Enforcement of Antitrust Laws for ACOs

The Department of Justice and the Federal Trade Commission have issued their final “Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participation in the Medicare Share Savings Program (Policy Statement). The Policy Statement describes how the agencies will enforce antitrust laws with respect to new Accountable Care Organizations (ACOs). The Policy Statement was issued in conjunction with CMS’ final rule for the Medicare Shared Savings Program: Accountable Care Organizations.

Section 3022 of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), established the Medicare Shared Savings Program to promote the formation and operation of ACOs to serve Medicare fee-for-service beneficiaries to improve the quality and reduce the costs of health care services. ACOs also may serve commercially insured patients. There is the potential that under certain conditions, however, ACOs could reduce competition and harm consumers through higher prices or lower quality care. The Policy Statement provides guidance to health care providers in forming procompetitive ACOs that benefit Medicare beneficiaries and patients with private health insurance and protect health care consumers from higher prices and lower quality care. CMS will provide the agencies with information to help the agencies assess the competitive effects of all ACOs. The agencies will use the information together with their traditional enforcement tools, to evaluate competitive concerns about an ACO’s formation or conduct and will take whatever enforcement action may be appropriate.

The Policy Statement

The Policy Statement describes

  • (1) the ACOs to which the Policy Statement will apply;
  • (2) when the Agencies will apply rule of reason treatment to those ACOs;
  •  (3) an antitrust safety zone; and
  • (4) additional antitrust guidance for ACOs that are outside the safety zone, including a voluntary expedited antitrust review process for newly formed ACOs.

The final Policy Statement differs from the proposal in two significant respects. First, except for voluntary expedited antitrust review, the policy applies to all provider collaborations that are eligible and intend, or have been approved, to participate in the Medicare Shared Savings Program. It is no longer limited to collaborations formed after March 23, 2010, the date on which PPACA was enacted. Second, it no longer contains provisions relating to mandatory antitrust review because the Medicare Shared Savings Program final rule no longer requires a mandatory antitrust review for certain collaborations as a condition of entry into the Shared Savings Program.

Rules of reason. Under the Policy Statement, the agencies will not challenge as per se illegal a Shared Savings Program ACO that jointly negotiates with private insurers to serve patients in commercial markets if the ACO complies with CMS’s eligibility criteria and uses the same governance and leadership structures and clinical and administrative processes to serve patients in the Medicare Shared Savings Program and commercial markets. Instead, the agencies will apply a “rule of reason” analysis in analyzing a potential antitrust violation. The rule of reason analysis evaluates whether the collaboration is likely to have anticompetitive effects and, if so, whether the collaboration’s potential procompetitive efficiencies are likely to outweigh those effects.  

Safety zone. The final Policy Statement sets forth a “safety zone” for certain ACOs that are highly unlikely to raise significant competitive concerns and, therefore, will not likely raise competitive concerns. Agencies will not challenge ACOs that fall in the safety zone, absent extraordinary circumstances. With some exceptions (rural exception and dominant participant limitation), safety zone eligibility is based on the combined Primary Service Area (PSA) shares of ACO participants that provide a common service to patients from the same PSA. A service is defined as a primary specialty for physicians, major diagnostics categories for inpatient facilities, or an outpatient category for outpatient facilities. To fall within the safety zone, an ACO’s independent participants that provide a common service must have a combined share of 30 percent or less of each common service in each participant’s PSA, where two or more participants provide that service to patients in that PSA. Detailed instructions for calculating PSA shares of common services are included in the Appendix of the Policy Statement. The safety zone will remain in effect for the duration of an ACO’s agreement with CMS provided the ACO continues to meet the safety zone requirements.

ACO outside of the safety zone. An ACO that falls outside the safety zone may be procompetitive and lawful if it does not impede the functioning of a competitive market. Conduct that may raise competitive concerns includes improper sharing of competitively sensitive information and ACOs with high PSA shares or other possible indicia of market power should avoid preventing or discouraging private payers from directing or incentivizing patients to choose certain providers, including providers that do not participate in the ACO; tying sales; contracting on an exclusive basis with ACO physicians, hospitals, or other providers; and restricting a private payer’s ability to make information on costs and quality, etc. available to its health plan enrollees.

Expedited review. The agencies offer voluntary expedited 90-day reviews for newly formed ACOs that are seeking additional antitrust guidance. The reviewing agency will examine whether the ACO likely will harm competition by increasing the ACO’s ability or incentive profitability to raise prices above competitive levels or reduce output, quality, service, or innovation below what likely would prevail in the absence of the ACO. Detailed instructions for submitting a request for expedited review are included in the Policy Statement.