While ACOs hold some promise to help improve the quality of care and lower costs, these organizations could also lead to higher costs through increased provider consolidation and cost-shifting. These two issues were raised in three separate letters sent to the Department of Justice and the Federal Trade Commission by three groups representing employers. Here are some of the highlights:
- “The harms that can result from increases in, and exercises of, market power in the delivery of health services are severe. Even a modest increase in the cost of health care services at a local level can result in many millions of dollars of additional cost to the Council’s members and to the employees, retirees and family members they cover. Similarly, an anticompetitive ACO that blockades creation of other ACOs or Medicare health care delivery programs, such as Medicare Advantage plans, could undermine the intended goals of the Medicare SSP and harm private payors as well.”
- “The prospect of antitrust law enforcement cannot be counted upon to deter or catch and prevent before harm occurs every inappropriate accretion of market power. Moreover, once ‘broken,’ it is very hard to ‘fix’ competition in health care markets after competition has lost dynamism and market power is entrenched. After-the-fact antitrust enforcement can take years and may be inadequate to prevent harm to consumers and restore competition.”
- “The Council is concerned, apart from the untested nature of the PSA screening measure, about the switch to a 30 percent threshold where exclusivity is present. In other words, assuming that the PSA tool were an accurate predictor of the contours of the applicable geographic market, a 30 percent safety zone for joint ventures of competitors that entail exclusivity would effectively assign automatic approval, absent extraordinary circumstances, to contracting that would create a market structure with only three provider network organizations and, via exclusivity, three pathways for private plan provider contracting throughout the marketplace.”
- “The Council recommends therefore that the safety zone screen in the Proposed Statement should be changed from 30 percent to 20 percent where two or more providers in the ACO provide a common service. Or, in the alternative, the safety zone should be set at 20 percent for any common service line where there is exclusivity for the affected ACO participants.”
- “Similarly, the CMS proposed regulation and the Proposed Statement set a 50 percent threshold for the mandatory antitrust review requirement. The Council is concerned that this threshold is too high. In health markets, an ACO with between 40 and 50 percent of the primary care physicians could very likely have the potential to exercise market power. Again, given uncertainty about the predictive value of PSAs as proxies for geographic market definition in an antitrust screening tool, and, moreover, the potential that ACO entities may have exclusivity arrangements with 50 percent of the primary care physicians or even specialists for commercial health plan products without triggering mandatory review under the Proposed Statement, the Council believes that the proposed 50 percent threshold is too high.”
- “Numerous scholars and studies have recognized that concentrated market power in the delivery of health care services is a cause of higher prices and costs and also that ACOs pose exactly that risk, if antitrust safeguards are not effective. The Medicare Payment Advisory Commission has warned that “One danger [of ACOs] is that physician groups consolidate into larger entities and use this negotiating power to increase prices charged to private insurers.”
- “The March 2010 report by Massachusetts Attorney General Martha Coakley made a key finding that price increases in provider services caused most of the increase in health care costs during the past few years in Massachusetts. The report suggests that market consolidations and combinations have contributed to this rise in prices and cost, and that increased prices are not explained by efficiencies or improvements in quality or health outcomes.”
- “It is a key responsibility of the Antitrust Agencies, therefore, to assure that private parties’ activities in response to the Medicare SSP initiative stay wholly within the bounds of the antitrust laws and do not create or entrench market power, both as regards impact on Medicare beneficiaries and the Medicare program, but also, and critically, as regards impact on the private plan marketplace. To protect against the latter risk, we recommend that applying ACOs, at least those outside the safety zone, be required to submit with their initial application, and in annual updates, their negotiated rates of payment with commercial payors and that this information be shared with the Antitrust Agencies. This will help CMS monitor for increased differentials between Medicare and commercial payment rates, which could be a signal that there may be difficulty in sustaining ACO providers active commitment to providing access to existing and new Medicare patients. This information would also be valuable to the Antitrust Agencies in identifying and guarding against anticompetitive price increases to private plan payers.”
National Business Group on Health:
- “ACOs hold promise to truly reorganize health care delivery and reorient care to focus on prevention, primary care and wellness. However, they must not serve as vehicles to exert market leverage over Medicare or private payers, including self-funded employer plans and commercial insurers and to the detriment of patients.”
- “NBGH believes that the Agencies’ guidelines setting up a screening mechanism for antitrust review of potential ACOs should err on the side of caution to prevent harm to consumers, the Medicare program, and private payers. Therefore, NBGH recommends that the Agencies lower the 30% safety zone and the 50% mandatory review thresholds to 20% and 40%, respectively.”
- “Furthermore, because ACOs should improve the efficiency and effectiveness of care for all, including non-Medicare patients, and because private payers—self funded employer plans, commercial insurers, and people who buy their own insurance or pay part of the cost of their coverage through employers—are likely to feel the brunt of anti-competitive effects because they cannot set prices administratively like Medicare, which can mitigate the harmful effects of market power, NBGH strongly believes that CMS should not provide shared savings payments to ACOs that demonstrate evidence of increased ‘cost-‘ shifting to private payers and non-Medicare beneficiaries.”
