The Patient Protection and Affordable Care Act, also known as ObamaCare, was designed to reform healthcare. One of the reforms is the Medicare Shared Savings Program, which promotes the formation and operations of Accountable Care Organizations ("ACOs"). On October 20, 2011, the DOJ and FTC announced that they issued the final version of a joint Policy Statement detailing how the agencies will enforce antitrust laws with respect to ACOs. An ACO is a group of healthcare providers that jointly offer services through the Shared Savings Program to Medicare beneficiaries in order to reduce healthcare costs and improve healthcare quality. Most ACOs will also offer services to commercially-insured patients. In short, ACOs agree to be accountable for the quality, cost and overall care of beneficiaries. The reward?
If the ACO achieves savings, it may share in some portion of those savings.
Why did the agencies get involved? Healthcare providers, like any other business entity, are subject to antitrust scrutiny. ACOs will be collaborations among independent providers that typically compete with each other for the provision of healthcare services, and thus under certain circumstances an ACO could reduce competition and harm consumers through higher prices and lower quality of care. Thus, the agencies developed the Policy Statement to provide guidance to ACOs to avoid crossing the line into engaging in anticompetitive activities. In sum, the Policy Statement describes: (1) the ACOs to which the Policy Statement will apply; (2) when the agencies will apply the "rule of reason" treatment to ACOs; (3) an antitrust safety zone; and (4) additional guidance for ACOs that are outside the safety zone, including a voluntary expedited antitrust review process for newly-formed ACOs that desire additional guidance.
Two important aspects of the Policy Statement are worth mentioning here. (I would urge readers to review the entire Policy Statement to get the complete picture). First, the agencies will not challenge as per se illegal an ACO that jointly negotiates with private insurers to serve patients in commercial markets if the ACO meets certain eligibility criteria (as mandated by the Centers for Medicare and Medicaid Services), in essence, clinical integration, including a formal legal structure (so it can receive payments for shared savings), a leadership and management structure that includes clinical and administrative processes, and reporting on quality and cost measures. For ACOs that meet those criteria, the agencies will apply a less rigorous rule of reason analysis in analyzing potentially anticompetitive conduct.
Second, the agencies created an antitrust safety zone for ACOs that meet the CMS eligibility criteria and are highly unlikely to raise significant competitive concerns. Absent extraordinary circumstances, the agencies will not challenge an ACO that operates within the safety zone. While the formula to determine whether an ACO falls within the safety zone is far too complicated to fully discuss here, it basically provides that each participant in the ACO must evaluate its market share in its primary service area in three major categories of services. The independent ACO participants must have a combined share of 30 percent or less of each common service to fall within the safety zone, with certain exceptions. For those ACOs falling outside the safety zone, thus raising market power concerns, the Policy Statement provides additional guidance of certain conduct to avoid in order to avoid an antitrust investigation.
One other significant aspect to be aware of: a draft policy statement was issued in March, 2011 for public comment. The final Policy Statement incorporates public input and differs from the original proposal in at least one important respect. The original proposal required mandatory antitrust review for certain ACOs - the final Policy Statement no longer does.
The Policy Statement strikes a good balance between promoting competition and healthcare policy. It encourages innovation in the provision of healthcare services. Nonetheless, the Policy Statement demonstrates that the agencies remain committed to vigorously enforcing antitrust laws in the healthcare industry by allowing them to closely monitor ACOs to prevent potential anticompetitive conduct. The agencies will be vigilant of ACOs operating outside the safety zone and accumulating market power, and they provide fair warning of the potentially anticompetitive conduct they will consider scrutinizing: anti-steering rules, tying arrangements, exclusive contracting and restricting enrollees' access to plan information.