[Federal Register Volume 65, Number 223 (Friday, November 17, 2000)]
[Rules and Regulations]
[Pages 69432-69439]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-29523]
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
Small Business Size Standards; Health Care
AGENCY: Small Business Administration.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Small Business Administration is adopting new size
standards for 19 Health Care industries and retaining the existing $5
million size standard for the remaining 11 Health Care industries. The
North American Industry Classification System classifies Health Care
industries under Subsector 621, Ambulatory Health Care Services;
Subsector 622, Hospitals; and Subsector 623, Nursing and Residential
Care Facilities. These revisions are made to more appropriately define
the size of businesses in these industries that SBA believes should be
eligible for Federal small business assistance programs.
DATES: This final rule is effective on December 18, 2000.
FOR FURTHER INFORMATION CONTACT: Gary M. Jackson, Assistant
Administrator for Size Standards, (202) 205-6618.
SUPPLEMENTARY INFORMATION: On May 4, 1999, the Small Business
Administration (SBA) proposed revisions to 11 size standards for the
Health Care industries (64 FR 23798). At that time, SBA size standards
were established for industries defined by the Standard Industrial
Classification (SIC) System. Effective October 1, 2000, SBA established
its size standards based on industries defined by the new North
American Industry Classification System (NAICS), and no longer uses the
SIC System (65 FR 30836, dated May 15, 2000). Accordingly, the changes
to the Health Care size standards adopted in this final rule pertain to
the NAICS industries.
The NAICS makes several noteworthy changes to the Health Care
industries listed in the SIC System. First, the NAICS changes the
terminology of the health related industries to ``Health Care'' from
``Health Services'' under the SIC System. Second, the NAICS establishes
a Sector (equivalent to a Division in the SIC System) titled ``Health
Care and Social Assistance.'' Health Services was a Major Group under
the Services Division with 19 industries. The Health Care industries
are grouped into three Subsectors (equivalent to a Major Group in the
SIC System). Third, the number of Health Care industries increases to
30 NAICS industries from 19 Health Services SIC industries.
SBA has decided to adopt the proposed revisions of May 4, 1999 to
the Health Care size standards. Most SIC Health Services industries
correspond to a NAICS industry. However, there are some Health Services
industries, or activities within an industry, that are combined with
other SIC industries to form a new Health Care NAICS industry. In these
cases, SBA has followed the guidelines it used to establish NAICS size
standards. These guidelines are described in the proposed rule of
October 22, 1999 (64 FR 57188) and the final rule of May 15, 2000 (65
FR 30836). In most cases, the NAICS size standard is the same as or
higher than the size standard SBA had proposed for the SIC industry.
Two activities in one Health Services industry, however, were
reclassified into industries outside of the Health Care with a size
standard lower than proposed for their SIC industries. The following
table lists the proposed size standards by SIC industry and adopted
size standards corresponding to the NAICS industries.
----------------------------------------------------------------------------------------------------------------
Proposed size Adopted size
standard standard
SIC code SIC industry (millions of NAICS code NAICS industry (millions of
dollars) dollars)
----------------------------------------------------------------------------------------------------------------
8011................. Offices and Clinics $7.5
of Doctors of
Medicine.
Surgical and .............. 621493 Freestanding $7.5
Emergency Centers. Ambulatory
Surgical and
Emergency Centers.
[[Page 69433]]
HMO Medical Centers. .............. 621491 HMO Medical Centers 7.5
Offices of .............. 621112 Offices of 7.5
Physicians, Mental Physicians, Mental
Health Specialists. Health (part).
Offices of .............. 621111 Offices of 7.5
Physicians Except Physicians (except
Mental Health. Mental Health
Specialists)
(part).
8021................. Offices and Clinics 5.0 621210 Offices of Dentists 5.0
of Dentists.
8031................. Offices and Clinics 5.0
of Dentists.
Offices of Doctors .............. 621111 Offices of 7.5
of Osteopathy, Physicians (except
Except Mental Mental Health
Health. Specialists)
(part).
Offices of Doctors .............. 621112 Offices of 7.5
of Osteopathy, Physicians, Mental
Mental Health. Health Specialists
(part).
8041................. Offices and Clinics 5.0 621310 Offices of 5.0
of Chiropractors. Chiropractors.
8042................. Offices and Clinics 5.0 621320 Offices of 5.0
of Optometrists. Optometrists.
8043................. Offices and Clinics 5.0 621391 Offices of 5.0
of Podiatrists. Podiatrists.
8049................. Offices and Clinics 5.0
of Health
Practitioners, NEC.
