In coordination with CMS publishing the final Accountable Care Organization (ACO) regulations, the federal antitrust agencies issued a Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Saving Program (the Statement). Under existing antitrust laws, providers who band together to jointly negotiate with payors are normally in “per se” violation of the antitrust laws unless they can show that they are financially or clinically integrated. To be financially integrated the providers who wish to jointly negotiate with payors must share material financial risk, through risk pools or other mechanisms. Most providers in ACOs will not be financially integrated, and the criteria for qualifying as clinically integrated have been vague and uncertain. If an ACO is not either financially or clinically integrated, it will not be permitted to negotiate rates with commercial payors.
While ACOs may initially be formed to take advantage of the Medicare Shared Savings Program, it is anticipated that the commercial market for ACOs will be a significant opportunity for expansion. Therefore, one of the most significant aspects of the Statement is the announcement that ACOs participating in the Medicare Shared Savings Program will be presumed to be clinically integrated, which will allow joint contracting with commercial payors. While such ACOs may be subject to antitrust scrutiny, the analysis will be subject to the “rule of reason”, and a determination of whether the ACO is pro or anti-competitive.
The Statement also provides guidance on the percentage of the market an ACO’s participants may have without being found to have excessive market power. Absent “extraordinary circumstances” if the ACO’s participants account for 30% or less of the services (each considered separately) within their primary service areas, the ACO will be in a “safety zone”. The identification of each service included within an ACO, and the extent of the primary service areas of the participants must be determined for each ACO, and the ACO must complete a thorough market analysis. The Statement includes guidance on the definition of distinct physician and hospital services. The participation of hospitals and ambulatory surgery centers in an ACO must be on a non-exclusive basis in order to qualify for the safety zone. A primary service area is defined as the lowest number of zip codes from which the participant obtains at least 75% of its patients for each service. These calculations are complex and require statistical analysis of the primary service area per physician/group in each specialty. There is a special rural exception to the 30% requirement allowing the inclusion of one physician or group practice for each specialty from each rural area.
ACOs that fall outside of the 30% safety zone are not necessarily illegal. The Statement acknowledges that such ACOs may be “pro-competitive”. Such ACOs will be subject to a higher level of scrutiny, and should avoid conduct that appears to be anticompetitive. The Statement provides guidance on a number of specific practices that should be avoided.
Lastly, antitrust guidance from the agencies is available on an expedited basis.
It should be noted that the Statement does not limit the rights of private parties, or the states, to challenge ACO arrangements.
For more information regarding the FTC’s antitrust enforcement guidance or ACO’s in general contact Doug Albright.