In April, 2008 DOTmed reported on the complaint brought by plaintiffs Sharp Healthcare, Scripps Health, Internist Laboratory, American Association of Bioanalysts, and the American Clinical Laboratory Association, against the Secretary of the Department of Health and Human Services (HHS) to enjoin the agency from proceeding with the first demonstration project for clinical diagnostic laboratory bidding, in the San Diego-Carlsbad-San Marcos area. (See DM 5801.) The District Court for the Southern District of California granted that injunction. Shortly thereafter, Congress passed the Medicare Improvements for Patients and Providers Act, which in effect repealed the original statutory authority for the demonstration project. HHS then moved for dismissal of the case.

However, the plaintiffs submitted an amended complaint regarding a controversy that still existed in the case--return of the plaintiffs' bid applications and the information therein. According to Court documents, the plaintiffs had requested the District Court to compel HHS to return the bid applications and preclude the agency from using the information or disclosing the information for any purpose. HHS moved to dismiss the amended complaint. The District Court has now handed down a decision denying the motion to dismiss in part.

The plaintiffs had claimed that under the Administrative Procedure Act HHS could not keep the applications because the statutory authority to use them no longer exists, the authority to collect the bids may never have existed, the secretary intends to use the information for a purpose to which the plaintiffs did not consent, and the information has no real utility.

HHS argued in turn that the plaintiffs' claim was too speculative and did not identify the final agency decision, and that the secretary had general authority to keep the information to make recommendations regarding Medicare. The Court strongly disagreed with HHS' arguments. U.S. District Judge Thomas J. Whelan noted that the secretary was being "coy" in alluding to using the information for some alternative, unrevealed purpose, and the Court could not support a dismissal simply because the plaintiffs were unable to guess what that purpose may be. Judge Whelan also stated that the repeal of the demonstration project could be a final agency action, and there was a question as to how far the secretary's authority extended in light of the repeal.

The case can now go forward with the plaintiffs' request to enjoin the HHS to use or disclose the information, and to compel HHS to return the bid applications.

More Industry Headlines