Experts warn ACOs could cause market power issues

As the federal government moves forward with plans to encourage accountable care organizations, experts are warning that if not done right, some ACOs could raise healthcare costs rather than lower them.

According to a white paper released by America's Health Insurance Plans, without proper program design, ACOs could result in undue market power, leading to higher prices for consumers with little or no quality-enhancing or cost-savings benefits.

"As with other industries, healthcare is not immune from the laws of market power and its impact on competition," the white paper stated.

This report follows a forum on ACOs hosted by AHIP on Sept. 23 in Washington, D.C. According to AHIP officials, the forum was intended to assist policymakers, regulators, providers, health plans and others in considering the forthcoming federal rules and regulations that are being formulated for ACOs.

According to AHIP officials, congressional staff, representatives of agencies that oversee related issues and other key stakeholders attended the forum. The white paper summarizes the key lessons and themes discussed by the presenters and forum participants "but does not necessarily reflect the views of AHIP, any presenter, or any audience participant," an AHIP spokesman said.

Experts who participated in the AHIP forum included Doug Hastings, chairman of the board of directors of Epstein, Becker & Green, P.C., and an expert on legal issues related to ACOs; Cory Capps, PhD, a partner at Bates White Economic Consulting and a healthcare economist with expertise on antitrust issues; Billy Vigdor, a partner specializing in antitrust issues with Vinson & Elkins LLP; and Mark J. Botti, co-chairman of AkinGump's antitrust group.

Organizations that operate like ACOs already exist in the private sector, and they may well move faster than federal ACOs in transforming the healthcare system, according to the white paper. Consequently, the private sector may offer some lessons as to what works well in the marketplace and what has been less successful, it said.

Hightlights of the paper include:

• Several studies have shown that prices go up in markets where large healthcare organizations have amassed substantial market power.

• To determine whether an ACO exhibits market power, one must evaluate the impact on both price and quantity of healthcare services provided.

• The Centers for Medicare and Medicaid Services should be concerned about the potential impact that ACO market power can have on both the Medicare program and the private sector.

• In general, the stronger the efficiencies generated and the lower the market share of the ACO, the lower the risk of an antitrust violation.

• ACOs may well face antitrust challenges, not only from consumers and consumer groups but also from providers excluded from the ACO and/or concerned about the increased oversight and discipline exerted by the ACO over the practice of medicine.

• ACOs can take several steps to minimize the risk that they may have or obtain market power and thus face a lawsuit or investigation.

• By providing clear guidance on these issues, CMS can help to ensure that provider organizations form ACOs that do not exhibit market power and harm consumers.

Read the entire white paper here.