The federal government could face a flurry of lawsuits from angry medical equipment suppliers if lawmakers get their way and cancel hundreds of contracts that took effect last week.

As of July 1, only those suppliers in 10 metropolitan areas that won contracts through a bidding process completed earlier this year are permitted to sell 10 types of medical equipment, such as diabetes test strips, walkers and oxygen tanks, to Medicare beneficiaries.

“I don’t think there’s any problem with just ending the bidding operation,” Rep. Pete Stark (D-Calif.) said. “We can do that at any time.”

If the legislation is enacted, the Centers for Medicare and Medicaid Services (CMS) will face an enormous administrative headache, as well as the threat of legal action from suppliers who feel that they played by the rules and deserve the spoils.

“There are going to be a rash of lawsuits,” including the possibility of class action and individual suits charging breach of contract, said Jeffrey Holman, the president of Hollywood, Fla.-based First Priority Medical Services. Holman is a founding member of the Contracted Medical Equipment Suppliers Association of America, a nascent group representing winning bidders. “It’s not what we want to see,” Holman added.

The big players in the durable medical equipment industry, led by groups such as the American Association for Homecare (AAHomecare) and companies like Invacare , fought hard to get Congress on board with legislation to postpone a competitive bidding program put in place by Medicare. Invacare is a major manufacturer of oxygen equipment, wheelchairs and other supplies.

“It would basically just retroactively break all the contracts,” said AAHomecare lobbyist Stacey Harms. The drive is “very much alive and well,” said Cara Bachenheimer, Invacare’s senior vice president of government relations.

To some suppliers who won bids, however, this seems like dirty pool. “The government is sending a real bad message right now, and the message they are sending is ‘We are not good partners,’ ” Holman said.

The language to delay the program, authored by Stark, became part of a larger Medicare bill that overwhelmingly passed the House but is mired in a partisan dispute in the Senate over spending on private Medicare Advantage health insurance plans. Stark, who chairs the Ways and Means Committee’s Health Subcommittee, co-sponsored the bill with subcommittee ranking member Dave Camp (R-Mich.).

Stark is only one of many key lawmakers who have sided with industry groups seeking a delay. House Minority Leader John Boehner (R-Ohio) co-sponsored Stark’s bill in the House with 98 other House members, including Ways and Means Committee Chairman Charles Rangel (D-N.Y.) and Energy and Commerce Committee Chairman John Dingell (D-Mich.).

Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) also support the Stark legislation.

Stark has expressed particular sympathy to the industry’s complaints that CMS mishandled the implementation of the bidding program by, for example, providing inadequate guidance to bidders about how to file the appropriate paperwork.

CMS has been stalwart in its defense of the program, pointing out that the bid prices are an average 26 percent lower than what the government currently pays and emphasizing that triumphant bidders had to win accreditation that had never before been required to participate in Medicare.

In exchange for agreeing to take up their cause, Stark extracted a heavy price from the medical equipment industry. In order to cover the $3.1 billion, five-year cost, the industry accepted a 9.5 percent cut off their current fees in those 10 geographic areas.

The industry also says the program will reduce access to medical equipment because it reduced the number of suppliers in the 10 regions from more than 6,000 to just over 300. AAHomecare has set up a website for providers and beneficiaries to file complaints and is sharing its findings with lawmakers.

AAHomecare’s membership includes companies that won some of their bids but the industry at large is so unsatisfied with the way the bidding process played out that its trade association is taking an aggressive tack for a delay.

For suppliers like Holman, though, their participation in this program was backed up by a significant capital investment they stand to lose, he said. Holman, who won contracts to supply five types of equipment in the Miami-Fort Lauderdale region, says he spent $15,000 on accreditation for Medicare alone, as well as the costs of ramping up his company’s infrastructure to handle the expected spike in volume and on inventory. Medicare is by far the dominant purchaser of this equipment.

A House Democratic aide said that the legislation would allow suppliers to file for restitution for this spending. Holman acknowledged that but expressed doubt it would help. “From a practical standpoint, I don’t know how they’re going to do that,” he said.

Meanwhile, he noted, Invacare raised its prices this month, effective the same day the contracts took effect. In a letter to its customers, the company said that rising costs of fuel, aluminum, copper and lead forced them to hike prices, according to a report in the trade newsletter HME News.

If the contracts were voided, or if other suppliers were permitted to enter Holman’s market and sell their products at the same price as his company, he could not profit, given the investments already made and the low bid submitted. “I’ll shut my doors. I’ll go open an ice cream parlor,” Holman said.