I. Background

The U.S. Office of Government Ethics (OGE) is amending pertinent sections of its executive branchwide ethics regulations on financial disclosure and standards of ethical conduct, as codified at 5 CFR parts 2634 and 2635, in order to update the thresholds for gifts and travel reimbursements, as well as the widely attended gatherings nonsponsor gifts exception dollar ceiling.

First, OGE is revising its executive branch financial disclosure regulation at 5 CFR part 2634 to reflect the increased reporting thresholds for gifts, reimbursements, and travel expenses for both the public and confidential executive branch financial disclosure systems. The increased thresholds are applicable as of January 1, 2023. These increases conform to the statutorily mandated public disclosure reporting thresholds under the Ethics in Government Act as amended, 5 U.S.C. 13104(a)(2)(A) and (B), (Ethics Act) and are extended to confidential disclosure reporting by OGE's regulation. Under the Ethics Act, the gifts and travel reimbursements reporting thresholds are tied to the dollar amount for the “minimal value” threshold for foreign gifts as the General Services Administration (GSA) periodically redefines it.

GSA raised the “minimal value” amount under the Foreign Gifts and Decorations Act, 5 U.S.C. 7342, to $480 for the three-year period 2023-2025 (from the prior level of $415) in a March 6, 2023, Federal Management Regulation Bulletin. See Gen. Servs. Admin., GSA Bull. FMR B-52, Foreign Gift and Decoration Minimal Value (2023) (revising retroactively to January 1, 2023, the foreign gifts minimal value definition as codified at 41 CFR 102-42.10).

Accordingly, applicable as of that same date, OGE is increasing the thresholds for reporting of gifts and travel reimbursements from any one source in 5 CFR 2634.304 and 2634.907(g). The thresholds have been raised to “more than $480” for the gifts and travel reimbursements aggregation thresholds and “$192 or less” for the de minimis exception for gifts and travel reimbursements that do not have to be aggregated. As noted, these regulatory increases implement the underlying statutory increases effective January 1, 2023. OGE is also updating the examples following those sections, including appropriate adjustments to gift values.

OGE will continue to adjust the gifts and travel reimbursements reporting thresholds in its part 2634 regulation in the future as needed in light of GSA's redefinition of “minimal value” every three years for foreign gifts purposes. See OGE's prior three-year adjustment of those regulatory reporting thresholds, as published at 85 FR 36715 (June 18, 2020) (for 2020-2022, the aggregate reporting thresholds were more than $415, with a $166 or less de minimis exception).

OGE is also increasing the exception ceiling for nonsponsor gifts of free attendance at widely attended gatherings from $415 to $480 in the executive branch standards of ethical conduct regulation, as codified at 5 CFR 2635.204(g)(3) (and as illustrated in the examples following paragraph (g)). This separate regulatory change is effective upon publication in the Federal Register , on June 9, 2023. As OGE noted in the preambles to the proposed and final rules on such nonsponsor gifts, that ceiling is tied to the financial disclosure gifts reporting threshold. See 60 FR 31415 (June 15, 1995) and 61 FR 42965 (Aug. 20, 1996). Thus, OGE is again increasing the nonsponsor gift ceiling to match the further increase in the gifts and travel reimbursements reporting thresholds described above. The nonsponsor gift ceiling was last raised June 2020. See 85 FR 36715 (June 18, 2020). The other requirements for acceptance of such nonsponsor gifts, including an agency interest determination and expected attendance by more than 100 persons, remain unchanged.

Pursuant to 5 U.S.C. 553(b), as Director of the Office of Government Ethics, I find that good cause exists for waiving the general notice of proposed rulemaking and public comment procedures as to these technical amendments. The notice and comment procedures are being waived because these amendments concern matters of agency organization, procedure and practice. It is also in the public interest that the accurate and up-to-date information be contained in the affected sections of OGE's regulations as soon as possible. The increase in the reporting thresholds for gifts and reimbursements is based on a statutory formula and lessens the reporting burden. Therefore, that regulatory revision is retroactively applicable as of January 1, 2023, when the change became effective under the Ethics Act.

As the Director of the Office of Government Ethics, I certify under the Regulatory Flexibility Act (5 U.S.C. chapter 6) that this final rule would not have a significant economic impact on a substantial number of small entities because it primarily affects current Federal executive branch employees.

The Paperwork Reduction Act (44 U.S.C. chapter 35) does not apply because this regulation does not contain information collection requirements that require approval of the Office of Management and Budget.

For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. chapter 25, subchapter II), this final rule would not significantly or uniquely affect small governments and will not result in increased expenditures by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (as adjusted for inflation) in any one year.

The Office of Government Ethics has determined that this amendatory rulemaking is a nonmajor rule under the Congressional Review Act (5 U.S.C. chapter 8) and will submit a report thereon to the U.S. Senate, House of Representatives and Government Accountability Office in accordance with that law at the same time this rulemaking document is sent to the Office of the Federal Register for publication in the Federal Register .

Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select the regulatory approaches that maximize net benefits (including economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. In promulgating this rulemaking, OGE has adhered to the regulatory philosophy and the applicable principles of regulation set forth in Executive Orders 12866 and 13563. The rule has not been reviewed by the Office of Management and Budget because it is not a significant regulatory action for the purposes of Executive Order 12866.

As Director of the Office of Government Ethics, I have reviewed this rule in light of section 3 of Executive Order 12988, Civil Justice Reform, and certify that it meets the applicable standards provided therein.

For the reasons set forth in the preamble, the U.S. Office of Government Ethics is amending 5 CFR parts 2634 and 2635 as follows:

Background

The FAA has received a report indicating operators have found damaged fastener holes on vertical sidewall decompression panels installed in the forward and aft cargo compartments ( i.e., cargo liner panel). These decompression panels are designed to open only during a decompression event and otherwise remain sealed. Damaged fastener holes that exceed the allowable damage limits or fastener holes that are folded back during installation could result in movement of the decompression panel affecting the seal. This could result in possible leakage in the cargo compartments, which in the event of a cargo fire, could lead to insufficient Halon concentrations to adequately control the fire. This condition, if not addressed, could result in the loss of continued safe flight and landing of the airplane. The FAA is issuing this AD to address the unsafe condition on these products.

The FAA is issuing this AD because the agency has determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This AD requires gaining access to the fastener holes on the vertical and bottom edges of the inward and outward blowing decompression panels installed on the forward and aft cargo compartment vertical sidewall linings; repetitive general visual inspections of those fastener holes for damage (such as a tear, cut, split, puncture, or delamination) and applicable on-condition actions; and making sure the panel fastener holes are not folded back when installing the decompression panel after completing the general visual inspection. On-condition actions include replacement of any decompression panel having damaged fastener holes that exceed the allowable damage limits with a serviceable panel. The allowable damage limits are as follows: damage on a fastener hole must not extend beyond the width of the fastener hole; if the damage is on one side of the fastener hole and the other side of the fastener hole has no damage, the damage must not extend more than the diameter of the fastener hole; the decompression panel must not have more than two adjacent damaged fastener holes with damage; and the decompression panel must not have more than four damaged fastener holes. For the purposes of this AD, a serviceable panel is one that has not exceeded the allowable damage limits. A decompression panel repaired using a method approved by The Boeing Company Organization Designation Authorization (ODA) is considered serviceable.

Paragraph (j) of this AD specifies that if any decompression panel is damaged and the decompression panel is deemed not serviceable, the airplane may be operated as specified in the operator's FAA-approved MEL, provided provisions that address the damaged decompression panel are included in the MEL.

The FAA considers this AD to be an interim action. If final action is later identified, the FAA might consider further rulemaking then.

Section 553(b)(3)(B) of the Administrative Procedure Act (APA) (5 U.S.C. 551 et seq. ) authorizes agencies to dispense with notice and comment procedures for rules when the agency, for “good cause,” finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under this section, an agency, upon finding good cause, may issue a final rule without providing notice and seeking comment prior to issuance. Further, section 553(d) of the APA authorizes agencies to make rules effective in less than thirty days, upon a finding of good cause.

An unsafe condition exists that requires the immediate adoption of this AD without providing an opportunity for public comments prior to adoption. The FAA has found that the risk to the flying public justifies forgoing notice and comment prior to adoption of this rule because significant leakage in the cargo compartments, in the event of a cargo fire, could lead to insufficient Halon concentrations to adequately control the fire. This condition, if not addressed, could result in loss of continued safe flight and landing of the airplane. Since this issue significantly compromises the fire suppression system, which is a required safety feature for extended operations (ETOPS) flights, the FAA finds this unsafe condition to be an urgent safety issue. In addition, the compliance time for the required action is shorter than the time necessary for the public to comment and for publication of the final rule. Accordingly, notice and opportunity for prior public comment are impracticable and contrary to the public interest pursuant to 5 U.S.C. 553(b)(3)(B).

In addition, the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days, for the same reasons the FAA found good cause to forgo notice and comment.

The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments to an address listed under ADDRESSES . Include Docket No. FAA-2023-1055 and Project Identifier AD-2023-00583-T at the beginning of your comments. The most helpful comments reference a specific portion of the final rule, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this final rule because of those comments.

Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this final rule.

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this AD, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to Nicole S. Tsang, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; telephone: 206-231-3959; email: Nicole.S.Tsang@faa.gov. Any commentary that the FAA receives that is not specifically designated as CBI will be placed in the public docket for this rulemaking.

The requirements of the Regulatory Flexibility Act (RFA) do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because the FAA has determined that it has good cause to adopt this rule without notice and comment, RFA analysis is not required.

The FAA estimates that this AD affects 152 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

The FAA estimates the following costs to do any necessary replacement that would be required based on the results of the inspection. The FAA has no way of determining the number of aircraft that might need this replacement:

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866, and

(2) Will not affect intrastate aviation in Alaska.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

Background

The FAA was notified by the manufacturer of the detection of iron inclusion in a turbine disk manufactured from the same material used to manufacture certain HPT interstage seals for EA Model GP7270, GP7272, and GP7277 engines. Further investigation by the manufacturer determined that the iron inclusion is attributed to deficiencies in the manufacturing process. The investigation by the manufacturer also determined that certain GP7270, GP7272, and GP7277 HPT interstage seals made from billets manufactured using the same process may have reduced material properties and a lower fatigue life capability due to iron inclusion, which may cause premature fracture and subsequent uncontained failure. This condition, if not addressed, could result in uncontained debris release, damage to the engine, and damage to the airplane. The FAA is issuing this AD to address the unsafe condition on these products.

The FAA is issuing this AD because the agency has determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This AD requires replacement of certain HPT interstage seals with a part eligible for installation.

The FAA considers this AD to be an interim action. This unsafe condition is still under investigation by the manufacturer and, depending on the results of that investigation, the FAA may consider further rulemaking action.

Section 553(b)(3)(B) of the Administrative Procedure Act (APA) (5 U.S.C. 551 et seq. ) authorizes agencies to dispense with notice and comment procedures for rules when the agency, for “good cause,” finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under this section, an agency, upon finding good cause, may issue a final rule without providing notice and seeking comment prior to issuance. Further, section 553(d) of the APA authorizes agencies to make rules effective in less than thirty days, upon a finding of good cause.

The FAA justifies waiving notice and comment prior to adoption of this rule because no domestic operators use this product. It is unlikely that the FAA will receive any adverse comments or useful information about this AD from any U.S. operator. Accordingly, notice and opportunity for prior public comment are unnecessary, pursuant to 5 U.S.C. 553(b)(3)(B). In addition, for the foregoing reason(s), the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days.

The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments to an address listed under ADDRESSES . Include “FAA-2023-1205 and Project Identifier AD-2023-00441-E” at the beginning of your comments. The most helpful comments reference a specific portion of the final rule, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this final rule because of those comments.

Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this final rule.

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this AD, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to Alexei Marqueen, Aviation Safety Engineer, FAA, 2200 South 216th Street, Des Moines, WA 98198. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

The requirements of the Regulatory Flexibility Act (RFA) do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because FAA has determined that it has good cause to adopt this rule without prior notice and comment, RFA analysis is not required.

The FAA estimates that this AD affects 0 engines installed on airplanes of U.S. registry.

The FAA estimates the following costs to comply with this AD:

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866, and

(2) Will not affect intrastate aviation in Alaska.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

I. Table of Abbreviations CFR Code of Federal Regulations DHS Department of Homeland Security FR Federal Register NPRM Notice of proposed rulemaking § Section U.S.C. United States Code II. Background Information and Regulatory History

The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because the event sponsor notified the Coast Guard with insufficient time to publish an NPRM and immediate action is necessary to protect personnel, vessels, and the marine environment in the St. Clair River. It is impracticable and contrary to the public interest to publish a NPRM because we must establish this safety zone by June 18, 2022.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . For the same reasons discussed in the preceding paragraph, delaying the effective date of this rule would be impracticable because immediate action is needed to respond to the potential safety hazards associated with a fireworks display.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034 (previously 33 U.S.C. 1231). The Captain of the Port Detroit (COTP) has determined that potential hazards associated with fireworks displays will be a safety concern for anyone within a 200-yard radius of the launch site. The likely combination of recreational vessels, darkness punctuated by bright flashes of light, and fireworks debris falling into the water presents risks of collisions which could result in serious injuries or fatalities. This rule is necessary to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone during the fireworks display.

This rule establishes a safety zone from 9:30 p.m. through 10:30 p.m. on June 18, 2023. In the case of inclement weather on June 18, 2023, this safety zone will be enforced from 10 p.m. through 10:30 p.m. on June 19, 2023. The safety zone will encompass all U.S. navigable waters of the St. Clair River within a 200-yard radius of the fireworks launch site located near the public launch site, in Marysville, MI. The duration of the zone is intended to protect personnel, vessels, and the marine environment in these navigable waters during the fireworks display. Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the Captain of the Port Detroit or his designated representative. The Captain of the Port Detroit or his designated representative may be contacted via VHF Channel 16.

We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on the size, location, and duration of the safety zone. Vessel traffic will be able to safely transit around this safety zone which would impact a small, designated area of the St. Clair River one hours during the evening when vessel traffic is normally low. Moreover, the Coast Guard would issue a Broadcast Notice to Mariners via VHF-FM Marine Channel 16 about the zone, and the rule would allow vessels to seek permission to enter the zone.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

Also, this rule does not have Tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes. If you believe this rule has implications for federalism or Indian tribes, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section above.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or Tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969(42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone lasting only 1 hour that will prohibit entry within 200-yard radius of where the fireworks display will be conducted. It is categorically excluded from further review under paragraph L[60] of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

I. Table of Abbreviations CFR Code of Federal Regulations DHS Department of Homeland Security FR Federal Register NPRM Notice of proposed rulemaking § Section U.S.C. United States Code II. Background Information and Regulatory History

The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because it is impracticable. We must establish this safety zone immediately to protect personnel, vessels, and the marine environment from potential hazards created by the fireworks display and lack sufficient time to provide a reasonable comment period and then to consider those comments before issuing the rule.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delaying the effective date of this rule would be contrary to the public interest because immediate action is needed to respond to the potential safety hazards associated with fireworks launched from a barge in the waters of the Laguna Madre.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034. The Captain of the Port Sector Corpus Christi (COTP) has determined that potential hazards associated with the fireworks displays occurring from 9:30 p.m. through 11:59 p.m. ong several dates from June 9, 2023 through August 25, 2023, will be a safety concern for anyone within the waters of the Laguna Madre area with a 700 yard radius from the following point; 26°6′02.1″ N, 97°10′17.7″ W. The purpose of this rule is to ensure safety of vessels and persons on these navigable waters in the safety zone while the display of the fireworks takes place in the Laguna Madre.

This rule establishes a temporary safety zone each night on June 9, 13, 16, 20, 23, 27, 30; July 7, 11, 14, 18, 21, 25, 28 and August 1, 4, 8, 11, 18, 25. The safety zone will encompass certain navigable waters of the Laguna Madre and is defined by a 700 yard radius around the launching platform. The regulated area encompasses a 700 yard radius from the following point; 26°6′02.1″ N, 97°10′17.7″ W. The fireworks display will take place in waters of the Laguna Madre. No vessel or person is permitted to enter the temporary safety zone during the effective period without obtaining permission from the COTP or a designated representative, who may be contacted on Channel 16 VHF-FM (156.8 MHz) or by telephone at 361- 939-0450. The Coast Guard will issue Broadcast Notices to Mariners, Local Notices to Mariners, and/or Safety Marine Information Broadcasts, as appropriate.

We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on the size, location, and duration of the safety zone. The temporary safety zone will be enforced for a short period of 2.5 hours, each night on June 9, 13, 16, 20, 23, 27, 30; July 7, 11, 14, 18, 21, 25, 28 and August 1, 4, 8, 11, 18, 25. The zone is limited to a 700 yard radius from the launching position of in the navigable waters of the Laguna Madre. The rule does not completely restrict the traffic within a waterway and allows mariners to request permission to enter the zone.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

While some owners or operators of vessels intending to transit the temporary safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this rule has implications for federalism or Indian tribes, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section above.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

We have analyzed this rule under Department of Homeland Security Directive 023-01, and Environmental Planning, COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f) and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves establishment of a temporary safety zone for navigable waters of the Laguna Madre in a zone defined by a 700-yard radius from the following coordinate: 26°6′02.1″ N, 97°10′17.7″ W. The safety zone is needed to protect personnel, vessels, and the marine environment from potential hazards created by fireworks display in the waters of the Laguna Madre. It is categorically excluded from further review under paragraph L60 of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A record of environmental consideration is not necessary, but will be provided if needed.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA.

On October 26, 2015, EPA promulgated a revised 8-hour ozone NAAQS of 0.070 parts per million (ppm). See 80 FR 65292. Upon promulgation of a new or revised NAAQS, the CAA requires EPA to designate as nonattainment any area that is violating the NAAQS based on the three most recent years of ambient air quality data. This action relates to nonattainment areas in Michigan that were designated nonattainment for the 2015 8-hour ozone NAAQS on June 4, 2018.

On December 6, 2018, EPA issued a final rule entitled, “Implementation of the 2015 National Ambient Air Quality Standards for Ozone: Nonattainment Area State Implementation Plan Requirements,” which established the requirements and deadlines that state, tribal, and local air quality management agencies must meet as they develop implementation plans for areas where ozone concentrations exceed the 2015 8-hour ozone NAAQS. Based on its initial nonattainment designation for the 2015 8-hour ozone standards, Michigan was required to make a SIP revision addressing NNSR program requirements. This requirement may be met by submitting a SIP revision consisting of a new or revised NNSR permit program, or an analysis demonstrating that the existing SIP-approved NNSR permit program meets the applicable 2015 ozone requirements and a letter certifying the analysis.

On January 24, 2023, Michigan submitted a SIP revision requesting that EPA approve Michigan's certification that its existing SIP-approved NNSR regulations fully satisfy the NNSR requirements set forth in 40 CFR 51.165 for all areas not attaining the 2015 ozone NAAQS. Michigan has certified that specific sections of its NNSR rules in Part 19, New Source Review for Major Sources Impacting Nonattainment Areas, continue to meet the NNSR requirements for ozone nonattainment areas under the 2015 ozone NAAQS. Table 1 below provides the sections of Michigan's NNSR rule corresponding to the relevant requirements at 40 CFR 51.165. The Michigan rules were previously approved on May 12, 2021 (86 FR 25954). Each requirement identified in Michigan's certification has not been revised since EPA last approved it. Table 1 lists the specific provisions of Michigan's NNSR rules that address the required elements of the Federal NNSR rules:

NNSR is a preconstruction review permit program that applies to new major stationary sources or major modifications at existing sources within a nonattainment area and is required under CAA sections 172(c)(5) and 173.

As mentioned in Section I of this preamble, NNSR permit program requirements were adopted for the 2015 ozone NAAQS at 40 CFR 51.1314 as part of the 2015 SIP Requirements Rule. The minimum SIP requirements for NNSR permitting programs for the 2015 ozone NAAQS are contained in 40 CFR 51.165. The SIP for each ozone nonattainment area must contain NNSR provisions that: (1) set major source thresholds for nitrogen oxides (NOX) and volatile organic compounds (VOC) pursuant to 40 CFR 51.165(a)(1)(iv)(A)( 1 )( i ) through ( iv ) and (a)(1)(iv)(A)( 2 ); (2) classify physical changes as a major source if the change would constitute a major source by itself pursuant to 40 CFR 51.165(a)(1)(iv)(A)( 3 ); (3) consider any significant net emissions increase of NOX as a significant net emissions increase for ozone pursuant to 40 CFR 51.165(a)(1)(v)(E); (4) consider any increase of VOC emissions in Extreme ozone nonattainment areas as a significant net emissions increase and a major modification for ozone pursuant to 40 CFR 51.165(a)(1)(v)(F); (5) set significant emissions rates for VOC and NOX as ozone precursors pursuant to 40 CFR 51.165(a)(1)(x)(A) through (C) and (E); (6) contain provisions for emissions reductions credits pursuant to 40 CFR 51.165(a)(3)(ii)(C)( 1 ) and ( 2 ); (7) provide that the requirements applicable to VOC also apply to NOX pursuant to 40 CFR 51.165(a)(8); (8) set offset ratios for VOC and NOX pursuant to 40 CFR 51.165(a)(9)(ii) through (iv); and (9) require public participation procedures compliant with 40 CFR 51.165(i).

