By Patricia A. Sullivan
Following a rulemaking process characterized by intense controversy, vigorous debate and acrimonious criticism of their proposed approach,1 on October 20, 2011, the Federal Trade Commission (“FTC”) and the Antitrust Division of the Department of Justice (“DOJ”) issued their final Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (the “Policy Statement”).2 Responsive to the critical comments3 and focused on the overarching goal of encouraging the formation of Accountable Care Organizations (“ACOs”), the final Policy Statement is significantly diluted from the proposed Policy Statement, which had been published on March 31, 2011.4
The final Policy Statement completely eliminates mandatory antitrust clearance as part of the ACO formation process and substitutes antitrust monitoring, coupled with a Safety Zone and guidance regarding how the agencies will evaluate specific conduct in determining whether to bring an antitrust challenge. This approach saves ACOs the substantial cost of performing an extensive (and expensive) Primary Service Area (PSA)/competitive effects analysis as part of the ACO formation process. The question is whether the guidance provided will be sufficient to eliminate the deterrent effect of the threat of antitrust enforcement on ACO formation, while still ensuring that competition is adequately protected.5
The dramatic course correction reflected in the final Policy Statement mirrors a similar shift in the final Medicare Shared Savings Programs regulations announced by the Centers for Medicare and Medicaid Services (“CMS”) on the same day.6 Commentators agree that the final rule goes a long way to reinvigorating interest in the ACO program.7 The final rule differs from the proposal in many key respects, all of which improve substantially the business case for formation and operation of a successful ACO.
What is an ACO?
ACOs are a critical centerpiece of the health care reform legislation – the Affordable Care Act – passed with such fanfare (and controversy) in the spring of 2010.8 As a qualified ACO, groups of health care providers meeting certain criteria work together to manage and coordinate care for Medicare beneficiaries. The Act encourages ACO formation by allowing a qualified ACO to share in a portion of any savings it creates, as long as it also meets quality standards established by CMS.9 CMS has estimated that ACOs participating in this Shared Savings Program will service between one and five million Medicare beneficiaries during the program’s first four years.10 An ACO may include both physicians and hospitals, who share responsibility for improving the quality and reducing the cost of the care of the ACO’s patients.
Antitrust Risks Posed by ACO Formation and Conduct
FTC and DOJ have acknowledged that a potential impediment to the formation of ACOs is providers’ understandable fear of aggressive enforcement of the antitrust laws. These concerns are heightened when ACOs are negotiating with private payers since Medicare sets its own rates, which providers cannot negotiate.11
Whenever competitors come together, as they must to form an ACO, there is increased antitrust risk. It has long been clear that, without adequate integration, price agreements among competing health care providers are condemned as naked price fixing judged under the harsh per se rule.12 Moreover, physician networks, which are a key component of an ACO, have been particularly vulnerable to antitrust enforcement.13 Similarly, the high concentration levels in some hospital markets, and the existing competition between physicians and hospitals in many service areas, could cause potentially serious antitrust consequences as hospitals and physicians collaborate as ACO participants.14
Description of the Final Policy Statement
Both FTC and DOJ have seemed genuinely interested in trying to get the balance of protection for ACO participants from antitrust risk and protection of competition properly calibrated.15 The final Policy Statement is self-described as intended to ensure that health care providers have the antitrust clarity and guidance needed to form pro-competitive ACOs that participate in both the Medicare and commercial markets.16 Instead of pre-formation review (analogous to the pre-merger review approach in the Hart-Scott-Rodino Act), it is patterned on the approach used in the 1996 Statements of Antitrust Enforcement Policy in Health Care (“1996 Health Care Statements”)17 – by establishment of a “Safety Zone,” coupled with clear and simplistic guidance regarding conduct that increases antitrust risk. The only fragment of the proposed pre-formation review remaining is the now entirely voluntary expedited review available to newly forming ACOs that wish more certainty about their antitrust exposure.
The Policy Statement applies to any ACO and, except for the voluntary expedited review program, is not limited to those formed after March 23, 2010, the date on which the Affordable Care Act was enacted. Specifically, it applies to all collaborations among otherwise independent providers and provider groups that are eligible and intend or have been approved to participate in the Medicare Shared Savings Program.18 The Statement acknowledges that most health care providers that form ACOs for Medicare beneficiaries will use the ACO structure seamlessly for their commercially-insured patients. Its guidance therefore applies equally to the conduct of the ACO in the private sector.
Click here to read the full article in the Winter 2012 edition of the Health Law Reporter.