N.J.'s Kennedy Health System rejoins Aetna network

After a year's absence, the Kennedy Health System in South Jersey has rejoined the Aetna insurance network under a two-year contract, Kennedy officials said Tuesday.

Kennedy terminated its previous Aetna contract in February 2013 because it was losing too much money under Aetna's payment terms, said Gary Terrinoni, Kennedy's chief financial officer.

"It was difficult for us to make that decision, because we were concerned about the disruption to our community and to our patients and doctors," Terrinoni said. "But we realized we couldn't continue to provide the services without really jeopardizing the rest of the organization and our ability to provide services to everyone else," he said.

The termination came after a long period of negotiation, Terrinoni said.

Effectively immediately, more than 340,000 Aetna members in the area served by Kennedy again have access to Kennedy's three hospitals and other facilities at in-network rates, as opposed to higher out-of-network rates that had been in force for the last year.

Kennedy's facilities are in Cherry Hill, Stratford, and Washington Township.

Aetna said it was pleased to have reached an agreement with Kennedy.

"We work to balance the demand for broad access to in-network care, with the need for our network to deliver high-quality, affordable services," Aetna spokeswoman Susan Millerick said.

During the year that it was out of network for people insured by Aetna, Kennedy recorded its highest operating profit ever, $20.74 million, more than double the amount from 2012, according to a preliminary account of 2013 financial results.

Kennedy's 2013 revenue, on the other hand, climbed just 1.9 percent, to $505.6 million.

Terrinoni said the absence of unprofitable Aetna patients for most of last year was only part of the reason for the improved profitability. He said Kennedy also tightened up on expenses and improved its billing practices.

Adding more Aetna patients - at rates negotiated to make both the health system and the insurer willing to do business together - back into the mix could again reduce the level of profitability.

"What would be counter to that would be if we could bring back the volume. Even though our profitability per case could go down, what we're hoping is that by adding cases back in, that would make up for any shortfall," Terrinoni said.

It's not clear where Aetna patients went instead of to Kennedy, which reported a 9.4 percent decline in admissions. Industry-wide, hospital admissions have been declining, so the lack of an Aetna contract is not likely to have accounted for all of that decline at Kennedy.

Two South Jersey competitors had solid revenue gains during 2013. Virtua's revenue was up 5.7 percent to $1.09 billion. Cooper Health System's revenue was $875 million, up 6.3 percent.