CLEVELAND--The industry’s fierce battle to delay competitive bidding took on extra firepower last week when attorneys requested an injunction that would delay the July 1 implementation of the CMS project.
“We are making a request to the court to enjoin implementation of [competitive bidding],” said Michael J. Jordan, attorney for Cleveland-based Walter & Haverfield LLP, which is handling the case backed by Last Chance for Patient Choice, a non-profit entity created by Waterloo, Iowa-based VGM Group to fight competitive bidding.
He noted that the basis for the request is CMS’ failure to comply with the public notice and comment provisions contained in the Administrative Procedure Act (APA), the Medicare Modernization Act (MMA) and the Regulatory Flexibility Act (RFA).
“We believe the changes between the proposed rule and the final rule are significantly changed. We believe [the final rule] should have been opened to public comment,” Jordan said, adding the motion for a preliminary injunction includes a request for a hearing in early June so that it can be ruled on by July 1, the implementation date for round one.
“It‘s in the lap of the court whether [the injunction] is issued or not,” said Jordan. “We’re optimistic that [Judge Patricia A. Gaughan] will hold a hearing or that there will be other action by the court. We’ve asked for a decision by July 1.”
The request for an injunction came in the form of an amended complaint to a lawsuit initially filed by the firm in December on behalf of a single plaintiff, Premier Medical Supplies. The suit alleges that competitive bidding violates the RFA, which “requires all agencies to carefully scrutinize ways to minimize the economic impact on small entities.”
The amended complaint, which was filed May 12, includes three additional plaintiffs: Medic Home Health Care LLC, Cornerstone Medical Services Midwest LLC, and Carested Inc. Two beneficiaries, Kit Shinkle and Laszlo Nagy, are also listed as plaintiffs in the suit, which names as defendants Department of Health and Human Services Secretary Michael O. Leavitt and CMS acting Administrator Kerry Weems.
Jim Walsh, legal counsel and president of VGM, said expansion of the Cleveland suit “is a direct result of what we experienced in the bid process. It became clear that the bid process itself was badly botched, to the point that people who had legitimate rights to be considered were not considered at all.”
That botched process has resulted in more plaintiffs in the suit, according to Walsh.
“Providers became more willing to step up and be named once they understood that CMS was not going to give them a fair chance to stay in the business,” Walsh said.
“In our view, [the lawsuit] has been strengthened by more plaintiffs,” said Jordan. “We also have more background and more claims.”
Key to the amended complaint are instances in which there are significant differences between the competitive bidding proposed and final rules. Jordan cited the following issues:
--A change in the “small supplier” definition from
$6.5 million in total annual receipts as defined by the Small
Business Administration to $3.5 million in total annual
receipts;
--Prohibition in the final rule of “any entities other than
small suppliers” participating in networks; and
--Prohibition in the final rule of small suppliers consolidating
billing functions within a network.
According to the amended complaint, “the reclassification of the definition of ‘small supplier’ in the final competitive bidding rule violates the Administrative Procedures Act … because it was implemented without compliance with the notice and comment provisions for rulemaking under the APA.”
The complaint argues that “comments should have been solicited to evaluate the impact upon suppliers with receipts between $3.5 million and $6.5 million. Comments should have been solicited to assess the impact upon network formation by eliminating all entities with receipts in excess of $3.5 million from participating networks.”
As well, according to the complaint, “there should have been an opportunity for notice and comment upon imposing the new requirement that each member of a network must separately submit its own Medicare claims … By requiring each member of a network to process and submit its own Medicare claims, a substantial benefit of network formation is eviscerated.”
In what Jordan believes to be the first legal challenge to CMS’ bid award process, the amended complaint also seeks redress for the home medical equipment providers named in the suit--Carested, Cornerstone and Medic--whose bids were disqualified. (Premier did not submit a bid, according to the complaint, “because as a small supplier it was not financially feasible for it to achieve the required accreditation and expend the significant time and financial resources required to prepare a bid submission.”)
“There were issues raised about the types of documentation,” explained Jordan. “Our clients’ documentation was submitted and they were disqualified because [the CBIC] said it wasn’t submitted. We’ve asked the court to review these specific bidding situations involving our clients.”
Jordan said the providers asked for reviews by the CBIC; the disqualifications were not reversed.
“The result is that plaintiffs will suffer significant loss of clientele and revenue due to their inability to provide DMEPOS to Medicare beneficiaries,” the complaint says, adding that Carested will lose 90 percent of its clientele if it loses its Medicare contract supplier status; Medic will lose 30 percent of its client base, as well as non-Medicare business from one of its biggest suppliers amounting to 150 to 200 orders a week; and Cornerstone will lose 70 percent of its overall revenue in Cleveland alone and 50 percent in Cincinnati.
The amended complaint asks that the defendants “be required to implement a meaningful review process for disqualification decisions” and that they “be required to reevaluate the application and disqualification status of plaintiffs Medic, Cornerstone and Carested.”
The amended complaint also challenges beneficiary access to service under competitive bidding. It notes that Laszlo Nagy is a quadriplegic who uses “a highly specialized custom power wheelchair.” Nagy’s provider has cared for him since 2002 and “goes to his home to custom fit the chair to his needs,” according to the complaint. Since Nagy obtained his new chair five months ago, the provider has visited him four times to customize the chair, the complaint says.
However, that provider was rejected as a supplier of power wheelchairs under competitive bidding. “Thus [Nagy] no longer has the choice to work with the supplier with whom he has an established relationship and from whom he received the specialized, individualized care necessitated by his medical condition.
“In addition,” the complaint continues, “because the Medicare competitive bidding scheme values low price point over all else, Nagy is imminently facing a likely lack of service from the supplier with whom he is forced to deal and complete alienation from the services upon which he has highly depended.”
Because CMS has not as yet released the names of the approved providers, the complaint notes, Nagy doesn’t even know who his new provider will be.
The complaint requests that “good-faith studies” be conducted on the impact that the MMA will have on beneficiaries and the provision of new technologies, as well as on “providers who service particular racial or cultural needs.”
The Cleveland suit is the second backed by VGM and its Last Chance for Patient Choice. The first suit, filed in June 2007 in Dallas by Amarillo, Texas-based Brown & Fortunato, challenged the constitutionality of competitive bidding but was dismissed on the grounds that the case was not “ripe”--that is, that bids had not yet been awarded or denied so there was nothing to adjudicate.
“The Dallas suit will be re-filed with new grounds and perhaps some new parties as plaintiff,” Walsh said. “It will be slightly different from Cleveland, allowing each of the attorney teams to pursue what they think will work best but all working towards the same end … an order stopping the program.”
Walsh said VGM would continue legislative efforts to get competitive bidding halted. “We felt that even though legal actions are expensive, we had to move ahead on all fronts,” he said.