B-213805, SEP 28, 1984

B-213805: Sep 28, 1984

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THE QUESTION OF WHETHER A PARTICULAR RULE ISSUED IN AN AGENCY MANUAL AMOUNTS TO A SUBSTANTIVE RULE THAT SHOULD HAVE BEEN PUBLISHED IN THE FEDERAL REGISTER FOR NOTICE AND COMMENT IN ACCORDANCE WITH 5 U.S.C. 553 OF THE ADMINISTRATIVE PROCEDURE ACT CAN ONLY BE MADE BY A COURT ON A CASE-BY- CASE BASIS UPON CONSIDERATION OF A VARIETY OF SPECIFIC FACTORS. UNLESS RULES ACTUALLY ARE PUBLISHED IN THE FEDERAL REGISTER UNDER 5 U.S.C. 553. AGENCIES ARE NOT REQUIRED TO CONDUCT A REGULATORY FLEXIBILITY ANALYSIS UNDER THE REGULATORY FLEXIBILITY ACT. CHAIRMAN: THIS IS IN RESPONSE TO YOUR NOVEMBER 9. ENCLOSED WITH YOUR LETTER WAS A COPY OF A LETTER THE COMMITTEE HAD RECEIVED FROM THE AMERICAN FEDERATION OF HOME HEALTH AGENCIES.

B-213805, SEP 28, 1984

ADMINISTRATIVE PROCEDURE ACT - RULEMAKING - PUBLICATION REQUIREMENT DIGEST: 1. THE QUESTION OF WHETHER A PARTICULAR RULE ISSUED IN AN AGENCY MANUAL AMOUNTS TO A SUBSTANTIVE RULE THAT SHOULD HAVE BEEN PUBLISHED IN THE FEDERAL REGISTER FOR NOTICE AND COMMENT IN ACCORDANCE WITH 5 U.S.C. 553 OF THE ADMINISTRATIVE PROCEDURE ACT CAN ONLY BE MADE BY A COURT ON A CASE-BY- CASE BASIS UPON CONSIDERATION OF A VARIETY OF SPECIFIC FACTORS. ADMINISTRATIVE PROCEDURE ACT - VIOLATIONS - NOT FOUND 2. BASED ON INFORMATION AVAILABLE TO US WE CANNOT CONCLUDE THAT THE HEALTH CARE FINANCING ADMINISTRATION WITHIN THE DEPARTMENT OF HEALTH AND HUMAN SERVICES VIOLATED EITHER THE ADMINISTRATIVE PROCEDURE ACT OR THE REGULATORY FLEXIBILITY ACT IN CONNECTION WITH ITS ISSUANCE OF CERTAIN SPECIFIED RULES AND REGULATIONS. REGULATORY FLEXIBILITY ACT - REGULATORY FLEXIBILITY ANALYSIS - AGENCY RULES - FEDERAL REGISTER PUBLICATION PREREQUISITE 3. UNLESS RULES ACTUALLY ARE PUBLISHED IN THE FEDERAL REGISTER UNDER 5 U.S.C. 553, AGENCIES ARE NOT REQUIRED TO CONDUCT A REGULATORY FLEXIBILITY ANALYSIS UNDER THE REGULATORY FLEXIBILITY ACT, 5 U.S.C. 601 612.

THE HONORABLE PARREN J. MITCHELL CHAIRMAN, COMMITTEE ON SMALL BUSINESS HOUSE OF REPRESENTATIVES

DEAR MR. CHAIRMAN:

THIS IS IN RESPONSE TO YOUR NOVEMBER 9, 1983, REQUEST FOR A LEGAL OPINION FROM OUR OFFICE CONCERNING THE MANNER IN WHICH THE HEALTH CARE FINANCING ADMINISTRATION (HCFA), WITHIN THE DEPARTMENT OF HEALTH AND HUMAN SERVICES (HHS), HAS BEEN IMPLEMENTING THE MEDICARE PROGRAM. YOU EXPRESS CONCERN ABOUT HCFA'S PRACTICE OF MAKING "SUBSTANTIAL CHANGES TO THE MEDICARE PROGRAM *** IN 'MANUAL' FORM WITHOUT PUBLICATION IN THE FEDERAL REGISTER FOR PUBLIC NOTICE OR COMMENT," AS REQUIRED BY THE ADMINISTRATIVE PROCEDURE ACT (APA). YOU ALSO ASK WHETHER HCFA HAS COMPLIED WITH THE REQUIREMENTS IMPOSED BY THE REGULATORY FLEXIBILITY ACT.

