1. ABA Washington Health Law Summit Consolidation or Coordination
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

2. Haynes and Boone LLP Co-Chair, Healthcare Practice Group
Kenya S. Woodruff
Haynes and Boone LLP
Co-Chair, Healthcare Practice Group

3. 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

4. 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.

5. Overview of ACO structure
Providers/Suppliers
(All Providers under a Participant’s TIN)
Participants
(Based on TIN)
ACO

6. 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.

7. Hospital ACO Structure
Participation Agreements
MSSP Agreement
ACO Participants
(e.g., Contracted Physicians)
Key
Shared Savings
Contractual Relationship
Equity Interest
Medicare D

8. Independent Physician ACO Structure
Physicians
Third-Party Investors
ACO
Participation Agreements
MSSP Agreement
ACO Participants
(e.g., Physicians)
Key
Shared Savings
Contractual Relationship
Equity Interest
Medicare D

9. Compensation for attainment as well as improvement
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

10. Next Gen ACO Payment Models
Normal FFS Payment
Normal FFS Payment + Infrastructure Payment
Population-Based Payments
Capitation

11. 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

12. How FTC and DOJ Guidance Affects the Future of Mergers and ACOs
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

13. “Because health care is fundamental to our lives, we share an interest in maintaining and fostering competitive markets that will keep prices in check, improve quality, and spur innovation.” William J. Baer, Assistant Attorney General, Remarks as Prepared for the Department of Justice and Federal Trade Commission Workshop on Examining U.S. Health Care Competition, February 25, 2015

14. DOJ Challenges to Health Insurance Mergers
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)

15. WellPoint-Amerigroup
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

16. US v. Humana and Arcadian
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

17. US v. Blue Cross of Montana
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.

18. Blue Cross of Montana Settlement Provisions
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

19. 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

20. Provider Merger Enforcement Actions
Evanston/Highland Park ( ) – IP GAC; order (conduct relief)
Inova/Prince William (2008) – IP GAC; abandoned
Carilion/CSE/CAI ( ) – advanced OP imaging, OP surgical services; consent order (divestitures)
ProMedica/St. Luke’s (2011-present) – IP GAC, OB; PI, divestiture
OSF/Rockford ( ) – IP GAC, PCP services; preliminary injunction
Phoebe Putney/Palmyra ( ) – 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

21. 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

22. 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
CMS MSSP ACO Final Rule
“the Antitrust Agencies will rely on their existing enforcement processes for evaluating concerns raised about an ACO’s formation or conduct and filing antitrust complaints when appropriate.”

23. ACOs and Antitrust CMS MSSP ACO Final Rule
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
CMS MSSP ACO Final Rule
“the Antitrust Agencies will rely on their existing enforcement processes for evaluating concerns raised about an ACO’s formation or conduct and filing antitrust complaints when appropriate.”

24. 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.
CMS MSSP ACO Final Rule
“the Antitrust Agencies will rely on their existing enforcement processes for evaluating concerns raised about an ACO’s formation or conduct and filing antitrust complaints when appropriate.”

25. Recent Development FTC challenges Cabell/St. Mary’s merger
According to the Administrative Complaint:
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
CMS MSSP ACO Final Rule
“the Antitrust Agencies will rely on their existing enforcement processes for evaluating concerns raised about an ACO’s formation or conduct and filing antitrust complaints when appropriate.”

26. 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

27. 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

28. Scenario #1 Single ACO Cheddar General Hospital Gouda General Hospital
Blue General Hospital
ACO

29. Scenario #2 Coordinated Care Agreements
Cheddar General Hospital
Gouda General Hospital
Blue General Hospital
ACO

30. Scenario #3 Merged Entity; Wholly-owned ACO
Cheddar General Hospital
Blue General Hospital
Gouda General Hospital
ACO

31. QUESTIONS