More Uncertainty for Uncertain Times: HHS Proposes Good Guidance Practices Rule

With regulatory overreach in the spotlight since the early days of the Trump Administration, a proposed rule published in the Federal Register on Aug. 20, 2020 (the “Proposed Rule”) seeks to establish “good guidance practices” across most agencies within the Department of Health and Human Services (HHS).¹   The Proposed Rule would restrict the ability of the HHS agencies to impose obligations on regulated parties that are beyond what is already required by the terms of an applicable statute or regulation.  But does it actually deliver on that promise?  The answer could be both yes and no if the Proposed Rule is finalized essentially unchanged.

Background

The Proposed Rule builds upon Executive Order 13891 issued by the President in October, 2019 (the “Executive Order”) and, to a lesser extent, the United States Supreme Court’s decision in Azar v. Allina Health Systems. The Executive Order requires agencies to “treat guidance documents as non-binding both in law and in practice, except as incorporated into a contract, take public input into account when appropriate in formulating guidance documents and make guidance documents readily available to the public.”  Further, agencies “may impose legally binding requirements on the public only through regulations and on parties on a case-by-case basis through adjudications, and only after appropriate process, except as authorized by law or as incorporated into a contract.”  In Allina, the Court vacated a Medicare payment policy on the basis that HHS, in issuing a policy that retroactively reduced payments to hospitals for services provided to low-income patients, did not abide by public notice and comment requirements under the Medicare Act.  Those requirements are more stringent than what otherwise would be applicable under the Administrative Procedures Act (APA).

The Proposed Rule

The Proposed Rule would establish 45 C.F.R. Part 1 that defines what constitutes guidance, institutes a process for issuing guidance, prohibits HHS from issuing guidance that establishes legal obligations not reflected in statutes or regulations, creates a guidance repository where all existing and new guidance documents would be housed, and provides a procedure whereby interested parties can obtain administrative and judicial review of whether a guidance document creates new obligations beyond the applicable statute or regulation.

On its face, the framework of the Proposed Rule would be an effective barrier to agency overreach—the general definitions are broad in scope, and there are a host of provisions and “guardrails” to ensure that HHS agencies interpret applicable law rather than make it.   However, as with anything, the devil is in the details.

The Proposed Rule would implement a content-based definition of “guidance document” versus one that focuses on the format of a communication.²   There are a host of exclusions, at least one of which would require speculation regarding an agency’s intent.³   Also, the definition specifically excludes communications with a person that interpret or apply the law to a specific set of facts, such as letter rulings and advisory opinions, but then provides an exception if the content of the document is designed to guide the conduct of other regulated parties.  While advisory opinions, by their terms, apply only to the addressee and only to the facts presented, the Proposed Rule interjects a degree of uncertainty as to whether they constitute guidance documents under some circumstances.  The HHS Office of the General Counsel (OGC) determines whether a particular document is excluded from the definition of “guidance document” and also whether a guidance document is subject to rulemaking procedures.

The Proposed Rule, at Section 1.3(a)(2), prohibits HHS from using any guidance document for purposes of requiring a person or entity outside the Department from taking any action (or refraining from taking an action) beyond what is required by the underlying statute or regulation.  It also requires HHS agencies to label the guidance as such and to include a specific statement regarding the legal effect of the guidance document.  There are additional requirements applicable to “significant guidance documents,” which are defined according to their effect on the economy and other macro indicators, any inconsistency or actions taken by another agency, their budgetary effect, or whether they raise novel legal or policy issues.  Significant guidance documents are presumed to require notice-and-comment rulemaking, with the Office of Management and Budget making the final determination except where that determination requires a legal conclusion.

The Proposed Rule would establish the aforementioned electronic guidance repository.  New guidance documents must be posted within three (3) business days of issuance.  Interestingly, given that this is a proposed rule, all existing HHS guidance would be required to be posted (or linked to) within the repository no later than November 2, 2020 or be deemed rescinded.  An agency may reinstate any such rescinded guidance by following all requirements applicable to newly issued guidance documents.  This may have the effect of creating significant uncertainty regarding the status of individual guidance documents for an indeterminate period of time.

Finally, as noted above, the Proposed Rule includes a procedure pursuant to which interested parties may obtain administrative, and ultimately, judicial review of whether a guidance document inappropriately creates (or is being used by HHS to create) new obligations.  The Proposed Rule, however, does not include a definition of interested parties.  HHS would have 90 days to respond to all petitions unless additional information is sought by HHS.  A decision by HHS would constitute final agency action for purposes of seeking judicial review.

Conclusion

While the goals of the good guidance practices regulation are laudable, the definitions create ambiguity and serve to temper the expected impact of the Proposed Rule.  Moreover, the aggressive timeline for including guidance documents in the guidance repository could create uncertainty among regulated parties as to the nature and extent of their obligations.  In a year marked by extreme uncertainty, less rather than more uncertainty should be the watchword going forward.

The deadline for comments on the Proposed Rule is September 15, 2020.

[1] The practices would apply to all agencies except for the Food and Drug Administration (FDA), which has its own good guidance practices in place.

[2] See Proposed 45 C.F.R. § 1.2 (Guidance document means any Department statement of general applicability, intended to have future effect on the behavior of regulated parties and which sets forth a policy on a statutory, regulatory, or technical or scientific issue or an interpretation of a statute or regulation.)

[3] Exempt from the definition is “internal guidance directed to the Department or other agencies that is not intended to have substantial future effect on the behavior of regulated parties . . . .”