Michigan's SIP-approved NNSR program, established in Part 19, “New Source Review for Major Sources Impacting Nonattainment Areas,” of the state's Air Pollution and Control rules, applies to the construction and modification of stationary sources, including major stationary sources in nonattainment areas under its jurisdiction. Michigan's submitted SIP revision includes a compliance demonstration, consisting of a table listing each of the 2015 ozone NAAQS NNSR SIP requirements from 40 CFR 51.165 and a citation to the specific provision of the rule satisfying the requirement. The submittal also includes a certification by the state that the cited rules meet the Federal NNSR requirements for the applicable ozone nonattainment designation. EPA has reviewed the demonstration and cited program elements intended to meet the Federal NNSR requirements and is approving the state's submittal because the current SIP-approved NNSR program satisfies all the 2015 ozone NAAQS SIP Requirements Rule NNSR program requirements applicable to the Michigan ozone nonattainment areas.

EPA is approving Michigan's January 24, 2023, SIP revision addressing the NNSR requirements of the 2015 ozone NAAQS. EPA has concluded that Michigan's submission fulfills the 40 CFR 51.1314 revision requirement, meets the requirements of CAA sections 110 and 172 and the minimum SIP requirements of 40 CFR 51.165. We are publishing this action without prior proposal because we view this as a noncontroversial amendment and anticipate no adverse comments. However, in the proposed rules section of this Federal Register publication, we are publishing a separate document that will serve as the proposal to approve the state plan if relevant adverse written comments are filed. This rule will be effective August 8, 2023 without further notice unless we receive relevant adverse written comments by July 10, 2023. If we receive such comments, we will withdraw this action before the effective date by publishing a subsequent document that will withdraw the final action. All public comments received will then be addressed in a subsequent final rule based on the proposed action. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment. If we do not receive any comments, this action will be effective August 8, 2023.

Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993), and 14094 (88 FR 21879, April 11, 2023);

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. );

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. );

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

• Does not have federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because it approves a state program;

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001); and

• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA.

In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

Executive Order 12898 (Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, February 16, 1994) directs Federal agencies to identify and address “disproportionately high and adverse human health or environmental effects” of their actions on minority populations and low-income populations to the greatest extent practicable and permitted by law. EPA defines environmental justice (EJ) as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” EPA further defines the term fair treatment to mean that “no group of people should bear a disproportionate burden of environmental harms and risks, including those resulting from the negative environmental consequences of industrial, governmental, and commercial operations or programs and policies.”

EGLE did not evaluate environmental justice considerations as part of its SIP submittal; the CAA and applicable implementing regulations neither prohibit nor require such an evaluation. EPA did not perform an EJ analysis and did not consider EJ in this action. Due to the nature of the action being taken here, this action is expected to have a neutral to positive impact on the air quality of the affected area. Consideration of EJ is not required as part of this action, and there is no information in the record inconsistent with the stated goal of E.O. 12898 of achieving environmental justice for people of color, low-income populations, and Indigenous peoples.

This action is subject to the Congressional Review Act, and EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by August 8, 2023. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. Parties with objections to this direct final rule are encouraged to file a comment in response to the parallel notice of proposed rulemaking for this action published in the proposed rules section of this Federal Register , rather than file an immediate petition for judicial review of this direct final rule, so that EPA can withdraw this direct final rule and address the comment in the proposed rulemaking. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

For the reasons stated in the preamble, title 40 CFR part 52 is amended as follows:

I. General Information A. Does this action apply to me?

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

You may access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Office of the Federal Register's e-CFR site at https://www.ecfr.gov/current/title-40.

Under FFDCA section 408(g), 21 U.S.C. 346a(g), any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2022-0314 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing and must be received by the Hearing Clerk on or before August 8, 2023. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2022-0314, by one of the following methods:

• Federal eRulemaking Portal: https://www.regulations.gov. Follow the online instructions for submitting comments. Do not submit electronically any information you consider to be CBI or other information whose disclosure is restricted by statute.

• Mail: OPP Docket, Environmental Protection Agency Docket Center (EPA/DC), (28221T), 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001.

• Hand Delivery: To make special arrangements for hand delivery or delivery of boxed information, please follow the instructions at https://www.epa.gov/dockets/contacts.html.

Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at https://www.epa.gov/dockets.

In the Federal Register of July 20, 2022 (87 FR 43231) (FRL 9410-03-OCSPP), EPA issued a document pursuant to FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 2F8986) by Syngenta Crop Protection, LLC, P.O. Box 18300, Greensboro, NC 27419. The petition requested that 40 CFR 180.665 be amended by establishing tolerances for residues of the fungicide sedaxane, N-[2-[1,1′-bicyclopropyl]-2-ylphenyl]-3-(difluoromethyl)-1-methyl-1H-pyrazole-4-carboxamide, in or on Vegetable, dry bulb, crop subgroup 3-07A and Vegetable, cucurbit, group 9 at 0.01 parts per million (ppm). The July 20, 2022, notice of filing referenced a summary of the petition prepared by Syngenta Crop Protection, LLC, the registrant, which is available in the docket, https://www.regulations.gov. There were no comments received in response to the notice of filing.

Based upon review of the data supporting the petition and in accordance with its authority under FFDCA section 408(d)(4)(A)(i), EPA is revising the commodity definition for “Vegetable, dry bulb, crop subgroup 3-07A” to “Onion, bulb, subgroup 3-07A”. The reason for this change is explained in Unit IV.C.

Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue . . . .”

Consistent with FFDCA section 408(b)(2)(D), and the factors specified therein, EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for sedaxane, including exposure resulting from the tolerances established by this action. EPA's assessment of exposures and risks associated with sedaxane follows.

In an effort to streamline its publications in the Federal Register , EPA is not reprinting sections that repeat what has been previously published in tolerance rulemakings for the same pesticide chemical. Where scientific information concerning a particular chemical remains unchanged, the content of those sections would not vary between tolerance rulemakings, and EPA considers referral back to those sections as sufficient to provide an explanation of the information EPA considered in making its safety determination for the new rulemaking.

EPA has previously published tolerance rulemakings for sedaxane, most recently in the Federal Registers of December 8, 2017 (82 FR 57867) (FRL-9970-04) and August 27, 2019 (84 FR 44703) (FRL-9998-22), in which EPA concluded, based on the available information, that there is a reasonable certainty that no harm would result from aggregate exposure to sedaxane and established tolerances for residues of that pesticide chemical. EPA is incorporating previously published sections from the 2017 and 2019 rulemakings as described further in this rulemaking, as they remain unchanged.

For a discussion of the Toxicological Profile of sedaxane, see Unit III.A. of the 2019 rulemaking.

For a summary of the Toxicological Points of Departure/Levels of Concern used for the safety assessment, see Unit III.B. of the 2017 rulemaking.

Much of the exposure assessment remains the same since the 2019 rulemaking, although the new exposure assessment incorporates additional dietary exposures from the petitioned-for tolerances. The updates are discussed in this section; for a description of the rest of the EPA approach to and assumptions for the exposure assessment, see Unit III.C. of the 2019 rulemaking.

Dietary exposure from food and feed uses. In evaluating dietary exposure to sedaxane, EPA considered exposure under the petitioned-for tolerances as well as all existing sedaxane tolerances in 40 CFR 180.665. For the acute and chronic dietary exposure assessments, EPA used tolerance-level residues for all registered and proposed commodities. The acute and chronic analyses used 100 percent crop treated (PCT) for all commodities.

Drinking water exposure. Drinking water exposures are not impacted by the proposed seed treatment uses on Onion, bulb, subgroup 3-07A and Vegetable, cucurbit, group 9. Since the 2019 rulemaking, EPA has conducted a new drinking water assessment for the registration review of sedaxane and subsequently updated that assessment with respect to seed treatment uses. Estimated drinking water concentrations (EDWCs) for annual potato seed treatments resulted in the highest concentrations for total sedaxane residues. The proposed seed treatment uses are not expected to result in total sedaxane residues at concentrations higher than the annual potato seed treatments; therefore, the EDWCs for annual potato seed treatments are protective. The groundwater EDWCs are 22.0 parts per billion (ppb) for acute exposures and 19.3 ppb for chronic exposures. These EDWCs were calculated with the Pesticide Root Zone Model for Groundwater (PRZM-GW).

Non-occupational exposure. The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure ( e.g., for lawn and garden pest control, indoor pest control, termiticides, and flea and tick control on pets). Sedaxane is not registered for any specific use patterns that would result in residential exposure, and residential exposures are not impacted by the proposed seed treatment uses.

Cumulative exposure. Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.” Unlike other pesticides for which EPA has followed a cumulative risk approach based on a common mechanism of toxicity, EPA has not made a common mechanism of toxicity finding as to sedaxane and any other substances. For the purposes of this action, therefore, EPA has not assumed that sedaxane has a common mechanism of toxicity with other substances.

EPA continues to conclude that there is reliable data to support the reduction of the Food Quality Protection Act (FQPA) safety factor to 1X. See Unit III.D. of the 2019 rulemaking for a discussion of the Agency's rationale for that determination.

EPA determines whether acute and chronic dietary pesticide exposures are safe by comparing aggregate exposure estimates to the acute population-adjusted dose (aPAD) and chronic population-adjusted dose (cPAD). For linear cancer risks, EPA calculates the lifetime probability of acquiring cancer given the estimated aggregate exposure. Short-, intermediate-, and chronic-term risks are evaluated by comparing the estimated aggregate food, water, and residential exposure to the appropriate points of departure (PODs) to ensure that an adequate margin of exposure (MOE) exists.

Acute dietary risks are below the Agency's level of concern of 100% of the aPAD; they are 1.4% of the aPAD for all infants (<1 year old), the population group receiving the greatest exposure. Chronic dietary risks are below the Agency's level of concern of 100% of the cPAD; they are 1.4% of the cPAD for all infants (<1 year old), the population group receiving the greatest exposure.

Short- and intermediate-term aggregate exposure risks take into account short- and intermediate-term residential exposures, respectively, plus chronic exposure to food and water (considered to be a background exposure level). Because there are no proposed or registered residential uses of sedaxane, short- and intermediate-term risk assessments were not performed. The chronic risk assessment is protective for any short- and intermediate-term exposures from food and drinking water.

Because the chronic risk is below the Agency's level of concern, EPA concludes the chronic dietary risk assessment adequately accounts for any potential carcinogenicity that could result from exposure to sedaxane.

Therefore, based on these risk assessments, EPA concludes that there is a reasonable certainty that no harm will result to the general population, or to infants and children, from aggregate exposure to sedaxane residues. More detailed information can be found at https://www.regulations.gov in the document titled “Sedaxane. Human Health Risk Assessment for a Proposed Seed Treatment Use on Bulb Onion Crop Subgroup 3-07A and Cucurbit Vegetables Crop Group 9” in docket ID number EPA-HQ-OPP-2022-0314.

For a discussion of the available analytical enforcement method, see Unit IV.A. of the 2019 rulemaking.

In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4).

The Codex has not established an MRL for sedaxane in or on Onion, bulb, subgroup 3-07A and Vegetable, cucurbit, group 9.

The petition requested a tolerance for “Vegetable, dry bulb, crop subgroup 3-07A”. Since the time of submission, EPA has updated the preferred vocabulary for establishing pesticide tolerances, and the correct commodity definition is “Onion, bulb, subgroup 3-07A”. The Agency is therefore revising the commodity definition for “Vegetable, dry bulb, crop subgroup 3-07A” to “Onion, bulb, subgroup 3-07A”.

Therefore, tolerances are established for residues of sedaxane, N-[2-[1,1′-bicyclopropyl]-2-ylphenyl]-3-(difluoromethyl)-1-methyl-1H-pyrazole-4-carboxamide, in or on Onion, bulb, subgroup 3-07A at 0.01 ppm and Vegetable, cucurbit, group 9 at 0.01 ppm.

This action establishes tolerances under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq. ), nor does it require any special considerations under Executive Order 12898, entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).

Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerances in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ), do not apply.

This action directly regulates growers, food processors, food handlers, and food retailers, not States or Tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the National Government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1501 et seq. ).

This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note).

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Therefore, for the reasons stated in the preamble, EPA is amending 40 CFR chapter I as follows:

I. Executive Summary and Background A. Executive Summary 1. Purpose and Legal Authority

This final action creates a policy governing the treatment of days associated with beneficiaries enrolled in Medicare Part C for discharges occurring prior to October 1, 2013, for the purpose of determining the additional Medicare payments to subsection (d) hospitals under section 1886(d)(5)(F) of the Social Security Act (the Act).

Section 1886(d)(5)(F) of the Act provides for additional Medicare payments to subsection (d) hospitals that serve a significantly disproportionate number of low income patients. The Act specifies two methods by which a hospital may qualify for the Medicare disproportionate share hospital (DSH) payment adjustment. Under the first method, hospitals that are located in an urban area and have 100 or more beds may receive a Medicare DSH payment adjustment if the hospital can demonstrate that, during its cost reporting period, more than 30 percent of its net inpatient care revenues are derived from State and local government payments for care furnished to needy patients with low incomes. This method is commonly referred to as the “Pickle method.” The second method for qualifying for the DSH payment adjustment, which is more common, is based on a complex statutory formula under which the DSH payment adjustment is based on the hospital's geographic designation, the number of beds in the hospital, and the hospital's disproportionate patient percentage (DPP). A hospital's DPP is the sum of two fractions: the “Medicare fraction” and the “Medicaid fraction.” The Medicare fraction (also known as the SSI fraction or SSI ratio) is computed by dividing the number of the hospital's inpatient days that are furnished to patients who were entitled to both Medicare Part A and Supplemental Security Income (SSI) benefits by the hospital's total number of patient days furnished to patients entitled to benefits under Medicare Part A. The Medicaid fraction is computed by dividing the hospital's number of inpatient days furnished to patients who, for such days, were eligible for Medicaid, but were not entitled to benefits under Medicare Part A, by the hospital's total number of inpatient days in the same period.

Because the DSH payment adjustment is part of the hospital inpatient prospective payment system (IPPS) for acute care hospitals, the statutory references to “days” in section 1886(d)(5)(F) of the Act have been interpreted to apply only to hospital acute care inpatient days. Regulations located at 42 CFR 412.106 implement the Medicare DSH payment adjustment and specify how the DPP is calculated as well as how beds and patient days are counted in determining the Medicare DSH payment adjustment.

Including days associated with patients enrolled in Medicare Part C in the calculation of the Medicare fraction and excluding them from the calculation of the numerator of the Medicaid fraction, does not have any additional costs or benefits relative to the Medicare DSH payments that have already been made because those payments were made under the policy reflected in the fiscal year (FY) 2005 IPPS final rule (69 FR 49099) (prior to it having been vacated). The effect of this final action is to provide certainty as to how Part C days will be treated for DSH calculations for cost years not governed by the FY 2014 IPPS/Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) final rule (78 FR 50614; hereinafter referred to as “the FY 2014 IPPS final rule”), resolving any uncertainty that may otherwise continue into the future.

In August 2020, we issued a proposed rule, which appeared in the Federal Register on August 6, 2020 (85 FR 47723) (hereinafter referred to as the “August 2020 proposed rule”). The proposed rule would establish a policy concerning the treatment of patient days associated with persons enrolled in a Medicare Part C (also known as “Medicare Advantage” or “MA”) plan for purposes of calculating a hospital's disproportionate patient percentage for cost reporting periods starting before October 1, 2013, in response to the Supreme Court's ruling in Azar v. Allina Health Services.

We received approximately 110 timely pieces of correspondence containing multiple comments on the August 2020 proposed rule. Summaries of the public comments received and our responses to those public comments are set forth in section II. of this final action.

Medicare Advantage (MA) plans are authorized under Medicare Part C. The regulation at 42 CFR 422.2 defines MA plan to mean “health benefits coverage offered under a policy or contract by an MA organization that includes a specific set of health benefits offered at a uniform premium and uniform level of cost-sharing to all Medicare beneficiaries residing in the service area of the MA plan . . . .” Generally, each MA plan must at least provide coverage of all services that are covered by Medicare Part A and Part B, but also may provide for Medicare Part D benefits and/or additional supplemental benefits. However, certain items and services, such as hospice benefits, continue to be covered under Medicare Part A fee-for-service (FFS) even if a beneficiary chooses to enroll in an MA plan. Generally, under § 422.50 of the regulations, an individual is eligible to elect an MA plan if he or she is entitled to Medicare Part A and enrolled in Medicare Part B. This is in accordance with section 1851(a)(3) of the Act, which requires that individuals enrolling in MA plans must be entitled to benefits under Part A and enrolled under Part B. Dually eligible beneficiaries (individuals entitled to Medicare and eligible for Medicaid) may choose to enroll in an MA plan.

In the FY 2004 IPPS proposed rule (68 FR 27208), in response to questions about whether the patient days associated with patients enrolled in an MA plan should be counted in the Medicare fraction or the Medicaid fraction of the DPP calculation, we proposed that once a beneficiary enrolls in an MA plan, patient days attributable to the beneficiary would not be included in the Medicare fraction of the DPP. (We note, at the time of the FY 2004 IPPS proposed rule and FY 2005 rulemaking, Medicare Part C was referred to as Medicare + Choice (M+C); however, to avoid confusion we use the current terminology (MA) when referring to Medicare Part C.) Instead, those patient days would be included in the numerator of the Medicaid fraction, if the patient also were eligible for Medicaid. In the FY 2004 IPPS final rule (68 FR 45422), we did not respond to public comments on this proposal, due to the volume and nature of the public comments we received, and we indicated that we would address those comments later in a separate document. In the FY 2005 IPPS proposed rule (69 FR 28286), we stated that we planned to address the FY 2004 comments regarding MA days in the IPPS final rule for FY 2005. After considering comments on this proposal, we decided not to implement the policy as proposed. Instead, in the FY 2005 IPPS final rule (69 FR 49099; hereinafter referred to as “the FY 2005 IPPS final rule”), we determined that, under § 412.106(b)(2)(i) of the regulations, MA patient days should be counted in the Medicare fraction of the DPP calculation. We explained that, even where Medicare beneficiaries enroll in an MA plan, they are still entitled to benefits under Medicare Part A. Therefore, we noted that if an MA beneficiary is also entitled to SSI benefits, the patient days for that beneficiary would be included in the numerator of the Medicare fraction (as well as in the denominator) and not in the numerator of the Medicaid fraction. We note that, despite our statement in the FY 2005 IPPS final rule that the text of the regulation at § 412.106(b)(2)(i) would be revised to state explicitly that the days associated with MA beneficiaries are included in the Medicare fraction, due to a clerical oversight, the regulation at § 412.106(b)(2)(i) was not amended to reflect this policy until 2007 (72 FR 47384).

In 2012, a district court vacated the final policy adopted in the FY 2005 IPPS final rule on the basis that the final rule was not a “logical outgrowth” of the proposed rule. Allina Health Svcs. v. Sebelius, 904 F. Supp. 2d 75, 89 (D.D.C. 2012). In the FY 2014 IPPS/LTCH PPS proposed rule (hereinafter referred to as “the FY 2014 IPPS proposed rule”), we proposed to re-adopt the policy of including MA patient days in the Medicare fraction prospectively for FY 2014 and subsequent fiscal years (78 FR 27578). We finalized this proposal in the FY 2014 IPPS final rule (78 FR 50614). We made no change to the regulation text at § 412.106(b)(2)(i) because the text of the regulation which was revised in 2007 (72 FR 47384) to incorporate the policy we first adopted in the FY 2005 IPPS final rule, already reflected the policy we again adopted in the FY 2014 IPPS final rule. In 2014, the United States Court of Appeals for the D.C. Circuit upheld the district court's holding that the policy adopted in the FY 2005 IPPS final rule requiring inclusion of Part C days in the Medicare fraction was not a logical outgrowth of the proposed rule, but left open the possibility that the agency could treat Part C days the same way through adjudication.

In Azar v. Allina Health Services, 139 S. Ct. 1804 (June 3, 2019, hereinafter referred to as Allina II ), the Supreme Court considered a challenge to the agency's inclusion of MA patient days in the Medicare fractions it published for FY 2012. Section 1871(a)(2) of the Act requires notice-and-comment rulemaking for any Medicare “rule, requirement, or other statement of policy” that “establishes or changes a substantive legal standard governing the scope of benefits, the payment for services, or the eligibility of individuals, entities, or organizations to furnish or receive services or benefits.” The Supreme Court held that section 1871(a)(2) of the Act required CMS to engage in notice-and-comment rulemaking before adopting its “avowedly gap-filling policy” regarding treatment of inpatient days for beneficiaries enrolled in MA plans for purposes of calculating the DPP.

Section 1871(e)(1)(A) of the Act authorizes CMS to engage in retroactive rulemaking when the Secretary determines that such retroactive application is necessary to comply with statutory requirements or that a failure to apply a policy retroactively would be contrary to the public interest. For example, CMS has invoked its authority to engage in retroactive rulemaking under section 1871(e)(1)(A) of the Act in connection with its policy related to bad debt (see the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32867)), predicate facts and cost report reopening (see the CY 2014 OPPS final rule (78 FR 75165)), and the low-volume hospital adjustment (see the FY 2020 IPPS/LTCH PPS final rule (84 FR 42349)).

