FTC and DOJ Issue Final Antitrust Guidance for ACOs

October 27, 2011

On October 20, 2011, the Federal Trade Commission (FTC) and Department of Justice (DOJ) issued a final Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations (ACOs) Participating in the Medicare Shared Saving Program (MSSP). The final statement is similar to the proposed statement the agencies issued on March 31, 2011, but there are some key differences. This article discusses the key differences and some additional clarification by the agencies.

Proposed Statement

The proposed statement included the following features:

  1. “Rule of reason” analysis for ACOs that participate in the MSSP (Participating ACOs).
  2. An antitrust “safety zone” for Participating ACOs.
  3. Guidance to ACOs on how to reduce the likelihood of an antitrust enforcement action when falling outside the safety zone.
  4. Mandatory agency review of Participating ACOs with a combined share of 50% or more of common services in the ACO’s Primary Service Area (PSA).
  5. Application limited to ACOs formed after March 23, 2010.

For further discussion of the proposed statement, click here.

Final Statement

The final statement is similar to the proposed statement, but with two key differences:

  1. The statement now applies to all Participating ACOs, not just those formed after March 23, 2010. Now a collaboration of otherwise independent providers—such as an Independent Practice Association (IPA) or Physician Hospital Organization (PHO)—in existence before March 23, 2010, and participating in the MSSP, can rely on the Statement to establish antitrust compliance.
  2. No mandatory agency review. No ACO will be required to complete an agency review as a prerequisite to participation in the MSSP. However, newly-formed ACOs can obtain voluntary expedited antitrust review.

Rule of Reason Analysis Still Applies

The agencies will continue to apply “rule of reason” analysis to a Participating ACO because the agencies recognize that organizations meeting the MSSP eligibility requirements are likely to be bona fide arrangements intended to improve healthcare quality and costs through collaboration. 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., cost savings and quality improvement). This is critical because, outside of rule of reason analysis, collaborations of otherwise independent providers, such as collective negotiations and fee agreements, are per se illegal under the antitrust laws.

The agencies further state that they will also treat joint negotiations with commercial payers under rule of reason analysis, so long as the same governance and leadership structures and clinical and administrative processes used in the MSSP are used to serve patients in commercial markets.

Safety Zone Still Available

The agencies have finalized the antitrust “safety zone” for Participating ACOs with a combined share of 30% or less of any common service among two or more ACO participants (e.g., physician groups) within a PSA. The agencies will not challenge ACOs in the safety zone, absent extraordinary circumstances.

The agencies will apply 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, a “common service” is determined by the primary specialty designated for Medicare enrollment purposes. The PSA for outpatient facilities is determined by CMS-defined outpatient categories. The PSA for inpatient hospitals is determined by Major Diagnostic Category (MDC). In addition, each inpatient hospital will have a separate PSA for its inpatient services, outpatient services, and physician services provided by its physician employees, if any.

Depending on the situation, if an ACO participant is exclusive to the ACO (i.e., not permitted to contract with payors through other entities), the safety zone may not be available.

Conduct to Avoid Outside the Safety Zone

An ACO 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. The agencies identify five types of conduct to avoid to reduce the likelihood of antitrust enforcement action:

  1. sharing competitively sensitive data among the ACO’s participants that could be used to set prices or other terms for services provided outside the ACO;
  2. preventing or discouraging commercial payors from directing or incentivizing patients to choose certain providers;
  3. tying sales – explicitly or through pricing policies – of the ACO’s services to a commercial payor’s purchase of other services from providers outside the ACO (and vice versa);
  4. contracting on an exclusive basis with ACO physicians, hospitals, Ambulatory Surgery Centers (ASCs), or other providers; and
  5. restricting a commercial payor’s ability to provide cost, quality, efficiency, and performance information 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.

Voluntary Expedited Review for “Newly Formed” ACOs

There is no mandatory antitrust review provision. However, the final statement establishes that newly formed ACOs—those that, as of March 23, 2010, had not yet signed or jointly negotiated any contracts with commercial payors and have not yet participated in the MSSP—can request a 90-day antitrust review by the agencies.

After the review, the agencies will advise the ACO of whether its formation or operation raises competitive concerns and if so may condition approval on a written agreement with the agencies specifying steps to remedy those concerns. Both the request for review and the agencies’ response will be made public.

Even though there is no mandatory antitrust review, the agencies and CMS made clear that they will actively monitor ACOs through data provided by CMS, and may investigate and take enforcement action against an ACO at any time, even after a review has been obtained.

Limitations of the Final Statement

Despite this statement, traditional antitrust analysis of provider networks remains relevant for developing ACOs. The final statement clarifies antitrust treatment of ACOs and creates some flexibility; however, it affords the most favorable treatment only to Participating ACOs. Antitrust actions are still a viable threat for any ACO contracting with commercial payors because:

  • Changes in an ACO’s network composition can remove it from the safety zone, increasing the likelihood of antitrust action.
  • The statement only applies to ACOs that currently participate in the MSSP with a valid MSSP agreement with CMS.
  • ACO agreements are subject to termination for a variety of reasons, not all of which are under an entity’s direct control.

Under these circumstances, an ACO may need to rely upon some basis other than the statement to avoid antitrust actions. This will be especially challenging for “loosely affiliated” or “virtual” provider networks that are not single-entity ACOs.

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