One of the underlying premises of the Patient Protection and Affordable Care Act (“PPACA”) is that integrated health care delivery systems will promote quality health care and lower health care costs. Among other things, the PPACA encourages the formation of Accountable Care Organizations (ACOs), which are described as organizations of providers that take responsibility for improving the health status, efficiency and experience of care for a defined patient population. The anticipated development of ACOs implicates a number of different federal regulatory regimes, including the antitrust laws, the physician self-referral prohibition, the anti-kickback statute, and the civil monetary penalty (“CMP”). Navigating the overlapping and sometimes inconsistent requirements of those laws will require a new approach to the provision of health care by both providers and, just as significantly, the regulators charged with enforcing the laws.

On October 5, 2010, the FTC, CMS and OIG hosted a public workshop to obtain information from various stakeholders on these issues and potential approaches to the establishment and regulation of ACOs. For those seeking an insight into how the regulatory agencies intend to adjust their enforcement policies to promote ACOs, the workshop offered few hints. However, based upon the opening comments of Don Berwick, the Administrator of CMS, FTC Chairman Jon Liebowitz, and HHS Inspector General Dan Levinson, it is clear that the agencies believe that ACOs present a significant opportunity to meet what Administrator Berwick described as the “triple aim” of truly integrated health care: better care for individual patients and better health for the general population, at a lower per capita cost of achieving both without diminishing quality. Equally clear is that current interpretations of many of the laws that shape health care delivery are not necessarily consistent with some of the innovative practices that the agencies hope that ACOs will adopt, and that the regulators believe that they have the authority under the PPACA to make the necessary changes to promote the development of effective ACOs.


The principal enforcement activities of the DOJ and the FTC in the past decade in the health care arena have involved the application of Section One of the Sherman Act to cooperation and collaboration among independent providers. Networks of otherwise independent, competing physicians, who wish to cooperate in entering certain reimbursement contracts, are constantly reminded that agreements on price adopted by competitors, without anything more, constitute per se unlawful price fixing. However, agreements on price that are ancillary to legitimate pro-competitive cooperation are subject to the rule of reason. Whether or not a physician network has achieved the requisite level of integration to be subject to the rule of reason has been one of the primary concerns facing such ventures in the past, and will be the subject of much discussion as the regulatory agencies develop the regulations that will guide the formation of ACOs.

Since the FTC and the DOJ issued their joint Statements of Antitrust Enforcement Policy in Health Care in 1994, physicians (and hospitals) seeking to establish networks or joint ventures for the delivery of health care have struggled to ensure that their activities will be analyzed under the rule of reason, and not treated as per se unlawful under the antitrust laws. The DOJ/FTC Guidelines applicable to physician networks established “safe harbors” for networks that, if satisfied, would not be challenged, absent extraordinary circumstances, by the DOJ or the FTC. Exclusive networks that include 20% or fewer of any physician specialty in the relevant market, which are sufficiently financially integrated or clinically integrated, and non-exclusive networks that include 30% or fewer of any physician specialty, that demonstrate the necessary financial or clinical integration, fall within the safe harbors. Networks that do not satisfy the market share thresholds are still analyzed under the rule of reason if they demonstrate sufficient financial or clinical integration.

In the 1990s, when capitated payments and payor arrangements with significant risk withholds were more prevalent, determining if a network had undertaken sufficient shared financial risk to be considered financially integrated was much easier than in today’s managed care market, where fee for service arrangements have predominated. For many years, the clinical integration aspect of the Guidelines was virtually ignored. However, since 2002, when the MedSouth advisory opinion was issued, the FTC has been providing more guidance (and, hence, comfort) to providers on what is required to achieve sufficient clinical integration.

The regulatory agencies’ interest in promoting ACOs will at the least provide more guidance, and in all likelihood, a more welcoming environment for the development of ACOs by independent physician groups. FTC Chairman Liebowitz stated that the FTC is considering both new safe harbors and an expedited review process for ACOs. Panel participants expressed ambivalent views toward safe harbors. On the one hand, given the level of capital and infrastructure development that will be required to form ACOs, certainty that a new ACO will be compliant with the requirements of the antitrust laws is a desirable goal. However, both the agency heads and workshop participants recognized that the development of ACO guidelines will not be a “one size fits all” approach. The precision necessary to define safe harbors will not be flexible enough to accommodate the wide diversity of models and approaches that could lead to the formation of successful ACOs, and also may inhibit the requisite level of experimentation and innovation required to develop successful ACOs.

Panel participants also raised questions about the DOJ/FTC Guidelines more favorable treatment of non-exclusive provider networks. Some panelists felt that exclusivity has value because participation in many ACOs could dilute the benefits of collaboration, particularly for primary care physicians.

One panelist commented that the very nature of ACOs suggests that organizations that properly approach the formation of an ACO as presenting an opportunity to change the way in which care is delivered to patients will lead to sufficient integration to comply with the antitrust laws. This is consistent with the comments of CMS Administrator Berwick, who emphasized that “authenticity matters” in analyzing ACOs. Berwick described truly integrated care as being patient-centered, involving shared medical decision-making where information about the patient is remembered by the system and available to all team members, who act proactively to manage the patient’s care. While some participants in the workshop expressed concerns about the costs required to accomplish the information-sharing envisioned for successful ACOs, and the possibility that some may be excluded from participating in ACOs because of those costs, development of such systems has been one of the recognized characteristics of clinically-integrated networks. Likewise, shared decision making in patient care accompanied by meaningful performance metrics (and the large commitment of resources and personnel required to implement such systems) are likely to lead to the type of integrated care that the FTC has recognized as characteristic of clinically integrated networks, and will be what the regulators will be looking for in ACOs.

