Aetna 2014 Annual Report Download - page 74

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Continuing consolidation and integration among providers and other suppliers may increase our medical and
other covered benefits costs, make it difficult for us to compete in certain geographies and create new
competitors.
Hospitals and other provider and health systems continue to consolidate across the industry. While this
consolidation is expected to increase efficiency and has the potential to improve the delivery of health care services,
it may also reduce competition and the number of potential contracting parties in certain locations. These health
systems are also increasingly considering forming health plans to directly offer health insurance in competition with
us, a process that has been accelerated by Health Care Reform, including Insurance Exchanges. In addition, ACOs,
practice management companies, consolidation among and by integrated health systems and other changes in the
organizational structures that physicians, hospitals and other health care providers adopt may change the way these
providers interact with us and may change the competitive landscape in which we operate. These changes may
increase our medical and other covered benefits costs, may affect the way we price our products and services and
estimate our medical and other covered benefits costs and may require us to change our operations, including by
withdrawing from certain geographies where we do not have a significant presence or are unable to contract with
providers on acceptable terms. Each of these changes may adversely affect our business and operating results.
Our operating results may be adversely affected if we are unable to contract with providers on competitive terms
and develop and maintain attractive networks with high quality providers.
Our operating results are dependent in part upon our ability simultaneously to contract competitively with and
develop and maintain favorable relationships with hospitals, physicians, pharmaceutical benefit management
service providers, pharmaceutical manufacturers and other health care benefits providers. Our relationships with
providers are affected by the rates we pay them for services rendered to our members (including financial incentives
to deliver 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 (including reductions due to the ATRA and sequestration), and increasing revenue
and other 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.