Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program

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FEDERAL TRADE COMMISSION / DEPARTMENT OF JUSTICE

Federal Trade Commission (“FTC”)

Antitrust Division of the Department of Justice (“DOJ”)

Statement of Antitrust Enforcement Policy Regarding Accountable Care

Organizations Participating in the Medicare Shared Savings Program

AGENCIES: FTC, DOJ

ACTION: Final Policy Statement

SUMMARY: The FTC and DOJ (the “Agencies”) are issuing the final Statement of

Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating

in the Medicare Shared Savings Program (the “Policy Statement”) in conjunction with

the final rule issued today by the Centers for Medicare and Medicaid Services (“CMS”)

under Section 3022 of the Affordable Care Act (the Patient Protection and Affordable

Care Act, Pub. L. 111-48, 124 Stat. 119 (2010), and the Health Care and Education

Reconciliation Act of 2010, Pub. L. 111-52, 124 Stat. 1029 (2010)).

The final Policy Statement differs from the proposed Policy Statement issued earlier this

year, 76 Fed. Reg. 21,894 (Apr. 19, 2011), in two significant respects. First, the entire

final Policy Statement—with the exception of the voluntary expedited antitrust review—

applies to all collaborations among otherwise independent providers and provider groups

that are eligible and intend, or have been approved, to participate in the Medicare Shared

Savings Program (the “Shared Savings Program”); its applicability is no longer limited to

those collaborations formed after March 23, 2010, the date on which the Patient

Protection and Affordable Care Act was enacted. Second, because the Shared Savings

Program final rule will no longer require a mandatory antitrust review for certain

collaborations as a condition of entry into the Shared Savings Program, the final Policy

Statement no longer contains provisions relating to mandatory antitrust review.

However, as discussed in the final rule, the Agencies will continue to protect competition

in markets served by accountable care organizations (“ACOs”) that participate in the

Shared Savings Program, aided by data and information from CMS that will assist the

Agencies in monitoring the competitive effects of ACOs. Specifically, CMS will provide

the Agencies with aggregate claims data regarding allowed charges and fee-for-service

payments for all ACOs accepted into the Shared Savings Program and also with copies of

all of the applications to the Shared Savings Program of ACOs formed after March 23,

2010. The Agencies will vigilantly monitor complaints about an ACO’s formation or

conduct and take whatever enforcement action may be appropriate. Additionally, upon

request, the Agencies will provide an expedited 90 day review for newly formed ACOs

that wish to obtain additional antitrust guidance.

SUPPLEMENTARY INFORMATION

Statement of Antitrust Enforcement Policy

Regarding Accountable Care Organizations

Participating in the Medicare Shared Savings Program

I. Introduction

The Patient Protection and Affordable Care Act and the Health Care and

Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”) seek to

improve the quality and reduce the costs of health care services in the United States by,

among other things, encouraging physicians, hospitals, and other health care providers to

become accountable for a patient population through integrated health care delivery

systems.

One delivery system reform is the Affordable Care Act’s Medicare Shared

Savings Program (the “Shared Savings Program”), which promotes the formation and

operation of Accountable Care Organizations (“ACOs”

) to serve Medicare fee-for-

service beneficiaries.

Under this provision, “groups of providers of services and

suppliers meeting criteria specified by the [Department of Health and Human Services]

Secretary may work together to manage and coordinate care for Medicare fee-for-service

beneficiaries through an [ACO].”

An ACO may share in some portion of any savings it

creates if the ACO meets certain quality performance standards established by the

Secretary of Health and Human Services through the Centers for Medicare and Medicaid

Services (“CMS”). The Affordable Care Act requires an ACO that wishes to participate

in the Shared Savings Program to enter into an agreement with CMS for not less than

three years.

Recent commentary suggests that some health care providers are likely to create

and participate in ACOs that serve both Medicare beneficiaries and commercially insured

patients.

The Federal Trade Commission and the Antitrust Division of the Department

of Justice (the “Agencies”) recognize that ACOs may generate opportunities for health

care providers to innovate in both the Medicare and commercial markets and achieve for

many other consumers the benefits Congress intended for Medicare beneficiaries through

the Shared Savings Program. Therefore, to maximize and foster opportunities for ACO

innovation and better health for patients, the Agencies wish to clarify their antitrust

enforcement policy regarding collaborations among independent providers that seek to

become ACOs in the Shared Savings Program. The Agencies recognize that not all such

Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-52, 124 Stat. 1029 (2010);

Patient Protection and Affordable Care Act, Pub. L. No. 111-48, 124 Stat. 119 (2010).

As used in this document, “ACO” refers to Accountable Care Organizations under the Medicare Shared

Savings Program, which also may operate in commercial markets. Patient Protection and Affordable Care

Act § 3022, 124 Stat. at 395-99.

Id.

Id. at 395.

Id. at 396.

Fed. Trade Comm’n & Dep’t of Health and Human Serv., Workshop Regarding Accountable Care

Organizations, and Implications Regarding Antitrust, Physician Self-Referral, Anti-Kickback, and Civil

Monetary Penalty (CMP) Laws (Oct. 5, 2010).

ACOs are likely to benefit consumers, and under certain conditions ACOs could reduce

competition and harm consumers through higher prices or lower quality of care. Thus,

the antitrust analysis of ACO applicants to the Shared Savings Program seeks to protect

both Medicare beneficiaries and commercially insured patients from potential

anticompetitive harm while allowing ACOs the opportunity to achieve significant

efficiencies.

