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U.S. health insurer CIGNA Corp. (CI - Analyst Report) announced that it is going to launch another ‘Accountable Care Organization’ (“ACO”) initiative with Banner Health Network. This step is in sync with Cigna’s goal to improve the quality of care and service provided to the customers along with lowering healthcare costs and improving overall value.

An ACO is a group effort by 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. By focusing on the needs of patients and connecting payments to the service offered, this model is intended to improve the health of individuals and communities as well as curtail the rising healthcare costs.

Cigna’s new ACO initiative with Banner, effective from November 1, 2012, will serve more than 20,000 individuals covered by Cigna health plan. These customers are already receiving services from approximately 2,600 doctors associated with Banner Health Network in Arizona.

Through this program doctors will monitor and coordinate all the aspects of a patient’s care. The enrollees in the program will also have the benefit of receiving services of registered nurses employed by Banner Health Network.

They will coordinate patient care, educate patients about various health conditions, and will also advice and give emotional support to the patients if need arises.  The ACO will also designate care coordinators who will stay close to the patients and monitor the services being given to them.

Cigna calls its ACO-like initiatives Collaborative Accountable Care (“CAC”). ACOs or CACs is one of the several ways by which President Obama is looking to improve the quality of health the people in his nation. It is considered as a tool that would offer seamless, high quality care for the entire population.

At present, Cigna is engaged in 42 CAC initiatives in 18 states. These programs provide service to more than 390,000 Cigna customers and more than 5,500 primary care physicians. The company initiated its first CAC program back in 2008. It aims to serve about 1 million customers via 100 CAC initiatives by 2014.

The Health Care Reform called for such an arrangement in order to control the unnecessary expenses associated with lack of coordination between multiple physicians and other providers. Most Americans with multiple chronic conditions receive care from multiple physicians, which often resulted in patients not getting proper attention from the physicians.

Thus, many patients ended up being victims of medical errors and faced hospital re-admissions within days of their discharge. To control such a situation, ACOs were formed so that exorbitant amounts spent due to lack of managed care become less.

Companies like UnitedHealth Group Inc. (UNH - Analyst Report) and Aetna Inc. (AET - Analyst Report) are also assertively taking ACO initiatives. Going forward, we expect acceleration in the formation of such patient-centered collaborations.

Cigna currently retains a Zacks # 3 Rank, which translates into a short-term Hold ating. We, also, maintain our long-term Neutral recommendation on its shares.

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