Technically, CMS-approved ACOs would affect only Medicare patients, who would in theory not increase providers’ market power because Medicare sets its payment rates without negotiating with hospitals or physicians.
But in reality, observers on virtually all sides agreed that ACOs were unlikely to overcome their initial startup costs if they also didn’t include commercially insured patients—which caused some fears that ACOs would deliver their “shared savings” simply by shifting even more costs to the private insurance industry.
Groups including America’s Health Insurance Plans and AdvaMed urged the regulators to increase the thresholds for the ACOs that would have to receive antitrust preapproval before they could apply to the CMS to join the program.
The FTC and Justice Department have proposed that organizations that would control more than a 50% share of a certain number of physician services within a given area be subject to mandatory antitrust review, while those with 30% or less would fall into a “safe harbor” and avoid any review. Those between 30% and 50% would be subject to optional review.
However, rather than relying on a traditional antitrust definition of a “market,” the agencies proposed what observers on all sides of the debate called a novel approach based on the proposed ACO’s “physician service area.” The PSA test would force prospective ACOs to compute what share of total Medicare allowable charges in their relevant ZIP codes are captured by the physicians in the ACO for numerous billing codes—a process the AHA said could cost several hundred thousand dollars.
“We firmly believe that the PSA model is biased toward creating artificially small geographic markets that overstate an ACO’s ability to exert market power,” American Medical Association Executive Vice President and CEO Michael Maves wrote.
The AHA said that by requiring antitrust review prior to applying the program, the CMS could be illegally “bootstrapping” the antitrust laws into a regulatory scheme that amounted to a “guilty until proven innocent” approach.
“The first prospective ACO participant to be blocked by the agencies should have a viable cause of action against CMS as there is no precedent for this kind of backdoor approach to regulation,” AHA’s Pollack wrote.
“I don’t buy that,” said Jack Rovner, founding principal with the Health Law Consultancy law firm in Chicago. “The alternative would be that the CMS approves the ACOs and then the FTC goes in and destroys it,” he said. “Here at least you have an argument, which is, the federal regulators looked at the thing and they say it’s OK.”