The Secretary has determined that to the extent there is a statutory gap to fill with respect to the treatment of Part C patient days, retroactive application is necessary to comply with statutory requirements and a failure to apply this policy retroactively would be contrary to the public interest. Section 1886(d)(5)(F) of the Act requires CMS to make DSH payments to eligible hospitals. Calculating such payments, in turn, requires CMS to calculate a Medicare fraction and a Medicaid fraction for each hospital. Under section 1886(d)(5)(F)(vi)(I) of the Act, the Medicare fraction must include the patient days for beneficiaries “entitled to benefits under part A.” The Court of Appeals for the D.C. Circuit has held that the Medicare statute does not speak directly to how Part C days should be treated for purposes of DSH calculations, that is, whether Part C patients are “entitled to benefits under part A” and should therefore be included in the Medicare fraction, or whether they are not so entitled, and should therefore be included in the numerator of the Medicaid fraction if they are also eligible for Medicaid. (See Northeast Hospital Corporation v. Sebelius, 657 F.3d 1, 13 (D.C. Cir. 2011) (hereinafter referred to as “ Northeast”. ) However, the court has also found that section 1886(d)(5)(F)(vi) of the Act requires the Secretary to account for Part C days in the DPP calculation by including them in one of the fractions (Medicare or Medicaid) and excluding them from the other. (See Allina Health Services. v. Sebelius, 746 F.3d 1102, 1108 (D.C. Cir. 2014) (hereinafter referred to as “ Allina I ”).)

Since the publication of our proposed rule, the Supreme Court handed down its decision in Becerra v. Empire Health Foundation, 142 S. Ct. 2354, 1368 (June 24, 2022) (hereinafter referred to as “ Empire ”). In Empire, the Supreme Court held that the statutory text is clear that “being `entitled' to Medicare benefits . . . means—in the [DSH] fraction descriptions, as throughout the statute—meeting the basic statutory criteria.” (142 S. Ct. at 2362.) Part C enrollees, who by definition must be “entitled” to Part A benefits to enroll under Part C, necessarily meet the basic statutory criteria (essentially that they are over 65 or disabled). Empire did not address Part C days specifically, it addressed the same statutory language that is the subject of the August 2020 proposed rule, the meaning of “entitled to benefits under part A of [Medicare].” The Supreme Court held that the Secretary was correct in interpreting that phrase as denoting a legal status that does not turn on whether Medicare pays for any particular hospital day. The Supreme Court concluded that the “[t]ext, context, and structure all support calculating the Medicare fraction HHS's way. In that fraction, individuals `entitled to [Medicare Part A] benefits' are all those qualifying for the program.” We believe it is now clear that the statute itself requires the Secretary to count Part C days in the Medicare fraction because Medicare beneficiaries remain “entitled to [Medicare Part A]” regardless of whether they enroll in Part C, just as do beneficiaries who have exhausted their coverage for a spell of illness. Nonetheless, Empire did not address specifically whether Part C enrollees remain “entitled to Part A,” and because the FY 2005 IPPS final rule was vacated, the Secretary “has no promulgated rule governing” the treatment of Part C days “for the fiscal years before 2014.” Allina Health Servs. v. Price, 863 F.3d 937, 939 (D.C. Cir. 2017). As a result, to the extent there is still a statutory gap for the Secretary to fill after Empire regarding the treatment of Part C days in the Medicare DSH payment calculation, CMS must determine whether beneficiaries enrolled in Part C are “entitled to benefits under part A” and so must be included in the Medicare fraction (and excluded from the numerator of the Medicaid fraction), or are not so entitled and so must be excluded from the Medicare fraction (and included in the numerator of the Medicaid fraction, if dually eligible). The Secretary has therefore determined that, in order to comply with the statutory requirement to make DSH payments and in order to address any potential statutory gap, to the extent one might remain after Empire, it is necessary for CMS to engage in retroactive rulemaking to establish a policy to govern whether individuals enrolled in MA plans should be included in the Medicare fraction or in the numerator of the Medicaid fraction, if dually eligible, for fiscal years before 2014.

We continue to believe, as we stated in the preamble to the FY 2014 IPPS final rule (78 FR 50614 and 50615) and have consistently expressed since the issuance of the FY 2005 IPPS final rule, that individuals enrolled in MA plans are “entitled to benefits under part A” as the phrase is used in the DSH provisions at section 1886(d)(5)(F)(vi) of the Act. Even without relying on the Supreme Court's decision in Empire, which in our view confirms our interpretation, we believe this is the best reading of the statute.

Section 226 of the Act provides that an individual is automatically “entitled” to Medicare Part A when the person reaches age 65, provided that the individual is entitled to Social Security benefits under section 202 of the Act, or becomes disabled. Beneficiaries who are enrolled in MA plans provided under Medicare Part C continue to meet all of the statutory criteria for entitlement to Medicare Part A benefits under section 226 of the Act. Moreover, section 1851(a)(3) of the Act provides that in order to enroll in Medicare Part C a beneficiary must be “entitled to benefits under Part A and enrolled under Part B.” Thus, by definition, a beneficiary must be entitled to Part A to be enrolled in Part C. There is nothing in the Act that suggests that beneficiaries who enroll in a Medicare Part C plan thereby forfeit their entitlement to Medicare Part A benefits. To the contrary, enrollment in a plan under Medicare Part C is simply an option that a person entitled to Part A benefits may choose as a way to receive their Part A benefits. A beneficiary who enrolls in Medicare Part C is entitled to receive benefits under Medicare Part A through the MA plan in which he or she is enrolled, and the MA organization's costs in providing such Part A benefits are paid for by CMS with money from the Medicare Part A Trust Fund. In addition, under certain circumstances, Medicare Part A pays directly for care furnished to patients enrolled in Medicare Part C plans, rather than indirectly through Medicare Part A Trust Fund payments to MA organizations. For example, under section 1852(a)(5) of the Act, if, during the course of the year, the scope of benefits provided under Medicare Part A expands beyond a certain cost threshold due to congressional action or a national coverage determination, Medicare Part A will pay providers directly for the cost of those services provided to beneficiaries enrolled in Part C. Similarly, Medicare Part A pays directly for hospice care furnished to MA patients who elect under section 1812(d)(1) of the Act to receive such care from a particular hospice program and, under certain circumstances, for federally qualified health center (FQHC) services provided to MA patients by FQHCs that contract with MA organizations under sections 1853(h)(2) and 1853(a)(4) of the Act, respectively. Thus, we continue to believe that a patient enrolled in an MA plan remains entitled to benefits under Medicare Part A, and patient days associated with that patient should be counted in the Medicare fraction of the DPP, and not (in the case of a dually-eligible patient) the numerator of the Medicaid fraction.

Additionally, the Secretary has determined that it is in the public interest for CMS to adopt a retroactive policy for the treatment of MA patient days in the Medicare and Medicaid fractions through notice and comment rulemaking for discharges before October 1, 2013 (the effective date of the FY 2014 IPPS final rule). CMS must calculate DSH payments for periods that include discharges occurring before the effective date of the prospective FY 2014 IPPS final rule for hundreds of hospitals whose DSH payments for those periods are still open or have not yet been finally settled, encompassing thousands of cost reports. In order to calculate these payments, CMS must establish Medicare fractions for each applicable cost reporting period during the time period for which there is currently no regulation in place that expressly addresses the treatment of Part C days. Because the Supreme Court has held in Allina II that, unless an exception applies, CMS cannot establish or change “an avowedly `gap'-filling policy” under the Medicare statute except by notice-and-comment rulemaking, we have concluded that, to the extent there is a gap after Empire, the only way for CMS to resolve this issue and properly calculate DSH payments for time periods before FY 2014 is to promulgate a new regulation through notice-and-comment rulemaking that would apply retroactively to the determination of Medicare and Medicaid fractions for this time period. Consequently, retroactive rulemaking is not only necessary to comply with the statutory requirement to calculate DSH payments, it is also necessary to avoid an outcome that would be contrary to the public interest. Absent such a retroactive rulemaking, if there is a gap in the statute to fill, the Secretary would be unable to calculate and confirm proper DSH payments for time periods before FY 2014, which would be contrary to the public interest of providing additional payments to hospitals that serve a significantly disproportionate number of low-income patients, as expressed in the DSH provisions of the Medicare statute. Moreover, to the extent the Secretary must adopt an approach to calculate those payments, it is in the public interest to permit interested stakeholders to comment on the proposed approach and for the agency to have the benefit of those comments in the development of any final action. Therefore, for the purposes of calculating the Medicare and Medicaid fractions for cost reporting periods that include discharges before October 1, 2013, in the August 2020 proposed rule (85 FR 47725), we proposed to adopt the same policy of including MA patient days in the Medicare fraction that was prospectively adopted in the FY 2014 IPPS final rule and to apply this policy retroactively to any cost reports that remain open for cost reporting periods starting before October 1, 2013. We stated that we did not expect the proposed policy to have an effect on payments as the payments previously made already reflect the proposed policy. We did not propose any change to the regulation text because the current text at § 412.106(b)(2)(i) reflects the policy being proposed for fiscal years before FY 2014. In the August 2020 proposed rule (85 FR 47726), we stated that because we proposed to establish this policy retroactively, it would cover cost reporting periods for which many cost reports have already been final settled. Consistent with 42 CFR 405.1885(c)(2), any final action retroactively adopting the policy at 42 CFR 412.106(b)(2)(i) for fiscal years before FY 2014 would not be a basis for reopening these final settled cost reports, irrespective of how payments in those cost reports were calculated.

In the August 2020 proposed rule, we sought comments on our proposed approach to include MA patient days in the Medicare fraction for fiscal years before FY 2014, and also on an alternative, of including MA patient days for dually eligible beneficiaries in the numerator of the Medicaid fraction for those fiscal years, which we discussed in detail in section V. of the August 2020 proposed rule (85 FR 47727). We summarize and respond to the public comments received on our proposal and the alternative approach considered in the proposed rule.

Comment: Some commenters stated that the statute unambiguously forecloses the Secretary's interpretation and is self-executing, so retroactive rulemaking cannot be justified.

Response: We disagree that the statute unambiguously forecloses the Secretary's interpretation. Quite the opposite is true; based on the Supreme Court's intervening decision in Empire, we believe the statute itself requires the Secretary to count Part C days in the Medicare fraction, exactly as contemplated in the August 2020 proposed rule. To the extent that the statute itself establishes the applicable “substantive legal standard,” there is no need for a “gap-filling policy” that would trigger the notice-and-comment obligations of section 1871(a)(2) of the Act, nor any resulting need to rely on the retroactive rulemaking authority under section 1871(e) of the Act. The Supreme Court in Allina II made clear that while notice-and-comment rulemaking is required to change or establish an “avowedly `gap'-filling policy,” its holding should not be construed to require such rulemaking where the substantive legal standard is established by the statute itself. (139 S. Ct. at 1816-17.) Of course, to the extent notice-and-comment rulemaking is required under Allina II, we continue to believe that this final action is a necessary and appropriate exercise of the Secretary's retroactive rulemaking authority under section 1871(e) of the Act. In our view, however, Empire now makes clear that the interpretation set forth in this final action simply reflects the “substantive legal standard” already set forth in the statute and the action thus does not “establish or change” that standard.

Although Empire did not address Part C days specifically, it addressed the same statutory language at issue here, and its analysis of that language compels the conclusion that Part C days must be treated as days for which patients are “entitled to part A benefits.” Under the governing statutory language, patients are “entitled” to Part A benefits if they meet the basic statutory criteria for such entitlement under section 226 of the Act—essentially, if they are over 65 or disabled. (142 S. Ct. at 2358, 2361-62, 2365-66.) As noted previously, Part C enrollees must, by definition, meet these statutory criteria. And because their enrollment in MA does not change their age or disability status, such enrollment also does not change their entitlement to benefits under Part A. 1 There is no indication in the Empire Court's opinion to suggest that some other interpretation might be permissible. To the contrary, the Court held that the meaning of the statute was clear (indeed, “surprisingly clear”), and that the Secretary had “correctly” interpreted the statutory language. 2 It also held that the alternative reading (including the reading advanced by the plaintiffs in Northeast, a Part C days case) would render various statutory provisions “unworkable or unthinkable or both,” which “is not the statute Congress wrote.”  3 It further found that excluding Medicare beneficiaries from the Medicare fraction denominator simply because payment was not made under Medicare Part A would “deflate” the Medicare fraction denominator and “distort[ ] what the Medicare fraction is designed to measure—the share of low-income Medicare patients relative to the total.”  4 The same concern applies at least as much, if not more, in the context of Part C days.

In short, based on the Empire Court's clarification of the governing statute, we now believe the interpretation announced here simply reflects the substantive legal standard already established in “the statute Congress wrote,” and that this action itself does not establish or change that standard. 5 That being the case, we now believe that notice-and-comment rulemaking is not required under Allina II, and the interpretation set forth in this action is proper without a need to rely on the Secretary's retroactive rulemaking authority.

Alternatively, if notice-and-comment rulemaking is required, then we continue to believe this action reflects an appropriate exercise of the Secretary's retroactive rulemaking authority. The commenters are incorrect to say the statute unambiguously forecloses the Secretary's interpretation. Even before the Supreme Court in Empire found that the Secretary had correctly construed the statutory language, the D.C. Circuit in Northeast held that “the statute does not unambiguously foreclose the Secretary's interpretation.”  6 The D.C. Circuit found that Congress “left a statutory gap, and it is for the Secretary . . . to fill that gap.”  7 Thus, to the extent that any such gap remains in the wake of the Supreme Court's clarification in Empire, the decision in Allina II would require notice-and-comment rulemaking to establish the gap-filling policy stated in this action. 8

Comment: Several commenters stated that retroactive rulemaking in this context offends “fundamental notions of justice” and the public interest and sets a dangerous precedent by giving CMS a way to evade the notice-and-comment requirements of the Medicare statute and the Administrative Procedure Act (APA) whenever it loses a procedural challenge in court. Some stated that retroactive rulemaking subverts what the Supreme Court in Allina II identified as Congress' purpose in the notice-and-comment requirement—giving the public fair warning and a chance to be heard. Some commenters suggested that it is poor public policy and contrary to the public interest to finalize a retroactive rule when the earlier rulemaking was found deficient on logical outgrowth grounds. A commenter stated that CMS's proposal suggests that there are no practical consequences associated with the agency's failure to comply with the APA.

Response: To the extent that Empire has now held that our interpretation of the statute reflects its clear meaning, we need not rely on retroactive rulemaking authority, as discussed previously. But to the extent retroactive rulemaking is necessary, we do not agree that retroactive rulemaking here offends justice, sets a dangerous precedent, or evades the APA's notice-and-comment rulemaking requirement. As described in the August 2020 proposed rule and herein, this retroactive rulemaking is authorized by statute, specifically section 1871(e) of the Act, complies with the Medicare statute's notice-and-comment requirement, and implements the Supreme Court's decision in Allina II, thereby upholding fundamental notions of justice. The Supreme Court did not expressly instruct CMS to promulgate a retroactive rule, but it did hold that the Medicare statute requires the agency to engage in notice-and-comment rulemaking before it may either “establish” or “change” a substantive legal standard, such as its policy governing the treatment of Part C days in the DSH statute, if such a policy is intended to fill a statutory gap. As noted previously, because the FY 2005 IPPS final rule was vacated, no policy governing the treatment of Part C days has been established by rulemaking for fiscal years before 2014. Thus, for fiscal years not already addressed by the FY 2014 IPPS final rule, 9 whether CMS interprets the statute to treat beneficiaries enrolled in Part C as “entitled to benefits under part A” or as not so entitled, the Medicare statute requires a policy established by notice-and-comment rulemaking to resolve the issue for these years, at least to the extent that any statutory “gap” remains to be filled after Empire. If CMS were to proceed to calculate DSH adjustments for fiscal years before 2014 without a promulgated rule in place, this would (to the extent any gap remains) be contrary to the holding of Allina II because the Supreme Court held that gaps in the Medicare statute can only be filled via rulemaking (unless an exception applies). The Allina II plaintiffs prevailed only on their procedural challenge. No provision of either the Medicare statute or the APA requires CMS to adopt a different substantive legal standard. Instead, the Medicare statute contemplates that “if the Secretary publishes a final regulation that includes a provision that is not a logical outgrowth of” a proposed rule, as happened here, under section 1871(a)(4) of the Act, “such provision” may still take effect after “further opportunity for public comment and a publication of the provision again as a final regulation.” Here, the August 2020 proposed rule provided that further opportunity, and all interested parties have had a full opportunity to share their views on the proper interpretation of the statute. We have fully considered all comments received before finalizing this action.

We are not setting a precedent in this action that the agency can always engage in retroactive rulemaking when courts find that one of our final rules is not a logical outgrowth of the associated proposed rule. Retroactive rulemaking is authorized only when the Secretary determines that retroactive application: (1) is necessary to comply with statutory requirements; or (2) that a failure to do so would be contrary to the public interest. These circumstances will not always be present. For example, as to necessity to comply with statutory requirements, there will not always be, as there is here, a statutory directive to calculate payments that demands an interpretation of the very statutory provision interpreted in the vacated rule coupled with the absence of a prior rule addressing the issue that needs to be resolved (here, how to treat days attributable to Part C enrollees in the DPP).

We do not agree that this retroactive rulemaking has deprived the public of a chance to be heard as the agency has provided a period for comment and considered all the comments submitted.

We also do not agree with the underlying premise that either the APA or the Medicare statute require some sort of punitive “consequences” to an agency as the result of a logical outgrowth deficiency, especially where, as here, the alternative interpretation (that Part C enrollees are not entitled to benefits under Part A) would be contrary to statute. CMS has given the public a chance to submit comments and has considered those comments, thereby curing the procedural error.

Comment: Some commenters stated that the DSH statute does not require any specific treatment of Part C days and so retroactive rulemaking is not authorized because retroactivity is not “necessary to comply with statutory requirements” as contemplated by section 1871(e)(i) of the Act. Similarly, a commenter asserted that because the D.C. Circuit in Northeast and the D.C. District Court in Alegent Health-Immanuel Medical Center v. Sebelius, 917 F. Supp. 2d 1 (D.D.C. 2012), have read the statute to permit excluding Part C days from the Medicare fraction, retroactive rulemaking would not be necessary to comply with the statute. Some commenters stated that retroactive rulemaking is only permitted to adopt what they believe to be CMS' pre-2004 policy.

Response: The commenters misunderstand the Secretary's position in the August 2020 proposed rule. Section 1871(e) of the Act authorizes retroactive rulemaking when the Secretary determines that, in order to comply with statutory requirements, it is necessary to apply a “substantive change in regulations, manual instructions, interpretative rules, statements of policy, or guidelines of general applicability . . . retroactively to items and services furnished before the effective date of the change.” Here the DSH statute requires the Secretary to calculate DSH payments by, in part, treating Part C enrollees as either “entitled to benefits under part A” or as not so entitled, but there is no promulgated rule governing the treatment of Part C days for fiscal years before 2014. Therefore, unless the statute itself establishes the substantive legal standard, retroactive rulemaking is required in order make the statutorily required DSH adjustments. In other words, the Secretary's determination that retroactive rulemaking is necessary to comply with statutory requirements is not based on the view that the statute admits of only one interpretation of “entitled to benefits under part A,” which the Court in Empire has now confirmed. Rather, the basis of the determination is that the statute requires the Secretary to make DSH adjustments, which in turn requires him (to the extent the statute itself contains any ambiguity or “gap”) to interpret the phrase “entitled to benefits under part A” as that phrase relates to Part C days, and the Supreme Court has instructed that such an interpretation must be promulgated by notice-and-comment rulemaking. This same conclusion—that retroactive rulemaking is required—results even if CMS found the commenters' preferred treatment of Part C days to be the better interpretation and wished to adopt it. Northeast and Alegent did not address section 1871 of the Act and have been superseded in some respects by the Supreme Court's decision in Allina II.

Comment: A commenter stated that CMS has authority to adopt a retroactive rule only if the substantive change in the regulation itself is required, in other words, only if the statute unambiguously requires the proposed interpretation. Some commenters stated that, contrary to the August 2020 proposed rule (as they interpret it), the Allina cases created no legal ambiguity and so retroactive rulemaking is not required. Another commenter stated that any legal ambiguity is already resolved by following the precedent of Northeast.

Response: By its terms, section 1871(e)(1)(A)(i) of the Act permits retroactive rulemaking when the Secretary determines rulemaking is “necessary to comply with statutory requirements,” not only when the Secretary determines that the interpretation embodied in a proposed regulation is itself unambiguously required by the statute. Where the statute admits of only one interpretation, rulemaking (prospective or retroactive) may not be required at all. In Allina II, the Court held that rulemaking is necessary under section 1871(a)(2) of the Act when HHS's policy fills a statutory gap. Here, as noted before, the D.C. Circuit previously found that the statute is ambiguous as to whether Part C days are days of beneficiaries “entitled to benefits under Part A,” and that the Secretary's interpretation is not foreclosed. Subsequently, in Empire, the Supreme Court held that “entitled to benefits under part A” clearly refers to “all those qualifying for the [Medicare] program.” (142 S. Ct. at 2368.) We believe this reasoning supports the Secretary's interpretation that “entitled to benefits under part A” includes Part C enrollees since, in order to enroll in Part C, an individual must be entitled to Part A. 10

Some commenters appear to have misunderstood the discussion of legal ambiguity in the August 2020 proposed rule. In that rule, we stated that failing to finalize a regulation through notice-and-comment rulemaking would create “legal ambiguity” in the future as to the Secretary's treatment of Part C days for fiscal periods before 2014. As noted previously and in the August 2020 proposed rule, until this action is finalized and in effect, no regulation governs the treatment of Part C days for years before FY 2014. Because there is no rule governing the treatment of Part C days for discharges before October 1, 2013, the Secretary concluded he must promulgate a rule that governs this period—whether the rule counts the Part C days in the numerator of the Medicaid fraction (for individuals also eligible for Medicaid), as most commenters desire, or in the Medicare fraction, as CMS proposed. The Northeast decision striking down the exclusion of Part C days from the numerator of the Medicaid fraction for FYs 1999 to 2002 and holding that the Secretary could not apply her 2004 interpretation retroactively to those years does not control in the face of the Supreme Court's decision in Allina II, as discussed throughout this action.

