[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]




 
                HEARING ON THE NATIONAL OMBUDSMAN'S 2000
                 REPORT TO CONGRESS AND THE REGULATORY
                            FAIRNESS PROGRAM

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON REGULATORY REFORM
                        AND PAPERWORK REDUCTION

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                     WASHINGTON, DC, JUNE 15, 2000

                               __________

                           Serial No. 106-65

                               __________

         Printed for the use of the Committee on Small Business




                      U.S. GOVERNMENT PRINTING OFFICE
67-562                        WASHINGTON : 2000



                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
DONALD A. MANZULLO, Illinois             California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROLYN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M. CHRISTIAN-CHRISTENSEN, 
DAVID M. McINTOSH, Indiana               Virgin Islands
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     MARK UDALL, Colorado
                                     SHELLEY BERKLEY, Nevada
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director
                                 ------                                

       SUBCOMMITTEE ON REGULATORY REFORM AND PAPERWORK REDUCTION

                  SUE W. KELLY, New York, Chairmwoman
LARRY COMBEST, Texas                 BILL PASCRELL, New Jersey
DAVID M. McINTOSH, Indiana           ROBERT A. BRADY, Pennsylvania
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
JOHN THUNE, South Dakota
               Meredith Matty, Professional Staff Member



                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 15, 2000....................................     1

                               WITNESSES

McDonald, Gail, Small Business and Agriculture Regulatory 
  Ombudsman......................................................     3
Maust, Ann Parker, President, Research Dimensions................    18
Coratolo, Giovanni, Director, The Small Business Council.........    21
Hexter, John, President, Hexter and Associates, Inc..............    23
Lara, Scott, Director, Governmental Affairs Home Care Association 
  of America.....................................................    26

                                APPENDIX

Opening statements:
    Kelly, Hon. Sue..............................................    34
    Pascrell, Hon. Bill..........................................    36
Prepared statements:
    McDonald, Gail...............................................    38
    Maust, Ann Parker............................................    46
    Coratolo, Giovanni...........................................    54
    Hexter, John.................................................    66
    Lara, Scott..................................................    74
Additional Information:
    SBA Executive Summary, National Ombudsman's 2000 Report to 
      Congress...................................................    94
    SBA, National Ombudsman's 2000 Report to Congress............   110
    NFIB News Release............................................   200
    [1&2] Start of Care Assessment form..........................   201


  THE NATIONAL OMBUDSMAN'S 2000 REPORT TO CONGRESS AND THE REGULATORY 
                            FAIRNESS PROGRAM

                              ----------                              


                        THURSDAY, JUNE 15, 2000

              House of Representatives,    
      Subcommittee on Regulatory Reform and
                               Paperwork Reduction,
                               Committee on Small Business,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:12 a.m., in 
room 2360, Rayburn House Office Building, Hon. Sue Kelly 
(chairman of the Subcommittee) presiding.
    Chairwoman Kelly. Good morning, ladies and gentlemen. 
Welcome to today's Subcommittee hearing on the Regulatory 
Fairness Program, and the Small Business Ombudsman Report 2000 
for Congress.
    For too long, small business owners have been subjected to 
overzealous enforcement by regulators who at times seem more 
interested in levying fines than ensuring compliance with the 
law. As a former small business owner, I know personally the 
frustration that exists among small business owners that, 
despite every effort to be in compliance, they are still 
treated unfairly by their government.
    The passage of the Small Business Regulatory Enforcement 
Act, SBREFA, four years ago restored some hope that this 
unfortunate reality might change. SBREFA established a Small 
Business and Agriculture Regulatory Enforcement Ombudsman at 
the Small Business Administration, and Regional Small Business 
Regulatory Fairness Boards in each of the SBA's 10 regions.
    The ombudsman is charged with gathering and recording 
comments from small businesses in order to form an evaluation 
of each agency's enforcement performance. The fairness boards, 
each composed of five small business owners, provide an 
opportunity for small businesses to come together on a regional 
basis to assess the enforcement activities of various Federal 
regulatory agencies. The ombudsman, using information provided 
by the fairness boards, is required to compile the comments of 
small businesses and provide an annual evaluation, similar to a 
customer satisfaction rating, for different agencies and 
regions and offices. The goal of the rating is to see whether 
or not agencies and their personnel are treating small 
businesses more like customers than as potential criminals and 
adversaries.
    Today we are going to hear from Gail McDonald, who is 
currently the Small Business Ombudsman. Since she is the new 
ombudsman this year, she issued a report evaluating a year that 
she was not the administrator of the program. Despite this 
fact, and because of the importance of the program for small 
businesses, I thought it was important to give Ms. McDonald an 
opportunity to represent and present this report formally to 
Congress, and to discuss her vision for the program.
    We also must deal with the reality that this program was 
without an appointed ombudsman for about seven months, so we 
need to examine the impact this had on the program and the 
small business owners it attempts to serve. Moreover, while I 
know Ms. McDonald is new to the program, there are portions of 
her report that deserve closer scrutiny and it is crucial that 
we discuss the report today. I also think that the program 
needs continued monitoring and oversight to ensure that it is 
meeting the goals of Congress when we enacted SBREFA.
    We will also hear testimony today from individuals from the 
small business community who are familiar with the Regulatory 
Fairness Program. They will discuss their views on how the 
program is working, as well as offer comments on how it might 
be improved in the future. Being treated fairly when regulatory 
enforcement takes place should be a fundamental right of every 
small business owner.
    SBREFA gave us the framework to help achieve this goal. 
Progress has been made in reaching it, but perhaps we have 
reached a crossroads with the program and it is time to examine 
very specific aspects of the report, including the criteria for 
evaluating the agency performance, and to explore better ways 
of communicating poor agency response to small business to 
Congress.
    More broadly, perhaps it is also the time to discuss the 
financial resources of the office, the program structure and 
its independence. It is the job of Congress, working with the 
small business community, to see that the program is meeting 
its worthwhile objectives.
    We have a number of excellent witnesses with us this 
morning. I am looking forward to their testimony. I thank all 
of you for being here, and now I am going to turn to Mr. 
Pascrell for his opening statement. And following that, since 
we have just been called for a vote, we will have a 10-minute 
recess for us to go and vote, and we will return. Thank you.
    Mr. Pascrell. Isn't it great to have a recess right after 
you start? [Laughter.]
    Thank you, Madam Chairlady. First I would like to begin by 
thanking you for your hard work in preparing these hearings in 
the Subcommittee. The issues that the chairlady has chosen are 
giving us beneficial opportunities for oversight of various 
Federal Government agencies and their interaction with small 
businesses. I know that the knowledge I have gained in these 
hearings has opened my eyes to some problems that remain in how 
these agencies deal with small businesses throughout the 
government.
    The need for reduced burdens on small business is our top 
challenge. We continue by looking at an interesting office 
today which is designed to help small businesses deal with the 
bureaucracy. All of us believe that there is too much 
bureaucracy.
    The office of the ombudsman is one that was an innovative 
idea back when it was proposed a few years ago, and is in a 
position that has much potential to serve small business 
interests nationwide. However, its work is showing the 
increased commitment toward having government and business work 
together to solve problems, as we steer away from a purely 
adversarial relationship.
    I welcome the opportunity to learn more about what the 
ombudsman does, and more importantly, what it can do in the 
future. I did read. I did do my homework.
    One area that is especially in need of greater effort on 
the part of the agencies is more equitable enforcement and 
compliance assistance. While the annual ombudsman report can 
play a critical role in identifying potential problems and 
proposing solutions, both the ombudsman and regulatory fairness 
boards are limited in their ability to effect real change 
because they lack any leverage with the agencies. If the 
ombudsman and the regulatory boards are to evolve into anything 
more than advocates for small business regulatory concerns with 
agencies, I think they should change.
    I want to thank Ms. McDonald for joining us today to 
explain her vision for where the Office of Ombudsman is going, 
and possibly explain what we can do in Congress to assist you 
in thatmission. I am interested to hear your thoughts on how 
more small businesses can make use of our office, and how we can make 
the agencies more receptive.
    I look forward to today's testimony. One of the questions I 
am going to ask is, you presented us with this report after 
only being there for three months. What would you change? And 
we will come back to talk about that. Thank you.
    Chairwoman Kelly. Thank you very much, Mr. Pascrell. We are 
going to adjourn now for 10 minutes. We will be back.
    [Recess.]
    Chairwoman Kelly. Thank you for waiting. Let's continue now 
with the testimony of Gail McDonald. As I said before, Ms. 
McDonald, we are very pleased to have you before the Committee 
and I really look forward to your testimony. Please proceed.

   STATEMENT OF GAIL McDONALD, NATIONAL OMBUDSMAN FOR SMALL 
BUSINESS AND AGRICULTURE REGULATORY ENFORCEMENT, SMALL BUSINESS 
   ADMINISTRATION, ACCOMPANIED BY HATEM H. EL-GABRI, SENIOR 
   COUNSEL; AND JOHN T. GREINER, DIRECTOR, REGULATORY REVIEW