Mental Health .............. 621330 Offices of Mental 5.0
Practitioners, Health
Except Physicians. Practitioners
(except
Physicians).
Offices of Physical, .............. 621340 Offices of 5.0
Occupational, Physical,
Recreational, and Occupational, and
Speech Therapists Speech Therapists
and Audiologists. Audiologists
Offices of All
Other.
Other Offices of .............. 621399 Miscellaneous 5.0
Health Health
Practitioners. Practitioners.
8051................. Skilled Nursing Care 10.0
Facilities.
Continuing Care .............. 623311 Continuing Care 10.0
Retirement Retirement
Communities. Communities (part).
All Other Skilled .............. 623110 Nursing Care 10.0
Nursing Care Facilities (part).
Facilities.
8052................. Intermediate Care 7.5
Facilities.
Continuing Care .............. 623311 Continuing Care 10.0
Retirement Retirement
Communities. Communities (part).
Mental Retardation .............. 623210 Residential Mental 7.5
Facilities. Retardation
Facilities.
8059................. Nursing and Personal 5.0
Care Facilities,
NEC.
Continuing Care .............. 623311 Continuing Care 10.0
Retirement Retirement
Communities. Communities (part).
Other Nursing and .............. 623110 Nursing Care 10.0
Personal Care Facilities (part).
Facilities.
8062................. General Medical and 25.0 622110 General Medical and 25.0
Surgical Hospitals. Surgical Hospitals
(part).
8063................. Psychiatric 25.0 622210 Psychiatric and 25.0
Hospitals. Substance Abuse
Hospitals (part).
8069................. Specialty Hospitals 25.0
Except Psychiatric.
Children's Hospitals .............. 622110 General Medical and 25.0
Surgical Hospitals
(part).
Substance Abuse .............. 622210 Psychiatric and 25.0
Hospitals. Substance Abuse
Hospitals (part).
Other Specialty .............. 622310 Specialty (except 25.0
Hospitals. Psychiatric and
Substance Abuse)
Hospitals.
8071................. Medical Laboratories 10.0
Diagnostic Imaging .............. 621512 Diagnostic Imaging 10.0
Centers. Centers.
Medical .............. 621511 Medical 10.0
Laboratories, Laboratories.
Except Diagnostic
Imaging Centers.
8072................. Dental Laboratories. 5.0 339116 Dental Laboratories (\1\)
8082................. Home Health Care 10.0 621610 Home Health Care 10.0
Services. Services.
8092................. Kidney Dialysis 25.0 621492 Kidney Dialysis 25.0
Centers. Centers.
8093................. Specialty Outpatient 7.5
Facilities, NEC.
Family Planning .............. 621410 Family Planning 7.5
Centers. Centers (part).
Outpatient Mental .............. 621420 Outpatient Mental 7.5
Health Facilities. Health and
Substance Abuse
Centers.
Other Specialty .............. 621498 All Other 7.5
Outpatient Outpatient Care
Facilities. Centers.
8099................. Health and Allied 7.5
Services, NEC.
Blood and Organ .............. 621991 Blood and Organ 7.5
Banks. Banks.
Medical Artists..... .............. 541430 Graphic Design 5.0
Services (part).
Medical Photography. .............. 541922 Commercial 5.0
Photography (part).
Childbirth .............. 621410 Family Planning 7.5
Preparation Classes. Centers (part).
Other Health and .............. 621999 All Other 7.5
Allied Services. Miscellaneous
Ambulatory Health
Care Services.
----------------------------------------------------------------------------------------------------------------
\1\ 500 Employees.
[[Page 69434]]
As shown in the table, the adopted size standard for doctors of
osteopathy is $7.5 million, although the proposed size standard for
this industry was $5 million. Under the NAICS, SIC 8031 (Offices and
Clinics of Doctors of Osteopathy) was combined into NAICS 621111
(Offices of Physicians) and NAICS 621112 (Office of Physicians, Mental
Health Specialists). These two industries were substantially created
from SIC 8011 (Offices and Clinics of Doctors of Medicine), where SBA
proposed and is adopting $7.5 million. Consistent with SBA's guidelines
in establishing NAICS size standards, the size standard for the SIC
code that accounted for the greatest amount activity within the new
NAICS is the size standard adopted for that NAICS code. The size of the
offices and clinics of medical doctors industry is significantly larger
than the offices and clinics of doctors of osteopathy industry.
