FTC to Develop Safe Harbors and Expedited Review Process for ACOs

Ashley McKinney Fischer, Partner, McDermott Emery Will

The FTC, CMS and OIG hosted a public workshop on October 5, 2010, featuring panel discussions on antitrust issues and an announcement from the FTC that it will develop antitrust safe harbors for accountable care organizations (ACOs), as well as an expedited review process for ACOs that do not qualify for those safe harbors.


During a workshop held by the U.S. Federal Trade Commission (FTC), the Centers for Medicare & Medicaid Services (CMS) and the Office of the Inspector General (OIG) on October 5, 2010, FTC Chairman Jon Leibowitz announced the FTC will develop antitrust safe harbors for accountable care organizations (ACOs) and an expedited review process for ACOs that do not qualify for those safe harbors.

For many providers with ACOs in development who have been looking for more definitive antitrust guidance, the announcement may be a welcome relief.   That being said, providers should know that fundamental antitrust principles will continue to apply to the formation and operation of ACOs—namely, that ACOs formed and operated to improve quality and reduce health care costs that do not create undue market concentration are pro-competitive and ACOs formed by independent, competing providers solely to raise prices are not.

This newsletter summarizes the morning sessions of the workshop concerning antitrust issues.   A future newsletter will address other regulatory issues discussed during the afternoon sessions of the workshop.


Section 3022 of the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-148, directs the secretary of the U.S. Department of Health and Human Services (HHS) to establish, no later than January 1, 2012, a shared savings program that promotes accountability for a patient population, coordinates services under Parts A and B of Medicare, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.   Under the shared savings program, ACOs that meet quality performance standards established by the HHS secretary are eligible to receive shared savings payments.  Among other requirements, an ACO must be accountable for the quality, cost and overall care of the Medicare fee-for-service beneficiaries assigned to it.

Although popularized by PPACA, the concept of independent providers coming together and being jointly accountable for the cost and quality of care they provide is not new.  In 1996 the U.S. Department of Justice (DOJ) and FTC in the Statements of Antitrust Enforcement Policy in Health Care(Policy Statements) first recognized the concept of clinical integration as a collaborative activity among competing health care providers that may provide a sufficient basis for analyzing joint-pricing negotiations under the rule of reason and not the per se standard of illegality.  Since the passage of PPACA, many providers have wondered how the DOJ and FTC would apply the standards they developed for clinically integrated managed care contracting networks—through the Policy Statements, advisory opinions and other, subsequent guidance—to the formation and operation of ACOs.

Government Officials’ Remarks

CMS Administrator Don Berwick, MD, stated the government wants to help integrated care thrive.   He also noted the government needs to be a proper steward of the antitrust laws.  Said differently, the government wants providers to cooperate and achieve synergies without colluding. 

Leibowitz stated the promise of ACOs—improved quality and reduced costs—offers a real opportunity for health reform and explained that the government’s job is to ensure that regulations encourage ACO development while also protecting consumers.   He then announced the FTC wants to explore the development of safe harbors so providers can know when they can collaborate.  Further, the FTC will explore an expedited review process for ACOs that fall outside the safe harbors.  Leibowitz acknowledged the difficulty of establishing safe harbors—that is, categories of conduct that, absent extraordinary circumstances, the DOJ and FTC will not challenge—that displace traditional facts and circumstances analysis under the antitrust laws.  He then appealed to the provider community, stating that in order to develop effective safe harbors, the FTC needs input from providers.  Specifically, the FTC is interested in the types of activities providers may engage in through ACOs and how providers envision ACOs operating in the marketplace.

FTC Panel Discussions

The FTC conducted two moderated panel discussions.   Provider and payor representatives, as well as policy experts, participated in the sessions.