    Ms. McDonald. Thank you. I am glad to be here, Chairwoman 
Kelly, and good morning, Congressman Pascrell. I appreciated 
your opening remarks. I know you both are very interested in 
this program, and indeed we have received assistance from you.
    I am Gail McDonald, the Small Business and Agriculture 
Regulatory Enforcement Ombudsman, or Ombudswoman, if you 
prefer. I was appointed by SBA Administrator Aida Alvarez this 
past February. Although my official capacity began in the midst 
of finalizing this report, my 10 years' experience both in the 
Federal Government and working with small business in the 
transportation sector, allows me to address the findings of the 
report. Certainly my years in my own family's businesses have 
helped me appreciate firsthand the regulatory concerns of small 
business.
    In my position I am ably assisted by 50 small business 
owners who make up the Regional Regulatory Fairness Boards, or 
we call them the RegFair Boards. I want to thank the members 
who were able to attend today, as well as those who could not. 
Each RegFair Board member has made a significant personal and 
professional sacrifice to serve, and has given us invaluable 
advice, program guidance, and outreach assistance. Together, we 
can offer this Subcommittee our plans and ideas for the future 
of the office.
    I would like to recognize Elise McCullough from Louisiana 
and Vinh Cam from Connecticut, who are here today, and then you 
will be hearing from two other of our members on the next 
panel.
    The year 2000 report to Congress, ``Building Small 
Business-Agency Partnerships,'' is a thorough review of the 
efforts of this program. I would like to submit the executive 
summary for the record. Today I would like to talk about what 
we have done in the context of what we are doing.
    The good news is, the tide is turning on a regulatory 
climate that has for too long plagued our country's small 
business owners. Step by step, our program and others are 
building bridges to change the way the Federal regulatory 
officials view small business compliance, and in some cases a 
change in the way small businesses view Federal regulations.
    The 2000 report demonstrates that these partnerships have 
improved agency enforcement practices by strengthening small 
business feedback, but we still have much work to do. Based on 
the recommendations of small business, we have prioritized four 
goals for next year:
    Encourage increased small business feedback; promote 
greater agency accountability; develop more small business-
agency communication; and foster creative partnerships between 
small business and Federal regulatory agencies.
    My appointment has brought about a change in the program. 
Administrator Alvarez recognized that one person should be 
dedicated to the position of National Ombudsman, and that 
person should be located at SBA headquarters so the program 
could be more visible within the administration.
    In the four months I have served, I have reached out to 
small business owners, listening to their concerns and 
compliments, assisting them in resolving important regulatory 
issues. Perhaps most importantly, I think the Office of the 
National Ombudsman helps close the loop on Federal agency 
accountability by allowing me to report directly to you, the 
Members of Congress.
    The tide is turning. Small businesses are beginning to see 
improvement in the regulatory enforcement and compliance 
environment. While few agencies achieve the highest ratings in 
our report, most are working to implement the annual 
recommendations to Congress and generally to improve their 
enforcement and compliance policies and practices. Those who 
aren't, certainly will hear from me.
    Federal agencies no longer feel that they are the only ones 
concerned with environmental protection or worker safety. 
Together, small businesses and Federal agencies are learning to 
appreciate each other's contributions toward addressing these 
issues and building a strong, healthy economy.
    Thank you again for inviting me today. I am looking forward 
to our joint efforts on behalf of this program.
    [Ms. McDonald's statement may be found in appendix]
    Chairwoman Kelly. Thank you very much, Ms. McDonald. We 
really appreciate having you here.
    I have a couple of questions that I wonder about. You know, 
we can assist you, and we would like to work with you, because 
I think the voice of the small businesses of this Nation truly 
needs an ombudsman to do outreach, to listen to what they have, 
to the complaints and problems that small businesses have with 
the agencies, and they really need to have your support. But 
from reading your full testimony and your report, it seems to 
me that there is a couple of things.
    In your opinion, do you think we ought to investigate 
further the agencies, for instance, that have received 
unsatisfactory ratings in the various categories. Do you think 
that you should be empowered to be able to do that kind of 
investigative research?
    Ms. McDonald. I am very disturbed that the three agencies 
don't participate, and I think, although they appointed someone 
that we can call when things come up, I do think that there 
ought to be some way to force them to comply with the law. When 
I was an agency head, I certainly felt like I should comply, 
and I think it is a great cause for concern.
    Chairwoman Kelly. Well, I know that many of the agencies 
that do comply, only partly comply. They marginally comply, and 
that I find disturbing also.
    Ms. McDonald. You know, I think in just going back and 
reading through the reports as they build forward, that you are 
seeing progress. I think it is so much about bringing about a 
cultural change with a lot of people in the agencies, that it 
takes a while, and I believe we have been seeing improvements 
year by year, not everywhere, but we certainly work at that.
    And I would say that the report to Congress is really a 
thing that the agencies spend a lot oftime talking to us about. 
It sort of pulls together what they are doing and how they are doing 
it, and focuses our discussions very tightly. And they compete to get 
in the ``best practices'' sections, and I think that section helps 
them, because a lot of times they are looking for new ideas.
    So I wish it were better, but it is just three and a half 
years old, and I think in that time there has been--you know, 
if you think of all the work Congress has done to change IRS 
and the sea change there, I mean the very organization of the 
whole agency has been changed, and when I work with the 
Taxpayer Advocate, I am just amazed at all the resources they 
have brought to bear on their small business issues, and that 
is an excellent thing. So I do see, you know, improvement 
around the government from say 1990, when I was in an agency 
where we just had one small effort going on.
    Chairwoman Kelly. I am interested. You say they actually 
could compete, would compete, are competing to be in ``best 
practices''?
    Ms. McDonald. Right.
    Chairwoman Kelly. Because if you look at what is at least 
my interpretation of your Table 3 on page 18 of your annual 
report, you know, I look at that ``timeliness of initial agency 
response,'' for instance, and you look at the enormous number--
IRS, USDA, DOT, DOL, FCC, FDA, HUD, INS, none of those did very 
well. They actually received lower ratings. Now, I am 
interested that you would feel that they are competing to be in 
``best practices'' when in fact it doesn't look that way to me 
from that table, if that table is accurate.
    So I think maybe the question here then resolves to, is 
that report--and I am not holding you responsible, please 
understand, I know you have been there just a short period of 
time--but is that report accurate and detailed enough to do the 
requirement for the RegFair hearings and the appraisal forms to 
provide this comprehensive picture that we in Congress are 
really asking for.
    Ms. McDonald. Sure. The Acting National Ombudsman last year 
was Hatem El-Gabri, who is still our senior counsel. He is 
here, and John Greiner, our program manager here, and they 
might speak to the criteria, because they fought that out on 
how you develop effective, objective criteria.
    Chairwoman Kelly. Well, I think that is fine. If they are 
here, if they would like to come and sit at the table and 
respond to that question, by all means, please come up and 
identify yourself, and let's get into a discussion here, 
because I think this is important for our small businesses.
    Mr. El-Gabri. Good morning.
    Chairwoman Kelly. Please pull the microphone close to you 
so we can all hear you, and identify yourself when you speak.
    Mr. El-Gabri. I am Hatem El-Gabri.
    Chairwoman Kelly. I am sorry. Please pull that microphone 
closer to you.
    Mr. El-Gabri. I am Hatem El-Gabri, senior counsel, and I 
was Acting National Ombudsman when Peter Barca left July 2nd, 
until Ms. McDonald was appointed.
    Chairwoman Kelly. I am still having real trouble hearing 
you. Is that microphone on?
    Mr. El-Gabri. Can you hear me now?
    Chairwoman Kelly. I think that is a little better. Okay, 
people in the room can also hear. Yes, please speak directly 
into the microphone. You may have to share.
    Mr. El-Gabri. I am Hatem El-Gabri----
    Chairwoman Kelly. Thank you.
    Mr. El-Gabri [continuing]. Senior counsel, and I was Acting 
National Ombudsman from July 2nd to the end of January, when 
Ms. McDonald was appointed.
    Chairwoman Kelly. From July----
    Mr. El-Gabri. Second.
    Chairwoman Kelly. Thank you. All right. You heard my 
question to Ms. McDonald about the agencies actually receiving, 
in the evaluation--if you have that report in front of you, 
turn to page 18.
    Mr. El-Gabri. Yes, I have it.
    Chairwoman Kelly. Okay. On Table 3, the agencies, like--and 
I read out the list, beginning with IRS, USDA, DOT, et cetera--
actually received lower ratings in the category of timeliness 
of the initial responses since the RegFair inception. And I 
want to know what you think, then, about whether or not, when 
Ms. McDonald testified that they are actually trying to compete 
to be better, whether this is a fair indication, and does this 
indicate that the report is in fact accurate?
    Mr. El-Gabri. I think the ``best practices'' section is 
separate than the question of timeliness. Timeliness addresses 
their response to specific small business comments and how long 
does it take for them to send a response to us. The best 
practices are simply structural changes within the agency that 
different agencies have undertaken.
    We thought it is important to have a ``best practices'' 
section for the sake of the agencies themselves, so one agency 
would know what other agencies are doing and have that dialogue 
going on, and to encourage them. The timeliness issue is 
something we have worked on, are consistently working on, and 
when agencies are late in submitting responses, we do have a 
dialogue with them, try to identify what the problem is and 
rectify it.
    So the fact that they are not timely does not mean they are 
not competing for best practices. As I said, it is viewed as a 
different matter than making structural changes within the 
agencies, and we have seen that with a number of agencies.
    Chairwoman Kelly. But are you saying that you have actually 
seen the agencies make structural changes as a result of your 
interest and the fact that they aren't timely and smiling?
    Mr. El-Gabri. Yes, ma'am. Yes, Congresswoman.
    Chairwoman Kelly. What other changes have you seen them 
make as a result of what your actions have been?
    Mr. El-Gabri. The individuals they have appointed to 
respond to the timeliness issues, we have seen that over and 
over. We have seen it with HCFA where we have, because of the 
timeliness issue, it was an issue where they have brought it to 
high profile. In the case of that agency, a direct dialogue was 
undertaken with the chief of staff to make sure that we get 
responses to these comments in a timely fashion, and responsive 
responses, not simply boilerplate type of languages. These are 
the type of structure changes we have seen as to the issue of 
timeliness, the kind of individual who the comments will be 
sent to, and the kind of responses we will get back from the 
agencies.
    Chairwoman Kelly. Mr. El-Gabri, do you think that this 
report is detailed enough to do the RegFair hearings and 
appraisal forms justice, in terms of providing us and Congress 
with a comprehensive picture of the agencies and what they are 
doing?
    Mr. El-Gabri. I believe it----
    Chairwoman Kelly. I am deliberately asking you because you 
have been working with the agencies and you obviously know. You 
recognize also I didn't include HCFA on that list.
    Mr. El-Gabri. I understand. The same format that was used 
with this report is basically the same format that was used in 
the previous two reports. We simply felt at that time that that 
wasresponsive as to what is going on.
    But as you are also aware, this is not the only thing that 
is available to Congress with what is going on. All the public 
hearings are on line and available to the Members of Congress. 
Members of Congress have been kind enough to attend these 
public hearings. So I don't think it is our position that any 
one document speaks as to what is going on with regard to the 
small business community.
    Chairwoman Kelly. Well, on the other hand, you are charged 
with the responsibility of reporting back, in this document, 
accurate, detailed information to give us a pretty clear 
understanding of what these agencies are doing vis-a-vis the 
small businesses. And my reason for questioning, for this line 
of questioning, is that I am wondering how seriously the 
agencies are taking this charge of yours.
    Mr. Greiner. Madam Chairlady, if I could----
    Chairwoman Kelly. Please identify yourself.
    Mr. Greiner. My name is John Greiner. I am, I guess, the 
Acting Program Manager and the Director of Regulatory Review. 
And I think if I could elaborate on a couple of points that 
Hatem El-Gabri made, on the timeliness alone, we get a lot of 
calls from agencies when they see our draft.
    And as the National Ombudsman stated earlier, that draft 
report that Congress and the President thought should go out to 
the agencies so they could comment on it is a great vehicle to 
attract their attention. When they see their initial ratings, 
for instance, on the recommendations, based on the previous 
responses they provided us, we get a lot of agencies that are 
very concerned about their ratings, so I think they are clearly 
interested in getting the highest ratings possible.
    On the timeliness issue in particular, a lot of agencies 
are working, even though I think you see the trend from '99 to 
2000 was not a positive trend in terms of timeliness, a lot of 
agencies are working to improve their timeliness. The manner in 
which the response will come, and in a lot of cases they pull, 
