By Caden Throneberry:
I. Introduction
Accountable Care Organizations (“ACOs”) participating in the Medicare Shared Savings Program (“MSSP”) raise antitrust concerns by their very nature. When physicians, hospitals, and other healthcare providers combine to deliver cost-effective, high-quality care, the potential for horizontal integration between competitors and an increase in concentrations of provider market power could lead to an increase in the cost of service. In anticipation of these concerns, the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) released a Joint Statement laying the groundwork for antitrust law in the industry. [1] The Joint Statement, however, contains numerous shortcomings and appears to be little more than a paper tiger. The agencies have yet to successfully bring a federal antitrust suit against an ACO, and considering the inherent antitrust concern, it is likely there are ACOs in operation that violate federal antitrust law. Therefore, the DOJ and the FTC should consider amending the Joint Statement to better regulate the industry and further protect consumers from the anti-competitive behavior of ACOs.
In 2020, the Center for Medicare and Medicaid Services (“CMS”) reported that national healthcare expenditure in the United States grew 9.7 percent to $4.1 trillion.[2] The United States’ national healthcare expenditure in 2020 represented 19.7 percent of the Gross Domestic Product (GDP).[3] National health spending is projected to increase annually at a rate of 5.4 percent, leading to expenditure in 2028 of $6.2 trillion and showing no signs of slowing.[4]
In 2008, President Barack Obama warned that “[b]y a large margin, the biggest threat to our nation’s balance sheet is the skyrocketing cost of healthcare.”[5] In anticipation of this rapid growth, President Barack Obama signed into law the Patient Protection and Affordable Care Act in 2010 to help relieve the burden on patients.[6] Section 3022 of the Affordable Care Act gave rise to a new entity available to healthcare providers to allow them to utilize the newly created “Medicare Shared Savings Program.”[7] Thus, the “Accountable Care Organization” was born.[8]
Part II of this article discusses the inception of ACOs, including their history and inherent antitrust concerns. Part III analyzes the current state of antitrust law in the industry, from the Sherman Act to the Joint Statement. Finally, Part IV proposes several amendments to the Joint Statement as well as the strengths and weaknesses of each.
II. Background
ACOs are groups of doctors, hospitals, and other healthcare providers who voluntarily join together to provide high-quality, coordinated healthcare to Medicare patients.[9] The goal of this entity is to enhance communication between providers and ensure that patients get the right care at the right time.[10] The Affordable Care Act requires that an ACO must work through CMS to ensure the ACO meets certain quality performance standards established by the Secretary of Health and Human Services.[11] The Affordable Care Act further requires that an ACO desiring to enter the Shared Saving Program must enter into an agreement with CMS for no less than three years.[12] If the ACO meets the requirements set forth under the Affordable Care Act, the ACO may share in some portion of any savings it creates through delivering high-quality care at a low cost.[13]
Traditionally, the healthcare industry operated on a fee-for-service model where the providers billed the patient or the patient’s insurance company for each service performed.[14] Unfortunately, this system created incentives that went against the best interests of the patients. When insurance companies reimburse the cost of care to the patients, the healthcare providers are incentivized to perform as many services as possible.[15]
Managed care organizations were proposed as a solution to the misaligned interests of healthcare providers and patients.[16] Under a managed care organization, patients receive specific care covered by their insurance premium instead of being billed for each service.[17] However, this seemingly swung the incentives in the opposite direction. If healthcare providers are paid a flat fee for each Medicare patient, the incentive is then to provide as few services as possible while receiving the same amount from the insurance company.[18]
ACOs operate similarly to managed care organizations, but instead of relying upon the insurance companies to manage the costs of services, ACOs emphasize the provider and the coordination of care to keep costs down and hold the providers alone accountable.[19] Healthcare providers are incentivized under ACOs to increase quality and decrease costs through a financial reward system that would compensate providers for performing low-cost, quality care.[20] This financial rewards system is based on “[s]pending for the population of patients in a particular ACO . . . to targets based on experience for the same patients, or to spending for similar patients in the community who were not assigned to the ACO.”[21] If the ACO performed services under the benchmark costs, the ACO would receive part of the savings.[22]
The conception of an ACO predates its inception. The term Accountable Care Organization itself is attributed to Dr. Elliot Fisher and his colleagues who, in 2006, found that “virtually all physicians are either directly or indirectly affiliated with a local acute care hospital, whether through their inpatient work or through the care patterns of the patients they serve.”[23] Taking into consideration the concentration of Medicare patients at certain hospitals and physicians, Fisher proposed that those hospitals and physicians be utilized as a “loc[i] of accountability” in the care provided to Medicare patients.[24]
Following President Barack Obama’s landmark legislation entitled the Affordable Care Act in 2010, collaboration and formation of ACOs between independent service providers grew rapidly.[25] In the following ten years, a total of 1,278 organizations have held at least one ACO contract.[26] However, in 2019 and 2020, 340 (27 percent) of all ACO contract holders dropped out of the program.[27] This mass exit was fueled by a shift in the bearing of the financial risk for ACOs that was further exacerbated by the COVID-19 pandemic.[28] ACOs began to fear the financial pressures of a looming recession would impact their ability to remain profitable.[29]
In 2022, CMS announced a resurgence in the industry as 66 new ACOs joined the program and 140 previously existing ACOs renewed their contracts.[30] CMS predicts that, in 2022, 483 ACOs will participate in the Shared Savings Program.[31] These ACOs include nearly 529,000 physicians and other non-physicians, as well as over 1,300 hospitals.[32] Additionally, these ACOs consist of eleven million beneficiaries, a three percent increase from the previous year.[33] However, more than fifty percent of all ACOs in the country do not participate in the Shared Savings program, instead opting to contract with commercial healthcare systems.[34]
The cost savings of ACOs in the Shared Savings Program has grown exponentially since the inception of the program. In 2014, ACOs had a total earned shared savings of 341 billion dollars.[35] This number has risen to $2.3 billion in 2020, an increase of nearly 600%.[36] Because ACOs share in a percent of the savings created, this extreme growth has led to an increase in the profitability of the industry.[37] The savings an ACO creates directly decreases the end costs of the patients. This decreased cost for the patient is undoubtedly beneficial to the consumer.