Comment: Some commenters stated that there was no missed statutory deadline to justify a retroactive rule.

Response: Section 1871(e) of the Act authorizes retroactive rulemaking when the Secretary determines that, in order to comply with statutory requirements, it is necessary to apply a “substantive change in regulations, manual instructions, interpretative rules, statements of policy, or guidelines of general applicability” or it is in the public interest. The Secretary's authority to undertake retroactive rulemaking is not limited to instances when a statutory deadline has been missed. As explained in this action, the Secretary has determined that retroactive rulemaking is necessary to comply with statutory requirements, to the extent a statutory gap is left to fill after Empire, and is in the public interest.

Comment: Some commenters stated that the Secretary's argument that retroactive rulemaking is in the public interest is circular because it presupposes that the DSH statute cannot be given effect except through regulation. Some stated that the Secretary's arguments that a retroactive rule would be in the public interest simply repeat his arguments for why a retroactive rule is required by statute.

Response: We do not agree that the conclusion that the treatment of Part C days cannot be resolved without rulemaking is a mere presupposition, and therefore that the Secretary's argument is circular. Rather, as stated previously, there is no “promulgated rule governing the treatment of Part C days for fiscal years before 2014” ( Allina Health Servs., 863 F.3d at 939), and the Supreme Court held that the Secretary cannot establish or change an avowedly gap-filling policy for the treatment of Part C days without first promulgating a regulation. Thus, to the extent the Supreme Court in Empire did not foreclose any other interpretation of the statute than the one the Secretary proposes, the need for rulemaking on the treatment of Part C days under the statute is not a presumption. We also believe it is in the public interest for the Secretary to enact rulemaking that reflects what he believes is the best interpretation of the statute, one consistent with what the Supreme Court has since described as the clear meaning of the statute, because to do otherwise may result in payments from the Medicare Trust Fund in excess of what he believes is authorized in the DSH statute.

Comment: Some commenters stated that the Medicare statute's authorization of a retroactive substantive change in regulations may apply only when the Secretary determines that the change has a positive impact on providers. Similarly, some commenters stated that CMS does not have authority to act retroactively because its proposed rule would cause a loss to most hospitals and the public interest exception was intended to apply only where beneficial to providers. Some commenters relied on language in a 2001 Ways and Means Committee report that stated that a retroactive substantive change would be permissible if it would “have a positive effect on beneficiaries or providers of services and suppliers.”

Response: By its terms, the statute as enacted does not restrict the Secretary's determination that a retroactive substantive change in regulations is in the public interest only in those instances where the change would have a positive impact on providers. The statute refers to “public interest” not “providers' interest.” It is in each providers' interest to receive as much in DSH payments as possible. It is in the public interest that hospitals are paid in accordance with the statute. To the extent that any statutory gap remains following the Supreme Court's Empire decision, the Secretary believes rulemaking on the Part C days issue for years prior to the FY 2014 IPPS final rule is required by Allina II and is in the public interest. We believe that the interpretation articulated in the August 2020 proposed rule best reflects the statutory text as well as congressional intent. We also believe that applying that interpretation retroactively is in the public interest because the alternative interpretation (that Part C enrollees are not entitled to benefits under Part A) would in many instances result in payments in excess of what Congress intended.

Comment: A commenter reasoned that because the D.C. Circuit held in Allina Health Services v. Price that CMS could not bypass notice-and-comment rulemaking and resolve the treatment of Part C days through adjudication, which is inherently retroactive, retroactive rulemaking is likewise impermissible.

Response: The Medicare statute at section 1871(e)(1)(A) of the Act expressly provides authority for retroactive rulemaking under certain conditions, as explained previously, and for the reasons articulated in the August 2020 proposed rule and in this final action, the Secretary finds that those conditions are met here.

Comment: Most commenters opposed CMS's proposal and urged CMS to exclude Part C days from the Medicare fraction of the DPP calculation and include them (for dually eligible individuals) in the numerator of the Medicaid fraction. (We note that, as explained previously, all patient days, regardless of eligibility for Medicaid or entitlement to Medicare Part A, are included in the denominator of the Medicaid fraction.) Many commenters disagreed that individuals enrolled in Part C are “entitled” to benefits under Part A and asserted that the proposed interpretation is inconsistent with their view of the intent of the statute. Commenters cited the following statutory provisions in support of their arguments:

• Section 226(c)(1) of the Act, which states that entitlement of an individual to hospital insurance benefits for a month under Part A “shall consist of entitlement to have payment made under, and subject to the limitations in, part A.”

• Section 1851(a)(1) of the Act, which states persons eligible for Medicare Advantage are “entitled to elect to receive benefits” either “through the original Medicare fee-for-service program under parts A and B” or “through enrollment in a [Medicare Advantage plan] under [Part C].”

• Section 1851(i)(1) of the Act, which states that “payments under a contract with a [Medicare Advantage] organization . . . with respect to an individual electing a [Medicare Advantage] plan . . . shall be instead of the amounts which (in the absence of the contract) would otherwise be payable under parts A and B . . .”

Commenters contended that individuals who enroll in an MA plan receive benefits under Part C and not Part A, and so cannot be “entitled” to benefits under Part A. Some stated that, because the payments received by providers under contract with the MA organization are made instead of the amounts that would otherwise be payable under Part A, Part C enrollees are not entitled to benefits under Part A. Some commenters stated that a patient who is enrolled in Part C on a given patient day is not entitled to Part A benefits “for that hospitalization”; several argued that while a beneficiary must at some point be entitled to benefits under Part A in order to enroll in Part C, once they do so they are no longer entitled to benefits under Part A. Similarly, a commenter suggested that the benefits to which beneficiaries are entitled under Part A are “subject to the limitations” of Part A, but Part C enrollees may receive benefits from their MA plans that are in excess of benefits to which they are entitled under Part A, such that beneficiaries must not be entitled to benefits under Part A.

Response: We disagree with the commenters, and we believe the Supreme Court's intervening decision in Empire now forecloses the commenters' interpretation. (142 S. Ct. 2354, 2368.) Indeed, even before Empire, we did not find these comments persuasive. These comments are the same or similar to comments CMS received in response to the proposed prospective rule concerning the treatment of Part C days that was finalized in the FY 2014 IPPS final rule. 11 We continue to disagree that Medicare beneficiaries enrolled in Part C no longer receive benefits under Part A and that, because the payment structure of Part C applies (that is, CMS pays the MA plans so that the plans may make payments to hospitals for the care of the beneficiaries), those beneficiaries are not entitled to Part A benefits. As we stated in the FY 2014 final rule, section 226 of the Act provides that an individual is automatically “entitled” to Medicare Part A when the person reaches age 65, provided that the individual is entitled to Social Security Benefits under section 202 of the Act, or becomes disabled.

We continue to believe, as we concluded in the FY 2014 IPPS final rule, that Congress uses the phrase “entitled to benefits under part A” consistently to refer to an individual's legal status as a Medicare Part A beneficiary. This phrase is used in numerous other sections of the Medicare statute, indicating that it has a specific, consistent meaning throughout the statutory scheme, rather than a varying, context-specific meaning in each section and subsection. Enrolling in Part C does not change an enrollee's status as a Medicare Part A beneficiary and does not remove or reduce any benefits the beneficiary would otherwise have received; indeed, the MA plan must provide the benefits to which the beneficiary is entitled under Part A as described by section 1852(a)(1)(A) and (B)(i) of the Act and may provide additional supplemental benefits as described by section 1852(a)(3)(C) of the Act. The D.C. Circuit rejected many of the commenters' views that the agency's interpretation is inconsistent with the plain language of the statute. ( Northeast, 657 F.3d at 6-13.) We note that the Supreme Court in Empire further explained that, for purposes of calculating hospitals' DPPs, “individuals `entitled to [Medicare Part A] benefits' are all those qualifying for the program ” and that entitlement to Part A benefits is, “according to the statute, simply a legal status arising from” meeting the statutory criteria in section 226(a)-(b) of the Act. (142 S. Ct. 2354 at 2368 and 2363 (emphasis added).) A person's entitlement to Part A benefits arises when the “person meets the basic statutory qualifications and (unless a disability diminishes) never goes away.” ( Id. at 2364.)

In response to commenters' concerns about section 226(c)(1) of the Act, we note that, for purposes of section 226(c)(1) of the Act, beneficiaries enrolled in Part C are having payment made under Part A for the month in question, via the Part A component of the monthly payment made to the MA organization, and are receiving Part A benefits subject to the limitations on such benefits provided for in Part A.

In response to commenters' concerns about section 1851(a)(1) of the Act, we note that, for purposes of section 1851(a)(1) of the Act, the “benefits” referenced in the phrase quoted by the commenters (“entitled to elect to receive benefits”) are the benefits provided for in Part A and Part B. Thus, this language confirms that beneficiaries enrolled in Part C remain “entitled” to benefits under Part A, and thus supports our interpretation of the statute. It is only the vehicle “through” which such Part A benefits are received that changes, from the “fee-for-service” method spelled out under Part A to the capitation payment method spelled out in Part C.

Section 1851(i)(1) of the Act similarly refers only to whether Part A benefits are provided via payments to, and by, the MA organization or direct payments made under the “fee-for-service” payment procedures provided for in Part A and Part B. It is only the process for furnishing these benefits that is at issue in the provision, not entitlement to such benefits themselves. That Part C enrollees may receive supplementary benefits beyond what other Part A-entitled beneficiaries are entitled to does not deprive the Part C enrollees of entitlement to Part A benefits.

Commenters who argue that it is obvious that a beneficiary cannot be entitled to both Part C and Part A benefits on the same day confuse the method for covering Part A benefits with whether an individual is entitled to receive such benefits. The question of whether a beneficiary is “entitled” to Part A benefits is distinct from how the provider is paid for furnishing those benefits. As we stated in the August 2020 proposed rule (85 FR 47725), and has been subsequently affirmed by the Supreme Court in Empire, section 226 of the Act identifies statutory criteria for an individual's entitlement to Part A benefits. (142 S. Ct. at 2362.) Beneficiaries who are enrolled in MA plans provided under Medicare Part C continue to meet all the statutory criteria for entitlement to Medicare Part A benefits under section 226 of the Act. Moreover, section 1851(a)(3) of the Act provides that, in order to be eligible to enroll in Medicare Part C, a beneficiary must be “entitled to benefits under Part A and enrolled under Part B.” Thus, by definition, a beneficiary must be entitled to Part A to be enrolled in Part C. We do not believe that the Act suggests that beneficiaries who enroll in a Medicare Part C plan thereby forfeit their entitlement to Medicare Part A benefits. To the contrary, as affirmed in Empire, because they continue to meet the basic statutory criteria for entitlement under the statute (that is, being over 65 or disabled), their entitlement status is unaffected by such enrollment. (142 U.S. at 2362.) In our view, enrollment in a plan under Medicare Part C is simply an option that a person entitled to Part A benefits may choose as a way to receive their Part A benefits. A beneficiary who enrolls in Medicare Part C is entitled to receive benefits under Part A through the MA plan in which he or she is enrolled, and the MA organization's costs for providing such Part A benefits are paid for by CMS with money from the Medicare Part A Trust Fund.

In addition, under certain circumstances, Medicare Part A pays providers directly for care furnished to patients enrolled in Medicare Part C plans, rather than indirectly through capitated payments to MA organizations from the Medicare Part A Trust Fund. For example, under section 1852(a)(5) of the Act, if, during the course of the year, the scope of benefits provided under Medicare Part A expands beyond a certain cost threshold due to Congressional action or a national coverage determination, Medicare Part A will pay providers directly for the cost of those services provided to beneficiaries enrolled in Part C. Similarly, Medicare Part A pays directly for hospice care (a Part A benefit) furnished to MA patients who elect under section 1812(d) of the Act to receive such care from a particular hospice program and, under certain circumstances, for FQHC services provided to MA patients for FQHCs that contract with MA organizations under sections 1853(h)(2) and 1853(a)(4) of the Act, respectively. Thus, we continue to believe that a patient enrolled in an MA plan remains entitled to benefits under Part A and should be counted in the Medicare fraction, not in the numerator of the Medicaid fraction (should the Part C enrollee also be eligible for Medicaid). Indeed, in light of the Supreme Court decision in Empire, we do not believe the statute can properly be read otherwise.

Comment: Some commenters stated that the Secretary's interpretation of “entitled to benefits under part A” in the DSH statute is inconsistent with his interpretation of “entitled to [SSI] benefits” in that same statute because he treats people as “entitled” to Medicare Part A benefits if they meet the statutory criteria for entitlement, regardless of whether Medicare pays for hospital services during a given hospital stay, but treats patients as “entitled” to SSI benefits only if they are actually paid those monthly cash benefits for the month(s) in which they are hospitalized. Some commenters suggested that, if CMS interprets “entitled” to Medicare to include unpaid days it must include in the Medicare fraction numerator days for beneficiaries who are (they argue) “entitled” to SSI but who do not receive any cash benefit. Some commenters proposed additional Social Security Administration status codes that, in their opinion, should be included in the numerator of the Medicare fraction because they capture individuals who, purportedly, are entitled to SSI.

Response: The meaning of “entitled to [SSI] benefits” in the DSH statute is beyond the scope of this action. However, we note that, as the Secretary explained in the FY 2014 IPPS final rule (78 FR 50617), the differing interpretation of these two distinct phrases is based on the two different kinds of entitlements at issue. Because SSI is a cash benefit, and because entitlement to that benefit depends on factors (such as income level) that can change over time, only a person who is actually entitled to be paid these benefits for the month in question is considered entitled to those benefits. This differs from entitlement to Medicare benefits under Part A, which are a distinct set of health insurance benefits where an individual's entitlement to such benefits does not generally evolve over time. The health insurance benefits also include ongoing, continuous coverage for various specified kinds of healthcare service, regardless of income status or other financial factors. 12 The Secretary has more extensively addressed these two different kinds of entitlement for purposes of the DSH calculation in another notice-and-comment rulemaking. For more information, we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50275 through 50286). That rulemaking further elaborates on the reasons for distinguishing between entitlement to SSI benefits and entitlement to Medicare benefits under Part A. ( Id. at 75 FR 50280 and 50281.) We note also that courts have upheld the Secretary's distinction between these two different kinds of entitlement against similar allegations of “inconsistency.”  13

Comment: Some commenters stated that the August 2020 proposed rule did not discuss the phrase “for such days” in the DSH statute and impermissibly seeks to eliminate that statutory clause through rulemaking. Other commenters state the phrase “for such days” could or must be interpreted to exclude Part C days from the Medicare fraction, which includes days for patients who “(for such days) were entitled to benefits under part A.” (Section 1886(d)(5)(F)(vi) of the Act.) These commenters believe this phrase requires that, to be included in the Medicare fraction, a patient must be entitled to Part A hospital benefits on the patient day being counted, and that Part C-enrolled patients are not so entitled.

Some commenters agree with then-Judge Kavanaugh's concurrence in Northeast when he reasoned that the statute's use of “were” indicates that the calculation of the Medicare fraction is meant to determine “what kind of benefits a specific patient received on a specific day” and so HHS must “isolate hospital days attributable to patients who were, on those days, receiving benefit payments through Part A of Medicare,” which in his (and the commenters') view excludes a Part C enrollee. ( Northeast, 657 F.3d. at 19 (Kavanaugh, J., concurring).) Moreover, these commenters assert that since a patient who is receiving benefits under Part A for a given day cannot also receive benefits under MA for that day, the “for such days” language indicates there is a clear delineation between MA days and Medicare Part A days.

Response: The Secretary's interpretation does not seek to eliminate the clause “for such days.” As the Supreme Court explained in Empire:

In the Secretary's view, Part C enrollees are entitled to all Part A benefits (including hospital benefits) regardless of how those benefits are (or are not) paid, that is they are “entitled” to Part A benefits when providers are paid by an MA organization (which in turn is paid from the Part A trust fund) and also when providers are paid directly from the Part A trust fund, such as in the case of hospice benefits. Part A entitlement is a status that does not change with enrollment in Part C. The Secretary's interpretation, which is the same one adopted by the Supreme Court in Empire, gives meaning to the clause “for such days” and does isolate hospital days attributable to patients who were entitled to—meaning qualified for—Part A benefits on specific patient days. An individual's entitlement to Medicare Part A is largely, but not perfectly static, and “[n]ot every patient who meets the criteria . . . during some portion of his hospital stay will meet those criteria for all of the stay.” Northeast, 657 F.3d at 12. For example, “a person who collects Social Security and who turns 65 during his hospital stay will become `entitled' to benefits under Part A on his sixty-fifth birthday,” and “a person under age 65 who reaches his twenty-fifth calendar month of entitlement to disability benefits under [section 223 of the Act] during his hospital stay will become `entitled' to benefits under Part A upon reaching his twenty-fifth month of disability entitlement.” ( Id. ) For such beneficiaries, the days before they become entitled to benefits under Part A are excluded from the Medicare fraction, but the days on or after they become entitled to benefits under Part A are included in that fraction. 14

Although our interpretation of the statute is not driven by the financial impact of that interpretation, we note also that excluding Part C days from the Medicare fraction based on the commenters' understanding of the statutory phrase “for such days” may put some hospitals in a worse position than the Secretary's view because those days would not necessarily be includable (for individuals also eligible for Medicaid) in the Medicaid fraction. The statutory language defining the Medicaid fraction only counts in that fraction patient days attributable to patients who “were not entitled to benefits under part A [of Medicare]” (section 1886(d)(5)(F)(vi)(II) of the Act); that phrase is not modified with the same “for such days” phrase that is present in the statutory language defining the Medicare fraction (section 1886(d)(5)(F)(vi)(I) of the Act). Therefore, under Empire, “the `not entitled' phrase in [the Medicaid fraction] should mean (consistent with the rest of the statute) not qualifying for Medicare,” which includes Part C enrollees that the commenters “would oust from the Medicare fraction,” and those Part C enrollees thus would “fall . . . outside the Medicaid fraction,” too. (142 S. Ct. at 2367.)

Comment: A commenter stated that because the statute expressly references Part C days in the indirect medical education (IME) provisions of the Balanced Budget Act of 1997 (Pub. L. 105-33) (BBA) in order to provide IME payments to hospitals in connection with patients enrolled in Part C plans, but did not also change the DSH statute to expressly refer to Part C days, the DSH Medicare fraction should not be interpreted to include Part C days and the Medicaid fraction should not be interpreted to exclude Part C days because Congress did not mean for Part A and Part C to be synonymous.

Response: The IME add-on for patients enrolled in Part C plans under section 1886(d)(5)(B) of the Act is designed to compensate IPPS teaching hospitals for increases in costs that are presumed to occur as an indirect consequence of the involvement of student doctors in patient care. Payments for IME costs in traditional Medicare are calculated on the basis of payments for discharges (Section 1886(d)(5)(B) of the Act); this language does not include any reference to entitlement to Part A benefits. Prior to the BBA, Medicare did not make any separate payment to hospitals for IME costs associated with Medicare patients enrolled in Part C plans. Sections 4622 and 4624 of the BBA directed the Secretary to provide for an additional payment amount to hospitals for IME in connection with Medicare beneficiaries enrolled in a Part C plan. Congress expressly referenced Part C in the IME provisions of the BBA because neither hospitals nor Part C plans are paid by the Secretary on the basis of discharges of Part C enrollees. (Section 1886(d)(5)(B) of the Act.) We disagree with the commenter that because the DSH statute does not expressly mention Part C days, the statute unambiguously treats such days as days for which beneficiaries are not entitled to Part A. Rather, other statutory provisions contemplate that Part C enrollees remain entitled to Part A, indicating that the statute includes them in the Medicare fraction. The Secretary's position is not that “Part A” and “Part C” are synonymous, but that Part C enrollees remain entitled to benefits under Part A.

Comment: A commenter stated that CMS is proposing to remove the word “covered” from the regulation. Other commenters stated that CMS implicitly conceded that Part C days are not “covered” days when it stated in the FY 2014 IPPS final rule that the corresponding proposed rule did not propose any change to the text of the regulation because “the current text [already] reflects the policy [that was] proposed” (78 FR 50615). The commenters appeared to mean that if, in CMS's view, the text of the regulation did not need to change in the FY 2014 IPPS final rule in order to include Part C days in the Medicare fraction, that is because the word “covered” had already been removed from the text of the regulation.

Response: We disagree with the suggestion that in the August 2020 proposed rule, CMS proposed to remove the word “covered” from the regulation; the regulation had already been revised to remove the word “covered” (69 FR 49099). Although the FY 2005 IPPS final rule was vacated by the D.C. Circuit as to its treatment of Part C days in Allina I, that decision did not address the issue of exhausted benefit days; that is, days that are not “covered.” Before we proposed the August 2020 proposed rule, the regulation had already been revised to remove the word “covered” (69 FR 49099). We also disagree with the commenters' interpretation that the statement in the FY 2014 IPPS final rule implied that Part C days are not “covered days.” When CMS stated in the FY 2014 IPPS proposed rule that the text already reflected the proposed policy, that was because the text of 42 CFR 412.106(b)(2)(i)(B) and (b)(2)(iii)(B) expressly included Part C days in the Medicare fraction numerator and denominator, not because the word “covered” had already been removed from the regulation. In the FY 2005 IPPS final rule, the agency had stated that it was “revising [its] regulations”—which at the time simply parroted the language of the statute—to specifically “include the days associated with M+C beneficiaries in the Medicare fraction of the DSH calculation” (69 FR 49099). Although, the agency inadvertently failed to make that revision in the text of the regulations at that time, the Secretary made a “technical correction” to the regulations in 2007 to expressly incorporate the interpretation announced in the FY 2005 IPPS final rule. (72 FR 47384 (August 22, 2007))

Comment: A commenter read our description of the alternative considered in the August 2020 proposed rule to contemplate the restoration of the term “covered” to the DSH regulation (meaning that exhausted benefit or unpaid days would not be included in the calculation of the Medicare fraction), which the commenter favored.

