August 2011 ACO Special Edition

Exclusivity: Antitrust Concerns for ACOs  

By Rashi Mittal,1 Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo, Washington, DC


The Centers for Medicare & Medicaid Services (CMS) proposed Medicare Shared Savings Program (MSSP) regulations2 and the Federal Trade Commission (FTC) and Department of Justice Antitrust Division (DOJ) guidance3 recognize the competitive concerns associated with the formation of Accountable Care Organizations (ACOs). The concept of exclusivity receives special attention in these documents. Exclusivity is generally a policy or practice of joint venture participants to restrict competition among themselves to ensure the success of the joint venture. In the ACO regulations and guidance, certain ACO participants (e.g., physicians, physician groups) are required to be exclusive to one ACO—i.e., to participate in only one ACO—while others are required to be non-exclusive. Because exclusivity may reduce the availability of healthcare provider options for consumers, it may have huge antitrust implications. This article provides a brief overview and discussion of the FTC, DOJ and CMS requirements related to exclusive arrangements for the ACO participants.

FTC & DOJ Guidelines on Exclusivity

The major concern of the FTC and DOJ is whether an ACO will have the ability to exercise market power, which is the ability to raise prices above competitive levels or reduce the quality or availability of services below competitive levels. Because exclusivity can increase the likelihood of an ACO being able to exercise market power, the FTC and the DOJ have proposed a screening mechanism that uses a proxy for market share, the Primary Service Area (“PSA”) share.4 The combined share of each common service independent ACO participants provide within a PSA is the ACO’s PSA share. The PSA is “defined as ‘the lowest number of contiguous postal zip codes from which the [ACO participant] draws at least 75 percent of its [patients].’”5 Low PSA shares reflect a low risk of an ACO being able to exercise market power, while high PSA shares indicate a likelihood of an ACO having market power. As such, the DOJ and FTC created a safety zone for ACOs with low PSA shares and a mandatory antitrust review process for ACOs with high PSA shares.

The antitrust agencies will not challenge ACOs if they fall within the safety zone.6 To receive the benefit of the safety zone, independent ACO participants must have combined shares of 30 percent or less of their common services in each ACO participant’s PSA.7 Irrespective of their PSA shares, any hospital or ambulatory surgery center (“ASC”) participating in the ACO must be non-exclusive—i.e., the hospital or ASC should be allowed to affiliate with another ACO or contract directly with commercial payors—for the ACO to fall within the safety zone.8 The antitrust agencies provide a PSA share exception for rural ACOs seeking to qualify for the zone: the ACO may include one physician per specialty from each rural county and a rural hospital, even if such inclusion results in the ACO’s combined market share for a common service to exceed 30 percent in a PSA.9 But here too, exclusivity is required. The rural ACO’s specialty physician per county and rural hospital may only participate on a non-exclusive basis if the ACO desires to qualify for the safety zone.

If an ACO falls within the safety zone, but includes a dominant provider—i.e., an ACO participant with a greater than 50 percent share in that PSA for any service that no other ACO participant provides to patients in that PSA—the dominant provider must be non-exclusive for the ACO to maintain safety zone status.10 Additionally, to stay within the safety zone, an ACO with a dominant provider cannot require a commercial payor to contract exclusively with the ACO or prevent a commercial payor from contracting with other ACOs or provider networks.11

While these guidelines are fairly clear, the FTC/DOJ should further clarify the meaning of non-exclusivity. Does the term non-exclusive mean that an ACO participant may contract with a private payor, even if the ACO has a contract with that payor? Or does non-exclusive merely mean that a provider should or is able to participate in more than one ACO? Additionally, the antitrust agencies should be aware that non-exclusive arrangements may result in a “free-riding” problem. Once an ACO is operating and has improved the quality of healthcare, a commercial health insurer may refuse to enter into a contract with the ACO and instead sign contracts with the ACO’s individual physicians. The health insurers will receive a “free ride” because the ACO’s physicians’ non-ACO patients covered by the insurers will receive the benefits of the ACO’s quality improvements. In addition, the physicians will have competing interests and may not be able to devote all of their efforts to the ACO’s success.

