The Hawaii Medical Service Association, the state's largest health insurer, said yesterday it will spend $50 million to help the state's hospitals and physicians install electronic medical records systems and fund other projects designed to improve care.

HMSA said it will spend $20 million over the next three years to fund the switch to electronic medical records and make another $30 million available as grants, which the 17 HMSA acute-care hospitals can apply for to fund projects that improve healthcare.

"This is an investment in the health of our community," said Dr. Richard Chung, HMSA senior vice president.

The insurer said funding will come from its reserve and investment income and will not affect future dues. While investment income and reserves play a role in HMSA's finances, the insurer said healthcare costs are the predominant factor in any premium increase or decline. During the second quarter, HMSA, which has more than 700,000 members, had more than $592 million of reserves and an investment gain of $6.27 million.

Dr. Patricia Blanchette, president of the Hawaii Medical Association, which counts 25 percent of the state's physicians in its membership, said the program sounded good on the surface and that HMSA has had an interest in improving healthcare quality here.

"Any way in which we can work together to improve patient care quality and outcomes would be worth exploring," Blanchette said. "My first reaction would be positive. It's worth a look."

Roughly $10 million a year will be available under the hospital initiative. The insurer said the amount given to hospitals will be proportional to how much service it provides HMSA members. Proposals will be reviewed by a panel of HMSA executives and funded if they are likely to elevate care and results for patients.

HMSA has not tested the program through a pilot project, choosing instead to institute it because of potential gains.

Robert Hiam, HMSA president and chief executive officer, said he believes the decision to undertake the grants is financially responsible because new ways to approach care that cost less and are more efficient may be discovered.

This could include new programs that hospitals don't have the money to bring to Hawai'i but may produce results with a little tailoring to the state, HMSA said.

The insurer said it will give up to $20,000, or up to half of the cost, of electronic medical records systems for physicians. HMSA said it wants to work with vendors to help more than 1,000 doctors install the technology.

The systems are seen as helping improve the quality of care with records being quickly accessed and updated, while giving doctors and others a better way to avoid ordering duplicate laboratory tests. It also can reduce errors and recording keeping costs.

Dr. Philip Hellreich of Kailua Dermatology Associates said medical records-keeping systems are a good concept, though the costs for installing them are steep for practitioners. He said systems can run $40,000 to $50,000.

He said some physicians would have trouble paying for the systems even if HMSA chips in half because of increasing costs for malpractice insurance and healthcare reimbursements to hospitals and doctors failing to rise fast enough.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.