AAHomecare Lawsuit to Stop Competitive Bidding Makes Four

WASHINGTON — In the latest legal maneuver to block
implementation of competitive bidding, last week
the American Association for Homecare filed a federal lawsuit
seeking an injunction against the controversial project.

The suit, filed by D.C. law firm Sidley Austin June 9 in U.S.
District Court for the District of Columbia, joins three others
seeking to delay the bidding program.

Administered by CMS, competitive bidding has come under
increasing fire as more problems surface with everything from
choice of product categories for inclusion and the bidding process
itself to the selection of contract winners and beneficiary
access.

“This flawed bidding program has not only been mishandled
by CMS, but both CMS and [the Department of Health and Human
Services] have violated the underlying statute in developing and
implementing the program,” said Tyler Wilson, AAHomecare
president and CEO. “The bidding program will put thousands of
home care providers out of business, and patients’ access to
quality home medical equipment and services will suffer as a
result.”

Wilson said he expected a hearing on the request for an
injunction before July 1, the start date for round one of the
bidding program.

The AAHomecare lawsuit was among three filed in less than a
two-week period aimed at putting the brakes on competitive
bidding.

On June 3, King & Spalding, Washington, D.C., filed a
request in U.S. District Court for the District of Columbia for a
preliminary injunction to halt competitive bidding on behalf of two
small business owners–Carolina Medical Sales and AmeriCare Health
Systems, both of North Carolina–that provide diabetic
supplies.

On June 11, Amarillo, Texas-based Brown & Fortunato also
filed for an injunction against competitive bidding in U.S.
District Court for the Northern District of Texas, Dallas
Division.

Funded by Waterloo, Iowa-based VGM Group’s Last Chance for
Patient Choice, an entity formed to fight competitive bidding, the
Dallas suit lists five home medical equipment providers and two
beneficiaries as plaintiffs: Scooters Unlimited and DME, Allen,
Texas; Reliable Medical Supply, Kansas City, Kan.; Eastern Medical
Equipment Distributors, Pompano Beach, Fla.; JI Medical, dba Ramat
Medical, Los Angeles; Preston Mobility Plus, Richardson, Texas;
Jose M. Salas, Jr., Arlington, Texas; and Charles W. Bell, Fort
Worth.

The three suits join another re-filed in mid-May by
Cleveland-based Walter & Haverfield, which amended a complaint
initially filed in December with one plaintiff. That suit, also
backed by VGM’s Last Chance, now has three additional
plaintiffs and also seeks an injunction against the bidding
program.

All four lawsuits list as defendants Michael O. Leavitt, HHS
secretary, and Kerry N. Weems, acting administrator for CMS.

Following are key components of the latest three complaints.

AAHomecare’s lawsuit contends
that:

–In direct contradiction to the statutory requirement, HHS
“did not specify in either the proposed rule or final rule
for competitive bidding the applicable financial standards that
[HME] providers must meet in order to be awarded a
contract.”
–In the proposed rule, CMS used the Small Business
Administration’s definition of “small business”
($6.5 million in revenues), but in the final rule reclassified a
small provider as having revenues less than $3.5 million.
“The adoption by CMS of its own arbitrary size standard
violated the Small Business Act, the [Medicare Modernization Act]
and the Administrative Procedures Act.”

The complaint asks for an injunction against competitive bidding
now and until “applicable financial standards” are
specified and CMS adopts the SBA definition of a small
supplier.

The Dallas suit charges that:

–In violation of the MMA, the defendants failed to assure
Medicare beneficiaries access to multiple suppliers.
–Arbitrary bidding notice, arbitrary evaluation of bid submissions
and denial of meaningful review place the project in violation of
the Administrative Procedure Act.”
–Competitive bidding fails to provide sufficient safeguards for
small businesses in violation of the MMA and the Regulatory
Flexibility Act.
–The definition of “small business” is arbitrary and
was selected without proper consideration, a violation of the
APA.
–Minimum financial standards were not specified, a violation of
the MMA.
–Although CMS created specific regulations prohibiting entities
subject to common ownership or common control from submitting
multiple bids through entities affiliated with them, the agency
failed to enforce the regulation.
–CMS failed to require appropriate state licenses for bid
applications, a violation of the MMA.
–The plaintiffs’ equal protection rights have been abridged
because “section 302 of the MMA discriminates against
Medicare beneficiaries and small DMEPOS providers … and
favors the non-Medicare patients and mid to large DMEPOS
suppliers.”

The suit asks for an injunction against competitive bidding; a
“meaningful” review of bidders deemed unqualified and
establishment and publication of evaluation procedures for those
bidders; the proper publication of standards to be used in
evaluating and considering winning bids; and compliance with
mandates of the APA so that proper notice and comment are allowed
on the reclassification of “small suppliers.”

The suit brought on behalf of the North Carolina
providers alleges that:

–Mail-order diabetic supplies “is the lone category among
the numerous DMEPOS categories selected by [HHS] that is defined by
mode of delivery rather than simply type of item or service”
and thus, its inclusion is discriminatory.
–Inclusion of mail-order diabetic supplies in competitive bidding
came only “after the agency had promulgated its rule
regarding the program.”
–With the inclusion of mail-order diabetic supplies, competitive
bidding “gives an immediate marketplace boost–via price
advantages and unrestricted market access–to large, high overhead
‘storefront suppliers’ that offer extremely diverse
product lines” and “it presses for cost reductions from
the one segment least able to generate or bear significant cost
reductions while letting off the hook entirely the segment with
great potential for cost savings.”
–Competitive bidding for mail-order diabetic supplies could result
in more out-of-pocket expenses for beneficiaries because “the
program will force some diabetic patients to purchase new testing
equipment because the program will force them to change brands of
diabetic testing supplies they receive from
plaintiffs.”
–The program is already causing harm to plaintiffs that is
“material, immediate and irreparable.” The suit notes
that Carolina Medical, which services more than 5,000 Medicare
beneficiaries, “is effectively shut out of providing
mail-order diabetic testing supplies to Medicare beneficiaries in
the competitive bidding areas” and will lose about 15 percent
of its sales volume and 50 percent of its market value. The company
will need to lay off at least 20 percent of its workforce, the suit
contends. AmeriCare will lose 15 percent of its gross profits
because of competitive bidding, according to the suit, and stands
to lose a distribution contract, which was predicated on high sales
volume, the complaint says.

The suit asks for an injunction against including mail-order
diabetic testing supplies in competitive bidding.

Meanwhile, the Cleveland lawsuit cites the failure of CMS to
comply with the public notice and comment provisions contained in
the APA, the MMA and the RFA.