In an effort to improve the safety and quality of patient care and make health care more affordable, U.S. health insurer Aetna Inc. ( AET - Analyst Report ) has agreed to form an ‘Accountable Care Organization’ (“ACO”) with Hunterdon HealthCare Partners.

Aetna will provide Hunterdon HealthCare with its full suite of health information technology – health information exchange technology from Medicity and care management capabilities, point-of-care clinical decision support services and the Active CareTeam and reporting tools.

These services will assist Hunterdon’s network of 225 affiliated primary care physicians and specialists, and the affiliated ambulatory surgery, radiology, and hospice facilities, to provide seamless service to patients.

Both Aetna and Hunterdon will start serving members this summer. This includes 2,200 members in the Hunterdon Healthcare employee benefits plan, and approximately 5,700 fully insured Aetna members living in Hunterdon, Mercer, Warren, Morris and Somerset Counties. Hunterdon Healthcare will be paid on the basis of its performance, which will be determined on the basis of certain quality of care, efficiency and overall patient satisfaction.

An ACO is a collaboration of health care providers, who voluntarily forge alliances to provide coordinated high quality care to patients. An ACO is accountable for the quality, cost, and overall care offered to members. By focusing on the needs of patients and linking payments to outcomes, this model of care is intended to improve the health of individuals and communities and curb rising health care costs.

ACOs, or collaborative accountable care, is one of the several ways by which President Obama has sought to improve the quality of health for 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 curb the unnecessary expenses associated with a lack of coordination between multiple physicians and other providers. Most Americans with multiple chronic conditions receive care from multiple physician, and often resulted in patients not getting the appropriate quality of care they need. A large percentage of the sick population 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.

Companies like UnitedHealth Group Inc. ( UNH - Analyst Report ) and CIGNA Corp. ( CI - Analyst Report ) are also aggressively forming ACOs. Going forward, we expect acceleration in the formation of such patient-centered collaborations.

Aetna currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering its better-than-average fundamentals, we are maintaining our long-term Outperform recommendation on the shares.