Aetna To Leave Medicare Administration Program To Focus On Growing Managed Care Business

HARTFORD, Conn., July 25, 1996 — Aetna (NYSE: AET) announced today it will not renew its contracts with the federal Health Care Financing Administration (HCFA) to administer the Medicare Part A and Part B fee- for-service program. Aetna instead will concentrate on growing its Medicare managed care business, offering products through its affiliated health maintenance organizations (HMOs). Medicare managed care is one of the fastest-growing segments of Aetna’s health business.

Aetna’s Part A intermediary and Part B carrier contracts were to expire on September 30, 1996. In order to enable Medicare beneficiaries, physicians and providers to make the transition to new contractors with the least amount of disruption, Aetna has agreed to extend its contracts to September 30, 1997. All operations are expected to be transferred by that date.

HCFA will negotiate agreements with other contractors over the next several months to administer the Medicare program for beneficiaries and providers in the jurisdictions serviced by Aetna. Aetna will work closely with HCFA and the replacement contractors during this extension period to ensure a smooth and orderly transition of business.

As a Part A fiscal intermediary, Aetna processes Medicare claims for hospitals and other facilities. As a Part B carrier, Aetna pays claims for physicians in nine states — Alaska, Arizona, Georgia, Hawaii, Nevada, New Mexico, Oklahoma, Oregon and Washington.

“Leaving the Medicare administration business is a difficult decision for us,” said Reginald R. Williams, head of Aetna’s Medicare operations. “But we have made a strategic decision that our future in this business lies more in the direction of Medicare managed care than in administering the traditional Medicare fee-for-service business.”

Aetna has consistently ranked among the top Medicare contractors in terms of quality and efficiency. Aetna has received many HCFA awards, including the Administrators Citation this past June for “30 years of exceptional service to the Medicare Program and its beneficiaries”.

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