A similar situation arose with SIC codes 8052 (Intermediate Care
Facilities) and 8059 (Nursing and Personal Care Facilities, Not
Elsewhere Classified). SBA proposed $7.5 million for SIC 8052 and $5
million for SIC 8059. However, most of SIC 8052 and all of SIC 8059
were combined with SIC 8051 (Skilled Nursing Care Facilities) to form
two NAICS industries--NAICS 623311 (Continuing Care Retirement
Communities) and 623110 (Nursing Care Facilities). SIC 8051 is much
greater in size than both SIC 8052 and 8059 combined. Thus, the $10
million size standard proposed for SIC 8051 is adopted for both NAICS
623311 and 623110.
The size standard for Dental Laboratories changed to 500 employees
effective October 1, 2000. This industry involves the manufacture of
dentures, crowns and other dental appliances. Under the SIC system, the
manufacture of dental appliances was classified as a manufacturing
activity unless the dental appliances were produced on a custom or
individual basis. The SIC system classified those latter activities
within the Services Division under the Dental Laboratories industry
(SIC 8072). NAICS now classifies all manufacturing of dental appliances
as manufacturing, and placed the Dental Laboratories industry under the
manufacturing sector--NAICS 339116. SBA's long standing policy has been
to establish a size standard no lower than 500 employees for a
manufacturing industry. This change was discussed and proposed in the
October 22, 1999 proposed rule. SBA received no comments on this change
and adopted the 500 employee size standard for NAICS 339116 in the May
15, 2000 final rule.
Two activities within SIC 8099, Health and Allied Services, Not
Elsewhere Classified, were reclassified to industries in the
Professional, Scientific, and Technical Services Sector with a size
standard lower than proposed for SIC 8099. The activity of Medical
Artists was combined with SIC 7336, Commercial Art and Graphic Design
to form NAICS 541430, Graphic Design Services. The $5 million size
standard for SIC 7336 was adopted for NAICS 541430 since it accounts
for virtually all of the new NAICS industry.
The activity of Medical Photography was classified into NAICS
541922, Commercial Photography. That NAICS industry is the same as the
SIC 7335 with the addition of Medical Photography. The $5 million size
standard of SIC 7335 was adopted for NAICS 541922 since it accounts for
virtually all the activities within the NAICS industry.
Background
SBA proposed changes to size standards based on its analysis of the
latest available economic characteristics data on the Health Care
industries from the U.S. Bureau of the Census (the Census Bureau) and
Federal contract award data from the Federal Procurement Data Center.
(At the time of the proposed rule, these data, and SBA's size
standards, were based on the SIC system. To be consistent with the
newly implemented NAICS size standards, the remainder of this rule will
use the NAICS terminology to refer to industries affected by this rule.
In a few cases, however, references are made to SIC industries to
ensure the information discussed is accurate.) With regard to the
economic characteristics data, SBA evaluated average firm size,
distribution of industry receipts by size of firm, start-up costs, and
industry competition of firms in the Health Care industries. SBA
compared these characteristics to the average characteristics of all
industries with a $5.0 million size standard (the most common size
standard established for nonmanufacturing industries and referred to as
the ``anchor'' size standard for the nonmanufacturing industries).
Doing so enabled SBA to determine whether it should propose size
standards for the Health Care industries that would be the same,
higher, or lower than the $5 million anchor size standard.
In addition to the economic characteristics data, SBA reviewed the
percent of total Federal contract dollars awarded to Health Care small
businesses to determine if small businesses were obtaining a reasonable
share of Federal contracts. For three industries covering Offices and
Clinics of Medical Doctors, Specialty Outpatient Facilities, and Health
and Allied Service--Not Elsewhere Classified (formally SIC codes 8011,
8093, and 8099, respectively), the proportion of Federal procurement
was so much lower than that of firms at the anchor size that SBA
proposed increasing those three size standards from the anchor size of
$5 million to $7.5 million. For a further discussion of SBA's size
standard methodology and analyses leading to the proposed size
standards see the proposed rule of May 4, 1999 (64 FR 23798). What
follows is a summary of the comments received and an explanation of the
decision to adopt the proposed increases to the Health Care industries.
Discussion of Comments on the Proposed Rule
SBA received 17 timely comments on the proposed size standards. Two
of these included comments by others in their organization. Of the 17
comments, two were from Federal agencies, one comment came from an
industry association, and the remainder came from representatives of
Health Care firms.
In summary, one commenter supported the proposed size standards
without comment. One hospital association generally supported the
proposed rule, but had several recommendations to modify it, which are
discussed below. All of the others supported an increase in the size
standards, but higher than the ones proposed by SBA.
