[Federal Register Volume 76, Number 209 (Friday, October 28, 2011)]
[Notices]
[Pages 67026-67032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-27944]



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Vol. 76

Friday,

No. 209

October 28, 2011

Part II





Federal Trade Commission





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Department of Justice





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Antitrust Division





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Statement of Antitrust Enforcement Policy Regarding Accountable Care 
Organizations Participating in the Medicare Shared Savings Program; 
Notice

  Federal Register / Vol. 76, No. 209 / Friday, October 28, 2011 / 
Notices  

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FEDERAL TRADE COMMISSION

DEPARTMENT OF JUSTICE

Antitrust Division


Statement of Antitrust Enforcement Policy Regarding Accountable 
Care Organizations Participating in the Medicare Shared Savings Program

AGENCIES: FTC, DOJ.

ACTION: Final Policy Statement.

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SUMMARY: The FTC and DOJ (the ``Agencies'') are issuing the final 
Statement of Antitrust Enforcement Policy Regarding Accountable Care 
Organizations Participating in the Medicare Shared Savings Program (the 
``Policy Statement'') in conjunction with the final rule issued today 
by the Centers for Medicare and Medicaid Services (``CMS'') under 
Section 3022 of the Affordable Care Act (the Patient Protection and 
Affordable Care Act, Public Law 111-48, 124 Stat. 119 (2010), and the 
Health Care and Education Reconciliation Act of 2010, Public Law 111-
52, 124 Stat. 1029 (2010)).
    The final Policy Statement differs from the proposed Policy 
Statement issued earlier this year, 76 FR 21,894 (Apr. 19, 2011), in 
two significant respects. First, the entire final Policy Statement--
with the exception of the voluntary expedited antitrust review--applies 
to all collaborations among otherwise independent providers and 
provider groups that are eligible and intend, or have been approved, to 
participate in the Medicare Shared Savings Program (the ``Shared 
Savings Program''); its applicability is no longer limited to those 
collaborations formed after March 23, 2010, the date on which the 
Patient Protection and Affordable Care Act was enacted. Second, because 
the Shared Savings Program final rule will no longer require a 
mandatory antitrust review for certain collaborations as a condition of 
entry into the Shared Savings Program, the final Policy Statement no 
longer contains provisions relating to mandatory antitrust review. 
However, as discussed in the final rule, the Agencies will continue to 
protect competition in markets served by accountable care organizations 
(``ACOs'') that participate in the Shared Savings Program, aided by 
data and information from CMS that will assist the Agencies in 
monitoring the competitive effects of ACOs. Specifically, CMS will 
provide the Agencies with aggregate claims data regarding allowed 
charges and fee-for-service payments for all ACOs accepted into the 
Shared Savings Program and also with copies of all of the applications 
to the Shared Savings Program of ACOs formed after March 23, 2010. The 
Agencies will vigilantly monitor complaints about an ACO's formation or 
conduct and take whatever enforcement action may be appropriate. 
Additionally, upon request, the Agencies will provide an expedited 90 
day review for newly formed ACOs that wish to obtain additional 
antitrust guidance.

SUPPLEMENTARY INFORMATION: 

Statement of Antitrust Enforcement Policy Regarding Accountable Care 
Organizations Participating in the Medicare Shared Savings Program

I. Introduction

    The Patient Protection and Affordable Care Act and the Health Care 
and Education Reconciliation Act of 2010 (collectively, the 
``Affordable Care Act'') seek to improve the quality and reduce the 
costs of health care services in the United States by, among other 
things, encouraging physicians, hospitals, and other health care 
providers to become accountable for a patient population through 
integrated health care delivery systems.\1\ One delivery system reform 
is the Affordable Care Act's Medicare Shared Savings Program (the 
``Shared Savings Program''), which promotes the formation and operation 
of Accountable Care Organizations (``ACOs'' \2\) to serve Medicare fee-
for-service beneficiaries.\3\ Under this provision, ``groups of 
providers of services and suppliers meeting criteria specified by the 
[Department of Health and Human Services] Secretary may work together 
to manage and coordinate care for Medicare fee-for-service 
beneficiaries through an [ACO].'' \4\ An ACO may share in some portion 
of any savings it creates if the ACO meets certain quality performance 
standards established by the Secretary of Health and Human Services 
through the Centers for Medicare and Medicaid Services (``CMS''). The 
Affordable Care Act requires an ACO that wishes to participate in the 
Shared Savings Program to enter into an agreement with CMS for not less 
than three years.\5\
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    \1\ Health Care and Education Reconciliation Act of 2010, Public 
Law 111-52, 124 Stat. 1029 (2010); Patient Protection and Affordable 
Care Act, Public Law 111-48, 124 Stat. 119 (2010).
    \2\ As used in this document, ``ACO'' refers to Accountable Care 
Organizations under the Medicare Shared Savings Program, which also 
may operate in commercial markets. Patient Protection and Affordable 
Care Act 3022, 124 Stat. at 395-99.
    \3\ Id.
    \4\ Id. at 395.
    \5\ Id. at 396.
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    Recent commentary suggests that some health care providers are 
likely to create and participate in ACOs that serve both Medicare 
beneficiaries and commercially insured patients.\6\ The Federal Trade 
Commission and the Antitrust Division of the Department of Justice (the 
``Agencies'') recognize that ACOs may generate opportunities for health 
care providers to innovate in both the Medicare and commercial markets 
and achieve for many other consumers the benefits Congress intended for 
Medicare beneficiaries through the Shared Savings Program. Therefore, 
to maximize and foster opportunities for ACO innovation and better 
health for patients, the Agencies wish to clarify their antitrust 
enforcement policy regarding collaborations among independent providers 
that seek to become ACOs in the Shared Savings Program. The Agencies 
recognize that not all such ACOs are likely to benefit consumers, and 
under certain conditions ACOs could reduce competition and harm 
consumers through higher prices or lower quality of care. Thus, the 
antitrust analysis of ACO applicants to the Shared Savings Program 
seeks to protect both Medicare beneficiaries and commercially insured 
patients from potential anticompetitive harm while allowing ACOs the 
opportunity to achieve significant efficiencies.
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    \6\ Fed. Trade Comm'n & Dep't of Health and Human Serv., 
Workshop Regarding Accountable Care Organizations, and Implications 
Regarding Antitrust, Physician Self-Referral, Anti-Kickback, and 
Civil Monetary Penalty (CMP) Laws (Oct. 5, 2010).
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    To achieve these goals, the Agencies have developed this Statement 
of Antitrust Enforcement Policy Regarding Accountable Care 
Organizations Participating in the Medicare Shared Savings Program (the 
``Policy Statement''). The Policy Statement is intended to ensure that 
health care providers have the antitrust clarity and guidance needed to 
form procompetitive ACOs that participate in both the Medicare and 
commercial markets. The Policy Statement describes (1) the ACOs to 
which the Policy Statement will apply; \7\ (2) when the Agencies will 
apply rule of reason treatment to those ACOs; (3) an antitrust safety 
zone; and (4) additional antitrust guidance for ACOs that are outside 
the safety zone, including a voluntary expedited

