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Aetna Posts Higher Profit With the Affordable Care Act

Stocks in this article: AET UNH

NEW YORK (TheStreet) -- Early this morning, Aetna (AET - Get Report) reported earnings that topped expectations.

The release came less than a month after Aetna's stock hit an all-time high. The Affordable Care Act should get some of the credit.

That's because the ACA encouraged the creation of Accountable Care Organizations, a term explained here by Kaiser Health News. ACOs are networks that share responsibility for patient care and get a chance to share in the savings if patients stay well.

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Aetna first got into the ACO business in a big way by buying Coventry Health, a major ACO provider under Medicare, for $5.7 billion in 2012. It's now trying to sell the workers' comp part of that business, but as Joe Paduda of Health Strategy Associates notes, it's not because the model is broken but because Aetna lacked control over costs in that part of the business.

TheStreet's Julia Sun has details has details on Aetna's Q2 results:


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An ACO is about cost control, about sharing data to manage patients' health rather than waiting for serious illness to strike. The idea was controversial and was at the heart of the political attack that the law would get between "a patient and their doctor." But it seems to be working for insurers by helping to control costs and maintain customers' health.

On Tuesday morning, shares of Aetna were trading at $82.61, down 2.6%, after the company reported a 2.4% increase in second-quarter earnings and raised its outlook for the full year.

Now Aetna appears to be doubling down on the ACO model. It signed a deal this week with Geisinger Health Systems in Pennsylvania to give all Aetna members in-network access to Geisinger's hospitals. Geisinger has been working on ACO implementation for several years.

Aetna has also formed an ACO with University Hospitals in Ohio, the fifth ACO that Aetna has formed in that state alone.

Under the University Hospitals plan, the insurer and the hospital system exchange patient data in order to identify gaps in care and to control costs. The exchange helps Aetna push patients toward preventive care, improve management of chronic conditions such as diabetes to keep people out of hospitals and better coordinate primary care to keep people from being readmitted into hospitals or taken to emergency rooms.

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