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Top-to-Bottom Rule Review Poses Test of HHS’ Staff and Resolve

Nov. 12, 2020, 10:18 AM

Ambitious plans to review all HHS regulations every decade would demand thousands of hours of staff time and open the agency up to a rash of new legal challenges, health-care attorneys and regulatory researchers say.

The goal of the top-to-bottom review is to improve policies that are outdated or aren’t working as intended. But combing through the Department of Health and Human Services’ mountains of rules will be an extremely difficult undertaking—with the threat of regulations expiring if they aren’t reviewed in time.

This would be the broadest audit of the department’s regulations ever undertaken and could allow for changes health-care industry groups and attorneys have long wanted but been unable to get Congress to pass.

The HHS is “creating a pretty big stick for itself to get it to do the reviews that Congress has told it to do,” and it’s a “good thing for regulated industry,” said Kelly Cleary, former HHS deputy general counsel and Centers for Medicare & Medicaid Services chief legal officer.

The Office of Management and Budget suggested reviewing regulations in its reports to Congress, Susan Dudley, who was a top White House regulatory official, said. But Dudley said she isn’t aware of any other agency doing something like this proposal.

Compliance across the federal government with the Regulatory Flexibility Act’s requirement for agencies to periodically review their regulations “has varied substantially from agency to agency, with some agencies reviewing few of their current rules,” Thomas Sullivan, then chief counsel for advocacy at the Small Business Administration, testified in 2008.

The HHS said its artificial intelligence analysis found 85% of the department’s regulations created before 1990 haven’t been edited.

This proposal could drive the department to see how its regulations really work and “find better ways to do what they’re doing,” said Dudley, founder of the George Washington Regulatory Studies Center and a former administrator of the Office of Information and Regulatory Affairs in the George W. Bush administration.

However, the possibility of rules expiring could increase uncertainty for businesses when the upfront costs to comply are high, as with electronic health records, Dudley said.

Staff, Time Burden

Eric Knickrehm, a health-care attorney at Ballard Spahr LLP, said this rule is unique in the scope of the regulations that will need to be reviewed. Knickrehm said there’s a reason it hasn’t been attempted more widely: the burden.

The HHS estimates that 20,000 to almost 45,000 hours will be spent reviewing the 2,480 regulations during the first two years, according to the proposal.

It’s good that the HHS is “making it a priority to clean out some of these and revise” the regulations, said Judy Waltz, a partner at Foley & Lardner LLP who co-chairs the firm’s health-care industry team. However, she said she wasn’t sure how the staff would have the time and resources necessary.

“Most of these are going to have to be really deeply analyzed to see if they’re worth keeping,” Waltz, a former HHS assistant regional counsel, said. “It’s just a huge undertaking.”

“The retrospective review of a regulation—if done properly—is really hard,” said Heather Pierce, senior director for science policy and regulatory counsel for the Association of American Medical Colleges, adding it should involve data collection and analysis.

Changes to Tackle

The proposed rule could allow for changes to some outdated regulations “that don’t reflect the way we live today,” Waltz said.

One example Waltz gave was the regulations around clinical laboratories, pointing out that certain types of requests for a pathologist to review a sample require that the slides stay at the lab and a pathologist go to that lab to view them. However, slides can now be digitized, but the regulations don’t allow a pathologist elsewhere to view the digitized slide.

Cleary said she expects the health industry would ask the department to review some older regulations around the physician self-referral rule and some states might ask for Medicaid state plan submission requirements to be amended or rescinded.

Some key regulations that won’t be subject to this: any Affordable Care Act market reforms because they are issued jointly with other departments. Also, annual Medicare and Medicaid payment rules since they are already reviewed on a yearly basis.

Authority

Waltz said the department’s authority to allow the rules to expire, or sunset, is inherent in its powers to make regulations.

Cleary, a partner at Akin Gump Strauss Hauer and Feld, said there isn’t a lot of precedent for the sunset provision, but the legal basis for it is sound.

The proposal includes a clause that would allow some parts of the rule to stand if a court struck down another part, known as a severability clause.

This indicates that the HHS expects there to be a legal challenge, Knickrehm said, and it would probably be the expiration that would be most at issue.

The proposal would also open the agency up to additional legal challenges because there will be more decisions made about each rule, which creates more points that could be challenged, Cleary said.

However, some attorneys questioned whether this proposal would ever come to fruition before the new administration takes office.

It will be “nearly impossible” for the Trump administration to finalize the proposal before the next presidential term, said Knickrehm. That is because some provisions require a 60-day comment period and the department plans to hold a public hearing, he said.

A new administration could either rescind this regulation before it takes effect, or it could push back the date it takes effect, Cleary said.

—With assistance by Jeannie Baumann

To contact the reporter on this story: Shira Stein in Washington at sstein@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Brent Bierman at bbierman@bloomberglaw.com

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