if the small business chooses to disclose its identity to the 
agency because they want a high-level review of their 
particular circumstances, they actually pull the enforcement 
records. They talk to the officials and the supervisors 
involved, and so there is a fairly in-depth process.
    We encourage agencies, when this in-depth process is being 
undertaken, to provide us at least an initial response within 
the 45-day time period, so that businesses know that they are 
working on it. And I think, I know for instance with EPA, with 
SEC, I recall specifically conversations with them, ``What can 
we do when we have a very complex situation, to improve this 
rating?'' And basically we tell them that it is important that 
you give us an update along the way; that we understand 
certainly in some cases these are on appeal, and so they won't 
actually be able to give us a final response for years.
    So there is an interest. I can't say it is a level interest 
throughout every agency. We thought the timeliness of the 
initial response was perhaps the best indicator, again because 
some of these appeals take years, and so to say the final 
response is the one evaluated is a little unfair, or maybe it 
is a less accurate judgment than at least that initial 
response.
    Another thing that we do in our office is, every 60 days we 
call these agencies if we don't have a response, and badger 
them basically. We tell them that we are going to continue to 
call them until they get us the response, and then we let the 
small businesses know that we are continuing to work on that.
    So we are doing what we can to remind them. I think this 
report does focus a lot of attention within the agency, and I 
think they are now learning that this timeliness rating is 
going to be a mainstay of one of the ratings we do, and that if 
they want to improve their ratings, they are going to have to 
improve, at least one of them is the timeliness.
    The other point, I think just real briefly, is the issue of 
the evaluations. In 2000 we added new evaluations, and I think 
that is the continuing trend. As we get more sophisticated and 
we develop more feedback from small businesses and through the 
board members, the feedback they are providing us, we are able 
to provide the Members of Congress with more information and 
better evaluations.
    Chairwoman Kelly. Thank you.
    Mr. El-Gabri. Madam Chairwoman.
    Chairwoman Kelly. Yes?
    Mr. El-Gabri. If I may point to page 15 of the report, 
these are questions we send to the agencies in addition to the 
comments that we receive from small businesses. The agencies 
are required to answer some of these questions.
    As you can tell, these are complex, elaborate questions, 
which might explain some of the timeliness issue. So the 
timeliness in the previous year I don't think is necessarily an 
accurate reflection of their effort in the year we evaluated, 
simply because of the type of questions we have been asking, 
simply for us to get a better sense of the small business 
climate within that agency.
    Chairwoman Kelly. The point, though, I think of all of this 
really is, we need, we in Congress really need good and useful 
information. This Committee is going to take action with 
agencies. We can do that, but we have to be confident before we 
draft letters and begin to have a dialogue with agencies, that 
we are getting accurate information from the agencies.
    And when Ms. McDonald testified, she said, well, they were 
competing in one area, but as I look at this chart on page 18, 
you see a number of agencies here who didn't bother to comment 
at all, and that raises the question in my mind that I 
presented. I wonder if all of these agencies actually have a 
liaison working with you, Ms. McDonald?
    Ms. McDonald. Yes, they all do have a liaison working with 
us. Sometimes we ask for someone else. Sometimes we will go 
through an issue with them, as we once did at the Department of 
Agriculture, and found that we needed someone at a higher level 
who was indeed independent of the regulatory area we were 
looking into. And we have also been encouraging the Department 
of Agriculture, where their different agencies have issues with 
us, to appoint someone like an FSIS, and they have done that 
recently. But they have a full list, and I can submit it for 
the record if you would like.
    Chairwoman Kelly. I would like that, please.
    Ms. McDonald. All right.
    Chairwoman Kelly. And I would like to know what agencies 
are not cooperating with you, because I think this Subcommittee 
has a duty to make sure that SBREFA is implemented fully, and 
to do that we have got to know who is cooperating with you and 
who isn't.
    Ms. McDonald. All right.
    Chairwoman Kelly. Because what you are doing needs to be 
supported, and you have asked, you have set as one of your 
goals that we would promote, that you would promote greater 
agency accountability. We in the small business community need 
that. We need to know, if you are going to be our ombudsman, 
that you are going to be there fighting for the small business 
people. And we need to know in Congress whether or not we need 
to tell the agencies that it is their duty, because of the 
mandates of SBREFA, it is their duty to cooperate and work with 
youso that you have the information you need in order to help 
small businesses when they have problems.
    Ms. McDonald. Well, I would appreciate that. That of course 
is very, very helpful. But I will put this in the record.
    Chairwoman Kelly. All right. Fine. And any further 
information you can give us about which agencies are and are 
not, especially the ``are not'' cooperating with you, we would 
like to have that as a part of the record.
    Ms. McDonald. Yes. All right.
    Chairwoman Kelly. I want to move on, because I just want to 
ask you if you think that we should appoint--every agency has a 
small and disadvantaged business utilization officer.
    Ms. McDonald. Yes.
    Chairwoman Kelly. Should we appoint an officer, a similar 
type of officer, created within the agency, for resolving the 
enforcement, the regulatory enforcement problems? Should we 
actually put someone in each agency to do that? Do you think 
that would be a good idea?
    Ms. McDonald. Generally, I do think it would be a good 
idea, but I was speaking with the ombudsman at EPA, for 
example, and she was telling me that last year she received 
only 20 regulatory enforcement problems. She deals with a 
broader, you know, spectrum of issues. And so I am sure it 
varies agency by agency on how it could be most effective.
    Chairwoman Kelly. Well, you said it was the EPA who said 
they only got 20?
    Ms. McDonald. Yes, it was EPA. Twenty on regulatory 
enforcement, you know, just my piece of it. She had many other 
issues that she was working on. And they have had that office 
for quite a long time.
    Chairwoman Kelly. I am not sure that is a very good 
measure, however. Put yourself in the position of being a small 
business person, wanting information, not sure if you have 
broken the law or not, dealing with the EPA, many of whose 
people decide that it is an ``Ah, ha, gotcha'' if you call them 
and say ``Could you please give me some direction here?''
    Quite honestly, I am not sure that is a good, a very good 
number, and I am not sure that is--that is why I am thinking 
that maybe we ought to think about asking the agencies to put 
someone in each agency to deal directly with the small 
businesses. where there is not going to be retaliation, where 
people--because most small businesses want to cooperate. You 
know that, or you wouldn't be sitting in the ombudsman's chair. 
And we need to have people understanding, because a lot of 
these rules and regulations are complicated.
    Ms. McDonald. Right.
    Chairwoman Kelly. And personally, as a small business 
owner, I know full well you haven't got time to sit down and 
read a whole bunch of Federal regulations, and all of the pages 
that they entail.
    Ms. McDonald. Right.
    Chairwoman Kelly. You do need to be able sometimes to pick 
up the phone, where you have got a finite area that you are not 
sure about, and ask somebody honestly. Can you give me some 
help here? I don't see that as happening right now for small 
businesses in government, in the way that we have this thing 
structured, and I would hope that you would consider that in 
the way we have been talking here.
    I think we would have to have those people, though, report 
to the Inspector General, to avoid politics, because I think 
these offices tend to be very political sometimes, and we want 
to avoid that at all cost.
    Ms. McDonald. Truly. You know, I have had good luck 
referring people to the Taxpayer Advocate at IRS. That office 
has been quite active and has----
    Chairwoman Kelly. We have had a very big attitudinal change 
over there, which I am very glad to hear about. But yes, I 
mean, and that has been very much welcomed by the small 
business community, I believe.
    But we need to get word about your program out. I think it 
lessens the fear, for small businesses to know that they have 
got someplace to go. I think we get, you know, we get 
complaints and requests for assistance. We get a lot of them, 
and when EPA said they get 20 a year, well, we get them over 
here on this side of the House at the rate of about 20 a month, 
so I know there is a little more interest out there.
    In testimony that we are going to hear from someone else 
who is going to be appearing in the next panel, Mr. Hexter 
brings up a point that I think is very interesting. He talks 
about a lack of sufficient resources and insufficient authority 
to address specific issues and complaints. Are those two things 
that you feel you need support from our Committees on?
    Ms. McDonald. Well, certainly every program director wants 
such things, but my role is to work with what we have. And when 
I visited with you before this meeting, you know, I knew 
because of your role with so many volunteer organizations, you 
could give us some nuts-and-bolts advice. Your suggestion that 
we go to the SCORE office is just an excellent one, and we 
certainly will do that.
    But within my agency I certainly will be working on the 
2002 budget, which is my first sort of shot at the apple to get 
us additional resources. I do think that our marketing efforts 
and so forth, while they are indeed volunteer-based, we want to 
do more because we want to get the word out so people can take 
advantage of their rights to regulatory fairness. I mean, it is 
a revolution, if you think about it, for small business people. 
So it is good news, and I am certainly impatient to get it out 
faster.
    Chairwoman Kelly. We need it. I would also hope that you 
will put a big poster up in every post office in the Nation, if 
that is possible, because we need to get the word out as much 
as possible to let people know. And I don't even know if that 
is possible or not, but----
    Ms. McDonald. Well, we are working, still working on that 
suggestion you gave us. We are working on a box that would go, 
and we are doing--the post office wants to do a pilot project 
with us, and we will be doing that next year and then see how 
that works, and then we could expand that program.
    Chairwoman Kelly. That is good, because small business 
needs all the help it can get. We are the engine driving this 
economy. We need to help.
    You are okay with, you are working out what is happening 
with the post office?
    Ms. McDonald. Yes, we are. We are doing a pilot project 
which will cost about $20,000.
    It is not that much, you know, for the printing and so 
forth, and so we are working on that. And then once, if the 
program is indeed successful, we could do the whole country for 
about $100,000.
    Chairwoman Kelly. Do you have a geographic area that you 
have decided on for the pilot project?
    Ms. McDonald. I have forgotten which one they told us. They 
are doing a study to select it, Hatem tells me.
    Chairwoman Kelly. How much money is the study costing?
    Ms. McDonald. Oh, they are doing that. They are not asking 
for money on that.
    Chairwoman Kelly. Just a question. If it is $20,000 of 
printing, I hope they are not spending $40,000 on a study.
    Okay. Thank you. I have taken up well more than my time 
here. I am going to turn it over to Mr. Pascrell.
    Mr. Pascrell. Thank you, Madam Chairlady.
    I think that the code of ethics that you put together for 
the board members is a good one and a solid one, to avoid 
conflicts of interest. I think that is something we need to pay 
very careful attention to, particularly in terms of loans and 
everything else in other agencies that we have to deal with.
    I don't think it should be too hard, though, to find out 
who is cooperating and who is not. I mean, you have been in 
business for three years. Who is cooperating and who is not? 
And we need to know that, because if they are not cooperating, 
I think that we have a role here to play.
    We are not just in existence, as I understand the ombudsman 
to be, we are not just in existence to have these agencies, 
these Federal agencies, produce more paperwork for you.
    Ms. McDonald. Right.
    Mr. Pascrell. I mean, then we are defeating basically 
what--we want to reduce paperwork and regulations for the 
business person, but we don't want to increase paperwork for 
those Federal agencies that have the problem as well, same 
problem. So we are not here just to create more paperwork.
    I noticed some on the first chart, those that weren't too 
quick to respond to comments, cleaned up their act. When they 
did respond, they did it well, like HCFA. We have a lot of 
complaints, a lot of problems with HCFA nowadays, and I am 
meeting with them to try to resolve them. But from what I see, 
it seems to me that they are trying to clean their act up in 
terms of when they do respond, there is substance. That can't 
be said for DOD or Government Services. Why not?
    Ms. McDonald. DOD has a letter, which we included, where 
they just don't feel that they are covered by the law. They 
take what I should not characterize, not being a lawyer, but 
they take a narrower view of the law than we do.
    Hatem, would you like to speak to the DOD comment?
    Mr. El-Gabri. That is an issue that was raised in the 
previous hearing. There are a number of agencies who do not 
believe SBREFA covers them. GSA is one of them. Department of 
Defense is another.
    Mr. Pascrell. State Department?
    Mr. El-Gabri. State Department believes it is covered. They 
simply say their resources are very limited, so unless they 
know from Congress they should participate, the person that was 
assigned did not have the resources to be able to respond. But 
the main ones were the VA, GSA, and DOD.
    The position the National Ombudsman has taken is, the 
definition of agencies covered is synonymous with the 
definition under FOIA, so as long as you are covered under 
FOIA, you are covered under SBREFA. That is the position we 