ENCLOSED WITH YOUR LETTER WAS A COPY OF A LETTER THE COMMITTEE HAD RECEIVED FROM THE AMERICAN FEDERATION OF HOME HEALTH AGENCIES, INC. (AFHHA), A NATIONAL TRADE ORGANIZATION THAT REPRESENTS A NUMBER OF HOME HEALTH AGENCIES (WHICH APPARENTLY ARE ALL SMALL BUSINESS CONCERNS) PARTICIPATING IN THE MEDICARE PROGRAM. THE AFHHA LETTER DESCRIBES SEVERAL INSTANCES IN WHICH HCFA ALLEGEDLY VIOLATED BOTH THE APA AND THE REGULATORY FLEXIBILITY ACT.

SPECIFICALLY, YOU ASK OUR OFFICE TO ANSWER THE FOLLOWING THREE QUESTIONS:

"(1) DOES THE HCFA PRACTICE OF ISSUING MANUALS TO EFFECT SUBSTANTIVE CHANGES OF PROSPECTIVE APPLICATION TO THE OPERATIONS OF THE MEDICARE PROGRAM VIOLATE THE ADMINISTRATIVE PROCEDURE ACT?

"(2) DOES THE FAILURE OF THE HCFA TO CONDUCT A REGULATORY FLEXIBILITY ANALYSIS ON THE PROVISIONS OF THOSE MANUALS REFERRED TO IN (1) ABOVE VIOLATE THE REGULATORY FLEXIBILITY ACT?

"(3) DO ANY OF THE SPECIFIC CASES CITED IN THE ENCLOSED LETTER FROM THE AFHHA VIOLATE EITHER OF THE AFOREMENTIONED ACTS?"

AS EXPLAINED IN GREATER DETAIL BELOW, WE CONCLUDE AS FOLLOWS:

1. WE ARE UNABLE TO STATE, WITHOUT QUALIFICATION, THAT HCFA'S PRACTICE OF ISSUING MANUALS TO IMPLEMENT THE MEDICARE PROGRAM VIOLATES THE APA. DETERMINATION AS TO WHETHER A PARTICULAR MANUAL PROVISION AMOUNTS TO A SUBSTANTIVE RULE THAT SHOULD HAVE BEEN PUBLISHED IN THE FEDERAL REGISTER FOR NOTICE AND COMMENT AS REQUIRED BY THE APA CAN ONLY BE MADE ON A CASE- BY-CASE BASIS, UPON CONSIDERATION OF A VARIETY OF SPECIFIC FACTORS.

2. UNLESS RULES ACTUALLY ARE PUBLISHED IN THE FEDERAL REGISTER UNDER 5 U.S.C. SEC. 553 (1982), HCFA IS NOT REQUIRED TO CONDUCT A REGULATORY FLEXIBILITY ANALYSIS UNDER THE REGULATORY FLEXIBILITY ACT.

3. BASED ON THE INFORMATION AVAILABLE TO US, WE CANNOT CONCLUDE THAT ANY OF THE THREE INSTANCES CITED IN THE AFHHA LETTER VIOLATE EITHER THE APA OR THE REGULATORY FLEXIBILITY ACT. HOWEVER, WE NOTE THAT IN THE THIRD INSTANCE HCFA'S DECISION FLEXIBILITY ACT COULD BE CRITICIZED IN LIGHT OF A DISTRICT OF COLUMBIA COURT OF APPEALS RULING IN A VERY SIMILAR FACTUAL SITUATION THAT A HCFA INSTRUCTION IN A MANUAL WAS SUBSTANTIVE AND THEREFORE SUBJECT TO BOTH ACTS. NATIONAL ASSOCIATION OF HOME HEALTH AGENCIES V. SCHWEIKER, 690 F.2D 932 (D.C. CIR. 1982).

