Regulating Competition in ACOs: Present and Future Jaime King, JD, PhD ACO Workshop UC Berkeley May 8, 2015

Road Map Federal Enforcement Background Federal Antitrust Enforcement- When to Use Structural vs. Conduct Remedies State Regulatory Options to Promote Competition

Consolidation in Health Care Markets

Federal Enforcement Timeline © Source on Healthcare Price and Competition 2015

Integration of Health Care Organizations Horizontal Integration Vertical Integration

Methods of Integration Alliance Joint Venture Mergers and Acquisitions Sale of Assets

Structural vs. Conduct Remedies

Pre-Merger/Pre-ACO Formation Rule of Reason Horizontal Merger Joint Venture/Collaboration MSSP Structural Remedies Preferred

Key Question Pre-Merger/ACO Formation Is a proposed structure necessary to obtain the pro-competitive goals of the ACO? Horizontal Mergers Alliances Management Contracts Vertical Mergers © Washington Monthly 2014

Pre-Merger Conduct Remedy Challenges Inferior substitute for competition among independent entities. Monitoring High Administrative Costs Enforcement Limited Duration Unintended Consequences

Pre-Merger/ACO Formation Conduct Remedies FTC generally rejects. State AG offices more open to the idea.

Post-Merger/Post ACO Formation Structural Remedies More challenging once firms have been fully integrated Threaten loss of procompetitive efficiencies Conduct Remedies Offer an opportunity to work with an ACO to correct harmful behavior.

Potential Conduct Remedies for ACOs Direct price caps per capita Limits on total health expenditures Contract limitations Limit future acquisitions

Healthcare Organizations with Great Market Concentration Structural Remedies (Sherman Act §2) Full or Partial Divestiture Division into Smaller Entities (AT&T)

ADDITIONAL STATE OPTIONS FOR ACO OVERSIGHT Additional State Options for Oversight

State Data Collection Collect and analyze price, quality and competition data to form empirical evidence base for ACOs. All Payer Claims Database Collect price and quality data on all market actors for comparison. Create entity to gather and analyze data and report to AG and FTC.

Potential Legislation Require Disclosure of Price and Quality Data Contract Provisions Most Favored Nation Bans Prohibit All or Nothing Provisions Limit Exclusionary Contracts State Certification of ACOs (e.g. MA, NY)

State Action Immunity and Certificate of Public Advantage Provide immunity from state and federal antitrust laws. 13 states offer immunity specifically for healthcare collaborations. (3 State Action Immunity/10 COPA) Provide varied requirements and degrees of protection. FTC generally opposes. Some benefits over conduct remedies.

Future Regulation and Oversight Careful scrutiny through pre-merger/pre-ACO formation review to avoid unnecessary market concentration. Data collection and analysis for impacts on price, quality and competition both within ACO and the market as a whole. If problems arise, agencies should work with the health care entities to find solutions, perhaps via conduct remedies. If repeated violations due to high market concentration, divestiture of a unitary entity should be considered. States can play a significant role, if so desired.

Thank You! Anne Marie Helm, Managing Editor, The Source on Healthcare Price and Competition Evan Sznol, Fellow, The Source on Healthcare Price and Competition

Promise of ACOs Promote Efficiency Improve Quality of Care Enhance Competition

Peril of ACOs Increase Consolidation Hinder Competition Increase Health Care Prices Quality Reduction or Stagnation © Washington Monthly 2014