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Justice and FTC Say ACOs and Antitrust Laws Can Coexist

By Jane Norman, CQ HealthBeat Associate Editor

March 31, 2011 -- The accountable care organizations (ACOs) proposed for Medicare will allow providers to collaborate without running afoul of federal anti-trust laws, according to officials from the Centers for Medicare and Medicaid Services (CMS), the Department of Justice (DOJ) and the Federal Trade Commission (FTC).

Essentially, the proposed approach is to divide ACOs into three categories, based on how much business each does in a defined geographic area. The largest ACOs will face a mandatory review from either the DOJ or FTC and can’t move ahead without approval, though the agencies are promising a fast process.

Physicians and other health care providers long have worried that ACOs authorized in the health care law (PL 111-148, PL 111-152) for the Medicare program might also expose them to the long arm of the law and prosecution for anti-competitive practices. ACOs are groups of providers who work together to deliver patient care. The goal is to lower costs and increase quality through the collaboration. Under rules proposed Thursday by CMS, they will be eligible for shared savings.

But there’s also a risk that an ACO could dominate a local market and harm consumers with higher prices and a reduced quality of care. That’s because the ACOs might not just treat medicare patients but under separate contract with private insurers.

Christine Varney, assistant attorney general for DOJ, told reporters in a conference call that her agency is committed to better health care at lower cost. But, she said, those providers who collaborate “inappropriately” to fix prices will be prosecuted. “Our goals here are to support those providers who want to bring health care to all Americans at a reasonable cost,” she said.

Clarifying what their approach will be, DOJ and the FTC released a joint Proposed Statement of Enforcement Policy on ACOs that applies to ACOs created after March 23, 2010, not including mergers, which wouldn’t meet the criteria of an ACO.

ACOs with two or more participants who have a combined share of 30 percent or less for each common service in a defined geographic area will be declared to be in a “safety zone.” For example, that might apply to an ACO with two orthopedists with a combined share of 30 percent or less.

In addition, any hospital or ambulatory surgery center in a “safety zone” ACO must be non-exclusive, meaning it is allowed to contract individually or affiliate with other ACOs or commercial payers.

Those in the zone are “highly unlikely to raise significant competitive concerns and the antitrust agencies will not challenge” them absent “extraordinary circumstances,” says a statement from the CMS.
The policy statement says that such ACOs have no obligation to contact the FTC or DOJ.

However, an ACO applicant with a share of 50 percent or more will need to obtain a letter from either the DOJ or the FTC saying the agency does not intend to challenge or recommend a challenge of the ACO. If the DOJ or FTC says it plans to do so, the ACO won’t be eligible for the Medicare program.

Federal Trade Commission Chairman Jon Leibowitz said the agencies are committed to an expedited, 90-day review of requests from ACOs that are above the 50 percent standard. Those ACOs will have to submit a number of documents and explanations, including a discussion of the ACO’s business strategies and likely impact on the quality and costs of care provided to both Medicare enrollees and private payers.

For ACOs between 50 percent and 30 percent, a review won’t be required. The key issue, says the policy statement, is whether they will still provide consumers with high-quality and cost effective health care or increase prices and reduce choice. Such ACOs can still seek a review from either DOJ or FTC, and it will still be completed within the expedited 90-day window.

In addition, CMS and the Health and Human Services Office of Inspector General issued a joint notice in connection with ACOs outlining proposed waivers of several laws that affect competitiveness in health care. The health care law (PL 111-148, PL 111-152) gives HHS the authority to waive certain fraud and abuse laws as necessary to accomplish the measure’s goals, a CMS statement says. The waivers would be applied when shared savings from the ACOs are distributed to the organization’s participants.

They are laws on physician self-referral that ban doctors from making referrals for Medicare services to entities with which they have financial relationships; anti-kickback laws; and laws that ban a hospital from making payments to induce physicians to reduce or limit services to their Medicaid beneficiaries.

“The anti-trust part shows a very coordinated effort between the FTC, DOJ, and HHS,” said Ian Spatz, a health policy expert with the Rock Creek Policy Group.

“No one wants to take on a lot of anti-trust to get involved in an ACO. This was a necessary thing,” he said. “It’s an upfront thing, so you’re not going to start doing the activities unless you know you have a clearance and it’s very important to have that certainty.”

Rebecca Adams contributed to this story
Jane Norman can be reached at
[email protected] .  

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