Hospital.

Sorry, I want to stop you right there because in your December talk with HMA, you brought up that urologist on Maui example also, and something about it kind of bothered me because there is already a urologist on Maui. The amount of need on Maui would not change through your partnership.

It's not like more people will need a urologist or fewer people will need one with your partnership. So when you say that by putting a urologist on Maui makes sense now that you have HMSA members to take care of, what you're necessarily saying, I think, is that now you have-- it incentivizes you to put someone on Maui to draw those patients away from the existing urologist.

And it kind of makes me afraid because the way you're going to draw them away is by either offering some kind of incentive to HMSA members at a lower cost-- I mean, that's kind of the only thing I can think of.

Yeah. So thank you for asking that question for clarity.

A lot of people are afraid of cherry picking.

We would only go in where there's a community need, if there's a need for additional services. They may have urologists. I was just using that as an example, or a neurologist, or cardiologist, or any-- oncologist. Wherever there's a need on that neighbor island where people are getting on airplanes and coming to Oahu now. And we already have responsibility, One Health Hawaii, through the HMSA membership for the those patients.

And if there's no--whatever the specialty is--where there's a need there on that island, then they get on a plane and come here. That's less efficient care. It's not as good for the patient, it's lower quality care, it's more costly care, and so the narrative changes but it's only possible when the value is created through the integrated system, the billions of dollars that we talk about. Without that, that funds the virtuous cycle.

The urologist situation just doesn't make sense to me because you-- if there was enough demand to put another urologist on Maui without drawing from the existing one, for example, then you would already make financial sense to put one there.

If there isn't enough demand to support two urologists, why are you putting another urologist there unless there's some kind of drawing away from HM-- I mean, you talked about the reason you're putting it there is because there's so many HMSA patients there.

So really the only thing-- the only reason you put it there, if there is not already enough demand for two urologists, is because you know that HMSA members will now come to your urologist instead, and that, I think, is part of the fear that this committee has of affecting the amount of services and supply of services available.

Great question. Again, if we're talking specific about urology, I don't know that we need a urologist there or not. I don't know. I'm using it as an example. But I will give you an example. On the island of Kauai, we have the need for 1.5 general surgeons.

I, personally, at Hawaii Pacific Health right now and HHSC does something, we employ four general surgeons to make it a sustainable system from a lifestyle standpoint. Because you know what happens in the emergency room? Those patients come in, and if that physician's on call every night or every other night, they leave Hawaii.

And so-- and what you're not hearing me say is that the support for placing that specialist on Maui, or on the Big Island, or on Kauai doesn't mean they're going to be employed by Hawaii Pacific Health or Hawaii Pacific Health Medical Group. We may in fact work with Maui Medical Group.

We may in fact work with Maui Health. We may in fact work with Queen's, depending on where it is. However best to get that service is to support that member, the services they need on a sustained basis in that community. Does that help?

Yeah, that's a lot of altruism, so we're going to hold you to that.

Yeah. The alternative is pessimism.

Can I just clarify, though, that when we say One Health would put the necessary resources, that means the high performing network of One Health.

That's right.

And we are very hopeful that it will include everybody in this room who said that they're worried about that they'll be cut out when we demonstrate. And I get it. We have to demonstrate it. When we demonstrate that we are not cutting them on--in fact, we need them, it may be their provider that goes to Maui, as an example.

So it'd be fair that one of the failure points would be if you don't get to Queen's, to Castle's to kind of join into your network, that would be considered a failure of this idea?

I don't think it's necessarily a failure, but it certainly would deliver less value to the people over Hawaii, and a lot of optimism. You're absolutely right, Mr. Chair. The current system is unsustainable. It will break and it will hurt the people of Hawaii. I'm not trying to create fear, and I would argue that if it's not really hard, you're probably not making a great enough impact.

One more nitpick with you because you said that one of the savings-- it seems like all of the savings is coming through non-duplication of services. And then you also say that you're not going to lay anyone off, but if two people are doing the same job, isn't that were the same-- our Department of Human Resources could use more people, so if you could send them our direction, we'd appreciate--

Great, great question. We're large, complex organizations and neither of us are in distress. When Hawaii Pacific Health was created, we were in distress. All three parties were in distress. I was the CEO of the Straub when we brought--CEO--when we brought that together.

I just come in as the CEO of Straub, and I didn't know how I was going to pay payroll in two weeks. We're not in that situation. Hawaii Pacific Health has a strong balance sheet. HMSA has a strong reserve base.

It allows us to do this integration and create that value over a period of time, as I've said, in a deliberate methodical manner and where it involves personnel is to do it through attrition. There is nothing in a reduction in force that is built into our performance for value creation.

I can tell you at day one, we've already identified who the senior management team will be, and it's without any reduction in force, and we're not going to have two general counsels, two human resource people, two CFOs.

I can use my organization as an example. For general counsel, my general counsel is going to retire at or before this transaction, and then at the end we'll end up with one. We have the opportunity.