Response: This commenter misunderstood our proposal and the alternative considered. As discussed in more detail elsewhere in the action, under both our proposal and the alternative considered, Part C days would be treated as “covered” days for the purposes of calculating a hospital's DPP and neither the rule proposed nor the alternative considered directly addressed the status of exhausted benefit or other unpaid days. As we did not propose the change the commenter supports, we will not be adopting the commenter's suggestion.

Comment: A commenter stated that the August 2020 proposed rule is arbitrary and capricious because the Secretary excludes from the Medicare fraction patient days paid under Medicare Part B and patient days for areas of a hospital not payable under Part A.

Response: The August 2020 proposed rule is not inconsistent with the exclusion of Part B days from the Medicare fraction; to enroll in Part B under section 1836 of the Act, an individual need not be “entitled to benefits under part A.” In a December 2, 2015 decision on remand in Allina I, the Administrator explained that the restriction on patient days to certain units of the hospital is entirely unrelated to the Secretary's interpretation of “entitled to benefits under part A” but is instead based on an interpretation of the term “patient days” in the DSH provision as limited to inpatient days payable under the IPPS.

Comment: Several commenters stated that the August 2020 proposed rule is inconsistent with the D.C. Circuit's holding in Allina Health Services v. Price, 863 F.3d 937 (D.C. Cir. 2017) and the Supreme Court's decision in Allina II because those cases held that the Secretary cannot undertake a policy change without first promulgating a regulation. Several commenters stated that the August 2020 proposed rule disregarded or circumvented the Supreme Court's holding in Allina II. Some commenters stated that CMS must not interpret the statute to treat Part C days as days beneficiaries are entitled to benefits under Part A because CMS has, purportedly, gotten more than one adverse decision on this issue. They argue that the higher DSH payments that would be calculated by excluding these days from the Medicare fraction and including them in the Medicaid fraction numerator (for patients also eligible for Medicaid) have therefore been wrongfully withheld from providers for many years.

Response: We agree that the Supreme Court in Allina II held that, because the policy on the treatment of Part C days in the DSH calculation was intended to address an avowed statutory gap, the Secretary cannot establish or change such a policy without first promulgating a regulation. The purpose of this final action is to comply with that requirement (to the extent any gap-filling policy is even necessary now that the Supreme Court has clarified the meaning of “entitled to benefits under part A,” as discussed more elsewhere), not to disregard or circumvent the Court's ruling. As stated in Allina Health Services, there is “no promulgated rule governing the [treatment of Part C days] for the fiscal years before 2014.” (863 F.3d at 939.) The Secretary explained in briefing to the Supreme Court in Allina II that if the Medicare statute required the Secretary's interpretation of “entitled to benefits under part A” to be promulgated through notice-and-comment procedures (as the Supreme Court ultimately held), then notice-and-comment rulemaking would also be necessary before the Secretary could adopt the respondents' preferred interpretation. And, even if considered retroactive in application, this action will not be effective until after the completion of this notice-and-comment rulemaking, which will have given interested parties the opportunity to present their arguments as to the proper interpretation of the statute and given the Secretary the opportunity to consider those arguments before the action is finalized.

No final binding court decision has found fault with the Secretary's interpretation of “entitled to benefits under part A” to include Part C enrollees. That is why, after the Supreme Court issued its Allina II decision, the United States District Court for the District of Columbia remanded to the Secretary cases presenting the Part C days issue, holding that the district court had “no basis to direct the agency as to what the formula for the [DSH] recalculation should be” because “this was the aspect of the case left open by previous opinions.” ( In Re Allina II-Type DSH Adjustment Cases, Misc. No. 19-0190, Dkt. 74 (D.D.C. Jan. 19, 2021).)

Indeed, the weight of authority—in our view—now conclusively shows that the Secretary's interpretation of the relevant phrase is permissible, if not required, under the language of the statute. In Northeast, the D.C. Circuit held that “the Balanced Budget Act of 1997, Public Law 105-33, 111 Stat 251, which enacted M+C, as well as subsequent amendments to Part C, assume that a person enrolled in [Part C] remains entitled to benefits under Part A, and nothing in the text or structure of the DSH fractions compels a different result.” Most importantly, the Supreme Court's decision in Empire has now confirmed the validity of the Secretary's interpretation. While Empire addressed exhausted benefit and other unpaid days, not Part C days, the Court's reasoning confirms that “entitled to benefits under part A” should be read to include Part C days. The Court concluded that the statutory text is clear: “being `entitled' to Medicare benefits . . . means—in the [DSH] fraction descriptions, as throughout the statute—meeting the basic statutory criteria.” ( Empire, 142 S. Ct at 2362.) Part C enrollees, who by definition must be “entitled” to Part A benefits, necessarily meet these basic statutory criteria. They do not cease to meet them through enrollment in Part C because such enrollment does not affect their age or disabled status.

Comment: Some commenters stated that CMS did not change what they call its “covered days” rule when Part C was added to the statute, and that CMS has acknowledged that, before the FY 2005 IPPS final rule, it had a practice of excluding Part C days from the Medicare fraction. The commenters appear to suggest that the pre-FY 2005 regulation therefore excluded Part C days from the Medicare fraction because they are (purportedly) not “covered days.”

Response: This argument was made by plaintiffs in Allina Health Services v. Price, 863 F.3d 937, 939 (D.C. Cir. 2017) and rejected by the D.C. Circuit, which held in that case that “HHS has no promulgated rule governing the interpretation of `entitled to benefits under part A' for the fiscal years before 2014.” (Emphasis added.) The 1986 regulation, which preceded the FY 2005 IPPS final rule, established the limitation to “covered” days and was promulgated more than a decade before the creation of Medicare Part C and thus plainly could not have addressed whether enrollees in the later-created Part C program are “entitled to benefits” under Part A. And the “covered” days limitation in the pre-FY 2005 IPPS final rule was not based on any interpretation of “entitled to benefits under part A,” nor did it establish any policy that would have excluded Part C days. Rather, as the Secretary explained in the 1986 rulemaking, the rule was intended to clarify that it “refer[red] only to Medicare covered days,” that is, days for which Medicare is authorized to make payment. 15 The “covered” limitation was an interpretation of the statutory phrase “for such days,” which modifies the phrase “entitled to benefits under part A” (51 FR 31460 and 31461). The determination of whether a patient day is “covered” has never depended on whether the day is attributable to an individual under the traditional Part A fee-for-service program or one enrolled in a managed care plan, such as under Part C. A Part C enrollee is entitled to receive benefits under Part A through the Part C plan in which he is enrolled, and such benefits are paid from the Medicare Part A Trust Fund. (Section 1853(f) of the Act.) Therefore, Part C days have always been considered to be paid or “covered” days even though Medicare payments for Part C days are made to managed care plans rather than directly to hospitals.

Comment: Some commenters stated that because the Ninth Circuit in Empire v. Becerra, 958 F.3d 873 (2020), vacated CMS's regulatory amendment in the FY 2005 IPPS final rule that removed the word “covered” from the DSH regulation, and (purportedly) did so on a nationwide basis, the previous regulation was reinstated and so only “covered” days can be included in the Medicare fraction. According to these commenters, Part C days can therefore not be included in the Medicare fraction because they are not paid for under Part A and so are not “covered” days. These commenters also believe that the Secretary ought to have discussed Empire in the proposed rule.

Response: The Supreme Court reversed the Ninth Circuit's decision in Empire, concluding that “individuals `entitled to [Medicare Part A] benefits' are all those qualifying for the program, regardless of whether they are receiving Medicare payments for part or all of a hospital stay.” (142 S. Ct. at 2368 (alteration in original).) Empire did not involve the treatment of Part C days, nor did the Ninth Circuit's analysis of its own prior precedent bear directly on that issue, which is why the Ninth Circuit's holding was not discussed in the August 2020 proposed rule. Regardless, and putting aside the fact that the Ninth Circuit's decision in Empire was overturned by the Supreme Court, any relevance of the Ninth Circuit's decision in Empire to the Part C days issue would lie only in the Ninth Circuit's interpretation of “entitled to benefits under part A,” an issue that was addressed at length in the August 2020 proposed rule. The Secretary has explained why Part C enrollees remain entitled to benefits under Part A and also that, because MA plans are paid from the Part A trust fund and use such payments to pay hospitals for Part C days, Part C days are “covered” days. Accordingly, the Ninth Circuit's conclusion that only “covered” or paid days are included in the Medicare fraction would not have required the exclusion of Part C days. In any event, the Supreme Court's holding in Empire that individuals who meet the basic statutory criteria for Medicare Part A benefits are “entitled to benefits under part A,” and their patient days are included in the Medicare fraction, has now confirmed the Secretary's interpretation.

Comment: Some commenters stated that CMS must apply what they assert is its pre-FY 2005 practice of excluding Part C days from the Medicare fraction. Of these, some rely on CropLife America v. EPA, 329 F.3d 876, 879 (D.C. Cir. 2003), and Action on Smoking & Health v. C.A.B., 713 F.2d 795, 797 (D.C. Cir. 1983), for the proposition that when an agency's rule is vacated, the agency's previous practice is reinstated. In Action on Smoking the Court of Appeals held that its vacatur of the challenged portion of a rule “had the effect of reinstating the rules previously in force.” In CropLife America the Court of Appeals held that the consequence of vacatur of a rule was the restoration of “the agency's previous practice.” Some of these commenters stated that CMS must therefore exclude Part C days from the Medicare fraction and include them in the Medicaid fraction (for individuals also eligible for Medicaid) either based on the pre-FY 2005 regulation or based on a “clarification” of its regulation to reflect the pre-FY 2005 “policy” for years before the effective date of the prospective rule. Some commenters stated that the Supreme Court's Allina II decision does not prevent CMS from reverting to its prior practice because the statute requires notice and comment only for “rule[s], requirement[s] or other statement[s] of policy,” not practices. Some commenters stated that the pre-FY 2005 practice could be reinstated without notice-and-comment rulemaking because the practice did not impose any “requirement” to which section 1871(a)(2) of the Act would apply, unlike the FY 2005 IPPS final rule that was vacated in Allina I. A commenter relied on Catholic Health Initiatives Iowa Corp. v. Sebelius, 718 F.3d 914 (D.C. Cir. 2013), in support of their argument that, whether a prior policy or practice is valid is irrelevant to the question of whether retroactive rulemaking is permissible; it matters only that such policy existed.

Response: To the extent these comments suggest that the agency must apply an alleged pre-FY 2005 practice of excluding Part C days from the Medicare fraction and including them in the Medicaid fraction, we believe that approach would violate existing law. First, as discussed in more detail previously, we believe that the statute, as construed in Empire, does not reasonably permit the agency to treat persons enrolled in Medicare Advantage as not “entitled” to benefits under Part A. Second, to the extent that the statute, as construed in Empire, does not itself establish the applicable substantive legal standard, then the Supreme Court's Allina II decision requires the agency to engage in notice-and-comment rulemaking to address whatever statutory “gap” might remain as to that issue. We do not agree that the agency could, consistent with Allina II, adopt an approach on the treatment of Part C days by relying on an alleged pre-FY 2005 practice, even if the practice could be said to amount to a “policy.” If rulemaking was required to change the Secretary's approach, as held in Allina II, then rulemaking was also required to establish the Secretary's approach in the first place.

Moreover, in a December 2, 2015 decision on remand in Allina I, the Administrator determined that “it has never been CMS policy for Part C days to be included in the numerator of the Medicaid fraction, nor has CMS included such days” as a matter of practice. The Secretary's practice prior to FY 2005 was to exclude Part C days from both the Medicare fraction and from the numerator of the Medicaid fraction (for individuals also eligible for Medicaid), and no approach to Part C days was embodied in a notice-and-comment rule before the now-vacated rule. We recognize that the D.C. Circuit in Northeast stated, in the context of discussing retroactivity, that the agency had a pre-FY 2005 “practice” of excluding Part C days from the Medicare fraction (657 F.3d at 17), but that case did not hold that this practice amounted to a policy or that the agency had adopted a legal interpretation of the statute that would require the Secretary to account for Part C days in the manner preferred by providers. Most importantly, the D.C. Circuit has confirmed that any such practice, however characterized, did not amount to a notice-and-comment rule, as required to establish a gap-filling policy under the Supreme Court's Allina II decision. Specifically, the D.C. Circuit found that HHS has “no promulgated rule” governing the treatment of Part C days for fiscal years prior to FY 2014. (863 F.3d at 939.)

Neither CropLife nor Action on Smoking and Health were Medicare cases and so they did not address section 1871(a)(2) of the Act. Under the Supreme Court's opinion in Allina II, pursuant to that provision a “substantive legal standard” concerning the treatment of Part C days can be established or changed only via notice and comment rulemaking, not merely by practice. Contrary to some commenters' suggestion, there is no valid substantive legal standard embodied in agency practice that the agency could “reinstate” for years prior to the effective date of the prospective rule, nor any “policy” created by adjudication or otherwise. The prior practice did not establish any policy consistent with section 1871(a)(2) of the Act as construed by the Supreme Court in Allina II. No commenter identified statutory language, or language from the Supreme Court in Allina II, that would suggest that the Secretary could establish a substantive legal standard concerning the treatment of Part C days simply by adopting a practice in the absence of notice-and-comment rulemaking.

As noted, the agency's prior practice was generally to exclude the days from both the Medicare fraction and the numerator of the Medicaid fraction (for individuals also eligible for Medicaid). In order to resolve the Part C days issue for pending appeals for cost years ending before the effective date of the prospective FY 2014 IPPS final rule, CMS must put these days in either the Medicare fraction or in the Medicaid fraction numerator (for individuals also eligible for Medicaid). In other words, CMS must instruct its contractors as to where these days are to be placed for DSH calculations for pending appeals. We do not agree that, after holding that the agency did not follow the proper procedure in adopting a policy regarding the treatment of Part C days after its rule was vacated, the Supreme Court contemplated that the Secretary could simply adopt a policy by reverting to an alleged prior practice that could not itself have established any policy under the terms of section 1871(a)(2) of the Act.

We also do not agree that the Secretary could finalize a rule that “clarifies” or “codifies” the regulation to reflect what some commenters refer to as the pre-FY 2005 “policy.” First, we believe that the characterization of the agency's practice of generally excluding Part C days from the Medicare fraction as a “policy” is mistaken. As already noted, and as we explained in the prospective FY 2014 IPPS final rule (78 FR 50496), as a matter of practice, the Secretary generally excluded these days from both the Medicare fraction and the numerator of the Medicaid fraction (for individuals also eligible for Medicaid). In order for a regulation to reflect the general pre-FY 2005 practice, the Secretary would have to interpret the DSH statute to treat Part C days as both days on which beneficiaries are “not entitled to benefits under part A” (and thus to be excluded from the Medicare fraction) AND “entitled to benefits under part A” (and thus to be excluded from the numerator of the Medicaid fraction (for individuals also eligible for Medicaid)). Such an interpretation would not be a “clarification,” as it would interpret the phrase “entitled to benefits under part A” in two different ways in the same clause of the statute and would not be in accord with Allina I, 746 F.3d at 1108, which stated that the statute “unambiguously” requires Part C days to be counted in one fraction or the other because “a Part C-enrolled individual is either eligible for Medicare Part A, or not.” Id. Second, as discussed further elsewhere, such a policy would be inconsistent with what the Supreme Court has now held in Empire is the clear meaning of “entitled to benefits under part A”: “meeting the basic statutory criteria.” (142 S. Ct. 2362.) Part C enrollees must meet the basic statutory criteria to enroll in Part C and do not cease to meet them through enrollment in Part C. For these reasons, we believe it would be legally impermissible to adopt a rule that codifies the agency's past practice.

Comment: Some commenters stated that CMS's prior practice (before FY 2005) was to exclude Part C days from the Medicare fraction and include them in the Medicaid fraction. Some commenters stated the D.C. Circuit held in Allina I that prior to FY 2005 the Secretary put Part C days in the Medicaid fraction.

Response: As explained previously, in a December 2, 2015 decision on remand in Allina I, the Administrator determined that “it has never been CMS policy for Part C days to be included in the numerator of the Medicaid fraction, nor has CMS included such days” as a matter of practice. Part C days were thus generally excluded from both fractions, and no regulation governed the issue before FY 2005. And in Allina I, the D.C. Circuit did not hold that the Secretary had a policy of putting Part C days in the Medicaid fraction, but instead stated, in connection with the logical outgrowth challenge at issue there, that “a party reviewing the Secretary's notice of proposed rulemaking understandably would have assumed that the Secretary was proposing to `clarify' a then-existing policy, i.e., one of excluding Part C days from the Medicare fraction and including them in the Medicaid fraction.” (746 F.3d at 1108.) But the Court of Appeals did not say that this was CMS's actual policy or practice.

Comment: A commenter argued that the proposed interpretation is inconsistent with statements the Secretary made in the Federal Register (68 FR 45419) stating that section 1886(d)(5)(F) of the Act requires him to consider only inpatient days to which the prospective payment system applies.

Response: The commenter mischaracterizes our statement in the Federal Register , which was discussing our interpretation of “patient days” and was unrelated to when a patient is considered entitled to benefits under Part A.

Comment: Numerous commenters stated that higher payments to hospitals, especially safety net hospitals, and especially during and in light of the COVID-19 pandemic, are in the public interest, with some commenters specifying programs they state they cannot expand without higher DSH payments. Commenters also asserted that many hospitals will receive less in DSH payments under the Secretary's proposed interpretation than they would under the alternative interpretation that Part C enrollees are not “entitled to benefits under part A,” and therefore they suggested the public interest lies in making DSH adjustments using their preferred interpretation. Similarly, some commenters criticized the August 2020 proposed rule for suggesting that, in the Secretary's (purported) view, the alternative model is not in the public interest because it costs more than would effectuating the proposed model. A commenter stated that the “public interest” exception does not apply merely because the agency is required to pay monies that it owes.

Response: We are adopting the interpretation of “entitled to benefits under part A” that we believe best comports with the statute enacted by Congress. Indeed, based on the Supreme Court's decision in Empire, we believe our interpretation is the only reasonable interpretation. We also do not agree it would be good public policy or in the public interest to promulgate a retroactive rule embodying the interpretation that beneficiaries enrolled in Part C are not entitled to Part A. Not only would this be a change from the position CMS has articulated consistently for many years, we believe that such an interpretation, in many instances, would result in payments in excess of what Congress authorized in the DSH statute and would be contrary to the Supreme Court's holding in Empire that a beneficiary is “entitled to benefits under part A” whenever he meets the statutory criteria for entitlement.

In any event, for all the reasons articulated in the August 2020 proposed rule and reiterated in this final action, we believe the better interpretation by far is that beneficiaries enrolled in Part C remain “entitled to benefits under part A.” And the Supreme Court's decision in Empire confirms this view, given its holding that, in the Medicare fraction of a hospital's DSH adjustment, “individuals `entitled to [Medicare Part A] benefits' are all those qualifying for the program, regardless of whether they are receiving Medicare payments for part or all of a hospital stay.” (142 S. Ct. at 2368 (alteration in original).) Congress, not the Secretary, can decide whether the resulting DSH payments are adequate, insufficient, or even too generous. “[T]he point of the DSH provisions is not to pay hospitals the most money possible; it is instead to compensate hospitals for serving a disproportionate share of low-income patients.” ( Id. at 2367.)

Comment: A commenter argued that the D.C. Circuit's decision in Allina Health Services. v. Price, 863 F.3d 937, 939 (D.C. Cir. 2017) forecloses retroactive rulemaking here because that case held that section 1871(a)(4) of the Act applied and required notice and comment before a rule can “take effect” when a regulatory provision is not the logical outgrowth of a proposed rulemaking. The commenter states that there are two possible meanings of “take effect” in section 1871(a)(4) of the Act, and the proposed retroactive rulemaking is impermissible under either of them. According to the commenter, either this final action will be impermissibly made effective earlier than the notice-and-comment period that was required under section 1871(a)(4) of the Act, or the action will be made effective later than the required notice-and-comment period but will apply to cost reporting periods pre-dating that period in violation of section 1871(e)(1)(C) of the Act, which provides, “No action shall be taken against a provider of services or supplier with respect to noncompliance with such a substantive change for items and services furnished before the effective date of such a change.” Relatedly, some commenters stated that retroactive rulemaking in the face of a logical outgrowth finding renders section 1871(a)(4) of the Act meaningless.

