I've gone and created a cursed magic item which lowers your max hp by 16, so I went into modifiers > Bonus > Hit Points > Fixed Value : -16 and now I equipped it to a test character. When I equip it and attune to it the character doesn't lose any max HP.  What am I doing wrong?

What you want is not currently possible. The player will have to remember to manually adjust their Max HP whenever they equip/unequip the item.

Thanks for the reply. Just curious, why isn't it possible? Is there a reason or is it just not supported?

It’s not supported because nothing official does that.

Ah, tis a shame. Thanks for the info!