The commenters raised eight major issues concerning the proposed
size standards. Because of the comments, we reevaluated the data before
adopting the proposed size standards. The issues are: (1) What are the
true small business contracting opportunities in the Health Care
industries; (2) do the proposed size standards provide for an
appropriate increase to the existing size standards; (3) whether there
should be a common size standard for all Health Care industries; (4)
whether there should be an employee-based size standard; (5) whether we
should establish a new industry code for Health Maintenance
Organizations; (6) whether we should have the same size standard for
doctors of medicine as for doctors of osteopathy; (7) whether Medicare
and Medicaid distributions should be counted as Federal procurements;
and (8) whether the receipts of affiliated health care services should
be included in gross
[[Page 69435]]
income. Below we explain our response to each issue.
What Are the True Small Business Contracting Opportunities in the
Health Care Industries?
The supporters of size standards higher than those proposed most
often gave reasons relating to Federal contracting as the basis for a
change. Commenters stated that firms at the proposed size standard are
not large enough to compete successfully for the size and type of
contracts offered in today's procurement environment. They stated that
in recent years Federal contracts have grown progressively larger and
more comprehensive. These contracts are generally multi-year and
regional and often include services other than health care such as
establishing, recruiting, and monitoring doctor or dentist practices.
These commenters argued that size standards higher than those proposed
are needed to recognize the size of small firms that can perform on
these newer contracts.
Specifically, comments expressed a consistent and serious concern
that the proposed size standard of $7.5 million for Offices and Clinics
of Doctors of Medicine (SIC 8011), Intermediate Care Facilities (SIC
8052), Specialty and Outpatient Facilities (SIC 8093), and Health and
Allied Services, NEC (SIC 8099) would preclude most firms from Federal
procurement. They contended that the impact of keeping the size
standards as low as proposed would be that few firms could qualify as
small given the size of the health care contracts, and those that did,
would quickly outgrow their small business status. Likewise, some
Federal contracting officials expressed concern that the government
would lose ``stellar performers'' who would no longer be considered
small after receiving just two or three contracts.
In addition, several comments raised the issue that very few
hospitals would qualify as small with the proposed $25 million size
standard. They believed that if this size standard were adopted for
hospitals, Federal agencies would be limited in their ability to
support small business programs, such as the small business set-aside
program.
Procuring agencies' comments opposing the ``low'' proposed size
standards for hospitals also stated that they currently have problems
meeting their commitment to include more small businesses because
finding for-profit hospitals in some areas is difficult. If the for-
profit hospitals (that is hospitals that qualify as businesses) are
usually larger than the proposed $25 million size standard, agencies
will not be able to set aside contracts for health care services.
SBA acknowledges that Federal agencies are issuing larger contracts
than in the past. However, contract award data from the Federal
Procurement Data System do not substantiate that large dollar contracts
dominate Federal contracting to an extent that significantly limits
small business opportunities. The vast majority of Federal contract
awards are still within a size that small businesses should be capable
of performing. Without verifiable data showing that large contracts
adversely impact small business opportunities, these comments do not
support establishing size standards to accommodate what appears to be a
small proportion of overall contracting. Nonetheless, we are
researching Federal procurement patterns and trends in greater detail
to determine whether a separate size standard for Federal procurement
of Health Care may be justified in the future.
Do the Proposed Size Standards Provide for an Appropriate Increase
to the Existing Size Standards?
Most of the comments addressed the question of what size standard
should be adopted for all of the Health Care industries. All of the
comments agreed that the size standard should be increased, but most of
the comments disagreed with the proposed size standards. Most of the
comments supporting an increased size standard substantiated their
comments with reasons related to Federal procurement. However, other
reasons were also given for supporting higher size standards in the
industry, such as the mergers and affiliations with Health Maintenance
Organizations (HMOs) that were generally not a force in the health care
industries just a decade ago.
Commenters also pointed out that an increased size standard is
justified because the cost of entry into these industries has also
increased over time, especially technology costs. These technology
costs include costs for specialty diagnostic and treatment equipment
such as computer-aided imaging. Commenters cited high start-up costs
because of the specialty equipment and the high-paid staff needed to
operate them as reasons for increasing size standards in the
industries. They pointed out that not all doctors' offices are similar,
some are ``high-risk'' specialties such as radiology, obstetrics and
gynecology, and anesthesiology. These types of offices have high start-
up and operating costs in addition to the physician and nursing
compensation. Therefore, if all of the specialties have the same size
standard, some offices within the same industry will be at a bigger
disadvantage to remain within the ``small'' status.
SBA is not convinced, at this time, that an additional increase
over the size standards proposed is justified. Many of the factors
discussed above are reflected in the Census Bureau data that SBA uses
to evaluate industry size standards. Later this year SBA will receive
the 1997 Economic Census on the Health Care industries. If any
significant differences are observed between the 1992 and 1997 data,
SBA will consider a larger size standard where appropriate.
