ACO Primer Part 2: ACOs and Antitrust

Brent T. Hoard, Business and Health Care Attorney

In the second installment of our series on accountable care organizations (“ACOs“), we will focus on the threshold issue of antitrust compliance in the formation and operation of ACOs. Under the recently-released regulations governing ACOs, ACOs will be permitted to provide services to both Medicare fee-for-service beneficiaries and commercially-insured patients. Thus, ACOs will have the potential to achieve significant efficiencies and cost savings across an expansive market. On the other hand, if used for improper means, ACOs could reduce competition and thereby result in higher prices and lower quality of care for health care consumers.

In order to provide guidance to parties wishing to form and operate ACOs, the Federal Trade Commission and Department of Justice (collectively, the “Agencies“) released a Proposed Statement of Antitrust Enforcement Policy Regarding ACOs (the “Policy“). The Policy is applicable to collaborations among independent providers and provider groups. The following is a brief summary of the guidance provided by the Agencies:

ACOs that meet certain eligibility criteria established by CMS, and utilize same in the operation of the ACO, will be subject to “rule of reason” treatment under federal antitrust law. An in-depth discussion of “rule of reason” analysis is beyond the scope of this article, but in general, such analysis is fact-specific, and focused on the balance of pro-competitive and anti-competitive aspects in a given arrangement.

One substantial component of the analysis is an ACO’s share of services in the ACO’s “primary service area” (i.e., the geographic market served by the ACO). The Agencies have proposed to create a “safety zone” (similar to a Safe Harbor under the federal anti-kickback statute) for ACOs that have a combined share of 30% or less of each common service provided by the ACO in its primary service area. For example, if two otherwise-independent cardiologists are members of the same ACO (i.e., the cardiologists provide a common service), their combined market share of cardiology services in the primary service area would be used in the ACO’s “safety zone” calculation.

Absent extraordinary circumstances, ACOs that fall within the “safety zone” will not be challenged by the Agencies. In addition, such ACOs will not be required to undergo an initial antitrust examination prior to formation and operation. At the other end of the spectrum, ACOs with a combined share of 50% or greater in any common service will be required to obtain approval from the Agencies as part of the application process with CMS.

If you are interested in learning more about ACOs, the Blalock Walters Health Care Team is ready to assist. Please contact Brent Hoard at bhoard@blalockwalters.com for additional information, and stay tuned for the next installment of the Blalock Walters ACO Primer.