Sufficient Integration and the Rule of Reason

The first panel addressed the issue of when ACO participants should be deemed sufficiently integrated through the ACO such that their collective price negotiations should be analyzed under the rule of reason and not the per se standard of illegality.  The panel considered whether the FTC should establish a safe harbor for ACOs that satisfy CMS’ criteria for ACO participation in the Medicare program.  Under the proposal, the FTC would view any ACO qualified by CMS to be sufficiently clinically integrated for rule of reason treatment.  The panel also considered how CMS should elaborate on PPACA requirements for ACOs—namely, that an ACO be accountable for the quality, cost and overall care of the Medicare fee-for-service beneficiaries assigned to it—to ensure that ACO participants are sufficiently integrated within the meaning of the antitrust laws.

Panelists discussed possible criteria.   Many provider representatives emphasized the importance of providers’ ability to share data and the ability of the organization to capture and analyze data.  A representative from a clinically integrated independent practice association emphasized the importance of electronic tools to improve cost and care coordination.  These tools allow providers to evaluate their performance against their peers. Another representative from a clinically integrated physician-hospital organization expressed the view that the importance of the adoption and implementation of electronic health records systems (EHRS) has been overemphasized, and that his organization has been clinically integrated despite its participants not having universally adopted EHRS.  Among other initiatives, his organization created disease registries to manage patient populations.  Later, it required participants to adopt high-speed internet technology, then e-prescribing.  As a result of federal stimulus money, the provider participants in his organization are now adopting EHRS.

A trade association representative encouraged the FTC to set the criteria at a high level in recognition that there are various care integration models.  Another panelist added that the FTC criteria cannot be too specific, otherwise competition could be stifled.  These comments recognize that one of the purposes of the antitrust laws is to foster innovation such as new care delivery models.   One of the challenges for the FTC as they consider a possible safe harbor will be how to answer the industry’s call for clear standards while also allowing for flexibility in model design.

Market Power, Over-Inclusiveness and Exclusivity

The second panel discussion addressed issues of market power, over-inclusiveness and exclusivity.  The participants considered whether the FTC should adopt an antitrust safety zone pertaining to market share for ACOs.  Statement 8 of the Policy Statements contains an antitrust safety zone that applies solely to physician networks.  Under the safety zone, the DOJ and FTC will not challenge, absent extraordinary circumstances, an exclusive physician network joint venture whose physician participants share substantial financial risk and constitute 20 percent or less of the physicians in each physician specialty who practice in the relevant geographic market, or a non-exclusive physician network whose physician participants share substantial financial risk and constitute 30 percent or less of the physicians in each physician specialty who practice in the relevant geographic market.  The DOJ and FTC did not extend the antitrust safety zone for physician networks to multiprovider networks, which the DOJ and FTC analyze under Statement 9 of the Policy Statements.

The panel first addressed the issue of how large an ACO needs to be in order to deliver care effectively.   Many panelists believed that ACOs need sufficient scale in order to achieve program objectives and properly measure performance.  ACOs also need scale in order to spread out the cost of infrastructure investments, staff and other resources.   Scale also enables an ACO to spread risk effectively.  The payors on the panel addressed the extent to which they are experiencing market power issues with providers and, not surprisingly, stated that they have experienced price increases in markets where certain providers are dominant.  One of the challenges for the FTC as they consider a possible safe harbor will be how to balance the need for scale to achieve program objectives against market power concerns.

Panel participants also discussed the issue of exclusivity.   Under an exclusive ACO, provider participants negotiate with payors only through the ACO and they may not join other ACOs.  A professor expressed the concern that the advisory opinions on clinically-integrated networks the FTC has issued to date unfairly emphasize non-exclusivity.  He doubted whether a high-functioning ACO can have provider participants whose loyalty is split among competing organizations.  Several representatives stated that exclusivity is necessary to achieve the benefits of clinical integration, at least with respect to primary care physicians.  As with other concerns the FTC must balance, it will be challenged to develop ACO guidance that recognizes both the benefits and foreclosure implications of exclusivity.



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