[Federal Register Volume 87, Number 43 (Friday, March 4, 2022)]
[Rules and Regulations]
[Pages 12399-12401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-04524]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 6

Public Health Service

42 CFR Part 1

Centers for Medicare and Medicaid Services

42 CFR Part 404

Office of the Inspector General

42 CFR Part 1000

Office of the Secretary

45 CFR Part 8

Administration for Children and Families

45 CFR Parts 200, 300, 403, 1010, and 1300

[Docket No. HHS-OS-2020-0012]
RIN 0991-AC24


Securing Updated and Necessary Statutory Evaluations Timely; 
Administrative Delay of Effective Date

AGENCY: Department of Health and Human Services (HHS).

ACTION: Final rule; delay of effective date.

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SUMMARY: The Department of Health and Human Services (HHS or 
Department) is postponing, pending judicial review, the effective date 
of a final rule entitled ``Securing Updated and Necessary Statutory 
Evaluations Timely'' (SUNSET final rule) and published in the Federal 
Register of January 19, 2021, and a final rule correction published in 
the Federal Register of March 23, 2021.

DATES: As of March 4, 2022, the effective date of the SUNSET final rule 
published January 19, 2021 (86 FR 5694), which was delayed until March 
22, 2022, by an order that took effect as of March 19, 2021 (86 FR 
15404, March 23, 2021), is further delayed pursuant to 5 U.S.C. 705 for 
six months until September 22, 2022.
    As of March 4, 2022, the effective date of the correction published 
March 23, 2021 (86 FR 15404), is delayed until September 22, 2022.

FOR FURTHER INFORMATION CONTACT: Daniel J. Barry, Acting General 
Counsel, 200 Independence Avenue SW, Washington, DC 20201; or by email 
at [email protected]; or by telephone at 1-877-696-6775.

SUPPLEMENTARY INFORMATION:

I. Overview

    The SUNSET final rule, if implemented, would establish a new 
process for regulatory review of HHS regulations, which includes the 
automatic expiration of regulations under certain circumstances. It was 
scheduled to take effect on March 22, 2021. After a lawsuit was filed 
on March 9, 2021, seeking to overturn the SUNSET final rule, HHS issued 
an Administrative Delay of Effective Date (First Administrative Delay), 
which took effect as of March 19, 2021, which postponed the effective 
date of the SUNSET final rule, pending judicial review, until March 22, 
2022. 86 FR 15404 (Mar. 23, 2021).
    After conducting a thorough review of the SUNSET final rule 
including the oral and written comments on its proposal and the 
allegations in the lawsuit, HHS published a notice of proposed 
rulemaking to withdraw or repeal the SUNSET final rule (Withdrawal 
NPRM). 86 FR 59906 (Oct. 29, 2021). The comment period on the 
Withdrawal NPRM closed on December 28, 2021. HHS received approximately 
80 comments. Some comments were submitted by Plaintiffs in the lawsuit 
seeking to overturn the SUNSET final rule, and their comments 
incorporated by reference the Complaint they had filed.
    HHS is currently in the process of reviewing the comments and 
developing a final rule. For the reasons described below, HHS finds 
that the interests of justice require that the SUNSET final rule's 
effective date be postponed pending judicial review because: (1) A 
postponement will permit HHS to continue and complete its review of the 
SUNSET final rule in light of the claims raised in the litigation; (2) 
the resolution of the rulemaking will inform the government's position 
in this lawsuit; and (3) based on HHS's review of the Complaint, HHS 
believes that the Court may find that: (a) Some of Plaintiffs' claims 
have merit; (b) Plaintiffs' allegations of harm are credible; and (c) 
the balance of equities and the public interest warrant postponement of 
the effective date to preserve the status quo while the Court considers 
the challenge to the SUNSET final rule.

