ACO Antitrust Guidance

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.

CMS Releases Final Rule on Accountable Care Organizations

On October 20, 2011, the Centers for Medicare and Medicaid Services (CMS) released its final rule on Accountable Care Organizations (ACOs), also known as the Medicare Shared Savings Program (the “Program”), enacted as a part of the Patient Protection and Affordable Care Act of 2010 (aka Health Reform).  The Program is designed to encourage providers and hospitals to create networks that deliver efficient and collaborative care, and allows ACOs to receive a portion of the savings that they produce.

The proposed rule was met with criticism from many providers, hospitals, and trade groups.  In response, CMS adopted a relaxed version of the proposed requirements for ACOs.  Some key changes, include:

  • One-Sided Risk Model:  Under the proposed rule, all ACOs would have operated under a “two-sided” risk model where ACOs had the chance of losing money if they did not produce sufficient savings.  In the final rule, ACOs are allowed to participate in a “one-side” risk model, which will allow providers to participate in the program without risking a loss in the event that their ACO does not produce savings.  The final rule also allows ACOs to opt into a “two-sided” risk model in exchange for the opportunity to receive a greater share of savings.
  • Shared Savings:  The proposed rule originally required that the ACO provide a savings of at least 2% to receive the shared savings payments.  Under the final rule, ACO’s are eligible beginning with the first savings they create.
  • Prospective Beneficiary Assignment:  Originally, CMS intended to assign Medicare beneficiaries retrospectively based on where the beneficiaries received care during the previous year.  In the final rule, CMS sought to provide ACOs more certainty about their beneficiary population and thus implemented a “preliminary perspective assignment” of Medicare beneficiaries.  CMS will modify the beneficiary assignment lists at the end of each contract year in order to determine final assignments.
  • Reduction in Quality Measures:  The proposed rules required ACOs to track 65 performance measures; whereas the final rule requires ACOs to track only 33 measures.
  • Eliminating the Savings Threshold:  The proposed rule required ACOs to produce savings of at least two percent in order to be eligible for shared savings.  The final rule allows ACOs to share in savings beginning with the first savings that they produce.
  • Changes to ACO Organization and Governance: The final rules allows for more flexible ACO organization and governance requirements.  Under the final rule, ACOs are still required to be a legal entity, as recognized under state, federal, or tribal law.  ACOs must meet requirements for governance, leadership, and management. However, the final rule also allows CMS to consider an innovative ACO with a management or governance structure that does not meet the regulatory requirements.
  • Advanced Payment Model:  In attempt to remove some funding hurdles faced by small ACOs, CMS introduced an Advance Payment program that will allow a select number of rural and small physician-owned ACOs to receive up-front payments that the agency will later recoup from the savings that the ACOs produce.
  • Expanded Participation:  The final rule broadens participation to include RHCs and FQHC, as well as practices/organizations in which specialists provide primary care.
  • Relaxed EHR Requirements:  The final rule eases EHR burdens by no longer requiring EHR meaningful use compliance for participation in the Program.  Under the final rule, EHR is retained as a quality measure, but weighted higher than measures for quality scoring purposes.

CMS will begin to accept applications for the Program on January 1, 2012, with start dates on April 1, 2012 and July 1, 2012.

ACO Final Rule On Its Way

CMS has sent the Medicare Shared Savings Program regulations to the Office of Management and Budget, one of the last stops prior to being published in the Federal Register.  The Medicare Shared Savings Program will govern the administration of Accountable Care Organizations (“ACOs”). The proposed rules, issued in March, contained 127 pages of details and 65 measures related to the formation of an ACO.  Based on the backlash from industry leaders, it is expected that the final rule will contain significant changes.

Impact of “Big Data” in Health Care

A Recent report from McKinsey & Company on the evolution of information technology focuses on health care as a sector to watch: “For instance, if US health care could use big data creatively and effectively to drive efficiency and quality, we estimate that the potential value from data in the sector could be more than $300 billion in value every year, two-thirds of which would be in the form of reducing national health care expenditures by about 8 percent.” Full report at

CMS Releases Proposed Rules for Accountable Care Organizations

On March 31, 2011, CMS released its proposed rules for public review and comment relating to Medicare payments for health care providers participating in Accountable Care Organizations (ACOs).  Under the proposed rules, health care providers participating in ACOs would be eligible to receive additional Medicare payments based on meeting certain specified quality and savings requirements in addition to receiving traditional Medicare fee-for-service payments under Medicare Parts A and B.

The proposed rules are available here and will be published in the Federal Register on April 7, 2011.  A fact sheet published by CMS which provides a summary of proposed rules is available here.  If you would like further information about ACOs, please contact Dave Schoolcraft or Elana Zana.