have taken, but to be honest, it is an intellectual 
disagreement that is up to Congress to decide. I mean, having 
letters go back and forth is not going to produce----
    Mr. Pascrell. The obligation to clear that problem up is on 
our shoulders. It shouldn't be on your shoulders. Because, very 
interesting, you are stating for the public record something 
that we think, but you are stating it for the public record, 
and that is that there are agencies who feel that they 
shouldn't even be affected by this. I find that to be 
unacceptable.
    And that is why we have problems in procurement with small 
businesses, with the DOD and Government Services. It is 
intolerable. We have written letters. And that is why, I am not 
speaking for the Chairlady, but I think that is why she asked, 
``Do you need more teeth in what you do, to make sure that 
people understand that you are serious about it?''
    I mean, these agencies aren't going to take you seriously 
because they think that the law was not written for them. 
Whatever gave them that idea, we might have to drag them in 
front of a panel here and ask them, and I think that is 
serious, very serious. We have had problems.
    You know, one of the major things we tried to open up, in 
fact around the country, we have had meetings and hearings and 
forums on how small businesses can compete for business with 
the Federal Government. If parts of the Federal Government feel 
that they don't have to comply to what the Congress has passed, 
we have a very serious problem here on contracting and 
services, and I think we should bring that up, Madam Chairlady, 
and we should bring it to a head.
    Ms. McDonald. I would like to add that we currently have an 
issue with the Department of Navy, and we just pursue it just 
like we would with any other agency, but we are--I am, I should 
say--largely jawboning. But we do have their attention, and I 
do think we have clarified an issue for a small business owner. 
It is a patent dispute.
    But this small business owner cannot fight Stanford 
University and the Navy in court and win, even though I have 
seen her data, I suspect she could, if she could afford to go 
into court, but of course she can't. So we have tried to help 
clarify the issue and get it to move on. And we are trying of 
course to encourage the Navy, as part of its program, and it 
has a large program trying to improve its contracting and 
procurement, and we are trying to say to them, at the same 
time, you know, ``Don't run this woman out of business,'' which 
is what the court case would do.
    Mr. Pascrell. Let's take the example you just gave us. Do 
you work with the Office of Advocacy within the SBA?
    Ms. McDonald. Yes. And Advocacy sent me this woman, the 
second day I was on the job.
    Mr. Pascrell. How is that working out?
    Ms. McDonald. That works very well. In fact, we have just 
done a big issue where we went to EPA on a nitrates enforcement 
issue and got them to back off of some 600 business people they 
had given very short notice to, you know, of a kind of a 
requirement that no one had noticed. And Advocacy held a 
roundtable which we participated in, and Jere Glover and I 
followed up with a letter to EPA and worked with a large number 
of trade associations here in town who were involved. And some 
of the best compliers in terms of the toxic release inventory 
were involved in this, so we were gratified when they backed 
off.
    Mr. Pascrell. Are you getting many comments or complaints 
about those small businesses dealing with contracts with the 
Federal Government, particularly the Department of Defense, 
that they cannot get on a list to bid, they are not even 
accepted as bidders?
    Ms. McDonald. I have not received those comments.
    Mr. Pascrell. Who would they go to? Would they go to the 
Office of Advocacy or you?
    Ms. McDonald. No, they would go to us, wouldn't they, John? 
Have we gotten any in other years?
    Mr. Greiner. Well, some of the comments we get on the 
Department of Defense and contracting issues generally do not 
directly apply to enforcement or compliance. And what we try to 
do, I mean, we want to be full service regardless of whether we 
have jurisdiction.
    What we try to do is to work with the representatives in 
each agency and say, ``We're not referring this to you in the 
role of regulatory fairness, but we're referring this to you in 
the role of a sister agency trying to make sure that the small 
business doesn't get lost in the cracks.'' And by and large, 
with every agency we have worked with, they are responsive. 
They do send us copies of their reviews that they send to the 
small business.
    There are some DOD comments that dealt with enforcement 
activities. I am not aware of any DOD contract issues, apart--
there was a bonding. There was one comment on a bonding issue 
for a trucker, and so you could say it dealt with contracting 
because if they weren't able to come up with this bond, they 
weren't going to get the contract. And we have had other DOD 
instances where there are enforcement activities that are--I 
guess they touch on contracting issues.
    Mr. Pascrell. I looked at the '98 recommendations, you 
know, the period just before the '99 recommendations.
    Ms. McDonald. Yes, right.
    Mr. Pascrell. It seems to me that those recommendations 
could be duplicated, some of them, for '99. ``To adopt and 
follow policies and procedures that make it clear to small 
businesses that they will not face retaliation,'' you mentioned 
that before, raising concerns about compliance and enforcement.
    Ms. McDonald. Right.
    Mr. Pascrell. How serious is that?
    Ms. McDonald. Small business people always mention it to 
me. They are very serious about it, and so we have made it very 
clear that you can file without giving us your identity. We 
have an agreement with the IGs in every agency that they will 
be careful of people's identity.
    I have been actually pleased at the number of people who 
have been willing to come forward and use their names and, you 
know, will stand up. I know my father, just in his experience 
with the FAA, would never have come forward and given his name.
    Mr. Pascrell. Well, I think that is one of the----
    Ms. McDonald. So we work against that all the time.
    Mr. Pascrell. The chairlady discussed the promulgation of 
what your office is all about. If small businesses don't know 
about you, they can't take advantage of you, and they cannot 
come to you.
    Ms. McDonald. Right.
    Mr. Pascrell. I think this is critical communication. Most 
small businesses don't even know you exist. How would they?
    Ms. McDonald. Right.
    Mr. Pascrell. How would they?
    Mr. Greiner. I guess one of the chief ways that the 
National Ombudsman's Office has worked to make sure small 
businesses know about us is that every agency, actually to some 
extent you can look at the previous reports, except the DOD has 
agreed to provide small businesses with notice of their rights 
to regulatory fairness when they take enforcement activity. So 
it is sort of, it is somewhat similar to a police officer 
reading you your Miranda rights when you are arrested.
    It is a timely notice, and I think that that is--sometimes 
you get a lot of paperwork, you know, during an enforcement 
activity, so it is some notice. It may not be sufficient, and 
that is why we are now working with agencies to market it 
beyond just notifying them at the time of enforcement.
    Mr. Pascrell. You have a role to----
    Chairwoman Kelly. Would the gentleman yield for one minute?
    Mr. Pascrell. Sure.
    Chairwoman Kelly. I just want to ask what you think about 
including a posting of the rights of small businesses on the 
web sites of each of the agencies. What do you think about 
that?
    Ms. McDonald. I think that would be excellent. I think some 
of them do that, you know, and reference our program that way 
as well.
    Chairwoman Kelly. Why can't we ask them to do that?
    Ms. McDonald. I can.
    Chairwoman Kelly. You think you could ask them to do that?
    Ms. McDonald. Oh, yes. Yes. Yes, we certainly could, and 
what you have done in the past, you know, mailing your 
constituents the card telling them about the program is a 
wonderful thing to do. And I think if you would help me reach 
out to new Members of Congress as they come in, tell them about 
the program and urge them to do this, I think that would be 
something that could help us get the word out. I think coming 
from a reliable source such as your Representative gives the 
program a lot more credibility, and so I would love to, as I 
say, use these cards a lot more.
    Chairwoman Kelly. Thank you.
    Mr. Pascrell. Just one more question, that is all. You have 
been there for three months.
    Ms. McDonald. Yes, sir.
    Mr. Pascrell. What would you change? Easy question.
    Ms. McDonald. You know, I don't think there is anything to 
change. I wish I could learn faster and, you know, come up to 
speed faster, but I am pleased with many of the things we have 
done. We did get the report out and meet our deadline. You 
know, in a small program you are anxious about deadlines, and 
we are doing more within the agency to publicize the program 
through other SBA programs, and I can see that moving on.
    Mr. Pascrell. So you don't need more money and you don't 
need more teeth?
    Ms. McDonald. Oh, we need everything. You know, every 
program needs more money and more teeth, but----
    Mr. Pascrell. Oh, I don't know about that.
    Ms. McDonald [continuing]. But, you know, I am working 
certainly within the agency to ask for more resources. SBA has 
been generous in giving us printing and congressional 
representation and outreach opportunities that we wouldn't have 
if we were an independent program, and I am grateful, and I am 
following up on those things.
    Mr. Pascrell. Thank you.
    Chairwoman Kelly. Ms. McDonald, I want to go to that 
independence question. You just raised it.
    Ms. McDonald. Yes.
    Chairwoman Kelly. Do you think that you might have more 
authority and be able to function better if you were an 
independent commission?
    Ms. McDonald. Oh, my perspective on that isn't good. I 
think, you know, that we benefit from our place in SBA, and the 
administrative contacts help us with the agencies when things 
get, you know, tense. I mean, as we did with the HCFA 
situation, the administrator became involved in talking one-on-
one with that administrator, so those things benefit us, too.
    Chairwoman Kelly. One final question.
    Ms. McDonald. Yes.
    Chairwoman Kelly. Why do you think the President only asked 
for half a million dollars for your agency?
    Ms. McDonald. You know, I wasn't here, and I don't know 
exactly. As I say, I will work on it, and SBA has made up more. 
They have given us 10 percent more this year, for example, to 
help us out, and are looking for some people to detail. But 
when you take from one program, it is a problem for the program 
that loses. So, you know, I am not a good one to comment on 
that.
    Chairwoman Kelly. Well, what about these other gentlemen at 
the table. They seem to have been there. Would they care to 
comment on that question? This seems to me to be one of the 
more important agencies for our Nation. It certainly is a very 
important agency for our small businesses. It seems to me also 
that because of the enormity of what small business means to 
this Nation, this Nation ought to be perhaps more financially 
committed to what you are doing to help our small businesses. 
Would either of you gentlemen care to comment on that?
    Mr. El-Gabri. Well, there has been discussion as to the 
annual report that you have and the resources SBA has devoted. 
We, during that hiatus between January and February, not only 
did we have the program continue as planned but I think we have 
done significant initiatives through the assistance of SBA, 
especially the chief of staff and the deputy general counsel 
and CLA.
    Chairwoman Kelly. I am glad about that, but that is not 
going to the heart of my question, which is why do you think 
you have only been funded at such a low level?
    Mr. Greiner. May I? I think one of the things that changed, 
Peter Barca was the regional administrator, and so some of the 
funding, the $500,000 that the program has been operating 
under, has in many regards been about a $1 million budget, with 
Peter Barca being paid out of the regional office, with our 
senior counsel and his paralegal. I mean, we have got a large 
portion of his time devoted to the program. We have had 
detailed employees from the district office for quite a while, 
and that has been very helpful.
    So I think in many ways the program has benefited greatly 
from SBA monetarily. I mean, I think the benefit of having a 
full-time National Ombudsman outweighs the impact on our 
budget, but that does mean that for 2002 we definitely need to 
work with the administration to compensate for that impact.
    Chairwoman Kelly. I would agree with you that we need to 
work with the administration to make sure that there is enough 
funding that you can do your job. I think a low budget figure 
like that indicates that there is no serious purpose behind it. 
I think that lack of serious purpose sends a very strong and 
not very positive message to our small businesses of this 
Nation.
    So I would hope that we are able to get you some funding at 
an appropriate level so you can do your job, Ms. McDonald, 
because I think that you have, with your background and just 
having worked with you, I believe that you have the skill to 
negotiate well for our small businesses, but I want to make 
sure that we are able to empower you to do that job.
    With that, I am going to thank you all for appearing and 
for speaking, and I now I am going to go to the second panel. 
Thank you.
    Ms. McDonald. Thank you.
    Mr. Greiner. Thank you.
    Chairwoman Kelly. Good morning, and thank you very much for 
being patient. And, Ms. McDonald, I am glad you are staying 
here with us, because that indicates the strength of your 
commitment to what we are trying to do here this morning, so I 
thank you very much for being here.
    Our second panel has Dr. Ann Parker Maust. She is the 
president of Research Dimensions of Richmond, Virginia, and we 
welcome you, Dr. Maust.
    Dr. Maust. Thank you.
    Chairwoman Kelly. Our next panelist is Mr. Giovanni 
Coratolo--I guess I got that right, I hope--director of the 
Small Business Council here in Washington. Our next witness is 
Mr. John Hexter. Mr. Hexter, I appreciate your comments, and 
picked up a few when I was reading your testimony. I am glad to 
have you here today. He is president of Hexter and Associates 
of Cleveland, Ohio. And our final panelist is Mr. Scott Lara. 
He is the Director of Governmental Affairs at the Home Care 
Association of America from Jacksonville, Florida.
    Welcome, all of you. We welcome your testimony here today, 
and let's begin with you, Dr. Maust.