Even as ACOs continue to lower the cost of care for patients in the United States, ACOs inherently bring anticompetitive risks to the healthcare industry. ACOs require networks of physicians and hospitals, who are often competitors, to coordinate at a high level.[38] In coordinating care, the providers in ACOs share their pricing information which inherently raises concerns regarding price fixing.[39] This coordination between providers also leads to the exclusion of other providers in the locale from participating in the ACO.[40] Additionally, as the market power of an ACO grows in an area, the concerns of a possible monopoly are increased.[41] In rural areas without many healthcare providers, the concerns of one ACO controlling the market are even further exacerbated.[42]
III. Current State of Antitrust Law Regarding ACOs
Where there is a collaboration between doctors, hospitals, and other healthcare providers, antitrust laws are brought to the forefront. Antitrust laws concerning Accountable Care Organizations are governed under Section 1 of the Sherman Act just as other industries in the United States.[43] However, due to the unique complexities of Accountable Care Organizations, the Department of Justice and the Federal Trade Commission together issued the Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (“Joint Statement”) to further provide industry participants antitrust guidance.[44]
A. Antitrust Law in the United States
Because of the heightened level of coordination between providers, ACOs are most likely to run afoul of Section 1 of the Sherman Act, which states that “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”[45] Price fixing arrangements and other restraints on trade are deemed per se illegal without any additional inquiry under the Sharman Act.[46] Alternatively, other anticompetitive actions are reviewed under the “rule of reason” which requires a deeper analysis in determining whether a practice is anti-competitive.[47]
An example of a per se illegal behavior in violation of Section 1 of the Sherman Act is a horizontal price-fixing agreement between competitors.[48] This is particularly of note for ACOs as they require agreements between competing healthcare providers and the sharing of pricing information to negotiate prices for patients in the MSSP.[49]
The distinction between behaviors that are per se illegal and those reviewed under the “rule of reason” approach marks a critical divide in the application of antitrust law. Anticompetitive practices that are deemed per se illegal are not allowed to offer procompetitive justifications or provide insight into the intentions of the actors.[50] On the other hand, the “rule of reason” approach allows the circumstances surrounding the alleged anticompetitive behavior to be considered in assessing whether the practice unreasonably restrains trade.[51] This divide between per se illegal behaviors and those reviewed under the “rule of reason” is critically important in the application of the law to ACOs because the Joint Statement applies the “rule of reason” to joint pricing negotiations provided that the ACOs are “financially or clinically integrated and the agreement is reasonably necessary to accomplish the precompetitive benefits of the integration.”[52]
Additionally, exclusive dealing agreements may raise antitrust concerns if entities with market power collude to exclude other competitors.[53] Preventing these exclusive agreements between dominant providers is a key component of antitrust law in the industry.[54] However, exclusive dealing agreements between providers without dominant market power can encourage collaboration, increase the quality of care, lower costs, and encourage investment in physicians and hospitals.[55]
B. The Joint Statement
In 2011, the Federal Trade Commission (“FTC”) and the Department of Justice (“DOJ”), foresaw the antitrust issues apparent in ACOs and issued the Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (“Joint Statement”).[56] The Agencies recognized that not all ACOs are likely to provide a benefit to consumers, and could likely reduce competition and harm patients through higher prices or a lower quality of care in certain circumstances.[57]
The Joint Statement intended to clarify the legal antitrust standards which govern ACOs in the United States.[58] The Joint Statement sets forth “(1) the ACOs to which the [Joint Statement] will apply; (2) when the agencies will apply the rule of reason treatment to those ACOs; (3) an antitrust safety zone; and (4) additional antitrust guidance for ACOs outside the safety zone, including a voluntary expedited review.”[59]
The Joint Statement applies to all ACOs that “are eligible and intend, or have been approved, to participate in the Shared Savings Program.”[60] The Joint Statement does not apply to mergers that are reviewed under the FTC and DOJ’s Horizontal Merger Guidelines nor ACOs with commercial health plans that do not participate in the Shared Savings Program.[61]
Most importantly, the Joint Statement provides that the FTC and DOJ will apply the “rule of reason” analysis to ACOs that meet certain conditions set forth by CMS.[62] CMS’s eligibility criteria include:
“(1) A formal legal structure that allows the ACO to receive and distribute payments for shared savings; (2) a leadership and management structure that includes clinical and administrative processes; (3) processes to promote evidence-based medicine and patient engagement; (4) reporting on quality and cost measures; and (5) coordinated care for beneficiaries.”[63]
The FTC and DOJ determined that ACOs complying with the eligibility requirements of CMS are likely to “improve the quality, and reduce the costs, of providing medical and other health care services through their participants’ joint efforts.”[64] The agencies concluded that CMS’s eligibility criteria are sufficient to ensure a certain level of clinical integration to produce pro-competitive effects and will help inform the FTC and DOJ’s analysis of the antitrust challenges to ACOs under the “rule of reason.”[65]
