AAHomecare, Maryland DME provider take Medicare agency to court

WASHINGTON, D.C., June 19, 2013—The American Association for Homecare, along with a home medical equipment provider from Maryland, announce the filing of a lawsuit in U.S. District Court in Washington, D.C., asking that the scheduled July 1 expansion of the Medicare competitive bidding program (CBP) for durable medical equipment (DME) be stopped because of serious licensing irregularities.

The lawsuit names Department of Health and Human Services (HHS) Secretary Kathleen Sebelius as the defendant. HHS oversees the Centers for Medicare & Medicaid Services (CMS), which designed and implemented the controversial bidding program that provides oxygen therapy, power wheelchairs, respiratory assistance, hospital beds, diabetic testing supplies, and other critical home medical equipment to Medicare beneficiaries.

In the lawsuit, AAHomecare maintains that CMS violated the rules governing the bidding program by allowing providers without the proper state and local licenses required to service Medicare beneficiaries in those jurisdictions to submit bids and later awarded contracts to those same companies. Furthermore, the suit maintains that bids by these unlicensed providers were wrongly used in calculating the Medicare payment amounts for DME products and services and thus the payment amounts should be invalidated.

“The Secretary’s failure to reject CBP bids from bidders to provide DME in States where bidders did not, as of May 1, 2012, have all required State and local licenses, was unlawful under the Secretary’s rules and other authority,” the lawsuit states. “Despite the requirement of her rules, and the promises made to Congress, the Secretary has failed not only to reject the CBP bids from unlicensed bidders, but she actually entered into contracts with them. These contracts must be invalidated because the bids of these awardees should have been rejected. The Secretary’s failure to follow her own rules threatens to cause severe and irreparable injury to Plaintiffs and all other Medicare-participating DME suppliers that sought to participate in the CBP.”

The lawsuit notes that there are licensing issues in Colorado, Ohio, Maryland, North Carolina, Tennessee, Virginia, and Washington, and that AAHomecare is in the process of gathering information from other states. In Maryland, 112 unlicensed bidders were awarded contracts. Cited in the lawsuit is a June 14 letter from CMS Administrator Marilyn Tavenner in which she acknowledges to Rep. David Roe (R-Tenn.) that CMS accepted bids from approximately 30 out of 98 unlicensed suppliers who bid to provide services and equipment to Medicare patients in Tennessee. The lawsuit notes that CMS sent letters to these unlicensed successful bidders in Tennessee notifying them that their contract awards were being invalidated.

“The action taken in Tennessee by CMS,” the suit contends, “will not put all properly licensed bidders in Tennessee in the position they would have been if the Secretary had, as she was required to have done, rejected the bids submitted by unlicensed bidders. Plaintiffs are not aware of similar letters being sent in other States, even though unlicensed bidders received Round 2 CBP contracts in many other States. By this action, Plaintiffs seek to require the Secretary to redetermine successful bidders, and recalculate the payment amount, in every State where the Secretary accepted bids from unlicensed bidders, after eliminating all contracts and bids from unlicensed bidders.”

“Today’s lawsuit zeroes in on a critical flaw in the bidding program—the failure to ensure that all bidders had satisfied state and local licensing requirements before accepting the bids and awarding contracts. CMS has not followed its own rules in implementing the program,” said Tyler J. Wilson, president of AAHomecare. “The piecemeal remedy undertaken in Tennessee is symptomatic of the Agency’s failure to grasp how the bidding process and cockeyed payment rate determination are integrally linked. It is impossible to void 30 percent of the bid submissions without undermining the payment rate calculation. The agency needs to put the brakes on Round 2 and sort out the licensing irregularities in a number of states and the payment rate problems.”

The bidding program has been sharply criticized since launching in nine localities in 2011. One of the major complaints is that the program allows non-binding bids, which means providers can submit unsupported low-bids that are used to calculate the prices for products and services, but the bidders have no commitment to sign contracts for the amounts of their bids. When CMS announced an average 45 percent price cut earlier this year for Round 2 of the program, many providers said they were being forced to lay off workers, close their businesses, or no longer service Medicare patients. In addition, Medicare beneficiaries reported instances where new providers contracted under the initial stage of the bidding program were undermining their health and not providing the level of service they had received previously.

In Round 2, CMS plans to expand the dangerous and defective bidding program to 91 new areas on July 1, but the lawsuit urges the court to delay that expansion. In addition, a bipartisan group of 227 House members signed a letter to CMS asking for a delay in implementing the program until licensing and other problems could be resolved.

Joining AAHomecare in filing the lawsuit today was Home Mediservice, Inc., of Havre de Grace, Maryland.

“This Competitive Bidding Program is just one more example of a program that was pursued with a good purpose—to save Medicare money—but in the end, its design is only serving to destroy an industry that cares for people in their own homes and already saves the Medicare program millions of dollars a year by keeping those patients out of more costly institutions,” said Mark Richardson, president of Home Mediservice. “The only thing we’d like to accomplish with this suit with AAHomecare is to force CMS to play by their own rules.”

The lawsuit asserts that successful bidders who rejected contract offers would be “severely and irreparably harmed” by the process because their rejection of contracts was based on low reimbursement rates influenced by the bids from unlicensed bidders. Moreover, the lawsuit says unsuccessful licensed bidders will be “severely and irreparably harmed” because bids were won by unlicensed bidders that CMS “unlawfully” failed to reject.

Thus, the lawsuit asked the court for injunctive relief requiring that contracts for all bidders that were not properly licensed by the deadline of May 1, 2012, be rescinded. It also asks for remedial steps including recalculating correct payment amounts without the bids of unlicensed providers, determining which bids from licensed bidders should have been accepted, and giving licensed bidders who rejected contracts because they were improperly lowered another opportunity to accept them after corrected payment amounts are calculated. Visit www.aahomecare.org.