Bid contracts: Payment cut: Breach or no breach?

WASHINGTON - The facts: CMS and HME providers agreed to certain payment rates for home medical equipment under Rounds 1 and 2 of competitive bidding. 

Up for debate, according to providers: Whether or not CMS had the right to apply an additional 2% cut in payments to those contracts. The cut is part of automatic, across-the-board spending cuts that went into effect April 1.

“Doesn't this set up an incredibly dangerous precedent?” wrote Alexander Hicks, senior general manager for Evercare Medical Solutions, to HME News. “If CMS can accept a binding contract, with set reimbursement amounts within that contract, and then simply change those amounts by 2%, what is to prevent any federal agency from doing the same thing?”

While providers may feel the cut isn't right, it's probably not illegal, industry attorneys say. For starters, any language about breach of contract in the competitive bidding regulations focuses on the provider—not CMS.

“The actual competitive bidding contracts state that 'any violation of the terms of [the] contract by the contract supplier constitutes a breach of contract,'” said Jeff Baird, chairman of the Health Care Group at Brown & Fortunato in Amarillo, Texas. “Further, the competitive bidding regulations only list actions that CMS may take when a contract supplier breaches the contract. They do not contemplate actions a contract supplier might take if CMS breaches.”

Even if a provider wants to sue for breach of contract, it would likely be an expensive waste of time, says attorney Neil Caesar, since a lot could happen between now and when Round 2 starts in July.

“They could always change their mind or the sequestration could go away before then,” said Caesar, president of the Health Law Center in Greenville, S.C. “Should we pay $100,000 to an attorney to do research and get briefs ready where the court's not going to let us do anything until there's actual harm? Or should we wait and see?”