Aetna 2013 Annual Report Download - page 76

Annual Report- Page 70
quality services in a cost-effective manner), by our business practices and processes, by our acquisitions, and by our
payment and other provider relations practices (including whether we include providers in the various provider
network options we make available to our customers). Our relationships with providers are also affected by factors
that impact these providers, but are not directly related to us, such as consolidations and strategic relationships
among providers and/or among our competitors, changes in Medicare and/or Medicaid reimbursement levels to
health care providers, and increasing financial pressures on providers, including ongoing reductions by CMS and
state governments (including reductions due to the ATRA and sequestration) in amounts payable to providers,
particularly hospitals, for services provided to Medicare and Medicaid enrollees.
The breadth and quality of our networks of available providers and our ability to offer different provider network
options are important factors when customers consider our products and services. Our customers, particularly our
self-insured customers, also consider our hospital and other medical provider discounts when evaluating our
products and services. For certain of our businesses, we must maintain provider networks that satisfy applicable
access to care and/or network adequacy requirements. Regulators also consider the breadth and nature of our
provider networks when assessing whether such networks meet network adequacy requirements which, in some
cases, are becoming more stringent. Our contracts with providers generally may be terminated by either party
without cause on short notice.
The failure to maintain or to secure new cost-effective health care provider contracts, including as a result of our
efforts to integrate our provider networks following the Coventry acquisition, may result in a loss of or inability to
grow membership, higher health care or other benefits costs (which we may not be able to reflect in our pricing due
to rate reviews or other factors), health care provider network disruptions, less desirable products for our customers
and/or difficulty in meeting regulatory or accreditation requirements, any of which could adversely affect our
operating results.
We may experience increased medical and other benefit costs, litigation risk and customer and member
dissatisfaction when providers that do not have contracts with us render services to our members.
Some providers that render services to our members do not have contracts with us. In those cases, we do not have a
pre-established understanding with these providers as to the amount of compensation that is due to them for
services rendered to our members. In some states, the amount of compensation due to these non-participating
providers is defined by law or regulation, but in most instances it is either not defined or it is established by a
standard that is not clearly translatable into dollar terms. In such instances providers may believe that they are
underpaid for their services and may either litigate or arbitrate their dispute with us or try to recover the difference
between what we have paid them and the amount they charged us from our members, which may result in customer
and member dissatisfaction. For example, during 2012, we settled litigation with non-participating providers for
$120 million, and during 2009, we settled a matter with the New York Attorney General that caused us to transition
to different databases to determine the amount we pay non-participating providers under certain benefit plan
designs. Such disputes may cause us to pay higher medical or other benefit costs than we projected.
Certain of these matters are described in more detail in “Litigation and Regulatory Proceedings” in Note 18 of
Notes to Consolidated Financial Statements beginning on page 130.
We could become overly dependent on key service providers, which could expose us to operational risks and
cause us to lose core competencies. If their services become unavailable, we may experience service disruptions,
reduced service quality and increased costs and may be unable to meet our obligations to our customers.
We contract with various third parties to perform certain functions and services and provide us with certain
information technology systems. These third parties include our PBM services suppliers, information technology
system providers, independent practice associations, accountable care organizations and call center and claim and
billing service providers. Certain of these third parties provide us with significant portions of our requirements, and
we could become overly dependent on key vendors, which could cause us to lose core competencies. In recent
years, certain third parties to whom we delegated selected functions, such as independent practice associations and
specialty services providers, have experienced financial difficulties, including bankruptcy. Furthermore, certain