On October 5, 2010, the Federal Trade Commission, the Centers for Medicare and Medicaid Services and the HHS Office of Inspector General jointly held a workshop to discuss the antitrust, anti-kickback, physician self-referral, and civil monetary penalty law implications regarding accountable care organizations (ACOs). Representatives from both the FTC and CMS announced that regulations implementing Congress’s plan for an ACO demonstration project in the Patient Protection and Affordable Care Act (PPACA) would be forthcoming this fall. Agency representatives used the panel discussions and subsequent listening session to receive feedback from industry stakeholders on the proper scope of any waivers, exceptions or safe harbors for ACOs from antitrust and fraud and abuse laws.

In their opening remarks, CMS Administrator Donald Berwick, FTC Chairman Jon Leibowitz and HHS Inspector General Daniel Levinson all voiced their support for the creation of ACOs as a vehicle for improving care coordination and reducing healthcare costs. Each said his agency would work to shape regulations that encourage ACO development.

The workshop’s morning session focused on the competitive effects of ACOs’ financial and clinical integration. Panelists from the provider (both hospitals and physician practice groups), payer, purchaser, and patient communities 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 warned that if safe harbors were too specific, innovation would be stifled—particularly in smaller communities where a particular hospital system or physician practice group may have a large share of the market.

However, disagreements did arise as to the effectiveness of a shared savings program outlined at section 3022 of PPACA. Some panelists warned that a shared savings program may in fact have anti-competitive effects: if physician groups share in the savings of reduced hospital admissions, hospitals may seek to acquire physician practices en masse to compensate for lost revenue. Others also warned that while flexibility is essential, so too is accountability. If members of an ACO can share in the savings of reduced healthcare costs, they also must bear the risk of loss—of both revenue and even ACO status itself—if their arrangements do not deliver results. Indeed, representatives from the payer and employer communities warned that safe harbors that encourage large ACOs and remove the risk of failure might actually reduce incentives to reduce costs by giving ACOs the leverage to negotiate higher rates.

Panelists also debated the merits of “exclusivity”—that is, a physician’s affiliation with only one ACO. The panelists stated that while exclusivity may streamline care coordination, it also may lead to burdensome restrictions in physicians’ ability to refer patients to specialists and other facilities, and may handcuff payers and purchasers to contract with all of an ACOs’ members.

The afternoon session moderated by CMS focused on the implications of anti-kickback, physician self-referral and civil monetary penalty laws on ACO development. CMS directed questions to the panelists regarding the scope of any proposed waiver of anti-kickback, self-referral and CMP laws, the types of financial arrangements (beyond shared savings) that needed waiver protection; the types of providers and relationships to be protected; safeguards to be incorporated; and the type of monitoring that should be required. Beyond the exercise of its waiver authority, CMS also inquired what was working now under the fraud and abuse laws.

Panelists voiced similar concerns as those raised in the morning session. Panelists agreed that any waiver or safe harbor should be broad enough in the providers and relationships covered in order to encourage ACO development. Both hospital and physician advocates warned that overly prescriptive safe harbors might encourage a “one size fits all” approach to ACO development, and could disrupt effective delivery models in certain markets. Panelists representing providers tended to emphasize 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. Panelists took different perspectives as to whether the waiver authority should be exercised on a case-by-case basis with respect to qualified ACO applicants. Some panelists argued that CMS should simply issue a broad waiver of all fraud and abuse laws to help physicians and allied health practitioners defray the costs of ACO startup. Others supported reforms to existing rules, e.g., broadening the safe harbor and Stark exception for electronic health records, to accelerate integration. Some panelists emphasized that providers need to be protected in ACO development efforts even if they ultimately failed in some respects. Several voiced support for waivers and safe harbors that created a “level playing field” without conferring special advantages on certain types of providers, demographic areas or structural models.

All panelists agreed that ACOs must be held to specific quality and cost-control standards. Some patient advocates urged that quality measures be transparent enough so that patients can make informed choices not just among different ACOs, but also among individual practitioners or facilities within an ACO. Some disagreements emerged regarding the stage at which such accountability ought to be enforced: those in favor of greater flexibility urged that quality and cost evaluations be made after an ACO is up and running for a sufficient period of time, while others voiced support for up front scrutiny and the granting of waivers on a case-by-case basis. Some panelists encouraged that more weight be given to quality metrics than to cost savings. A subsequent listening session from members of the audience and those listening in via teleconference voiced similar concerns and that the rules be flexible enough to incorporate other entities in the healthcare delivery system, including home health agencies and rural providers.

The extent to which the agencies will incorporated panelist and audience feedback will be known once the proposed regulations are announced in the coming weeks.