The Federal Trade Commission (FTC) has published a notice explaining how it may go about applying antitrust rules to the new Medicare accountable care organizations (ACOs).

The FTC, which has developed the notice together with the antitrust division of the U.S. Justice Department, says it and the Justice Department will apply a “rule of reason” when financial or clinical integration arrangements appear to be good for the overall level of competition, rather than bad.

Arrangements that are acceptable in the Medicare ACO program will also be acceptable in the commercial ACO market, officials say.

THE ACO

An ACO is supposed to be a vehicle for paying teams of health care providers to provide and manage care for whole patients, instead of paying for care one service at a time.

Section 3022 of the Patient Protection and Affordable Care Act (PPACA) requires Medicare to set up a Medicare Shared Savings Program that will promote use of Medicare ACOs starting in 2012.

Commercial insurers have been experimenting with their own ACO programs, and some policymakers say the Medicare ACO program may encourage expansion of the commercial ACO efforts.

Medical societies have argued that health insurer concentration helps insurers dominate physicians in an unfair way.

Health insurers traditionally have said that they need substantial market clout to bargain

for reasonable prices from physicians and hospitals. They have expressed concerns that poorly structured ACO programs could lead to higher health care prices rather than lower prices.

REGULATORS’ BENCHMARKS

When regulators are deciding whether an ACO is likely to raise competitive concerns, they will start by looking at the ACO’s share of services in each ACO participant’s Primary Service Area (PSA), officials say today in the ACO antitrust standards proposal notice, which appears today in the Federal Register.

“The higher the PSA share, the greater the risk the ACO will be anticompetitive,” officials say.

To fall within an antitrust “safety zone,” an ACO “must have a combined share of 30% 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.”

Regulators will define the PSA for each service as ”the lowest number of contiguous postal zip codes from which the [ACO participant] draws at least 75% of its [patients]” for that service.

To fall within the safety zone, any hospital or ambulatory surgery center in the ACO must be non-exclusive, regardless of its share.

If a participant in an ACO has a share greater than 50% in its PSA for any service that no other ACO participant provides to patients in a PSA, then, to fall within the safety zone, that “dominant provider” must be non-exclusive to the ACO.

“In addition, to fall within the safety zone, an ACO with a dominant provider cannot require a commercial payer to contract exclusively with the ACO or otherwise restrict a commercial payer’s ability to contract or deal with other ACOs or provider networks,” officials say.

Officials will set tougher review standards for ACOs have a share of 50% or higher for any common service that two or more independent ACO participants provide to patients in the same PSA.

Comments on the proposal are due May 31.

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