Whether There Should Be a Common Size Standard for All Health Care
Industries?
A majority of the commenting firms and both Government agencies
argued for a common size standard all Health Care industries. The most
often mentioned size standard was $25 million. The basis for these
comments was the merger, affiliation and HMO activity that has
integrated the various industries more so than in the past. For
example, hospitals have home health care businesses, HMOs link formerly
independent private offices together into larger networks, and
independents (that decide not to join an HMO) may merge or affiliate to
continue to be viable in this new environment. These firms integrate
the skills of each profession to offer quality services to their
clients.
SBA agrees with the desirability of establishing the same size
standard for industries in the same Subsector provided that industry-
specific factors are reasonably consistent within that Subsector.
However, neither the industry characteristic data nor the Federal
procurement data supports one size standard for all Health Care
industries. For example, we could find no justification in the economic
characteristics data to continue the same size standard of $5 million
for general medical and surgical hospitals and physician's offices.
Accordingly, SBA does not believe that there should be a common size
standard for all Health Care industries. Because the data support
different levels, whichever one was selected would only fit some of the
industries. Furthermore, based on the data, no case could be made to
support that a $25 million size standard would be appropriate for all
Health Care.
[[Page 69436]]
Whether There Should Be an Employee-Based Size Standard?
Two comments recommended that SBA adopt an employee-based size
standard for all Health Care industries rather than a receipts-based
size standard. The comments provided no supporting evidence showing why
number of employees is a better measure of size than receipts. The
Small Business Act requires us to use receipts as the basis for size
standards in the service industries (Small Business Act
(Sec. 3(a)(2)(C))). In addition, SBA's policy has been to use employee-
based size standards for manufacturing, mining and wholesale, and
receipts-based size standards for most non-manufacturing industries.
Therefore, SBA will continue to use receipts as the basis for size
standards in the Health Care industries.
Whether We Should Establish a New Industry Code for HMOs?
Some of the comments expressed the need for a new industry to cover
the HMO industry. On October 1, 2000, SBA implemented size standards
based on NAICS industries. The NAICS lists three codes for HMOs--(1)
facilities actually providing health care listed as an ``HMO Medical
Center'' (NAICS 621491), (2) health practitioners contracting to
provide their services to subscribers of prepaid health plans within
``Offices of Physicians'' (NAICS 62111), and (3) organizations that
underwrite and administer health and medical insurance policies, but
which do not directly provide health care services as ``Direct Health
and Medical Insurance Carriers'' (NAICS 524114).
Because HMOs have not previously been designated as a separate
industry, the Census Bureau has not collected the same data for HMOs as
it has collected for SIC industries. Now that the NAICS has identified
specific industries for HMOs, the 1997 Economic Census will have data
on HMOs. We expect to have that data later this year and will review
the HMO size standards at that time.
Whether We Whould Have the Same Size Standard for Doctors of
Medicine as for Doctors of Osteopathy?
In response to SBA's review of the Health Care size standards and
to our proposal to increase the size standards for doctors of medicine,
we received comments recommending that doctors of medicine and doctors
of osteopathy have the same size standards. The commenters stated that
both health care providers basically meet the same educational
requirements and perform the same services. The proposed rule included
doctors of osteopathy in the group of health care services remaining at
the $5 million while the size standard for doctors of medicine was
proposed to be $7.5 million.
Based on the comments, we agree that the same standard should be
adopted for doctors of osteopathy and doctors of medicine recognizing
that the two professions should be considered as one for most purposes.
Furthermore, NAICS recognizes that these two types of practitioners
should be considered the same and combined doctors of osteopathy and
doctors of medicine into a new industry titled ``Offices of
Physicians'' (NAICS code 62111). As previously discussed, $7.5 million
is being adopted for this industry and results in the same size
standard being applicable to doctors of medicine and doctors of
osteopathy.
Whether Medicare and Medicaid Distributions Should Be Counted as
Federal Procurements?
Although we specifically requested comments on this issue in the
proposed rule, we received only one comment. A hospital association
representing nearly 5,000 hospitals took a strong stand against this
approach. It contended that the payments are to and for health care
beneficiaries, not the health care provider. As such, these payments
are not discretionary but mandatory payments for services obtained by
beneficiaries. In addition, it stated that health care services are
purchased by beneficiaries based on consumer preference in a
competitive environment. SBA agrees and does not believe the
distribution of Medicare and Medicaid funds should influence the
establishment of size standards.