This entity is going to require two to three years of investment and commitment before the wheel starts spinning where all of a sudden the investment is outpaced by the value creation. That doesn't mean there's not value creation, but that's the value that comes through having two organizations that aren't in distress and allow us to do it in the right way.

And I just wanted to clarify that that is one way that we will generate the $2 billion in savings, but there are other ways.

What other ways? I'm curious.

We can bend the cost curve by better care coordination. I think I've ex--

Bending the cost curve comes from the savings that you're investing to bend the cost curve. Are you bending the cost curve in other ways?

You can bend the cost curve by better care coordination. So right now we have a care coordination area. Queens' has one, Castle has one, HPH has one. Somebody who touches all four organizations, which is common in Hawaii amazingly, like somebody to all of those places, they have four care coordinators if they are, if they're a complex patient.

And so not only is that expensive, it's confusing. Like you're going to listen to four different people. So one, right-- if we have one, that is easier for the patient, it's a better experience, it's clear to understand, and it's cheaper. And it will give you better care coordination. So that's one way.

Second way is CapEx, OpEx. So OpEx, you heard about OpEx? We will be more efficient at operation. But even the way we invest capital, right now, we do it just with our own lens. When you're in One Health Hawaii, we all talk together about, how should we invest our capital to better this state? That's another way that we can bend the cost curve. And the third one is revenue capture.

So it's just a fact of life that healthcare dollars, a lot of them come from the feds and a lot of them are things that are physician dependent, like your STARS Performance, which is a Medicare pay-for-performance program, your risk adjustment, how you code.

Right now we're the ones who get that revenue, but we're not the ones who have to do it as the physicians who are at all these different places, and we're not always aligned in how that gets done. So in an integrated entity, we would all be aligned and we would do it.

It's not an accident why Ed Chan and his wonderful vertically integrated thing gets five stars all the time because his physicians are on their same EMR, they share the same data, they have the same processes, and they get things together. So we're hoping that with One Health, we would capture that revenue as well. So all those things can bend the cost curve.

Okay. I think, Dr. Mugiishi, if you can just-- as we follow up a breakdown of those, I think you mentioned four things would be helpful just so that I can see your version of it with my own eye rather than the notes because you guys did answer one of my lingering questions, which is-- and this is gonna get flushed out more as you get into the actual legalese of the transaction, but just on its face, the challenge I'm having and the public, I think, is going to have is you're saying this is not a merger. We're going from two to three organizations and we're going to save you money by eliminating administrative duplication.

Well, that's one way.

Well, right, but that's sort of the top-line thing. You've clarified that there are these other things that happen from the way you're going to structure the entities and then the follow on effects, but--

We can bring that to--

You know, we have to communicate this out to our constituencies as well and we have to manage the healthcare system in Hawaii through working with everybody in this room. And that right off-- on its face is hard, doesn't make sense on its face, right?

So if you can-- if you can just help us with some fallen materials afterward, it will allow us to have a dialogue with everybody else, including the members in this body who have to process everything that's that's gone on. So thank you.

Absolutely.

Is it our turn? Because I do have a--

That wasn't your turn just now?

Oh no, no, no. I have a question for Mr. Kaiser actually, because I-- the way you-- the way you brought up the incentives fit my ear the most clearly, I think, because in his opening, Dr.-- and this is not like a deposition or whatever, but again, what I'm hearing from Dr. Mugiishi and Mr. Vara is that aligning payer and deliverer incentives and better coordinating care will save people money.

But then when you came up and gave your presentation, you said that an arm's length relationship between a payer and a deliverer is better. So that's an easy place there where we have directly contradicting opinions on this, and then obviously there's the space between them and then how you guys see it. Can you help me understand that a little bit better?

I can try. Our perspective is, competition leads to more competitive pricing in the marketplace and when you're negotiating against a 80 pound gorilla, they get to dictate, more times than not, what you need to do in relation to negotiations.

So having one-off negotiations makes it more palatable, particularly from a small insurer's perspective, because again, you know, would HMSA have favored nation pricing in such a relationship that HMA would not have the same negotiating power or the pricing component in the marketplace. Those type of things. Does that answer your question?

Great. I-- that's one incentive. Are there others?

That's one that comes to mind. Sure.

And it's not an insignificant one. Okay. Okay. Vice Chair.

Thank you, Chair. It's for Dr. Mugiishi. You mentioned-- again, going back to this idea that it's not a merger, it's three now, three entities, and you also talked about administrative redundancy and the cost savings. Has One Health Hawaii already been incorporated?

No, we haven't-- we haven't been approved yet.

Okay, so when, when that does happen, if it does happen, will-- and you mentioned, I think, that the two of you will be the leaders of the organization. Will you be getting additional compensation as leaders of that organization? That's one question.

