7 Thoughts on How Antitrust Laws Could be Changed to Accommodate ACOs

The Federal Trade Commission recently held a listening session with stakeholders on possible ways to change antitrust enforcement to allow accountable care organizations to bring together competing organizations. Here Axel Bernabe and Ankur Kapoor, healthcare antitrust attorneys and partners in the New York office of Constantine Cannon, discuss what federal regulators will have to consider in any changes of antitrust rules.

1. Insurers seen with too much market power. At a meeting with antitrust attorneys in May, representatives of the U.S. Department of Justice suggested they would oppose more mergers of insurance companies because insurers already have too much market power. This could be an argument for allowing stronger provider organizations under ACOs to counterbalance insurers. However, a recent study of the Massachusetts market by that state's attorney general and other reports suggest large hospital organizations, too, might have too much market power. This situation could lead to a "bilateral monopoly," in which both sides benefit by jacking up prices to the detriment of the public.

2. Providers want exclusive ACOs.
Some physician organizations are asking for permission to form exclusive arrangements, in which physicians can only be in one ACO. This would allow an ACO to have more volume with the same number of providers, helping it pay for the high start-up costs of ACOs. It is also being argued that allowing physicians to join several ACOs creates a "free rider" effect in which a physician who does not take up the ACO's cost saving strategies would nevertheless share in the savings.

3. Exclusive arrangements unlikely. Antitrust officials generally oppose exclusive arrangements because they view them as very, very anti-competitive. They would even look askance at a "most favored nation" contract clause, in which provider and payor would favor each others business. "I don't think they will allow an exclusive arrangement," Mr. Bernabe says.

4. Specialists might be treated differently. It is easier to argue for exclusivity for primary care physicians, who have specific patient populations they must orchestrate, than for specialists, who make up smaller groups and could easily tilt the market if they ally with only one ACO.

5. Should antitrust rules be made simpler? A lot of providers have argued that the vagueness of current antitrust guidelines makes it very difficult, expensive and time-consuming to create an ACO, and this could have the chilling effect on ACO formation. Furthermore, the AMA argues that federal regulators' current safe harbor provisions are outdated and should be relaxed. But there is an argument that too much specificity would make it hard to adjust the law in an uncharted area where flexibility is needed.

6. FTC may be less invested in ACOs. Because HHS oversees implementation of ACOs, that federal agency is highly invested in making is them work, meaning it may well lift fraud and abuse provisions that get in the way. The FTC and the Department of Justice, however, are one step removed from the implementation process and might be less interested in making significant changes in enforcement.

7. Less emphasis on market share. Federal regulators are less interested than they used to be in making sure an arrangement meets a particular percentage of market share. They are more interested in the outcome of an arrangement, such as creating higher prices. Therefore, it is important to create an arrangement that can demonstrate lower prices and improved quality.

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