YOUR FIRST QUESTION IS WHETHER HCFA VIOLATES THE APA WHEN IT ISSUES MANUALS "TO EFFECT SUBSTANTIVE CHANGES" IN THE MEDICARE PROGRAM. THE WAY THE QUESTION IS PHRASED ASSUMES THAT HCFA MAKES A PRACTICE OF ACCOMPLISHING SUBSTANTIVE PROGRAM CHANGES BY ISSUING MANUALS THAT HAVE NOT BEEN SUBJECTED TO THE NOTICE AND COMMENT RULEMAKING REQUIREMENTS OF THE APA. THIS DOES NOT APPEAR TO BE THE CASE. WE REQUESTED A REPORT FROM HCFA WHEN WE FIRST RECEIVED YOUR LETTER, AND RECEIVED ITS COMMENTS IN A LETTER DATED MARCH 9, 1984 (COPY ENCLOSED). HCFA POINTS OUT THAT THE RULEMAKING SECTION OF THE APA GENERALLY PROVIDES THAT SUBSTANTIVE RULES MUST BE PUBLISHED IN THE FEDERAL REGISTER FOR PUBLIC NOTICE AND COMMENT, BUT ALSO PROVIDES AN EXEMPTION FOR RULES DEALING WITH GRANTS AND BENEFITS (AMONG OTHER TOPICS). 5 U.S.C. SEC. 553(A)(1). IN OTHER WORDS, UNDER THE APA, HCFA COULD HAVE WITHHELD, HAD IT CHOSEN TO DO SO, ALL OF ITS REGULATIONS FROM PUBLICATION IN THE FEDERAL REGISTER.

IN 1971, DHHS CHOSE INSTEAD TO WAIVE THE APA BROAD EXEMPTION FOR GRANT AND BENEFIT PROGRAMS, AND IT MADE ITSELF SUBJECT TO THE GENERAL NOTICE AND COMMENT RULEMAKING REQUIREMENTS OF THE APA. SEE 36 FED.REG. 2532 (1971). BY THIS ACTION HCFA, AS A PART OF HHS, IS REQUIRED, BEFORE IT ISSUES A SUBSTANTIVE RULE COVERING THE MEDICARE PROGRAM, TO PROVIDE THOSE AFFECTED BY THE RULE WITH NOTICE OF THE PROPOSED RULE AND GIVE THEM AN OPPORTUNITY TO COMMENT ON IT. HCFA MUST ALSO EXPLAIN THE BASIS AND PURPOSE OF THE FINAL SUBSTANTIVE RULE. THE COURTS HAVE HELD THAT THIS WAIVER ESTABLISHES A LEGALLY BINDING REQUIREMENT. SEE CHESHIRE HOSPITAL V. NEW HAMPSHIRE- VERMONT HOSPITALIZATION SERVICE, 689 F.2D 1112, 1122 N.13B (1ST CIR. 1982). THE QUESTION, THEN, IS WHETHER HCFA VIOLATED ANY OF THE REQUIREMENTS IT CHOSE TO FOLLOW.

HCFA'S POSITION IS THAT ITS MANUALS DO NOT CONTAIN SUBSTANTIVE PROGRAM CHANGES AND THEREFORE IT DOES NOT VIOLATE THE APA WHEN IT ISSUES THEM. HCFA SAYS THAT THE MANUALS ARE INTERPRETATIVE RULES ND THE RULEMAKING REQUIREMENTS OF 5 U.S.C. SEC. 553, DO NOT APPLY TO INTERPRETATIVE RULES. FOR THE MOST PART, IT CLAIMS, THE MANUALS CONTAIN "DETAILED POLICY AND OPERATIONAL GUIDANCE TO PROVIDERS, CONTRACTORS AND STATE AGENCIES. UNLIKE REGULATIONS, THEY DO NOT HAVE BINDING LEGAL EFFECT."

