Home Health & Hospice Week

Similar suits may hit courts soon.

A new lawsuit has the potential to halt the implementation of Medicare's competitive bidding program--and to save many suppliers from long-term fiscal distress.

The move to put the brakes on the fledgling program comes as the Centers for Medicare & Medicaid Services gears up for the April 2008 start of phase one of competitive bidding for Medicare-covered durable medical equipment, prosthetics, orthotics and supplies (DMEPOS).

The litigation, filed June 12 in the U.S. District Court for the Northern District of Texas by law firm Brown & Fortunato, challenges the constitutionality of competitive bidding and seeks a permanent injunction that would stop CMS from ever implementing it.

The argument: Competitive bidding illegally discriminates against both beneficiaries and providers.

The VGM Group and its nonprofit affiliate Last Chance for Patient Choice, a group formed to oppose competitive bidding, support the lawsuit, brought on behalf of both beneficiaries and home medical equipment suppliers. Dallas and the surrounding area is one of 10 competitive bidding areas (CBAs) included in phase one.

Plaintiffs include beneficiaries Gregory Hewitt, Jose Salas, Jr. and Charles Bell, and HME firms Oxyonly (doing business as Procair), Dallas; M.S.B. Inc., Ft. Worth; and Cardiorespiratory Home Systems, Mabank, TX. The suit names Health and Human Services Secretary Michael Leavitt and acting CMS Administrator Leslie Norwalk as defendants.

"The complaint seeks to show that competitive bidding violates due process and equal protection under the U.S. Constitution," Brown & Fortunato attorney Jeffrey Baird tells Eli.

Keep Deadlines In Sight

The suit maintains, among other things, that beneficiaries in the areas affected by competitive bidding will receive substandard care and services.

"An area of service constrained by an artificial bidding system which rewards bidders who reduce quality of service and product and punishes providers who demand a price sufficient to maintain acceptable and equal service levels ... is inherently unjust, unequal and unnecessary," reads the suit.

"Competitive bidding is essentially setting up a two-tier system for Medicare beneficiaries," says VGM's John Gallagher. "By statute, Medicare can't provide a two-tier system."

The lawsuit also charges that the competitive bidding cards are stacked against small suppliers, who will find it difficult to meet the requirements of the program, such as providing all items in a product category and serving all beneficiaries in a given CBA.

"Small suppliers who want to compete are left with the almost unworkable option of forming networks," says Baird. "From a practical standpoint, it's a real challenge to meet the many requirements, especially by July 13," he adds. That's the last day suppliers may submit bids for phase one, whether they are bidding individually or as part of a network.

Forecast: Similar lawsuits may be forthcoming in Cleveland or other cities among the other phase-one CBAs, insiders say.