To achieve these goals, the Agencies have developed this Statement of Antitrust

Enforcement Policy Regarding Accountable Care Organizations Participating in the

Medicare Shared Savings Program (the “Policy Statement”). The Policy Statement is

intended to ensure that health care providers have the antitrust clarity and guidance

needed to form procompetitive ACOs that participate in both the Medicare and

commercial markets. The Policy Statement describes (l) the ACOs to which the Policy

Statement will apply;

(2) when the Agencies will apply rule of reason treatment to those

ACOs; (3) an antitrust safety zone; and (4) additional antitrust guidance for ACOs that

are outside the safety zone, including a voluntary expedited antitrust review process for

newly formed ACOs.

II. Applicability of the Policy Statement

The Policy Statement applies to collaborations among otherwise independent

providers and provider groups

that are eligible and intend, or have been approved, to

participate in the Shared Savings Program. For ease of reference, the Policy Statement

refers to such collaborations as ACOs, although they may not yet have been approved to

participate as ACOs in the Shared Savings Program. The Policy Statement refers to the

otherwise independent providers and provider groups that constitute the ACO as ACO

participants.

The Policy Statement does not apply to mergers. Merger transactions,

including transactions that meet the criteria set forth in Section 1.3 of the Antitrust

Guidelines for Collaborations Among Competitors,

will be evaluated under the

Agencies’ Horizontal Merger Guidelines.

The Policy Statement also does not apply to

single, fully integrated entities.

The analytical principles underlying the Policy Statement also would apply to various ACO initiatives

undertaken by the Innovation Center within CMS as long as those ACOs are substantially clinically or

financially integrated.

The Policy Statement provides guidance to assist ACOs in determining whether they are likely to present

competitive concerns. It does not reflect the full analysis that the Agencies may use in evaluating ACOs or

any other transaction or course of conduct. “Newly formed ACOs” are defined infra at note 23.

A “collaboration” comprises an agreement or set of agreements, other than merger agreements, among

otherwise independent entities jointly to engage in economic activity, and the resulting economic activity.

U.S. D

EP’T OF JUSTICE & FED. TRADE COMM’N, ANTITRUST GUIDELINES FOR COLLABORATIONS AMONG

COMPETITORS § 1.1 (2000) [hereinafter COLLABORATION GUIDELINES], available at

http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf.

An ACO participant can be an independent physician solo practice, a fully integrated physician group

practice, an inpatient facility, or an outpatient facility. The Policy Statement’s definition of ACO

participant may differ from CMS’s use of the term.

COLLABORATION GUIDELINES, supra note 9, § 1.3.

U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N, HORIZONTAL MERGER GUIDELINES (rev. ed. 2010),

available at http://www.justice.gov/atr/public/guidelines/hmg-2010.pdf.

III. The Agencies Will Apply Rule of Reason Analysis to ACOs That Meet

Certain Conditions

The antitrust laws treat naked price-fixing and market-allocation agreements

among competitors as per se illegal. Joint price agreements among competing health care

providers are evaluated under the rule of reason, however, if the providers are financially

or clinically integrated and the agreement is reasonably necessary to accomplish the

procompetitive benefits of the integration.

A rule of reason analysis evaluates whether the collaboration is likely to have

anticompetitive effects and, if so, whether the collaboration’s potential procompetitive

efficiencies are likely to outweigh those effects. The greater the likely anticompetitive

effects, the greater the likely efficiencies must be for the collaboration to pass muster

under the antitrust laws. The Agencies have articulated the standards for both financial

and clinical integration in various policy statements, speeches, business reviews, and

advisory opinions. For example, the Agencies’ Statements of Antitrust Enforcement

Policy in Health Care (the “Health Care Statements”) explain that where participants in

physician or multiprovider joint ventures have agreed to share substantial financial risk as

defined in the Health Care Statements, their risk-sharing arrangement generally

establishes both an overall efficiency goal for the venture and the incentives for the

participants to meet that goal.

Accordingly, the setting of price is integral to the

venture’s use of such an arrangement and therefore warrants evaluation under the rule of

reason.

The Health Care Statements provide examples of financial risk-sharing

arrangements that can satisfy this standard, but also recognize that other acceptable

financial risk-sharing arrangements might develop.

The Health Care Statements further explain that provider joint ventures also may

involve clinical integration sufficient to ensure that the venture is likely to produce

significant efficiencies.

Clinical integration can be evidenced by the joint venture

implementing an active and ongoing program to evaluate and modify practice patterns by

the venture’s providers and to create a high degree of interdependence and cooperation

among the providers to control costs and ensure quality.

Federal Trade Commission

staff advisory opinions discuss evidence that appears sufficient to demonstrate clinical

integration in specific factual circumstances.

The Affordable Care Act provides that CMS may approve ACOs that meet certain

eligibility criteria, including (1) a formal legal structure that allows the ACO to receive

U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N, STATEMENTS OF ANTITRUST ENFORCEMENT POLICY IN

HEALTH CARE, Statements 8 and 9 (1996) [hereinafter HEALTH CARE STATEMENTS], available at

http://www.ftc.gov/reports/hlth3s.pdf.

Id.

