CLEVELAND--As the clock ticks steadily toward the July 1 implementation date for national competitive bidding, industry stakeholders are making yet another bid to stop the project by filing a lawsuit on behalf of a small Ohio home medical equipment provider.
The suit was filed in December in U.S. District Court for the Northern District of Ohio (Cleveland Eastern Division) on behalf of Premier Medical by Cleveland-based law firm Walter & Haverfield LLP. It alleges that competitive bidding violates what is known as the Regulatory Flexibility Act, which "requires all agencies to carefully scrutinize ways to minimize the economic impact on small entities."
"The Final Competitive Bidding Rule violates the Regulatory Flexibility Act because [the Department of Health and Human Services] failed to adequately address the specific considerations for small businesses," the suit argues.
The recent lawsuit is the second backed by Waterloo, Iowa-based buying group VGM and its Last Chance for Patient Choice, a non-profit formed to fight competitive bidding. This suit, however, takes a different tack than its predecessor, filed in June in Dallas, which challenges the constitutionality of competitive bidding. (See HomeCare Monday, June 18, 2007.)
"The Ohio lawsuit is based on CMS' failure to follow federal law in enacting the rules related to the so-called competitive acquisition program," said Jim Walsh, VGM Group president and legal counsel. "This is a different theory than was urged in the Texas suit."
"[Competitive bidding] doesn't adequately address the effect on small providers," Walter & Haverfield attorney Michael Jordan told HomeCare. "I think we have beneficiaries who will be able to show the direct adverse impact that will occur."
The Ohio suit, which names as defendants Department of Health and Human Services Secretary Michael O. Leavitt and CMS Acting Administrator Kerry Weems, alleges that CMS did not "pursue alternatives to the competitive bidding scheme that would have minimized the significant economic impact on small entities."
"CMS could have (and in fact, was required to by the new law) set up the regulations to help protect the current dominance in the home care equipment markets of small businesses," Walsh said. "For example, a 'carve out' for Small Business Administration-level businesses could have been mandated in the regulations allowing small businesses to continue to serve patients who were Medicare beneficiaries if they accepted the bid prices of the non-small business bidders."
Instead, he noted, "the rules that CMS did adopt absolutely assure that small business participation in this segment of the health care industry will be cut in half or worse."
Under the competitive bidding project, the lawsuit notes, only 30 percent of small providers at most would be protected, and those shut out of the program have "no avenue for administrative redress."
The 14-page document requests that competitive bidding be halted now and in the future.
Attorneys had hoped to file the new lawsuit in October, but waited in hopes of gaining more plaintiffs. There is still the possibility of adding small providers to the suit, both Jordan and Walsh said.
"We will be adding more plaintiffs if they step up," said Walsh, lauding Premier for making that choice. "The number of companies willing to do that is surprisingly small. They're worried that they are going to get put on a list of troublemakers somewhere and be in trouble. But we don't need a lot of plaintiffs. What's good for one is good for all."
The government has 60 days to respond to the suit.
Meanwhile, the first lawsuit filed in Texas by Amarillo-based Brown & Fortunato is in a holding pattern. In that suit, the government's response was to file a motion to dismiss the suit primarily on the grounds that the case was not "ripe"--that is, that bids have not yet been awarded or denied so there is nothing to adjudicate.
"After giving it serious thought, we have made the decision not to file a motion for reconsideration," said attorney Jeffrey S. Baird, chairman of Brown & Fortunato's Health Care Group. "Rather, we are waiting for the CMS announcement of winning bidders. When that happens, then the government's 'ripeness' argument either goes away or is substantially weakened. At that time, we will seriously consider refiling the lawsuit."
CMS is scheduled to announce winners from the first round of DMEPOS bidding in March.
