Humana Inc. (HUM - Analyst Report) recently announced that it has renewed its value-based network agreement with the Delaware Valley Accountable Care Organization (“DVACO”). The revised agreement will be effective from Jan 1, 2017.
DVACO serves nearly 9,000 members of Humana Medicare Advantage plan in Greater Philadelphia by providing access to a premium level of healthcare. The company has already facilitated Humana members with its value-based care. In fact, these members experienced fewer ER visits, lower hospital readmission rates, higher screening rates, and assistance at the time of medical expense reimbursements.
We expect the latest deal to result in a more proactive and wellness-focused health care experience for the Humana members. Doctors involved in this initiative are also likely to receive financial rewards on providing high-quality treatment. Humana members are also offset to gain from numerous wellness programs that include screening and monitoring of chronic conditions like diabetes, heart diseases to name a few.
Value-based healthcare, which has replaced the “Fee-for-Service” model of conventional healthcare, has mainly shifted the focus from curing the disease to prevention. This proactive approach has also changed the policy of payments to doctors. Physicians, who were earlier paid according to the number of services they provided, are now reimbursed on the basis of patients’ health outcomes.
DVACO is one of the largest Accountable Care Organizations in the United States. Hence, the renewal of the partnership should help Humana provide a cheaper yet smarter medical experience to its members. Under the new agreement, the doctors of DVACO will be held accountable for more than 200,000 Humana members in Greater Philadelphia. This new deal between Humana and DVACO covers nine acute care hospitals, two rehabilitation hospitals and a variety of ancillary health care services.
Humana will also be largely benefitted through the alignment of DVACO’s highly talented physician base with its own expertise in value-based healthcare, population health tools and data-driven insights. By the end of second quarter, roughly 61% of Humana’s Medicare Advantage members were served by value-based healthcare providers. With this new deal, Humana targets 75% of its members to be in the same list by the end of 2017.
DVACO, on the other hand, will utilize Humana’s analytics to better understand patients’ needs. The data will be used to provide preventive services to the members in order to avoid serious medical conditions.
Under the agreement, both the companies are expected to develop strategies in order to provide superior level of wellness treatment at a lower cost. Humana has already witnessed 18% cost reduction in 2014 due to its relentless efforts to transform its historic health care model from a fee-for-service model to a value-based one.
When the entire HMO (Health Maintenance Organization) industry is suffering from rising medical costs, players like UnitedHealth Group Inc. (UNH - Analyst Report) , Molina Healthcare Inc. (MOH - Analyst Report) , Aetna Inc (AET - Analyst Report) , have started to shift their focus on initiatives to bring out low cost solutions. Humana is no exception to this trend as evidenced by its recent moves. All these companies are putting continuous efforts to meet the growing demand of personalized services with less expensive healthcare offerings.
Humana presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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