See, e.g., Christine A. Varney, Assistant Attorney Gen., Antitrust Div., U.S. Dep’t of Justice, Antitrust

and Healthcare at 12 (May 24, 2010), available at http://www.justice.gov/atr/public/speeches/258898.pdf.

See FED. TRADE COMM’N, ADVISORY OPINIONS (1982-2010), available at

http://www.ftc.gov/bc/healthcare/industryguide/advisory.htm#2010.

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.

CMS has further defined these eligibility criteria

through regulations.

By contrast, the Agencies have not previously listed specific criteria required to

establish clinical integration, but instead have responded to detailed proposals from

health care providers who have decided on specific ways to integrate their health care

delivery systems to improve quality and lower costs.

The Agencies have chosen to

avoid prescribing how clinical integration should take place. Nonetheless, the Agencies

recognize that health care providers seeking to create ACOs in the context of the Shared

Savings Program could benefit from additional antitrust guidance in evaluating whether

an ACO that satisfies the CMS eligibility criteria could be subject to an antitrust

investigation and potential challenge as engaging in per se illegal conduct.

The Agencies have determined that CMS’s eligibility criteria are broadly

consistent with the indicia of clinical integration that the Agencies previously set forth in

the Health Care Statements and identified in the context of specific proposals for clinical

integration from health care providers.

The Agencies also have determined that

organizations meeting the eligibility requirements for the Shared Savings Program are

reasonably likely to be bona fide arrangements intended to improve the quality, and

reduce the costs, of providing medical and other health care services through their

participants’ joint efforts.

To assess whether an ACO has improved quality and reduced costs to Medicare,

CMS will collect and evaluate cost, utilization, and quality metrics relating to each

ACO’s performance in the Shared Savings Program. The results of this monitoring will

help the Agencies determine whether the CMS eligibility criteria have required a

sufficient level of clinical integration to produce cost savings and quality improvements,

and may help inform the Agencies’ future analysis of ACOs and other provider

organizations.

In light of CMS’s eligibility criteria, and its monitoring of each ACO’s results, the

Agencies will treat joint negotiations with private payers as reasonably necessary to an

ACO’s primary purpose of improving health care delivery, and will afford rule of reason

Patient Protection and Affordable Care Act, Pub. L. No. 111-48, § 3022, 124 Stat. 119, 395-99 (2010).

Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations, 42 C.F.R. pt.

425 (2011) [hereinafter CMS ACO Rule].

See generally FTC Staff Advisory Opinions (2002-Present), available at

www.ftc.gov/bc/healthcare/industryguide/opinionguidance.htm; see also U.S. D

EP’T OF JUSTICE & FED.

RADE COMM’N, IMPROVING HEALTH CARE: ANOTHER DOSE OF COMPETITION ch. 2 at 34-41 (July 2004),

available at http://www.ftc.gov/reports/healthcare/040723healthcarerpt.pdf.

Id. See also, e.g., TriState Health Partners, Inc. Advisory Opinion from FTC Staff (Apr. 13, 2009)

(evaluating TriState Health Partners’ proposal and stating that, if implemented as proposed, FTC staff

would not recommend that the Commission challenge the proposed program), available at

www.ftc.gov/os/closings/staff/090413tristateaoletter.pdf.

treatment to an ACO that meets CMS’s eligibility requirements for, and participates in,

the Shared Savings Program and uses the same governance and leadership structures and

clinical and administrative processes it uses in the Shared Savings Program to serve

patients in commercial markets. The Agencies further note that CMS’s regulations allow

an ACO to propose alternative ways to establish clinical management and oversight of

the ACO, and the Agencies are willing to consider other proposals for clinical integration

as well.

IV. The Agencies’ Antitrust Analysis of ACOs That Meet CMS Eligibility

Criteria

The following Sections provide additional antitrust guidance for ACOs that are

eligible and intend, or have been approved, to participate in the Shared Savings Program,

including those ACOs that also plan to operate in the commercial market. Section A sets

forth a safety zone for certain ACOs that are highly unlikely to raise significant

competitive concerns and, therefore, will not be challenged by the Agencies under the

antitrust laws, absent extraordinary circumstances.

The Agencies emphasize that ACOs outside the safety zone may be

procompetitive and legal. An ACO that does not impede the functioning of a competitive

market will not raise competitive concerns. The creation of a safety zone reflects the

view that ACOs that fall within the safety zone are highly unlikely to raise significant

competitive concerns; it does not imply that ACOs outside the safety zone necessarily

present competitive concerns.

Section B offers options for ACOs that seek additional antitrust guidance. It

describes certain conduct all ACOs generally should avoid, other conduct that ACOs with

high Primary Service Area (“PSA”) shares or other possible indicia of market power may

wish to avoid, and the process by which a newly formed ACO

may obtain a voluntary

expedited antitrust review.

A. The Antitrust Safety Zone for ACOs in the Shared Savings Program

This Section sets forth an antitrust safety zone for ACOs that meet the CMS

eligibility criteria for and intend, or have been approved, to participate in the Shared

Savings Program and are highly unlikely to raise significant competitive concerns. The

Agencies will not challenge ACOs that fall within the safety zone, absent extraordinary

circumstances.

