Under the Patient Protection and Affordable Care Act, physicians, hospitals and other health care providers are encouraged to form collaborative care groups, called Accountable Care Organizations ("ACOs"), to provide innovative services to reduce costs and improve quality of patient care. The Affordable Care Act created the Medicare Shared Savings Program under which ACOs may share in any savings they create for Medicare beneficiaries if the ACOs meet quality performance standards established by the Secretary of Health and Human Services through the Centers for Medicare & Medicaid Services ("CMS").1
Under a companion CMS proposed rule, independent providers are
permitted to qualify as an ACO if the organization has (i) a formal
legal structure that allows it to receive and distribute payments
for shared savings, (ii) a leadership and management structure that
includes clinical and administrative processes, (iii) processes to
promote evidence-based medicine and patient engagement, (iv) a
system for reporting on quality and cost measures, and (v) the
ability to provide coordinated care for beneficiaries. Because the
formation of ACOs is costly, requiring the integration of
independent provider practices, providers have indicated they are
more likely to form ACOs if they can use the ACO for commercially
insured patients as well as Medicare beneficiaries.
Understandably, independent providers are concerned about the
antitrust exposure that may result from forming an ACO, an
organization that may contain competing providers, to serve both
the Medicare and commercial markets. To allay this concern, the
Federal Trade Commission and the Antitrust Division of the
Department of Justice ("Agencies") have jointly issued
for comment the Proposed Statement of Antitrust Enforcement Policy
Regarding Accountable Care Organizations Participating in the
Medicare Shared Savings Program ("Policy
Statement").2
The fundamental premise underpinning the Policy Statement is that
the Agencies have determined that organizations meeting the
above-listed CMS criteria for approval of an ACO are
"reasonably likely to be bona fide arrangements intended to
improve the quality, and reduce the costs, of providing medical and
other health care services through their participants' joint
efforts."3 Further, the Agencies have determined
that meeting the CMS requirements provides antitrust protection for
ACOs to jointly negotiate with private-sector payers in the
commercial market.4
Agencies' Antitrust Analysis
The Policy Statement provides guidance to providers on how to
form procompetitive ACOs. It describes (i) the ACOs to which the
Policy Statement will apply, (ii) when the Agencies will apply rule
of reason treatment to those ACOs,5 (iii) an antitrust
safety zone for certain ACOs, (iv) the CMS-mandated antitrust
review process for certain other ACOs, and (v) options for ACOs to
gain additional antitrust clarity if they fall outside the safety
zone but below the CMS-mandated antitrust threshold.
In determining whether an ACO is likely to raise competitive
concerns, the Agencies will evaluate its share of services in the
ACO participants' Primary Service Area
("PSA").6 The higher the PSA share, the
greater the risk the ACO will be anticompetitive. "An ACO with
high PSA shares may reduce quality, innovation, and choice for
Medicare and commercial patients, in part by reducing the ability
of competing . . . ACOs to form . . .and may allow the ACO to raise
prices to commercial health plans above competitive
levels."7
The Agencies are not likely to challenge an ACO when independent
ACO participants providing the same services "have a combined
share of 30 percent or less of each common service in each
participant's PSA."8 Further, "[a]ny
hospital or ambulatory surgery center ("ASC")
participating in an ACO must be non-exclusive to the ACO to fall
within the safety zone . . . [allowing] a hospital or ASC . . . to
contract individually or affiliate with other ACOs or commercial
payers."9
ACOs whose share exceeds 50 percent for any common service that two
or more independent participants provide to patients in the same
PSA would trigger a mandatory review by the Agencies.10
The 50 percent share threshold for mandatory review provides an
indication of the potential for competitive harm from ACOs with
high PSA shares, although such share would not be presumed to be
unlawful.
Finally, a voluntary review is permitted for ACOs falling between
the 30 percent and 50 percent thresholds that "desire further
certainty" regarding the application of the antitrust laws to
their formation and planned operations. All antitrust reviews would
be coordinated by an interagency working group and performed on an
expedited basis - within 90 days of receiving all necessary
documents and information.
Comment Period
The Agencies are accepting public comment from health care providers, payers, consumers, and other stakeholders on the proposed Policy Statement through May 31, 2011.
Footnotes
1. Patient Protection and Affordable Care Act, Pub. L. No. 111-48, § 2706 (2010).
2. Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, available at http://www.ftc.gov/os/fedreg/2011/03/110331acofrn.pdf
3. Id. at 5.
4. "[T]he Agencies will provide rule of reason treatment to an ACO if, in the commercial market, the ACO uses the same governance and leadership structure and the same clinical and administrative processes as it uses to qualify for and participate in the Shared Savings Program." Id. at 5.
5. "Joint price agreements among competing health care providers are evaluated under the rule of reason . . . if the providers are financially or clinically integrated and the agreement is reasonably necessary to accomplish the procompetitive benefits of the integration. . . . A rule of reason analysis evaluates whether the collaboration is likely to have substantial anticompetitive effects and, if so, whether the collaboration's potential procompetitive efficiencies are likely to outweigh those effects." Id. at 3-4. The Agencies have articulated fulsome standards for financial and clinical integration in Statements of Antitrust Enforcement Policy in Health Care (1996), available at http://www.ftc.gov/reports/hlth3s.pdf .
6. "While a PSA does not necessarily constitute a relevant antitrust geographic market, it nonetheless provides a useful tool for evaluating potential competitive effects." Policy Statement, supra note 2, at 6 n22.
7. Id. at 6.
8. Id. at 7.
9. Id.
10. The Policy Statement sets forth a "rural
exception" and a "dominant provider limitation" that
enable an ACO to contract on a non-exclusive basis with a physician
from a rural county even if the inclusion of that physician causes
the ACO's share of any common service to exceed 30 percent of
the market, and to contract on a non-exclusive basis with a
physician with a greater than 50 percent share in its PSA of any
service that no other participant provides in that PSA.
Id. at 7-8.
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