Whether the Receipts of Affiliated Health Care Services Should Be
Included in Gross Income?
The Health Care industries are continuing to evolve. Since the
advent of managed care changed the Health Care landscape, other
networks and alliances have emerged to respond to this new environment.
Many hospitals own or control home health services, physician clinics,
medical laboratories or dialysis centers. SBA's regulations require
that the income of all affiliates be included when calculating average
annual receipts. We received one comment on this subject. A hospital
association recommended that income from such hospital affiliates not
be taken in consideration when calculating either the average annual
receipts of the hospital or the home health services, physician
clinics, medical laboratories or dialysis centers so that hospital
affiliates could qualify as small businesses.
Affiliation is a key concept in determining which businesses are
small. One of the criteria for being a small business under the Small
Business Act (Sec. 3(a)) is that it be independently owned and
operated. Businesses owned or controlled by other concerns have access
(actual or potential) to resources not available to other similar
businesses. The Census Bureau data we use to evaluate size standards
captures affiliation through ownership among businesses. Other new
relationships in terms of networks and alliances may have to be looked
at on a case-by-case basis. We believe our current affiliation
regulations are adequate to distinguish relationships that lead to
control, and, thus, when we should consider businesses affiliated (see
13 CFR 121.103).
Why We Are Adopting These Size Standards?
Comments to the proposed rule generally argued for higher size
standards because of trends in Federal procurement. They also argued
that the proposed size standards were not high enough to effectively
help small businesses obtain additional Federal contracting
opportunities. They recommended that we adopt a much higher size
standard, such as $25 million, but did not identify supporting data.
In view of these comments, SBA had three viable options; (1) adopt
the proposed standards, (2) revise the size standards upward based on
comments without supporting data, or (3) suspend action on the size
standards and wait for more current data.
SBA decided to go with option one--adopt the size standards as
proposed. SBA does not believe that the reasons given by the comments
for a $25 million size standard, in the absence of supporting data, are
sufficient to support that level. SBA cannot follow larger and larger
Federal contracts with increasing size standards when industry
characteristics do not otherwise support the action. Also, size
standards are used for purposes other than Federal procurement, such as
regulatory flexibility analyses and SBA financial assistance programs.
Thus, we need to ensure that size standards are viable for a variety of
uses.
Because most of the comments expressed concerns in the Federal
procurement area, we recognize that we need to consider establishing a
size standard just for the purpose of Federal procurement of Health
Care. Our preliminary work on this approach
[[Page 69437]]
shows that more research is needed to determine if size standards
larger than adopted by this final rule are supportable and how to best
describe Federal procurements for Health Care. If we believe a
different standard(s) is justified, a new proposed rule will be issued.
Meanwhile, firms in these industries will benefit from the increase
made in this final rule. SBA chose not to suspend action on the
proposed size standards until we have more current data because the
proposed higher size standards will make more opportunities available
for small businesses than retaining the current size standards and all
of the commenters supported higher size standards for the Health Care
industries.
Compliance With Executive Orders 12866, 12988, and 13132, the
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866.
This is not a major rule under the Congressional Review Act, 5
U.S.C. 800.
Under the Regulatory Flexibility Act (RFA), this rule may have a
significant impact on a substantial number of small entities.
Immediately below, SBA sets forth a final regulatory flexibility
analysis (FRFA) of this final rule addressing the following questions:
(1) What is the need for and objective of the rule, (2) what are the
significant issues raised by the commenters in response to the initial
regulatory flexibility analysis (IRFA), (3) what is SBA's assessment of
those IFRA issues, (4) what changes if any are made from the proposed
rule as a result of the comments on IFRA, (5) what is SBA's description
and estimate of the number of small entities to which the rule will
apply, (6) what is the projected reporting, record keeping, and other
compliance requirements of the rule, and an estimate of the classes of
small entities which will be subject to the requirements, (7) what type
of type of professional skills are necessary to prepare the required
reports or records, (8) what are the steps SBA has taken to minimize
the economic impact on small entities, (9) what are the legal policies
or factual reasons for selecting the alternative adopted in the final
rule, and (10) what alternatives did SBA reject.
(1) What Is the Need for and Objective of the Rule?
These revisions are made to more appropriately define the size of
businesses in these industries that SBA believes should be eligible for
Federal small business assistance programs.
(2) What Are the Significant Issues Raised by the Commenters in
Response to the IRFA?
The comments raised eight major issues concerning the proposed size
standards, but none of the comments addressed the IRFA in the proposed
rule.
(3) What Is SBA's Assessment of Those IFRA Issues?
No issues were raised in response to the IFRA, so SBA had no issues
to assess.