“Newly formed ACOs” are those ACOs that, as of March 23, 2010, the date on which the Patient

Protection and Affordable Care Act was enacted, had not yet signed or jointly negotiated any contracts with

private payers, and have not yet participated in the Shared Savings Program. Patient Protection and

Affordable Care Act, Pub. L. No. 111-48, 124 Stat. 119 (2010). An ACO is not newly formed if it

comprises only the same, or a subset of the same, providers that signed or jointly negotiated contracts with

private payers on or before March 23, 2010.

Extraordinary circumstances could include, for example, ACO participants engaging in collusion or

improper exchanges of price information or other competitively sensitive information with respect to their

sale of competing services outside the ACO. See infra IV(B)(1)(a).

To determine whether it falls within the safety zone, an ACO should evaluate the

ACO’s share of services in each ACO participant’s PSA. Although a PSA does not

necessarily constitute a relevant antitrust geographic market, it nonetheless serves as a

useful screen for evaluating potential competitive effects.

The Policy Statement focuses on PSA shares for three major categories of

services: physician specialties, major diagnostic categories (“MDCs”) for inpatient

facilities, and outpatient categories, as defined by CMS, for outpatient facilities.

Although these services are useful in evaluating potential anticompetitive effects, they do

not necessarily constitute relevant antitrust product markets. The Appendix to the Policy

Statement describes how to calculate an ACO’s shares of these services in the relevant

PSAs, identifies data sources available for these calculations, and provides illustrative

examples.

For an ACO to fall within the safety zone, independent ACO participants that

provide the same service (a “common service”) must have a combined share of 30

percent or less of each common service in each participant’s PSA, wherever two or more

ACO participants provide that service to patients from that PSA.

As noted above, a

service is defined as a primary specialty for physicians, an MDC for inpatient facilities,

or an outpatient category for outpatient facilities. The PSA for each participant is defined

as “the lowest number of postal zip codes from which the [ACO participant] draws at

least 75 percent of its [patients],”

separately for all physician, inpatient, or outpatient

services. Thus, for purposes of determining whether the ACO is eligible for the safety

zone, each independent physician solo practice, each fully integrated physician group

practice, each inpatient facility (even if part of a hospital system), and each outpatient

facility will have its own PSA. In addition, each inpatient facility hospital will have

separate PSAs for its (1) inpatient services, (2) outpatient services, and (3) physician

services provided by its physician employees, if any.

As described below, the availability of the PSA safety zone differs in some cases

depending on whether an ACO participant is exclusive or non-exclusive to the ACO. To

participate in an ACO on a non-exclusive basis, a participant must be allowed to contract

with private payers through entities other than the ACO, including contracting

individually or through other ACOs or analogous collaborations. The ACO must be non-

exclusive in fact and not just in name. Exclusivity may be present explicitly or

The Policy Statement does not apply to other types of providers (e.g., clinical laboratories or nursing

homes). Nonetheless, the Agencies recognize that those providers may participate in ACOs.

The ACO may send questions regarding PSA share calculations to aco_psa_questio[email protected]v.

Thus, if two otherwise independent physician group practices form an ACO and each includes

cardiologists and oncologists, each physician group practice would be an independent participant in the

ACO, and cardiology and oncology would be common services. If, on the other hand, one physician group

practice consists only of cardiologists and the other only of oncologists, then there would be no common

services and the ACO would fall within the safety zone regardless of its share, subject to the dominant

participant limitation described below.

Medicare Program: Physicians’ Referrals to Health Care Entities With Which They Have Financial

Relationships (Phase II), 69 Fed. Reg. 16,094 (Mar. 26, 2004).

See Appendix to the Policy Statement.

implicitly, formally or informally, through a written or de facto agreement as shown by

conduct.

Hospitals and Ambulatory Surgical Centers. Any hospital or ambulatory surgery

center (“ASC”) participating in an ACO must be non-exclusive to the ACO to fall within

the safety zone, regardless of its PSA share.

Physicians. The safety zone for physicians (regardless of whether the physicians

are hospital employees) does not differ based on whether the physicians are exclusive or

non-exclusive to the ACO, unless they fall within the rural exception or dominant

participant limitation described below.

1. Rural Exception

An ACO that exceeds the 30 percent PSA share may still fall within the safety

zone if it qualifies for this rural exception. The rural exception allows such an ACO to

include one physician or physician group practice

per specialty from each rural area

on a non-exclusive basis and still fall within the safety zone, provided the physician’s or

physician group practice’s primary office is in a zip code that is classified as “isolated

rural” or “other small rural.”

Thus, an ACO may qualify for the safety zone as long as

it includes only one physician or physician group practice per specialty for each county

that contains at least one “isolated rural” or “other small rural” zip code, even if the

inclusion of these physicians causes the ACO’s share of any common service to exceed

30 percent in any ACO participant’s PSA.

The Health Care Statements further explain the indicia of non-exclusivity that the Agencies consider

relevant to this evaluation. H

EALTH CARE STATEMENTS, supra note 13, at 66-67.

To qualify for the rural exception, the physician group practice must be treating patients as a fully

integrated practice group as of the date of the Policy Statement. The practice group can add or eliminate

physicians and still remain in the safety zone, as long as the number of full-time equivalent physicians in

the practice group does not increase during the ACO’s Shared Savings Program agreement period. For the

purposes of the Policy Statement, Federally Qualified Health Centers and Rural Health Clinics, as defined

by the Social Security Act, are considered physician group practices. 42 U.S.C. § 1396d (2006); 42 U.S.C.

