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White House Issues Executive Order to Improve the Regulatory Process

Regulatory Process(January 18, 2011):  Earlier today, President Obama signed an Executive Order and Memoranda to the heads of executive agencies to redesign the regulatory process.  Health care is one of the most highly regulated industries in the county.  Thus, the manner in which the United States Department of Health and Human Services (“HHS”), the Department of Justice, and other regulatory agencies such as the Department of Labor and the Internal Revenue Service implement the Order could have a major impact on the industry.

I.  Overview of the Executive Order Intended to Improve the Regulatory Process:

The documents instruct agencies to minimize to the extent practicable regulatory burdens on businesses while also protecting the public and the environment.  Where sectors or industries, such as health care, face significant requirements by more than one agency, the Order instructs agencies to identify and attempt to harmonize their regulatory approaches to avoid inconsistent approaches.  One publications, BNA Health Care Daily, cited senior administration officials as stating that the Order generally requires agencies to develop regulations that are evidence based and cost effective, and that are consistent with job creation, economic growth, and competitiveness, see BNA Health Care Daily – Breaking News, January 18 at 11:56 AM.

II. Focus of the Executive Order on the Regulatory Process and Enforcement Procedures:

The Order also instructs agency heads to promote a retrospective analysis of existing rules to consider whether any are “outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned…” in the review.  Within 120 days, agencies are to develop and submit a preliminary plan on how they intend to implement this directive.  Given the volume of regulations under HHS’ purview, this requirement, alone, has the potential to have a major impact on the health care industry – especially with the new health care reform legislation.  The process, in essence, could focus the government on applying across the board the process that it is currently going through to accommodate the fraud and abuse and anti-trust laws with the goals of establishing accountable care organizations (“ACOs”).

Also, to encourage and involve public participation, the Order requires that before issuing any notice of proposed rulemaking, each agency, where feasible and appropriate, shall seek the view of those likely to be affected by the rulemaking.  While the Centers for Medicare and Medicaid Services (“CMS”) has informally followed this path on some occasions, the Executive Order appears to formalize the process of “pre NPR consultation.”  In essence, it encourages the agency to try to “get it right” in the first instance, and thus to streamline and refine the process of soliciting public comments through the NPR process.  Also, through a more robust “given and take,” it increases the likelihood that the final product will avoid unintended consequences that complicate compliance efforts with the regulatory process for the industry without furthering the government’s interest.

III.  Memoranda Accompanying the Executive Order:

The Executive Order is accompanied by two short memoranda to agency heads.  The first focuses on regulatory compliance and enforcement activities, and instructs the Chief Information Officer and Chief Technology Officer to make data available on line and to share data across agencies.

The second focuses on regulatory flexibility, small business, and job creation to eliminate “excessive and unjustified burdens on small business.”  It instructs executive departments and agencies to consider when initiating rulemaking whether and how it is appropriate to reduce regulatory burdens on small businesses through increased flexibility.  Citing to the Regulatory Flexibility Act, 5 USC 601 et seq., the memorandum lists several options such as:  extended compliance dates to account for resources available to small entities; performance rather than design standards; simplified reporting and compliance requirements; different requirements for large and small entities; and exemptions.  This can be especially useful as smaller health care entities tailor their now mandatory compliance programs to the size and complexity of their operations, and also hopefully will place some more rational thought into the audit process that now includes a multiplicity of external contractors such as MACs, ZPICs, and RACs, as well as the Office of Inspector General (“OIG”) .

IV.  These Changes Are Not Intended to Create New Enforceable Rights for Third Parties:

The Executive Order and memoranda state specifically that the documents do not create enforceable rights for third parties.  Nevertheless, they may well further focus the various regulatory agencies including HHS and its principal operating components, such as CMS and OIG, on the practical implications of their actions on the businesses that they regulate and on the importance of understanding how these businesses operate.  It also reinforces the importance on providers of providing realistic input to the agencies during the rulemaking and regulatory process, and may provide an additional vehicle to prevent unintended consequences in that process, and also to provide a better balance between the concerns of government to intelligently regulate the health care industry, and the need for the industry to be able to operate with the minimum amount of confusion, complexity, and avoidable administrative expense.

Attorneys at Liles Parker have substantial experience in guiding clients through the regulatory and enforcement process.  Should you have questions regarding this issue, please call Michael H. Cook.  He can be reached at (202) 298-8750, ext. 35.