(4) What Changes if any Are Made From the Proposed Rule as a Result of
the Comments on IFRA?
None, since no comments were received on the proposed rule
concerning the IRFA.
(5) What Is SBA's Description and Estimate of the Number of Small
Entities to Which the Rule Will Apply?
SBA estimates that 4,700 additional firms will be considered small
as a result of this final rule. These firms will be eligible to seek
available SBA assistance provided that they meet other program
requirements. Of the additional firms gaining eligibility, more than
half would be Offices and Clinics of Doctors of Medicine, and Skilled
Nursing Care Facilities. Firms becoming eligible for SBA assistance as
a result of this rule cumulatively generate more than $50 billion in
annual sales; total sales in all twelve industries receiving a size
standards increase are $544 billion.
(6) What Is the Projected Reporting, Record Keeping, and Other
Compliance Requirements of the Rule and an Estimate of the classes of
small entities Which Will Be Subject to the Requirements?
The new size standards are not expected to impose any additional
reporting, record keeping or compliance requirements on small entities
because a change in size standards does not affect their business
operations. Increasing size standards provides more access to SBA
programs that assist small businesses, but does not impose a regulatory
burden as they neither regulate nor control business behavior.
(7) What Type of Professional Skills Are Necessary to Prepare the
Required Reports or Records?
No reports or records are required as a result of changing the size
standards.
(8) What Are the Steps SBA Has Taken to Minimize the Economic Impact on
Small Entities?
Most of the economic impact on small entities will be positive. The
most significant benefits to businesses that would obtain small
business status as a result of adoption of this final rule are: (1)
Eligibility for the Federal Government's procurement preference
programs for small businesses 8(a) firms, small disadvantaged
businesses and small businesses located in Historically Underutilized
Business Zones) and (2) the eligibility for SBA's financial assistance
programs such as 7(a) and 504 business loans. SBA estimates that firms
gaining small business status could potentially obtain Federal
contracts worth $325 million per year under the small business set-
aside program, the 8(a) program or unrestricted contracts. This
represents 7.4 percent of the $4.4 billion the Federal government
awarded in these nineteen Health Care industries during fiscal year
1999. Under SBA's 7(a) Guaranteed Loan Program and Certified
Development Company (504) Program, SBA estimated that less than $4
million in new loans could be made to these newly defined small
businesses. During fiscal year 1999, $600 million in loans were
guaranteed by SBA under these two financial programs for firms in the
Health Care industries. Because of the size of the loan guarantees,
most loans are made to small businesses well below the size standard.
(For example, more than 95% of the 1999 loans were made to firms with
less than $3.5 million in receipts.) Thus, increasing the size standard
would likely result in only a small increase in small business
guaranteed loans to businesses in these Health Care industries.
The competitive effects of size standard revisions differ from
those normally associated with other regulations which typically burden
smaller firms to a greater degree than larger firms in areas such as
prices, costs, profits, growth, innovation and mergers. The change to
size standards is not anticipated to have any appreciable affect on any
of these factors. Firms affected by this rule-making would be eligible
to seek available SBA assistance provided that they meet other program
requirements. However, small businesses, 8(a) firms, or small
disadvantaged businesses much smaller than the size standard for their
industries may be less successful in competing for some Federal
procurement opportunities due to the presence of larger newly defined
small businesses. On the other hand, with
[[Page 69438]]
more and larger small businesses competing for small business set-aside
and 8(a) procurements, contracting agencies are likely to increase the
overall number of contracting opportunities available under these
programs.
(9) What Were the Legal Policies or Factual Reasons for Selecting the
Alternative Adopted in the Final Rule?
As stated in 15 U.S.C. 632(a)(3) and 13 CFR 121.102, SBA is to
consider the differences in industries when establishing size
standards. SBA is not convinced, at this time, that an additional
increase over the size standards proposed is justified. Many of the
factors discussed in the comments are reflected in the Census Bureau
data that SBA uses to evaluate industry size standards, so they are
already included in our analysis published in the proposed rule. Later
this year SBA will receive the 1997 Economic Census on the Health Care
industries. If any significant differences are observed between the
1992 and 1997 data, SBA will consider new size standards where
appropriate. Nonetheless, we are researching Federal procurement
patterns and trends in greater detail and will evaluate the 1997
Economic Survey data to determine whether an increased size standard
for Federal procurement of Health Care is justified.
(10) What Alternatives Did SBA Reject?