§ 1395x(aa) (2006). A physician or physician group practice that qualifies for the rural exception may

obtain “call coverage” from other physicians in the same rural area without losing its safety zone status as

long as those physicians do not participate in the ACO.

For the purposes of the Policy Statement, a “rural area” means any county containing at least one zip

code that has been classified as “isolated rural,” or “other small rural,” according to the WWAMI Rural

Health Research Center of the University of Washington’s seven category classification.

http://depts.washington.edu/uwruca/ruca-maps.php. These are zip codes that have a Rural Urban

Commuting Area (“RUCA”) code of 10.0, 10.2-10.6, 8.0, 8.2-8.4, or 9.0-9.2 as developed by the WWAMI

Rural Health Research Center of the University of Washington and the U.S. Department of Agriculture’s

Economic Research Service. http://www.ers.usda.gov/briefing/Rurality/RuralUrbanCommutingAreas/.

The RUCA code for any particular zip code can be found at http://depts.washington.edu/uwruca/ruca-

download.php.

A physician’s or physician group practice’s primary office is the office in which the majority of the

physician’s or physician group practice’s patient visits take place. If no office serves a majority of a

physician’s patients, the majority of patient visits must take place in offices located in “isolated rural” or

“other small rural” zip codes to qualify for the rural exception.

Likewise, an ACO may include Rural Hospitals

on a non-exclusive basis and

qualify for the safety zone, even if the inclusion of a Rural Hospital causes the ACO’s

share of any common service to exceed 30 percent in any ACO participant’s PSA.

2. Dominant Participant Limitation

The dominant participant limitation applies to any ACO that includes a participant

with a greater than 50 percent share in its PSA of any service that no other ACO

participant provides to patients in that PSA. Under these conditions, the ACO participant

must be non-exclusive to the ACO for the ACO to fall within the safety zone.

addition, to fall within the safety zone, an ACO with a dominant participant cannot

require a private payer to contract exclusively with the ACO or otherwise restrict a

private payer’s ability to contract or deal with other ACOs or provider networks.

* * *

The safety zone will remain in effect for the duration of an ACO’s agreement with

CMS, provided the ACO continues to meet the safety zone’s requirements. An ACO will

not lose its safety zone status solely because it attracts more patients.

B. ACOs Outside the Safety Zone

ACOs that fall outside the safety zone may be procompetitive and lawful. An

ACO that does not impede the functioning of a competitive market will not raise

competitive concerns.

Nonetheless, there may be circumstances in which an ACO would raise

competitive concerns. This section describes some types of conduct by an ACO that,

For the purposes of the Policy Statement, a Rural Hospital is defined as a Sole Community Hospital, a

Critical Access Hospital, or any other acute care hospital located in a rural area that has no more than 50

acute care inpatient beds and is located at least 35 miles from any other inpatient acute care hospital. A

Sole Community Hospital is a hospital that is paid under the Medicare hospital inpatient prospective

payment system and meets the criteria for Sole Community Hospital status as specified at 42 C.F.R. §

412.92. See also D

EP’T OF HEALTH AND HUMAN SERVS., CTRS. FOR MEDICARE & MEDICAID SERVS., SOLE

COMMUNITY HOSPITAL, RURAL HEALTH FACT SHEET SERIES (Oct. 2010), available at

https://www.cms.gov/MLNProducts/downloads/SoleCommHospfctsht508-09.pdf; Social Security Act, 42

U.S.C. § 1395ww(d)(5)(D)(iii) (2006). A Critical Access Hospital is a hospital that has been certified as a

Medicare Critical Access Hospital, as described in 42 C.F.R. § 485 Subpart F. See also 42 U.S.C. § 1395i-

4(c)(2).

For example, a physician group participating in the ACO may comprise a specialty not found in any

other ACO participant. In this case, the ACO may be eligible for the safety zone even if the physician

group’s share exceeds 50 percent, but only if the physician group participates in the ACO on a non-

exclusive basis and the ACO does not restrict a private payer’s ability to contract or deal with other ACOs

or provider groups.

The Agencies emphasize that PSA shares are useful as a screening device and that alternative data and

information also may be useful in evaluating the likely competitive significance of a particular ACO. The

Agencies recognize that an ACO may have reliable evidence other than PSA shares from which the ACO

may reasonably conclude that the ACO is unlikely to raise competitive concerns.

under certain circumstances, may raise competitive concerns and outlines how an ACO

may obtain further antitrust guidance from the Agencies.

1. Conduct to Avoid

a. Improper Sharing of Competitively Sensitive Information

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 sale 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 health care 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.

b. Conduct by ACOs with High PSA Shares or Other Possible

Indicia of Market Power That May Raise Competitive Concerns

For ACOs with high PSA shares or other possible indicia of market power, the

Agencies identify four types of conduct that may raise competitive concerns.

The

Agencies recognize that some of the conduct described in (1) through (4) below may be

competitively neutral or even procompetitive, depending on the circumstances, including

whether the ACO has market power. For example, an ACO that requires its participants

to contract exclusively through the ACO to increase the ACO’s efficiency is generally

less likely to raise competitive concerns the greater the number of competing ACOs or

independent providers available to contract with private payers or to participate in

competing ACOs or other analogous collaborations.

