Laboratory News

Judge Denies Request for Restraining Order Against CMS' Competitive Bidding Project

Yesterday, a federal judge denied a request by three clinical laboratories in San Diego for a temporary restraining order (TRO) against the Medicare competitive bidding demonstration project. As a result, federal officials are scheduled to open bids for the project today.

In a related development yesterday, the American Clinical Laboratory Association  (ACLA) sent a letter to federal Health and Human Services Secretary Michael O. Leavitt, asking him to suspend the project for 180 days. (There's more on this development below.)

Sharp Healthcare, Scripps Health, and Internist Laboratory requested the TRO on Feb. 4, seeking to stop the project before CMS opens the bids today. The request followed a suit the labs filed Jan. 29 in the U.S. District Court for the Southern District of California against Leavitt. In the suit seeking to prevent Leavitt from implementing the project, the labs said the project as currently being implemented would result in substantial losses to their businesses, employees, and patients.

Internist Laboratory alleged that it would lose 65% of its business if not selected as a bid winner, court records show. (Based in Oceanside, California, Internist Laboratory was the subject of an article in the Dec. 31 special issue of The Dark Report on the bid demonstration project.) Sharp and Scripps said layoffs will result if the project is implemented and that the project will disrupt health care for the patients who depend on these labs. Sharp and Scripps also argued that the project will disrupt patient care by adversely affecting medical networks and critical patient health communication between laboratories and clinicians.

In rejecting the labs' arguments, Judge Thomas J. Whelan concluded that any harm that may behalf the labs as a result of the project is speculative. "Here, plaintiffs seek a TRO to enjoin the project before the Feb. 15, 2008, application deadline," he wrote. "But according to the plaintiffs' motion, the loss of business will occur, if at all, after they lose the bidding competition. The secretary [Leavitt] anticipates that winners will be announced on April 11, 2008. Thus, not only is plaintiffs' alleged injury speculative, but it does not support granting a TRO two months before the injury might occur."

He also rejected the labs' arguments about the potential harm to patients. "Traditionally the irreparable injury standard focuses on the possibility of injury to the plaintiff, not third parties," he wrote. "Thus, although the court appreciates plaintiffs' concern over the disruption to patients, the proper focus is on the likely harm to Internist, Sharp, and Scripps."

The proper method of challenging CMS on the merits of its bidding demonstration project is through CMS's administrative review procedure first, Judge Whelan wrote. In court papers, CMS had argued that once the winning bidders were selected, the labs (whether they win or lose) would submit claims for laboratory tests to Medicare. If the labs were dissatisfied with the reimbursement they receive, they could pursue an administrative remedy, CMS argued. Then, once Leavitt makes a decision on the administrative review phase, the plaintiffs could then pursue a court case, CMS wrote.

After citing these concerns, Whelan asked the plaintiffs to show why the case should not be dismissed. The plaintiffs have until Feb. 29 to address the issues Whelan raised in his decision.

Related Information:

• Access the ACLA letter to Secretary Leavitt on Competitive Bidding at:
  (http://www.clinical-labs.org/documents/LeavittCompetitiveBiddingLetter4.pdf)
• Full assessment of the Medicare Competitive Bidding Demonstration Project in The Dark Report, issue of December 31, 2007