United States: HHS Announces Withdrawal Of Good Guidance Practices And Fairness In Enforcement Rules

On October 19, the U.S. Department of Health and Human Services (HHS) issued a proposed rule that would withdraw two regulations issued during the past administration that were directed at HHS's issuance of guidance documents and processes around enforcement actions: the Good Guidance Practices rule (GGP Rule) (discussed further here) and the Transparency and Fairness in Civil Administrative Enforcement Actions rule (Fairness in Enforcement Rule).  

HHS stated that its action was prompted by concerns relating to the rules' adverse effect on HHS's "ability to efficiently interpret and enforce regulations." In proposing to withdraw these rules, HHS did acknowledge the constraints it still faces under the Administrative Procedure Act (APA) and the Medicare Act, as interpreted by Azar v. Allina Health Servs., 139 S. Ct. 1804 (2019), in using guidance documents to impose new requirements on regulated entities. Comments are due by November 19, 2021.

GGP Rule

The GGP Rule's major provisions include the following:

• A requirement that each guidance document issued by HHS include a statement clarifying that the guidance does not have the force and effect of law and is not binding unless specifically incorporated into a contract;
• Heightened procedures for "significant" guidance documents including a notice-and-comment period;
• The creation of a repository for all guidance documents considered to be in effect (available at www.hhs.gov/guidance), with any guidance not included in the repository considered rescinded; and
• Procedures for the public to petition to HHS to withdraw or modify unlawful guidance documents.¹ 

In the proposed rule, HHS outlines four primary reasons for repealing the GGP Rule:

Rule may delay or prevent issuance of guidance documents.  HHS stated that the GGP Rule's heightened procedures for issuing guidance documents—particularly a comment period for interested parties affected by proposed "significant" guidance documents—"provide little value" and could delay the issuance of guidance documents, with "substantial negative consequences for the public."

In particular, HHS claimed that the GGP Rule's requirements threaten HHS's ability to issue guidance in a timely manner during a public health emergency. HHS cited no examples of instances in which the GGP Rule inhibited its ability to move quickly during the COVID-19 pandemic and acknowledged that the GGP Rule includes an exception to the notice-and-comment requirement for issuing significant guidance documents where HHS finds "that notice and public comment are impracticable, unnecessary, or contrary to the public interest." Nonetheless, HHS has concluded that the burden of making such a finding would "consume time and resources" and that the "procedural burdens" on the department outweigh the benefits to the public of enhanced transparency. 

Uniform requirements may be confusing and overly rigid.  HHS criticized the GGP Rule's requirements for "impos[ing] identical requirements on agencies with different legal authorities and mechanisms for achieving their mission." As an example, the proposed rule points to the requirement that guidance documents contain a statement clarifying that guidance documents "are not meant to bind the public," but rather only "provide clarity . . . regarding existing requirements under the law" unless "specifically incorporated into a contract." HHS says this statement is not appropriate for all HHS guidance documents and the terms "contract" and "guidance" are ambiguous.

Guidance repository may cause confusion.  HHS plans to maintain a guidance document repository, as implemented by the GGP Rule, but objects to the GGP Rule's requirement that omitted guidance documents be considered rescinded. The withdrawal proposal contends that the repository is confusing for stakeholders, who may not know whether a guidance document was deliberately or accidentally rescinded. The proposal does not address the challenges many stakeholders have articulated about the state of affairs prior to the creation of the guidance repository, which required regulated entities to mine various websites and search out paper documents to aggregate all relevant guidance HHS considers applicable to them. HHS specifically invites comments from stakeholders about their experiences with the HHS guidance repository to inform improvements to its usability and utility.

Limited agency resources better used elsewhere. In the proposed rule, HHS shares its belief that several provisions in the GGP Rule drain the Department's resources without conferring a corresponding benefit. HHS highlighted the petition process, which allows the public to request that unlawful guidance documents be withdrawn or modified, as "unnecessary and burdensome," particularly because the petition process requires HHS generally to respond to petitions within 90 business days. HHS pointed out that "many agencies have well-established petition processes that are already in use by stakeholders seeking changes to or rescission of existing guidance" and that "stakeholders could still petition the Department to take certain actions related to guidance documents under their general rights to communicate with and to seek redress from the Federal Government." Repeal of the rule may cause regulated entities to rely more heavily on existing processes for agency engagement, although the lack of a mandatory timeline for response may hamper meaningful engagement.  

The proposed rule also articulates HHS's belief that that certain statements in the GGP Rule that "seek to capture a current understanding of principles established by the APA" confer "little benefit," "are not necessary[,] and could cause confusion." As an example, the proposed rule cites to 45 C.F.R. § 1.3(a)(1), which was added by the GGP Rule: "Under the Administrative Procedure Act, the Department may not issue any guidance document that establishes a legal obligation that is not reflected in a duly enacted statute or in a regulation lawfully promulgated under a statute." The proposal does not dispute that this is a correct statement of law or explain how a correct statement of law reiterating regulated parties' rights causes confusion.  

Fairness in Enforcement Rule

The Fairness in Enforcement Rule's major provisions include:

• Limitations on how HHS can use guidance documents in administrative enforcement actions;
• Procedural requirements designed to avoid unfair surprise and to ensure fair notice as part of administrative enforcement actions; and
• A requirement that, before taking a civil enforcement action, HHS offer notice to affected parties and an opportunity to respond, and then provide a response, generally in writing.

Unnecessary hurdles to agency action.  HHS now believes that requirements within the Fairness in Enforcement rule "create unnecessary hurdles and roadblocks for agency action." In particular, HHS views the requirement to provide advance notice and an opportunity to be heard, and to respond to feedback from regulated entities, as "a rigid, burdensome, and resource-intensive path for Department staff, which is unnecessary when other tools in use, such as information negotiation, could be more efficient and effective."

Although the Fairness in Enforcement rule excludes actions involving "a serious threat to health, safety, or similar emergency" from the opportunity-to-be-heard process, HHS criticizes the exception for extending only to circumstances relating to physical harm and not financial harm. Certain Center for Program Integrity procedures allow the Centers for Medicare & Medicaid Services to withhold money from entities under investigation without advance due process. Revoking this protection may harm healthcare providers who are stuck in the middle of investigatory processes that can be drawn out for years. Nonetheless, the proposal claims that its processes preceding the implementation of the Fairness in Enforcement Rule fully and completely "compl[ied] with principles of due notice, fairness, and transparency." Regulated entities with experiences to the contrary should consider submitting comments on this point.

Uniform requirements and resource diversion.  Notably, one basis for the proposed withdrawal is the fact that the Fairness in Enforcement Rule provides regulated entities with additional defensive arguments in enforcement actions. A consideration supporting withdrawal, according to HHS, is the perception that the Fairness in Enforcement rule "is likely to invite opportunistic litigation," including "spurious challenges to valid enforcement actions and adjudications."

Regulated parties in the healthcare industry weighed in largely with strong support at the proposed rule stage when HHS was developing the GGP Rule. Many of their assessments contradict HHS's current views on the benefits of heightened procedural protections for regulated entities, particularly relating to guidance documents. Those that disagree with the proposed changes should consider submitting comments.

Notwithstanding HHS's actions to revoke these rules, the important background protections imposed by the APA on which the rules were based remain valuable defenses to regulated entities facing enforcement scrutiny on the basis of noncompliance with sub-regulatory guidance.

The Notice of Proposed Rulemaking is available here.

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