Congress passed the health care reform law amidst a wave of public discontent with the disjointed management of health care in the United States, the health insurance industry, the quality of medical care, and the entailed costs. After noting the paradox that more frequent use of health care or more expensive treatment does not result in higher quality,25 the Medicare Payment Advisory Council’s (MedPAC)26 2009 report to
21 See infra Part II.B.2.
22 See infra Part II.C.
23 See RICHARD J. PIERCE ET AL.,ADMINISTRATIVE LAW AND PROCESS § 5 (4th ed. 2004).
24 Additionally, since the agency action here has obviously engaged in rulemaking pursuant to 5 U.S.C. § 553, the resulting regulations have the force of law and are not limited by considerations affecting interpretive rules and other lesser agency rulings. Cf. United States v.
Mead Corp., 533 U.S. 218 (2001).
25 MEDPAC, REPORT TO THE CONGRESS: IMPROVING INCENTIVES IN THE MEDICARE PROGRAM xi (2009) [hereinafter IMPROVING INCENTIVES], available at http://www.medpac.gov/
documents/jun09_entirereport.pdf.
26 Congress formed MedPAC pursuant to the Balanced Budget Act of 1997, Pub. L. No.
105-33, to advise Congress on matters pertaining to the operation of the Medicare program, such as pricing of services, beneficiaries’ access to health care, and quality of health care. About
Congress delivered the grave assessment that “[t]he current trajectory of Medicare spending is unsustainable.”27 The Medicare Board of Trustees28 also issued a warning in its contemporaneous report that the Hospital Insurance trust fund would become insolvent by 2017.29 Members of Congress used similar language to emphasize the scope and immediacy of problems with the national health care system.30 Indeed, the MedPAC report admitted that the health care incentives created in the law at that point were incongruous, and even inimical, to an efficient, patient-centered system.31
One of the major focal points for reform was the promotion of efficient health care delivery through new incentives for health care providers to offer coordinated care.32 In fact, the MedPAC report included an entire chapter to introduce the ACO as a proposed mechanism for such increased efficiency.33 MedPAC defined an ACO as
“a set of fee-for-service . . . providers responsible for the health care of a population of Medicare beneficiaries.”34 Commentators who foresaw that value of ACOs also articulated support for this model, stating that
“[t]he lesson of [these] high-quality, low-cost communities is that someone has to be accountable for the totality of care.”35 Members of Congress overwhelmingly supported creating incentives for health care
MedPAC, MEDPAC,http://www.medpac.gov/about.cfm (last visited Aug. 24, 2012).
27 IMPROVING INCENTIVES, supra note 25, at 43.
28 The Social Security Act established two trust funds, the Hospital Insurance (HI) and the Supplemental Medical Insurance (SMI) trusts, to provide fiscal support for the operation of the Medicare program and appointed a board of trustees to oversee and manage investment and disbursement of the funds. Social Security Act, 42 U.S.C. §§ 1395i, 1395t (2006). The trustees are responsible for reporting on the financial status of the trust funds and the funds’ abilities to meet Medicare beneficiaries’ current and future needs. See generally MEDICARE BOARD OF TRUSTEES, 2009ANNUAL REPORT OF THE BOARDS OF TRUSTEES OF THE FEDERAL HOSPITAL INSURANCE AND FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST FUNDS (2009) [hereinafter MEDICARE TRUSTEES REPORT], available at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR 2009.pdf.
29 MEDICARE TRUSTEES REPORT, supra note 28, at 2.
30 See 155 CONG.REC. S11,133 (daily ed. Nov. 5, 2009) (statement of Sen. Mark Udall) (“The unsustainable growth in health care costs and lack of stable affordable coverage for millions of Americans continue to jeopardize not only our Nation’s fiscal well-being but also the physical well-being of our families and neighbors . . . .”).
31 IMPROVING INCENTIVES,supra note 25, at xi(“Medicare must . . . creat[e] new payment methods that reward higher quality, promote efficient use of limited resources, and encourage effective integration of care.”).
32 See 155 CONG.REC. S11,133 (daily ed. Nov. 5, 2009) (statement of Sen. Mark Udall) (stating no incentives for collaborative groups to exist under the law before passage of PPACA).
33 IMPROVING INCENTIVES, supra note 25, at ch. 2.
34 Id. at 43. Fee-for-service is the default model of Medicare payments to health care providers, whereby a patient receives a certain treatment and the Medicare program compensates “each provider of services with respect to the services furnished by it.” 42 U.S.C.
§ 1395g(a) (2006); see also Robert A. Berenson & Eugene C. Rich, US Approaches to Physician Payment: The Deconstruction of Primary Care, 25 J.GEN.INTERNAL MED. 613 (2010).
