AAHomecare, DME Provider Sue HHS Over Competitive Bidding Expansion

The American Association for Homecare and a Maryland home medical equipment provider have filed suit against the Department of Health and Human Services over the July 1 expansion of the agency’s competitive bidding program for Medicare-participating durable medical equipment (DME).

The agency and DME provider Home Mediservice, Inc. said Wednesday they have filed suit in the U.S. District Court in Washington, D.C. seeking a halt on the July 1 expansion of the program, while HHS says it has no plans to delay.

“The Secretary’s failure to reject CBP bids from bidders to provide DME in States where bidders did not, as of May 1, 2012, have all required State and local licenses, was unlawful under the Secretary’s rules and other authority,” the lawsuit states. “Despite the requirement of her rules, and the promises made to Congress, the Secretary has failed not only to reject the CBP bids from unlicensed bidders, but she actually entered into contracts with them.”


HHS, in response, told HHCN it has no plans to delay the July 1 implementation of Round 2.

“Competitive bidding is working, is saving taxpayers and beneficiaries billions of dollars, and ends unnecessarily high payments for common purchases like wheelchairs, diabetic testing strips, and oxygen equipment,” a HHS spokesperson told HHCN in an email. “We remain confident that seniors will have access to their equipment, savings will continue, and we have no plans for delay.”

The expansion of the program has been opposed by industry groups and some providers due to its potential threats to DME providers, noted in the filing, which alleges CMS violated the program rules by allowing providers without proper state and local licenses required to service Medicare beneficiaries in those jurisdictions to submit bids and later awarded contracts to those same companies. The suit also maintains that bids by these unlicensed providers were wrongly used in calculating the Medicare payment amounts for DME products and services and thus the payment amounts should be invalidated.


“These contracts must be invalidated because the bids of these awardees should have been rejected,” it states. “The Secretary’s failure to follow her own rules threatens to cause severe and irreparable injury to Plaintiffs and all other Medicare-participating DME suppliers that sought to participate in the CBP.”

The program was initially implemented in 2011 in nine areas across the country, with Round 2 adding 91 new ones. Earlier this year, CMS announced Medicare reimbursement cuts under Round 2, which average 45%, according to AAHomecare. Many providers have reported having to cut staff and close operations in order to accommodate the changes.

“Today’s lawsuit zeroes in on a critical flaw in the bidding program—the failure to ensure that all bidders had satisfied state and local licensing requirements before accepting the bids and awarding contracts. CMS has not followed its own rules in implementing the program,” said Tyler J. Wilson, president of AAHomecare. “The piecemeal remedy undertaken in Tennessee is symptomatic of the Agency’s failure to grasp how the bidding process and cockeyed payment rate determination are integrally linked.”

Thus, the lawsuit asks that contracts for all bidders that were not properly licensed by the deadline of May 1, 2012, be rescinded.

Written by Elizabeth Ecker

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