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antitrust review process for newly formed ACOs.\8\
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    \7\ The analytical principles underlying the Policy Statement 
also would apply to various ACO initiatives undertaken by the 
Innovation Center within CMS as long as those ACOs are substantially 
clinically or financially integrated.
    \8\ The Policy Statement provides guidance to assist ACOs in 
determining whether they are likely to present competitive concerns. 
It does not reflect the full analysis that the Agencies may use in 
evaluating ACOs or any other transaction or course of conduct. 
``Newly formed ACOs'' are defined infra at note 23.
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II. Applicability of the Policy Statement

    The Policy Statement applies to collaborations among otherwise 
independent providers and provider groups \9\ that are eligible and 
intend, or have been approved, to participate in the Shared Savings 
Program. For ease of reference, the Policy Statement refers to such 
collaborations as ACOs, although they may not yet have been approved to 
participate as ACOs in the Shared Savings Program. The Policy Statement 
refers to the otherwise independent providers and provider groups that 
constitute the ACO as ACO participants.\10\ The Policy Statement does 
not apply to mergers. Merger transactions, including transactions that 
meet the criteria set forth in Section 1.3 of the Antitrust Guidelines 
for Collaborations Among Competitors,\11\ will be evaluated under the 
Agencies' Horizontal Merger Guidelines.\12\ The Policy Statement also 
does not apply to single, fully integrated entities.
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    \9\ A ``collaboration'' comprises an agreement or set of 
agreements, other than merger agreements, among otherwise 
independent entities jointly to engage in economic activity, and the 
resulting economic activity. U.S. Dep't of Justice & Fed. Trade 
Comm'n, Antitrust Guidelines for Collaborations Among Competitors 
1.1 (2000) [hereinafter Collaboration Guidelines], available at 
http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf.
    \10\ An ACO participant can be an independent physician solo 
practice, a fully integrated physician group practice, an inpatient 
facility, or an outpatient facility. The Policy Statement's 
definition of ACO participant may differ from CMS's use of the term.
    \11\ Collaboration Guidelines, supra note 9, 1.3.
    \12\ U.S. Dep't of Justice & Fed. Trade Comm'n, Horizontal 
Merger Guidelines (rev. ed. 2010), available at http://www.justice.gov/atr/public/guidelines/hmg-2010.pdf.
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III. The Agencies Will Apply Rule of Reason Analysis to ACOs That Meet 
Certain Conditions

    The antitrust laws treat naked price-fixing and market-allocation 
agreements among competitors as per se illegal. Joint price agreements 
among competing health care providers are evaluated under the rule of 
reason, however, 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 anticompetitive effects and, if so, whether the 
collaboration's potential procompetitive efficiencies are likely to 
outweigh those effects. The greater the likely anticompetitive effects, 
the greater the likely efficiencies must be for the collaboration to 
pass muster under the antitrust laws. The Agencies have articulated the 
standards for both financial and clinical integration in various policy 
statements, speeches, business reviews, and advisory opinions. For 
example, the Agencies' Statements of Antitrust Enforcement Policy in 
Health Care (the ``Health Care Statements'') explain that where 
participants in physician or multiprovider joint ventures have agreed 
to share substantial financial risk as defined in the Health Care 
Statements, their risk-sharing arrangement generally establishes both 
an overall efficiency goal for the venture and the incentives for the 
participants to meet that goal.\13\ Accordingly, the setting of price 
is integral to the venture's use of such an arrangement and therefore 
warrants evaluation under the rule of reason.\14\ The Health Care 
Statements provide examples of financial risk-sharing arrangements that 
can satisfy this standard, but also recognize that other acceptable 
financial risk-sharing arrangements might develop.\15\
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    \13\ U.S. Dep't of Justice & Fed. Trade Comm'n, Statements of 
Antitrust Enforcement Policy in Health Care, Statements 8 and 9 
(1996) [hereinafter Health Care Statements], available at http://www.ftc.gov/reports/hlth3s.pdf.
    \14\ Id.
    \15\ Id.
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    The Health Care Statements further explain that provider joint 
ventures also may involve clinical integration sufficient to ensure 
that the venture is likely to produce significant efficiencies.\16\ 
Clinical integration can be evidenced by the joint venture implementing 
an active and ongoing program to evaluate and modify practice patterns 
by the venture's providers and to create a high degree of 
interdependence and cooperation among the providers to control costs 
and ensure quality.\17\ Federal Trade Commission staff advisory 
opinions discuss evidence that appears sufficient to demonstrate 
clinical integration in specific factual circumstances.\18\
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    \16\ Id.
    \17\ See, e.g., Christine A. Varney, Assistant Attorney Gen., 
Antitrust Div., U.S. Dep't of Justice, Antitrust and Healthcare at 
12 (May 24, 2010), available at http://www.justice.gov/atr/public/speeches/258898.pdf.
    \18\ See Fed. Trade Comm'n, Advisory Opinions (1982-2010), 
available at http://www.ftc.gov/bc/healthcare/industryguide/advisory.htm#2010.
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    The Affordable Care Act provides that CMS may approve ACOs that 
meet certain eligibility criteria, including (1) a formal legal 
structure that allows the ACO to receive and distribute payments for 
shared savings; (2) a leadership and management structure that includes 
clinical and administrative processes; (3) processes to promote 
evidence-based medicine and patient engagement; (4) reporting on 
quality and cost measures; and (5) coordinated care for 
beneficiaries.\19\ CMS has further defined these eligibility criteria 
through regulations.\20\
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    \19\ Patient Protection and Affordable Care Act, Public Law 111-
48, 3022, 124 Stat. 119, 395-99 (2010).
    \20\ Medicare Program; Medicare Shared Savings Program: 
Accountable Care Organizations, 42 CFR part 425 (2011) [hereinafter 
CMS ACO Rule].
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    By contrast, the Agencies have not previously listed specific 
criteria required to establish clinical integration, but instead have 
responded to detailed proposals from health care providers who have 
decided on specific ways to integrate their health care delivery 
systems to improve quality and lower costs.\21\ The Agencies have 
chosen to avoid prescribing how clinical integration should take place. 
Nonetheless, the Agencies recognize that health care providers seeking 
to create ACOs in the context of the Shared Savings Program could 
benefit from additional antitrust guidance in evaluating whether an ACO 
that satisfies the CMS eligibility criteria could be subject to an 
antitrust investigation and potential challenge as engaging in per se 
illegal conduct.
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    \21\ See generally FTC Staff Advisory Opinions (2002-Present), 
available at http://www.ftc.gov/bc/healthcare/industryguide/opinionguidance.htm; see also U.S. Dep't of Justice & Fed. Trade 
Comm'n, Improving Health Care: Another Dose of Competition ch. 2 at 
34-41 (July 2004), available at http://www.ftc.gov/reports/healthcare/040723healthcarerpt.pdf.
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    The Agencies have determined that CMS's eligibility criteria are 
broadly consistent with the indicia of clinical integration that the 
Agencies previously set forth in the Health Care Statements and 
identified in the context of specific proposals for clinical 
integration from health care providers.\22\ The Agencies also have 
determined that organizations meeting the eligibility requirements for 
the Shared Savings Program are reasonably likely to be bona fide 
arrangements intended to improve the quality, and reduce the costs, of 
providing medical and other health care

