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Last week, U.S. health insurer UnitedHealth Group Inc. (UNH - Analyst Report) announced that it intends to expand its accountable care contracts to $50 billion over the coming five years. 
 
UnitedHealth's Accountable Care Organization (ACO) initiative will span its employer-sponsored, Medicare and Medicaid health benefit businesses.
 
An ACO is a collaboration of health care providers, who voluntarily form alliances to provide coordinated high quality care to patients. An ACO is accountable for the quality, cost, and overall care offered to members. Focus on the needs of patients and linking payments to outcomes directs the model to improve the health of individuals and communities and curb rising health care costs.
 
In the U.S., UnitedHealth is engaged in accountable care contracts with more than 575 hospitals, 1,100 medical groups and 75,000 doctors.  UnitedHealth expects more care providers to move to accountable care contracts over the next five years.
 
Via ACO, UnitedHealth targets on getting timely information to the provider to improve care for patients and build healthier communities. These solutions also focus on growing membership in the company’s medical products through provider collaborations that are designed to lower costs.
 
UnitedHealth’s Accountable Care Solution (ACS) business offers a suite of solutions designed to facilitate delivery system reform and help reduce the cost of care by enabling population health management for providers. 
 
Apart from ACO, UnitedHealth has two other accountable care strategies – Performance based programs and Centers of Excellence program. Via these initiatives UnitedHealth have shown remarkable results in reducing medical costs while at the same time improving quality of service provided.  
ACOs or collaborative accountable care is one of the several ways by which President Obama wants to improve the quality of health of all Americans. It is viewed as a tool that would deliver seamless, high quality care for the overall population.
 
The Health Care Reform called for such an arrangement in order to trim unnecessary expenses due to a lack of coordination between multiple physicians and other providers. Most Americans with multiple chronic conditions receive care from multiple physicians and it has been observed that a few of them receive inadequate care.
 
A large percentage of the sick population also ended up being victims of medical errors and faced hospital readmissions within days of their discharge. Thus, ACOs were formed to reduce the exorbitant amounts spent due to lack of managed care.
 
Other health insurers like Aetna Inc. (AET - Analyst Report) and Cigna Corp. (CI - Analyst Report) are also aggressively forming ACOs. Going forward, we expect such patient-centered collaborations to grow rapidly.
 
UnitedHealth carries Zacks Rank # 2 (Buy). 
 
Another player in the same industry Humana Inc. (HUM - Analyst Report) with Zacks Rank  #1 (Strong Buy) is worth considering.  

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