Tenet & BCBSTX Extend Contract - Analyst Blog

Tenet Healthcare Corporation THC is again making headlines with its development on the previously announced collaboration with the Blue Cross and Blue Shield of Texas (BCBSTX). The collaborating entities have made their first move toward implementing the Accountable Care Organization ACO by extending their contract for a multi-year period.

This ACO, which is an outcome of the collaboration between BCBSTX and Tenet Healthcare's clinically integrated organizations in Texas, will expectedly be launched on Jan 1, 2015. The motive behind the formation of the statewide ACO is to bring in healthcare providers from Tenet Healthcare's Texas markets to deliver high-quality value-based care to BCBSTX members. This is aimed to be done by improving coordination among physicians and reducing unnecessary hospital admissions, readmissions, ER visits and duplication of services.

While announcing the collaboration in Nov 2013, it was stated that the agreement could be extended to incorporate health insurance marketplace patients over the life of the agreement. Along with the aforementioned long-term contract extension, BCBSTX members will be consistently provided an in-network access to Tenet Healthcare's hospitals and outpatient centers at Texas. This, in turn, should help Tenet Healthcare to generate more revenues.

Health care providers voluntarily form alliances to establish ACOs to provide coordinated high quality care to patients at lower costs. Tenet Healthcare has been forming ACOs with a number of organizations for quite some time to enhance patient care in the U.S. Earlier this month, the company inked a collaborative Accountable Care deal with the Blue Cross and Blue Shield company of Florida, named Florida Blue. Tenet Healthcare presently operates 12 ACOs in nine states.

Other healthcare stocks that have formed ACOs in recent times include Humana Inc. HUM and Aetna Inc. AET. While Aetna formed an ACO with Northeast Medical Group, Inc. (“NEMG”) in Connecticut on May 1, Humana formed an Accountable Care relation with Mercy in Apr 2014.  These ACOs or collaborative accountable cares are a means of working toward improving the health of all Americans, in consistence with President Obama's policies.

Currently, Tenet Healthcare has a Zacks Rank #3 (Hold). However, among the better-ranked stocks in the healthcare services space, Horace Mann Educators Corp. HMN is worth considering. Horace Mann sports a Zacks Rank #1 (Strong Buy).