Through applying the “rule of reason” to an ACO’s potential anti-competitive effects through market power, the Joint Statement provides a “safety zone” for “all the common services” it provides that are less than thirty percent, except in “extraordinary circumstances” such as rural areas of practice.[66] If an ACO falls within this safety zone, the entity will not be challenged under antitrust laws by the FTC and DOJ absent “extraordinary circumstances.”[67] However, this does not imply that ACOs not within the thirty percent safety zone raise concerns of anticompetitive behavior.[68]
The Joint Statement differentiates between ACOs that fall within a “safety zone” of less than thirty percent market share, exempting them from antitrust review, and those outside the “safety zone” which are analyzed under the “rule of reason.”[69] The market share is determined by the “common markets” independent service providers within the ACO operate and the “primary service areas” they cover.”[70] The ACOs also are provided the opportunity to undergo a voluntary expedited review in which the FTC and DOJ analyze the organizations for antitrust violations.[71]
In the following sections, this article dives deeper into the minutia contained in the Joint Statement.
1. PSA Shares
The determination of an Accountable Care Organization’s market power is found through a complex and nuanced, yet mechanical, approach utilizing Primary Service Area (“PSA”) shares.[72] The calculation of an ACOs market power is critical in analyzing the antitrust implications because the Joint Statement provides a “safety zone” in which ACOs are highly unlikely to raise significant competitive concerns.[73]
If an ACO complies with the CMS eligibility requirements and falls within the thirty percent market power “safety zone,” the FTC and DOJ will not challenge them to absent “extraordinary circumstances.”[74] Extraordinary circumstances may include, for example, “ACO participants engaging in collusion or improper exchanges of price information or other competitively sensitive information concerning their sale of competing services outside the ACO.”[75]
To calculate the market share, an ACO evaluates its share of services in each of its independent provider’s Primary Service Areas (“PSA”). The Joint Statement itself admits that PSA “does not necessarily constitute a relevant antitrust geographic market, but it nonetheless serves as a useful screen for evaluating potential competitive effects.”[76]
To fall within the “safety zone,” independent providers within an ACO that provide a “common service” must have a combined share of less than thirty percent in each of the independent participants’ PSAs, “wherever two or more ACO participants provide that service to patients from that PSA.”[77] Three separate categories constitute a service under the Joint Statement: a primary specialty for physicians, an MDC for inpatient facilities, or an outpatient facility.[78] For example, if two or more ophthalmologists in separate independent groups are within an ACO, optometry is considered a “common service.”[79]
Next, the PSA of each provider participating in the ACO is calculated.[80] The PSA is “the lowest number of postal zip codes from which the [ACO] draws at least 75 percent of its [patients].” [81] This calculation is further complicated as participants in the ACO can either practice exclusively within the ACO or non-exclusively.[82] Once again, the Joint Statement acknowledges that PSA “does not necessarily constitute a relevant antitrust geographic market, it nonetheless serves as a useful screen for evaluating potential competitive effects.”[83]
After the above calculations are made, if the ACOs market share is less than thirty percent, the ACO is protected from antitrust challenges absent “extraordinary circumstances.”[84] The Joint Statement sets forth only two examples of “extraordinary circumstances.”[85] The first is the rural exception when an ACO exceeds the thirty percent threshold yet includes one physician or physician group per specialty located in a rural area.[86] The second is the dominant participant exception, where an ACO “includes a participant with a greater than fifty percent share of its PSA of any service that no other ACO participant provides to patients in that PSA.”[87] If an ACO’s market share exceeds thirty percent and satisfies one of these two exceptions, it is considered within the “safety zone.”[88]
Regardless of whether an ACO’s PSA shares fall within the prescribed “safety zone,” the Joint Statement describes specific conduct to avoid:
“Regardless of an ACO’s PSA shares or other indicia of market power, significant competitive concerns can arise when an ACO’s operations lead to price-fixing or other collusion among ACO participants in their sales of competing services outside the ACO. For example, improper exchanges of prices or other competitively sensitive information among competing participants could facilitate collusion and reduce competition in the provision of services outside the ACO, leading to increased prices or reduced quality or availability of healthcare services. ACOs should refrain from, and implement appropriate firewalls or other safeguards against, conduct that may facilitate collusion among ACO participants in the sale of competing services outside the ACO.”[89]
While an ACO with high PSA shares does not immediately show a violation of antitrust law, the Joint Statement sets forth four types of conduct that may raise anti-competitive concerns due to the fact a dominant ACO “may prevent private payers from obtaining lower prices and better quality service for their enrollees.”[90] The conduct to avoid includes:
“(1) Preventing or discouraging private payers from directing or incentivizing patients to choose certain providers, including providers that do not participate in the ACO, through ‘anti-steering,’ ‘antitiering,’ ‘guaranteed inclusion,’ ‘most-favored-nation,’ or similar contractual clauses or provisions.
