Humana Rises on Yet Another ACO Deal - Analyst Blog

Share price of Humana Inc. HUM has inched up 0.4% to $114.20 per share within a day of the collaborative Accountable Care deal with Health4. This news is set to drive bullish sentiment on the stock as it marks Humana's relentless effort to provide high-quality health care at an affordable price to medical members.

After the back-to-back Accountable Care deals with St. Luke's University Health Network and Regional HealthPlus in Dec 2013, Humana has signed a similar deal with the clinically integrated health care delivery model, Health4, co-owned by OhioHealth and Medical Group of Ohio (MGO). While the last two deals were aimed to help the company foray into the Pennsylvania and Spartanburg areas, respectively, this initiative with Health4 is intended to provide high-end health care to Humana's 41,000 Medicare Advantage members in Columbus and Central Ohio. Thus, the company stays adept in its service enhancement strategies.

Although Health4 is a relatively new player in the industry with operations in Ohio since 2010, it is a prominent name when it comes to providing premium health care to over 160,000 patients. In its small span of operations, Health4 has formed a 34-county network across central Ohio consisting of more than 2300 MGO physicians who provide patient-centric care. Thus, the deal with Health4 will benefit Humana's central Ohio members by delivering better patient co-ordination, cost-effective care, improved outcome, and as a result enhanced patient experience.

To offer superior health care to patients, this Accountable Care arrangement will resort to a number of population management tools viz. predictive analytics and chronic care, disease management and wellness programs. Better patient experience will boost customer confidence and will help Humana gain more members in the region.

Humana's Accountable Care initiative is similar to an Accountable Care Organization ACO.  An ACO is a collaboration of health care providers who voluntarily form alliances to provide coordinated high quality care to patients at reduced costs. In line with the objectives of an ACO, the aforementioned deal should mutually benefit both Humana and Health4. Thus, the collaboration will not only benefit Humana members but Health4 patients will also receive enhanced care, thus, preserving the principal goal of an ACO of improving overall health care in the respective region.

Humana currently consists of 33,000 primary care physicians and is in Accountable Care associations with 900 organizations. We believe the strengthening of Humana's health care services in central Ohio will enhance the membership base of the company, thereby paving the way for more revenue generation.

Humana currently carries a Zacks Rank #3 (Hold). However, some better-ranked stocks in the healthcare services space include Aetna Inc. AET, Chemed Corp CHE and China Cord Blood Corporation CO. While Chemed sports a Zacks Rank #1 (Strong Buy), Aetna and China Cord carry a Zacks Rank #2 (Buy).