Two of Hawaii's leading hospital systems are considering merging their money-losing managed-care plans, but the preliminary talks could evolve into something broader.
Queen's Health Systems, which operates the islands' largest hospital, 530-bed Queen's Medical Center in Honolulu, and Kapiolani Health, a two-hospital system specializing in women's and children's care, say their discussions regarding Queen's Island Care and Kapiolani's HealthHawaii HMOs are preliminary.
"We are quite a way from any sort of final agreement-should there be an agreement at all," the systems said in a joint statement.
The systems' goals "are to see if some sort of combination" could reduce costs while improving the quality of care, according to the statement.
However, other sources say the talks are "very serious" and could lead to a broader affiliation beyond the systems' managed-care components.
Between them, Island Care and HealthHawaii lost nearly $10 million in the first nine months of last year, according to figures from the insurance division of the Hawaii Department of Commerce and Consumer Affairs (See chart).
The 43,000-enrollee HealthHawaii lost more than $6 million during the first three quarters of 1998 on revenues of $42 million. It lost a total of $3 million in 1997.
The 35,000-enrollee Island Care lost more than $3.6 million during the first three quarters of 1998 on revenues of $34.5 million. In 1997, it posted a $3.9 million profit on substantially higher revenues of $62.8 million.
The Queen's Health Systems operates three other managed-care products with a total of 138,000 enrollees. One of them, a Medicaid plan known as Queen's Hawaii Care, is operated jointly with Island Care. The other two plans are not part of the current discussions.
Queen's Health officials declined to comment on the reasons for last year's losses at Island Care.
Pat Oda, a HealthHawaii spokeswoman, said the health plan's start-up financial losses weren't unexpected and "don't accurately reflect" its early successes in its third year of operation. "In just two short years, we grew an entire health plan from the ground up," she said.
"A key question is whether a merger at the HMO level might draw both organizations into another round of strategic discussions" involving a broader form of collaboration, said Douglas Murata, a healthcare consultant who formerly worked for Queen's Health as vice president in charge of managed-care operations.
Murata said the two systems discussed a systemwide collaboration nearly five years ago "and got pretty far along before the plug was pulled" because of governance and cultural differences.
While dismissing such comments as speculative, Queen's Health spokesman Joel Kennedy acknowledged that "whether (the talks) include just Island Care or some other configurations hasn't been determined."
Any broader links between the systems could be significant. Queen's Health is an island powerhouse, ranking as the 12th-largest corporation in Hawaii, with 4,000 employees and net income of $19.8 million for 1998 on revenues of $497 million, according to system officials.