(2) Tying sales (either explicitly or implicitly through pricing policies) of the ACO’s services to the private payer’s purchase of other services from providers outside the ACO (and vice versa), including providers affiliated with an ACO participant (for example, an ACO should not require a purchaser to contract with all of the hospitals under common ownership with a hospital that participates in the ACO).
(3) Contracting on an exclusive basis with ACO physicians, hospitals, ASCs, or other providers, thereby preventing or discouraging those providers from contracting with private payers outside the ACO, either individually or through other ACOs or analogous collaborations.
(4) Restricting a private payer’s ability to make available to its health plan enrollees cost, quality, efficiency, and performance information to aid enrollees in evaluating and selecting providers in the health plan, if that information is similar to the cost, quality, efficiency, and performance measures used in the Shared Savings Program.”[91]
In sum, an ACO’s market share is calculated through the utilization of Primary Service Area (“PSA”) shares.[92] If an ACO falls within the thirty percent market share “safety zone,” the FTC and DOJ will not challenge them to absent “extraordinary circumstances” such as collusion or the improper exchange of information.[93] If an ACO is outside the prescribed “safety zone,” it is not immediately found in violation of antitrust law unless evidence is found of anti-competitive behavior.[94]
2. Voluntary Expedited Review
Newly formed ACOs and ACOs that do not fall within the “safety zone,” are provided the opportunity to seek antitrust guidance from the FTC and DOJ in the form of an expedited voluntary review to be completed within ninety days.[95] During these ninety days, the FTC and DOJ together will consider the ACO’s antitrust compliance under the “rule of reason” analysis.[96] However, the two agencies do not perform their own fact-finding, instead relying upon the ACO to submit its own information.[97] The information the ACO must provide includes:
“1. The application and all supporting documents that the ACO plans to submit, or has submitted, to CMS, including a sample of each type of participation agreement and each type of document that reflects a financial arrangement between or among the ACO and its participants, as well as the ACO’s bylaws and operating policies.
2. Documents discussing
(a) the ACO’s business strategies or plans to compete in the Medicare and commercial markets, including those relating to the ACO’s likely impact on the prices, cost, or quality of any service provided by the ACO to Medicare beneficiaries, commercial health plans, or other payers; and
(b) the level and nature of competition among participants in the ACO, and the competitive significance of the ACO and ACO participants in the markets in which they provide services.
3. Information sufficient to show the following:
(a) The common services that two or more ACO participants provide to patients from the same PSA, as described in the Appendix, and the identity of the ACO participants or providers providing those services.
(b) The PSA of each ACO participant and either PSA share calculations the ACO may have performed or other data that show the current competitive significance of the ACO or ACO participants, including any data that describe the geographic service area of each participant and the size of each participant relative to other providers serving patients from that area.
(c) Restrictions that prevent ACO participants from obtaining information regarding prices that other ACO participants charge private payers that do not contract through the ACO.
(d) The identity, including points of contact, of the five largest commercial health plans or other private payers, actual or projected, for the ACO’s services.
(e) The identity of any other existing or proposed ACO known to operate, or known to plan to operate, in any market in which the ACO will provide services.”[98]
Within ninety days, the FTC and DOJ must review the entirety of this information and determine whether the ACO’s conduct is anticompetitive under the “rule of reason.”[99] Additionally, the DOJ and FTC reserve the right to request additional information and extend the ninety days of voluntary expedited review.[100]
3. Commercial ACOs
The FTC and DOJ acknowledge that ACOs participating in the Shared Savings Program are also likely to enter the commercial market as well.[101] When an ACO meets the eligibility requirements of CMS, the FTC and DOJ will treat negotiations with private payers as reasonably necessary to an ACO’s purpose to increase the quality of healthcare and will analyze the ACO under the “rule of reason” so long as the ACO “uses the same governance and leadership structures and clinical administrative processes it uses in the Shared Savings Program to serve patients in commercial markets.”[102]
The voluntary review process includes the requirement for CMS to make publicly available the current list of applicable specialties the ACO operates within.[103] The data CMS holds pertains only to the ACO’s participation in the Shared Savings Program.[104] Therefore, the PSA calculations done during the voluntary review process omit the commercial arm of an ACO except where the ACO voluntarily provides that information. The FTC and DOJ require only that an ACO must provide “[t]he identity, including points of contact, of the five largest commercial health plans or other private payers, actual or projected, for the ACO’s services.”[105] If an ACO contains more than five commercial health plans or other private payers, the ACO is not required to disclose that information to the FTC and DOJ.[106]
IV. Proposed Amendments to the Joint Statement
By their very nature, ACOs lead to collaboration and communication across independent healthcare providers on patient care and the prices charged for that care. The Joint Statement attempts to anticipate the antitrust issues ACOs inherently raise, yet falls short in some respects, leaving open opportunities for ACOs to exploit the guidelines and negotiate amongst themselves higher prices that harm consumers.