An ACO with high PSA shares or other possible indicia of market power may

wish to avoid the conduct set forth in (1) through (4) below. Depending on the

circumstances, the conduct identified below may prevent private payers from obtaining

lower prices and better quality service for their enrollees:

1. Preventing or discouraging private payers from directing or incentivizing patients

to choose certain providers, including providers that do not participate in the

Health Care Statements 4, 5, and 6 relate to the sharing of data and information among competing

providers. The Health Care Statements set forth safety zones for providers’ collective provision of fee- and

non-fee-related information to health care purchasers and participation in exchanges of price and cost

information. The Health Care Statements also provide further guidance on the distinctions between

legitimate information sharing and information sharing that may facilitate collusion or otherwise raise

competitive concerns. H

EALTH CARE STATEMENTS, supra note 13, at 40-52.

ACOs within the safety zone should also refrain from this conduct. See supra note 24.

ACOs with high PSA shares or other possible indicia of market power also should consider the likely

competitive effects of other types of conduct in which they engage.

ACO, through “anti-steering,” “anti-tiering,” “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

(e.g., 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

2. Availability of Expedited Voluntary Antitrust Review

Any newly formed ACO

that desires further antitrust guidance regarding its

formation and planned operation can seek expedited 90 day review from the Agencies.

During expedited review, the reviewing Agency will examine whether the ACO will

likely harm competition by increasing the ACO’s ability or incentive profitably to raise

prices above competitive levels or reduce output, quality, service, or innovation below

what likely would prevail in the absence of the ACO.

To the extent possible in the 90

day review period, the Agency will consider factors in the rule of reason analysis as

explained in the Antitrust Guidelines for Collaborations Among Competitors and the

Health Care Statements.

The ACO should submit its request for expedited review, along with a completed

cover sheet (available on the Agencies’ websites), to both Agencies before its entrance

into the Shared Savings Program, and the Agencies will then promptly determine, and

Note that, although CMS requires the physician practice through which physicians bill for primary care

services and to which Medicare beneficiaries are assigned to contract exclusively with one ACO for the

purposes of beneficiary assignment, CMS does not require either those individual physicians or physician

practices to contract exclusively through the same ACO for the purposes of providing services to private

health plans’ enrollees. CMS ACO Rule, supra note 20.

See supra note 23.

When the Federal Trade Commission is the reviewing Agency, Commission staff will perform the ACO

review pursuant to the Commission’s authorization of its staff in 16 C.F.R. § 1.1(b). When the Antitrust

Division is the reviewing Agency, the Assistant Attorney General in charge of the Antitrust Division or the

Assistant Attorney General’s delegate will sign the review letter. 28 C.F.R § 50.6.

See COLLABORATION GUIDELINES, supra note 9, § 1.2.

See id. § 3.3; HEALTH CARE STATEMENTS, supra note 13, Statements 8 and 9.

notify the applicant, which Agency will be the reviewing Agency.

As soon as the

Agencies notify the applicant which Agency will be the reviewing Agency, the applicant

should provide all of the documents and information listed below to the reviewing

Agency. The Agencies shall establish a Federal Trade Commission/Department of

Justice ACO Working Group to collaborate and discuss issues arising out of the ACO

reviews. This process will allow ACOs to rely on the expertise of both Agencies and

ensure efficient, cooperative, and expeditious reviews.

To start the 90 day review, the reviewing Agency must receive all of the

following documents and information:

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

A request for an expedited review must be submitted in writing to either (1) the Office of the Assistant

Attorney General, Antitrust Division, Department of Justice, Main Justice Building, Room 3109, 950

Pennsylvania Avenue, NW, Washington, DC 20530 (for non-U.S. Postal Service deliveries, use ZIP code

20004), and to the Federal Trade Commission, Bureau of Competition, Premerger Notification Office,

Room 303, 600 Pennsylvania Avenue, NW, Washington, DC 20580 or (2) acorequest@usdoj.gov and

[email protected].

For example, it has been standard practice for the Agencies to share with each other their proposed health

care business review and staff advisory opinion letters before issuing them in final form to ensure

application of consistent standards of antitrust review.

The ACO must represent in writing that it has undertaken a good-faith search for the documents and

information specified in the Policy Statement and, where applicable, provided all responsive material.

Moreover, the Agencies may request additional documents and information where necessary to evaluate the

ACO. A request for additional documents and information, however, will not extend the 90 day review

period.

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

Moreover, the ACO may submit any other documents and information that it

believes may be helpful to the Agency in assessing the ACO’s likely impact on

competition. The documents and information may include anything that may establish a

clearer picture of competitive realities in the market, including

1. evidence that the ACO is not likely to have market power in the relevant market;

2. any substantial procompetitive justification for why the ACO needs its proposed

composition to provide high-quality, cost-effective care to Medicare beneficiaries

and patients in the commercial market; and

3. if relevant, an explanation as to why the ACO engaging in any of the four types of

conduct listed in Section IV.B of the Policy Statement would not be

anticompetitive or might even be procompetitive.

Within 90 days of receiving all of the above documents and information,

the

reviewing Agency will advise the ACO that the ACO’s formation and operation, as

described in the documents and information provided to the Agency,

1. does not likely raise competitive concerns or, if appropriate, does not likely raise

competitive concerns conditioned on the ACO’s written agreement to take

specific steps to remedy concerns raised by the Agency;

2. potentially raises competitive concerns; or

3. likely raises competitive concerns.

