Court Issues an Injunction in San Diego Clinical Laboratory Bidding Case

SAN DIEGO--()--On April 8, 2008, federal court Judge Thomas Whelan approved Hooper, Lundy & Bookman, Inc.s request for a preliminary injunction on behalf of plaintiffs Sharp HealthCare, Scripps Health and Internist Laboratory of Oceanside, in their complaint against the federal Health and Human Services Agency (HHS) for the governments attempted imposition of a flawed bidding process for clinical laboratory services.

Patric Hooper, lead counsel for the plaintiffs, welcomed the court's decision and characterized it as a very important ruling for all providers and beneficiaries of the Medicare program. "Judge Whelan got it completely right. His analysis is excellent and very well thought out."

HHS will now be required to go through a formal rulemaking process, with adequate provider, laboratory and input, prior to implementing a future bidding process.

The injunction was the result of a complaint seeking to halt a competitive bidding process imposed on clinical labs serving Medicare beneficiaries in the San Diego, Carlsbad, and San Marcos communities.

In issuing the injunction, the court found that the Secretary of Health and Human Services had failed to comply with required federal rulemaking procedures and that unless the project was enjoined immediately irreparable harm would be suffered by plaintifffs and third parties, including Medicare patients. The project is enjoined until further notice of the court.

Background on the Case

The plaintiffs filed suit in federal court against the federal government on January 29, 2008 to halt a Medicare Demonstration Project slated for the San Diego-Carlsbad-San Marcos region. The demonstration project threatens to irreparably harm vital laboratory testing services for thousands of Medicare beneficiaries if it is allowed to move forward as expected on February 15, 2008, according to the complaint.

The three-year Demonstration Project singles out the San Diego region for testing of a new competitive bidding program that if implemented will force many small community laboratories out of business and may force systems like Sharp HealthCare and Scripps Health to refuse service to non-hospital patients who have come to rely on their labs for ongoing testing, according to Mr. Hooper.

The plaintiffs contend that rather than creating competition, the Demonstration Project will result in fewer labs, less competition and increases in Medicares laboratory expenditures. The ramifications to Medicare beneficiaries, their physicians and the labs that currently serve them could be devastating.

In their complaint, the plaintiffs argue, in part, that the federal Department of Health and Human Services:

  • Failed to follow a legally required rulemaking process by failing to hold appropriate public hearings and failing to allow Medicare recipients, physicians and others to provide input into the process.
  • Failed to incorporate protections for small businesses, as required by law. The Demonstration Project requires all labs to perform all 303 tests or obtain the financial and bidding cooperation of reference laboratories, which are now considered competitors.
  • Has established a program that threatens to cause severe and irreparable injury to plaintiffs Internist, Sharp, and Scripps, as well as to their respective employees and patients.
  • Has included many policies that are arbitrary.

Internist Laboratory is a family-owned business with eight employees and roughly 65 percent of the companys business is derived from Medicare beneficiary lab tests. If Internist is not chosen as a winning laboratory, it could be forced to consider closing down eventually.

Sharp HealthCare may have to close down some local drawing stations if it is not a winning laboratory. This includes the likelihood of sending out its laboratory tests for Medicare fee for service urgent care patients, potentially causing a significant and dangerous delay in critical testing results. Like Sharp, Scripps Health may be forced to discontinue completely, or significantly decrease, furnishing laboratory services to non-hospital patients.

About Hooper, Lundy & Bookman, Inc.: Hooper, Lundy & Bookmans lawyers are regularly engaged in complex litigation involving hospitals and health systems, laboratories and other health care providers. The firms regulatory department regularly assists provider clients with litigation, arbitration and mediation services that have resulted in numerous favorable judgments and new case law. With clients in 47 states and offices in Los Angeles, San Francisco and San Diego, the firm is the largest law firm in the country dedicated solely to the representation of health care providers. For more information, visit the firms website at


Hooper, Lundy & Bookman, Inc.
Patric Hooper, 310-551-8165
Cell: 310-387-5905



Hooper, Lundy & Bookman, Inc.
Patric Hooper, 310-551-8165
Cell: 310-387-5905