Lawsuit Filed to Foil Competitive Bidding

DALLAS

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

Filed June 12 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 VGM 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 Leavitt and acting CMS Administrator Leslie 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 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 welcomed at VGM’s June Heartland Conference in Waterloo, Iowa, the buying group’s hometown.

“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.”