Upon the applicant’s request, the reviewing Agency may extend the review beyond 90 days, subject to

the availability of resources or other discretionary considerations.

As is current practice, both the request letter and the reviewing Agency’s response

will be made public consistent with applicable confidentiality provisions.

Also,

consistent with current practice, if it appears that an ACO’s formation or conduct may be

anticompetitive, the Agency may investigate the ACO and, if appropriate, take

enforcement action at any time before or during the ACO’s participation in the Shared

Savings Program.

The provisions regarding public access to review information, non-disclosure of competitively sensitive

or business confidential information, and retention of review information set forth in 28 C.F.R. § 50.6

(2010) (U.S. Department of Justice business review letters) and 16 C.F.R. §§ 1.1-1.4 (2010) (FTC advisory

opinions) will generally apply to the expedited review process. Requesters should follow applicable

Agency procedures governing the designation of competitively sensitive business information and other

information the requesters wish not to be made public in connection with a review request. See 28 C.F.R. §

50.56 (U.S. Department of Justice procedures); 16 C.F.R. §§ 4.2, 4.9, and 4.10 (FTC procedures).

Appendix

This Appendix explains how to calculate the PSA shares of common services

discussed in the Policy Statement.

There are three steps:

1. Identify each service provided by at least two independent ACO participants (i.e.,

each common service). A service is defined as follows:

a. For physicians, a service is the physician’s primary specialty, as

designated on the physician’s Medicare Enrollment Application. Each

specialty is identified by its Medicare Specialty Code (“MSC”), as defined

by CMS.

b. For inpatient facilities (e.g., hospitals), a service is an MDC.

c. For outpatient facilities (e.g., ASCs or hospitals), a service is an outpatient

category, as defined by CMS.

2. Identify the PSA(s) for each participant (e.g., physician group, inpatient facility,

or outpatient facility) in the ACO that provides any common service. For each

participant, the PSA is defined as the lowest number of postal zip codes from

which the participant draws at least 75 percent of its patients.

Each independent

physician solo practice, each fully integrated physician group practice,

each inpatient facility (even if part of a hospital system), and each outpatient

facility will have its own PSA. In addition, each inpatient facility will have a

separate PSA for inpatient services, outpatient services, and physician services

provided by its physician employees.

3. Separately for each common service, calculate the ACO’s PSA share in the PSA

of each participant that provides that service if at least two participants provide

that service to patients from that PSA. If an entity owned by an ACO participant

provides services in a PSA, those services should be included in the share

calculation regardless of whether the affiliated organization participates in the

ACO.

Any ACO participant that wants to determine whether it meets the dominant participant limitation of the

safety zone should calculate its PSA share in a similar manner.

CMS will make publicly available the most current list of applicable specialties. Specialty Codes 01

(general practice), 08 (family practice), 11 (internal medicine), and 38 (geriatric medicine) are considered

“Primary Care” specialties, and are treated as a single service for the purposes of the Policy Statement.

CMS will make publicly available the most current list of MDCs.

CMS will make publicly available a list of applicable outpatient categories as well as data necessary to

assign procedure codes to the appropriate category.

This PSA calculation is based on the Stark II regulations. Medicare Program: Physicians’ Referrals to

Health Care Entities With Which They Have Financial Relationships (Phase II), 69 Fed. Reg. 16,094 (Mar.

26, 2004).

a. For physician services, the ACO should calculate its shares of Medicare

fee-for-service allowed charges (i.e., the amount that a provider is entitled

to receive for the service provided) during the most recent calendar year

for which data are available. CMS will make public the data necessary to

identify the full range of services and the aggregate fee-for-service

allowed charges for each service, by zip code.

b. For inpatient services, the ACO should calculate its shares of inpatient

discharges, using state-level all-payer hospital discharge data where

available, for the most recent calendar year for which data are available.

For ACOs located in a state where all-payer hospital discharge data are not

available, the ACO should calculate its shares of Medicare fee-for-service

payments during the most recent federal fiscal year for which data are

available. CMS will make public the data necessary to identify the full

range of services and the aggregate fee-for-service payments for each

service, by zip code.

c. For outpatient services, the ACO should calculate its shares of Medicare

fee-for-service payments for hospitals and fee-for-services allowed

charges for ASCs during the most recent calendar year for which data are

available, or the ACO can use state-level all-payer claims data, if

available. CMS will make public the data necessary to identify the full

range of services and the aggregate fee-for-service payments and allowed

charges for each service, by zip code.

For those services that are rarely used by Medicare beneficiaries (e.g., pediatrics,

obstetrics, gynecology, and neonatal care) and for which all-payer data are not

available, the ACO may use other available data to determine the relevant shares.

For example, for those services, data on the number of active physicians within

the specialty and located within the PSA may be a reasonable alternative for the

purposes of calculating shares of physician services.

Example of How to Calculate an ACO’s PSA Shares

The following example illustrates how to calculate the ACO’s relevant PSA

shares. Assume that two independent physician practices, two independent hospitals, and

an ASC propose to form an ACO. For purposes of this example, further assume that the

hospitals do not directly employ physicians. If they do, then services provided by the

hospitals’ employed physicians would need to be taken into account in determining the

PSA and calculating the ACO’s shares for each common physician service where at least

two participants provide that service to patients from the same PSA.