STATEMENT OF ANN PARKER MAUST, PRESIDENT, RESEARCH DIMENSIONS, 
                       RICHMOND, VIRGINIA

    Dr. Maust. Thank you, Chairwoman Kelly, Congressman 
Pascrell, and members of the Subcommittee. I am pleased to be 
here today to provide my perspectives on the Regulatory 
Fairness Program and the National Ombudsman's 2000 Report to 
Congress. I currently serve as vice chair of the Small Business 
Regulatory Enforcement Fairness Board for the South Atlantic 
States.
    I am also a member of the Virginia State Leadership Council 
for the National Federation of Independent Business, and served 
as Chair of the '95 Virginia delegation to the White House 
Conference on Small Business. Our Virginia delegation was very 
active in pushing for regulatory reform for small businesses.
    We have been active supporters of SBREFA. We feel this 
legislation holds much hope for our small business community, 
not only in terms of better communication with Federal agencies 
on enforcement and compliance issues but also as an avenue to 
voice concerns and have those concerns thoughtfully addressed 
before the various Federal agencies.
    We do feel, however, that we have lost much momentum this 
year, as structural changes from the top of the SBREFA 
infrastructure have funneled down through the system, with 
small businesses in our State ultimately being the loser. In 
the face of these changes, however, we applaud the efforts of 
the new National Ombudsman and her staff in preparing a well-
documented and thorough annual report, produced in a timely 
fashion under very difficult circumstances, reflecting the best 
input to date from the small business community.
    From my perspective on the South Atlantic RegFair Board, 
ensuring the success of this program hinges on the careful 
nurturing and development of a strong national infrastructure 
to provide support, guidance and assistance to the network of 
RegFair Boards. As you know, small business owners are critical 
partners in this structure, and this partnership is what helps 
with the implementation of SBREFA and provides it so much of 
its unique strength.
    We must remember, however, that small business owners are 
just that. They each own a business that requires considerable 
demands on their time, and the time that they devote to this 
program, while willingly given, must be backed up with strong 
staff support from the top in order to ensure viability of the 
entire structure. When such support begins to waiver, the 
entire system is jeopardized. This is indeed what I believe 
began to happen this year, first with the departure of the 
National Ombudsman, then followed by the significant time delay 
in the reappointment of a new ombudsman.
    Let me illustrate for the Subcommittee. On March the 4th, 
'98, I testified before this Subcommittee that I believe State 
industry trade associations are a critical vehicle in the 
information dissemination process to the grassroots small 
business owner. I noted that we had a huge job yet to do in 
educating the leadership of these State associations about 
SBREFA, and until the leadership understands the value and 
power of this act for their respective memberships, the process 
of information dissemination will be stymied.
    Further, my testimony indicated that outreach to the 
leadership is needed, not simply to requestthat they put a 
letter about SBREFA into their respective newsletters, but to inform 
and counsel about the value of this piece of legislation for their 
membership. Such outreach will allow association leaders to link the 
opportunities under SBREFA with the regulatory issues brought before 
them by their members, and to frame these opportunities in language and 
options more familiar to the small business member.
    The importance of such outreach to State associations, I 
believe, rests with the fact that we can't assume that the 
results of meetings with national trade associations will 
automatically filter down to the State leadership. As such, 
while I think all information dissemination vehicles are 
important, and that programs like Association of the Month are 
a vital component in this initiative, particularly for national 
associations that don't have State affiliates, I still feel 
that we have much more intensive outreach that is needed at the 
State level.
    I would like to share with you what progress I believe has 
been made in this type of outreach initiative since the March 
'98 hearing, and how important the national infrastructure is 
in terms of ensuring that small businesses at the grassroots 
are informed of their rights under SBREFA. Please reference the 
outreach section of the National Ombudsman's 2000 Report to 
Congress, as this section indicates the Office of the National 
Ombudsman and the RegFair Boards held Business Leader 
Roundtable Discussion Groups across the country to build 
stronger relationships with small business trade associations 
at the State and local levels.
    As the report indicates, five roundtables were held between 
January and June of '99. Suddenly, in June '99, this series of 
roundtables comes to a halt, and to this date, to my knowledge, 
no others have been held, although it is my understanding that 
an additional series is planned for the future. What is 
significant about the June '99 date? It is at this time that 
the announcement was made that the National Ombudsman was 
leaving his office to take another position.
    In Virginia, in the months leading up to the departure of 
Mr. Barca, we were making considerable progress. We were 
building important connections within the wider business 
community, and had begun to obtain the support of several very 
influential organizations within our State for this initiative.
    In September '98 we had held a very successful public 
hearing with testimony from a diverse group of small 
businesses. We were on a momentum path. Our efforts were 
gathering steam, and more and more small business owners and 
their organizations were becoming aware of SBREFA, the RegFair 
Boards, and the mechanism for registering their concerns under 
the Act. In addition, our RegFair Board was becoming much more 
cohesive and knowledgeable.
    As part of this momentum, we were scheduled to hold a 
Business Leader Roundtable in July of '99. Working with the SBA 
district office and the State office of the NFIB, we had 
already begun informally notifying some of our State 
associations about this meeting. Abruptly, it was cancelled, 
not because of lack of interest but because of the other 
demands engendered by changes at the top.
    In short, we have yet to gain the momentum in Virginia that 
was lost at this time approximately a year ago. I believe that 
this momentum could have been regained if there had been a 
shorter period of time between Mr. Barca's departure and the 
announcement of a successor, or certainly if the work had been 
allowed to continue under the able hands of the staff still in 
place to execute the program.
    In summary, I still believe that these roundtables are 
needed, and I assure the National Ombudsman that we will do all 
we can in Virginia to continue to support this initiative. We 
feel that these roundtables can play a vital role in 
strengthening the entire SBREFA process.
    By building strong, viable linkages with business leaders 
in the various States, an automatic feeder network or system is 
put into place, not only for informing the small business 
owner, the ultimate target of the Act, but also strengthening 
the public hearing process. In short, with better informed 
State leadership, more productive input into the public hearing 
process can be assured, thus hopefully ensuring that realistic 
and critical views of the various industry sectors are fed into 
the public hearing process.
    Chairwoman Kelly and members of the Subcommittee, let's 
strengthen the SBREFA network, not only by ensuring 
continuation of these roundtables, but also by ensuring that 
these roundtables are linked to a public hearing process in a 
thoughtful, analytical manner. Let's also do whatever we can to 
ensure the creation of a strong national infrastructure. This 
does cost resources.
    I believe that the substantive information resulting from 
the small business community through this process will be 
better and more representative than is currently obtained 
through regional public hearings, which are costly for small 
businesses to attend and often reflect the testimony of 
professionals randomly pulled into the process rather than 
thoughtfully planned and provided for.
    Thank you for your time and thoughtful consideration of the 
testimony.
    [Dr. Maust's statement may be found in appendix.]
    Chairwoman Kelly. Thank you so much, Dr. Maust. As usual, 
very concise and very precise. Thank you for speaking.
    Next we will turn to Mr. Coratolo.

  STATEMENT OF GIOVANNI CORATOLO, DIRECTOR OF SMALL BUSINESS 
       POLICY, U.S. CHAMBER OF COMMERCE, WASHINGTON, D.C.

