San Diego Labs Pursue Return of Bids from Medicare Officials

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HAVING WON a significant court ruling last spring that stopped the Medicare Laboratory Testing Competitive Bidding Demonstration Project dead in its tracks, three San Diego-area laboratories are scheduled to return to court today. Important legal issues still need resolution.

At today’s scheduled hearing, the three plaintiff laboratories—Sharp HealthCare, Scripps Health, and Internist Laboratory of Oceanside, California—will present arguments to amend their existing complaint. The labs seek to have the federal Centers for Medicare & Medicaid Services (CMS) return the bid information submitted by these labs last year.

In a ruling on March 25, Federal Judge Thomas J. Whelan dismissed the plaintiffs’ lawsuit. At the same time, Whelan also denied the government’s motion to dissolve a preliminary injunction he granted in April 2008 that prevented the federal government from implementing the lab testing competitive bidding demonstration project that was scheduled for implementation beginning on July 1, 2008.

Injunction Remains in Place

In his March 25 ruling, Whelan said he would dissolve the preliminary injunction unless the plaintiff laboratories file an amended complaint by April 27. At the same time, Whelan has urged the parties to resolve the dispute themselves.

“Judge Whelan actually gave us a very good ruling by keeping the preliminary injunction in effect until we can amend the complaint or work out something with CMS restricting CMS’ use of the bid data—which we are trying to do,” commented Patric Hooper of Hooper, Lundy & Bookman, Inc., in Los Angeles, California.

In January 2008, Sharp, Scripps, and Internist Laboratory sued Michael Levitt, the former secretary of the U.S. Department of Health and Human Services (HHS), claiming HHS had failed to comply with the Administrative Procedure Act (APA) by imposing the competitive bidding demonstration project on the Metropolitan Statistical Area (MSA) in San Diego. The labs said that if they were not named the winning bidders, the competitive bidding project would cause irreparable harm to them and to the physicians and patients they serve. (See TDRs, December 31, 2007, April 14, 2008.)

Plaintiffs Want Bids Returned

Whelan’s preliminary injunction effectively stopped the project from going forward, but those labs seeking to be winning bidders had already submitted bids to CMS. Since the project was halted, the three plaintiff labs have requested the return of the competitive bidding information so that CMS cannot use the data against them. Hooper argued that CMS could use the bid pricing information to set lower Medicare reimbursement rates, thereby achieving one goal of the competitive bidding demonstration project.

Last summer, the U.S. Congress permanently repealed the competitive bid- ding demonstration project for clinical laboratory services when it passed the Medicare Improvements for Patients and Providers Act (MIPPA) of 2008.

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