On Feb. 3, 2023, the Department of Justice Antitrust Division (DOJ) announced that it has withdrawn what it considers to be “outdated” joint Federal Trade Commission (FTC) and DOJ guidance, including the 1996 Statements of Antitrust Enforcement in Healthcare (1996 Statements) along with predecessor 1993 guidance, and the 2011 Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (2011 ACO Statement).
Countless healthcare providers have looked to these statements for guidance over almost three decades to understand the enforcement agencies’ perspective on structuring provider collaborations, group purchasing organizations, benchmarking programs and other arrangements. The press release follows Feb 2, 2023, remarks by Deputy Assistant Attorney General Doha Mekki (flagged in a Feb. 3 McGuireWoods legal alert) foreshadowing the withdrawal.
In the announcement, DOJ indicated that the withdrawal of the three policy documents was the “best course of action for promoting competition and transparency” regarding the DOJ’s current approach to healthcare antitrust enforcement. The press release acknowledged that, “since this guidance was first released, the healthcare landscape has changed significantly. As a result, the statements are overly permissive on certain subjects, such as information sharing, and no longer serve their intended purposes of providing encompassing guidance to the public on relevant healthcare competition issues in today’s environment” in light of increased concentration, vertical integration and other changes.
DOJ stressed that it will take a case-by-case enforcement approach informed by recent DOJ enforcement actions and advocacy in healthcare and that there is no plan to issue replacement guidance. There is broad speculation that the FTC will also withdraw the 1996 Statements and 2011 ACO Statement and that other joint guidance that incorporates aspects of the 1996 Statements (e.g., the 2016 Antitrust Guidance for Human Resources Professionals) may be withdrawn in the near term.
The Feb. 3 announcement is the latest in a string by DOJ highlighting that healthcare antitrust enforcement is a top priority. It should serve as notice to healthcare providers that antitrust compliance — including implementation of antitrust compliance protocols that require regular evaluation of antitrust risk associated with arrangements involving competitors — must be part of a broader healthcare compliance program and that antitrust risk should be factored into business planning.
What did the DOJ change and how should providers respond to the withdrawal of this guidance?
It is critical to note that DOJ’s decision to withdraw these policy documents and “safety zones” in favor of adopting a case-by-case approach to analysis and enforcement decisions does not mean that provider arrangements are categorically suspect, unlawful or lacking in pro-competitive benefits. Before, during and now after the period of time when these guidance documents were in place, it has been true that conduct may be deemed per se unlawful if it constitutes price fixing, market allocation, joint boycott or another serious antitrust violation; may be subject to a rule-of-reason analysis weighing the pro-competitive benefits and anti-competitive harms to determine the conduct’s lawfulness; or may be inherently unproblematic.
There is no doubt that legitimate provider arrangements with demonstrable potential to expand care delivery, generate efficiencies and reduce costs, and that result in higher-quality care and better patient experience without any undue anti-competitive downside, will continue to be an important part of the healthcare landscape.
However, withdrawal of this guidance creates an opportunity for any healthcare provider to assess the antitrust risk related to arrangements structured based on the 1996 Statements or the 2011 ACO Statement. They would need to confirm that the arrangements would pass muster under the antitrust laws in light of current enforcement norms and guidance; to identify strategies to bring them in line with these norms and guidance; or to determine whether it is in the best interest of the provider to cease participating the arrangement.
This is particularly true because the 1996 Statements and the 2011 ACO Statement contained “safety zones” with market share and other thresholds that DOJ has now disavowed as being indicative of an arrangement’s competitive significance. To the extent participants may have taken comfort in a particular arrangement’s compliance profile in light of these thresholds, it may be prudent to apply a more current analytical framework to assess the antitrust risk associated with collaborative activities. This is particularly true in light of the FTC and DOJ’s dramatically increased civil and criminal enforcement activity in the past few years, much of it focused on provider collusion and information exchange.
1996 Statements and “Safety Zones”
The now-withdrawn 1996 Statements used a framework based on “safety zones,” “which describe conduct that the [FTC/DOJ] will not challenge under the antitrust laws, absent extraordinary circumstances.” Simply because an arrangement fell outside the safety zones did not mean that it was likely to be challenged by the FTC or DOJ. Indeed, antitrust analysis is fact-intensive, and the 1996 Statements themselves “outline[d] the analysis the Agencies will use to review conduct that falls outside the safety zones.” It is also important to note that the statements never provided that any particular arrangement that fell within a safety zone was per se lawful.
The chart below summarizes the subject matter of each of the nine 1996 Statements, along with any safety zone or competitive analysis guidance for arrangements outside the safety zones. It also offers examples of common healthcare arrangements that may have been structured in light of the 1996 Statements.
2011 ACO Statement and “Safety Zones”
In connection with the final rule establishing accountable care organizations, in 2011, FTC/DOJ promulgated the Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program. The 2011 ACO Statement applied to “collaborations among otherwise independent providers and provider groups that are eligible and intend, or have been approved, to participate in the Shared Savings Program.”
It indicated that the eligibility criteria for participating in the Shared Savings Program “are broadly consistent with the indicia of clinical integration that the Agencies previously set forth in the Health Care Statements [specifically Statements 8 and 9]” and, therefore, even ACO arrangements involving contracts with private commercial payors would be subject to a rule-of-reason analysis. With the withdrawal of Statements 8 and 9, it is no surprise that the 2011 ACO Statement was also withdrawn.
The 2011 ACO Statement established its own safety zone, stating that particularly in light of ongoing regulatory monitoring of ACOs, “ACOs that meet the CMS eligibility criteria for and intend, or have been approved, to participate in the Shared Savings Program and are highly unlikely to raise significant competitive concerns” would not be challenged by the antitrust agencies, absent extraordinary circumstances. To qualify for the safety zone, ACO participants providing the same service within the ACO were required to have, combined, no more than 30% of that service in each participant’s primary service area. In addition, whether a particular provider was rural, exclusive to the ACO or nonexclusive was relevant to the safety zone analysis, depending on that provider’s characteristics.
Although ACOs historically have not been a focus of antitrust enforcement, as these entities grow in size, they may become subject to increased scrutiny. Recently announced coordination between DOJ and the Department of Health and Human Services, with an aim of improving antitrust enforcement (flagged by McGuireWoods this 2022 alert), also may lead to competitive concerns regarding ACOs coming to DOJ’s attention through CMS regulators.