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IT WAS A RADICAL idea back then, but Dr. Peter Kim, president of the Kauai Medical Group, decided in 1980 to take on the giant Hawaii Medical Service Association (HMSA) and start up a competing health maintenance organization on tiny Kauai. The Kauai Medical Group wasn't getting into the new venture to become insurance barons but, rather, says Kim, to better address the needs of the Kauai community. The 30-physician Kauai Medical Group had been operating under HMSA's Community Health Program (CHP), an HMO-type alternative to HMSA's traditional insurance offering. But it wasn't satisfied. HMSA, says Kim, could make whatever decisions it thought best, but they weren't necessarily in the best interest of Kauai Medical Group or its patients.
At one point, Kauai Medical Group requested a seat on HMSA's CHP board, but was denied. "Physicians should have an input about the provisions for medical care and the premiums offered," says Kim. "We didn't want control, just a say in the matter."
Meanwhile, Kim had been reading about HMOs and their proliferation on the Mainland. He consulted with national experts and decided the concept of an independent HMO could work on Kauai. But while Kim was convinced, there was still the very difficult sales job of winning over the other physicians in the medical group. "We wanted 100-percent support. It was a big risk, so we wanted to be sure everyone agreed with it," says Kim. After a year of talking, more studying and listening to Mainland speakers, Kim finally got the 100-percent consensus he sought.
Rough start. The medical group first commissioned a Mainland-done feasibility study in 1980, which determined that, in spite of Kauai's limited population base of approximately 40,000, there was definitely room for another health plan: at the time, HMSA and the plantation clinics were the only local options available to Kauai patients, says Kim. Kauai Medical Group was the largest on the island, already servicing some 7,500 HMO clients, or about 20 percent of Kauai's population, through HMSA's Community Health Program. If the medical group terminated its working agreement with HMSA, it figured it could switch those members over to its own HMO program. So, on December 31, 1980, Kauai Medical Group ended its relationship with CHP, and on New...