Inspector General Levinson discussed the importance of achieving measurable performance improvements, in terms of utilization and patient outcomes. Workshop participants expressed the hope that performance metrics would be transparent and applied to both public and private contracts. These metrics presumably will be applied both to reward successful performance but also to impose meaningful consequences on providers who do not meet reasonable thresholds.

The PPACA itself probably does not provide sufficient financial incentives to achieve the level of integration that workshop participants feel should be required of an ACO. Section 3022 of the PPACA directs CMS to create a National Shared Savings Program to share savings from budgeted costs for services provided to beneficiaries assigned to an ACO. Workshop participants felt that these savings would not constitute sufficient financial risk sharing to achieve the integration expected of ACOs, because savings will not necessarily be tied to improved patient outcomes or integration, because they will not include sanctions for underperformers, and because those savings will necessarily only be applied to a limited patient population. In this regard, while Section 3022 only applies to Medicare savings, many participants expressed the concern that ACO models must also be readily accepted in the commercial sector.

A topic that was not directly addressed by either of the two panels on antitrust issues underscored one of the inherent problems that the antitrust laws present for the regulators. The first session focused on how independent physicians and hospitals can form ACOs that can lawfully engage in joint pricing and negotiations, and the second session focused on how to encourage the formation of multiple ACOs in a single market. Noticeably absent was any discussion of the formation of ACOs by fully integrated health care providers. Physician networks and joint ventures between physicians and hospitals are governed by Section One. However, the unilateral activity of a single entity (such as a hospital and its employed physicians) is not subject to Section One. While the trend toward hospital acquisitions of physician practices had started in many markets throughout the country before passage of the PPACA, one of the “unintended consequences” of the Act may be to hasten that consolidation, as ACOs formed by independent physicians and hospitals inevitably will face more scrutiny under the antitrust laws than fully integrated ACOs. Panel participants representing payors and employers expressed concern that ACOs in markets with dominant providers, and particularly hospitals, might squeeze out independent providers from the market by locking up certain specialties or services needed to form an ACO. In this regard, the agencies may wish to promote or even require non-exclusivity in certain circumstances, while encouraging exclusivity in others.


The HHS Panel, representing providers, suppliers and health policy experts, discussed the interplay between ACOs and the fraud and abuse laws. The Panel was moderated by OIG Senior Advisor Vicki Robinson, Healthcare Reform, and Troy Barsky, the CMS Director of Technical Payment Policy. The moderators reviewed the Stark Law, Anti-Kickback Statute and the Civil Money Penalty Law, and stated the basic premise of the fraud and abuse laws is that patients are best protected by limiting the financial relationships between referring parties, and that providers cannot engage in payments to limit care in order to increase financial gain. It was noted that the Affordable Care Act grants the Secretary waiver authority relative to the fraud and abuse laws under the Shared Savings Program and the Center for Medicare and Medicaid Innovation in order to eliminate barriers to the creation of ACOs and carry out the intent of PPACA. Assurance was given that work has begun on the Shared Savings Program regulations which will be issued this fall. CMS and OIG acknowledged that it may be necessary to create additional exceptions and safe harbors in order to promote the creation and development of ACOs. The Panel favored waivers to provide clarity to a regulatory scheme that is designed to prevent fraud and abuse in a fee-for-service environment, but acts as a barrier to collaborative and integrated care models. The Panel was divided regarding the need for broad waivers, with some suggesting that broad waivers were needed for all participating ACOs which would create a level playing field for all, rather than advantage the large integrated healthcare systems with shared savings. Others suggested that waivers should be approved on a case by case basis with a need to focus on speed and flexibility within a short process. It was stressed that waivers should not only protect the shared savings distributions, but also other financial arrangements such as the up-front capitalization needs and the inner workings process of forming and achieving an integrated ACO. Panelists were reminded that waiver authority only extends to distributions of ACO shared savings.

The discussion regarding types of monitoring needed to ensure continual quality and efficiency improvement and the role of health information technology and electronic health records focused on self-monitoring and reporting with transparency to patients in order to promote choice based on quality of care. It was suggested that assigning patients to ACOs with no choice would not meet the goal of patient-centered care.

Regarding whether CMS should dictate certain governance and legal structures of ACOs, the Panelists all agreed that any prescriptive structure would be counterproductive and stifle innovation. Rather, the focus should be on function, not structure. Requiring EHR as part of necessary qualification for ACOs would depend on the size of the entity and the function of the organization. Governance should include a feedback loop to demonstrate continuous, measurable improvement that is transparent to patients.

In conclusion, the moderators focused on the future and ways to encourage innovation. The Panelists suggested that change built on cost-savings alone was not sustainable. To form and thrive, ACOs must be developed outside the box of current, tortuous regulatory restrictions that give no certainty to the process or outcome.

The workshop ended with a listening session that included audience comments with minimal response from agency representatives. HHS did remind the audience that the mandate of the PPACA is for a shared savings program for Medicare, but that it also needs to complement the private sector initiatives. The audience commented on the need to expand protection for incentives furnished by providers to patients to motivate them to engage in their own healthcare and outcomes.

The goals for ACOs are clear, and both the industry and regulators are clearly engaged in development of this new delivery model. Changes in the regulatory landscape to accommodate this model, including the CMS Shared Savings Program regulations, which should be issued soon, merit continuing attention.