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services through their participants' joint efforts.
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    \22\ Id. See also, e.g., TriState Health Partners, Inc. Advisory 
Opinion from FTC Staff (Apr. 13, 2009) (evaluating TriState Health 
Partners' proposal and stating that, if implemented as proposed, FTC 
staff would not recommend that the Commission challenge the proposed 
program), available at http://www.ftc.gov/os/closings/staff/090413tristateaoletter.pdf.
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    To assess whether an ACO has improved quality and reduced costs to 
Medicare, CMS will collect and evaluate cost, utilization, and quality 
metrics relating to each ACO's performance in the Shared Savings 
Program. The results of this monitoring will help the Agencies 
determine whether the CMS eligibility criteria have required a 
sufficient level of clinical integration to produce cost savings and 
quality improvements, and may help inform the Agencies' future analysis 
of ACOs and other provider organizations.
    In light of CMS's eligibility criteria, and its monitoring of each 
ACO's results, the Agencies will treat joint negotiations with private 
payers as reasonably necessary to an ACO's primary purpose of improving 
health care delivery, and will afford rule of reason treatment to an 
ACO that meets CMS's eligibility requirements for, and participates in, 
the Shared Savings Program and uses the same governance and leadership 
structures and clinical and administrative processes it uses in the 
Shared Savings Program to serve patients in commercial markets. The 
Agencies further note that CMS's regulations allow an ACO to propose 
alternative ways to establish clinical management and oversight of the 
ACO, and the Agencies are willing to consider other proposals for 
clinical integration as well.

