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CMS to Face Legal Threat if Congress Cancels DMEPOS Contracts

The federal government could face a flurry of lawsuits from angry medical equipment suppliers if lawmakers get their way and cancel hundreds of contracts that took effect July 1.

As of July 1, only those suppliers in 10 metropolitan areas that won contracts through a bidding process completed earlier this year are permitted to sell 10 types of medical equipment, such as diabetes test strips, walkers and oxygen tanks, to Medicare beneficiaries.

But despite the fact that those suppliers are already abiding by the terms of their winning bids and have spent thousands of dollars to prepare for the starting date, key lawmakers remain committed to retroactively terminating their contracts, making changes to the program and opening it up for a fresh round of bids to take effect in 2010.

If the legislation is enacted, the Centers for Medicare and Medicaid Services (CMS) will face an enormous administrative headache, as well as the threat of legal action from suppliers who feel that they played by the rules and deserve the spoils.

The language to delay the program, authored by Rep. Stark (D-CA), became part of a larger Medicare bill that overwhelmingly passed the House, and just passed the Senate.

Stark has expressed particular sympathy to the industry’s complaints that CMS mishandled the implementation of the bidding program by, for example, providing inadequate guidance to bidders about how to file the appropriate paperwork.

CMS has been stalwart in its defense of the program, pointing out that the bid prices are an average 26 percent lower than what the government currently pays and emphasizing that triumphant bidders had to win accreditation that had never before been required to participate in Medicare.

In exchange for agreeing to take up their cause, Stark extracted a heavy price from the medical equipment industry. In order to cover the $3.1 billion, five-year cost, the industry accepted a 9.5 percent cut off their current fees in those 10 geographic areas.

(The Hill, July 8, 2008)