- “While not all market consolidation is anticompetitive, given the recent wave of hospital consolidation and hospital purchase of physician practices, consumers and payers have legitimate reason to be concerned if this program leads to additional consolidation that proves anti-competitive.”
- “…NBGH believes that the Agencies should assure sufficient review of entities to prevent harm to consumers for several reasons. First, because of the newness of the ACO and Shared Savings Program, the Agencies should review more rather than fewer entities. Not only is the program new, but also its approach to analyzing entities based on primary service areas (PSAs) is new. Second, the potential harm and cost to consumers of false negatives—insufficient review of entities that could exercise market power—warrant the additional caution. Finally, proactive prevention of antitrust problems at the outset rather than enforcement after the fact, always a much harder task, calls for lower thresholds.”
- “Similarly, because antitrust agencies and courts have found anti-competitive harm to consumers at levels below 50%, and because of the newness of the program and the proposed screening process for review, lowering the threshold for mandatory review from 50% to 40% will reduce the possibility that ACOs will harm consumers.”
- “‘Cost’ shifting definitely is not the intention of the ACO program and can also be evidence of market power. For both of these reasons, NBGH strongly believes that CMS should not reward ACOs with shared savings payments if data show that the ACOs have shifted costs to private payers and private patients. At a minimum, CMS should reduce bonuses by the amount of ‘cost-‘ shifting. Furthermore, CMS should consider removing ACOs found to be ‘cost-‘ shifting from the program. The final rules should specify.”
- “A recent analysis commissioned by the National Business Group on Health and conducted by the actuarial consulting firm Milliman, identified health care markets that produce high value care for Medicare but not for other payers while other markets produce high value care at low cost for both Medicare and patients in the private sector. NBGH believes that markets characterized by the former should not be rewarded since they are likely to be ‘cost-‘ shifting to the private sector as they produce ‘savings’ for Medicare.”
- “Classic economics identifies the ability of a seller to differentially price the same goods or services to different buyers as a potential sign of market power. If a seller can make up lower prices to one buyer by charging more to other buyers, it certainly suggests the absence of competitively determined prices in a marketplace. While the underlying level of ‘cost-‘ shifting is unfortunately routine in the health care ‘market’ in the US, what concerns NBGH and other private payers is that the ACO program not exacerbate the ‘cost-‘ shifting problem.”
- “As part of the program, CMS will collect cost, quality, and utilization data to determine whether the program is meeting its goals. NBGH believes that as part of its data gathering, CMS should determine baseline levels of ‘cost-‘ shifting by calculating the ratio of public to private payments to ACOs for the same services and recalculate these ratios annually. CMS should share these data with the Agencies to alert them to potential antitrust problems.”
Consumer-Purchaser Disclosure Project:
- “ACOs that fall within the antitrust safety zone are considered highly unlikely to raise competitive concerns, and the agencies, ‘absent extraordinary circumstances,’ will not conduct an initial competitive review. For the safety zone, ACO participants that provide common services must have a combined share of 30% or less. We believe the FTC and DOJ should be cautious about which organizations fall into the safety zone and recommend reducing the threshold for the combined share of common services to 20% or less. Given the new and untested nature both of the Shared Savings Program and the Policy Statement, this will reduce the likelihood that the safety zone will generate significant consumer harm by not submitting enough entities to any review.”
- “We strongly support non-exclusivity but feel the threshold should be lowered to 20%. Moreover, we completely agree with the policy statement that ‘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.’ This is an opportunity to strengthen proactive monitoring and enforcement of both newly formed ACOs and already dominant providers.”
- “For reasons stated above, we recommend the PSA share threshold for mandatory antitrust agency review be lowered to 40%.”
- “We recommend in the short-term that FTC and DOJ conduct analyses of private sector market concentration based on data from self-insured employers or proprietary databases.”
- “Second, we strongly encourage the FTC and DOJ to exert a greater level of scrutiny in markets that already have dominant providers. ACOs should not be allowed to extend the reach of already dominant providers. We are concerned this will make matters worse by legitimizing even larger aggregations of supply in the market. In addition to greater scrutiny during the screening process, ACOs with non-dominant providers should be favored in the selection process for the program.”
- “Third, ACO participants undergoing review should inform the three most affected employers and/or labor organizations in their area, which means those with the highest concentration of employees/members served by the ACO. This will provide an opportunity for purchasers to come forward with evidence that may be relevant to the review.”
- “Clearly, the Affordable Care Act’s intent is not to reduce costs for one sector at the expense of another. Therefore, it is not only important to address inappropriate cost-shifting within Medicare, it is imperative to address it across sectors as well so that consumers are not harmed by resulting increases in premiums or reductions in benefits. To do so, we need a system for ongoing monitoring of potential cost-shifting between sectors and within sectors. Per the Shared Savings proposed rule, we support having CMS conduct data analyses to look at patterns in the use of health care services inside and outside ACOs. Even so, what currently is in the proposed rule is not enough to measure progress towards the goal of reducing costs. We think it is vitally important for CMS to add requirements to the ACO program to build a more robust monitoring system and we expect the FTC and DOJ will play a central role in this monitoring as well.”