Response: We do not agree that the D.C. Circuit's holding in Allina Health Services v. Price concerning section 1871(a)(4) of the Act forecloses retroactive rulemaking here. The D.C. Circuit in Allina I held that the FY 2005 IPPS final rule was not a logical outgrowth of the proposed rule. Allina I, 746 F.3d at 1109. Section 1871(a)(4) of the Act states that “[i]f the Secretary publishes a final regulation that includes a provision that is not a logical outgrowth, such provision shall be treated as a proposed regulation and shall not take effect until there is the further opportunity for public comment and a publication of the provision again as a final regulation.” There was no retroactive rule challenged in Allina Health Services v. Price the providers in that case challenged SSI ratios that included Part C days that CMS posted after the FY 2005 IPPS final rule had been vacated. Thus, the D.C. Circuit was considering whether section 1871(a)(2) of the Act incorporates the APA's notice-and-comment exception for interpretive rules. In that context, the D.C. Circuit held that even if section 1871(a)(2) of the Act did incorporate an exception for interpretive rules (which the Supreme Court subsequently held it does not), section 1871(a)(4) of the Act required “further opportunity for public comment and a publication of the provision again as a final regulation' before HHS could re-impose the rule.” 863 F.3d at 945. This final action complies with that holding as it follows a further opportunity for public comment on a proposed rule and results in publication of a final action. This action will not “take effect” until after the notice-and-comment period has closed. Section 1871(e)(1)(C) of the Act is irrelevant here because CMS is not taking any enforcement action against providers for noncompliance with the policy adopted in this retroactive rulemaking. Instead, CMS will issue NPRs and revised NPRs, the DSH adjustments of which will be calculated pursuant to this final action. Finally, retroactive rulemaking after a failure of logical outgrowth problem does not render section 1871(a)(4) of the Act meaningless both because the retroactive rulemaking follows an opportunity for public comment, as required, and because CMS can only exercise retroactive rulemaking authority based on a finding that doing so “is necessary to comply with statutory requirements” or that failing to do so “would be contrary to the public interest.” (Section 1871(e)(1)(A) of the Act.)

Comment: A commenter argued that promulgation of retroactive rulemakings to remedy procedural defects in a rule “make a mockery of the provisions of the [Administrative Procedure Act],” citing Georgetown University Hospital v. Bowen, 821 F.2d 750, 758 (D.C. Cir. 1987).

Response: In Georgetown University Hospital, the D.C. Circuit noted that the circuit had “previously held that the effect of invalidating an agency rule is to `reinstat[e] the rules previously in force.' ” ( Id. at 757 (alteration in original) (emphasis omitted).) Here, there was no rule governing the treatment of Part C days “previously in force.” Moreover, that 1987 case pre-dated Congress' express grant of authority to the Secretary for retroactive rulemaking; section 1871(e) of the Act was added by section 903 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173, 117 Stat. 2066, 2376. To the extent Empire has not resolved the interpretive issue, the Medicare statute would require rulemaking, where it might not otherwise have been required under the APA, and the Medicare statute explicitly authorizes retroactive rulemaking.

Comment: Some commenters stated the retroactivity provision was intended to prevent HHS from generally applying rules retroactively by “changing the rules” and then “punishing providers,” or “taking action against” them, and the provision specifically bars the agency from “reimposing” a rule on the Part C days issue on which the commenters assert HHS has lost three times in the Court of Appeals and once in the Supreme Court.

Response: We agree that Congress intends that HHS not generally apply a substantive change in regulations retroactively. Yet Congress did authorize retroactive rulemaking in specified circumstances. HHS's intent is not to punish providers in any way, nor do we believe this action punishes them. This action will affect final payment determinations for many providers with a new rulemaking that applies retroactively, but providers have been on notice of the Secretary's interpretation since no later than the publication of the FY 2005 IPPS final rule. While that rule eventually was vacated on notice-and-comment grounds in 2014, even then the D.C. Circuit prohibited the district court from directing the agency to calculate DSH fractions by excluding Part C days from the Medicare fraction. The Secretary has advanced the same interpretation of the statute consistently since the publication of the FY 2005 IPPS final rule. And that rule was consistent with both the agency's prior rulemaking on HMO days and its longstanding definition of “entitled” under the Medicare statute, promulgated in 1983, as meaning that “an individual meets all the requirements for Medicare benefits” (42 CFR 400.202). Providers, therefore, cannot be said to have relied on a contrary interpretation at a minimum since FY 2005. Moreover, the D.C. Circuit has never taken issue with the Secretary's interpretation, even when it invalidated the FY 2005 IPPS final rule on procedural grounds. The Supreme Court also did not address the merits of the Secretary's interpretation when it held that the Secretary could not use Medicare fractions embodying that interpretation that were published in the absence of notice and comment rulemaking. (139 S. Ct. at 1816-17 (notice-and-comment rulemaking is required to change or establish an “avowedly `gap'-filling policy.”).) After the Supreme Court issued its Allina II decision, the United States District Court for the District of Columbia remanded cases presenting the Part C days issue to the agency, holding that the court had “no basis to direct the agency as to what the formula for the [DSH] recalculation should be” because “this was the aspect of the case left open by previous opinions.” In Re Allina II-Type DSH Adjustment Cases, Misc. No. 19-0190, Dkt. 74 (Jan. 19, 2021). Paying providers in accordance with the Secretary's interpretation after remedying the procedural problems identified by the D.C. Circuit and the Supreme Court is consistent with those court decisions and permitted by section 1871(e) of the Act under these circumstances. We do not agree that paying providers consistent with our interpretation of the statute punishes providers.

Comment: Some commenters stated the proposed retroactive rulemaking was foreclosed by Supreme Court precedent prohibiting giving retroactive effect to statutes burdening private rights.

Response: We disagree that hospitals have any private right to compensation in excess of what Congress has provided for according to the best interpretation of the DSH statute. Nor was it reasonable for providers to expect that the Secretary would change his long-standing consistent interpretation of the DSH statute in the absence of any binding court ruling rejecting that interpretation on the merits.

Comment: Some commenters stated that the Medicare statute authorizes the Secretary to “change” a policy retroactively, but not to “establish” one, and because the Secretary concedes he did not have a regulation in place that governed the treatment of Part C days, he cannot establish one retroactively, relying on Bowen v. Georgetown Hosp., 488 U.S. 204 (1988).

Response: Section 1871(e) of the Act authorizes the Secretary to retroactively effect a “substantive change in regulations, manual instructions, interpretive rules, statements of policy, or guidelines of general applicability” when the Secretary makes one or both of specified determinations. We believe this rulemaking effects a “substantive change” to the DSH regulations, which until now did not address how to treat Part C days in the DSH calculation for discharges prior to October 1, 2013. Bowen held that the Medicare statute's grant of authority to provide in regulation for “suitable retroactive corrective adjustments,” section 1861(v)(1)(A) of the Act, did not provide authority for the promulgation of retroactive cost limit rules and neither did the Secretary's general rulemaking authority. (488 U.S. at 209.) However, Bowen pre-dates Congress' grant of retroactive rulemaking authority at section 1871(e) of the Act that the Secretary relies upon in this action and so its interpretation of “suitable retroactive corrective adjustments” does not speak to the interpretation of the far broader “substantive change in regulations” language in section 1871(e).

Comment: Some commenters stated that the August 2020 proposed rule flouts the D.C. Circuit's decision in Northeast. In that case, a hospital challenged the Secretary's exclusion of Part C days from the numerator of the Medicaid fraction for FYs 1999 to 2002. The court of appeals held that the Secretary could not apply his interpretation retroactively to those years. Commenters noted that the August 2020 proposed rule did not mention Northeast or any of the agency's prior instructions to its contractors acquiescing in that decision and subsequent resolution of cases challenging application of the FY 2005 IPPS final rule to earlier periods. Some commenters stated that Northeast controls the treatment of Part C days for all years prior to the prospective FY 2014 IPPS final rule. Some commenters stated that, contrary to the holding of Northeast, the August 2020 proposed rule “attaches new legal consequences to hospitals' treatment of low-income patients during the relevant time period.”

Response: In Northeast, the D.C. Circuit observed “[i]t is well settled that an agency may not promulgate a retroactive rule absent express congressional authorization.” (657 F.3d at 13.) The Secretary had not invoked the retroactive rulemaking authority in Northeast, and neither party brought that authority to the court's attention. That circumstance likely explains the court's statement that it was “aware of no statute that authorizes the Secretary to promulgate retroactive rules for the DSH calculations.” (657 F.3d at 17.) Such a statute does exist, however, and the Secretary is invoking it here. The D.C. Circuit has held that the Medicare statute “unambiguously requires that Part C days be counted in one fraction or the other” ( Allina I, 746 F.3d at 1108), yet does not dictate which fraction ( Northeast, 657 F.3d at 13). And, to the extent the statute could still be said to “leave[ ] a `gap' for the agency to fill” ( Allina II, 139 S. Ct. at 1817) after the Supreme Court's clarifying decision in Empire, the Secretary cannot decide where to put the Part C days without first undertaking notice-and-comment rulemaking ( Id. ). In other words, because there is no rule governing the treatment of Part C days for discharges before October 1, 2013, if there is a statutory gap left to fill post- Empire, a rule that governs this period would be necessary even if the Secretary were to adopt the hospitals' preferred interpretation. In many cases, even a rule interpreting “entitled to benefits under part A” to exclude Part C days from the Medicare fraction (as most commenters would prefer) would itself attach new legal consequences to past discharges because the appeals were of DSH adjustments that were based on the (later-vacated) rule that embodied the Secretary's interpretation.

Comment: Several commenters inferred from CMS's promulgation of the FY 2014 IPPS final rule that CMS understood and impliedly conceded that it lacked authority to implement a retroactive rule.

Response: The prospective nature of the FY 2014 IPPS final rule did not reflect any understanding by CMS that it lacked authority to promulgate a retroactive rule. The FY 2014 IPPS final rule appeared in the Federal Register on August 19, 2013 (78 FR 50496), before the D.C. Circuit affirmed the vacatur of the FY 2005 IPPS final rule in Allina I in 2014. Furthermore, in Allina I, the D.C. Circuit reversed the district court's decision insofar as it prohibited the Secretary from applying his interpretation to the Allina I plaintiffs' FY 2007 DSH adjustments on remand. The Secretary interpreted this aspect of the D.C. Circuit's Allina I decision to mean that he could proceed to calculate DSH adjustments for cost years predating the prospective FY 2014 IPPS final rule by interpreting the DSH statute's treatment of Part C days in adjudications. The Administrator issued a 46-page decision after remand in that case, concluding anew that Part C days are to be included in the Medicare fraction. However, as discussed previously, the agency's attempt to resolve this issue through adjudication was rejected in Allina II, and so the Secretary must instead proceed by rulemaking, to the extent there is a statutory gap to fill.

Comment: Some commenters stated that the August 2020 proposed rule is unfair to DSH hospitals because they have challenged the treatment of Part C days for more than a decade and now CMS is, in their view, attempting to circumvent the results of that litigation and reduce payments they believe are rightfully due to the hospitals. Similarly, many commenters expressed the opinion that it is unfair to hospitals to attempt to remedy notice and comment problems so many years after the D.C. Circuit vacated the rule; some commenters expressed that hospitals have counted on receiving additional money in DSH adjustments that would result from excluding Part C days from the Medicare fraction.

Response: Hospitals have pursued procedural challenges to the FY 2005 IPPS final rule, however, that rule was not vacated on logical outgrowth grounds until 2014. This action implements the subsequent directive of the Supreme Court that the Secretary establish or change a substantive legal standard concerning the treatment of Part C days only by rulemaking, if there is still a statutory gap to fill, and thus we do not agree that it is unfair for HHS to propose and finalize such a rule. We do not agree that it was reasonable for hospitals to have counted on additional reimbursement as a result of the Allina litigation since neither the D.C. Circuit nor the Supreme Court addressed the merits of our interpretation of “entitled to benefits under part A”, and the Secretary has consistently articulated the same interpretation for nearly twenty years. Nor do we agree that the Secretary's interpretation reduces payments that are due to hospitals. The Secretary believes this final action embodies the correct interpretation of the Medicare statute and that the alternative interpretation, that beneficiaries enrolled in Part C are not entitled to benefits under Medicare Part A, would, in many cases, result in payments in excess of what Congress intended.

Comment: Some commenters who disagreed that retroactive rulemaking is required here stated that if CMS nonetheless concludes that retroactive rulemaking is required, it should propose to adopt its prior practice of excluding Part C days from the Medicare fraction. A commenter stated that adoption of the August 2020 proposed rule is impermissibly retroactive, but CMS could instead simply “codify” the agency's prior agency practice and such rule would not be retroactive because, unlike the proposed interpretation, the alternative interpretation would (purportedly) not attach new legal consequences to events completed before its enactment.

Response: In order to exclude Part C days from the Medicare fraction, the Secretary would have to construe “entitled to benefits under part A” in the Act as excluding Part C days, and construe “not entitled to benefits under part A” as including these days. The Secretary has never so interpreted the Act. As explained previously, we believe the correct interpretation of the statute is that beneficiaries enrolled in Part C remain entitled to Part A and that the commenters' proposed interpretation would require “entitled to benefits under part A” to mean something different in the DSH statute than it does in other parts of the Medicare statue. The Supreme Court in Empire has foreclosed the commenters' interpretation. Even setting aside that the general prior practice was to exclude Part C days from both the Medicare fraction and the numerator of the Medicaid fraction, we do not agree that a rule that codified such a practice would not also be retroactive. Section 1871(a)(2) of the Act contemplates that policies are “establishe[d] or change[d]” only by notice and comment rulemaking. As acknowledged by the D.C. Circuit in Northeast, no rule addressed the treatment of Part C days before the FY 2005 IPPS final rule, and, of course, that rule was then vacated.

Comment: Some commenters stated that other instances of retroactive rulemaking by CMS are distinguishable from this instance.

Response: The citation to other instances of retroactive rulemaking in the August 2020 proposed rule was intended to illustrate that retroactive rulemaking is not unprecedented, not because the same legal arguments justify each instance of retroactive rulemaking.

Comment: A commenter stated that CMS should finalize a policy of excluding Part C days from the Medicare fraction and including those days for individuals also eligible for Medicaid in the numerator of the Medicaid fraction and could lawfully do so because CMS gave the public an opportunity to comment on that proposal in the FY 2004 IPPS proposed rule.

Response: The Secretary believes the correct interpretation of the statute is that Part C enrollees remain entitled to benefits under Part A and for that reason will not finalize a policy of excluding such days from the Medicare fraction. Moreover, the Supreme Court's decision in Empire forecloses a policy of excluding Part C days from the Medicare fraction and including those days for individuals also eligible for Medicaid in the numerator of the Medicaid fraction. 16 In any event, there has been notice of and an opportunity to comment in advance on the interpretation adopted in this final action. Thus, even if the statute itself does not give rise to the substantive legal standard adopted here, thereby necessitating reliance on retroactive rulemaking authority, the public has now had an opportunity to comment on the proper interpretation of the statute, and we have considered all comments to the August 2020 proposed rule that were timely submitted as part of the development of this final action.

Comment: A commenter stated that because there was no valid regulation governing the treatment of Part C days between FY 2005 and FY 2014, there is a legitimate legal question of what policy governs their proper treatment, and this question should be determined by the courts in light of facts and circumstances that existed during those years. The commenter stated that CMS's proposed rule would usurp the authority of the courts.

Response: We agree that no valid regulation governs the treatment of Part C days between FY 2005 and FY 2014, and even before FY 2005. But CMS's interpretation of the proper treatment of Part C days has been consistent since FY 2005. The D.C. Circuit in Allina I held the lower court erred by directing the Secretary to include Part C days in the numerator of the Medicaid fraction, recognizing that it was an open question whether CMS could apply its interpretation retroactively through adjudication. And then the Supreme Court in Allina II concluded that the Secretary could only apply any gap-filling interpretation through rulemaking. Therefore, the courts have used their authority to judge the Secretary's acts, and there will be an opportunity for providers to exhaust administrative remedies and seek judicial review of the interpretation embodied in this final action, and so the role of the courts is preserved.

Comment: Some commenters stated that in 2012 (after the Northeast decision), Medicare contractors were instructed to include Part C days for dual-eligibles in the Medicaid fraction numerator for discharges on or after January 1, 1999, and before October 1, 2004. Along the same lines, some commenters noted that Medicare contractors have finalized some cost reports that were remanded under CMS Ruling 1498-R of appeals specific to the Baystate case (which concerned the SSI data used by CMS in calculating the Medicare fraction) with Part C days for dually eligible beneficiaries included in the Medicaid fraction numerator, while other cost reports that are the subject of appeals remanded under 1498-R will be finalized, pursuant to this final action, with Part C days included in the Medicare fraction instead. A commenter questioned what will happen for cost reports that have Part C days in the Medicaid fraction numerator but are still subject to remand or realignment where the Medicare fraction will be revised. And similarly, a commenter stated that there will be cost reports where Part C days for discharges before October 1, 2004, were already included in the Medicaid fraction but will now be finalized with these days included in the Medicare fraction. A commenter requested that the Secretary make a distinction between discharges occurring prior to October 1, 2004, and later discharges to avoid what the commenter sees as arbitrary treatment depending on when remands or resolutions are completed and to avoid counting Part C days in both fractions.

Response: We appreciate the commenters' concern with treating all hospitals fairly. We do not agree that it is arbitrary or capricious to treat hospitals' Part C days differently on the basis of the timing of their appeals vis-à-vis Supreme Court and lower court decisions. The instructions to contractors that issued after the Northeast decision cannot control over the holding of the Supreme Court in Allina II. It is also not unusual for cost reports to be finalized differently from one another with respect to a legal issue depending on the outcome of litigation raising that issue and the status of a hospital's appeal at the time of a final non-appealable decision. Providers will also be able to request to have their Medicare fraction realigned to be based on their individual cost reporting periods rather than the Federal fiscal year, in accordance with the normal rules. Providers who remain dissatisfied after receiving NPRs and revised NPRs that reflect the interpretation adopted in this final action retain appeals rights and can challenge the reasonableness of the Secretary's interpretation set forth in this final action.

Comment: A commenter sought clarification concerning whether this action applies to pre-2000 discharges of patients enrolled in managed care organizations, such as health maintenance organizations (HMOs), or only to patients enrolled in Part C plans (first known as Medicare + Choice and later as Medicare Advantage plans). The commenter stated that the action should not be applied to pre-2000 patient discharges for days attributable to patients enrolled in Medicare HMOs authorized under section 1876 of the Act. The commenter stated that the application of this action to pre-2000 days would be inconsistent with Baptist Medical Center v. Burwell, 2019 WL 978957 (D.D.C. Feb. 29, 2019).

Response: The treatment of patients entitled to benefits under Part A and enrolled in an HMO authorized under section 1876 of the Act is outside of the scope of this rulemaking, which applies to discharges of patients enrolled in Part C prior to FY 2014. We note, however, that section 1876 of the Act repeatedly refers to beneficiaries who are “entitled to benefits under part A,” and as stated throughout this final action preamble, the statute unambiguously requires the inclusion in the Medicare fraction of patients entitled to benefits under Part A.

Comment: Some commenters stated that the August 2020 proposed rule would renege on the statements included in reopening notices issued between 2013 and 2015 that the CMS would adjust DSH calculations in the event of an unfavorable final, non-appealable decision in Allina I.

Response: Between 2013 and 2015 the Secretary did not yet know that neither Allina I nor Allina Health Services v. Burwell, 201 F. Supp. 3d 94 (D.D.C. 2016) (the district court case that became Allina II ) would not lead to a final, non-appealable decision on the merits of his interpretation of “entitled to benefits under part A” to include Part C days. In 2016, the district court upheld the Secretary's interpretation in Allina Health Services v. Burwell but neither the D.C. Circuit nor the Supreme Court reached the merits of that interpretation.

Once this final action is effective, the Secretary will commence issuing NPRs and revised NPRs pursuant to the action, including for those NPRs previously held open.

Comment: Some commenters stated that the action, if it finalizes the policy proposed, will deprive hospitals with pending appeals of the Part C days issue of their right to be heard in court. Some commenters characterized a final action that embodies the proposed interpretation as a “non-action” of the Secretary and questioned how hospitals will appeal the alleged “non-action” of the Secretary, if a hospital's DSH payments calculated under the new action do not change.

Response: Providers with pending appeals subject to this action challenge DSH payments that were based on Medicare fractions that were issued in the absence of a valid rule addressing the Part C days issue (or, providers brought appeals to the Provider Reimbursement Review Board based on untimely NPRs and challenge Medicare fractions issued in the absence of a valid rule). The Secretary has already acquiesced in the Supreme Court's Allina II holding that if the statute itself does not dictate the substantive legal standard, then such fractions could not be lawfully issued without rulemaking. Providers who have pending appeals reflecting fractions calculated in the absence of a valid rule will receive NPRs or revised NPRs reflecting DSH fractions calculated pursuant to this new final action and will have appeal rights with respect to the treatment of Part C days in the calculation of the DSH fractions contained in the NPRs or revised NPRs. Providers whose appeals of the Part C days issue have been remanded to the Secretary will likewise receive NPRs or revised NPRs reflecting fractions calculated pursuant to this new final action, with attendant appeal rights. Because NPRs and revised NPRs will reflect the application of a new DSH Part C days rule, CMS will have taken action under the new action, and the new or revised NPRs will provide hospitals with a vehicle to appeal the new final action even if the Medicare fraction or DSH payment does not change numerically.

Comment: Some commenters stated that the August 2020 proposed rule is unfair because it did not mention CMS Ruling 1739-R (hereinafter referred to as “the Ruling”), that the Ruling demonstrates that the outcome of the rulemaking was pre-ordained, and that the Ruling would deprive providers of appeal rights. Some commenters recommended that the final action state that the hospitals may “reinstate” any appeals remanded under the Ruling within a year after the issuance of the final action. Some commenters stated that it is unfair that the Ruling permits CMS to “reopen” properly appealed cost reports to apply this final action, but does not permit providers to cite this action as a basis for reopening closed cost reports.