THE DISTINCTION BETWEEN INTERPRETATIVE AND SUBSTANTIVE RULES HAS BEEN A MAJOR AREA OF DISCUSSION IN THE FIELD OF ADMINISTRATIVE LAW EVER SINCE THE APA WAS ENACTED IN 1946. IN A DISPUTE OVER WHETHER A PARTICULAR RULE IS SUBSTANTIVE, AND THEREFORE COVERED BY THE RULEMAKING REQUIREMENT IN 5 U.S.C. SEC. 553, OR INTERPRETATIVE, AND THEREFORE EXEMPT FROM THESE REQUIREMENTS, ONLY A COURT OF COMPETENT JURISDICTION CAN FINALLY RESOLVE THE MATTER AFTER FULL CONSIDERATION OF THE SPECIFIC CIRCUMSTANCES INVOLVED.

WE DO, HOWEVER, HAVE SOME GENERAL OBSERVATIONS AND COMMENTS CONCERNING THE ISSUE YOU RAISE. FIRST, THE FOLLOWING CRITERIA HAVE GENERALLY BEEN CONSIDERED SIGNIFICANT BY THE COURTS IN DECIDING WHICH RULES ARE SUBJECT TO APA NOTICE AND COMMENT REQUIREMENTS:

"(1) THE COMPLEXITY AND PERVASIVENESS OF THE RULES ISSUED, (2) THE DRASTIC CHANGES EFFECTED IN EXISTING LAW BY THE RULES, (3) THE DEGREE OF RETROACTIVITY AND ITS IMPACT AND (4) THE CONFUSION AND CONTROVERSY ENGENDERED BY PRACTICAL DIFFICULTIES OF COMPLIANCE WITH THE NEW RULES."

SEE SPRING MILLS, INC. V. CONSUMER PRODUCT SAFETY COMMISSION, 434 F.SUPP. 416, 430 (D.S.C. 1977); AND CASES CITED THEREIN. ALSO, SEE ADMINISTRATIVE CONFERENCE OF THE UNITED STATES, OFFICE OF THE CHAIRMAN, A GUIDE TO FEDERAL AGENCY RULEMAKING (1983), WHICH CONTAINS A LENGTHY DISCUSSION AND ANALYSIS OF THIS AND OTHER ISSUES RELATED TO THE APA.

SECOND, THE COURTS AND COMMENTATORS AGREE THAT THERE IS AN IMPORTANT AND VALID FUNCTION PERFORMED BY THE ISSUANCE OF AGENCY MATERIALS IN THE FORM OF MANUALS. IN OUR REVIEW OF RECENTLY REPORTED CASES, AGENCY DETERMINATIONS THAT PARTICULAR PUBLICATIONS ARE INTERPRETATIVE RULES HAVE LARGELY BEEN UPHELD BY THE COURTS. WE HAVE FOUND THIS TO BE TRUE IN NUMEROUS CASES DEALING SPECIFICALLY WITH HCFA MANUAL PROVISIONS. SEE E.G., COLUMBUS COMMUNITY HOSPITAL, INC. V. CALIFANO, 614 F.2D 181, 187 (8TH CIR. 1980); JOHN MUIR MEMORIAL HOSPITAL V. SCHWEIKER, 664 F.2D 1337, 1339 (9TH CIR. 1981); RIO HONDO MEMORIAL HOSPITAL V. UNITED STATES 689 F.2D 1025, 1033 (CT. CL. 1982). BUT SEE NATIONAL ASSOCIATION OF HOME HEALTH AGENCIES V. SCHWEIKER, 690 F.2D 932, 948-950 (D.C. CIR. 1982), DISCUSSED LATER.