IV. The Agencies' Antitrust Analysis of ACOs That Meet CMS Eligibility 
Criteria

    The following Sections provide additional antitrust guidance for 
ACOs that are eligible and intend, or have been approved, to 
participate in the Shared Savings Program, including those ACOs that 
also plan to operate in the commercial market. Section A sets forth a 
safety zone for certain ACOs that are highly unlikely to raise 
significant competitive concerns and, therefore, will not be challenged 
by the Agencies under the antitrust laws, absent extraordinary 
circumstances.
    The Agencies emphasize that ACOs outside the safety zone may be 
procompetitive and legal. An ACO that does not impede the functioning 
of a competitive market will not raise competitive concerns. The 
creation of a safety zone reflects the view that ACOs that fall within 
the safety zone are highly unlikely to raise significant competitive 
concerns; it does not imply that ACOs outside the safety zone 
necessarily present competitive concerns.
    Section B offers options for ACOs that seek additional antitrust 
guidance. It describes certain conduct all ACOs generally should avoid, 
other conduct that ACOs with high Primary Service Area (``PSA'') shares 
or other possible indicia of market power may wish to avoid, and the 
process by which a newly formed ACO \23\ may obtain a voluntary 
expedited antitrust review.
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    \23\ ``Newly formed ACOs'' are those ACOs that, as of March 23, 
2010, the date on which the Patient Protection and Affordable Care 
Act was enacted, had not yet signed or jointly negotiated any 
contracts with private payers, and have not yet participated in the 
Shared Savings Program. Patient Protection and Affordable Care Act, 
Public Law 111-48, 124 Stat. 119 (2010). An ACO is not newly formed 
if it comprises only the same, or a subset of the same, providers 
that signed or jointly negotiated contracts with private payers on 
or before March 23, 2010.
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A. The Antitrust Safety Zone for ACOs in the Shared Savings Program
    This Section sets forth an antitrust safety zone for 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. The Agencies will not challenge 
ACOs that fall within the safety zone, absent extraordinary 
circumstances.\24\
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    \24\ Extraordinary circumstances could include, for example, ACO 
participants engaging in collusion or improper exchanges of price 
information or other competitively sensitive information with 
respect to their sale of competing services outside the ACO. See 
infra IV(B)(1)(a).
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    To determine whether it falls within the safety zone, an ACO should 
evaluate the ACO's share of services in each ACO participant's PSA. 
Although a PSA does not necessarily constitute a relevant antitrust 
geographic market, it nonetheless serves as a useful screen for 
evaluating potential competitive effects.
    The Policy Statement focuses on PSA shares for three major 
categories of services: physician specialties, major diagnostic 
categories (``MDCs'') for inpatient facilities, and outpatient 
categories, as defined by CMS, for outpatient facilities.\25\ Although 
these services are useful in evaluating potential anticompetitive 
effects, they do not necessarily constitute relevant antitrust product 
markets. The Appendix to the Policy Statement describes how to 
calculate an ACO's shares of these services in the relevant PSAs, 
identifies data sources available for these calculations, and provides 
illustrative examples.\26\
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    \25\ The Policy Statement does not apply to other types of 
providers (e.g., clinical laboratories or nursing homes). 
Nonetheless, the Agencies recognize that those providers may 
participate in ACOs.
    \26\ The ACO may send questions regarding PSA share calculations 
to [email protected].
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    For an ACO to fall within the safety zone, independent ACO 
participants that provide the same service (a ``common service'') must 
have a combined share of 30 percent or less of each common service in 
each participant's PSA, wherever two or more ACO participants provide 
that service to patients from that PSA.\27\ As noted above, a service 
is defined as a primary specialty for physicians, an MDC for inpatient 
facilities, or an outpatient category for outpatient facilities. The 
PSA for each participant is defined as ``the lowest number of postal 
zip codes from which the [ACO participant] draws at least 75 percent of 
its [patients],'' \28\ separately for all physician, inpatient, or 
outpatient services. Thus, for purposes of determining whether the ACO 
is eligible for the safety zone, each independent physician solo 
practice, each fully integrated physician group practice, each 
inpatient facility (even if part of a hospital system), and each 
outpatient facility will have its own PSA. In addition, each inpatient 
facility hospital will have separate PSAs for its (1) inpatient 
services, (2) outpatient services, and (3) physician services provided 
by its physician employees, if any.\29\
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    \27\ Thus, if two otherwise independent physician group 
practices form an ACO and each includes cardiologists and 
oncologists, each physician group practice would be an independent 
participant in the ACO, and cardiology and oncology would be common 
services. If, on the other hand, one physician group practice 
consists only of cardiologists and the other only of oncologists, 
then there would be no common services and the ACO would fall within 
the safety zone regardless of its share, subject to the dominant 
participant limitation described below.
    \28\ Medicare Program: Physicians' Referrals to Health Care 
Entities With Which They Have Financial Relationships (Phase II), 69 
FR 16,094 (Mar. 26, 2004).
    \29\ See Appendix to the Policy Statement.
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    As described below, the availability of the PSA safety zone differs 
in some cases depending on whether an ACO participant is exclusive or 
non-exclusive to the ACO. To participate in an ACO on a non-exclusive 
basis, a participant must be allowed to contract with private payers 
through entities other than the ACO, including contracting individually 
or through other ACOs or analogous collaborations. The ACO must be non-
exclusive in fact and not just in name. Exclusivity may be present 
explicitly or implicitly, formally or informally, through a written or 
de facto agreement as shown by conduct.\30\
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    \30\ The Health Care Statements further explain the indicia of 
non-exclusivity that the Agencies consider relevant to this 
evaluation. Health Care Statements, supra note 13, at 66-67.
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    Hospitals and Ambulatory Surgical Centers. Any hospital or 
ambulatory surgery center (``ASC'') participating in