First, the Agencies should reconsider their calculation of the market power an ACO controls. Measuring market power solely by considering the Primary Service Area of ACOs may lead to oversight where an ACO practices in multiple service areas. Additionally, the agencies should remove the “safety zone” of thirty percent market share.[107] Due to the voluntary review process, ACOs themselves provide the information to the FTC and DOJ, leaving open the possibility of “window-dressing” the numbers to fall within the “safety zone.”[108]
Second, the Joint Statement should reconsider the voluntary review process and replace it with a mandatory review. Currently, the review period is expedited, with little time for fact-finding by the agencies.[109] In addition, the protection afforded an ACO after completing the voluntary review process allows the ACO to expand without challenge from the FTC and DOJ absent “extraordinary circumstances.”[110]
Next, the Agencies should consider mandating the disclosure of the commercial contacts held by ACOs participating in the Shared Savings Program. Without the commercial data included in the PSA share calculation, it is possible for an entity operating in both the private and public sectors to avoid antitrust challenges.
Finally, the DOJ and FTC should reconsider their regulatory authority of ACOs. Placing two separate agencies in charge of a ninety-day review process leads to crucial time wasted as the Agencies must coordinate and communicate information. The FTC is better equipped to regulate Accountable Care Organizations, and a single regulatory agency would increase the efficiency of the process.
A. PSA Shares/Safety Zone
The most glaring oversight in the Joint Statement is the FTC and DOJ’s reliance upon Primary Service Areas (“PSAs”) to determine the geographic markets necessary for the market share calculation. The FTC and DOJ themselves recognize that the PSA calculation is a poor barometer in which to determine the geographic area of an ACO.[111] As one commentator on the Joint Statement warned, the use of PSA shares could “inevitably result in unintended consequences not stemming from competitive influences,” and PSA shares are liable to fluctuate widely due to changes in patient demographics.[112] Additionally, an ACO’s conduct potentially raising anticompetitive concerns requires “notoriously high evidentiary burdens” and these issues by nature cannot be reduced to a single calculation.[113]
To begin, the FTC and DOJ themselves should calculate the market share of ACOs. Currently, given that ACOs themselves calculate their own market share, it opens the door for inconsistencies as each ACO may perform the calculation slightly differently than others. The FTC and the DOJ combined have the resources to implement an efficient system in which to uniformly calculate market share across all ACOs. During a workshop to seek input on the Proposed Statement of Antitrust Enforcement Policy, one commentator stated that the lowest estimate to calculate a PSA share for an ACO was $15,000.[114] Under the current system, the ACO bears the responsibility of footing the bill.[115] This may be affordable for larger ACOs, but smaller, rural organizations may not have the financial capacity to calculate its own PSA shares and will instead opt to avoid review.
Another issue with the Joint Statement is the thirty percent market share “safety zone.”[116] The DOJ and FTC began with a fifty percent threshold in the Proposed Statement of Antitrust Enforcement Policy Regarding ACOs Participating in the Medicare Shared Savings Program and after public comment, lowered the threshold to thirty percent.[117] If an ACO falls within the thirty percent market share “safety zone,” the FTC and DOJ will not challenge them absent “extraordinary circumstances” such as collusion or the improper exchange of information.[118] If an ACO is outside the prescribed “safety zone,” it is not immediately found in violation of antitrust law unless evidence is found of anti-competitive behavior.[119]
The Joint Statement should remove the “safety zone” entirely and judge all ACOs participating in the Shared Savings Program under the “rule of reason” analysis. The Agencies themselves recognize that the PSA calculation is a poor barometer in which to determine the geographic area of an ACO.[120] Additionally, the Joint Statement lacks a safeguard that mandates ACOs report changes in their PSA shares.[121]
The primary benefit of this approach is that through analyzing all the anti-competitive risks of an ACO under the “rule of reason,” the likelihood of an ACO either manipulating their PSA shares or falling through the cracks is lessened. Under the current Joint Statement, an ACO within the “safety zone” is not automatically exempt from antitrust challenge as the Agencies consider “extraordinary circumstances,” and ACOs outside the “safety zone” are not a per se violation and are subject to the “rule of reason”.[122]
ACOs outside the “safety zone” are already subject to a “rule of reason” analysis.[123] Due to the high likelihood of fluctuation in PSA shares along with the ability for ACO to gain the Agencies stamp of approval with PSA shares below 30% and later increase their market power, analyzing all ACOs under the “rule of reason” would prevent ACOs from falling through the cracks as well as treat every ACO under the same standard.