    Mr. Coratolo. Thank you, Chairwoman Kelly, and thank you, 
Congressman Pascrell. I am Giovanni Coratolo, Director of Small 
Business Policy for the U.S. Chamber of Commerce. We applaud 
this Subcommittee's dedication and interest in reducing the 
regulatory burdens faced by the Nation's 24 million small 
businesses.
    I am here today representing the Chamber's small business 
membership. These are business owners who are faced with the 
daily challenges of complying with thousands of pages of 
regulations that are generated by almost 40 government agencies 
on a yearly basis, and that is just what is produced at the 
Federal level. If you measure the cumulative effect of all 
Federal, State and local regulations on the small business 
owner, the prodigious task of compliance becomes overwhelming.
    Typically, the small business owner is the human resource 
director, the maintenance engineer, the industrial hygienist, 
as well as serving in many other positions that demand in-depth 
understanding and meticulous implementation of a plethora of 
rules and regulations. The small business owner is faced with 
the presumption of knowledge of an array of confusing and 
sometimes conflicting mandates from the regulators, with heavy 
penalties for noncompliance.
    Small businesses bear a disproportionate regulatory burden, 
as we all know. According to the report by the Small Business 
Administration, the total cost of Federal regulations per 
employee was 50 percent greater for firms with less than 20 
employees than for firms with more than 500 employees.
    There is not compelling evidence that the disproportionate 
burden has at all subsided. Just this year alone, OSHA, in its 
proposed ergonomics final rule, will likely add hundreds of 
pages of regulatory burden with vague guidelines on 
implementation and compliance. Conservativeestimated cost to 
small business, $45 billion.
    Now four years old, the Regulatory Fairness Program, 
RegFair, offers an incentive for agencies to change their 
culture and treat small businesses as partners. The primary 
mission of the program is to encourage a regulatory enforcement 
environment that is fair to small business. It is the current 
intent of the National Ombudsman to engender greater compliance 
by more consultation, communication, partnerships, 
accountability and feedback on behalf of the small business and 
Federal agency enforcement communities.
    The framework of this program remains unchanged since its 
inception. Coordinated and supervised by the statutory 
ombudsman for the Small Business Administration, the boards' 
activities include soliciting and gathering subjective views 
and comments from small businesses about their interactions 
with Federal agencies in their compliance efforts.
    In order to encourage agencies to make changes, the RegFair 
program required the National Ombudsman to file an annual 
report to Congress on agency evaluation of enforcement and 
compliance activities. The annual report provides information 
and a rating system that praises those agencies that have 
successfully implemented cultural change.
    Agencies that have resisted cultural change that would have 
allowed greater sensitivity to regulatory enforcement concerns 
of small businesses are singled out in the report for 
criticism. Maybe this is an area we can look at to find a 
little more teeth, and to subjecting agencies to comply better.
    We applaud the National Ombudsman's efforts to partner with 
organizations like the U.S. Chamber of Commerce to provide 
outreach and marketing of the program and the hearings. Based 
on materials provided to us by the ombudsman's office, we have 
recently developed and have widely disseminated to our members 
a user-friendly reference brochure, and you will see an 
attachment there, and it is titled, ``When the government comes 
knocking on your door, know your rights to regulatory 
fairness.'' We also have just recently implemented an e-mail 
notice to a small but growing sample database of our membership 
that will announce each upcoming regulatory fairness hearing in 
the regions and encourage their participation.
    Even though we feel the overall program has been beneficial 
for small businesses, it has been only incremental in changing 
the culture of the Federal agencies' compliance activities from 
the ``gotcha'' mentality to the consultant or compliance 
advisor. If you look at the back of the attachment, you will 
notice the Chamber listed the Federal organizations with their 
respective regulatory help phone numbers, agency ombudsman 
contacts, agency web site home pages, and small business help 
links.
    Some agencies have attempted to provide a wealth of web 
resources directed to small business, in order to provide 
information on regulatory compliance. You will also note that 
agencies like the Department of Agriculture, the Department of 
Transportation, and Health Care Financing Administration 
provide little or no targeted help for the small business 
community via their web sites.
    Another concern of the program is the lack of broad-based 
small business participation. We attribute this to the 
following: Even with the most creative efforts to market the 
program, it is not widely known or understood within the 
business community. Small business owners feel they are no 
match against the resources of the Federal agency. Small 
business owners fear retribution on behalf of the Federal 
agency, and faced with the knowledge that the panel can only 
report their findings to Congress and not change the outcome of 
a compliance disposition, small business owners feel voicing 
their grievance, regardless of its merits, is not a good use of 
their valuable time.
    As far as our recommendations, we feel the program can best 
be served by stepping back and viewing the totality of SBREFA 
in the regulatory process. The two departments within SBA that 
are responsible for carrying out the responsibilities of the 
small business community under SBREFA are the Office of 
Advocacy and the Office of the National Ombudsman.
    Each office must engage in duplicative and simultaneous 
efforts in their mission to encourage Federal agencies to 
invoke a friendlier environment for small business to comply 
with the plethora of Federal regulation. Each office must 
establish outreach into the small business community in order 
to achieve their prospective objectives.
    The Office of Advocacy needs feedback from small business 
owners in the early stages of rulemaking to determine what 
impact these rules will have, and if there are alternative ways 
of achieving the same agency objectives while mitigating their 
impact on small business. The National Ombudsman needs the same 
small business outreach in order to fulfill the objectives of 
her program. Each office must deal with high level contacts 
within Federal agencies to act as liaisons for the small 
business community.
    We strongly feel the interests of the small business 
community would best be served by combining the RegFair Program 
under the Office of Advocacy's General Council and having one 
coordinated force to administer the rights that SBREFA has 
created. In this time of budget constraints, splintering the 
effectiveness of the full potential of SBREFA by having two 
programs does not maximize the potency and effectiveness that 
could be accomplished by unifying them under the guidance and 
direction of one office.
    Furthermore, we feel that the combined overall budget of 
both programs should be a line item designation in the SBA 
budget. This would provide more independence from external 
pressures that adversely affect sensitive decisions that must 
be made on behalf of small business regulatory reform. Even 
though the funding for the SBA has increased over the last 
several years, the portion allocated to Advocacy has decreased 
and the portion attributed to the RegFair Program has remained 
constant. There should be a reallocation of funding within the 
SBA budget to fully fund both programs as a line item.
    The Chamber appreciates the opportunity to comment on this 
important program for small business. We especially applaud the 
interest shown by Congress and this Subcommittee through 
hearings such as this, that clearly signal that Congress will 
do all that it can do to make sure the law works as you 
intended it to, and so that small business will be the 
beneficiaries.
    Thank you, Chairwoman. Thank you, Congressman Pascrell.
    [Mr. Coratolo's statement may be found in appendix]
    Chairwoman Kelly. Thank you very much, Mr. Coratolo. I let 
you run over because I was watching your testimony, but if it 
is possible, we really would like to adhere to that 5-minute 
rule.
    Mr. Hexter, we would like to hear from you next.

  STATEMENT OF JOHN HEXTER, PRESIDENT, HEXTER AND ASSOCIATES, 
                     INC., CLEVELAND, OHIO

    Mr. Hexter. I think he covered a couple of my points, so I 
can cut them out.
    Madam Chairwoman, Congressman Pascrell, thank you for 
allowing me to testify today. My name is John Hexter, and I am 
the chairman of National Small Business United. I have the 
opportunity and pleasure, in addition, to serve as a member of 
the Region V Regulatory Fairness Board since its inception.
    Today's hearing regarding the Regulatory Fairness Program 
is critically important to the future of the small business 
community. It has been over four years now since Congress 
passed, without dissent, and the President signed into law, 
SBREFA. Now, NSBU worked for this passage, and it was a highly 
important item at the White House Conference on Small Business 
in 1995, and we consider it one of our greatest successes that 
in the last few years we have added teeth to the Regulatory 
Flex Act, 1980.
    We have previously mentioned the impact of regulation on 
enterprises with fewer than 20 employees, and that represents 
the vast majority of NSBU's 65,000 members. No matter the 
perspective, the report from the SBA found that the total costs 
of Federal regulation are generally 90 percent higher for small 
companies than they are for large companies.
    With 30 more hearings now behind us, I think it is a good 
time to assess the success of that program and to suggest ways 
that this effort can be improved. Understandably impatient with 
the bureaucracy and anxious to provide results and relief, we 
must view the program as a mixed success. We see great 
potential, to date largely unfulfilled, to make SBREFA the tool 
that Congress and the small business community envisioned.
    The problems we see stem essentially from two glaring 
shortcomings in the current program: one, a lack of sufficient 
resources; and, two, insufficient authority to address specific 
issues and complaints.
    Small businesses are mostly unaware--we have talked about 
this--that there is a mechanism to address their regulatory 
concerns. Information about board hearings, the kinds of issues 
that are being raised, and the relief that is possible, needs 
to be more widely circulated. I don't have to beat up on that.
    There is a great deal of apprehension in the small business 
community about making our disaffection with the Federal 
Government known. A chilling effect does exist. Small 
businesses are concerned that any number of negative 
consequences may follow if we take on a large government agency 
in a public forum. Retribution is serious, real, and a 
legitimate concern. Small business owners are uncomfortable 
about sharing business information with Federal agencies. You 
have pointed this out already. We must work to find a solution 
to that issue.
    Returning again to the issue of impatience, entrepreneurial 
impatience I believe is the largest inhibitor of small business 
participation in the Regulatory Fairness Board process, because 
it has to do with results. That is, from a small business 
perspective, can my participation make my problem go away in 
the relative short term? Because I will be out of business in 
the long term.
    The answer, in most cases, I am afraid is no. How can a 
small business owner justify traveling hours to an out-of-town 
hearing, or even writing an extensive letter to an organization 
that is only statutorily sanctioned to gather comments and 
issue a general report sometime next year? It is time, I 
believe, that we give another look at the law in this regard. 
Small businesses need to be assured that someone in this 
process has the authority to act in the most egregious and 
pressing cases. I urge the Committee to consider initiating 
this discussion.
    Further, the Office of the Ombudsman is crippled by 
dramatic underfunding. In order to achieve the objectives 
Congress unanimously voted, the budget must be increased 
markedly. A handful of staff people cannot possibly hope to 
both promote the program and meaningfully address the 
regulatory enforcement issues encountered by millions of small 
businesses nationally, especially if, as we recommend, the 
underlying statute is changed to enhance the authority of the 
ombudsman. The resources of the office will be doubly 
insufficient.
    The dangers of continuing along the current path are 
substantial to small business. Because of the lack of resources 
for outreach and the lack of authority to actually address real 
problems, small businesses are not coming to the ombudsman or 
fairness boards in great numbers. We are already seeing Federal 
agencies and others pointing out those low response rates, 
suggesting, therefore, that small business regulatory concerns 
are overblown. Allowing SBREFA to limp along, as it currently 
is, undermines the cause of small business regulatory fairness 
rather than promotes it.
    While there are many positive aspects to the current and 
previous annual National Ombudsman's Reports, the reports have 
not measured up to our expectations. The Ombudsman's Reports 
should applaud all efforts to reduce the burden of regulation 
on small business, but I believe that picture is not quite as 
bright as the reports may lead some to believe.
    NSBU works with Federal agencies regularly. We know the 
individuals at EPA, OSHA, and the IRS who are doing their very 
best for small business. These individuals are lonely and too 
few in number. The reason they are lonely is because their 
actions are not embraced and fully supported by the rest of the 
agency. We are talking about changing the culture. No matter 
the quality of individual or the quality of a single pro-small 
business program, we have not overcome this regulatory culture. 
The Ombudsman's Report must not shy away from the tough 
criticism of agencies when necessary.
    The Fairness Program is still a work in progress, but a 
very important one that must be accelerated and strengthened to 
become truly effective for small business. The program needs 
more resources; it needs more authority. We cannot let this 
experiment falter.
    Let me conclude with praise and support for the efforts 
made by my fellow volunteers who make up the Regulatory Boards, 
and I also want to recognize the efforts of a number of 
excellent staff who have shown great dedication and 
perseverance to keep the program moving forward despite its 
lack of resources. On behalf of NSBU, I would like to thank 
you, Chairwoman Kelly, Congressman Pascrell, and the entire 
Committee for allowing me this opportunity to testify.
    [Mr. Hexter's statement may be found in appendix]
    Chairwoman Kelly. Thank you very much, Mr. Hexter. I, too, 
really want to go on record as lauding and very appreciative of 
the people who take their time out of their business to sit at 
the roundtables and try to help us in small business get our 
feelings and our information out their and known, and work with 
the agencies. That is a very tough job to do, and it is one 
that we need to have people do, and I am glad there are people 
willing to do it.
    With that, let's go on to you, Mr. Lara.

