Physicians and Aetna Begin New Era of Cooperation

Agreement focuses on streamlining communication, reducing administrative complexity and improving the quality of the health care system; upon court acceptance, agreement would conclude litigation for Aetna; establishment of independent foundation and Physicians’ Advisory Board highlight agreement

NEW YORK, May 22, 2003 — Aetna (NYSE: ΑET) and representatives of over 700,000 physicians, state and other medical societies have settled a national class action pending in the federal court for the Southern District of Florida before U.S. District Judge Federico Moreno, as well as multiple state court actions filed against the company. The agreement includes industry-leading improvements to physician-related business practices that set new levels of transparency in paying claims, including a National Advisory Committee of Practicing Physicians to provide advice to Aetna on issues of importance to physicians. It also establishes an independent foundation dedicated to improving the quality of health care in America. The agreement will streamline communication between physicians and Aetna, reduce administrative complexity in the claims payment system and help improve the quality of the health care system.

These changes are expected to result in increased predictability and speed of claims payment, creating significant value for physicians by reducing time-consuming and costly administrative burdens and giving them and their office staffs more time to focus on their central mission – providing health care to patients. Aetna also expects to be able to operate more efficiently and serve its customers and members more effectively, with lower administrative costs over time.

If approved by the court, the agreement would conclude this lawsuit against Aetna involving issues dating back to 1990 and was part of on-going multi-district litigation currently pending against many of the nation’s largest for-profit health insurers. This agreement will be filed with the court today.

The value to physicians of the business practice improvements over the course of the agreement is estimated at approximately $300 million. This represents, among other things, the value of prompt payment, lower administrative costs for physicians due to electronic claims submissions and reduced resubmissions resulting from increased levels of auto-adjudication. The cost to Aetna of implementing these changes already has been included in Aetna’s financial plans, including guidance for 2003.

In addition to the significant business practice commitments that create a new a standard for the industry, Aetna has agreed to pay $100 million to physicians and $20 million to a foundation established by the agreement, as well as up to $50 million in legal fees to be determined by the court. In connection with the settlement, Aetna expects to take an after-tax charge of approximately $75 million in the second quarter of 2003, reflecting anticipated payments net of insurance. It will be recorded as an “other item” with no impact on operating earnings.

Openness and Cooperation

The physicians and Aetna have agreed to new levels of transparency and communication as well as a renewed commitment concerning business practices through a number of initiatives. Examples of these include:
Agreement Establishes Foundation to Focus on Critical Health Care Issues

The Agreement establishes and provides initial funding for a newly created foundation, which will support initiatives that enhance physicians’ ability to focus on the health care of their patients in critical areas such as:
The foundation will be funded with an initial grant of $20 million from Aetna. In addition, physicians will have the option of directing their individual shares of the $100 million settlement to the foundation.

“This agreement represents a sea change in relations between physicians and Aetna that will lead to greater cooperation on critical aspects of quality, availability and affordability of care,” said John W. Rowe, M.D., chairman and CEO of Aetna. “As a physician, I know the importance of strengthening our working relationship with the medical community and have made it a priority for the entire Aetna organization.

“These initiatives build on our ongoing efforts to increase efficiency and lower administrative costs in the health care system. Streamlining business processes will leverage great value for physicians in terms of reduced overhead and greater focus on patient care, as well as reduce Aetna’s administrative costs.

“We do not anticipate that the agreement will affect Aetna’s ability to effectively manage medical costs for its customers. In fact, the new climate of cooperation will further enhance Aetna’s competitiveness by increasing our ability to work with physicians on case and disease management programs, which help control medical costs by ensuring that patients receive timely care. I am also pleased that this agreement removes the major and costly distraction of this litigation from our business environment and will allow us to concentrate further on achieving our objective of profitable growth.”

“They have opened their doors and we see this as a turning point in modern medicine,” agreed Jack Lewin, M.D., CEO of the California Medical Association. “Aetna is a leader in demonstrating real innovation in this agreement. In short, physicians will have more time to be physicians. This improved efficiency has enormous value to physicians as well as to the entire health care system, including Aetna. We also believe that the Foundation established by this agreement will make an important contribution in improving health quality for Americans."

“Today marks a new era in health care delivery and Aetna should be congratulated for their openness and support of physicians and their patients,” said Tim Norbeck, executive director of the Connecticut State Medical Society. “From the very beginning, our primary goal has been to change the system and make it better for physicians and their patients. Our member physicians are pleased that many of their issues have been addressed fairly, and we believe that this new level of cooperation and transparency will benefit patients. Aetna’s bold step in this class action settlement has set a new standard for the industry.”

Medical Societies Endorse Agreement

The agreement has been endorsed by the following medical societies and professional organizations who will be actively encouraging their members to indicate their support for the proposal:
“The American Medical Association expects this settlement to raise the bar for the entire health insurance industry on fair and open business practices,” said Donald J. Palmisano, M.D., AMA President-elect. “The AMA commends the many medical associations and individual physician plaintiffs, who fought for these improvements and persevered. Dr. Rowe, Aetna’s CEO and a longtime AMA member, has succeeded in turning his understanding of physician concerns into action will benefit both patients and Aetna as well.”

"The primary achievement of this agreement for physicians is found in the fundamental recognition by Aetna of the importance of America's physicians in the healthcare equation,” said Archie Lamb, co-lead counsel of the national class action. “Aetna's promises memorialized in the agreement to commit to external review, transparency, clearly defined coding guidelines and a meaningful enforcement mechanism are truly landmark commitments."

”The commitments contained in this agreement are premised on achieving the highest quality delivery of health care and represent a new standard for the industry that is truly in the best interest of physicians and their patients,” said Edith Kallas, a partner at Milberg Weiss Bershad Hynes & Lerach LLP.

“As an employer we applaud today’s agreement between Aetna and physicians as an opportunity to leapfrog industry efforts to remove administrative costs by streamlining our complex health care system. We believe this will be a win for our employees, retirees and their families, as well as for doctors and employers,” said David Kostelansky, Corporate Director, Human Resources & Benefits, FMC Technologies, which has been a customer of Aetna’s for 14 years, and has worked in partnership with Aetna on efforts to improve relationships with physicians.

“We believe that this agreement has the potential to ultimately remove costs from the system by enhancing Aetna’s substantial efforts to date to streamline processes and improve its relationships with doctors and care providers,” added Kostelansky.

Aetna is one of the nation’s leading providers of health care, dental, pharmacy, group life, disability and long-term care products, serving approximately 13.0 million medical members, 11.4 million dental members and 11.8 million group insurance customers, as of March 31, 2003. The company has expansive nationwide networks of more than 562,000 health care services providers, including over 337,000 primary care and specialist physicians and 3,387 hospitals. For more information about Aetna, please visit the company’s website at www.aetna.com.

The California Medical Association is the professional organization of 35,000 California physicians, representing all modes of practice and specialties.

The Connecticut State Medical Society (CSMS) is a federation of eight component county medical associations, with a total membership exceeding 7,000 physicians. CSMS itself is a constituent state entity of the American Medical Association. Founded by the physician-patriots of the American Revolution, the Society operates from a heritage of democratic principles embodied in its Charter and Bylaws.



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