YOUR SECOND QUESTION IS WHETHER HCFA'S FAILURE TO CONDUCT A REGULATORY FLEXIBILITY ANALYSIS (RFA) ON THE PROVISIONS OF THOSE MANUALS REFERRED TO IN YOUR FIRST QUESTION VIOLATES THE REGULATORY FLEXIBILITY ACT, 5 U.S.C. SECS. 601-612. UNDER 5 U.S.C. SEC. 603 AND SEC. 604 OF THE REGULATORY FLEXIBILITY ACT, WHICH TOOK EFFECT ON JANUARY 1, 1981, AGENCIES ARE REQUIRED TO PREPARE AN RFA OF PROPOSED AND FINAL RULES UNLESS THE HEAD OF THE AGENCY CERTIFIES UNDER 5 U.S.C. SEC. 605(B) THAT THE RULE WILL NOT, IF PROMULGATED, HAVE SIGNIFICANT ECONOMIC IMPACT ON A SUBSTANTIAL NUMBER OF SMALL ENTITIES. THE RFA MUST DEMONSTRATE THAT THE AGENCY HAS CONSIDERED THE LIKELY IMPACT THE REGULATION WILL HAVE ON SMALL BUSINESS AND OTHER SMALL ENTITIES AND HAS CONSIDERED ALTERNATIVES THAT WOULD REDUCE SUCH IMPACT. UNDER 5 U.S.C. SEC. 604, THE REQUIREMENT OF PREPARING A FINAL RFA APPLIES WHENEVER AN AGENCY PROMULGATES A FINAL RULE UNDER 5 U.S.C. SEC. 553 "AFTER BEING REQUIRED BY THAT SECTION OR ANY OTHER LAW TO PUBLISH A GENERAL NOTICE OF PROPOSED RULEMAKING ***." ALSO, 5 U.S.C. SEC. 603(A) REQUIRES AGENCIES TO PREPARE AN INITIAL RFA WHENEVER 5 U.S.C. SEC. 553 OR ANY OTHER LAW REQUIRES PUBLICATION OF A GENERAL NOTICE OF PROPOSED RULEMAKING. IF THE REGULATORY FLEXIBILITY ACT APPLIES AND THE AGENCY HEAD DOES NOT MAKE THE NECESSARY CERTIFICATION WITHIN 180 DAYS FROM THE DATE ON WHICH THE FINAL RULE IS PUBLISHED, THE RULE WILL "LAPSE AND HAVE NO EFFECT." SEE 5 U.S.C. SEC. 608(B). FOR A LENGTHY DISCUSSION OF THE BACKGROUND, MEANING AND APPLICABILITY OF THE REGULATORY FLEXIBILITY ACT, SEE VERKUIL, A CRITICAL GUIDE TO THE REGULATORY FLEXIBILITY ACT, 1982 DUKE L.J. 213.

WE DO NOT BELIEVE THAT HCFA'S FAILURE TO CONDUCT AN RFA OF THE MANUALS IT ISSUES IN IMPLEMENTING THE MEDICARE PROGRAM CONSTITUTES A VIOLATION OF THE REGULATORY FLEXIBILITY ACT. OF THE MANUALS IT ISSUES IN IMPLEMENTING THE MEDICARE PROGRAM CONSTITUTES A VIOLATION OF THE REGULATORY FLEXIBILITY ACT. THE REGULATORY FLEXIBILITY ACT ONLY APPLIES TO NOTICE AND COMMENT RULES PROMULGATED UNDER 5 U.S.C. SEC. 553.

OF COURSE, IF A PARTICULAR HCFA RULE WAS ISSUED IN MANUAL FORM, BASED ON HCFA'S DETERMINATION THAT THE INSTRUCTION WAS INTERPRETATIVE, PROCEDURAL, OR IN SOME OTHER CATEGORY EXEMPT FROM THE REQUIREMENTS OF 5 U.S.C. SEC. 553, AND IT WAS LATER FOUND THAT IT WAS A SUBSTANTIVE RULE SUBJECT TO THE REQUIRED NOTICE AND COMMENT PROCEDURES IMPOSED BY THAT SECTION, THE REGULATORY FLEXIBILITY ACT WOULD APPLY WHEN THOSE PROCEDURES ACTUALLY ARE FOLLOWED.

YOUR THIRD QUESTION IS WHETHER ANY OF THE SPECIFIC EXAMPLES CONTAINED IN THE LETTER FROM AFHHA OF ALLEGED VIOLATION BY HCFA OF THE APA OR THE REGULATORY FLEXIBILITY ACT DID, IN FACT, VIOLATE EITHER OF THOSE ACTS.

