On October 5, 2010, the United States Federal Trade Commission (FTC), the Centers for Medicare & Medicaid Services (CMS), and the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) hosted a public workshop to discuss the antitrust, anti-kickback, physician self-referral and civil monetary penalty law implications regarding accountable care organizations (ACOs). At the workshop, representatives from the FTC and CMS confirmed that regulations implementing requirements for an ACO demonstration project would be proposed in late fall but would not commit to a date for release.

Section 3022 of the Patient Protection and Affordable Care Act (PPACA) directs the HHS Secretary to establish a shared savings program that promotes accountability for a patient population, coordinates services under Parts A and B of Medicare, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery. Section 3022 sets forth provisions that provide for the creation of ACOs to carry out the shared savings program. Importantly, ACOs that meet quality performance standards established by HHS are eligible to receive shared savings payments. Each ACO must be accountable for the quality, cost and overall care of the Medicare feefor- service beneficiaries assigned to the ACO.

The purpose of the workshop was to receive feedback from providers, payors and other industry stakeholders on the scope of waivers and safe harbors for ACOs from antitrust and fraud and abuse laws. In the workshop’s opening remarks, CMS Administrator Donald Berwick, FTC Chairman Jon Leibowitz, and HHS Inspector General Daniel Levinson all expressed their agencies’ support for the creation of ACOs as a vehicle for improving care coordination and reducing healthcare costs. Mr. Leibowitz noted that the promise of ACOs to improve quality and reduce costs provides a real opportunity for health reform and explained that the government’s job is to ensure that regulations encourage ACO development while also protecting consumers. Further, Mr. Leibowitz announced that the FTC wants to explore the development of safe harbors so providers can know when they can collaborate. Mr. Leibowitz stated that to develop effective safe harbors, the FTC needs input from providers. The FTC is interested in the types of activities in which providers may engage through ACOs and how providers envision ACOs operating in the marketplace.


The morning session of the workshop focused primarily on the competitive effects of ACOs’ financial and clinical integration. Inquiries to the panelists included the following:

  • Whether the CMS should expand the PPACA’s statutory ACO requirements;
  • How ACOs can get a consistent commitment from their participants;
  • Whether the Shared Savings Program was sufficient financial risk to ensure adequate integration;
  • What appropriate performance metrics are;
  • How large ACOs need to be in order to be effective;
  • Whether payors and purchasers are running into providers exercising market power and the ACOs’ impact;
  • How a safe harbor might deal with geographic areas;
  • How ACO contracting exclusivity can increase/decrease competition; and
  • Whether there should be an antitrust safe harbor for ACOs and should it be similar to the Physician Network Joint Venture safety zone.  

The first panel addressed when ACO participants should be deemed sufficiently integrated through the ACO such that their collective price negotiations should be analyzed under the “rule of reason” and not the per se standard of illegality. The panel addressed whether the FTC should establish a safe harbor for ACOs that satisfy the CMS’s criteria for ACO participation in the Medicare program. Under the proposal, the FTC would view any ACO qualified by the CMS to be sufficiently clinically integrated for rule of reason treatment. The panel also discussed how the CMS should elaborate on PPACA requirements for ACOs.  

The second morning panel addressed issues of market power, over-inclusiveness and exclusivity. The participants considered whether the FTC should adopt an antitrust safety zone pertaining to market share for ACOs. The panel specifically addressed issues relating to how large an ACO should be to effectively deliver care. Many panelists argued that ACOs need sufficient scale to achieve program objectives and measure performance. The payors on the panel addressed their experience with market power issues with providers.  

The panelist also discussed issues with exclusive ACOs in which provider participants negotiate with payors only through the ACO and they may not join other ACOs. Several representatives stated that exclusivity is necessary to achieve the benefits of clinical integration, at least with respect to primary care physicians.  

Panelists also urged the FTC to permit flexibility in the establishment of ACOs by applying a “rule of reason” approach to the competitive effects of ACOs. Panelists expressed concerns that if safe harbors were too specific, innovation would be stifled, especially in smaller communities where a particular hospital system or physician practice group may have a large share of the market. With respect to performance metrics, all generally agreed they should exist, they should be effective and require follow-up discipline, and should be transparent. The panelists disagreed as to whether the metrics could be uniform.

Fraud and Abuse

The afternoon session was moderated by the CMS and focused primarily on the implications of the anti-kickback statute, physician self-referral law and civil monetary penalty laws (CMP) for ACOs. Panelists were asked questions regarding the scope of any proposed waiver of anti-kickback, self-referral and CMP laws and the different types of financial arrangements that needed waiver protection.

Section 3022 of PPACA gives the Secretary broad authority to create waivers with respect to fraud and abuse laws to carry out the Shared Savings Program. In addition to such waiver authority, the Secretary may consider creating new safe harbors or exceptions to the fraud and abuse laws that are applicable to appropriately structured and operated ACOs. The workshop panelists discussed how the CMS should use its waiver authority to create waivers and safeguards, and to take future actions to encourage innovation.  

Panelists representing providers, (i.e., hospitals and physician practice groups) generally emphasized that existing self-referral laws and exceptions are directed to potential abuses arising in a fee-for-service system and are simply too rigid and misdirected to afford sufficient protection to providers within an ACO context. As to whether the waiver authority should be exercised on a case-by-case basis for qualified ACO applicants, the panelists held different positions. For instance, some asserted that the CMS should issue a broad waiver of all fraud and abuse laws to assist physicians and allied health practitioners to defray the costs of starting up an ACO. Other panelists were in support of reforming existing rules to accelerate integration. On the other hand, some panelists argued that providers need protection in developing ACOs even if they fail in ACO development. Further, there was some discussion regarding support for waivers and safe harbors that would level the playing field without conferring any special advantages on certain types of providers, structural models or demographic areas. In summary, no consensus was reached as to the form of any waivers, safeguards or future action to encourage innovation other than a clear indication that guidance is needed and that the government faces challenges in drafting the same.