Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Sunday, July 22, 2012

Health Care Reform, Provider Affiliations, and Antitrust Risks

Posted by D. Daniel Sokol

Lona Fowdur & John Gale (Economists Incorporated) discuss Health Care Reform, Provider Affiliations, and Antitrust Risks.

ABSTRACT: The Accountable Care Act ("ACA") has brought to the fore the concept of Accountable Care Organizations ("ACOs"). These organizations comprise networks of otherwise unaffiliated providers that can obtain approval from the Centers for Medicare & Medicaid Services ("CMS") to become jointly responsible for the coordinated care of an assigned Medicare patient population. Per their agreement with CMS, ACOs are eligible to participate in the Medicare Shared Savings Program ("MSSP"). The program entitles participants to share in the Medicare savings they generate if they are able to lower the cost of care for their assigned Medicare patient population, and if they are able to perform adequately along a range of pre-determined quality metrics. Such ACOs would also be permitted to negotiate collectively with private providers and thereby extend the potential savings from care-coordination to commercially insured patients.

As such, it would seem that in passing the ACA, legislators took note of the potential efficiencies that could be realized through affiliations between provider groups. Providers, on the other hand, have sought such efficiencies, even prior to the enactment of the ACA, both through negotiations with managed care plans-for example under pay-for-performance systems-and through formal consolidations in the form of mergers and acquisitions.

Antitrust regulatory agencies at the U.S. Department of Justice and the Federal Trade Commission ("the Agencies") remain concerned, however, that affiliations between provider groups may lead to market power and price increases. Such concerns could be warranted if affiliations between provider groups lead to an increase in the providers' negotiating power vis-à-vis managed care plans. For example, if there were no equivalent alternative to a group of providers and a managed care plan were unable to offer a product without the group, it is possible that the group could extract higher payments for their services than they otherwise could. The Agencies aim to safeguard against such outcomes, but they also recognize the need for integration in order to achieve efficiencies. Consequently they have provided some guidance to provider groups as to how they will evaluate affiliations.

Provider groups need to recognize the Agencies' stance on antitrust regulation as they consider affiliations with other groups, whether under the banner of an ACO, in joint-negotiations with commercial payers, or in the context of formal integrations through mergers and acquisitions. In this article we provide an overview of ACO formation to date, survey similar payment systems outside of CMS's MSSP initiatives, and briefly review the Agencies' policies in regards to ACO formation and recent merger activity.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/07/health-care-reform-provider-affiliations-and-antitrust-risks.html

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