Response: The Ruling is outside the scope of this action, but we will respond to the concern about appeal rights. The commenters misperceive the purpose and intended effect of the Ruling. The Ruling was not intended to cut off appeal rights and will not operate to do so. It was intended to promote judicial economy by announcing HHS's response to the Supreme Court's decision in Allina II. After the Supreme Court made clear that CMS could not resolve the avowedly gap-filling issue of whether Part C enrollees are or are not “entitled to benefits under part A” for years before FY 2014 without rulemaking, HHS issued the Ruling so that providers would not need to continue litigating over DPP fractions that were issued in the absence of a valid rule. In other words, the point of the Ruling was to avoid wasting judicial, provider, and agency resources on cases in which the Secretary agreed that, after the Supreme Court's decision in Allina II, he could not defend such appeals of fractions issued in the absence of a valid regulation.

Because rulemaking would be necessary to the extent there remains a statutory gap to fill after Empire, and irrespective of what interpretation CMS were to adopt, the Ruling does not demonstrate that the outcome of any rulemaking was foreordained. CMS's intention was (and is) to issue new and revised NPRs consistent with this final action, in order to implement the statute and respond to the Supreme Court's decision in Allina II. When the Secretary's treatment of Part C days in this final action is reflected in NPRs and revised NPRs, providers, including providers whose appeals were remanded under the Ruling, will be able to challenge the agency's interpretation by appealing those NPRs and revised NPRs. While some providers have already received reopening notices and had their NPRs held open for resolution of the Part C days issue, the issuance of new NPRs and revised NPRs pursuant to remands under the Ruling are not reopenings.

Comment: Some commenters stated that in his petition for certiorari in Allina II, the Secretary said that a loss would result in significant costs, so the Secretary presumed he would have to pay these sums to providers if he lost that case.

Response: The Secretary's petition stated that “the particular issue in this case concerning the proper interpretation of the Medicare-fraction statute alone implicates between $3 and $4 billion in reimbursement for FY2005 through FY2013.” The Secretary's acknowledgement that the underlying merits issue implicated significant costs to the Medicare program neither stated nor implied that an adverse Supreme Court decision that did not touch on the merits of his interpretation would lead him to pay providers according to their preferred interpretation.

Comment: A commenter speculated that some hospitals may have made financial decisions, such as taking out debt through notes or bonds, or taking on construction projects, on the basis of their expectation that, after the Supreme Court's decision in Allina II, additional DSH funds would be forthcoming. This same commenter noted that the Secretary's November 15, 2019 motion to voluntarily remand the consolidated cases presenting the Allina issue in In Re Allina II-Type DSH Adjustment Cases, Misc. No. 19-0190 (D.D.C.), stated that voluntary remand would give the providers that had appeals pending before the district court the “functional equivalent of a victory on the merits without any need to litigate the matter”; this commenter interpreted this statement to mean that CMS was intending to pay additional DSH funds after recalculating Medicare fractions to exclude Part C days.

Response: No hospital commented that it had made financial decisions in reliance on the expectation of additional payment after the Supreme Court's decision, based on the expected exclusion of Part C days from the Medicare fraction for years with open appeals. Nor would such reliance have been reasonable, as the reasonableness of the Secretary's interpretation was not the issue before the Supreme Court in Allina II, nor did it opine on this issue.

The Secretary's statement in district court that a remand was the functional equivalent of a victory for plaintiff hospitals did not imply that the Secretary intended to pay plaintiffs according to their preferred interpretation of the DSH statute. The Secretary's November 15, 2019 motion to voluntarily remand the consolidated cases that presented the Allina issue stated accurately that a remand would give the plaintiff hospitals all they could achieve in a victory in their challenge to the procedural defects of the Secretary's calculation of Medicare fractions in the absence of a validly promulgated rule: namely, a remand for further proceedings consistent with the Supreme Court's decision. In other words, there was no need to litigate the issue of whether notice-and-comment rulemaking was necessary for deciding the treatment of Part C days because the cases were all controlled by the Supreme Court's decision in Allina II. Moreover, the Secretary disclosed in his November 15, 2019 motion to dismiss that he was contemplating retroactive rulemaking. And, as noted, the Supreme Court had not addressed the reasonableness of the Secretary's interpretation of the DSH statute, and Allina II pre-dated Empire wherein the Court agreed with the Secretary's interpretation of what it means to be “entitled to benefits under part A” of the Act.

Comment: Some commenters, relying on the Ninth Circuit's Empire decision, stated that the Secretary's interpretation of “entitled to benefits under part A” impermissibly treats “entitled” and “eligible” as synonymous. According to these commenters, beneficiaries are “entitled” to Part A benefits only on covered days but are eligible for Medicaid on days for which Medicaid does not pay. Therefore, these commenters conclude, the Secretary errs in treating a day for which Medicare Part A does not pay as a day for which that patient is entitled to benefits under Part A.

Response: Whether exhausted benefit days and Medicare Secondary Pay days attributable to Medicare beneficiaries should be included in the Medicare fraction even though Medicare has not paid for them is beyond the scope of this action and has been resolved by the Supreme Court in Empire. As the Secretary explained in his briefing in that case, Congress's use in the Medicare and Medicaid fractions of “entitled” and “eligible” in referring to the Medicare and Medicaid programs, respectively, merely reflects Congress's usage of different terminology in the underlying Medicare and Medicaid statutes. ( Northeast, 657 F.3d at 12.) The Supreme Court agreed with this reading of the statute. ( Empire, 142 S. Ct. at 2363 n.3.) Moreover, as noted previously, CMS has always considered Part C days to be covered days.

Comment: Some commenters stated that CMS is mistaken that the Supreme Court's holding in Allina II requires notice-and-comment rulemaking to resolve fiscal years before the FY 2014 final rule became effective. They state that the Court held only that “the rule” before it was invalid because it did not go through notice-and-comment rulemaking. They further assert that because the D.C. Circuit in Allina I held that CMS could resolve the treatment of Part C days in the DSH fraction by adjudication, and CMS agreed with this in its briefing in Allina II, CMS could now proceed by adjudication, and retroactive rulemaking is therefore not required.

Response: We disagree that there was a rule at issue in Allina II. Rather, plaintiffs in that case challenged the publication of Medicare fractions on CMS's website, fractions that CMS had expected could be used in DSH calculations, then appealed and, under Allina I, resolved by adjudication. However, the Supreme Court in Allina II held that publishing of the Medicare fractions was “at least a `statement of policy' because it `le[t] the public know [the agency's] current . . . adjudicatory approach' to a critical question involved in calculating payments for thousands of hospitals nationwide.” (139 S. Ct. at 1810 (alterations in original).) The Court held that, because that policy established an avowedly gap-filling substantive legal standard, the Medicare statute required notice-and-comment rulemaking.

The Secretary does not see an adjudicatory approach to the treatment of Part C days that would be consistent with the Supreme Court's holding in Allina II (at least to the extent that a statutory gap remains after Empire ). Medicare fractions necessarily include or exclude Part C days. Whether Part C enrollees are “entitled to benefits under part A,” or are not so entitled, is a legal question that does not turn on facts unique to any particular hospital. Thus, to resolve this issue by adjudication, hospitals would appeal fractions that, just as in Allina II, would necessarily already reflect a policy establishing the substantive legal standard of which DPP fraction includes Part C days and would end in final agency decisions that reflect the same policy in each case.

Comment: Some commenters stated that their Medicare Administrative Contractors (MACs) are still issuing NPRs applying the vacated policy; thus, they opine, the Secretary is being disingenuous in claiming that retroactive rulemaking is necessary to calculate fractions. Similarly, some commenters stated that because CMS issued fractions before FY 2005 without a regulation governing the treatment of Part C days, CMS knows that it can calculate fractions in the absence of a rule.

Response: After the Supreme Court's decision in Allina II, in April 2020 the Secretary instructed MACs to stop issuing NPRs calculating DSH fractions until promulgation of a new final rulemaking. That some contractors issued NPRs before this instruction or contrary to the instruction does not demonstrate that the Secretary is being disingenuous. Where providers have challenged the treatment of Part C days in NPRs prior to this final action, the Secretary has sought to have these cases remanded for recalculation under the final action. While it is operationally possible to calculate DSH fractions in the absence of a new rulemaking, any such fractions must necessarily treat Part C enrollees as entitled to benefits under Part A or as not-so entitled. After the Supreme Court's ruling in Allina II, establishing or changing a policy concerning Part C days in the absence of rulemaking is impermissible, to the extent there is a gap to fill in the statute. Whether calculating DSH fractions is feasible as a practical matter and whether such calculations are legally permissible (either procedurally or as a matter of interpretation) are distinct questions.

Comment: Some commenters stated that CMS did not collect information about Part C days from non-teaching hospitals prior to October 1, 2006, and therefore cannot “enforce” the August 2020 proposed rule as written; some of these commenters refer to Transmittal 1311 issued July 29, 2007, which instructed providers to submit “no-pay” claims for Medicare Advantage days because Medicare Advantage plans would no longer be required to submit “encounter days” for inclusion in the Medicare Provider and Analysis Review (MedPAR) file. Some of these comments argue that because Transmittal 1311 was not itself promulgated by regulation it is invalid under the Supreme Court's decision in Allina II. Some commenters described various change requests relating to data for Part C days that CMS issued to hospitals over the years and speculated as to the significance of the timing of those requests. Some stated that, because CMS has different data for teaching hospitals than non-teaching hospitals it will necessarily apply different “methodologies” to these different types of hospitals (teaching hospitals and other hospitals), whereas the statute does not provide for different treatment. A commenter suggested that CMS should choose a method of treating Part C days for which the Part C data is available for all hospitals for all discharges before the FY 2014 IPPS final rule became effective on October 1, 2013; this commenter stated that this would mean excluding Part C days from the Medicare fraction and including them (for individuals also eligible for Medicaid) in the Medicaid fraction numerator. A commenter stated that it would be arbitrary and capricious and contrary to the public interest for CMS to apply the August 2020 proposed rule to all hospitals for all discharges prior to October 1, 2013, when it does not have necessary data to include Part C days for all hospitals, and some hospitals will lack the ability to supply this data.

Response: Transmittal 1311 is outside the scope of this action. At least some of these commenters appear to believe, mistakenly, that CMS will require hospitals to submit information about their Part C days for periods prior to October 1, 2006. This action concerns the Secretary's interpretation of “entitled to benefits under part A” as it relates to the treatment of Part C days. That interpretation is logically distinct from any operational issues with whether or not CMS is able to include all such days in the Medicare fraction for any given hospital. We do not agree that if Part C days are not included in a hospital's Medicare fraction because CMS and the hospital do not have the necessary data that this means that CMS is applying a different methodology to that hospital than it applies to a hospital for which it does have such data. Nor do we agree that the Secretary's interpretation of the statute should be determined by what data is readily available for all or most hospitals.

After considering the comments received, we are finalizing our proposal that a patient enrolled in an MA plan remains entitled to benefits under Medicare Part A and will be counted in the Medicare fraction of the DPP and not counted in the numerator of the Medicaid fraction.

This document does not impose information collection requirements, that is, reporting, recordkeeping, or third-party disclosure requirements. Consequently, there is no need for review by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

This final action is necessary to create a policy governing the treatment of days associated with beneficiaries enrolled in Medicare Part C for discharges occurring prior to October 1, 2013, for the purposes of determining additional Medicare payments to subsection (d) hospitals under section 1886(d)(5)(F) of the Act.

We have examined the impact of this action as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993) as amended by Executive Order 14094 (April 6, 2023), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (5 U.S.C. 603), section 1102(b) of the Act, section 202 of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Section 3(f) of Executive Order 12866, as amended recently by Executive Order 14094, defines a “significant regulatory action” as an action that is likely to result in a rule: (1) having an annual effect on the economy of $200 million or more in any 1 year, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, territorial, or tribal governments or communities; (2) creating a serious inconsistency or otherwise interfering with an action taken or planned by another agency; (3) materially altering the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raising legal or policy issues for which centralized review would meaningfully further the President's priorities or the principles set forth in Executive Order 12866.

The discussion accompanying our proposal along with this Regulatory Impact Analysis (RIA) demonstrate that this final action has been analyzed consistent with the regulatory philosophy and principles identified in Executive Orders 12866 and 13563, the RFA, and section 1102(b) of the Act. We note that Medicare DSH payments affect a substantial number of small rural hospitals, as well as other classes of hospitals, and the effect of Medicare DSH payments on some hospitals is significant.

An RIA must be prepared for major rules that are subject to Section 3(f)(1) of Executive Order 12866 (effect on economy of $200 million or more in any 1 year). This action is subject to Section 3(f)(1) of Executive Order 12866 and also meets the definition in 5 U.S.C. 804(2) (Congressional Review Act). Accordingly, we have prepared an RIA that to the best of our ability presents the costs and benefits of the action.

In the August 2020 proposed rule (85 FR 47726), we explained that DSH payments made under our proposed policy, which we are finalizing here, would not differ from hospitals' historical DSH payments. We also stated that Medicare DSH payments have already been made under the policy reflected in the proposal (prior to the previous rule which governed the treatment of these days having been vacated by the Court of Appeals, which was affirmed by the Supreme Court's decision). Therefore, the effect of the August 2020 proposed rule being finalized here would be to avoid the consequences of legal ambiguity created by the absence of any properly promulgated regulation that would otherwise continue into the future; the resulting costs, benefits, and transfer impacts are thus highly uncertain. In other words, given that there is currently no regulation governing the treatment of Part C days for the period before FY 2014, it is not clear what to compare an estimate of DSH payments under the policy we are finalizing in order to determine the effect of this policy on DSH payments during that time period.

In the August 2020 proposed rule (85 FR 47726 through 47727), we stated that there are multiple possible trajectories whereby agency actions could be made consistent with the Supreme Court's ruling requiring notice-and-comment rulemaking. The proposed (and now final) policy provides one such trajectory, and we stated that DSH payments made under the proposed policy would not differ from hospitals' historical DSH payments; as such, this comparison between DSH payments under our proposed policy and hospitals' historical DSH payments quantifies one point within the relevant uncertainty range of potential costs, benefits, and transfer impacts. In order to explore another possible trajectory (and thus to quantify an additional point within the relevant uncertainty range), we also discussed our consideration of an alternative approach that excluded days associated with patients enrolled in Medicare Part C from the calculation of the Medicare fraction and included them in the numerator of the Medicaid fraction (for those patients who are dually eligible). In addition, we explained that we were not proposing such a policy because we continue to believe, as we stated in the preamble to the FY 2014 IPPS final rule (78 FR 50614 and 50615) and have consistently expressed since the issuance of the FY 2005 IPPS final rule, that individuals enrolled in MA plans are “entitled to benefits under part A” as the phrase is used in the DSH provisions at section 1886(d)(5)(F)(vi) of the Act. However, in conjunction with the August 2020 proposed rule, we created a public use data file in order to facilitate public comment and analysis of our proposal and the alternative approach. This file was made available in the Downloads section of the Disproportionate Share Hospital web page on the CMS website: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh. The file contained an illustrative model at the hospital level of the potential effect on the DSH adjustment of excluding days associated with patients enrolled in Medicare Part C from the Medicare fraction and including them in the numerator of the Medicaid fraction (for those patients who are dually eligible).

Based on this illustrative model, in the August 2020 proposed rule we stated that under the alternative approach, most hospitals' Medicare DSH payments would increase relative to their historical Medicare DSH payments; however, some hospitals' Medicare DSH payments would decrease or not change. As discussed in the proposed rule (87 FR 47727), in aggregate, the modelled Medicare DSH payments under the alternative approach would increase by 6 percent relative to the historical Medicare DSH payments, which for the hospitals represented in the model meant approximately a net $0.6 billion annualized increase for their longest cost reporting period ending between January 1, 2013, and December 31, 2013. In that same proposed rule, we stated that these estimates were for illustrative purposes and involved modelling assumptions (for example, use of a proxy for the Medicaid days associated with patients enrolled in Medicare Part C, as described previously), which may differ from actual calculations that would be done during cost report review and settlement processes by contractors if such a policy were adopted. These expenditures (or, as regards payments already made for past years, the avoidance of potentially necessary reimbursements from providers to the Trust Fund) would be classified as transfers to Medicare providers. In addition, we sought comments on this illustrative model of the alternative approach and the assumptions used in this analysis. For additional details on the illustrative model, we refer readers to the August 2020 proposed rule (85 FR 47726 through 47727).

Comment: We received many comments about the financial impact of the August 2020 proposed rule and the modeling of the alternative approach. Many commenters stated that the August 2020 proposed rule did not attempt to address what the loss in DSH payments associated with the agency's retroactive proposal would mean to safety net hospitals. Several commenters estimated that for 2004 to 2013 there would be a multibillion dollar difference under the proposed policy compared to the alternative approach.

Many commenters stated that the alternative approach underestimated the impact on hospitals. Many of these commenters used their own data to argue that the estimated impact of the proposed rule was higher than the amount reflected under the alternative approach. Some commenters stated that CMS's calculations under the alternative approach using the illustrative model (that is, removing Part C days from the Medicare fraction and including in the Medicaid fraction days associated with patients enrolled in Medicare Part C who were also eligible for SSI as a proxy for counting Medicaid eligible days) are “suspect” due to issues with the CMS's data file, such as the exclusion of Medicaid patients. These commenters suggested that CMS should have validated data by requesting from providers the patient eligibility information.

Some commenters disagreed with the August 2020 proposed rule's description of the summary of costs and benefits described as “highly uncertain” because the commenters stated CMS has actual hospital data for October 1, 2005, through September 30, 2013, and they believe that data should have been used by CMS to calculate “more accurate” estimates, at least for discharges after September 30, 2005, instead of using a proxy as CMS did with its alternative model of using days associated with patients enrolled in Medicare Part C who were also eligible for SSI benefits as a proxy to count Medicaid days for FY 2013. Commenters stated that over the years CMS has been inconsistent in its estimates of the financial impact of including Part C days in the Medicare fraction and excluding them from the numerator of the Medicaid fraction. Some commenters stated that CMS ought to have sought patient details concerning Part C days from its contractors to account in its alternative calculations for Part C beneficiaries who are eligible for Medicaid but who do not receive SSI benefits. In addition, some commenters stated that CMS's modeling of the alternative approach failed to account for the impact on capital DSH payments, and another commenter indicated that the model did not include hospitals that do not currently qualify for DSH payments, but would qualify for DSH under the alternative approach.

Some commenters faulted CMS's proxy modeling assumption because it did not account for beneficiaries enrolled in Part C who receive SSI but who are not eligible for Medicaid. Specifically, commenters expressed that CMS's estimates exclude the very large number of Medicaid patients who are not receiving SSI benefits, thereby understating the effect of the issue on the Medicaid fraction. In addition, some commenters stated that it was unreasonable for CMS to use only 2013 data or any proxy at all, and that providers did not have the information about financial impact they needed to comment meaningfully.

Response: We thank the commenters for their input. Regarding the comments on the financial impact of the proposal, we stated in the August 2020 proposed rule that the DSH payments under the proposed policy will not differ from historical payments for years after FY 2005 for most hospitals because CMS has made payments under the same interpretation, an interpretation which has never been substantively struck down. Many commenters compared the difference in the estimated DSH payments between the proposal and alternative approach using the hospitals' own estimates. Commenters' ability to do so overwhelmingly shows that many commenters were able to meaningfully engage with the August 2020 proposed rule's policy proposal and alternative approach model.

There has been more than a decade of litigation over the treatment of Part C days in DSH calculations, and it is widely understood by DSH hospitals, and the Secretary has acknowledged, that the financial impact of the Secretary's interpretation of “entitled to benefits under part A” to include Part C days in the Medicare fraction as compared with excluding them, is significant. While hospitals may argue whether the Secretary has over- or under-stated that number in the proxy described in the August 2020 proposed rule's alternative approach, by the time the August 2020 proposed rule was published hospitals had years of experience of the financial impact of the Secretary's interpretation, as the Secretary has been applying his policy to DSH adjustments for years. 17

Regarding the commenters who stated CMS should have used alternative data sources and/or hospitals' patient level data and/or different assumptions for the illustrative model of the alternative approach, in the August 2020 proposed rule we stated that these estimates are for illustrative purposes and involve modelling assumptions (for example, use of a proxy for the Medicaid days associated with patients enrolled in Medicare Part C, as described previously) which may differ from actual calculations that would be done during cost report review and settlement processes by contractors if such a policy were adopted (85 FR 47727). In other words, the proxy assumption and alternative approach model were intended to approximate the potential impact of the proposed interpretation and facilitate comment, rather than to reflect actual payment calculations.

We note that, under the Administrative Procedure Act, a proposed rule is required to include either the terms or substance of the proposal or a description of the subjects and issues involved. We disagree with the commenters' assertion the August 2020 proposed rule did not provide an opportunity to meaningfully comment on the financial impact of the proposed policy. The August 2020 proposed rule did include a detailed discussion of our proposed policy and alternative approach to facilitate comments. Furthermore, as discussed, many commenters were able to meaningfully engage with the policy proposal and alternative approach, as evidenced by the analyses they provided in their comments, including comparisons of the difference in estimated DSH payments between the proposal and alternative approach using hospitals' own estimates. Accordingly, we believe interested parties were able to meaningfully comment on our proposed policy and the alternative approach.

In addition, the financial impact of the interpretation of “entitled to benefits under part A” is not legally relevant to the substance of CMS's interpretation of that statutory clause in relation to the treatment of Part C days in the DPP calculation. Whether that clause is best interpreted to include Part C days has never turned on the financial impact of that interpretation in comparison with the impact of treating Part C enrollees as not entitled to benefits under Part A. That many hospitals would enjoy higher DSH payments if CMS adopted the interpretation that Part C enrollees are not “entitled to benefits under part A” does not show that Congress would have agreed with that interpretation. 18 Information from CMS contractors about Part C enrollees dually eligible for Medicaid would not resolve the interpretive question of whether Part C enrollees are or are not “entitled to benefits under part A.”

