Accountable Care Organizations: A Balancing Act

In 2010, the Patient Protection and Affordable Care Act (ACA) was signed into law by President Barack Obama. The ACA has three fundamental goals: (1) Increase access to health care; (2) Reduce the cost of health care; and (3) Improve the quality of health care. To reduce costs and improve quality, section 3022 of the ACA promotes the formation and operation of Accountable Care Organizations (ACOs) to treat Medicare beneficiaries in the new Medicare Shared Savings Program (SSP). ACOs are made up of competing health care providers collaborating to deliver efficient, coordinated care that meets quality performance and cost-saving standards that are determined by the Centers for Medicare and Medicaid Services (CMS). ACOs may take many forms, “including networks of individual practices, partnerships, hospitals, [joint ventures] and other health care professionals.” The ACA hopes to encourage new innovative delivery models and does not place heavy restrictions on the form or type of entity sufficient to gain the status of ACO.“It is expected that most health care providers that form ACOs for Medicare beneficiaries will also seek to use the ACO structure for their commercially-insured patients.” In order to produce cost-saving efficiencies, ACOs will look to negotiate contracts between their participating providers, including price terms. ACOs negotiating with private payers raises antitrust concerns over possible price fixing and exercise of market power to restrain trade. ACO practices that restrain trade would undermine the ACA’s attempt to reduce costs and improve quality by further impairing the health care market and harming consumers/patients.In 2011, CMS published the final rule implementing section 3022 of the ACA which creates the Medicare Shared Savings Program and encourages the creation of ACOs. The Department of Justice and the Federal Trade Commission are the two government agencies charged with enforcing antitrust law. The Federal Trade Commission and the Department of Justice have recently published guidance laying out antitrust enforcement as it relates to Accountable Care Organizations.There are three significant developments that flow from the guidance: 1) ACOs engaged in joint price negotiations with commercial health plans will be treated under the “rule of reason” if the ACO meets CMS’ eligibility standards for SSP participation; 2) ACOs that control up to 30% of market shares in any of its “common services” will be protected by a “safety zone” which shields the ACO from antitrust challenge absent extraordinary circumstances and 3) the Federal Trade Commission and the Department of Justice scrapped a mandatory review of ACOs that might wield market power and replaced it with a voluntary review process that can help ACOs that fall outside the safety zone to better assess its chances of raising antitrust concerns.As mentioned, collaboration between competing providers in ACOs raises antitrust concerns that providers may engage in horizontal price-fixing or exercise market power by setting supracompetitive prices for their services in the commercial market. Horizontal price-fixing violates section 1 of the Sherman Act. Horizontal price-fixing occurs when competitors agree on prices, allowing the competitors to raise prices to supracompetitive levels and possibly shield themselves from competition. ACOs bring competing providers together to share information and coordinate care in order to lower costs and improve the quality of care. An unintended outcome could be horizontal price-fixing by participant providers who use the ACO structure to negotiate with health insurance plans in the commercial market. The result of ACO participant providers engaging in anticompetitive behavior would be higher prices for consumers and lower quality of care. Thus, horizontal price-fixing threatens not only to undermine the goals of the Shared Savings Program, but to possibly exacerbate the very problems that the ACA attempts to solve.This research article explores the guidance, in light of past policy, with a focus on whether the Federal Trade Commission and the Department of Justice’s approach properly balances the need to incentivize provider participation in the SSP and the need to prevent restraint of trade in the health care markets. First, we will look at the dynamics of the health care market and the body of law that make up American antitrust law. Second, we will look at how the antitrust statutory law has been applied to the health care market in the past. Finally, we will address the marked changes in antitrust policy as it relates to ACOs under the ACA and whether or not these perceived changes are for the better or the worse.