Health Care Stakeholders Advise FTC/DOJ on Payer Networks, ACOs, and Anti-Trust Concerns

As we reported in our last issue, the Federal Trade Commission (FTC) is concerned about the effects of health care reform on competition. The FTC and Department of Justice (DOJ) held a joint workshop to gain insight from industry experts including economists, lawyers, academics, payer representatives and others about how the market is responding to the integration efforts aimed at improving quality while reducing costs and shifting from fee-for-service to value-based reimbursement. Antitrust lawyer, Dionne Lomax of Mintz Levin, a panelist at the workshop, described the overall tone of the two-day event as one of “learning and gathering of information. The agencies are trying to gather information from the industry participants to inform their thinking. The agencies are obviously going to enforce antitrust law and they understand providers under some circumstances can save costs and recognize potential benefits” from various integration and consolidation strategies, Lomax explains, “but they also recognize there can be harms under certain circumstances.”

Why the Health Care Industry Raises Antitrust Concerns

Introductory remarks both days of the workshop and presentations from panelists all highlighted the importance of the health care industry and the need for change. Federal Trade Commission Chairwoman Edith Ramirez opened the workshop noting the industry is “one of the most important segments of the U.S. economy” at 17% of the GDP. Many panelists highlighted the high costs associated with healthcare and the Affordable Care Act’s efforts to reform the system and reduce those costs. Certain providers and some commentators think that aggressive antitrust enforcement is counterproductive to what the ACA is meant to achieve, says Lomax. Panelists and agency representatives dispelled this concern throughout the workshop. Ramirez said that the goals of antitrust law are consistent with goals of health care reform.

Recognizing the complexity of the issues that are at stake, Ramirez stated: “To say that the health care industry has been changing significantly and rapidly would be a vast understatement.” Noting that industry participants are reacting to a new business and regulatory environment, she expressed concern that “their awareness of antitrust law is often in the background.”

Thus, she expressed the importance for the FTC and DOJ to understand what is going on in the marketplace and “anticipate” the potential anticompetitive effects of the industry’s efforts to adapt to a new environment. Assistant Attorney General William J. Baer from the DOJ’s Antitrust Division, echoed her concerns while opening the second day of the conference, explaining that to effectively enforce antitrust law, the agencies need to understand the marketplace and learn about the challenges the industry is facing.

The Importance of Affordable Care Organizations

A major focus of the discussions was the formation of affordable care organizations (ACOs), with an entire panel devoted to discussion of ACOs. Representatives from the Centers for Medicare and Medicaid, private payers and other experts discussed current ACO models, the goals of encouraging more ACO participation and how the CMS is helping entities form ACOs and implement risk based models.

In her opening remarks, Ramirez called the ACO model a “central component of ongoing health care reform efforts.” Indeed, G2 Intelligence’s report Laboratory Services in Accountable Care Organizations indicates that adoption of the ACO model is rapidly growing: “While Medicare ACOs still lead the way in the number of ACO contracts, commercial ACOs cover more lives. As of mid 2014, 60.5 percent of lives served by ACOs were covered under commercial contracts.”

Panelists throughout the conference expressed a need for more data and that it is too early to tell what benefits ACOs are achieving and what changes in the marketplace can be directly linked to ACOs. G2’s report indicates “[e]arly results from Medicare ACO programs were mixed” but that industry experts interviewed for the report “share a positive outlook for ACOs, encouraged particularly by the fact that almost half of the ACOs generated savings.”

Lomax indicates that the impact of an ACO on competition is “situational” and really depends on the market in which it operates, the market share held by the participants, and how concentrated the market is. She noted the DOJ/FTC joint guidelines for ACOs released in 2011 “provide guidance regarding the market shares the agencies will find acceptable” to avoid anti-competitive effects but cautioned that failure to meet the parameters of the safety zone enumerated in the 2011 guidelines doesn’t necessarily mean the entity is anti-competitive.

Payer networks

A panel devoted to the health care exchanges and their potential impact discussed forming payer networks in tiers and what factors make it easier for customers to compare health care insurance. On this subject, as with ACOs, there was some agreement that it is too early to tell the true effect of new network models for payers and the impact of the ACA-spurred health care insurance exchanges.

The potential value of tiered and narrow networks was discussed throughout the workshop. One panelist predicted narrow networks are inevitable if true integration is achieved. Participants noted the need for providers to compete on price and quality and some panelists promoted narrow networks as drivers of such competition.

Lessons for the Agencies

Lomax indicates the agencies learned from the workshop that there is still a lot of movement in the industry toward consolidation but noted that many panelists highlighted the lack of sufficient metrics or information about the efficiencies and cost savings resulting from these consolidations. “Obviously somebody is getting it right – it just takes time to get that type of metrics and information” to explain how and why, she adds. Lomax indicates that “there’s always been a sense that providers don’t want to give up too much of their autonomy” and we are likely “to see more clinical integration and arrangements short of mergers and consolidations.”

While public comments are being accepted until April 30 it is unclear what will happen after that. Lomax notes that while the agencies indicated the workshop may result in further study, reports, or new guidelines, she doesn’t see immediate revisions to existing guidance as likely.

In their summations, the participants of the final panel offered a mixture of caution and encouragement to the agencies. Noting the need to protect the market from anti-competitive behavior and to carefully watch behavior in the marketplace, several panelists cautioned against overly aggressive enforcement of antitrust law and promoted keeping an open mind to how this changing environment affects competition.

Panelists noted the recent St. Luke’s case in which a court found a hospital acquisition of a medical group violated antitrust law and discussed the court decision’s impact on the likelihood of efficiencies being a viable defense to antitrust allegations. Lomax in particular predicted “very stringent efficiency defense standards will apply in the wake of” the St. Luke’s decision. She expressed concern that it’s unclear what the FTC and the courts would find persuasive in terms of quality and efficiencies in an antitrust analysis and that “certain providers may have reduced incentive to pursue certain transactions if they see antitrust as an insurmountable barrier.” Lomax’s summation encouraged the agencies to be “measured” in their enforcement efforts and indicated a concern that agencies not “chill innovation” but rather support good faith efforts by providers to enter into risk based contracting and partner with others to help control costs.

Sources

G2 Intelligence, Laboratory Services in Accountable Care Organizations (2014).

Federal Trade Commission/Department of Justice, Examining Health Care Competition Workshop, Feb. 24-25, 2015; slide presentations, transcripts and video of the workshop are available on the FTC website under News & Events, Events Calendar.

Takeaway: Industry experts advise FTC and DOJ to temper antitrust enforcement with a recognition of the unique challenges facing providers due to current health care reforms.

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