Comment: A commenter stated that the August 2020 proposed rule would disproportionately affect rural hospitals because such hospitals are struggling more than urban hospitals due to the COVID-19 pandemic. The commenter considers the statement in the August 2020 proposed rule that there would not be additional costs or benefits for small rural hospitals to be arbitrary and capricious because, in the commenter's view, the DSH payments received by these hospitals were improperly calculated for these and other hospitals under a vacated rule.

Response: In the August 2020 proposed rule the Secretary acknowledged that Medicare DSH payments generally affect a substantial number of small rural hospitals, as well as other hospitals, and the effect of DSH payments on some hospitals is significant (85 FR 47726). (We note approximately 500 rural hospitals with less than 100 beds are eligible for Medicare DSH payments.) The August 2020 proposed rule stated that a regulatory impact analysis under section 1102(b) of the Act was nonetheless not necessary because the Secretary had determined that adoption of the August 2020 proposed rule would not impose “additional costs or benefits” for small rural hospitals “relative to Medicare DSH payments that have already been made” because the DSH payments for these hospitals (like others) have generally already been calculated according to the proposed interpretation. Nonetheless, we included a discussion with a regulatory impact analysis in the interest of public transparency.

We do not agree that the DSH payments already calculated for such hospitals reflect an unreasonable interpretation. In the August 2020 proposed rule, we proposed to adopt an interpretation of the statutory language “entitled to benefits under part A” in section 1886(d)(5)(F)(vi)(I) to include Part C enrollees. We do not agree that the financial impact of COVID-19 on hospitals generally or on rural hospitals specifically is relevant to the proper interpretation of that phrase as the statute long pre-dates the pandemic.

In the August 2020 proposed rule, we considered as an alternative to our proposal excluding days associated with patients enrolled in Medicare Part C from the calculation of the Medicare fraction and including them in the calculation of the Medicaid fraction for dually eligible beneficiaries. However, in the August 2020 proposed rule, we stated that we were not proposing such a policy because we continue to believe, as we stated in the preamble to the FY 2014 IPPS final rule (78 FR 50614 and 50615) and have consistently expressed since the issuance of the FY 2005 IPPS final rule, that individuals enrolled in MA plans are “entitled to benefits under part A” as the phrase is used in the DSH provisions at section 1886(d)(5)(F)(vi) of the Act.

In the August 2020 proposed rule, we sought comments on our proposed approach as well as on the alternative approach. After consideration of those comments, in this final action we are adopting the same policy of including MA patient days in the Medicare fraction that was prospectively adopted in the FY 2014 IPPS final rule and applying this policy retroactively to any cost reports that remain open for cost reporting periods starting before October 1, 2013. This final action also provides descriptions of the statutory provisions that are addressed, identifies the finalized policy, and presents rationales for our decisions and, where relevant, alternatives that were considered.

As required by OMB Circular A-4, in the following Table 1 we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this final action as they relate to hospitals receiving Medicare DSH payments. It is not clear what to compare an estimate of DSH payments under our final policy. Therefore, consistent with the proposed rule, this table provides our estimate of the change in Medicare DSH payments to hospitals as a result of the policy finalized in this action based on a range of potential expenditures. All expenditures are classified as transfers to Medicare providers.

The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. We estimate that most hospitals and most other providers and suppliers are small entities as that term is used in the RFA. The great majority of hospitals and most other health care providers and suppliers are small entities, either because they are nonprofit organizations or because they meet the Small Business Administration (SBA) definition of a small business (having revenues of less than $8.0 million to $41.5 million in any 1 year). (For details on the latest standards for health care providers, we refer readers to page 38 of the Table of Small Business Size Standards for NAIC 622 found on the SBA website at https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.)

For purposes of the RFA, all hospitals and other providers and suppliers are considered to be small entities. We are not preparing an analysis for the RFA because we have determined, and the Secretary certifies, that with the adoption of this policy there will not be any additional costs or benefits relative to Medicare DSH payments that have already been made. Therefore, this final action will not have a significant economic impact on a substantial number of small entities.

In addition, section 1102(b) of the Act requires us to prepare an RIA if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that with the adoption of this policy there will not be any additional costs or benefits for small rural hospitals relative to Medicare DSH payments that have already been made to these hospitals. Therefore, this final action would not have a significant impact on the operations of a substantial number of small rural hospitals.

Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2022, that threshold is approximately $165 million. This final action will have no unfunded mandate effect on state, local, or tribal governments or on the private sector.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has Federalism implications. Since this action does not impose any costs on state or local governments, the requirements of Executive Order 13132 are not applicable.

In accordance with the provisions of Executive Order 12866, this final action was reviewed by the Office of Management and Budget.

Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & Medicaid Services, approved this document on May 23, 2023.

This final rule amends the DFARS to make needed editorial changes as follows:

• At 48 CFR part 209, updated the debarring and suspending official for the Defense Health Agency and reformatted the list at DFARS 209.403.

• At 48 CFR part 217, corrected a typographical error in the heading at subpart 217.1.

• At DFARS 224.103(b)(2), updated cross-references. Federal Acquisition Regulation 24.103(b)(2) requires agencies to make available regulations implementing the Privacy Act of 1974.

Therefore, 48 CFR parts 209, 217, and 224 are amended as follows:

I. Background

DoD published an interim rule in the Federal Register at 87 FR 76980 on December 16, 2022, to implement section 848 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) FY 2022 (Pub. L. 117-81). This interim rule implements section 855 of the NDAA for FY 2023 (Pub. L. 117-263), which repeals section 848 of the NDAA for FY 2022, including the requirement for a certification from offerors for contracts with DoD stating the offeror has made a good faith effort to determine that forced labor from Xinjiang Uyghur Autonomous Region of the People's Republic of China (XUAR) was not or will not be used in the performance of a contract.

Section 855 adds 10 U.S.C. 4661, which prohibits the use of DoD funds for any fiscal year to be obligated or expended to knowingly procure any products mined, produced, or manufactured wholly or in part by forced labor from XUAR. Section 855 also requires offerors or awardees of a DoD contract to make a good faith effort to determine that forced labor from XUAR will not be used in the performance of a DoD contract. This interim rule requires offerors to represent, by submission of an offer, that they have made, and requires contractors to make, a good faith effort to determine that forced labor from XUAR will not be used in the performance of a DoD contract. The term “forced labor” is revised and is defined, along with “XUAR” at 10 U.S.C. 2496 (see section 651 of the NDAA for FY 2023). The definition of “person” is removed in its entirety.

Two respondents submitted public comments in response to the interim rule published at 87 FR 76980 on December 16, 2022. DoD reviewed the public comments in the development of this interim rule. A discussion of those comments and the changes made to the rule as a result of those comments is provided as follows:

DoD made the following changes in this interim rule:

1. At DFARS 225.7022-1, revised the reference to implementation of section 855 of the NDAA for FY 2023 and 10 U.S.C. 4661 with conforming revisions throughout.

2. For consistency with the requirements of section 855 of the NDAA for FY 2023, at DFARS 225.7022-2 the definition of “forced labor” was revised to align with 10 U.S.C. 2496, with conforming changes throughout. The term “XUAR” is also defined at 10 U.S.C. 2496, and the cross-reference is added to the definition. References to the definition of “person” are removed for consistency with the repeal of section 848 of the NDAA for FY 2022 and the revised statutory requirement in section 855 of the NDAA for FY 2023.

3. The certification requirement for offerors is replaced with a representation.

Comment: A respondent strongly supported the interim rule. The respondent noted that this prohibition on the purchase of products from the Xinjiang Uyghur Autonomous Region is an important step in preserving the United States as the leader of the free world and protects our national security.

Response: DoD acknowledges the support for the rule.

Comment: A respondent commented the scope and applicability of the rule should be clarified. The respondent questioned the applicability to products, or if the use of tools that could have been made of parts made with forced labor from XUAR, are to also be covered by the prohibition.

Response: The rule implements section 855 of the NDAA for FY 2023. Product, as defined at Federal Acquisition Regulation (FAR) 2.101, Definitions, has the same meaning as “supplies”. The FAR definition of “supplies” means all property except land or interest in land. It includes (but is not limited to) public works, buildings, and facilities; ships, floating equipment, and vessels of every character, type, and description, together with parts and accessories; aircraft and aircraft parts, accessories, and equipment; machine tools; and the alteration or installation of any of the foregoing. In accordance with the FAR definition of “product” the scope of the prohibition will include any products mined, produced, or manufactured wholly or in part by forced labor from XUAR or from any entity that has used labor from within or transferred from XUAR made with forced labor.

This DFARS rule implements section 855 of the NDAA for FY 2023. Section 855 prohibits the use of DoD funds for any fiscal year to knowingly procure any products mined, produced, or manufactured wholly or in part by forced labor from XUAR and requires offerors or awardees of DoD contracts to make a good faith effort to determine that forced labor from XUAR will not be used in the performance of a DoD contract.

This rule amends the solicitation provision at DFARS 252.225-7059, Prohibition on Certain Procurements from the Xinjiang Uyghur Autonomous Region-Representation, and the contract clause at DFARS 252.225-7060, Prohibition on Certain Procurements from the Xinjiang Uyghur Autonomous Region. The clause at DFARS 252.225-7060 is prescribed for use in solicitations and contracts utilizing funds appropriated or otherwise made available for any fiscal year, including solicitations using FAR part 12 procedures for the acquisition of commercial services and commercial products including COTS items. DoD made the determination to apply the rule to contracts valued at or below the simplified acquisition threshold (SAT) and to the acquisition of commercial services and commercial products, including COTS items, as defined at FAR 2.101.

41 U.S.C. 1905 governs the applicability of laws to contracts or subcontracts in amounts not greater than the SAT. It is intended to limit the applicability of laws to such contracts or subcontracts. 41 U.S.C. 1905 provides that if a provision of law contains criminal or civil penalties, or if the Federal Acquisition Regulatory Council makes a written determination that it is not in the best interest of the Federal Government to exempt contracts or subcontracts at or below the SAT, the law will apply to them. The Principal Director, Defense Pricing and Contracting, is the appropriate authority to make comparable determinations for regulations to be published in the DFARS, which is part of the FAR system of regulations.

10 U.S.C. 3452 exempts contracts and subcontracts for the acquisition of commercial services and commercial products (including COTS items) from provisions of law enacted after October 13, 1994, that, as determined by the Under Secretary of Defense for Acquisition and Sustainment (USD(A&S)), set forth policies, procedures, requirements, or restrictions for the acquisition of property or services unless—

The provision of law—

—Provides for criminal or civil penalties;

—Requires that certain articles be bought from American sources pursuant to 10 U.S.C. 4862 or that strategic materials critical to national security be bought from American sources pursuant to 10 U.S.C. 4863; or

—Specifically refers to 10 U.S.C. 3452 and states that it shall apply to contracts and subcontracts for the acquisition of commercial services and commercial products (including COTS items); or USD(A&S) determines in writing that it would not be in the best interest of the Government to exempt contracts or subcontracts for the acquisition of commercial products and services from the applicability of the provision. This authority has been delegated to the Principal Director, Defense Pricing and Contracting.

Section 855 is silent on applicability to contracts and subcontracts in amounts at or below the SAT or for the acquisition of commercial products and commercial services. Also, the statute does not provide for civil or criminal penalties. Therefore, it does not apply to the acquisition of contracts or subcontracts in amounts not greater than the SAT or the acquisition of commercial services and commercial products (including COTS items), unless the Principal Director, Defense Pricing and Contracting, makes a written determination as provided for in 41 U.S.C. 1905 and 10 U.S.C. 3452.

The solicitation provision and contract clause provided are necessary to implement the statutory restrictions and to protect the contracting officer from violating the prohibition on the use of funds to knowingly procure any products mined, produced, or manufactured wholly or in part by forced labor from XUAR or from an entity that has used labor from within or transferred from XUAR as part of a forced labor program.

If the solicitation provision and contract clause are not included in solicitations and contracts valued at or below the SAT and for the acquisition of commercial services and commercial products (including COTS items), it becomes more likely that a contracting officer could procure a prohibited product, thereby undermining the overarching public policy purpose of the law. Subjecting FAR part 13 simplified acquisitions to section 855 will not impact simplified acquisitions conducted through the use of the Governmentwide commercial purchase card or the SF 44, as these acquisitions are excepted from section 855.

An exception for contracts for the acquisition of commercial services and commercial products, including COTS items, would exclude some high dollar value contracts, thereby undermining the overarching public policy purpose of the law. However, the prohibition in section 855 covers only “knowingly” procuring covered items. It would be unreasonable to expect the parties to a procurement through the use of the Governmentwide commercial purchase card or the SF 44 to know whether the commercial products or commercial services being procured are mined, produced, or manufactured wholly or in part by forced labor from XUAR or from an entity that has used labor from within or transferred from XUAR as part of a forced labor program.

Based on the findings above, it would not be in the best interest of the United States to exempt acquisitions not greater than the SAT (except for purchases made regardless of dollar value through the use of the Governmentwide commercial purchase card or the SF 44) and acquisitions of commercial services or commercial products, including COTS items, from the applicability of section 855 of the NDAA for FY 2023.

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993.

As required by the Congressional Review Act (5 U.S.C. 801-808) before an interim or final rule takes effect, DoD will submit a copy of the interim or final rule with the form, Submission of Federal Rules under the Congressional Review Act, to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States. A major rule under the Congressional Review Act cannot take effect until 60 days after it is published in the Federal Register . The Office of Information and Regulatory Affairs has determined that this rule is not a major rule as defined by 5 U.S.C. 804.

DoD does not expect this interim rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule replaces a burdensome certification requirement with a representation requirement. However, an initial regulatory flexibility analysis has been performed and is summarized as follows:

DoD is amending the DFARS to implement section 855 of the National Defense Authorization act (NDAA) for Fiscal Year (FY) 2023 (Pub. L. 117-263). Section 855 prohibits the use of DoD funds for any fiscal year to knowingly procure any products mined, produced, or manufactured wholly or in part by forced labor from the Xinjiang Uyghur Autonomous Region of the People's Republic of China (XUAR). Section 855 requires offerors or awardees of a DoD contract to make a good faith effort to determine that forced labor from XUAR will not be used in the performance of a DoD contract. In addition, section 855 repeals section 848 of the NDAA for FY 2022 (Pub. L. 117-81), which required a certification from offerors that they had made a good faith effort to determine that forced labor from XUAR was not or will not be used in the performance of a DoD contract.

The objective of the rule is to implement the prohibition and the requirement for offerors or contractors to make a good faith effort to determine that forced labor from XUAR will not be used in the performance of a DoD contract. The rule revises the solicitation provision at DFARS 252.225-7059, Prohibition on Certain Procurements from the Xinjiang Uyghur Autonomous Region—Representation, to remove the certification requirement and include a representation requirement. The legal basis for this rule is section 855 of the NDAA for FY 2023.

DoD reviewed data obtained from the Federal Procurement Data System for FY 2020, 2021, and 2022 for DoD purchases of supplies or end products valued above the micro-purchase threshold, including commercial products and commercially available off-the-shelf items. DoD made an average of 374,735 awards to 16,122 unique entities, of which 154,515 awards were made to 12,187 unique small entities. In addition to the small entities that received awards, DoD estimates there were approximately 621,718 unsuccessful offerors. Note that the unsuccessful offerors are not unique entities; in other words, a single entity may have been counted more than once as an unsuccessful offeror. The rule will apply to successful offerors that receive awards and unsuccessful offerors.

The solicitation provision at DFARS 252.225-7059, Prohibition on Certain Procurements from the Xinjiang Uyghur Autonomous Region—Representation, requires offerors to represent, by submission of an offer, that the offeror has made a good faith effort to determine that forced labor from XUAR will not be used in the performance of a contract resulting from a solicitation containing the provision. Small entities that sell products to DoD will be subject to this requirement when they submit offers for DoD contracts. The rule does not require any other reporting or recordkeeping.

The rule does not duplicate, overlap, or conflict with any other Federal rules.

The section 855 prohibition will not apply to purchases under the micro-purchase threshold made using the Governmentwide commercial purchase card or to purchases using the SF 44, Purchase Order-Invoice-Voucher (see DFARS 213.306). DoD was unable to identify any other alternatives that would reduce burden on small businesses and still meet the objectives of the statute. Moreover, this interim rule removes the certification requirement that was required by section 848 of the NDAA for FY 2022, thereby removing the associated burden.

DoD invites comments from small business concerns and other interested parties on the expected impact of this rule on small entities.

DoD will also consider comments from small entities concerning the existing regulations in subparts affected by this rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C 610 (DFARS Case 2023-D015), in correspondence.

This rule does not contain any information collection requirements that require the approval of the Office of Management and Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. chapter 35). OMB, under the prior interim rule for DFARS Case 2022-D008 that is superseded by this interim rule, assigned OMB Control Number 0750-0007, Prohibition on Certain Procurements from the Xinjiang Uyghur Autonomous Region—Certification; DFARS Provision 252.225-70UU. Upon publication of this interim rule and removal of the certification reporting requirement, OMB Control Number 0750-0007 will be canceled, as it is no longer required.

A determination has been made under the authority of the Secretary of Defense that urgent and compelling reasons exist to promulgate this interim rule effective immediately without prior opportunity for public comment (41 U.S.C. 1707(d)). This action is necessary to implement section 855 of the National Defense Authorization Act for Fiscal Year 2023 (Pub. L. 117-263; 10 U.S.C. 4661). Section 855 repeals section 848 of the NDAA for FY 2022 (Pub. L. 117-81), including the requirement to obtain a certification from offerors for contracts with DoD stating the offeror has made a good faith effort to determine that forced labor from XUAR was not or will not be used in the performance of a contract. Section 855 prohibits the use of funds to knowingly procure any products mined, produced, or manufactured wholly or in part by forced labor from XUAR or from any entity that has used forced labor from within or transferred from XUAR as part of any forced labor program, thereby extending the prohibition initiated under section 848 of the NDAA for FY 2022. The section 855 prohibition requires the offeror to make a good faith effort to determine that forced labor from XUAR was not or will not be used in the performance of a contract.

This interim rule must be effective immediately, in the interest of avoiding further genocide in XUAR (see the Joint Explanatory Statement To Accompany the National Defense Authorization Act for Fiscal Year 2022), to mitigate the risks associated with procuring products produced or manufactured using forced labor from XUAR, and to ensure contracting officers comply with the new statutory requirements in section 855. Public Law 117-263 containing section 855 was enacted on December 23, 2022, and section 855 is effective not later than 180 days after the date of the enactment, or June 21, 2023.

Therefore, 48 CFR parts 212, 225, and 252 are amended as follows:

I. Background

Section 852 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2020 (Pub. L. 116-92) modifies 10 U.S.C. 2411(3) (redesignated 10 U.S.C. 4951) to transfer authority of the procurement technical assistance cooperative agreement (PTAC) program from the Director of the Defense Logistics Agency to the Under Secretary of Defense for Acquisition and Sustainment. This final rule revises a solicitation provision and a contract clause to reflect this statutory change, change the name of the of the entities providing assistance from PTACs to APEX Accelerators, update statutory references, and update the applicable website.

The statute that applies to the publication of the Federal Acquisition Regulation (FAR) is 41 U.S.C. 1707, Publication of Proposed Regulations. Subsection (a)(1) of the statute requires that a procurement policy, regulation, procedure, or form (including an amendment or modification thereof) must be published for public comment if it relates to the expenditure of appropriated funds, and has either a significant effect beyond the internal operating procedures of the agency issuing the policy, regulation, procedure, or form, or has a significant cost or administrative impact on contractors or offerors. This final rule is not required to be published for public comment, because this rule merely reflects the transfer of responsibility for the PTAC program from the Director of the Defense Logistics Agency to the Under Secretary of Defense for Acquisition and Sustainment, changes the name of the of the entities providing assistance from PTACs to APEX Accelerators, and updates the applicable website. This final rule does not have a significant effect beyond the internal operating procedures of the Government and does not have a significant cost or administrative impact on contractors or offerors.

This rule does not create any new solicitation provisions or contract clauses. This rule merely updates information provided in the contract clause at DFARS 252.205-7000, Provision of Information to Cooperative Agreement Holders, and the solicitation provision at DFARS 252.219-7000, Advancing Small Business Growth. The rule does not impact the applicability of this clause or provision.

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993.

As required by the Congressional Review Act (5 U.S.C. 801-808) before an interim or final rule takes effect, DoD will submit a copy of the interim or final rule with the form, Submission of Federal Rules under the Congressional Review Act, to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States. A major rule under the Congressional Review Act cannot take effect until 60 days after it is published in the Federal Register . The Office of Information and Regulatory Affairs has determined that this rule is not a major rule as defined by 5 U.S.C. 804.

The Regulatory Flexibility Act does not apply to this rule because this final rule does not constitute a significant DFARS revision within the meaning of FAR 1.501-1, and 41 U.S.C. 1707 does not require publication for public comment.

The Paperwork Reduction Act (44 U.S.C. chapter 35) applies to this rule. However, these changes to the DFARS do not impose additional information collection requirements to the paperwork burden previously approved by the Office of Management and Budget (OMB) under OMB Control Number 0704-0286, Defense Federal Acquisition Regulation Supplement (DFARS), Part 205, Publicizing Contract Actions, and DFARS 252-205-7000, Provision of Information to Cooperative Agreement Holders.

Therefore, 48 CFR part 252 is amended as follows: