Aetna Forms Another ACO - Analyst Blog

U.S. health insurer Aetna Inc. (AET) has formed yet another Accountable Care Organization ACO with Atlantic Accountable Care Organization (Atlantic ACO), a partner of Atlantic Health System. This is in sync with the company's effort to improve standards of safety and quality in patient care with the aim of achieving affordable and efficient healthcare.

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.

With this ACO, Aetna will be able to provide healthcare services to 28,000 of its members in the counties of Morris, Sussex, Union, Somerset, Warren and Passaic via a network of more than 1,700 primary care physicians.
 
ACOs or collaborative accountable care is one of the several means by which policies undertaken by the U.S. President, Mr. Barack Obama, will work toward improving the quality of health of all Americans.

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 its core business. In 2013, the company signed 17 new ACO collaborative agreements, bringing its total ACO count to 32, serving 550,000 members.

Aetna plans to hit a total of 60 by the end of 2014 with 0.75 million members and earn $2.5 billion or 7% of the company's total revenue. 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 an average, a 10% savings.

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

Aetna currently retains a Zacks Rank #2 (Buy).