On April 19, 2011, the Federal Trade Commission and Antitrust Division of the Department of Justice (the “Agencies”) published for public comment their “Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program” (the “Proposed Guidelines”).[1] Public comments are required by May 31, 2011.

The proposed guidelines were published in the wake of recent health care reforms and, in particular, the 2010 Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (referred to collectively as “Affordable Care Act” or “ACA”). Among other things, the Affordable Care Act created Medicare’s Shared Savings Program, which promotes the formation of Accountable Care Organizations (ACOs).[2] ACOs are groups of health care providers who coordinate their medical practices to more efficiently provide services to Medicare beneficiaries.

While the Shared Savings Program was initially intended for Medicare beneficiaries, the Agencies determined that there is a great likelihood that healthcare providers would be more likely to form ACOs under the Shared Savings Program if the ACOs could service both Medicare beneficiaries and commercially-insured patients.[3] The Agencies recognized that while such dual-market ACOs may provide competitive advantages for both Medicare patients and commercially-insured patients, not all such ACOs are likely to benefit consumers.[4] Thus, the Agencies issued the Proposed Guidelines to provide guidance to health care practitioners and entities contemplating participation in ACOs serving both markets.[5]

This article will summarize the critical aspects of the proposed ACO Guidelines. Given their limited scope, the ACO Guidelines do not on their face displace the agencies’ 1996 Healthcare Guidelines. [6] The ultimate effect of the Proposed ACO Guidelines in the health care industry, however, remains to be seen. At least facially, the Proposed ACO Guidelines provide significantly more guidance than the Agencies’ 1996 Healthcare Guidelines for health care practitioners and institutions seeking to take part in the Shared Savings Program and, if and when adopted, may provide some guidance for competitor collaborations outside the healthcare industry.

The Proposed ACO Guidelines technically will only apply to collaborations formed for the purpose of participating in Shared Savings Programs.

The Proposed ACO Guidelines would, if adopted, have a very limited scope when compared with the 1996 Guidelines. The ACO Guidelines will apply to “collaborations among otherwise independent providers and provider groups” that are formed after March 23, 2010, for the purpose of participating in the Medicare Shared Savings Program.[7] They will not apply to all health care joint ventures. They also will not apply to health care mergers, which will continue to be evaluated under the Horizontal Merger Guidelines.[8]

The Proposed ACO Guidelines would create antitrust safety zones for those entities meeting CMSapproved qualifying criteria.

Typically, any efforts by competitors to share pricing information or allocate territories are extremely questionable under Section 1 of the Sherman Act.[9] The 1996 Healthcare Guidelines, however, created an antitrust safety zone for certain physician network joint ventures.[10]

The Proposed Guidelines would continue this antitrust safety zone policy, but it would do so only for those ACOs utilizing the same clinical and administrative arrangements required to qualify for the Shared Savings Program in their commercial activities.[11] Under the Shared Savings Programs, an ACO must meet the following requirements in order to receive approval from CMS: (1) a formal legal structure that allows the ACO to receive and distribute payments; (2) a leadership structure that includes both clinical and administrative processes; (3) processes that promote evidence-based medicine; (4) reporting on quality and cost measures; and (5) coordinated care for beneficiaries.[12] Such arrangements, according to the Agencies, “are sufficiently rigorous that joint-negotiations with private-sectors payers will be treated as subordinate and reasonably related to the ACO’s primary purpose of improving health care services.” [13]

Application of the Proposed Guidelines will depend upon the calculation of an ACO’s PSA shares.

Under the Proposed Guidelines, the exact treatment of an ACO under a rule of reason analysis will depend exclusively on the calculation of the ACO’s Primary Service Area ("PSA") share.[14] A PSA does not, according to the Agencies, “necessarily constitute a relevant antitrust geographic market.”[15] Such equivocal language creates uncertainty as to the Agencies’ exact understanding of the relationship between PSAs and a relevant antitrust geographic market. Nevertheless, the Proposed Guidelines essentially treat PSAs in the same manner as relevant antitrust geographic markets. That is, the Proposed Guidelines assume that ACOs with larger PSA shares are more likely to have increased market power and thus more likely to produce an anticompetitive effects.

Under the proposal, there would be three steps in calculating an ACO’s PSA share[16]:

  1. Identify each service provided by at least two independent ACO participants. A service is defined as: (1) a physician’s primary specialty; (2) each major diagnostic category by an inpatient facility; and (3) each outpatient category as defined by CMS.  
  2. For each service indentified in step # 1, identify the relevant PCA. A PSA is “the lowest number of contiguous zip codes from which the participant draws at least 75 percent of its patients for that service.”  
  3. Calculate the ACO’s market share, for each common service identified step #1, in the PSA. It bears noting that this process must be completed for each common service found in an ACO. As discussed below, an ACO must meet the applicable threshold PSA share numbers for each common service.  

ACO’s with a PSA share of less than thirty percent would be in an antitrust safety zone (subject to certain exclusivity requirements).