Secondly, we heard about this idea of equal, like, different healthcare facilities getting equal status as HPH. How will they be equal if one of the providers is part of this One Health Hawaii with the layered fiduciary duties to the existing entities. Will it be that if they become a member, an equal member of One Health Hawaii, that they also get a seat at the leadership table, or how does that work out in the future? So compensation, and as you get more members.

So I'll start off with compensation. One Health Hawaii will be a 501c3, and like HMSA, which is a mutual benefit society, and Hawaii Pacific Health, which is a 501c3, we are bound by our missions and by our charters and by the laws of the land to have compensation that is appropriately benchmarked and competitive across like institutions.

And so we all have boards that do the appropriate diligence to make sure they are fairly compensating executives. One Health Hawaii will have its own board. It will have the responsibility to set Ray and my compensations. It will do so in the appropriate legal way that all not-for-profits must set their compensation.

And this is something that's true of all of us. We're very lucky in Hawaii that most of a healthcare delivery is not-for-profit because it makes sure that executive compensation is appropriate and benchmarked properly. And so that will continue to be true for One Health Hawaii.

For your second question about everybody being part of it-- you know, there are going to be appropriate firewalls that won't allow necessarily, like, HPH's contract. And we will still-- by the way, One Health will still have to have a contract with HPH because HPH will be an independent deliverer of provider services.

Queen's won't see HPH as contract and HPH won't see Queen's as contract, but the whole philosophy of the parent organization is to take everybody who's in the high-performing network and make sure that they are equally incentivized and equally rewarded to perform at the same levels.

Okay. Yeah. I have a question, so. Okay, so I've been a Kaiser member forever, really, and the reason is--

Can I change your mind?

No, well reason is my mom got me into the Kaiser system. So if you've ever seen my number, it's a really low number. They got my record since I was a small kid, but the big difference from a consumer point of view between Kaiser and HMSA is Kaiser basically appoints you a physician, not of your choosing, and that physician changes. I don't-- versus having a physician, a family doctor throughout your life.

And the other difference--and this is my concern if you folks are going to be this vertically integrated model like Kaiser--is that there's going to be a difficulty in getting a second opinion outside of the network which is what we're having now with my husband's multiple symptoms.

How can we, as a consumer--I mean Queen's is concerned that medical providers are going to start going over to Straub, and I understand that because even before this a whole cardiac unit, I think, went from Queen's to Staub for a while there--how can we assure the public that, you know, you're not going to have the limitation of choice that a Kaiser patient has?

So the similarity between Kaiser and what we contemplate for One Health Hawaii is that they're vertically integrated, and the benefits of that are sharing data, alignment of incentives, common processes, reduction of waste. Those kinds of things are the benefits of a vertically integrated structure. The difference is open versus closed.

So in a closed network, choice is limited because your delivery system is confined to what they built, right? Kaiser's closed and your articulation of how sometimes that's impeded choice, that's an experience. Ours is open. It means people will still be able to choose their family provider. They can stay with them their whole length of time.

They can go to Queen's, they can go to Castle, they can go anywhere because they will have a contract with HMSA. Now, we're going to have a high-performing network that some of them--we hope all of them--will be part of, and that may have a different product, a different benefit structure, and there'll be some rules around that, but anybody who's part of it, again, you will have free choice within that.

But even if your provider doesn't choose that, they will have a contract with HMSA if they want and you can still choose to go there. You can still buy a PPO product that will allow you to have a second opinion. You will still be able to do all of those things. We will still be a Blue Cross/Blue Shield plan. You can still go to the mainland because you can access our Blue Card network. All of those things will continue in an open system.

And I'm sorry, just one more follow-up. Sorry. While you're still there. We heard from Mr. Vara that he assures us there's not going to be these billing problems. I'm just going to tell you, I mean, after what happens, the consumers or the patients are-- we kind of doubt that, okay?

With administrative issues as far as consolidations-- so there are going to be bills. I've already introduced a couple of them regarding bill transparency-- I'm hoping that you folks are not going to object to them because the consumers are going to want to know when they're going to get billed, how they're going to get billed, and whether or not the right insurance companies. Can we have that kind of assurance from you folks that the bill transparency will continue or we hope we'll be more transparent?

I have my government relations people. I'm sure they don't want me to commit to anything, but I will say that, philosophically, we're in agreement that billing should be easier for people. Look, I run a healthcare company. I don't always understand my bill when it comes because it's hard, it's complicated, and it's a challenge.

We have to get better. But believe me, we all have the same objective, to get better. And when you're integrated, you actually have a platform to potentially make it because how many bills do you get from Kaiser?

Not many.

Yeah. And I can guarantee you, if you're at our network, you get plenty. You know, if you have a surgery, you get one from HMSA, you get one from the facility, you get one from the doctor, you get one from the anesthesiologist who did the doc-- you get one from the pathologist, and once we are one company, we can start to streamline that. So my only request on your bill transparency thing is give us enough leeway to make things happen because it takes time. But we are aligned. We need it to be better.

Thank you.