FTC And DOJ Issue Proposed Statement Of Antitrust Policy Regarding Accountable Care Organizations Seeking To Participate In The Medicare Shared Savings Program
The Federal Trade Commission ("FTC") and Department of Justice's Antitrust Division ("DOJ") recently issued a joint Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (the "Policy Statement"). The Policy Statement details how the federal antitrust agencies will apply the nation's antitrust laws to accountable care organizations ("ACOs") created pursuant to the health care reform act, the Patient Protection and Affordable Care Act (the "Act"). Public comments were to be submitted by May 31, 2011.
The agencies identify the potential advantages and disadvantages of ACOs that they will examine under the antitrust laws. The agencies "recognize that ACOs may generate opportunities for health care providers to innovate in both the Medicare and commercial markets and achieve for many consumers the benefits Congress intended for Medicare beneficiaries through the Shared Savings Program." Policy Statement, at p. 2. However, the agencies also understand that "not all such ACOs are likely to benefit consumers, and under certain conditions ACOs could reduce competition and harm consumers through higher prices or lower quality services." Id.
ACOs Covered By Policy Statement
The Policy Statement applies to "collaborations among otherwise independent providers and provider groups, formed after March 23, 2010, that seek to participate, or have otherwise been approved to participate, in the Shared Savings Program." Id. "[C]ollaboration" is defined to mean an agreement or set of agreements, other than merger agreements, thus, the Policy Statement does not apply to mergers among health care providers, which will still be analyzed under the Horizontal Merger Guidelines. Id.
The Rule of Reason Will Be Applied To ACOs
The agencies have previously stated that joint price agreements among competing health care providers are evaluated under the Rule of Reason, if the providers are financially or clinically integrated and the agreement is reasonably necessary to accomplish the pro-competitive benefits of the integration. The Rule of Reason "evaluates whether the collaboration is likely to have substantial anticompetitive effects and, if so, whether the collaboration's potential pro-competitive efficiencies are likely to outweigh those effects." Id., at p. 4. Thus, "the greater the likely anticompetitive effects, the greater the likely efficiencies must be to pass muster under the antitrust laws." Id.
In prior pronouncements regarding health care provider collaborations, the agencies have stated that sufficient financial integration exists if the collaboration's participants have agreed to share substantial financial risk, because such risk-sharing generally establishes both an overall efficiency goal for the venture and the incentives for the participants to meet that goal. The agencies have previously provided a number of examples of satisfactory financial risk-sharing arrangements, while noting that the examples did not represent an exhaustive list.
Regarding clinical integration, while not previously providing specific examples, the agencies have noted that such integration must be "sufficient to ensure that the venture is likely to produce significant efficiencies." Id., at p. 4. The Act authorizes CMS to approve ACOs meeting certain eligibility criteria, and the Policy Statement indicates that "CMS's proposed eligibility criteria are broadly consistent with the indicia of clinical integration that the Agencies previously set forth [and that] organizations meeting the CMS criteria for approval as an ACO are reasonably likely to be bona fide arrangements intended to improve quality, and reduce the costs, of providing medical and other health care services through their participants' joint efforts." Id., at p. 5. Because many health care providers will want to use the ACO structure in both the commercial market and the Medicare context, "if a CMS-approved ACO provides the same or essentially the same services in the commercial market the Agencies will provide rule of reason treatment to an ACO if, in the commercial market, the ACO uses the same governance and leadership structure and the same clinical and administrative processes as it uses to qualify for and participate in the Shared Savings Program." Id., at p. 5. The Rule of Reason analysis applies to ACOs for the length of their participation in the Shared Savings Program.
Streamlined Approach For The Rule Of Reason Analysis Of ACOs
The Policy Statement provides a streamlined approach to determining market shares for the common services provided by an ACO's participants. The first step is to list the common services provided by two or more of the ACOs' participants. The list of services for the various types of health care providers ( i.e., physicians, inpatient facilities, and outpatient facilities) will be made available by CMS. The second step is to determine the Primary Service Area ("PSA") for each common service of the ACO participants. "The PSA is defined as the lowest number of contiguous postal zip codes from which the participant draws at least 75 percent of its patients for that service." Id., at pp. 7 & 12.
If the ACO participants do not provide any common services in any of the same PSAs, then the ACO needs to determine if any ACO participant is a "Dominant Provider," meaning a participant with greater than 50 percent market share for a service in a PSA. If the ACO does include a Dominant Provider, such participant must be non-exclusive to ACO, and the ACO cannot require commercial payers to be exclusive to ACO or otherwise restricted in dealing with other ACOs or providers.
Safety Zone Applies If ACO Has Less Than 30 Percent Combined Market Share For All Common Services In All PSAs
If there are common services provided by two or more ACO participants in the same PSA, then the ACO must calculate its combined market share for each such common service in each PSA. CMS will make available Medicare fee-for-service data sufficient for physicians and outpatient facilities to calculate their market shares. For inpatient facilities, market shares should be calculated based on "inpatient discharges, using state-level all-payer hospital discharge data where available, for the most recent calendar year for which data are available." Id., at p. 13. Where such data is not available, Medicare fee-for-service payment data should be used, or other available data if such Medicare data is insufficient.
