Lawsuit Labels Government Actions ‘Arbitrary, Capricious and an Abuse of Discretion’

WASHINGTON–CMS may be held accountable for what 18 providers in
the Miami-Ft. Lauderdale CBA are calling “wrongful
disqualification” from the competitive bidding process
pending a lawsuit alleging the government’s actions were
“arbitrary, capricious and an abuse of discretion.”

The suit, brought on behalf of the All Florida Network, charges
CMS’ claims that the network failed to submit proper financial
documentation for bidding are erroneous. Further, the suit says
CMS’ refusal to allow the network to participate in competitive
bidding resulted in the loss of contracts for some of the bid
items. Without those contracts, the All Florida Network contends
many of its members may have to shut their doors.

The suit was filed June 16 in the U.S. Court of Federal
Claims–a court that hears actions against the government–by Miami
law firms de la O, Marko, Magolnick & Leyton and Kravitz &
Talamo LLP. The action was supported by the efforts of the American
Association for Homecare, Waterloo, Iowa-based VGM and the
Accredited Medical Equipment Providers of America.

“As industry observers and commentators have noted in
overwhelming numbers, the entire process behind this new system has
been riddled with errors; e.g., suppliers’ associations being
disqualified for failing to provide financial documentation, when
those suppliers, in fact, submitted everything that they were
supposed to,” the lawsuit reads.

“This is precisely what happened to [the All Florida
Network], a bidding group whose members face total financial ruin
as a result of CMS’ error and whose (often elderly) customers face
uncertainty and confusion in acquiring the DME products they cannot
live without. It is urgently necessary that round one be enjoined
to correct the error.”

Daniel L. Leyton of de la O, Marko, Magolnick & Leyton, said
All Florida’s problems with CMS began when the group was initially
disqualified March 20 based on CMS’ contention that the network
included an ineligible company and also failed to provide the
proper documentation for bidding. But Leyton said All Florida
contacted CMS immediately to dispute the claims, as the ineligible
company had notified CMS months prior to submission of the bid that
it would not be participating with All Florida.

“The company that was ineligible had been withdrawn from
the network. There was a letter [both to and from CMS] to prove
this–all of this was done five months before the disqualification
letter came out,” Leyton said.

“And,” he continued, “we were certain from the
beginning that we weren’t missing these financial documents. [All
Florida Network] had a lawyer … go over the documents and
then VGM went over it and then it was sent [to CMS]. So we called
CMS promptly and let them know all of this and they took it under
investigation. Roughly 30 days later they came back and said ‘You
are disqualified,’ but this time they did not say anything about
the ineligible provider or the previously identified missing
financial documents. This time they identified new missing
financial documents.”

The All Florida Network received its second disqualification
notice April 21 and CMS has since refused to reconsider its
decision, Leyton said, despite the network’s contention that the
“missing documentation”–mostly income tax
statements–were, in fact, submitted.

The types of documents CMS said were missing “were
documents that would raise red flags with anyone,” according to
Leyton. “Balance sheets, income tax statements–these are the types
of items that would set off red flags for anyone who was doing even
a cursory examination and certainly would set off alarms for anyone
who was heavily invested in making sure that the financial
documentation was complete,” he said.

Based on the winning bids, All Florida would have been awarded
contracts in five of the 10 bid product categories and might have
been awarded a contract in three additional categories, according
to the court filing. The denial of these contracts, All Florida
contends, could put its members out of business.

“These are critical decisions for all of the providers in
the network. They rely on Medicare reimbursements … if they
are excluded from the Medicare program beginning July 1, very
quickly their businesses are going to wither and many of them may
have to shut their doors,” Leyton said.

The suit requests a preliminary injunction “requiring that
the United States offer [All Florida] the same standardized
contract it offered winning bidders in [several] product
categories.” In addition, the suit seeks “a declaratory
judgment that [All Florida] should not have been disqualified from
consideration in the round one DMEPOS competitive bidding
program” and “an appropriate award of
damages.”

“The first alternative for us would be to have the
standardized contracts extended to round one winners extended to us
as well until a decision can be made. The alternative is a
postponement of round one until these issues can be
resolved,” Leyton said.

Leyton said his firm has asked the court for an expedited
hearing before July 1, the day round one contracts become
effective.

“I can’t emphasize enough how pressing the issue is for
DME providers across the country, and we are hopeful the court will
give us the opportunity … to see a final decision
made,” Leyton said.

The lawsuit makes five that have been filed disputing various
aspects of the process and implementation involved with competitive
bidding. For more, see HomeCare Monday, June 16.