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an ACO must be non-exclusive to the ACO to fall within the safety zone, 
regardless of its PSA share.
    Physicians. The safety zone for physicians (regardless of whether 
the physicians are hospital employees) does not differ based on whether 
the physicians are exclusive or non-exclusive to the ACO, unless they 
fall within the rural exception or dominant participant limitation 
described below.
1. Rural Exception
    An ACO that exceeds the 30 percent PSA share may still fall within 
the safety zone if it qualifies for this rural exception. The rural 
exception allows such an ACO to include one physician or physician 
group practice \31\ per specialty from each rural area \32\ on a non-
exclusive basis and still fall within the safety zone, provided the 
physician's or physician group practice's primary office is in a zip 
code that is classified as ``isolated rural'' or ``other small rural.'' 
\33\ Thus, an ACO may qualify for the safety zone as long as it 
includes only one physician or physician group practice per specialty 
for each county that contains at least one ``isolated rural'' or 
``other small rural'' zip code, even if the inclusion of these 
physicians causes the ACO's share of any common service to exceed 30 
percent in any ACO participant's PSA.
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    \31\ To qualify for the rural exception, the physician group 
practice must be treating patients as a fully integrated practice 
group as of the date of the Policy Statement. The practice group can 
add or eliminate physicians and still remain in the safety zone, as 
long as the number of full-time equivalent physicians in the 
practice group does not increase during the ACO's Shared Savings 
Program agreement period. For the purposes of the Policy Statement, 
Federally Qualified Health Centers and Rural Health Clinics, as 
defined by the Social Security Act, are considered physician group 
practices. 42 U.S.C. 1396d (2006); 42 U.S.C. 1395x(aa) (2006). A 
physician or physician group practice that qualifies for the rural 
exception may obtain ``call coverage'' from other physicians in the 
same rural area without losing its safety zone status as long as 
those physicians do not participate in the ACO.
    \32\ For the purposes of the Policy Statement, a ``rural area'' 
means any county containing at least one zip code that has been 
classified as ``isolated rural,'' or ``other small rural,'' 
according to the WWAMI Rural Health Research Center of the 
University of Washington's seven category classification. http://depts.washington.edu/uwruca/ruca-maps.php. These are zip codes that 
have a Rural Urban Commuting Area (``RUCA'') code of 10.0, 10.2-
10.6, 8.0, 8.2-8.4, or 9.0-9.2 as developed by the WWAMI Rural 
Health Research Center of the University of Washington and the U.S. 
Department of Agriculture's Economic Research Service. http://www.ers.usda.gov/briefing/Rurality/RuralUrbanCommutingAreas/. The 
RUCA code for any particular zip code can be found at http://depts.washington.edu/uwruca/ruca-download.php.
    \33\ A physician's or physician group practice's primary office 
is the office in which the majority of the physician's or physician 
group practice's patient visits take place. If no office serves a 
majority of a physician's patients, the majority of patient visits 
must take place in offices located in ``isolated rural'' or ``other 
small rural'' zip codes to qualify for the rural exception.
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    Likewise, an ACO may include Rural Hospitals \34\ on a non-
exclusive basis and qualify for the safety zone, even if the inclusion 
of a Rural Hospital causes the ACO's share of any common service to 
exceed 30 percent in any ACO participant's PSA.
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    \34\ For the purposes of the Policy Statement, a Rural Hospital 
is defined as a Sole Community Hospital, a Critical Access Hospital, 
or any other acute care hospital located in a rural area that has no 
more than 50 acute care inpatient beds and is located at least 35 
miles from any other inpatient acute care hospital. A Sole Community 
Hospital is a hospital that is paid under the Medicare hospital 
inpatient prospective payment system and meets the criteria for Sole 
Community Hospital status as specified at 42 CFR 412.92. See also 
Dep't of Health and Human Servs., Ctrs. for Medicare & Medicaid 
Servs., Sole Community Hospital, Rural Health Fact Sheet Series 
(Oct. 2010), available at https://www.cms.gov/MLNProducts/downloads/SoleCommHospfctsht508-09.pdf; Social Security Act, 42 U.S.C. 
1395ww(d)(5)(D)(iii) (2006). A Critical Access Hospital is a 
hospital that has been certified as a Medicare Critical Access 
Hospital, as described in 42 CFR part 485 subpart F. See also 42 
U.S.C. 1395i-4(c)(2).
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2. Dominant Participant Limitation
    The dominant participant limitation applies to any ACO that 
includes a participant with a greater than 50 percent share in its PSA 
of any service that no other ACO participant provides to patients in 
that PSA. Under these conditions, the ACO participant must be non-
exclusive to the ACO for the ACO to fall within the safety zone.\35\ In 
addition, to fall within the safety zone, an ACO with a dominant 
participant cannot require a private payer to contract exclusively with 
the ACO or otherwise restrict a private payer's ability to contract or 
deal with other ACOs or provider networks.
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    \35\ For example, a physician group participating in the ACO may 
comprise a specialty not found in any other ACO participant. In this 
case, the ACO may be eligible for the safety zone even if the 
physician group's share exceeds 50 percent, but only if the 
physician group participates in the ACO on a non-exclusive basis and 
the ACO does not restrict a private payer's ability to contract or 
deal with other ACOs or provider groups.
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* * * * *
    The safety zone will remain in effect for the duration of an ACO's 
agreement with CMS, provided the ACO continues to meet the safety 
zone's requirements. An ACO will not lose its safety zone status solely 
because it attracts more patients.
B. ACOs Outside the Safety Zone
    ACOs that fall outside the safety zone may be procompetitive and 
lawful. An ACO that does not impede the functioning of a competitive 
market will not raise competitive concerns.\36\
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    \36\ The Agencies emphasize that PSA shares are useful as a 
screening device and that alternative data and information also may 
be useful in evaluating the likely competitive significance of a 
particular ACO. The Agencies recognize that an ACO may have reliable 
evidence other than PSA shares from which the ACO may reasonably 
conclude that the ACO is unlikely to raise competitive concerns.
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    Nonetheless, there may be circumstances in which an ACO would raise 
competitive concerns. This section describes some types of conduct by 
an ACO that, under certain circumstances, may raise competitive 
concerns and outlines how an ACO may obtain further antitrust guidance 
from the Agencies.
1. Conduct To Avoid
a. Improper Sharing of Competitively Sensitive Information
    Regardless of an ACO's PSA shares or other indicia of market power, 
significant competitive concerns can arise when an ACO's operations 
lead to price-fixing or other collusion among ACO participants in their 
sale of competing services outside the ACO. For example, improper 
exchanges of prices or other competitively sensitive information among 
competing participants could facilitate collusion and reduce 
competition in the provision of services outside the ACO, leading to 
increased prices or reduced quality or availability of health care 
services.\37\ ACOs should refrain from, and implement appropriate 
firewalls or other safeguards against, conduct that may facilitate 
collusion among ACO participants in the sale of competing services 
outside the ACO.\38\
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    \37\ Health Care Statements 4, 5, and 6 relate to the sharing of 
data and information among competing providers. The Health Care 
Statements set forth safety zones for providers' collective 
provision of fee- and non-fee-related information to health care 
purchasers and participation in exchanges of price and cost 
information. The Health Care Statements also provide further 
guidance on the distinctions between legitimate information sharing 
and information sharing that may facilitate collusion or otherwise 
raise competitive concerns. Health Care Statements, supra note 13, 
at 40-52.
    \38\ ACOs within the safety zone should also refrain from this 
conduct. See supra note 24.
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b. Conduct by ACOs With High PSA Shares or Other Possible Indicia of 
Market Power That May Raise Competitive Concerns
    For ACOs with high PSA shares or other possible indicia of market 
power, the Agencies identify four types of conduct that may raise 
competitive concerns.\39\ The Agencies recognize that

[[Page 67030]]