 STATEMENT OF SCOTT LARA, DIRECTOR, GOVERNMENTAL AFFAIRS, HOME 
       CARE ASSOCIATION OF AMERICA, JACKSONVILLE, FLORIDA

    Mr. Lara. Good morning, Chairwoman Kelly, Representative 
Pascrell, and esteemed members of the Subcommittee. My name is 
Scott Lara, and I am the Director of Governmental Affairs for 
the Home Care Association of America. HCAA represents over 250 
locally owned and operated home health agencies across the 
United States.
    I deeply appreciate the opportunity to testify before you 
today regarding the Small Business Administration Regulatory 
Fairness Program and its benefit to America's small business 
men and women. I would first like to commend you, Chairwoman 
Kelly, for holding this hearing. It is important for you and 
for members of the Subcommittee to know the importance of the 
Regulatory Fairness Program.
    Under the leadership of former ombudsman Peter Barca, and 
now Gail McDonald, the Regulatory Fairness Program has provided 
the opportunity for small business men and women tovoice their 
concerns over the excessive undue paperwork burdens and about 
overzealous and unfair enforcement actions by Federal agencies.
    Many of HCAA's members, who are small business men and 
women who own home health agencies, have taken the opportunity 
to testify before the Regional Fairness Boards throughout the 
country. Without the Regional Fairness Boards, there would be 
no avenue for them to comment about the excessive regulations 
and paperwork requirements that have been placed on the home 
health industry by the Health Care Financing Administration, 
HCFA. I have personally taken the opportunity to testify before 
the Regional Fairness Boards, most recently in Houston in 
April; and in Nashville, that was in 1998.
    I would first like to discuss two of the main comments made 
to the Regional Fairness Boards from home health agency owners: 
first, the Outcome and Assessment Information Set, OASIS; 
HCFA's failure to protect patient choice. And hopefully in the 
follow-up I can discuss the 50-50 payment method.
    The first issue is the OASIS information, which consists of 
hundreds of questions, over 50 pages of paper comprising 
several data collection forms that home health nurses are 
required to complete on each home health patient. It takes 
approximately three hours for a home health nurse to complete 
the Start of Care form alone. Now, I have included the OASIS 
forms with my testimony, and as an example of the amount of 
paperwork that is required, allow me briefly to demonstrate the 
amount of the OASIS forms.
    Chairwoman Kelly. It needs to be shown as a part of the 
record that this form is unrolling from the witness table all 
the way to the back of the room and beyond. It looks as though 
it might go all the way across the bridge to Arlington.
    Mr. Lara. So, as I said, Madam Chairwoman----
    Chairwoman Kelly. Excuse me, Mr. Lara, but I can't believe 
the length of this form. We have now wrapped this form around 
the room, and it is continuing on. That needs to be a matter of 
record, absolutely.
    Mr. Lara. Thank you, Chairwoman.
    Chairwoman Kelly. Thank you, Mr. Lara.
    Mr. Lara. And I would request three minutes be restored to 
my time. [Laughter.]
    Chairwoman Kelly. We will see about that.
    Mr. Lara. Thank you. In consideration of time, please allow 
me to present only two examples of the many unnecessary and 
improper questions in that OASIS form that HCFA is mandating 
home health agency nurses to ask our Nation's Medicare 
beneficiaries.
    First, a life expectancy question: A home health nurse is 
forced to ask or to observe if the patient's life expectancy is 
greater than or less than six months. Secondly, the behaviors 
demonstrated at least once a week, and I am paraphrasing these. 
You can refer to my written testimony: Either having memory 
deficit; impaired decisionmaking; verbal disruption, which 
would include yelling, threatening, excessive profanity, sexual 
references; physical aggression; disruptive or infantile 
behavior; delusional; or none of the above.
    Now, clearly some paperwork is needed when treating 
Medicare beneficiaries, but the OASIS data collection effort is 
a result of HCFA's overzealous attempt to collect highly 
personal information which is not relevant to patient care, but 
instead is targeting to make home health nurses part of the 
Census Bureau. Now, how can a nurse or any health care 
professional determine how long a patient will live?
    Besides being unethical and overly burdensome, HCFA is now 
reimbursing home health agencies only $10 for each OASIS data 
set that the home agency collects. This is a far greater cost 
than just $10 to collect this information. Now, equally 
important is that many good nurses who should be in the 
industry have opted not to serve because they became a nurse to 
take care of patients, not to become a spy or a paperwork 
pusher.
    Now, the second issue is regarding the unethical referral 
processes by hospitals, which have resulted in denial of 
patient choice as mandated by the BBA of '97. By way of 
background, the BBA of '97 sought to prevent hospitals from 
denying patient choice by systematically downstreaming patients 
into their own hospital-owned home health agencies. The BBA of 
'97 mandated two things: first, that hospitals disclose their 
financial interest to patients; and, secondly, that hospitals 
provide a list of home health agencies in the community to 
patients being discharged from the hospital who will require 
doctor-certified home health services.
    We have found that many hospitals are openly violating the 
intent of Congress, and in fact are further denying patient 
choice by placing their hospital-owned agency frequently at the 
top of the list; placing their hospital-owned agency in bold, 
and large font, while placing the locally-owned and operated 
home health agency in non-bold, lower type font; stating that 
their agency is fully licensed and certified by Medicare, while 
implying that the locally-owned agencies are not; stating that 
the hospital-owned agency is accredited, implying that the 
locally-owned agencies are not; and stating that they can only 
guarantee the quality of the services you will receive by the 
hospital-owned home health agency, and cannot guarantee or 
certify the quality of other home health agencies on the list.
    This coercion tactic at the patient's most vulnerable 
moment places doubt in the patient's mind about the quality of 
care provided by the locally-owned and operated home health 
agencies. Hospital discharge planners are not informing the 
patient of what agencies are in the community and which one 
that the doctor recommends regarding home health care.
    In summary, hospitals are denying patient choice by using 
the patient notification as a blatant marketing tool. Hospitals 
are improperly misleading their patients by stating they cannot 
guarantee any care except theirs, and then conveniently 
refusing to tell the patient whom their doctor recommends and 
feels which agency is best qualified to provide the care they 
need.
    Our recommendations: HCAA urges this Subcommittee to hold a 
hearing this year specifically about the overzealous 
regulations and burdensome paperwork requirements that HCFA is 
placing on home health agencies. HCFA Administrator Nancy-Ann 
Min Deparle should be asked about placing unrealistic burdens 
on home health agencies without reimbursing those agencies for 
completing that paperwork.
    HCAA urges the Subcommittee to continue their support of 
the Regulatory Fairness Program. Without this important 
program, there would not be a vehicle to voice concerns about 
burdensome regulations and paperwork such as the OASIS data 
collection effort.
    HCAA requests that this Subcommittee take the lead by 
crafting legislation to enforce the provision of the BBA of '97 
regarding hospital self-referrals; providing specific language 
on the notification to patients which specifically outlaws 
hospital marketing, propaganda, and horn-blowing on the 
services of their hospital-owned agency, and it should be on 
one page; and mandating that the patient be informed of their 
doctor's recommendation for a home care provider, and this 
physician designation should also be on the same page. We would 
recommend that legislation state that those hospitals who are 
found in violation of denying patient choice would lose their 
Medicare provider number.
    In closing, HCAA deeply appreciates the opportunity to 
testify before you today. We applaud Ombudsman McDonald, Mr. 
Jere Glover, John Greiner, and the entire staff of the SBA for 
theirleadership and commitment to our Nation's small 
businesses. We also applaud this Subcommittee and you, Chairwoman 
Kelly, for conducting this hearing today. Your commitment to the small 
business men and women of America is a strong sign that Congress 
recognizes and is willing to deal with Federal agencies who are clearly 
abusing their power.
    I have included with my testimony the October 15, 1999 
Heritage Foundation Lecture No. 646 that talks about the OASIS 
data collection effort. Thank you. I appreciate this 
opportunity.
    [Mr. Lara's statement may be found in appendix]
    Chairwoman Kelly. Thank you very much, Mr. Lara. I am 
beginning to wonder if you talked to my husband before you 
conducted your testimony, because my husband, who is in a 
totally unrelated business, also has to fill out a lot of 
forms. And he keeps scratching his head and saying to me, 
``Sue, why do I have to fill these forms out? Who is getting 
this information, and why? It takes me hours to fill these 
forms out about my employees, and I'm not even sure my 
employees know that I have to divulge this information to the 
Federal Government.''
    Good question, Mr. Lara. I don't know, either, but if we 
can, we are going to try to get at the root of that, because 
that is what this Committee is all about, so I thank you very 
much.
    Mr. Lara. If I may comment on that, Chairwoman Kelly, it is 
amazing that you said that, because these patients that are in 
the home do not know that the home health nurse, who is a 
trusted clinician, is observing them about disruptive behavior, 
sexual references. And of course 99 percent of our patients 
don't have that, but to have someone who is trusted in your 
home being a spy for the United States Government, specifically 
HCFA, is an outrage.
    Chairwoman Kelly. Well, it certainly isn't open democracy, 
is it?
    Mr. Lara. No, ma'am.
    Chairwoman Kelly. Well, at any rate, I am delighted to hear 
from you. I want you to answer me a question, another question, 
answer for me another question. I would like to know how, right 
now, the ombudsman's office is helping you, because you closed 
in thanking them. How are they helping you address these 
concerns right now, and what is the office doing to assist you?
    Mr. Lara. Let me say that the office is doing great work on 
behalf of my industry. Peter Barca spoke to my association two 
years ago in Las Vegas at our convention, and Ms. McDonald has 
committed to speak to our trade association in Biloxi, 
Mississippi in July. So they are reaching out to us, to let us 
know what is available.
    Secondly, John Greiner has been working very hard, along 
with Jere Glover and Ms. McDonald, about setting up a forum 
between the SBA, my trade association along with my colleague 
trade associations, and HCFA, to iron out some of these 
problems regarding the 15 percent, the additional cut that is 
coming October 1, 2000; regarding the 50-50 payment method, 
where government is only going to pay us 50 percent up front, 
and then at the end of the 60 days pay us the remaining 50 
percent, which no one can afford to be paid 50 percent up front 
and then 50 percent at the end and stay in business, when you 
have overhead. And they are also helping us with the surety 
bond.
    So they are working very hard. We talk on a frequent basis, 
and they have helped us immeasurably.
    Chairwoman Kelly. Good. I am glad to hear that.
    Ms. McDonald, I am glad you are here to hear that praise.
    I find it interesting, again, that you are talking about 
getting 50 percent up front. I find it very curious that the 
U.S. Government, with as many tax dollars as we take in, tries 
to live on the ``float'' from other people, so I am glad to 
hear you are working on that, Ms. McDonald.
    Mr. Coratolo, I want to go to your testimony right now. You 
spoke about the fact that the small businesses are faced with a 
lot of vague guidelines on the implementation and compliance, 
on the rules and regulations, and that you feel that the Office 
of Advocacy and the Ombudsman need feedback early in the 
process. Now, is that happening with the roundtables?
    Mr. Coratolo. Well, it is to an extent, but there is a lot 