However, this approach does not come without its flaws. The Agencies’ ability to rubber stamp ACOs as falling within the “safety zone” and having a low likelihood of anticompetitive behavior saves the Agencies both time and resources. Removing the “safety zone” would subject hundreds of ACOs to further investigation under the “rule of reason.” This would lead to an increase in the cost of regulating the industry, a cost that may outweigh the benefits. Under the current Joint Statement, the Agencies have yet to successfully bring a federal antitrust claim, and it is unclear whether increasing the number of ACOs subject to scrutiny would reveal enough anticompetitive behavior to outweigh the cost shouldered by the taxpayer.
B. Voluntary Expedited Review
The Joint Statement should replace voluntary expedited review with the mandatory review process. As of 2013, two years after issuing the Joint Statement, the FTC and DOJ received only two requests for voluntary review, both in March of 2012.[124] There is little to no upside for ACOs to submit themselves to the voluntary review process. As one legal scholar noted, “it is highly unlikely that an ACO engaging in anticompetitive conduct is going voluntarily seek expedited review.”[125] Currently, the voluntary expedited review has failed to serve its intended purpose.
Furthermore, the ACO must bear the costs themselves and runs the risk of the FTC and DOJ denying their admittance to the Shared Savings Program. It is likely so few ACOs applied for voluntary review as they view the process as overly burdensome and with little upside. The Agencies failed to correctly incentivize ACOs to submit themselves to review. Additionally, under the Joint Statement, if an ACO satisfies the FTC and DOJ’s review, there is no process to further evaluate the organization if it continues to expand in the following years.[126]
Mandatory review offers a method for the Agencies to subject ACOs falling through the cracks to close antitrust scrutiny. A mandatory process would discourage and likely prevent the formation of ACOs primed to gain a substantial share of the market.[127] The Proposed Joint Statement contained mandatory review and stated:
“First, it would ensure that ACOs participating in the Shared Savings Program would not present competitive problems that could subject them to antitrust challenges that may prevent them from completing the term of their agreement with us. Second, it would maintain competition for the benefit of Medicare beneficiaries by reducing the potential for the creation of ACOs with market power. In this context market power refers to the ability of an ACO to reduce the quality of care furnished to Medicare beneficiaries and/or to raise prices or reduce the quality for commercial health plans and enrollees, thereby potentially increasing providers’ incentives to provide care for private enrollees of higher-paying health plans rather than for Medicare beneficiaries . . . . Furthermore, competition benefits the Shared Savings Program by allowing the opportunity for the formation of two or more ACOs in an area. Competition among ACOs can accelerate advancements in quality and efficiency. All of these benefits to Medicare patients would be reduced or eliminated if we were to allow ACOs to participate in the Shared Savings Program when their formation and participation would create market power.”[128]
However, the mandatory review would be costly for the Agencies while also potentially preventing entry into the industry for ACOs that cannot bear the costs. Furthermore, many argue that it would be “bad public policy to change the nature of antitrust enforcement from law enforcement to a regulatory regime.”[129]
Due to the high likelihood for an ACO to slip through the cracks as well as the current lack of ACOs submitting themselves to voluntary expedited, the Agencies should consider shifting the review process for newly formed ACOs from voluntary to mandatory.
C. Commercial ACOs
Currently, the voluntary review process includes the requirement for CMS to make publicly available the current list of applicable specialties the ACO operates within, however, the data CMS holds pertains only to the ACOs participation in the Shared Savings Program and does not include commercial contracts.[130] Therefore, when the Agencies calculate the market power of an ACO, the commercial power of an ACO is excluded.
An ACO submitting itself to the review process under the Joint Statement is solely analyzed for anti-competitive behavior concerning its actions undertaken in the Shared Savings Program.[131] An ACO may seem to fall within the “safety zone,” yet in combination with its market share in the commercial space, it could possess a dominant market share in the area.
To remove the possibility of ACOs operating both in the Shared Savings Program and the commercial sector from dominating a local market, ACO’s PSA shares in the private sector should also be included in the determination of anti-competitive behavior. Under the current system, an ACO can appear absent of anticompetitive effects yet dominate a market when commercial contracts are considered.
D. Regulatory Agencies
Under the current Joint Statement, both the Department of Justice and the Federal Trade Commission share equal regulatory authority over Accountable Care Organizations. Instead of sharing this role, the Joint Statement should delegate authority to review ACOs to the FTC and remove the authority of the DOJ.
Commissioner J. Thomas Rosch, as the lone dissenter in the approval of the proposed Joint Statement, believed: “1) the Antitrust Division [of the DOJ] has far less expertise or experience than the Commission in reviewing the formation of ACOs or applying antitrust laws to them, and 2) the Antitrust Division is more susceptible . . . to lobbying and other political pressure.”[132]
Additionally, the American government is not well known for its ability to communicate across departments. Delegating the task of analyzing the potential antitrust concerns of ACOs to only one arm of the government removes any possibility of miscommunication and differences of opinion.
However, if the Department of Justice relinquishes its regulatory authority over ACOs, the industry would lose the wealth of expertise and experience the DOJ provides. It is uncertain how this loss would affect the regulation of Accountable Care Organizations, but the woefully short ninety-day review period does not afford regulators the time to communicate and coordinate across two governmental agencies.
IV. Conclusion
In conclusion, the Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program issued jointly by the Department of Justice and the Federal Trade Commission does not adequately provide the foundation for the application of antitrust laws to Accountable Care Organizations. The Agencies themselves admit the flaws of the methodology in calculating market power that provides a “safety zone” for ACOs.[133] The Agencies should instead consider removing the “safety zone” entirely as a barometer for the likelihood of anticompetitive conduct and instead utilize the “rule of reason” analysis for all newly formed ACOs.
Additionally, the voluntary review process has yet to fulfill its intended purpose as so few ACOs have submitted themselves to the process. In its place, the Agencies should move to a mandatory review process that submits all ACOs to the same level of scrutiny.
Furthermore, the lack of the inclusion of commercial contracts leaves open the possibility for an ACO to behave anticompetitively while appearing within the “safety zone” under the current PSA share calculations. On top of that, the Department of Justice should relinquish its regulatory authority and allow the Federal Trade Commission to work independently, removing the chance of miscommunication or inefficiencies.
[1] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,026 (Oct. 20, 2011).
[2] NHE Fact Sheet, Centers for Medicare & Medicaid Services (2021), https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet.
[3] Id.
[4] Id
[5] Atul Gawande, The Cost Conundrum: What a Texas Town Can Teach Us About Health Care, New Yorker (Jun. 1, 2009, at 36.
[6] Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119,
395 (2010).
[7] Id. at § 3022.
[8] Id.
[9] Accountable Care Organizations (ACOs), Centers for Medicare & Medicaid Services (2021), https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ACO.
[10] Id.
[11] Patient Protection and Affordable Care Act 3022, 124 Stat. at 395–99
[12] Id.
[13] Id.
[14] Taylor Burke & Sara Rosenbaum, Accountable Care Organizations: Implications for Antitrust Policy, 19 Health L. Rep. (BNA) 358, at 1 (2010).
[15] James E. Dalen, Health Care in America: The Good, the Bad, and the Ugly, 160 Archives Internal Med. 2573, 2573 (2000).
[16] Id.
[17] Id.
[18] Jacob S. Hacker & Theodore R. Marmor, How Not to Think About “Managed Care,” 32 U. Mich. J.L. Reform 661, 667–68 (1999).
[19] Kelly Devers & Robert Berenson, Robert Wood Johnson Foundation, Can Accountable Care Organizations Improve the Value of Health Care by Solving the Cost and Quality of Care?: Timely Analysis of Immediate Health Policy Issues, Oct. 2009, at 3.
[20] Burke & Rosenbaun, supra¸note 14 at 4–5.
[21] Robert Wood Johnson Foundation, Health Policy Brief: Accountable Care Organizations, Health Aff., 1, 3 (2010).
[22] Id.
[23] Elliott S. Fisher et al., Creating Accountable Care Organizations: The Extended Hospital Medical Staff, 26 Health Aff. w44, w45 (2007).
[24] Id. at w46.
[25] David Muhlestein, et al., All-Payer Spread Of ACOs And Value-Based Payment Models In 2021: The Crossroads And Future Of Value-Based Care, HealthAffairs (2021), https://www.healthaffairs.org/do/10.1377/forefront.20210609.824799/full/.
[26] Id.
[27] Id.
[28] Id.
[29] Id.
[30] Medicare Shared Savings Program Continues to Grow and Deliver High-Quality, Person-Centered Care Through Accountable Care Organizations, Centers for Medicare & Medicaid Services (2022), https://www.cms.gov/newsroom/press-releases/medicare-shared-savings-program-continues-grow-and-deliver-high-quality-person-centered-care-through.
[31] Jacqueline LaPointe, More Beneficiaries, But Fewer ACOs for Medicare Shared Savings Program, Revcycle Intelligence (2022), https://revcycleintelligence.com/news/more-beneficiaries-but-fewer-acos-for-medicare-shared-savings-program.
[32] Id.
[33] Id.
[34] Nikhil R. Sanhi, et al., The Math of ACOs, McKinsey & Company (2020), https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/the-math-of-acos
[35] Id.
[36] Id.
[37] Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119,
395 (2010) at § 3022.
[38] Peyton M. Sturges, Attorneys Say Clinical Integration Model Safest Way to Move Toward ACO Formation, 19 Health L. Rep. (BNA), 1, 1–2 (2010).
[39] C. Frederick Geilfuss & Renate M. Gray, Accountable Care Organizations: Promise of Better Outcomes at Restrained Costs; Can They Meet Their Challenges, 16 Health Ins. Rep. (BNA) 23, at 23 (2010).
[40] Id.
[41] Id.
[42] Id.
[43] 15 U.S.C. § 1 (2006).
[44] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,026 (Oct. 20, 2011).
[45] 15 U.S.C. § 1 (2006).
[46] See, United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223 (1940).
[47] 15 U.S.C. § 1 (2006).
[48] Id.
