By Terry Baynes
(Reuters) - A federal judge in Minnesota delivered a sharp
rebuke to the government's new competitive bidding program that
affects who can supply certain medical equipment and how much
they can be paid by Medicare.
U.S. District Judge Donovan Frank said in an order on
Tuesday that while he lacked the authority to rule on the
legality of the program, the government was ignoring the harm
inflicted on people with disabilities.
"This is a sad day for those who believe that when a judge
adheres, even-handedly, to his or her oath of office, justice
will prevail and the public interest will be served," Frank
In the order, Frank granted the government's request to
dismiss the lawsuit filed last March by Key Medical Supply Inc,
a family-owned Minnesota company that supplies specialty medical
equipment to the developmentally disabled, including customized
feeding tubes that enter through a patient's stomach.
Key Medical Supply argued that the new competitive bidding
program, scheduled to take effect in Minneapolis and St. Paul in
July, would destroy much of the company's business and prevent
people with developmental disabilities from having continued
access to crucial equipment and supplies.
The bidding program implemented by the Centers for Medicare
and Medicaid Services aims to slash the prices Medicare has to
pay for certain medical equipment and supplies. The program is
being phased in gradually across the country and is already in
effect in nine states, including Florida, Pennsylvania and
California. By July 1 it will go into effect in 91 new
metropolitan areas, which include 21 that were added by the
Affordable Care Act.
The new program caps what Key Medical Supply would be
reimbursed for a specialty tube at less than $40, considerably
less than what one costs to acquire, the suit said. The
custom-fit tubes have advantages over conventional tubes, which
are long and protruding and carry a risk of being accidentally
'DELAYS IN ACCESS'
In his order, Frank said the government appeared to be
indifferent to the fact that people with disabilities have a
clear need for the custom-fit tube, given that people with
mobility or coordination difficulties may be more prone to
Nevertheless, he found that Congress had intentionally
prevented courts from reviewing the program.
"Half of Key Medical Supply's supply revenue is at risk,"
said the company's lawyer, Samuel Orbovich of Fredrikson &
Byron. He said the company may have to refocus its business as a
result of the new program, but that it is not considering
bankruptcy protection. Filing an appeal with the 8th U.S.
Circuit Court of Appeals is also an option, he said.
The Department of Health and Human Services did not
immediately respond to a request for comment.
The Centers for Medicare and Medicaid Services has estimated
that the program will save Medicare $25.7 billion and patients
$17.1 billion between 2013 and 2022.
Alexandra Bennewith, a vice president for the United Spinal
Association, which represents people with spinal cord injuries
and disease, welcomed the judge's strong response, even though
he rejected the challenge.
The competitive bidding program, in places where it has gone
into effect, has already impaired patients' access to
wheelchairs, oxygen equipment and other supplies, Bennewith
"It all comes down to delays in service and delays in
access. We really want to see this fixed," she said. The home
care community has been lobbying for legislation to improve the
program, which is expected to be introduced in 2013, she said.
The case is Key Medical Supply Inc v. Sebelius, U.S.
District Court for the District of Minnesota, No. 12-752.
For Key Medical Supply: Samuel Orbovich of Fredrikson &
For Sebelius: Clifford Reeves, Friedrich Siekert and Gregory
Dworkowitz of the Justice Department.
(This story updates a prior version to indicate that the
company is not exploring bankruptcy protection.)
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