II. Background

A. The SUNSET Proposed and Final Rules

    On November 4, 2020, HHS published a notice of proposed rulemaking 
entitled ``Securing Updated and Necessary Statutory Evaluations 
Timely'' (SUNSET proposed rule). 85 FR 70096. The SUNSET proposed rule 
provided that comments could be submitted until December 4, 2020, 
except for comments on the portion of the rule amending 42 CFR parts 
400-429 and parts 475-499, which were due by January 4, 2021. HHS 
received 532 comments total throughout the 60-day comment period, and 
the commenters ``generally opposed the proposed rule, although some 
commenters supported it.'' 86 FR 5704.
    HHS also held a public hearing on November 23, 2020, to receive 
information and views on the proposed rule (Public Hearing). Over 
twenty interested parties provided oral comments at the Public Hearing. 
See Transcript, Public Hearing on the

[[Page 12400]]

Securing Updated and Necessary Statutory Evaluations Timely Notice of 
Proposed Rulemaking (Nov. 23, 2020) (available at https://www.regulations.gov/document/HHSOS-2020-0012-0501) (Public Hearing 
Transcript).
    HHS issued the SUNSET final rule on January 19, 2021. 86 FR 5694. 
The substance of the SUNSET proposed and final rules are more fully 
described in the First Administrative Delay, and that description is 
adopted by reference into this preamble. See 86 FR 15405.

B. The Santa Clara Complaint

    On March 9, 2021, the County of Santa Clara, California Tribal 
Families Coalition, National Association of Pediatric Nurse 
Practitioners, American Lung Association, Center for Science in the 
Public Interest, and Natural Resources Defense Council sued the 
Department seeking to overturn the SUNSET final rule under the 
Administrative Procedure Act (APA). Complaint, County of Santa Clara v. 
HHS, Case No. 5:21-cv-01655-BLF (N.D. Cal.). The substance of the 
Complaint is more fully described in the First Administrative Delay, 
and that description is adopted by reference into this preamble. See 86 
FR 15405.

C. The Administrative Delay of Effective Date and Stay of Litigation.

    On March 9, 2021, HHS issued the First Administrative Delay, which 
took effect as of March 19, 2021, which postponed the effective date of 
the SUNSET final rule, pending judicial review, until March 22, 2022. 
HHS explained that it believed that the Court may find: (a) That some 
of Plaintiffs' claims have merit; (b) that Plaintiffs' allegations of 
harm are credible; and (c) that the balance of equities and the public 
interest warrant postponement of the effective date pending judicial 
review. Accordingly, the Department found that the interests of justice 
required a postponement in order to preserve the status quo, because, 
if the rule took effect while HHS was evaluating the rule in light of 
the claims raised in litigation, it could create significant 
obligations for HHS, cause confusion for the public, including 
Plaintiffs, and may lead to compliance costs as entities, including 
Plaintiffs, plan steps necessary to deal with the rule's 
implementation. HHS also observed that it was unaware of any benefits 
from the implementation of the SUNSET final rule that would be 
significantly curtailed from a stay of its effective date. See 86 FR 
15404-08.
    With respect to the Santa Clara litigation, the parties requested 
that the court stay the case on the ground that HHS was reviewing the 
SUNSET final rule in light of Plaintiffs' claims raised in this 
litigation and needed additional time to evaluate the claims and its 
position before taking further steps in the litigation. The court 
granted the stay. Order, County of Santa Clara v. HHS, Case No. 5:21-
cv-01655-BLF (N.D. Cal.) (Apr. 22, 2021). Since that time, the parties 
have periodically submitted joint status reports to the court and 
requested that the litigation stay be extended, and those requests have 
thus far, as of February 1, 2022, been granted.

D. The Withdrawal NPRM

    HHS published the Withdrawal NPRM on October 29, 2021, in which it 
proposed to withdraw or repeal the SUNSET final rule in its entirety. 
86 FR 59906. In the Withdrawal NPRM, the Department explained that, in 
issuing the SUNSET rule, it should have engaged in a more robust 
consideration of the comments and should have given greater weight to 
the potential harms to stakeholders and the public health. Therefore, 
before issuing the Withdrawal NPRM, the Department reexamined the 
SUNSET final rule in light of the allegations in the Santa Clara 
complaint, the many comments submitted to the SUNSET proposed rule 
docket and raised at the Public Hearing, and the current 
Administration's policies. That review considered the processes 
followed in issuing the SUNSET final rule, its policy goals and 
objectives, the projected effects and analysis of impacts in its 
implementation, and the legal evaluation of and support for its 
provisions, including whether the rule is consistent with all HHS 
statutory obligations and its mission to promote and protect the public 
health.
    The comment period on the Withdrawal NPRM closed on December 28, 
2021, and HHS received approximately 80 comments. HHS is actively 
engaged in considering the comments and developing a final rule.