Also, market share does not always equate to market power, especially because in a non-exclusive arrangement, health insurers have the ability to walk away from these ACOs and still have access to any desirable physicians belonging to these ACOs. If a commercial payor cannot be forced to do business with an ACO, then the ACO and its physicians do not have a means to increase the fees. This makes the percentages associated with the safety-zone rather arbitrary. Accordingly, to maintain the benefits of the formation of the ACOs, the FTC and DOJ should only require non-exclusive arrangements when there is a strong indication that the ACO will actually be able to exercise market power and not rely entirely on market share percentages.

CMS Exclusivity Requirements

The agencies that enforce the antitrust laws are not alone in addressing exclusivity in ACOs. In its Proposed MSSP Regulations, CMS has stated that each Medicare beneficiary will be assigned to only one ACO for cost savings reasons.12 CMS will use claims data to assign to each ACO the beneficiaries who received a plurality of their primary care services from the primary care physicians (PCPs) participating in the ACO.13 Accordingly, each PCP can affiliate with only one ACO, making them exclusive participants.14 This exclusivity will not apply to non-PCP ACO participants (e.g., acute care hospitals, surgical and medical specialists, RHCs, and FQHCs). These participants can participate in more than one ACO and “facilitate the creation of competing ACOs.”15

There are important antitrust implications from PCPs being exclusive ACO participants. An ACO must have sufficient PCPs to serve 5,000 Medicare beneficiaries, which means each ACO requires a minimum number of participating PCPs.16 If an ACO establishes exclusive relationships with most, or all, of the PCPs in a geographic market, the ACO’s market share in PCP services may be high enough to enable the ACO to exercise market power.

Similar antitrust concerns influenced CMS’s decision on whether specialists, who provide primary care services in geographical markets with the shortage of PCPs, should be exclusive to one ACO or not.17 CMS notes that “the ability of specialists to participate in more than one ACO is especially important in certain areas of the country that might not have many specialists.” It therefore decided to only “assign beneficiaries to physicians designated as primary care providers [not specialists] who are providing the appropriate primary care services to beneficiaries.”18 The CMS, however, sought comments on this issue, and the final rule may require specialists on whom beneficiary assignment is based (i.e., those providing a plurality of the primary care services a beneficiary has received) to be exclusive.

In its final rule, the CMS should also clarify whether PCPs are only limited to exclusivity for the MSSP, or if they are allowed to be non-exclusive ACO participants as to private payors.


Exclusivity is important to the antitrust analysis of the competitive impact of an ACO. The agencies’ final rules and guidance will determine what role various ACO participants play in an ACO, including who must be exclusive or non-exclusive ACO participants. The ability of ACOs to achieve universal benefits for their patients, however, may be compromised if the agencies are too restrictive regarding exclusivity. The agencies should consider the pro-competitive benefits of exclusive arrangements and not allow the fear of ACOs exercising market power to outweigh those potential benefits. Also, the three agencies should collaborate and have a uniform approach to exclusivity in relation to ACOs.


Rashi Mittal is an Associate in the Federal practice group of Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo, PC’s Washington, DC office.


Medicare Shared Savings Program: Accountable Care Organizations, 76 Fed. Reg. 19,528 (Apr. 7, 2011) (to be codified at 42 C.F.R. pt. 425) [hereinafter “Proposed MSSP Regulations”].


Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 Fed. Reg. 21,894 (Apr. 8, 2011) [hereinafter “Proposed Antitrust Policy Statement”].



Id., at 21896



Id., at 21897.


















Proposed MSSP Regulations, supra note 2, at 19,562


ACO applicants must provide the tax identification numbers (TINs) of their participants to the CMS, and based on this data, the CMS will link a physician specialty code (e.g., “08” for family practice) to each participant TIN. CMS will, in this way, identify each ACO’s PCPs, or those physicians who specialize in general practice, family practice, geriatric medicine and internal medicine. Id. at 19,563.








Id. at 19,545.


17 Id. at 19,565.


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