35 Atul Gawande, The Cost Conundrum: What a Texas Town Can Teach Us About Health Care, NEW YORKER, Jun. 1, 2009, at 36, 45.
providers to integrate their services to form ACOs as part of health care reform.36 The health care reform law also created MSSP, which allows participating Medicare providers37 to receive a portion of realized savings from efficient procedures38 as a unique incentive to form ACOs.39
Of course, health care provider integration and consolidation creates antitrust concerns even in the absence of government-created incentives,40 but the inclusion of such incentives in health care reform necessitated regulatory action. The health care reform law gave governmental sanction and support for doctors, specialists, suppliers, and hospitals to combine services into financially integrated entities.41 Accordingly, health care providers eagerly initiated significant mergers, sparking concern among health care industry observers.42 In response to such concerns, the Federal Trade Commission or DOJ (the Antitrust
36 See, e.g., Public Bills and Resolutions 155 CONG.REC. H7022 (“A bill . . . to establish an [ACO] pilot program to reduce the growth of expenditures and improve health outcomes under the Medicare program . . . ”); 155 CONG. REC. H13,294 (daily ed. Nov. 19, 2009) (statement of Rep. John Spratt) (“[ACOs] encourage providers to improve quality and control costs . . . .”); 155 CONG.REC. S11,133 (daily ed. Nov. 5, 2009) (statement of Sen. Mark Udall) (“These organizations would encourage groups of health care professionals to team up to provide more coordinated, streamlined care to Medicare patients.”); 155 CONG.REC. S12,125 (daily ed. Dec. 2, 2009) (statement of Sen. Tom Coburn) (“Wouldn’t it be better to incentivize good behavior by [health care providers] through [ACOs], through transparency for both quality and price?”).
37 While PPACA grants the Secretary the discretion to deem various health care providers or suppliers eligible to participate in MSSP, the statute allows groups or partnerships of hospitals, physicians, and other licensed medical practitioners to join ACOs. 42 U.S.C.S.
§ 1395jjj(b)(1), (h) (Lexis 2012).
38 The greatest advantage of ACOs, which congressional supporters prominently touted during floor debates, is the ability to comprehensively coordinate health care for an enrolled beneficiary, which reduces burdens due to consultation times, transfers of medical records, and referrals. See, e.g., 155 CONG.REC. S12,648 (daily ed. Dec. 8, 2009). Also, CMS will encourage ACOs to employ electronic medical records, which presumably will lower costs by ensuring that all of a patient’s health care providers have efficient access to the correct patient information. See Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations, 76 Fed. Reg. 67,802, 67,878–79 (Nov. 2, 2011); see also 155 CONG.REC. H4574 (daily ed. Apr. 21, 2009) (statement of Rep. Burgess).
39 See 42 U.S.C.S. § 1395jjj(a)(1).
40 See, e.g., Health Care Provider Market Power: Hearing on Health Care Consolidation Before the Subcomm. on Health of the H. Comm. on Ways and Means, 112th Cong. 1 (2011) (testimony by Paul B. Ginsburg, President, Center for Health System Change), available at http://waysandmeans.house.gov/uploadedfiles/ginsburg_testimony_9-9-11_final.pdf; Maria T.
Currier, Medicare Payment Reform: Accelerating the Transformation of the U.S. Healthcare Delivery System and Need for New Strategic Provider Alliances, 22 HEALTH LAW. 1 (2010);
Thomas L. Greaney, Whither Antitrust? The Uncertain Future of Competition Law in Health Care, 21 HEALTH AFFAIRS 185 (2002).
41 Health care providers integrated into an ACO must receive shared savings payments under a single taxpayer identification number (TIN). Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations, 76 Fed. Reg. 19,528, 19,537 (Apr. 7, 2011) (to be codified at 42 C.F.R. pt. 425).
42 See, e.g., Health Care Provider Market Power: Hearing, supra note 40, at 1; Robert Pear, Antitrust Concerns Are Raised on New Law’s Doctor-Hospital Collaborations, N.Y.TIMES, Feb.
9, 2011, at A19.
Agencies)43 released a joint statement concerning antitrust enforcement policy that it would apply to ACOs.44
While the antitrust enforcement policy governs ACOs, in general, DHHS also required a mechanism to control ACOs since the health care reform law contemplates ACOs as the primary health care delivery services eligible for shared savings.45 The text of the Act defines the eligibility criteria for an ACO to participate in the program, and grants authority to the Secretary of HHS to develop a payment method that will reward ACOs for reducing costs while adhering to “quality performance standards” for Medicare beneficiaries.46 Thus, Congress delegated authority to HHS and, ultimately, to CMS to create rules to give effect to the broad scheme embodied in § 1395jjj.
The resulting final rules governing MSSP specify CMS’s preferred regulatory regime pursuant to MSSP’s provisions in the health care reform law. The rules include eligibility and quality standards that an ACO must follow to gain the benefit of shared savings, as well as circumstances under which CMS may terminate an ACO from the program.47 While the final rules do not clearly identify these circumstances, CMS originally proposed terminating an ACO upon notice that the Antitrust Agencies are likely to review the ACO under antitrust laws, or when the Antitrust Agencies conclude that an ACO has violated such laws.48 The statute further denies administrative and judicial review to an ACO if CMS terminates the organization under
§ 1395jjj(d)(4).49