Bid lawsuit reaches end of line

Friday, February 22, 2013

WASHINGTON – The U.S. Supreme Court on Feb. 19 refused to hear a petition that would have stopped CMS from awarding competitive bidding contracts until it complied with rulemaking processes.

“It’s hard when they tell you ‘no’ from the day you file it until the day they kick you out the door,” said Barry Johnson, executive director of the Texas Alliance for Home Care Services (TAHCS), which filed the original lawsuit against CMS and the Department of Health and Human Services in 2010.

The lawsuit claimed CMS violated federal statutes that require the agency to disclose the financial standards that HME providers must meet under the bidding program and to provide an opportunity for public comment.

TAHCS appealed to the Supreme Court after the D.C. Court of Appeals ultimately ruled that DME statutory provisions precluded it from reviewing the issue, says a source close to the case.

“The government continues to maintain that they can ignore policy,” said Johnson. “It has become a political issue because they don’t want to interrupt competitive bidding. They don’t care about financial stability.”

Concern over the financial stability of winning bidders has increased since the Jan. 30 release of the Round 2 payment amounts, which stakeholders believe are unsustainable. That’s especially true for the national mail-order program for diabetes supplies, which suffered an average cut of 72%. Such cuts only heighten the need for program transparency, sources say.

“With diabetes supplies, that presents a whole new threat to Medicare recipients and presents new legal issues that need to be resolved,” said Bruce Levinson, senior vice president of regulatory intervention for the Center for Regulatory Effectiveness (CRE), a watchdog group. “With the ability of people to consult with pharmacists (at risk), this is getting into an essential part of care. It’s becoming a bigger issue.”

In December, the CRE filed the first of several Freedom of Information Act (FOIA) requests seeking information about the methodology behind the bidding program, but CMS hasn’t acknowledged receipt of the requests. The CRE says it may file a Data Quality Act petition against CMS. The act requires federal agencies to use accepted scientific methods when making regulations, something the CRE, as well as industry stakeholders and auction experts, say CMS has not done.


It is important to note at least the following about the U.S. Supreme Court action:

1.  The Court's denial of the petition for a writ of certiorari by no means can be interpreted by lawyers or the courts as Supreme Court approval of the opinion by the D.C. Court of Appeals.  The Supreme Court has re-iterated this point numerous times.  The denial of a cert. petition means only that the Supreme Court "decided not to decide."

2.  The final holding in the case is only that the the D.C. Court of Appeals determined that it did not have jurisdiction to rule on the merits because it decided that the judicial review preclusion provisions in the DMEPOS statute (specifically, no judicial review of "the awarding of contracts" and "the bidding structure") were intended by Congress to encompass all aspects of the DMEPOS program, including the "general condition" that the Secretary "specify financial standards that suppliers must meet, taking into account the needs of small providers," and that the Secrertary do so in compliance with Medicare and Administrative Procedure Act rulemaking requirements.  The Court of Appeals expressed no opinion on whether or not CMS was violating the law; it only decided it was against Congressional intent for it to intervene and rule on the merits.

3.  While the D.C. Court of Appeals would not intervene, that does not mean that Congress cannot clarify its intent and hold the agency's feet to the fire.  Congress (and the broad industry) has not shown much interest in this issue to date, and this could be one reason behind the denial of cert.

4.  A similar suit could be brought in another federal circuit where a company ruled ineligible under the secret financial standards does Medicare business, or by an Asssociation with such members.