THE ONLY EXAMPLE OF AN ALLEGED VIOLATION OF THE APA THAT IS SET FORTH IN ANY DETAIL CONCERNS PROPOSED REVISIONS TO THE DEFINITIONS OF THE TERMS "HOMEBOUND" AND "INTERMITTENT SERVICES" IN THE HOME HEALTH AGENCY MANUAL ISSUED BY HCFA. THE AFHHA LETTER CONTENDS THAT "THE PROPOSED REVISIONS CONSTITUTE SIGNIFICANT CHANGES IN THE TERMS AND CONDITIONS UNDER WHICH HOME HEALTH SERVICE CAN BE FURNISHED" AND THEREFORE "SHOULD HAVE BEEN ISSUED AS PROPOSED REGULATIONS WITH THE OPPORTUNITY FOR FULL COMMENT BY THE PROVIDER COMMUNITY AND PUBLIC." IN ITS REPORT TO US ON THIS MATTER, HCFA TAKES THE POSITION THAT THE MANUAL REVISIONS WERE NOT A CHANGE IN POLICY. THE "PROPOSED CLARIFICATIONS OF THE 'INTERMITTENT' AND 'HOMEBOUND' DEFINITIONS CONSTITUTED CONFIRMATION AND REINFORCEMENT OF LONG ESTABLISHED POLICIES WITH FIRM LEGAL BASIS."

HOWEVER, AFTER WE RECEIVED HCFA'S REPORT, WE WERE INFORMALLY ADVISED BY HCFA OFFICIALS THAT DUE IN SOME PART TO THE CONTROVERSY THAT AROSE OVER THE PROPOSED REVISIONS, HCFA HAD RECONSIDERED AND DECIDED TO WITHDRAW THE PROPOSED CHANGES. ACCORDINGLY, SINCE HCFA NO LONGER PLANS TO AMEND ITS HOME HEALTH AGENCY MANUAL BY REVISING THE DEFINITIONS OF EITHER OF THE TERMS IN QUESTION, WE BELIEVE THAT THIS PARTICULAR ISSUE HAS BEEN RENDERED MOOT.

AFHHA ALSO ALLEGES THAT WHEN HCFA DOES ADHERE TO THE "REGULATORY PROCESS IT OFTEN DOES NOT FOLLOW THE REGULATORY FLEXIBILITY ACT, 5 U.S.C. SEC. 605(605)." IN PARTICULAR, AFHHA CITES TWO EXAMPLES OF INSTANCES IN WHICH HCFA ALLEGEDLY VIOLATED THE REGULATORY FLEXIBILITY ACT IN CONNECTION WITH REGULATIONS IT ISSUED.

ON AUGUST 2, 1983, HCFA PUBLISHED A NOTICE OF PROPOSED RULEMAKING IN CONNECTION WITH PROPOSED REGULATIONS THAT WOULD MODIFY THE PRIOR RULES CONCERNING THE OPTION THAT ALLOWS MEDICARE PROVIDERS TO ELECT TO RECEIVE PAYMENT FOR COVERED SERVICES DIRECTLY FROM HCFA, RATHER THAN THROUGH AN INTERMEDIARY. 48 FED.REG. 34979. HOWEVER, HCFA DID NOT PREPARE AN INITIAL RFA IN CONNECTION WITH THE PROPOSED REGULATION. AFHHA TAKES THE POSITION THAT SINCE THE PROPOSED RULE WOULD HAVE A SIGNIFICANT ADVERSE IMPACT ON THE TRANSFERRED PROVIDERS, HCFA'S FAILURE TO PREPARE THE INITIAL RFA VIOLATED THE ACT.

