When the idea of ACOs was floating around prior to enactment of the Affordable Care Act last March, some groups and commentators argued that antitrust enforcement was likely to deter their formation. Some commentators simply had an ox to gore and raised antitrust concern merely as a smokescreen. But the primary concern was that ACOs would constitute clinically integrated provider controlled contracting networks and that there was too little and uncertain antitrust guidance explaining the circumstances under which networks are sufficiently clinically integrated so that their joint negotiations of contracts with health plans on behalf of their competing participants would not run afoul of the antitrust law’s per se ban on horizontal price-fixing agreements.

Probably as a result of this criticism, the Federal Trade Commission, Antitrust Division of the Department of Justice, and Centers for Medicare and Medicaid Services decided that the FTC and DOJ, in conjunction with CMS’s issuance of its proposed ACO regulation, would issue an antitrust enforcement statement explaining how they would analyze ACOs under the antitrust laws and, in particular, when clinical integration is sufficient to permit joint negotiations without their constituting a per se violation of Section 1 of the Sherman Act. Thus, in their proposed ACO Antitrust Statement, issued in March 2011, the agencies made it clear that the rule of reason would apply to ACO joint negotiations with Medicare if they met CMS’s eligibility requirements for participation in the Medicare Shared- Savings Program. Those requirements, as the agencies opined, are broadly consistent with the requirements for clinical integration as discussed in four FTC Staff Advisory Opinions examining specific contracting networks that proposed to clinically integrate and then negotiate contracts. The same principle, the statement provided, would apply to ACO joint negotiations with commercial health plans if the ACO used the same clinical-integration program in contracting with private health plans. Merely because an ACO’s joint negotiations don’t result in a per se horizontal price-fixing violation, however, does not mean that its negotiations are per se legal. Rather, it only means that the effect of the negotiations on competition is assessed under the rule of reason rather than the per se rule; there, the primary question is whether the ACO will have a sufficient degree of market power to raise reimbursement levels above the “competitive” level.