Stakeholders Push Ahead with Second Lawsuit to Stop NCB

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.