THERE MAY BE SOME MERIT IN AFHHA'S POSITION THAT THE PROPOSED RULE REQUIRING PROVIDERS TO DEAL WITH INTERMEDIARIES RATHER THAN WITH HCFA DIRECTLY COULD HAVE A SIGNIFICANT ADVERSE IMPACT ON THE TRANSFERRED PROVIDERS. PRIOR TO PUBLICATION OF THE PROPOSED RULE IN THE FEDERAL REGISTER ON AUGUST 2, 1983, THE SECRETARY OF HHS HAD ATTEMPTED TO ACCOMPLISH ESSENTIALLY THE SAME CHANGE THROUGH THE ISSUANCE OF AN ADMINISTRATIVE INSTRUCTION IN THE FORM OF A LETTER TO INTERMEDIARIES. ASSOCIATION OF HOME HEALTH AGENCIES (HHA'S) FILED SUIT TO ENJOIN THE SECRETARY FROM IMPLEMENTING THE NEW INSTRUCTION, CLAIMING, INTER ALIA, THAT HHS WAS REQUIRED TO COMPLY WITH THE REQUIREMENTS OF THE APA. NOTING THAT FOR 16 YEARS PRIOR THERETO, FREESTANDING HHA'S HAD THE OPTION OF DEALING WITH THE SECRETARY AND THAT UNCONTRADICTED EVIDENCE HAD DEMONSTRATED THAT LOSING THAT RIGHT COULD CAUSE THE HHA'S GREAT EXPENSE AND INCONVENIENCE, THE DISTRICT OF COLUMBIA COURT OF APPEALS CONCLUDED THAT THE INSTRUCTION DID "SUBSTANTIALLY AFFECT THE RIGHTS AND INTERESTS OF FREESTANDING HHA'S." THEREFORE, THE COURT HELD THAT THE INSTRUCTION ELIMINATING THAT RIGHT COULD NOT BE ISSUED AS A RULE OF AGENCY PROCEDURE EXEMPT FROM THE NOTICE AND COMMENT REQUIREMENTS OF 5 U.S.C. SEC. 553 AS CLAIMED BY HHS. NATIONAL ASSOCIATION OF HOME HEALTH AGENCIES V. SCHWEIKER, 690 F.2D 932, 948-950 (D.C. CIR. 1982).

NEVERTHELESS, UNDER 5 U.S.C. SEC. 605, AN AGENCY DOES NOT HAVE TO PREPARE THE INITIAL OR FINAL RFAS THAT OTHERWISE ARE REQUIRED BY 5 U.S.C. SEC. 603 AND 604 OF THE ACT, IF THE ADMINISTRATOR CERTIFIES THAT THE RULE WILL NOT "HAVE A SIGNIFICANT ECONOMIC IMPACT ON A SUBSTANTIAL NUMBER OF SMALL ENTITIES." WHEN THIS PARTICULAR NOTICE OF PROPOSED RULEMAKING WAS PUBLISHED IN THE FEDERAL REGISTER ON AUGUST 2, 1983, THE SECRETARY OF HHS CERTIFIED THAT THE PROPOSED REGULATIONS WOULD NOT HAVE A SIGNIFICANT IMPACT ON A SUBSTANTIAL NUMBER OF SMALL ENTITIES. WHILE THE COURT'S HOLDING IN THE AFOREMENTIONED CASE MIGHT CAST SOME DOUBT ON THE FACTUAL ACCURACY OF THE CERTIFICATION, 5 U.S.C. SEC. 611 PROVIDES THAT AGENCY CERTIFICATIONS UNDER 5 U.S.C. SEC. 605(B) ARE EXEMPT FROM JUDICIAL REVIEW. THEREFORE, IT WOULD APPEAR THAT UNDER THE TERMS OF THE REGULATION FLEXIBILITY ACT AN INITIAL RFA WAS NOT REQUIRED. SEE VERKUIL, SUPRA, AT 260.

AFHHA ALSO QUESTIONED HCFA'S DETERMINATION NOT TO PREPARE AN RFA IN CONNECTION WITH AN INTERIM RULE ISSUED BY HCFA ON OCTOBER 26, 1982, CONCERNING THE INVOLVEMENT OF PHYSICIANS WITH HHAS. 47 FED.REG. 47388. THE NEW REGULATION PROVIDED THAT PHYSICIANS WHO HAD A SIGNIFICANT OWNERSHIP INTEREST IN, OR A SIGNIFICANT FINANCIAL OR CONTRACTURAL RELATIONSHIP WITH, THE AGENCY COULD NO LONGER CERTIFY THAT AN INDIVIDUAL REQUIRED HOME HEALTH SERVICES. THE REGULATION DEFINED "SIGNIFICANT OWNERSHIP INTEREST" TO MEAN THAT THE PHYSICIAN OWNED 5 PERCENT OR MORE OF THE HHA'S ASSETS OR WAS AN OFFICER, DIRECTOR, OR PARTNER IN THE HHA.

