ACOs could hurt competition, Health Affairs authors say

Fledgling accountable care organizations have faced plenty of challenges. Now a group of economists and lawyers are calling for a close look at issues involving insurance, antitrust and other regulation to avoid “unintended consequences.”

Health policy experts Gary Bacher, Michael Chernew, Daniel Kessler and Stephen Weiner write in the latest issue of the policy journal Health Affairs that ACOs could stifle competition among insurers and providers and potentially drive up prices.

The risk to competition from accountable care has figured prominently in the debate over how best to regulate the emerging ACO payment and delivery model. The reason? Accountable care seeks to more closely tie the operations and finances of hospitals, doctors and other healthcare providers—which in some ACOs are independent entities—to better coordinate care, eliminate waste, improve quality and reduce overall costs. Policymakers see better coordination as desirable. But regulators fear close cooperation among independent provider groups will give providers too much market clout.

Antitrust regulators have sought to find the line between coordination and collusion. They generally have decided that efforts that integrate clinical efforts among independent providers are acceptable if they benefit consumers by seeking to lower costs and improve care. The Federal Trade Commission recently approved coordination efforts among independent doctors and a health system in Oklahoma after the commission found patients would likely benefit from clinicians' greater access to data, Modern Healthcare's Joe Carlson reported in March.

Medicare's launch of accountable care under the Patient Protection and Affordable Care Act came with its own antitrust guidance from the FTC and the Justice Department that generally blesses ACOs whose members do not have too big a local market share.

But the Health Affairs authors say more “activist” intervention is needed to protect competition. That could include targeted legislation, such as a California law that prohibits contract language limiting release of private or quality information to consumers. They also cite a law in Massachusetts barring provider systems from cutting off talks with insurers that develop tiered networks discouraging consumers from seeking care from non-preferred providers.

The authors say such this more activist approach would help create a level playing field, or what they call “regulatory neutrality.”

Other regulatory-neutral policies would clearly define when ACOs meet the threshold for oversight by state insurance regulators, they said. Such oversight would include the solvency requirements that insurers must meet. When an “ACO seeks to compete with health plans—for example, by contracting with employers or individuals directly to accept risk—it should be subject to the same state solvent standards as any insurer,” the authors wrote.

That has been the position of the insurance industry. And Bacher, one of the paper's authors, is the director of the Institute for Health Systems Solutions with the America's Health Insurance Plans Foundation. AHIP, the major health insurance trade group, argued in a letter to the CMS in 2011 that ACOs should be subject to insurance regulations where they carry financial risk similar to that of insurers. The group warned that if ACOs are not regulated as strictly as insurers, consumers could suffer if an ACO were financially strapped and stinted on care.

Follow Melanie Evans on Twitter: @MHmevans