In its proposed rule for the bidding program, CMS anticipated using the Small Business Administration's (SBA) definition of "small business" to evaluate whether a DMEPOS supplier qualifies as a "small supplier." To be considered "small," the SBA standard requires business engaged in renting home health equipment to earn no more than $6.5 million in total annual receipts. CMS's final rule, however, classified a small supplier as an entity receiving less than $3.5 million in annual receipts. CMS also included, for the first time, in the final rule a provision allocating 30% of contracts to small suppliers. Neither of these changes were subjected to notice and comment. Under the APA, when a governmental policy acts as a rule and alters existing regulation, the agency must first give the public "notice" --publishing the changes in the Federal Register, and allow the public to participate in policy-making by submitting written comments. This is known as the "notice and comment" rulemaking requirements.

On May 15, 2007, CMS issued a request for bids for the first round of the bidding program. On May 25, 2007, CMS released a series of financial ratios that it would apply to the financial documents submitted with bids, but those ratios did not include specific figures or values. The bidding window closed on September 25, 2007. In May 2008, the government announced the winning bidders for each product category in the bidding program. On July 1, 2008, sales under the program were to commence, at which time the plaintiffs are excluded from DMEPOS items and services to Medicare beneficiaries for which they have not been awarded a contract from CMS until the next round of bidding.


Judge Urbina's decision is based on his conclusion that the plaintiffs failed to demonstrate irreparable injury. An injunction to stop an act from occurring may only be granted if the party requesting the injunction demonstrates a likelihood that they will succeed in the litigation at hand, and that it will suffer irreparable injury (a harm which no monetary compensation can cure nor can the injured party be returned to the condition it was prior to injury). Such injunctions are rarely awarded due to the extraordinary and drastic nature of the remedy. The Plaintiffs in this case claim a procedural injury through the implementation of the program and an economic injury through exclusion from the program.

Regarding the economic injury, AAH stated in court papers that it would lose significant clientele and revenue, while Ace Drug estimated that revenue loss in the first three years of the program would be $75,000. Ace Drug also says it will be disqualified as a small supplier due to annual revenues of 3.5 million and therefore lose opportunities to smaller businesses. Judge Urbina stated that the estimated losses from both were not "sufficiently grave" and catastrophic enough to justify injunction, particularly as AAH's estimates were vague in description and Ace Drug's prior annual revenue of 3.7 million too high for a prospective $75,000 loss to be considered a significant hardship. Judge Urbina further stated that the Plaintiffs did not support speculated future losses with sufficient evidence.

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