ABA Washington Health Law Summit
Consolidation or Coordination? FTC and DOJ
Guidance on the Future of ACOs
Alexis James Gilman
Assistant Director, Mergers IV Division, Bureau of Competition
Federal Trade Commission
Peter J. Mucchetti
Chief, Litigation I Section, Antitrust Division
United States Department of Justice
Kenya S. Woodruff
Partner, Co-Chair – Healthcare Practice Group
Haynes and Boone, LLP
Kenya S. Woodruff
Haynes and Boone LLP
Co-Chair, Healthcare Practice Group
© 2015 Haynes and Boone, LLP
Agenda
• ACO Overview
• Increased consolidation and coordination
• Overview of DOJ enforcement in the health
insurance industry
• Overview of FTC enforcement in the provider
industry
• Scenarios
© 2015 Haynes and Boone, LLP
© 2015 Haynes and Boone, LLP
3
Overview of ACOs
An accountable care organization (ACO) is a group of
doctors, hospitals, and other health care providers who join
together voluntarily to give coordinated care to their
Medicare patients, and who can share in the savings
achieved as a result of their coordination.
• The Medicare Shared Savings Program rewards ACOs
that lower their health care costs while meeting quality of
care performance standards.
• ACOs split the shared savings that they generate with
Medicare.
© 2015 Haynes and Boone, LLP
© 2015 Haynes and Boone, LLP
Overview of ACO structure
ACO
Participants
(Based on TIN)
Providers/Suppliers
(All Providers under a Participant’s TIN)
© 2015 Haynes and Boone, LLP
© 2015 Haynes and Boone, LLP
ACO Payment Models
• Although Medicare will continue to offer a Fee-for-Service
program for patients, there are two types of payment models
available to the ACOs.
– One-sided model
– Two-sided model
• The main differences between these two types of models are
the degree of risk involved and the potential savings available.
See Methodology for Determining Shared Savings and Losses under the Medicare Shared
Savings Program issued by CMS in November 2012.
© 2015 Haynes and Boone, LLP
© 2015 Haynes and Boone, LLP
Hospital ACO Structure
Hospital
ACO
Participation
Agreements
ACO Participants
(e.g., Contracted
Physicians)
MSSP
Agreement
Key
Shared Savings
Medicare
Contractual
Relationship
Equity Interest
D-2154516
© 2015 Haynes and Boone, LLP
© 2015 Haynes and Boone, LLP
Independent Physician ACO Structure
Physicians
Third-Party Investors
ACO
Participation
Agreements
ACO Participants
(e.g., Physicians)
MSSP
Agreement
Key
Shared Savings
Medicare
D-2154516
© 2015 Haynes and Boone, LLP
© 2015 Haynes and Boone, LLP
Contractual
Relationship
Equity Interest
Next Generation ACO
• Greater access to home health, telehealth
and skilled nursing facilities
• Opportunities for beneficiaries to receive
benefits for receiving services from the
ACO and certain affiliated providers
• A process to allow beneficiaries to confirm
their relationship with an ACO provider
• Compensation for attainment as well as
improvement
© 2015 Haynes and Boone, LLP
© 2015 Haynes and Boone, LLP
Next Gen ACO Payment Models
• Normal FFS Payment
• Normal FFS Payment +
Infrastructure Payment
• Population-Based Payments
• Capitation
© 2015 Haynes and Boone, LLP
© 2015 Haynes and Boone, LLP
Increased Consolidation and Collaboration
• Causes
– Uncertainty of reimbursement models
– Greater emphasis on continuum of care
– Need for funding to foster the technology and staffing innovations
necessary to be competitive
• Effects
– “Bigger is better” mentality
– Increased efforts to achieve greater network adequacy through
joint ventures, collaborative relationships, mergers and
acquisitions
– Rural and community hospitals are struggling
– Technology for better data analytics and predictive analysis
© 2015 Haynes and Boone, LLP
© 2015 Haynes and Boone, LLP
11
Peter J. Mucchetti
Chief, Litigation I Section
Antitrust Division
United States Department of Justice
December 7, 2015
The views expressed in this presentation are the author’s and
do not purport to reflect those of the United States Department of Justice
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WellPoint-Amerigroup (2012)
Humana-Arcadian (2012)
BCBS of Montana-New West (2011)
BCBS of Michigan-Physicians Health Plan of
Mid-Michigan (2010)
UnitedHealth Group-Sierra Health Services
(2008)
UnitedHealth Group-PacifiCare (2005)
Aetna-Prudential (1999)
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WellPoint proposed to acquire Amerigroup for
approximately $5 billion.
The merger would have substantially lessened
competition in the provision of Medicaid
managed care plans in Northern Virginia.
WellPoint and Amerigroup were the only two
providers of Medicaid managed care plans in
Northern Virginia.
The companies addressed the Department’s
concerns by divesting Amerigroup’s Virginia
operations
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Humana sought to acquire Arcadian
Substantial concentration in 45 counties in
Arizona, Arkansas, Louisiana, Oklahoma, and
Texas
Product market – no broader than the sale of
Medicare Advantage plans
Settlement required divestitures in 51
counties
Settlement requires acquirer to have
substantially the same access to healthcare
providers
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Hospitals owned New West, a health insurer
New West was one of only two significant
competitors to Blue Cross in commercial
health insurance in four parts of Montana
Hospitals collectively agreed to buy health
insurance only from Blue Cross for six years
Hospitals received two seats on Blue Cross’
board if they did not compete with Blue Cross
The agreement effectively eliminated New
West as a competitor.
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Divestiture of New West’s remaining
commercial health-insurance business
Hospital owners required to enter three-year
contracts with the acquirer on substantially
similar terms to New West’s terms
Blue Cross must provide notice before using
exclusive contracts with health-insurance
brokers, or exclusive or most-favored-nation
provisions in agreements with health-care
providers
How FTC and DOJ Guidance Affects
the Future of Mergers and ACOs
Alexis James Gilman
Assistant Director
Mergers IV Division, Bureau of Competition
Federal Trade Commission
13th Annual Washington Health Law Summit
December 7, 2015
Any views expressed are the views of the presenter and do not reflect those of the
Federal Trade Commission or any individual Commissioner
Provider Merger Enforcement Actions
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Evanston/Highland Park (2004-2008) – IP GAC; order (conduct relief)
Inova/Prince William (2008) – IP GAC; abandoned
Carilion/CSE/CAI (2009-2010) – advanced OP imaging, OP surgical services;
consent order (divestitures)
ProMedica/St. Luke’s (2011-present) – IP GAC, OB; PI, divestiture
OSF/Rockford (2011-2012) – IP GAC, PCP services; preliminary injunction
Phoebe Putney/Palmyra (2011-2015) – IP GAC; consent order
Reading/SIR (2012) – 4 IP and OP surgical services; abandoned
Renown Health (2012) – adult cardiology services; consent order
Capella/Mercy (2013) – hospitals; abandoned prior to suit
St. Luke’s/Saltzer (2013-present) – adult PCP services; divestiture order
CHS/HMA (2014) – IP GAC; consent order (divestitures)
Surgery Partners/Symbion (2014) – OP surgical services; consent order
(divestiture)
Keystone/Ortho. Assoc. (2015) – ortho physician services; consent order
Cabell/St. Mary’s (filed 2015) – IP GAC, OP surgical services; TBD
St. Luke’s/Saltzer – Overview
• Health system acquisition of physician group in
Nampa, Idaho
• Private plaintiff suit, follow by FTC and Idaho suit
• Product market: adult PCP services
• Market share/structure: 80% (24 PCPs), 3-2
• Key Issues
– Geographic market: Nampa v. Nampa/Boise
– Efficiencies analysis and the ACA
– Vertical foreclosure of competitor
ACOs and Antitrust
• Antitrust agencies recognize potential ACO benefits
CMS MSSP ACO Final Rule
– Recognizes antitrust review of ACO formation and
conduct
• DOJ/FTC antitrust statement of enforcement policy
– Does not apply to mergers
– Expedited review available
– “Rule of reason” analysis for ACOs in MSSP
– Safe harbors based on market shares
ACOs and Antitrust
• Potential red flags for ACOs with high shares
– Prevent steering/tiering; MFNs
– Tying sales of ACO services to purchasing services
outside ACO
– Exclusivity that inhibits payer contracting outside ACO
– Limiting payer’s ability to share info with enrollees on
cost, quality, efficiency, and performance
• Early Results
– Hundreds of MSSP and commercial ACOs
– Only two ACOs have requested antitrust review
– No FTC enforcement actions to date
Hot Topics
• CONs
– Commissioner Ohlhausen speech
– FTC staff comment re: North Carolina CON regs.
– FTC/DOJ statement re: Virginia COPN
• COPA Comment Letters
– New York legislation
– Oregon legislation
– Tennessee Dep’t of Health re: COPA
– Virginia Dep’t of Health re: Cooperative Agrmts.
Recent Development
• FTC challenges Cabell/St. Mary’s merger
• According to the Administrative Complaint:
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Only two hospitals in Huntington, WV
Product market: IP GAC, OP surgical services
Geographic market: Four-County Huntington Area
Market shares/structure: 75% combined share
Merger would eliminate price and non-price competition
Entry is unlikely to be timely or sufficient
Efficiencies largely not cognizable
Temporary conduct remedies (AVC, LOA) are insufficient
WV rate review does not prevent price increases
Take-Aways
• Potential harm assessed in individual services lines and
cluster of services
• Health plans don’t always complain; complaints do not
always amount to antitrust concern
• Health plan, community support is not always outcome
determinative
• Consummated mergers can and may be challenged
• Efficiency arguments taken seriously and can succeed
• ACA is not an antitrust defense
• Strong preference for structural relief
• FTC likely to be active in COPA matters
Scenario Assumptions
• The hospitals are all in the same geographic
market
• Although the purpose of the entity was to
contract for MSSP, the resulting entity is
attractive to private payors as well
• The value of the ACO is the data that it has
collected and created through the use of data
analytics technology
• The relationship captures at least 75% of the
market
27
Scenario #1
Single ACO
Cheddar General
Hospital
Gouda General
Hospital
Blue General
Hospital
ACO
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Scenario #2
Coordinated Care Agreements
Cheddar General
Hospital
Gouda General
Hospital
Blue General
Hospital
ACO
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Scenario #3
Merged Entity; Wholly-owned ACO
Cheddar General
Hospital
Blue General
Hospital
Gouda General
Hospital
ACO
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QUESTIONS
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