of duplicative efforts being done through having both offices 
separate. You know, we feel that outreach to a small business 
community shouldn't have to take place in two separate offices. 
They should be combined. They should have one streamlined way 
of outreaching small business. Certainly they, the National 
Ombudsman as well as Jere Glover has leveraged his position 
with the different associations, with the U.S. Chamber. We are 
always invited to the roundtables. We always try to disseminate 
that information, and they are widely attended.
    Chairwoman Kelly. Well, then, that is good. I think 
obviously the ombudsman is struggling right now to get more 
information out into the community. I would hope the Chamber 
would work with the ombudsman to get information, and I know 
that you probably are.
    One thing I want to throw in here, because it is my pet 
project, is that with the CORA legislation passage, if we can 
get that office in place, that will help because we can pick up 
the feedback from the small businesses of the Nation and talk 
with an office that would be in the General Accounting and 
would be able to intercede before the rules and regulations 
become absolute. After the comment period but before they 
become absolute, that office could inform Congress about what 
is going on.
    With the plethora of rules and regulations that are being 
promulgated over there by the agencies, I think we have got to 
have some control. So I am hopeful that, working together with 
the Office of Advocacy, with the Ombudsman, and having this 
CORA office in place, those three things can be like the three 
legs of a stool that is holding up and supporting the small 
businesses of the Nation. And I also feel that a lot of the 
problems with the vague guidelines can be corrected through 
that office. I think that, again, we could address the vague 
guidelines and the problems of implementation.
    I have got a couple of other questions that I wrote out 
here that I wanted to ask you, and that goes back to one of the 
comments I made. How do you think we can address the problem of 
marketing this program? Have you got any suggestions for that?
    Mr. Coratolo. Marketing the program is difficult. You are 
trying to get the attention of people that are always on the 
go. They don't necessarily have time. A business person that is 
not truly involved at the upper levels of advocacy and Federal 
regulation tends not to have the time to visit web sites, to 
look at rules, to look at regulations.
    The other thing is, small businesses tend to be more 
focused on local regulation, because you have got to remember 
we are not only competing with Federal guidelines, but there 
are local and State guidelines that tend to be--also take them 
off, you know, take them on as far as their time. A lot of 
times they will be facing a compliance officer and they feel 
that, ``Well, you know, there is so much that I don't know, 
that if I open my doors, while they got me on this one, while 
this may be a cost of doing business, there may be 10 other 
things that they haven't seen or they forgot.''
    So it is a tough thing to market. It is a tough program to 
market. I think we have to look at it on a statistical basis. 
Every time we get a comment, there is probably 100 m more 
people back there that had the same comments or the same 
concerns. We are doing all we can to market the program.
    Mr. Lara. If I can respond to that also, Chairwoman Kelly, 
the fear of retribution for peoplecoming forward is amazing. I 
know with the home health agencies I represent, they are scared to come 
out and say, a HCFA surveyor or an auditor came out and denied this, 
and they are scared to death that they are going to swing right back 
around and punish them further.
    Chairwoman Kelly. I think that is a normal fear of anyone 
who is in business, because there has been this long history of 
the ``Ah, ha, gotcha'' mentality. That is why I feel so 
strongly that we have got to have some help here for our small 
businesses. We are drowning, I think.
    And with that I want to talk about the historical 
perspective, and I am going to go to you, Dr. Maust. Dr. Maust, 
in 1998 you told us you only had one appraisal form filed and 
three inquiries which didn't result in appraisal forms being 
filled out. Do you know if the number of filings in Virginia 
has increased?
    Dr. Maust. I don't believe they have. Maybe one or two 
more. I don't think we have had a lot of appraisal forms filed.
    Can you help me with that, John?
    Mr. Greiner. Yes, if we can get back to that.
    Chairwoman Kelly. Why don't we get back to that, and I will 
ask you another question.
    Dr. Maust. Okay.
    Chairwoman Kelly. I want to know if you know how your 
national trade association informs its members about SBREFA.
    Dr. Maust. You are talking now the NFIB?
    Chairwoman Kelly. Right.
    Dr. Maust. Obviously we have national newsletters, we have 
State meetings, we have national meetings and that type of 
thing. The issue here, and I think maybe I mentioned this 
before, NFIB represents a wide diversity of small businesses, 
and these regulatory issues are often obviously very industry-
specific, and because of that they are complex to the industry. 
And the businesses in those industries' linkage with their 
State associations, the State associations can, I think, target 
those issues more specifically and can in a way run protection 
and interference from some of the owners themselves in terms of 
some of these issues. That is why I just think this mechanism 
is so important, and--well, I will just stop there.
    Chairwoman Kelly. Thank you. In the interests of letting 
Mr. Pascrell speak up here, I am going to stop my line of 
questioning. We will talk in a minute.
    Go ahead, Mr. Pascrell.
    Mr. Pascrell. I just want you folks to go away from here 
knowing that we want to address--we think that this could be 
such a great thing for small business, as well as the Advocacy 
Office, we want it utilized. We want to promulgate, you know, 
what is available, so that people feel armed, if I can use that 
term, to protect themselves.
    On the other hand, many of these regulations are generated 
by us. Some are generated by second and third level management. 
You know, what protection do you have? I do notice this, and I 
can say, I mean, anybody on the panel can agree or disagree. I 
do notice in the past few years, not only on the Federal level 
but the State level, that these agencies have become less 
prosecutorial and more abatement oriented. We are always going 
to have regulations. We are always going to have rules. The 
question is, what are reasonable and what are not, and how do 
we judge?
    Mr. Lara. If I may respond to that, sir----
    Mr. Pascrell. Sure.
    Mr. Lara [continuing]. Regarding home health agencies, they 
have been overpaid because of the interim payment system, well, 
home health agencies have filed for bankruptcy and they have 
gone into Federal court and they have told HCFA, ``Please don't 
shut our doors. We know we owe you $1.5 million. Will you take 
$1 million?'' HCFA says, ``No, shut them down.'' So for the 
Health Care Financing Administration not to take something and 
just to send that kind of a message is unbelievable.
    Mr. Pascrell. Well, we certainly don't want you to go out 
of business. You almost described what some HMOs have done. You 
know, they don't pay their bills, either, and we are getting 
back 15, 16 cents on the dollar in some places, and they have 
utilized already Federal dollars, our tax dollars. So, I mean, 
you know----
    Mr. Lara. And let me follow up on that, sir. Don't be 
misled, as Members of Congress, that it is your fault. It is 
not your fault. Certainly you did the BBA of '97, but HCFA 
helped you to write that. And on the surety bond issue, they 
had plenty of latitude, along with the 50-50 payment method, 
they have plenty of latitude, and they will use that latitude 
when they want to. But when they don't want to, they will throw 
their arms up and say, ``Well, that's the way Congress wrote 
it. That's how Bill Thomas wrote it.''
    That is not true. They have the authority and they refuse 
to use it. So please don't be misled that ``Oh, no, we did 
it,'' and beat yourselves up, because certainly on some things 
Congress has to do things legislatively, but on the other hand, 
HCFA does have the authority to do it. And, Chairwoman, I would 
respectfully request that you call Nancy-Ann Min Deparle, or 
ask Mr. Talent to do that, and ask her some of these questions. 
I would be honored to testify at that hearing.
    Mr. Pascrell. I think you ought to run for Congress. 
[Laughter.]
    Mr. Lara. I am planning on it, sir. Thank you.
    Mr. Pascrell. I mean, you go straight to the issue.
    Mr. Lara. Thank you, sir.
    Mr. Pascrell. I have no other questions. Well, I have other 
questions but we have to go and vote. Thank you, all of you.
    Chairwoman Kelly. I thank all of you, also.
    I just wanted to ask Mr. Hexter, I did use some of your 
testimony before. I just want to talk with you a minute about 
the public relations awareness that you think we could--have 
you got any suggestions?
    Mr. Hexter. I do. One of the issues that you raised early 
on was how to get the attention of the agencies, and it occurs 
to me that Ms. McDonald waived the Miranda rights, loosely 
used. But it seems to me that anytime the interaction between 
the government and the individual business owners is, from the 
business owners' perspective, as limited as possible, we would 
rather not know and not have to interact.
    But at the point at which we do encounter those agencies, 
that is when the Miranda rights are important, and it seems to 
me that we could get the agencies' attention if, A, they had to 
deliver the Miranda rights with the visit and, B, that that in 
fact put a delay in the enforcement action, unless there is a 
health and safety issue that is clear and present, so that the 
attention of the business owner was drawn to the fact that 
there is an agency out there that could help and could in fact 
run interference. That would force the agencies themselves to 
take a closer look at their enforcement actions and make sure 
they have something that was valid and would last.
    It bothers me that we get harassment enforcement by what I 
will refer to as rogue agents who haven't bought into the new 
culture, so you have got to find a way to delay that process, 
and I think you will get the attention of the people you need 
to get the attention of. We don't need toinform the entire 
business community, as Ann indicated, if it doesn't apply to them. We 
need to make sure that the people it applies to know that there is help 
out there, and that should be at the point of the encounter. Every 
agency should deliver that Miranda rights, and then have to step back 
so that the employer/business owner could cure the problem.
    Chairwoman Kelly. Well, if I remember correctly, there is a 
30-day time period for compliance once you are notified that 
there is a problem with an agency. However, I am going to look 
into that because I am not really sure of it. But if I 
understand what you just said, you feel that an agent going in 
from an agency to a small business should allow the small 
business first of all to understand where there is a problem 
that brought the agent into the business, and then there should 
be a wait period of time for that business to be allowed to 
correct and work with the agency so they can correct, prior to 
anything else happening. Is that what you are asking, what you 
are saying?
    Mr. Hexter. That is right. Yes, that is where I am coming 
from. Your question dealt with informing everybody about the 
availability of the tools, and I am saying that the only people 
who need to be informed are those that it applies to. We may 
not be missing the mark as badly as we think, but we need to 
make sure that everybody that it does apply to gets 
appropriately informed and then can use the tool. It is one 
thing to say it is out there. It is another thing to be able to 
use that tool.
    Chairwoman Kelly. Good. I thank you very much. This has 
really been an interesting hearing. I appreciate all of you 
being here. I especially appreciate our roundtable 
participants.
    You are wonderful to come and spend some more of your time 
here with us. And I hope that the hearing, I am certainly going 
to work to try to make sure that this hearing bears some fruit 
and does have some--we are able to get some response from the 
agencies on this. So thank you so much for your participation, 
and I have to bang this gavel here. We are adjourned.
    [Whereupon, at 12:13 p.m., the Subcommittee was adjourned.


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