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Life After Obamacare – Part II

Life After Obamacare – Part II

Implications for Accountable Care Organizations

Health Care Law Note
(November 29, 2016)

Click here to read part one of this series.

The Patient Protection and Affordable Care Act (“PPACA”), popularly known as “Obamacare,” encourages health care providers to form Accountable Care Organizations, or ACOs. By linking physician groups, hospitals, and other health care providers that share risk, the PPACA theorizes, better and less costly care could be delivered to patient populations. With the possible death of or significant changes to Obamacare anticipated under the new administration, is it time to put the brakes on ACOs? To the contrary—the gas pedal should be deployed!

Before Obamacare, combinations of health care providers raised the collective skepticism of the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”), which feared that such combinations reduced competition. The DOJ and FTC thus issued its Health Care Antitrust Guidelines in the last decade of the twentieth century, defining standards under which the anticompetitive impacts of mergers, combinations, and information exchanges in the health care industry would be measured. The method of evaluation required close examination of the metrics of competition within a geographic area and included tests of efficiency that only an economist could appreciate. Merely having to contemplate escaping this hurdle discouraged health care mergers, networks, and combinations.

Enter Obamacare. The drafters no doubt realized that to encourage ACO formation, the legislation needed to avoid the DOJ/FTC’s Guidelines, and appropriate language in the Act provided relief. Consistent with the PPACA, on October 11, 2011, the DOJ and the FTC jointly issued a Policy Statement regarding antitrust enforcement under Obamacare. Included in the Policy Statement was a “safe harbor” policy, shielding ACOs from antitrust scrutiny under described circumstances. Essentially, the DOJ/FTC Policy established a truncated competitive impacts analysis for ACOs based on governmentally-reported Medicare data. If ACO formation falls within the safe harbor, the typical DOJ/FTC analysis is no longer a hurdle.

In 2015, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) enhanced the opportunity for bonus payments and higher incentives for ACO participation in Medicare, increasing the value of ACOs to health care providers, in addition to the benefits to health care delivery expressed in the PPACA.  This legislation continues to signal Congressional intent to pursue reimbursement and service delivery models designed to reduce the overall cost of health care spending.

The crystal ball on what, if anything, will replace Obamacare is obscure. Some news reports indicate that the repeal of Obamacare in its entirety is unlikely. It seems premature at best, and foolish at worst, to abandon ACOs at this stage. It appears likely that any changes will be accompanied by some grandfathering provision for existing ACOs to allow more time to see if they are effective in controlling costs, enhancing quality, and improving population health.  This suggests that one suspecting the demise of the ACO “safe harbor” against antitrust enforcement would be better served by taking full advantage of the PPACA while it remains in effect. Forming multi-provider groups after Obamacare is repealed or revised could become more difficult and expensive.

Natalma M. McKnew
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