There are two requirements that an ACO would have to meet to qualify for the Agencies’ antitrust safety zone under the proposed Guidelines. First, the ACO must have a combined share of 30 percent or less for each service that two or more ACO members provide to patients from that PSA. [17] Second, any hospital or ambulatory surgery center participating in an ACO must be nonexclusive to that ACO in order to fit within the Agencies’ antitrust safety zone.[18] The antitrust safety zone would apply to physicians regardless of their exclusivity status, a significant change from the 1996 Healthcare Guidelines.[19]

The Agencies would not challenge ACOs in this antitrust safety zone “absent extraordinary circumstances.[20]” There is no discussion in the proposed Guidelines, however, as to what would constitute extraordinary circumstances. The proposed Guidelines merely state that ACO’s falling within the antitrust safety zone “are highly unlikely to raise significant competitive concerns.”

There are two exceptions to the above proposed rule governing the antitrust safety zone. First, there is a Rural Exception, which would apply to any rural county as defined by the U.S. census bureau.[21] Under this exception, an ACO in a rural county could include one physician per specialty on a nonexclusive basis even if that physician’s inclusion causes the PSA share for any service to exceed thirty percent. Second, there is a Dominant Provider Limitation, which would apply to any ACO that includes a participant with a greater than fifty percent share in its PSA, provided that no other ACO participant offers that service in that PSA.[22] The ACO participant could not be exclusive to the ACO, and an ACO with a dominant provider could not require a commercial payer to contract exclusively with that ACO.

For the first time, multiprovider networks would be entitled to protection under the ACO Guidelines. Under the 1996 Healthcaere Guidelines, there is no antitrust safety zone for multiprovider networks. According to those Guidelines, multiprovider networks are too varied and evolve too rapidly to allow for the creation of a “meaningful” antirust safety zone.[23]

The Agencies would conduct a mandatory review of any ACO with a PSA share in excess of fifty percent.

The proposed ACO Guidelines state that the Agencies will conduct a mandatory review of any ACO with a PSA share that is in excess of 50 percent.[24] That is, for any service that two or more independent ACO members provide to patients in the same PSA, the Agencies would automatically review any ACO whose PSA share for that service exceeds fifty percent. While there would be no exceptions to such a review, the proposed Guidelines state that the Agencies, when conducting their review, will consider any information suggesting that PSA shares do not reflect likely market power.[25]

The proposed Guidelines contain no explanation as to the scope or nature of the Agencies’ review, but do contain procedures for an expedited review for those ACO’s that meet specific requirements.[26] To obtain an expedited review, the ACO would be required to submit detailed documentation to the “reviewing Agency.” Within 90 days of receiving these materials, the reviewing Agency will issue a statement either that: (1) it has no present intention to challenge the ACO (either as presented or as modified as required by the reviewing agency); or (2) it is likely to challenge the ACO. An ACO that receives the latter statement would not be approved by CMS for the Shared Savings Program.

The 1996 Healthcare Guidelines do not contain a mandatory review category of physician network joint ventures or any expedited review procedures. Instead, those Guidelines apply the same traditional antitrust analysis that would apply to any joint venture, and the Agencies stated that it is not their “intent to treat such networks either more strictly or more leniently than joint ventures in other industries . . . .” [27]

ACOs with PSA shares between thirty and fifty percent would be left in an uncertain middle ground.

The proposed Guidelines provide little guidance for those ACO’s that would be stranded between the antitrust safety zone and mandatory review. According to the proposed Guidelines, “[t]he Key issue is whether the ACO, on balance, will provide consumers with high-quality, cost-effective health care or, instead, increase price and reduce consumer choice and value.”[28] Unlike the 1996 Healthcare Guidelines, the proposed ACO Guidelines are silent on whether the Agencies will treat ACO’s that fall within this category more leniently than joint ventures in other industries. It is stated, however, that “[a]s is current practice . . . if it appears that an ACO’s formation or conduct many be anticompetitive, one of the Agencies may investigate and, if appropriate, take enforcement action . . . .” [29]

To provide some concrete guidance to ACOs in this grey area, the ACO Guidelines state that an ACO in this category is “highly unlikely to present competitive concerns” if the ACO avoids the following conduct: (1) preventing commercial payers from incentivizing patients to choose certain providers; (2) tying ACO services to non-ACO services; (3) contracting with other providers on an exclusive basis; (4) restricting the ability to provide information; and (5) sharing information that could be used to set prices for services provided outside of the ACO.[30]


The proposed ACO Guidelines represent an attempt by the federal antitrust enforcement agencies to modify traditional antitrust analysis of joint ventures to the changing healthcare landscape. If adopted, they would constitute significant departures from the agencies’ 1996 Healthcare Guidelines. The magnitude of these changes, however, is difficult to discern without further information as to Shared Savings Program. To the extent that participation in the Shared Savings Program becomes routine for healthcare joint ventures, if adopted, the proposed ACO Guidelines could represent a significant change in existing healthcare antitrust law, and could become a template for competitor collaborations in other industries as well.