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Aetna and LHS Health Network Form ACO in New Jersey

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U.S. health insurer Aetna Inc. (AET - Free Report) has announced the formation of another Accountable Care Organization (“ACO”) with LHS Health Network – a group of primary care providers which houses 90 primary care physicians.

The latest ACO reflects Aetna’s proactive expansion of its accountable care solution. This solution is the company’s new provider model aiming improved-yet-affordable standards of safety and quality in patient care.

An ACO is a voluntary collaboration of healthcare providers offering coordinated high-quality care to patients. Such an organization is accountable for the quality, cost, and overall care offered to members.

Through  its latest ACO, effective Jul 1, 2014, Aetna will serve 20,000 of its members in Camden, Burlington and Gloucester counties in New Jersey.

Aside from forming an ACO, Aetna and LHS Health Network will begin a new Medicare provider collaboration which will serve more than 2,000 Aetna Medicare members.

All of Aetna’s commercial members who are fully insured or have self insured plans and have availed healthcare service from LHS Health Network in the last couple of years will also be serviced by the ACO.  

Both Aetna and LHS Health Network have also implemented a Medicare Provider Collaboration model to provide palliatives to more than 2,000 Aetna Medicare Advantage members. A dedicated team of nurses will be entrusted to work seamlessly for the patients.

Payment to LHS Health Network physicians will be made on the basis of the quality of service rendered. The quality of care provided is measured in terms of management of patients with long-term diseases such as diabetes and heart ailments, reducing hospital readmissions, emergency room visits and lowering pharmacy cost, among others.

ACOs are meant to fill the chasm between the optimal care that should be delivered to patients and what is actually being received.

Aetna is aggressively expanding its ACO strategy by collaborating with provider systems, which include multi-payer primary care, Medicaid primary care, state-wide ACOs and multi-line multi-payer ACOs. As a consequence, Aetna’s ACOs are gaining traction and enhancing the core business. In 2013, the company signed 17 new ACO collaborative agreements, bringing its total count to 32, serving 550,000 members.

Aetna targets to reach 215,000 or nearly 20% of its membership by the year end. Aetna has over 200 ACO deals in its pipeline that could serve 60% of the U.S. population. ACOs allow the company to exercise tighter control over medical management, generating on average10% savings.

Other health insurers like UnitedHealth Group Inc. (UNH - Free Report) , Cigna Corp. (CI - Free Report) and Humana Inc. (HUM - Free Report) are also aggressively forming ACOs. Going forward, we expect such patient-centric collaborations to grow rapidly.

Aetna currently retains a Zacks Rank #3 (Hold).

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