some of the conduct described in (1) through (4) below may be 
competitively neutral or even procompetitive, depending on the 
circumstances, including whether the ACO has market power. For example, 
an ACO that requires its participants to contract exclusively through 
the ACO to increase the ACO's efficiency is generally less likely to 
raise competitive concerns the greater the number of competing ACOs or 
independent providers available to contract with private payers or to 
participate in competing ACOs or other analogous collaborations.
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    \39\ ACOs with high PSA shares or other possible indicia of 
market power also should consider the likely competitive effects of 
other types of conduct in which they engage.
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    An ACO with high PSA shares or other possible indicia of market 
power may wish to avoid the conduct set forth in (1) through (4) below. 
Depending on the circumstances, the conduct identified below may 
prevent private payers from obtaining lower prices and better quality 
service for their enrollees:
    1. Preventing or discouraging private payers from directing or 
incentivizing patients to choose certain providers, including providers 
that do not participate in the ACO, through ``anti-steering,'' ``anti-
tiering,'' ``guaranteed inclusion,'' ``most-favored-nation,'' or 
similar contractual clauses or provisions.
    2. Tying sales (either explicitly or implicitly through pricing 
policies) of the ACO's services to the private payer's purchase of 
other services from providers outside the ACO (and vice versa), 
including providers affiliated with an ACO participant (e.g., an ACO 
should not require a purchaser to contract with all of the hospitals 
under common ownership with a hospital that participates in the ACO).
    3. Contracting on an exclusive basis with ACO physicians, 
hospitals, ASCs, or other providers, thereby preventing or discouraging 
those providers from contracting with private payers outside the ACO, 
either individually or through other ACOs or analogous 
collaborations.\40\
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    \40\ Note that, although CMS requires the physician practice 
through which physicians bill for primary care services and to which 
Medicare beneficiaries are assigned to contract exclusively with one 
ACO for the purposes of beneficiary assignment, CMS does not require 
either those individual physicians or physician practices to 
contract exclusively through the same ACO for the purposes of 
providing services to private health plans' enrollees. CMS ACO Rule, 
supra note 20.
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    4. Restricting a private payer's ability to make available to its 
health plan enrollees cost, quality, efficiency, and performance 
information to aid enrollees in evaluating and selecting providers in 
the health plan, if that information is similar to the cost, quality, 
efficiency, and performance measures used in the Shared Savings 
Program.
2. Availability of Expedited Voluntary Antitrust Review
    Any newly formed ACO \41\ that desires further antitrust guidance 
regarding its formation and planned operation can seek expedited 90 day 
review from the Agencies.\42\ During expedited review, the reviewing 
Agency will examine whether the ACO will likely harm competition by 
increasing the ACO's ability or incentive profitably to raise prices 
above competitive levels or reduce output, quality, service, or 
innovation below what likely would prevail in the absence of the 
ACO.\43\ To the extent possible in the 90 day review period, the Agency 
will consider factors in the rule of reason analysis as explained in 
the Antitrust Guidelines for Collaborations Among Competitors and the 
Health Care Statements.\44\
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    \41\ See supra note 23.
    \42\ When the Federal Trade Commission is the reviewing Agency, 
Commission staff will perform the ACO review pursuant to the 
Commission's authorization of its staff in 16 CFR 1.1(b). When the 
Antitrust Division is the reviewing Agency, the Assistant Attorney 
General in charge of the Antitrust Division or the Assistant 
Attorney General's delegate will sign the review letter. 28 CFR 
50.6.
    \43\ See Collaboration Guidelines, supra note 9, 1.2.
    \44\ See id. 3.3; Health Care Statements, supra note 13, 
Statements 8 and 9.
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    The ACO should submit its request for expedited review, along with 
a completed cover sheet (available on the Agencies' Web sites), to both 
Agencies before its entrance into the Shared Savings Program, and the 
Agencies will then promptly determine, and notify the applicant, which 
Agency will be the reviewing Agency.\45\ As soon as the Agencies notify 
the applicant which Agency will be the reviewing Agency, the applicant 
should provide all of the documents and information listed below to the 
reviewing Agency. The Agencies shall establish a Federal Trade 
Commission/Department of Justice ACO Working Group to collaborate and 
discuss issues arising out of the ACO reviews. This process will allow 
ACOs to rely on the expertise of both Agencies and ensure efficient, 
cooperative, and expeditious reviews.\46\
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    \45\ A request for an expedited review must be submitted in 
writing to either (1) the Office of the Assistant Attorney General, 
Antitrust Division, Department of Justice, Main Justice Building, 
Room 3109, 950 Pennsylvania Avenue NW., Washington, DC 20530 (for 
non-U.S. Postal Service deliveries, use ZIP code 20004), and to the 
Federal Trade Commission, Bureau of Competition, Premerger 
Notification Office, Room 303, 600 Pennsylvania Avenue NW., 
Washington, DC 20580 or (2) [email protected] and 
[email protected].
    \46\ For example, it has been standard practice for the Agencies 
to share with each other their proposed health care business review 
and staff advisory opinion letters before issuing them in final form 
to ensure application of consistent standards of antitrust review.
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    To start the 90 day review, the reviewing Agency must receive all 
of the following documents and information: \47\
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    \47\ The ACO must represent in writing that it has undertaken a 
good-faith search for the documents and information specified in the 
Policy Statement and, where applicable, provided all responsive 
material. Moreover, the Agencies may request additional documents 
and information where necessary to evaluate the ACO. A request for 
additional documents and information, however, will not extend the 
90 day review period.
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    1. The application and all supporting documents that the ACO plans 
to submit, or has submitted, to CMS, including a sample of each type of 
participation agreement and each type of document that reflects a 
financial arrangement between or among the ACO and its participants, as 
well as the ACO's bylaws and operating policies.
    2. Documents discussing
    a. the ACO's business strategies or plans to compete in the 
Medicare and commercial markets, including those relating to the ACO's 
likely impact on the prices, cost, or quality of any service provided 
by the ACO to Medicare beneficiaries, commercial health plans, or other 
payers; and
    b. the level and nature of competition among participants in the 
ACO, and the competitive significance of the ACO and ACO participants 
in the markets in which they provide services.
    3. Information sufficient to show the following:
    a. The common services that two or more ACO participants provide to 
patients from the same PSA, as described in the Appendix, and the 
identity of the ACO participants or providers providing those services.
    b. The PSA of each ACO participant, and either PSA share 
calculations the ACO may have performed or other data that show the 
current competitive significance of the ACO or ACO participants, 
including any data that describe the geographic service area of each 
participant and the size of each participant relative to other 
providers serving patients from that area.
    c. Restrictions that prevent ACO participants from obtaining 
information regarding prices that other ACO participants charge private 
payers that do not contract through the ACO.
    d. The identity, including points of contact, of the five largest 
commercial health plans or other private payers, actual or projected, 
for the ACO's services.
    e. The identity of any other existing or proposed ACO known to 
operate, or

