American Association for Homecare Sues U.S. Department of Health and Human Services to Halt Controversial Medicare Bidding Program Scheduled to Start July 1

Thursday, June 12, 2008 General News
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ARLINGTON, Va., June 11 Citing faulty implementation of Medicare's competitive bidding program for durable medical equipment, prosthetics, and supplies (DMEPOS), the American Association for Homecare filed a federal lawsuit on June 9 seeking to stop the controversial bidding program.

The bidding program, enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Action of 2003 (MMA), is scheduled to be implemented in 10 metropolitan statistical areas throughout the U.S. on July 1, 2008. Those 10 areas include Charlotte, N.C.; Cincinnati, Ohio; Cleveland, Ohio; Dallas - Ft. Worth, Texas; Kansas City, Mo.; Miami, Fla.; Orlando, Fla.; Pittsburgh, Pa.; Riverside, Calif.; and San Juan, P.R.

The American Association for Homecare complaint names as defendants U.S. Department of Health and Human Services (HHS) Secretary Michael Leavitt and Centers for Medicare and Medicaid Services (CMS) Acting Administrator Kerry Weems. The complaint was filed in U.S. District Court for the District of Columbia.

The Association, which initiated the complaint on behalf of its members, argues that the regulatory implementation of the bidding program has resulted in numerous violations of the Medicare Prescription Drug, Improvement, and Modernization Action of 2003 (MMA), the Small Business Act, and the Administrative Procedures Act.

Specifically, the complaint contends that:

In direct contradiction to the statutory requirement, the Secretary did not specify in either the proposed rule or final rule for competitive bidding the applicable financial standards that home medical equipment providers must meet in order to be awarded a contract. The defendants' failure to specify financial standards as required by the MMA is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, the complaint alleges. American Association for Homecare members are injured by the defendants' unlawful actions or omissions because they have been excluded from providing items and services in the first round of bidding areas for which they submitted bids as a result of the legally defective competitive bidding program administered by CMS. Association members will be further injured by the unlawful acts and omissions because their ability to provide DMEPOS items and services in the 70 additional metropolitan areas in the second round of bidding, for which they will submit bids, will be determined by the legally defective bidding program.

Also, in the proposed rule, CMS proposed using the Small Business Administration's definition of small business ($6.5 million in total annual receipts) when determining whether a DMEPOS provider is defined as a "small supplier." In the final rule, CMS instead reclassified a small supplier as having less than $3.5 million in annual receipts, including Medicare and non-Medicare receipts. This reclassification occurred without any explanation in the final rule as to the basis for CMS selection of $3.5 million in total annual receipts as the definition of small supplier. The adoption by CMS of its own arbitrary size standard violated the Small Business Act, the MMA, and the Administrative Procedures Act. The MMA mandates that "the Secretary shall take appropriate steps to ensure that small suppliers of items and services have an opportunity to be considered for participation in the program...."

The primary relief sought by the Association is a preliminary and permanent injunction ordering the HHS Secretary and the Administrator of CMS and their agents to cease the implementation of the competitive bidding program. The complaint also requests that the defendants be enjoined from future implementation until the Secretary of HHS specifies applicable financial standards and provides notice and comment regarding this proposed rule required by law, and u

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