If the combined market share for each common service in each PSA is less than 30 percent, then the ACO falls within the "safety zone," meaning that there will be no agency challenge of the ACO absent extraordinary circumstances. If the combined share for even one common service is greater than 30 percent in a PSA, the safety zone does not apply.
In addition, for the safety zone to apply, any hospital or ambulatory surgery center participating in the ACO must be non-exclusive - i.e., allowed to contract or affiliate with other ACOs or commercial payers - regardless of its PSA market shares. If the ACO falls within the safety zone, but includes a Dominant Provider, then the same Dominant Provider requirements described above must be met.
An ACO may include one physician per specialty from each "rural county" (as defined by the U.S. Census Bureau), and a Rural Hospital, on a non-exclusive basis and still qualify for the safety zone even if the inclusion of the rural provider or Rural Hospital makes the ACO's combined market share for a common service greater than 30 percent in a PSA.
Mandatory Review By The Agencies Applies If ACO Has Greater Than A 50 Percent Combined Market Share For Any Common Service In A PSA
If an ACO's combined market share for any common service in any PSA is greater than 50 percent, the ACO must make a submission to the agencies for a mandatory initial review of the ACO's potential competitive effects. Thus, if the combined share for even one of the ACO's common services is greater than 50 percent in a PSA, review by the antitrust agencies is mandatory. The mandatory review requirement does not mean that the ACO is presumed to be anticompetitive, but only that an initial review is necessary.
The ACO must submit to the agencies a copy of its application and all supporting documents that the ACO plans to submit, or has submitted, to CMS or that CMS requires the ACO to retain as part of the Shared Savings Program application process. In addition, the ACO must submit other documents that will allow the agencies to analyze the ACO's potential competitive effects. If the agencies receive all such documentation in a timely fashion, they have committed to completing the review in an expedited, 90-day time period. The additional documents that must be submitted include documents relating to the ability of the ACO's participants to compete with the ACO, the ACO's business strategies, competitive plans, and likely impact on prices, cost, or quality of any service the ACO provides, any other ACOs created by or affiliated with the proposed ACO or its participants, the ACO's market share calculations, the identity of the ACO's five largest payer customers, and the identity of any competing ACOs. Id., at pp. 9-10.
After receiving this documentation, the reviewing agency will advise the ACO within 90 days of whether it has no intent to challenge the ACO or is likely to challenge it. CMS will not approve an ACO that has received a letter of likely challenge.
No Man's Land If > 30 Percent, But << 50 Percent Combined Share
Given the safety zone and mandatory review thresholds, there is a no man's land for ACOs with market shares for common services that fall between these two thresholds - i.e., if the ACO has a combined market share for any common service in any PSA greater than 30 percent, but no combined market share greater than 50 percent in any PSA. While there is no presumption that ACOs falling in this no man's land will have anticompetitive effects, the agencies have identified certain conduct that such ACOs should avoid to reduce the risk of challenge by the antitrust agencies:
1. Steering or incentivizing commercial payers away from providers outside the ACO.
2. Tying sales of the ACO's services to the purchase of non-ACO services (and vice versa).
3. Contracting with ACO participants on an exclusive basis (except for primary care physicians, who can be exclusive to an ACO).
4. Prohibiting commercial payers from providing health plan participants with the ACO's cost, quality or other performance information.
5. Sharing price or other competitive information among the ACO's participants that can be used to collude regarding non-ACO services.
ACOs with market shares requiring mandatory review should also avoid such conduct to reduce the risk of antitrust challenge.
If an ACO falling within the no man's land desires to obtain further certainty regarding whether it will face an antitrust challenge, it can request expedited antitrust review by the agencies similar to the mandatory review process.
Likely Concerns Regarding The Proposed Policy Statement
Potential public comments to the Policy Statement include:
1. Whether non-exclusivity should be required for a hospital or ambulatory surgery center if the ACO still falls within the safety zone for all common services and does not include a Dominant Provider for any service.
2. Whether the 30 percent and 50 percent market share thresholds are appropriate.
3. Are PSAs an appropriate proxy for the relevant antitrust geographic market?
4. Will the Medicare and other publicly available data allow for accurate market share calculations?
5. Will the mandatory review process represent an unreasonable time and cost burden to be incurred by proposed ACOs?
6. Should the Policy Statement include additional examples of market share calculations for hypothetical ACOs?
The Policy Statement represents a substantial and welcome effort on the part of the agencies to provide guidance to the health care industry regarding the antitrust analysis to be applied to ACOs seeking to participate in the Shared Savings Program; however, it is likely that some procedural and substantive modifications will be necessary to help health care providers fully achieve the goals of the Act through the formation of ACOs.
This article appeared in the June 2011 issue of The Metropolitan Corporate Counsel.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of Sills Cummis & Gross P.C.