APPARENTLY, HCFA'S POSITION IS THAT IT HAS CERTIFIED THAT THE REGULATIONS WILL NOT HAVE A SIGNIFICANT ECONOMIC IMPACT BECAUSE THEY "PRIMARILY IMPLEMENT STATUTORY REQUIREMENTS." THIS IS NOT STATED AS CLEARLY AS IT MIGHT SINCE THE PUBLISHED CERTIFICATION SUGGESTS THAT IMPLEMENTING STATUTORY REQUIREMENTS IS A SEPARATE GROUND UPON WHICH AN RFA CAN BE AVOIDED INDEPENDENT OF A FINDING OF "NO SIGNIFICANT ECONOMIC IMPACT." HCFA'S REASONING APPEARS TO BE THAT WHERE A STATUTE PROVIDES LITTLE DISCRETION FOR AN AGENCY TO DECIDE THE CONTENTS OF A REGULATION ISSUED UNDER 5 U.S.C. SEC. 553, THE RULE DOES NOT HAVE A SIGNIFICANT ECONOMIC IMPACT SINCE THAT HAD ALREADY OCCURRED AS THE RESULT OF ENACTMENT OF THE STATUTORY PROVISION.

WHILE WE MIGHT BE INCLINED TO AGREE WITH THIS LINE OF REASONING AS A GENERAL PROPOSITION, WE HAVE SOME DOUBT AS TO ITS APPLICABILITY TO THESE PARTICULAR REGULATIONS. IT IS TRUE, AS MAINTAINED BY HCFA, THAT SECTION 930(E) OF PUB.L. NO. 96-499 REQUIRED HHS TO PRESCRIBE REGULATIONS PROHIBITING PHYSICIANS WITH SIGNIFICANT OWNERSHIP INTERESTS IN HHAS, OR SIGNIFICANT FINANCIAL OR CONTRACTUAL RELATIONSHIPS WITH HHAS, FROM CERTIFYING THAT AN INDIVIDUAL REQUIRED HOME HEALTH SERVICES. HOWEVER, THE STATUTE DID NOT PURPORT TO DEFINE THOSE TERMS. THAT RESPONSIBILITY WAS VESTED IN THE SECRETARY OF HHS. ACCORDINGLY, WE DO NOT AGREE WITH THE DEPARTMENT'S POSITION THAT AN RFA WAS NOT NEEDED BECAUSE THE REGULATIONS MERELY IMPLEMENTED STATUTORY REQUIREMENTS. HOWEVER, WE MUST AGAIN POINT OUT THAT HCFA'S DETERMINATION IN THIS CASE APPEARS TO BE EXEMPT FROM JUDICIAL REVIEW UNDER 5 U.S.C. SEC. 611. ALSO, WE NOTE THAT HCFA'S REPORT TO US ON THIS MATTER INDICATED THAT IN ORDER TO ASSURE COMPLIANCE WITH THE REGULATORY FLEXIBILITY ACT IT MAY RECONSIDER ITS POSITION. SEE ENCLOSED LETTER.

THE AFHHA ALSO CLAIMS, WITHOUT MUCH ELABORATION, THAT REGULATIONS ISSUED ON DECEMBER 6, 1982, CONCERNING INTEREST CHARGES ON MEDICARE UNDERPAYMENTS AND OVERPAYMENTS (47 FED.REG. 54811), AND REGULATIONS ISSUED ON DECEMBER 30, 1982, DEALING WITH ACCESS TO SUBCONTRACTOR REWARDS (47 FED.REG. 58260), WERE ISSUED IN VIOLATION OF THE REGULATORY FLEXIBILITY ACT. AGAIN, WE DISAGREE. IN BOTH INSTANCES, THE SECRETARY MADE THE CERTIFICATION REQUIRED BY THE ACT, THAT THE REGULATIONS WOULD NOT HAVE ANY SIGNIFICANT ECONOMIC IMPACT ON A SUBSTANTIAL NUMBER OF SMALL ENTITIES. ACCORDINGLY, RFAS WERE NOT REQUIRED IN EITHER CASE.

UNLESS THERE IS ANOTHER AGREEMENT WITH YOUR OFFICE, 30 DAYS AFTER THE DATE OF THIS OPINION COPIES WILL BECOME AVAILABLE FOR DISTRIBUTION TO THE PUBLIC.