Lawsuit Filed to Foil Competitive Bidding

DALLAS — In a move to halt competitive bidding, a lawsuit
filed last week on behalf of three Medicare beneficiaries and three
small HME companies asks for a permanent injunction that would stop
CMS from ever implementing the program.

Filed on Tuesday in the United States District Court for the
Northern District of Texas, Dallas division, the suit challenges
the constitutionality of competitive bidding, claiming that it
illegally discriminates against both beneficiaries and
providers.

The Amarillo, Texas, law firm of Brown & Fortunato filed the
lawsuit–supported by The VGM Group and its Last Chance for Patient
Choice, a non-profit formed to fight the bidding system–on behalf
of plaintiffs in the Dallas competitive bidding area. Those listed
on the suit include beneficiaries Gregory Hewitt, Jose M. Salas Jr.
and Charles W. Bell, and HME companies Oxyonly (dba Procair),
M.S.B. and Cardiorespiratory Home Systems. The suit names HHS
Secretary Michael O. Leavitt and acting CMS Administrator Leslie V.
Norwalk as defendants.

“The theories set out in the complaint are that competitive
bidding violates due process and equal protection under the U.S.
Constitution,” said Jeffrey S. Baird, chairman of Brown &
Fortunato’s Health Care Group.

According to the 19-page document, the suit argues that
beneficiaries in CBAs will receive “a different, lower level of
product and/or service quality,” and that small HME businesses will
be unable to compete under the program.

“The bidding system is built to reward the characteristics of
large DME providers by basing its ultimate decision on the bidder’s
ability: 1) to make the lowest bid, and 2) to service an entire
metropolitan area. The per-unit expense, and thus the bid, of
larger providers is almost necessarily lower than those companies
that operate on a smaller scale. As if that is not enough, the
requirement that the DME bidder must be able to cover the entire
metropolitan area will clearly exclude smaller outfits,” the suit
reads.

“An area of service constrained by an artificial bidding system
which rewards bidders who reduce quality of service and product and
punishes providers who demand a price sufficient to maintain
acceptable and equal service levels … is inherently unjust,
unequal and unnecessary.”

The suit also alleges that the bid program creates two classes
of beneficiaries.

“The competitive acquisition scheme will leave two disparate
classes in its wake. Medicare beneficiaries in the cities using the
low-bid system are left to sink or swim with the surviving DME
suppliers whose sole virtue is their cheap product,” the suit says,
noting that suppliers that win bids “may be unable to match the
quality of the goods and services, or even meet the medically
necessary minimum standards” of providers that beneficiaries had
previously chosen.

“In contrast, non-Medicare beneficiaries will find safe harbor
in DME suppliers concerned with not only price, but quality and
service,” according to the suit. “Thus, the favored class,
non-Medicare beneficiaries, will receive all the care their medical
conditions require, while Medicare beneficiaries are left to choose
among the low-quality, generic products, regardless of their
individualized health care needs.”

As a result, the document continues, “the competitive
acquisition scheme poses an imminent threat of harm to those
Medicare beneficiaries whose medical needs cannot be met by
one-size-fits-all DME providers.”

News of the lawsuit was announced last week at VGM’s Heartland
Conference in Waterloo, Iowa, the buying group’s hometown. (For
more on the conference, see Heartland Conference Draws 1,000 in this
issue.)

“We understand from our attorneys that this will be a difficult
and uphill fight for us in the courts,” said LCPC President Mike
Mallaro. “We feel strongly that this is very bad legislation and
bad public policy, and we simply cannot allow it to go unchallenged
in the court system.”

“This forced ‘race to the bottom’ in service and quality is not
what the overall Medicare law is structured on or what
beneficiaries deserve,” added Jim Walsh, VGM president and general
counsel. “It is certainly not what anyone wants to happen to health
care in this country.

“The winners in this new system will be the providers that can
quickly reduce the level of services provided and substitute cheap,
low-quality products for the high-quality products the system now
allows them to provide to seniors–both Medicare beneficiaries and
others,” Walsh continued. “The losers will be seniors and their
families and the companies that continue to provide high-quality
services and products.”

Stakeholders said similar suits might be filed in Cleveland or
other cities in the 10 CBAs where competitive bidding is set to be
implemented in April 2008.

Stated Mallaro: “It has to be stopped.”