SBA acknowledges that Federal agencies are issuing larger contracts
than in the past. However, contract award data from the Federal
Procurement Data System do not substantiate that large dollar contracts
dominate Federal contracting to an extent that significantly limits
small business opportunities. The vast majority of Federal contract
awards are still within a size that small businesses should be capable
of performing. Without verifiable data showing that large contracts
adversely impact small business opportunities, these comments do not
support establishing size standards to accommodate what appears to be a
small proportion of overall contracting.
For purposes of Executive Order 13132, SBA has determined that this
rule does not have any federalism implications warranting the
preparation of a Federalism Assessment.
For purposes of Executive Order 12988, SBA certifies that this rule
is drafted, to the extent practicable, in accordance with the standards
set forth in section 3 of the order.
For the purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35,
SBA certifies that this rule does not impose new reporting or
recordkeeping requirements.
List of Subjects in 13 CFR Part 121
Administrative procedure and practice, Government procurement,
Government property, Grant programs--business, Loan programs--business,
Reporting and recordkeeping requirements, Small businesses.
For reason stated in the preamble, SBA is amending 13 CFR Part 121
as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
1. The authority citation of Part 121 continues to read as follows:
Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a), 644(c), and
662(5); and Sec. 304, Pub. L. 103-403, 108 Stat. 4175, 4188.
2. In Sec. 121.201, amend the table ``SIZE STANDRDS BY NAICS
INDUSTRY,'' under the heading SECTOR 62--Health Care and Social
Assistance, revise the entries Subsector 621--Ambulatory Health Care
Services, Subsector 622--Hospitals, and Subsector 623--Nursing and
Residential Care Facilities, to read as follows:
Sec. 121.201 What size standards has SBA identified by North American
Industry Classification codes?
* * * * *
Size Standard by NAICS Industry
------------------------------------------------------------------------
Size standards in
Description number of
NAICS codes (N.E.C.=Not elsewhere employees or
classified) millions of
dollars
------------------------------------------------------------------------
* * * *
* * *
------------------------------------------------------------------------
Sector 62--Health Care and Social Assistance
------------------------------------------------------------------------
* * * *
* * *
------------------------------------------------------------------------
Subsector 621--Ambulatory Health Care Services
------------------------------------------------------------------------
621111...................... Offices of Physicians $7.5
(except Mental Health
Specialists).
621112...................... Offices of Physicians, $7.5
Mental Health
Specialists.
621210...................... Offices of Dentists.... $5.0
621310...................... Offices of $5.0
Chiropractors.
621320...................... Offices of Optometrists $5.0
621330...................... Offices of Mental $5.0
Health Practitioners
(except Physicians).
621340...................... Offices of Physical, $5.0
Occupational and
Speech Therapists and
Audiologists.
621391...................... Offices of Podiatrists. $5.0
621399...................... Offices of All Other $5.0
Miscellaneous Health
Practitioners.
621410...................... Family Planning Centers $7.5
621420...................... Outpatient Mental $7.5
Health and Substance
Abuse Centers.
621491...................... HMO Medical Centers.... $7.5
621492...................... Kidney Dialysis Centers $25.0
621493...................... Freestanding Ambulatory $7.5
Surgical and Emergency
Centers.
621498...................... All Other Outpatient $7.5
Care Centers.
621511...................... Medical Laboratories... $10.0
621512...................... Diagnostic Imaging $10.0
Centers.
621610...................... Home Health Care $10.0
Services.
[[Page 69439]]
621910...................... Ambulance Services..... $5.0
621991...................... Blood and Organ Banks.. $7.5
621999...................... All Other Miscellaneous $7.5
Ambulatory Health Care
Services.
------------------------------------------------------------------------
Subsector 622--Hospitals
------------------------------------------------------------------------
622110...................... General Medical and $25.0
Surgical Hospitals.
622210...................... Psychiatric and $25.0
Substance Abuse
Hospitals.
622310...................... Specialty (except $5.0
Psychiatric and
Substance Abuse)
Hospitals.
------------------------------------------------------------------------
Subsector 623--Nursing and Residential Care Facilities
------------------------------------------------------------------------
623110...................... Nursing Care Facilities $10.0
623210...................... Residential Mental $7.5
Retardation Facilities.
623220...................... Residential Mental $5.0
Health and Substance
Abuse Facilities.
623311...................... Continuing Care $10.0
Retirement Communities.
623312...................... Homes for the Elderly.. $5.0
623990...................... Other Residential Care $5.0
Facilities.
* * * *
* * *
------------------------------------------------------------------------
Dated: November 9, 2000.
Aida Alvarez,
Administrator.
[FR Doc. 00-29523 Filed 11-16-00; 8:45 am]
BILLING CODE 8025-01-P