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April 1‚ 2011
FTC/DOJ Issue Proposed Statement of Antitrust
Enforcement Regarding Accountable Care Organizations
By Bruce D. Sokler,
Christi J. Braun,
and Robert G. Kidwell
On March 31, 2011, the Federal Trade Commission and
Department of Justice issued a joint proposed antitrust enforcement policy
statement (Proposed Antitrust Policy Statement) to accompany the release by
the Department of Health and Human Services of its proposed regulations to
cover Accountable Care Organizations (ACOs) participating in the Medicare
Shared Savings Program (the Program). The agencies ask for comment on the
proposed statement by May 31, 2011. While additional details and insights
will emerge in the coming weeks, we thought it was important to provide
interested parties an initial summary and analysis of the Proposed
Antitrust Policy Statement.
The Proposed Antitrust Policy Statement only applies to
competitor collaborations formed after March 23, 2010 that seek to
participate in the Program. Physician practice groups or integrated health
systems that form ACOs through merger transactions will be evaluated under
the Agencies' Horizontal Merger Guidelines.
Antitrust enforcement officials have stated that their review
of proposed ACOs will ultimately turn on the question of whether the ACOs
will have high enough shares of their markets to raise price above
competitive levels. Initial reactions suggest that there are many
controversial elements to the Proposed Antitrust Policy Statement. We
anticipate that many comments will be filed by May 31st, and the final
Statement may ultimately be modified in some important respects.
To distill the Proposed Antitrust Policy Statement to its
essence, it:
·
Indicates that, if an ACO is approved by the Centers for
Medicare & Medicaid Services (CMS) to participate in the Program, the
antitrust enforcement agencies will analyze the arrangement under the more
lenient rule of reason standard, which balances harm to competition against
procompetitive benefits to consumers. Importantly, the rule of reason
treatment will extend to such an ACO's activities in the commercial market
if, in the commercial market, the ACO uses the same governance and leadership
structure and the same clinical and administrative processes it uses to
qualify for and participate in the Program. This rule of reason treatment
will apply to the ACO for the duration of its participation in the Program.
·
Creates an antitrust safety zone for ACOs in the Program. If
an ACO falls within the safe zone, the agencies will not challenge its
activities, absent extraordinary circumstances. ACOs in the safety zone
have no obligation to contact the antitrust agencies. For an ACO to fall
within the safety zone, independent ACO participants (e.g., physician group
practices) that provide the same service (a "common service") must have a
combined share of 30% or less of each common service in each participant's
primary service area (PSA), wherever two or more ACO participants provide
that service to patients from that PSA. The PSA for each service is defined
as "the lowest number of contiguous postal zip codes from which the [ACO
participant] draws at least 75% of its patients for that service."
To be in the safety zone, any
hospital or ambulatory surgery center participation in an ACO must be
non-exclusive to the ACO. There is a rural exception that preserves
qualification for the safety zone where an ACO may include one physician
per specialty for each rural county if done on a non-exclusive basis, even
if the ACO's share exceeds 30%.
·
Addresses the situation under the CMS regulations where the
proposed ACO will need to submit to a mandatory antitrust review by either
FTC or DOJ in order to obtain CMS approval to qualify for the Program. The
threshold for the mandatory antitrust review is reached if the ACO's share
exceeds 50 percent for any common service that two or more independent ACO
participants provide to patients in the same PSA. When conducting a review,
the agencies will consider information or data suggesting that the PSA
shares may not reflect the ACO's likely market power, and will also
consider any substantial procompetitive justification for why a higher PSA
share is needed to provide high-quality, cost-effective care to Medicare
beneficiaries and patients in the commercial market.
The enforcement agencies commit
that, if they receive certain enumerated categories of information, they
will provide the ACO, within 90 days, with a statement indicating either no
present intention of recommending a challenge to the ACO or, conversely,
that they are likely to recommend an antitrust challenge if the ACO
proceeds. The information that agencies want before the 90-day expedited
clock will start includes:
1.
The proposed CMS application;
2.
Documents relating to the ability of ACO participants to compete
with the ACO, either individually or through other ACO entities, or
relating to financial or other incentives to encourage ACO participants to
contract with CMS or commercial payers through the proposed ACO;
3.
Business strategy documents and documents assessing the likely
impact on prices, costs, and quality;
4.
ACO formation documents;
5.
The ACO's PSA share calculations for each common service;
6.
Restrictions that prevent ACO participants from obtaining
information regarding prices that other ACO participants charge commercial
payers that do not contract through the ACO; and
7.
Information to permit the antitrust agency to contact the five
largest commercial health plans or other payers regarding the proposed ACO.
Some of these requirements are sufficiently imprecise
that there can foreseeably be controversy as to whether the 90-day
expedited period has begun. The Statement cautions that all of the above
material must be received by the reviewing agency at least 90 days before
the last day on which CMS has stated that it will accept ACO applications
to participate in the Program for the relevant calendar year.
·
Acknowledges that ACOs that are outside the safe zone and
below the 50% mandatory review threshold may frequently be procompetitive.
To the agencies, the key issue is whether the ACO, on balance, will provide
consumers with high-quality, cost-effective health care, or instead,
increase price and reduce consumer choice and value. The agencies will
permit ACOs who are not required to undertake the mandatory review to avail
themselves of the same expedited review process if they provide the
required information. The agencies estimate that between mandatory and
voluntary applications, they may be asked to undertake up to 200 reviews.
·
Provides additional antitrust guidance for ACOs by
identifying five types of conduct that an ACO can avoid to reduce
significantly the likelihood of an antitrust investigation:
1.
preventing or discouraging commercial payers from directing or
incentivizing patients to choose certain providers, including providers
that do not participate in the ACO, through "anti-steering," "guaranteed
inclusion," "product participation," "price parity," or similar contractual
clauses or provisions;
2.
tying sales of the ACO's services to the commercial payer's purchase
of other services from providers outside the ACO (and vice versa),
including providers affiliated with an ACO participant (e.g., an ACO may
not require a purchaser to contract with all the hospitals in the
same network as the hospital that belongs to the ACO);
3.
with an exception for primary care physicians, contracting with
other ACO physician specialists, hospitals, ASCs, or other providers on an
exclusive basis, thus preventing or discouraging them from contracting
outside the ACO, either individually or through other ACOs or provider
networks;
4.
restricting a commercial payer's ability to make cost, quality,
efficiency, and performance information available to its health plan
enrollees if that information is similar to the cost, quality, efficiency,
and performance measures used in the Program; and
5.
sharing among the ACO's provider participants competitively
sensitive pricing or other data that they could use to set prices or other
terms for services they provide outside the ACO.
The Proposed Policy Statement
contains a detailed appendix indicating how to calculate the PSA shares of
common services, and some potential data sources for the calculation.
This alert represents merely a quick overview of an important
and anticipated proposed policy statement. We would be happy to discuss its
content and implications in more detail.
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