The Federal Trade Commission (FTC) and Antitrust Division of the Department of Justice (DOJ) on March 31 released their long-awaited “Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Programs.” The Agencies’ Statement provides a three-tiered system regarding application of the antitrust laws to collaborations among otherwise independent health care providers and provider groups participating in accountable care organizations (ACOs) formed after March 23, 2010, the enactment date of the Patient Protection and Affordable Care Act. With this Act, Congress sought to improve the quality and reduce the cost of health care services by providing incentives in the form of shared savings to providers that integrate their health care delivery systems and agree to become accountable for a patient population of Medicare fee-for-service beneficiaries. With a stated goal of ensuring ACOs have the opportunity to achieve substantial efficiencies while protecting Medicare beneficiaries and payers from potential anticompetitive harm, the Agencies’ Statement sets forth guidance regarding the application of the antitrust laws to these health care collaborations with greater specificity than have previous policy statements, consistent with requests of the provider community.
The three-tiered system for purposes of antitrust analysis provides: (1) an antitrust safety zone for ACOs that meet the Centers for Medicare & Medicaid Services (CMS) eligibility criteria to participate in the Shared Savings Program and whose participants have a combined market share of 30 percent or less (as defined by the statement) of each common service provided by two or more participants, with any hospital or ambulatory surgery center (ASC) participating on a non-exclusive basis; (2) a mandatory Agency review process for ACOs whose participants have a combined market share for any common service exceeding 50 percent; and (3) guidance on conduct that if avoided will significantly reduce the likelihood of an antitrust investigation into ACOs whose participants have combined market shares between 30 percent and 50 percent, along with the option for expedited FTC or DOJ antitrust review.
For purposes of determining the ACO’s market share, the share of each medical service provided in each participant’s Primary Service Area (PSA) is calculated. The PSA is defined as “the lowest number of contiguous postal zip codes from which the ACO participant draws at least 75 percent of its patients for that service.” The Statement’s Appendix explains the methodology and data necessary to calculate an ACO’s PSA share for each service provided.
The Statement provides that the Agencies will not challenge ACOs that fall within the safety zone, absent extraordinary circumstances, and provides two exceptions for calculating an ACO’s shares of services: a Rural Exception and a Dominant Provider Limitation. In a rural geographic area, as defined by the U.S. Census Bureau, an ACO may include one physician per specialty on a non-exclusive basis even if that results in a market share above the 30 percent limit for any service. Likewise, a Rural Hospital (as defined in the Statement) may be included in an ACO on a non-exclusive basis and still fall within the safety zone even if that inclusion causes the ACO’s share of any service to be above the 30 percent threshold. The Dominant Provider Limitation permits the inclusion of a participant that provides a service that no other participant provides and has a greater than 50 percent share in that service in its PSA, as long as the “dominant” provider participates in the ACO on a non-exclusive basis. Furthermore, in a “dominant” provider situation, the ACO may not “require a private payer to contract exclusively with the ACO or otherwise restrict the payer’s ability to contract with other ACOs or provider networks.”
ACOs that do not qualify for the rural exception or fit within the dominant provider limitation and have a combined market share greater than 50 percent in any common service in the same PSA, will not be approved by CMS for participation in the Shared Savings Program unless the ACO obtains a letter from one of the Agencies stating that the Agency “has no present intention to challenge or recommend challenging the ACO under antitrust laws.” The Statement details the documentation and information to be provided to the reviewing Agency. The Statement also explains that in conducting this mandatory review, the Agencies will consider alternative data regarding the ACO’s likely market power and any substantial precompetitive justification for the arrangement.
Finally, for ACOs falling outside of the antitrust safety zone, but below the mandatory Agency review threshold (i.e., ACOs with defined shares between 30 percent and 50 percent), the Statement provides guidance as to actions the ACO should avoid to reduce antitrust risk. These five enumerated actions should be assessed carefully to lessen antitrust exposure as the Agencies have stated that ACOs that avoid the following enumerated conduct are “highly unlikely to present competitive concerns”: (1) prohibiting or discouraging commercial payers from “directing or incentivizing” patients from choosing certain providers; (2) tying services provided by the ACO to services provided outside the ACO; (3) contracting with specialists, physicians (other than primary care physicians), hospitals, or other ACOs on an exclusive basis; (4) prohibiting or restricting a commercial payer’s ability to provide performance data and information to its enrollees; and (5) sharing competively sensitive pricing and related data to ACO provider participants that could be used to set prices for services outside the ACO. In addition, ACOs in this category that desire further certainty regarding the application of the antitrust laws may seek expedited review by the FTC or DOJ similar to the mandatory review for those exceeding the 50 percent threshold. Within 90 days after receipt of all necessary documentation, the FTC or DOJ will complete its review and inform the ACO of its decision, which is then binding on the ACO.
Significantly, the Statement also confirms that the Agencies will apply a “rule of reason” analysis to any enforcement action regarding ACOs provided the ACO meets CMS’s eligibility criteria for integration in promoting coordinated health care services. The Agencies also recognize that providers may be more inclined to integrate the delivery of health care services for Medicare beneficiaries under the Shared Savings Program if ACOs also can be used to negotiate with commercial payers. Thus, this rule of reason review will also apply to ACO negotiations with private payers, assuming CMS’s criteria are met in the context of the Shared Savings Program, and the “same or essentially the same services” are provided in the commercial market as they are for Medicare enrollees.
The Agencies invite public comment on the proposed Statement. Any such comment must be received on or before May 31, 2011. We look forward to discussing and working with anyone interested in submitting public comments.
For background on ACOs, see also Pepper Hamilton's Health Care Law Alerts, "ACOs: Applying 20th Century Laws to 21st Century Ideas" and "Are Accountable Care Organizations in Your Vocabulary?"