For the physician groups:

1. Identify the physician groups’ common MSCs. In this example, Physician Group

A (“PG A”) has physicians with general surgery (MSC 02) and orthopedic

surgery specialties (MSC 20). Physician Group B (“PG B”) has physicians with

orthopedic surgery (MSC 20) and cardiology (MSC 06) specialties. The only

common service is orthopedic surgery, not general surgery or cardiology, because

PG A does not have cardiologists and PG B does not have general surgeons.

2. Identify the zip codes that make up the PSA for each physician group. In this

example, there will be two PSAs: one for PG A (“PSA A”) and one for PG B

(“PSA B”).

3. Determine the ACO’s share in each of the PSAs. In this example, both PG A’s

and PG B’s orthopedic surgeons serve patients located in both PSAs. Thus,

shares need to be calculated in PSA A and PSA B. The ACO’s share of

orthopedic surgery in PSA A would be the total Medicare allowed charges for

claims billed by the ACO’s orthopedic surgeons (which are PG A’s and PG B’s

total allowed charges for claims billed by orthopedic surgeons for Medicare

beneficiaries in PSA A’s zip codes) divided by the total allowed charges for

orthopedic surgery for all Medicare beneficiaries in PSA A. Likewise, the ACO’s

share of orthopedic surgery services in PSA B would be the total Medicare

allowed charges for claims billed by the ACO’s orthopedic surgeons (which are

PG A’s and PG B’s total allowed charges for claims billed by orthopedic surgeons

for Medicare beneficiaries in PSA B’s zip codes) divided by the total allowed

charges for orthopedic surgery for all Medicare beneficiaries in PSA B.

For the inpatient services:

1. Identify the hospitals’ common MDCs. In this example, Hospital 1 and Hospital

2 each provide services in 10 MDCs, but only two are common services: cardiac

care (i.e., services related to diseases and disorders of the circulatory system—

MDC 05) and orthopedic care (i.e., services related to diseases and disorders of

the musculoskeletal system and connective tissue—MDC 08).

2. Identify the zip codes that make up the PSA for inpatient services for each

hospital. In this example, there will be two PSAs: Hospital 1’s PSA and Hospital

2’s PSA.

3. Determine the ACO’s share in each of the PSAs. In this example, Hospital l and

Hospital 2 both serve cardiac patients located in each hospital’s PSA and both

serve orthopedic patients in each hospital’s PSA. Thus, shares need to be

calculated in both PSAs, resulting in four shares. This hypothetical ACO is

located in a state for which all-payer hospital discharge data are available, so the

ACO’s share of cardiac care in Hospital 1’s PSA would be the ACO’s total

number of inpatient discharges for MDC 05 (which are Hospital 1’s and Hospital

2’s total inpatient discharges for cardiac care in Hospital l’s PSA) divided by the

total number of inpatient discharges for MDC 05 for all residents of this PSA.

Use the analogous process to calculate the ACO’s share of cardiac care in

Hospital 2’s PSA, the ACO’s share of orthopedic care in Hospital 1’s PSA, and

the ACO’s share of orthopedic care in Hospital 2’s PSA.

For the outpatient services:

1. Identify the hospitals’ and ASC’s common outpatient categories. In this example,

Hospital 1 does not provide outpatient services, while Hospital 2 and the ASC

each provide services in 10 outpatient categories, but only two are common

services: cardiovascular tests/procedures (outpatient category 2) and

musculoskeletal procedures (outpatient category 5).

2. Identify the zip codes that make up the PSA for outpatient services for Hospital 2

and the ASC. In this example, there will be two PSAs: Hospital 2’s PSA for

outpatient services and the ASC’s PSA.

3. Determine the ACO’s share in each of the PSAs. In this example, Hospital 2 and

the ASC both provide cardiovascular tests/procedures to patients located in each

facility’s PSA, and both provide musculoskeletal procedures to patients located in

each facility’s PSA. Thus, shares need to be calculated in both PSAs, resulting in

four shares. The ACO’s share of cardiovascular tests/procedures in Hospital 2’s

PSA would be the ACO’s total Medicare fee-for-service payments/charges for

outpatient category 2 (which are Hospital 2’s total payments and the ASC’s total

allowed charges for outpatient cardiovascular tests/procedures for Medicare

beneficiaries in Hospital 2’s PSA) divided by the total payments/charges for

outpatient category 2 for all Medicare beneficiaries in this PSA. Use the

analogous process to calculate the ACO’s share of cardiovascular tests/procedures

in the ASC’s PSA, the ACO’s share of musculoskeletal procedures in Hospital 2’s

PSA, and the ACO’s share of musculoskeletal procedures in the ASC’s PSA.

Application to the Safety Zone: In this example, the ACO would calculate ten

PSA shares. If all of the shares are 30 percent or below, and the hospitals and the ASC

are non-exclusive to the ACO, then the ACO would fall within the safety zone. In other

words, the 30 percent threshold must be met in each relevant PSA for each common

service. If that condition is not met, then the ACO does not fall within the safety zone,

unless it qualifies for the rural exception.

For the Antitrust Division of the Department of Justice.

Sharis A. Pozen

Acting Assistant Attorney General

For the Federal Trade Commission.

Donald S. Clark

Secretary