[[Page 67031]]

known to plan to operate, in any market in which the ACO will provide 
services.
    Moreover, the ACO may submit any other documents and information 
that it believes may be helpful to the Agency in assessing the ACO's 
likely impact on competition. The documents and information may include 
anything that may establish a clearer picture of competitive realities 
in the market, including:
    1. evidence that the ACO is not likely to have market power in the 
relevant market;
    2. any substantial procompetitive justification for why the ACO 
needs its proposed composition to provide high-quality, cost-effective 
care to Medicare beneficiaries and patients in the commercial market; 
and
    3. if relevant, an explanation as to why the ACO engaging in any of 
the four types of conduct listed in Section IV.B of the Policy 
Statement would not be anticompetitive or might even be procompetitive.
    Within 90 days of receiving all of the above documents and 
information,\48\ the reviewing Agency will advise the ACO that the 
ACO's formation and operation, as described in the documents and 
information provided to the Agency,
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    \48\ Upon the applicant's request, the reviewing Agency may 
extend the review beyond 90 days, subject to the availability of 
resources or other discretionary considerations.
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    1. does not likely raise competitive concerns or, if appropriate, 
does not likely raise competitive concerns conditioned on the ACO's 
written agreement to take specific steps to remedy concerns raised by 
the Agency;
    2. potentially raises competitive concerns; or
    3. likely raises competitive concerns.
    As is current practice, both the request letter and the reviewing 
Agency's response will be made public consistent with applicable 
confidentiality provisions.\49\ Also, consistent with current practice, 
if it appears that an ACO's formation or conduct may be 
anticompetitive, the Agency may investigate the ACO and, if 
appropriate, take enforcement action at any time before or during the 
ACO's participation in the Shared Savings Program.
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    \49\ The provisions regarding public access to review 
information, non-disclosure of competitively sensitive or business 
confidential information, and retention of review information set 
forth in 28 CFR 50.6 (2010) (U.S. Department of Justice business 
review letters) and 16 CFR 1.1-1.4 (2010) (FTC advisory opinions) 
will generally apply to the expedited review process. Requesters 
should follow applicable Agency procedures governing the designation 
of competitively sensitive business information and other 
information the requesters wish not to be made public in connection 
with a review request. See 28 CFR 50.56 (U.S. Department of Justice 
procedures); 16 CFR 4.2, 4.9, and 4.10 (FTC procedures).
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Appendix

    This Appendix explains how to calculate the PSA shares of common 
services discussed in the Policy Statement.\50\ There are three 
steps:
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    \50\ Any ACO participant that wants to determine whether it 
meets the dominant participant limitation of the safety zone should 
calculate its PSA share in a similar manner.
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    1. Identify each service provided by at least two independent 
ACO participants (i.e., each common service). A service is defined 
as follows:
    a. For physicians, a service is the physician's primary 
specialty, as designated on the physician's Medicare Enrollment 
Application. Each specialty is identified by its Medicare Specialty 
Code (``MSC''), as defined by CMS.\51\
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    \51\ CMS will make publicly available the most current list of 
applicable specialties. Specialty Codes 01 (general practice), 08 
(family practice), 11 (internal medicine), and 38 (geriatric 
medicine) are considered ``Primary Care'' specialties, and are 
treated as a single service for the purposes of the Policy 
Statement.
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    b. For inpatient facilities (e.g., hospitals), a service is an 
MDC.\52\
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    \52\ CMS will make publicly available the most current list of 
MDCs.
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    c. For outpatient facilities (e.g., ASCs or hospitals), a 
service is an outpatient category, as defined by CMS.\53\
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    \53\ CMS will make publicly available a list of applicable 
outpatient categories as well as data necessary to assign procedure 
codes to the appropriate category.
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    2. Identify the PSA(s) for each participant (e.g., physician 
group, inpatient facility, or outpatient facility) in the ACO that 
provides any common service. For each participant, the PSA is 
defined as the lowest number of postal zip codes from which the 
participant draws at least 75 percent of its patients.\54\ Each 
independent physician solo practice, each fully integrated physician 
group practice, each inpatient facility (even if part of a hospital 
system), and each outpatient facility will have its own PSA. In 
addition, each inpatient facility will have a separate PSA for 
inpatient services, outpatient services, and physician services 
provided by its physician employees.
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    \54\ This PSA calculation is based on the Stark II regulations. 
Medicare Program: Physicians' Referrals to Health Care Entities With 
Which They Have Financial Relationships (Phase II), 69 FR 16,094 
(Mar. 26, 2004).
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    3. Separately for each common service, calculate the ACO's PSA 
share in the PSA of each participant that provides that service if 
at least two participants provide that service to patients from that 
PSA. If an entity owned by an ACO participant provides services in a 
PSA, those services should be included in the share calculation 
regardless of whether the affiliated organization participates in 
the ACO.
    a. For physician services, the ACO should calculate its shares 
of Medicare fee-for-service allowed charges (i.e., the amount that a 
provider is entitled to receive for the service provided) during the 
most recent calendar year for which data are available. CMS will 
make public the data necessary to identify the full range of 
services and the aggregate fee-for-service allowed charges for each 
service, by zip code.
    b. For inpatient services, the ACO should calculate its shares 
of inpatient discharges, using state-level all-payer hospital 
discharge data where available, for the most recent calendar year 
for which data are available. For ACOs located in a state where all-
payer hospital discharge data are not available, the ACO should 
calculate its shares of Medicare fee-for-service payments during the 
most recent federal fiscal year for which data are available. CMS 
will make public the data necessary to identify the full range of 
services and the aggregate fee-for-service payments for each 
service, by zip code.
    c. For outpatient services, the ACO should calculate its shares 
of Medicare fee-for-service payments for hospitals and fee-for-
services allowed charges for ASCs during the most recent calendar 
year for which data are available, or the ACO can use state-level 
all-payer claims data, if available. CMS will make public the data 
necessary to identify the full range of services and the aggregate 
fee-for-service payments and allowed charges for each service, by 
zip code.
    For those services that are rarely used by Medicare 
beneficiaries (e.g., pediatrics, obstetrics, gynecology, and 
neonatal care) and for which all-payer data are not available, the 
ACO may use other available data to determine the relevant shares. 
For example, for those services, data on the number of active 
physicians within the specialty and located within the PSA may be a 
reasonable alternative for the purposes of calculating shares of 
physician services.

