Under the Patient Protection and Affordable Care Act, physicians, hospitals and other health care providers are encouraged to form collaborative care groups, called Accountable Care Organizations ("ACOs"), to provide innovativde services to reduce costs and improve quality of patient care. The Affordable Care Act created the Medicare Shared Savings Program under which ACOs may share in any savings they create for Medicare beneficiaries if the ACOs meet quality performance standards established by the Secretary of Health and Human Services through the Centers for Medicare & Medicaid Services ("CMS"). 
Under a companion CMS proposed rule, independent providers are permitted to qualify as an ACO if the organization has (i) a formal legal structure that allows it to receive and distribute payments for shared savings, (ii) a leadership and management structure that includes clinical and administrative processes, (iii) processes to promote evidence-based medicine and patient engagement, (iv) a system for reporting on quality and cost measures, and (v) the ability to provide coordinated care for beneficiaries. Because the formation of ACOs is costly, requiring the integration of independent provider practices, providers have indicated they are more likely to form ACOs if they can use the ACO for commercially insured patients as well as Medicare beneficiaries.
Understandably, independent providers are concerned about the antitrust exposure that may result from forming an ACO, an organization that may contain competing providers, to serve both the Medicare and commercial markets. To allay this concern, the Federal Trade Commission and the Antitrust Division of the Department of Justice ("Agencies") have jointly issued for comment the Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program ("Policy Statement").
The fundamental premise underpinning the Policy Statement is that the Agencies have determined that organizations meeting the above-listed CMS criteria for approval of an ACO are "reasonably likely to be bona fide arrangements intended to improve the quality, and reduce the costs, of providing medical and other health care services through their participants' joint efforts." Further, the Agencies have determined that meeting the CMS requirements provides antitrust protection for ACOs to jointly negotiate with private-sector payers in the commercial market.
Agencies' Antitrust Analysis
The Policy Statement provides guidance to providers on how to form procompetitive ACOs. It describes (i) the ACOs to which the Policy Statement will apply, (ii) when the Agencies will apply rule of reason treatment to those ACOs, (iii) an antitrust safety zone for certain ACOs, (iv) the CMS-mandated antitrust review process for certain other ACOs, and (v) options for ACOs to gain additional antitrust clarity if they fall outside the safety zone but below the CMS-mandated antitrust threshold.
In determining whether an ACO is likely to raise competitive concerns, the Agencies will evaluate its share of services in the ACO participants' Primary Service Area ("PSA"). The higher the PSA share, the greater the risk the ACO will be anticompetitive. "An ACO with high PSA shares may reduce quality, innovation, and choice for Medicare and commercial patients, in part by reducing the ability of competing . . . ACOs to form . . .and may allow the ACO to raise prices to commercial health plans above competitive levels."
The Agencies are not likely to challenge an ACO when independent ACO participants providing the same services "have a combined share of 30 percent or less of each common service in each participant's PSA." Further, "[a]ny hospital or ambulatory surgery center ("ASC") participating in an ACO must be non-exclusive to the ACO to fall within the safety zone . . . [allowing] a hospital or ASC . . . to contract individually or affiliate with other ACOs or commercial payers."
ACOs whose share exceeds 50 percent for any common service that two or more independent participants provide to patients in the same PSA would trigger a mandatory review by the Agencies. The 50 percent share threshold for mandatory review provides an indication of the potential for competitive harm from ACOs with high PSA shares, although such share would not be presumed to be unlawful.
Finally, a voluntary review is permitted for ACOs falling between the 30 percent and 50 percent thresholds that "desire further certainty" regarding the application of the antitrust laws to their formation and planned operations. All antitrust reviews would be coordinated by an interagency working group and performed on an expedited basis - within 90 days of receiving all necessary documents and information.
The Agencies are accepting public comment from health care providers, payers, consumers, and other stakeholders on the proposed Policy Statement through May 31, 2011.
Day Pitney's Antitrust group will continue to track the proposed Policy Statement. For more information on the Policy Statement and the comment process, please contact any of the individuals listed above.
 Patient Protection and Affordable Care Act, Pub. L. No. 111-48, § 2706 (2010).
 Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, available at http://www.ftc.gov/os/fedreg/2011/03/110331acofrn.pdf
 Id. at 5.
 "[T]he Agencies will provide rule of reason treatment to an ACO if, in the commercial market, the ACO uses the same governance and leadership structure and the same clinical and administrative processes as it uses to qualify for and participate in the Shared Savings Program." Id. at 5.
 "Joint price agreements among competing health care providers are evaluated under the rule of reason . . . if the providers are financially or clinically integrated and the agreement is reasonably necessary to accomplish the procompetitive benefits of the integration. . . . A rule of reason analysis evaluates whether the collaboration is likely to have substantial anticompetitive effects and, if so, whether the collaboration's potential procompetitive efficiencies are likely to outweigh those effects." Id. at 3-4. The Agencies have articulated fulsome standards for financial and clinical integration in Statements of Antitrust Enforcement Policy in Health Care (1996), available at http://www.ftc.gov/reports/hlth3s.pdf.
 "While a PSA does not necessarily constitute a relevant antitrust geographic market, it nonetheless provides a useful tool for evaluating potential competitive effects." Policy Statement, supra note 2, at 6 n22.
 Id. at 6.
 Id. at 7.
The Policy Statement sets forth a "rural exception" and a "dominant provider limitation" that enable an ACO to contract on a non-exclusive basis with a physician from a rural county even if the inclusion of that physician causes the ACO's share of any common service to exceed 30 percent of the market, and to contract on a non-exclusive basis with a physician with a greater than 50 percent share in its PSA of any service that no other participant provides in that PSA. Id. at 7-8.
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