[49] Medicare Program, 76 Fed. Reg. 67,802, 67,802 (Nov. 2, 2011).
[50] See, Citizen Publishing Co. v. United States, 394 U.S. 131, 135 (1969); United States v. Paramount Pictures, Inc., 334 U.S. 131, 143 (1948); United States v. Masonite Corp., 316 U.S, 265, 276 (1942); United States v, Socony-Vacuum Oil Co., 310 U.S. 150, 223 (1940).
[51] See Broadcast Music, Inc. v. Columbia Broadcasting System where a blanket license for an entire market of goods is not a per se violation of antitrust laws where the defendant can prove the blanket license produces procompetitive effects.
[52] Statement of Antitrust Enforcement Policy, 76 Fed. Reg. 67,026, 67,027 (Oct. 20, 2011).
[53] See, e.g., U.S. v. Microsoft Corp., (D.C. Cir. 2001) (affirming holding that Microsoft’s exclusive agreements with Internet access providers, software vendors, and original equipment manufacturer essentially requiring the use of Microsoft’s “Internet Explorer” browser violated the Sherman Act).
[54] Letter from Harold D. Miller, Exec. Dir., Center for Healthcare Quality and Payment Reform, to Donald S. Clark, Sec’y, Federal Trade Comm’n (May 31, 2011).
[55] Id.
[56] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,026 (Oct. 20, 2011).
[57] Id.
[58] Id.
[59] Id.
[60] Id. at 67,028.
[61] Collaboration Guidelines, supra note 9, 1.3.
[62] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,026 (Oct. 20, 2011).
[63] Patient Protection and Affordable Care Act, Public Law 111–48, 3022, 124 Stat. 119, 395–99 (2010).
[64] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,026 (Oct. 20, 2011).
[65] Id.
[66] Id.
[67] Id.
[68] Id.
[69] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,026 (Oct. 20, 2011).
[70] Id.
[71] Id.
[72] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg., 67,026 (Oct. 20, 2011).
[73] Id. at 67,028.
[74] Id.
[75] Id. at 67,028 n.24.
[76] Id.
[77] Id.
[78] Id.
[79] Id.
[80] Id.
[81] Medicare Program: Physicians’ Referrals to Health Care Entities With Which They Have Financial Relationships (Phase II), 69 FR 16,094 (Mar. 26, 2004).
[82] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,026 (Oct. 20, 2011).
[83] Id.
[84] Id.
[85] Id.
[86] Id.
[87] Id.
[88] Id.
[89] Id. at 67, 028.
[90] Id.
[91] Id. at 67,030.
[92] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,028 (Oct. 20, 2011).
[93] Id.
[94] Id.
[95] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,030 (Oct. 20, 2011).
[96] Id.
[97] Id.
[98] Id.
[99] Id.
[100] Id.
[101] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,028 (Oct. 20, 2011).
[102] Id.
[103] Id. at 67,031 n. 51.
[104] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,028 (Oct. 20, 2011).
[105] Id. at 67,031.
[106] Id.
[107] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,026 (Oct. 20, 2011).
[108] Id.
[109] Id.
[110] Id.
[111] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,026 (Oct. 20, 2011).
[112] Patricia M. Bruns, An Antitrust Analysis of Accountable Care Organizations: Potential Abuses from Allowing Reduced Scrutiny Under the Affordable Care Act, 28 J. Contemp. Health L. & Pol’y 268, 284–87 (2012).
[113] Id.
[114] Another Dose of Competition: Accountable Care Organizations and Antitrust, Federal Trade Commission (2011), https://www.ftc.gov/news-events/events/2011/05/another-dose-competition-accountable-care-organizations-antitrust.
[115] Id.
[116] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,026 (Oct. 20, 2011).
[117] Remarks of J. Thomas Rosch; Commissioner, Federal Trade Commission before the ABA Section of Antitrust Law Fall Forum Washington, DC November 17, 2011. p.13
[118] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,026, 67,028 (Oct. 20, 2011).
[119] Id.
[120] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,026 (Oct. 20, 2011).
[121] Id.
[122] Id.
[123] Id.
[124] Summary of Activities Following Issuance of the Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, Federal Trade Commission/Department of Justice ACO Working Group (2011).
[125] Patricia M. Bruns, An Antitrust Analysis of Accountable Care Organizations: Potential Abuses from Allowing Reduced Scrutiny Under the Affordable Care Act, 28 J. Contemp. Health L. & Pol’y 268, 286 (2012).
[126] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg., 67,026, 67,028 (Oct. 20, 2011).
[127] Thomas L. Greaney, Regulators as Market-Makers: Accountable Care Organizations and Competition Policy, 46 Ariz. St. L.J. 1, 35 (2014)
[128] Medicare Shared Savings Program, 76 Fed. Reg. at 67,841–42.
[129] Id.
[130] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 67,028 (Oct. 20, 2011).
[131] Id.
[132] Press Release, Fed. Trade Comm’n, FTC, DOJ Seek Public Comment on Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations (Mar. 31, 2011),
[133] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg., 67,026, 67,028 (Oct. 20, 2011).
TRANSACTIONS 
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