HONOLULU-After being jilted by one of Hawaii's healthcare giants in an attempt to salvage its struggling HealthHawaii HMO, Kapiolani Health almost immediately launched talks with another island powerhouse.
The new potential white knight is 600,000-enrollee Hawaii Medical Service Association, the state's Blue Cross and Blue Shield plan.
Kapiolani, a two-hospital system specializing in women's and children's care, and HMSA are discussing a possible "reaffiliation" involving 51,000-enrollee HealthHawaii. The two sides signed a preliminary agreement Sept. 10 to formalize their discussions, said Cliff Cisco, an HMSA senior vice president.
"We're working toward having a definitive agreement within a couple of months," Cisco said.
The Hawaii Blues helped Kapiolani launch HealthHawaii in 1996, but the Blues pulled out of the joint venture in October 1997, saying Kapiolani wanted the plan to be more independent (Nov. 3, 1997, p. 36). Other sources suggested at the time that the real reason for the breakup was that HMSA was losing enrollment to the joint-venture plan.
Kapiolani officials declined to answer questions on specifics of the current round of talks. "We're in the initial stages. There's nothing definitive to say," said spokeswoman Pat Oda.
In late July Honolulu-based Queen's Health System walked away from talks about acquiring HealthHawaii (Aug. 16, p. 8). Some observers thought those talks might be a precursor to a broader merger between the two systems.
Queen's, which owns Hawaii's largest private hospital, 530-bed Queen's Medical Center in Honolulu, is considering dumping its health plans but has not yet made a decision on how to proceed.
Kapiolani officials made it clear that the system needs to quickly evaluate other options for dealing with its money-losing health plan. It approached HMSA in late August, a few weeks after the Queen's talks fell apart, to jump start the current round of affiliation discussions, according to HMSA officials.
Kevin Hara, M.D., a Kapiolani senior vice president as well as HealthHawaii's president and chief executive officer, said in a written statement that Kapiolani realizes it needs to make changes at HealthHawaii. The health plan lost $8 million in the fiscal year ended June 30 on revenues of $66 million.
HMSA posted a $37.5 million operational loss last year on $1 billion in revenues, but investment income gave the plan a $10 million net profit, Cisco said.