FTC and DOJ Propose Antitrust Guidance for ACOs

April 7, 2011

A major concern among healthcare providers with regard to Accountable Care Organizations (ACOs) is the potential for antitrust action by regulators as competing providers collaborate to provide coordinated care. In addition, under the proposed ACO regulations, compliance with antitrust law is a requirement for ongoing participation in the Medicare Shared Savings Program (MSSP), and violation of antitrust law is grounds for termination of an ACO. To address these concerns, the Federal Trade Commission and the Antitrust Division of the Department of Justice (Antitrust Agencies) have issued a Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program.

The Statement proposes an antitrust enforcement policy for healthcare collaborations among otherwise independent providers and provider groups that participate as an ACO under the MSSP. While the Proposed Statement provides some clarity for providers seeking to collaborate as an ACO, there are limitations to this guidance and numerous pitfalls to avoid.

Structure of the Proposed Statement

In the Proposed Statement, the agencies recognize that healthcare providers are more likely to integrate care in an ACO for Medicare beneficiaries if they can also use the ACO for commercially insured patients, and that providers will benefit from greater certainty in evaluating the risk of antitrust enforcement actions. To that end, the agencies determined ACOs meeting the criteria for participation in the MSSP are reasonably likely to be bona fide arrangements intended to improve quality and reduce costs of healthcare.

Because they have determined that CMS' ACO criteria are sufficiently rigorous, the agencies will provide favorable "rule of reason" analysis to an ACO if, in its relationships with private payors, it uses the same governance and leadership structure and the same clinical and administrative processes that it uses to qualify for and participate in the MSSP. Under "rule of reason" analysis, anti-competitive effects of collective negotiations are weighed against pro-competitive efficiencies that result from concerted activities among provider network members (e.g., in the context of ACOs, cost savings and quality improvement). This is essential, because it allows providers to collaborate in ways – including collective negotiations with payors – that might otherwise be outright prohibited.

The Proposed Statement also creates an antitrust "safety zone" for ACOs participating in the MSSP that have a combined share of 30% or less of any common service among two or more ACO participants (e.g., physician groups) within a Primary Service Area (PSA). The agencies will not challenge ACOs that fall within the safety zone, absent extraordinary circumstances.

The Proposed Statement adopts the CMS definition of PSA: the lowest number of contiguous postal zip codes from which the ACO participant draws at least 75% of its patients for that service. For physician services, whether there is a "common service" is determined by the primary specialty as designated for Medicare enrollment purposes. For example, Specialty Codes 01 (general practice), 08 (family practice), 11 (internal medicine), and 38 (geriatric medicine) are all considered primary care specialties and are treated as a common service. The PSA for inpatient hospitals is determined by the Major Diagnostic Category (MDC) for the services provided.

An ACO that falls outside the safety zone is not per se illegal, but as the PSA share for any common service increases, so does the risk of antitrust action. In fact, an ACO with a PSA share greater than 50% for any common service must first obtain agency review, with an exception for certain rural ACO participants. The agencies have committed to providing expedited review of proposed ACOs. The agencies must determine that they have no intent to challenge a proposed ACO for it to be eligible to participate in the MSSP.

ACOs that are below the 50% threshold for mandatory review, but outside of the safety zone may, but are not required to, seek agency review to better assess their antitrust risk. In addition, the agencies have identified five types of conduct that an ACO can avoid to prevent anti-competitive behaviors and reduce the likelihood of an antitrust enforcement action:

  1. preventing or discouraging commercial payors from directing or incentivizing patients to choose certain providers;
  2. tying sales – explicitly or through pricing policies – of the ACO's services to the commercial payor's purchase of other services from providers outside the ACO (and vice versa);
  3. except for primary care physicians, contracting with other ACO providers on an exclusive basis;
  4. restricting a commercial payor's ability to make cost, quality, efficiency, and performance information available to its enrollees to aid in evaluating and selecting providers in the health plan, if the information is similar to measures used in the MSSP; and
  5. sharing competitively sensitive pricing or other data among the ACO's provider participants that could be used to set prices or other terms for services provided outside the ACO.

Limitations of the Proposed Statement

The Proposed Statement goes a long way towards clarifying antitrust treatment of ACOs; however, the more favorable treatment it affords is only available for ACOs participating in the MSSP. Furthermore, it demonstrates that antitrust enforcement actions are a viable threat for any ACO contracting with private payors that is not eligible for or at any point fails to meet the requirements of or is terminated from the MSSP. Reliance on the Proposed Statement would offer limited, if any, protection in a variety of situations. For example:

  1. Changes in an ACO's network composition can change its eligibility for the safety zone or trigger mandatory review, increasing the likelihood of antitrust action.
  2. The Proposed Statement is inapplicable to any ACO that does not participate in the MSSP.
  3. The Proposed Statement only applies to ACOs formed after March 23, 2010.
  4. The Proposed Statement only applies while an ACO has in effect an agreement with CMS to participate in the MSSP.
  5. Termination of an ACO's MSSP agreement with CMS terminates any protection afforded by the Proposed Statement. ACO agreements are subject to termination for a variety of reasons, not all of which are under an entity's direct control.

Accordingly, depending upon the circumstances, an ACO may need to rely upon some basis other than the Proposed Statement to avoid antitrust enforcement actions. This can be particularly challenging for ACOs that are not single entities, but are instead structured as "loosely affiliated" or "virtual" provider networks. This suggests that traditional antitrust analysis of provider networks, including existing safety zones for financially and clinically integrated provider networks, remains relevant for developing ACOs.

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