Example of How To Calculate an ACO's PSA Shares

    The following example illustrates how to calculate the ACO's 
relevant PSA shares. Assume that two independent physician 
practices, two independent hospitals, and an ASC propose to form an 
ACO. For purposes of this example, further assume that the hospitals 
do not directly employ physicians. If they do, then services 
provided by the hospitals' employed physicians would need to be 
taken into account in determining the PSA and calculating the ACO's 
shares for each common physician service where at least two 
participants provide that service to patients from the same PSA.
    For the physician groups:
    1. Identify the physician groups' common MSCs. In this example, 
Physician Group A (``PG A'') has physicians with general surgery 
(MSC 02) and orthopedic surgery specialties (MSC 20). Physician 
Group B (``PG B'') has physicians with orthopedic surgery (MSC 20) 
and cardiology (MSC 06) specialties. The only common service is 
orthopedic surgery, not general surgery or cardiology, because PG A 
does not have cardiologists and PG B does not have general surgeons.
    2. Identify the zip codes that make up the PSA for each 
physician group. In this example, there will be two PSAs: one for PG 
A (``PSA A'') and one for PG B (``PSA B'').
    3. Determine the ACO's share in each of the PSAs. In this 
example, both PG A's and PG B's orthopedic surgeons serve patients

[[Page 67032]]

located in both PSAs. Thus, shares need to be calculated in PSA A 
and PSA B. The ACO's share of orthopedic surgery in PSA A would be 
the total Medicare allowed charges for claims billed by the ACO's 
orthopedic surgeons (which are PG A's and PG B's total allowed 
charges for claims billed by orthopedic surgeons for Medicare 
beneficiaries in PSA A's zip codes) divided by the total allowed 
charges for orthopedic surgery for all Medicare beneficiaries in PSA 
A. Likewise, the ACO's share of orthopedic surgery services in PSA B 
would be the total Medicare allowed charges for claims billed by the 
ACO's orthopedic surgeons (which are PG A's and PG B's total allowed 
charges for claims billed by orthopedic surgeons for Medicare 
beneficiaries in PSA B's zip codes) divided by the total allowed 
charges for orthopedic surgery for all Medicare beneficiaries in PSA 
B.
    For the inpatient services:
    1. Identify the hospitals' common MDCs. In this example, 
Hospital 1 and Hospital 2 each provide services in 10 MDCs, but only 
two are common services: cardiac care (i.e., services related to 
diseases and disorders of the circulatory system--MDC 05) and 
orthopedic care (i.e., services related to diseases and disorders of 
the musculoskeletal system and connective tissue--MDC 08).
    2. Identify the zip codes that make up the PSA for inpatient 
services for each hospital. In this example, there will be two PSAs: 
Hospital 1's PSA and Hospital 2's PSA.
    3. Determine the ACO's share in each of the PSAs. In this 
example, Hospital l and Hospital 2 both serve cardiac patients 
located in each hospital's PSA and both serve orthopedic patients in 
each hospital's PSA. Thus, shares need to be calculated in both 
PSAs, resulting in four shares. This hypothetical ACO is located in 
a state for which all-payer hospital discharge data are available, 
so the ACO's share of cardiac care in Hospital 1's PSA would be the 
ACO's total number of inpatient discharges for MDC 05 (which are 
Hospital 1's and Hospital 2's total inpatient discharges for cardiac 
care in Hospital l's PSA) divided by the total number of inpatient 
discharges for MDC 05 for all residents of this PSA. Use the 
analogous process to calculate the ACO's share of cardiac care in 
Hospital 2's PSA, the ACO's share of orthopedic care in Hospital 1's 
PSA, and the ACO's share of orthopedic care in Hospital 2's PSA.
    For the outpatient services:
    1. Identify the hospitals' and ASC's common outpatient 
categories. In this example, Hospital 1 does not provide outpatient 
services, while Hospital 2 and the ASC each provide services in 10 
outpatient categories, but only two are common services: 
cardiovascular tests/procedures (outpatient category 2) and 
musculoskeletal procedures (outpatient category 5).
    2. Identify the zip codes that make up the PSA for outpatient 
services for Hospital 2 and the ASC. In this example, there will be 
two PSAs: Hospital 2's PSA for outpatient services and the ASC's 
PSA.
    3. Determine the ACO's share in each of the PSAs. In this 
example, Hospital 2 and the ASC both provide cardiovascular tests/
procedures to patients located in each facility's PSA, and both 
provide musculoskeletal procedures to patients located in each 
facility's PSA. Thus, shares need to be calculated in both PSAs, 
resulting in four shares. The ACO's share of cardiovascular tests/
procedures in Hospital 2's PSA would be the ACO's total Medicare 
fee-for-service payments/charges for outpatient category 2 (which 
are Hospital 2's total payments and the ASC's total allowed charges 
for outpatient cardiovascular tests/procedures for Medicare 
beneficiaries in Hospital 2's PSA) divided by the total payments/
charges for outpatient category 2 for all Medicare beneficiaries in 
this PSA. Use the analogous process to calculate the ACO's share of 
cardiovascular tests/procedures in the ASC's PSA, the ACO's share of 
musculoskeletal procedures in Hospital 2's PSA, and the ACO's share 
of musculoskeletal procedures in the ASC's PSA.
    Application to the Safety Zone: In this example, the ACO would 
calculate ten PSA shares. If all of the shares are 30 percent or 
below, and the hospitals and the ASC are non-exclusive to the ACO, 
then the ACO would fall within the safety zone. In other words, the 
30 percent threshold must be met in each relevant PSA for each 
common service. If that condition is not met, then the ACO does not 
fall within the safety zone, unless it qualifies for the rural 
exception.

    For the Antitrust Division of the Department of Justice.
Sharis A. Pozen,
Acting Assistant Attorney General.

    For the Federal Trade Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2011-27944 Filed 10-27-11; 8:45 am]
BILLING CODE 6750-01-P