III. Discussion

    Under 5 U.S.C. 705 of the APA, an agency ``may postpone the 
effective date of action taken by it, pending judicial review,'' when 
the ``agency finds that justice so requires.'' On March 9, 2021, HHS 
issued the First Administrative Delay after concluding that the 
interests of justice required that the SUNSET final rule be stayed 
pending judicial review. For the reasons described in the First 
Administrative Delay and as further discussed in this document, the 
Department has concluded that the considerations supporting the First 
Administrative Delay remain true today, and the interests of justice 
require that the effective date of the SUNSET final rule should be 
further stayed until September 22, 2022.
    In the First Administrative Delay, the Department explained that it 
was taking a fresh and critical look at the SUNSET final rule in light 
of the allegations in the Complaint. The Complaint alleged serious 
legal vulnerabilities of the rule, and, while HHS did not concede any 
of these claims at that time, HHS required additional time to complete 
its evaluation of the SUNSET final rule given the pending litigation. 
In addition, the Complaint raised the question as to whether the SUNSET 
final rule, issued in the final days of the last Administration, is 
consistent with the policies and goals of the current Administration, 
both in terms of the appropriate role of regulatory oversight of the 
health care industry and necessary engagement with the public, 
including tribal organizations.
    After further review of the SUNSET final rule, the allegations in 
the Complaint, and the comments on the SUNSET proposed rule, we issued 
the Withdrawal NPRM in October 2021, in which we discussed our 
tentative conclusions for further public comment. Our discussion 
included concerns regarding the procedural shortcomings of the SUNSET 
rulemaking process, the fundamental errors in its Regulatory Impact 
Analysis, and the attendant legal vulnerabilities of the SUNSET final 
rule. Our reanalysis of the regulatory impact of this rule, as set 
forth in the Withdrawal NPRM, has underscored our belief that the Santa 
Clara court could find merit in at least some of Plaintiffs' claims.
    Our review of the approximately 80 comments submitted on the 
Withdrawal NPRM is ongoing. A few substantive comments support the 
SUNSET final rule while many other substantive comments favor 
withdrawal or repeal. As noted, Plaintiffs in the Santa Clara 
litigation submitted comments on the Withdrawal NPRM that attached 
copies of the Complaint. Accordingly, HHS's consideration of the 
Complaint's critique of the SUNSET final rule are part of its ongoing 
review.
    The Complaint also alleges that Plaintiffs and others would be 
immediately harmed by the SUNSET final rule, if implemented. The 
Complaint alleges that the uncertainty resulting from its 
implementation impacts the entire healthcare sector, which accounts for 
nearly one-fifth of the U.S. economy and secures individual and 
community health for

[[Page 12401]]

hundreds of millions of Americans, and that participants in every 
single industry the Department regulates, including Plaintiffs, must 
plan their futures and operations without knowing what regulations will 
govern their businesses in these notoriously complex regulatory arenas. 
See Complaint, ]] 2, 95-122. While HHS does not concede that Plaintiffs 
would establish irreparable harm in litigation, HHS agrees that it is 
appropriate to postpone the effective date of the SUNSET final rule to 
preserve the status quo and to ensure that HHS has time to evaluate the 
rule before it takes effect to avoid the possibility of confusion among 
the regulated community. All of these potential consequences would be 
detrimental to the public health, underscoring that justice requires a 
postponement of the SUNSET final rule's effective date pursuant to 5 
U.S.C. 705.
    We further conclude that extending the effective date of the SUNSET 
final rule will create no countervailing harms because this delay 
merely continues the status quo. And because implementation of the 
regulatory review framework provided under the SUNSET final rule would 
be a complex and lengthy process, any purported benefits from the 
retirement of regulations under the new process would not accrue for 
several years. Accordingly, given the public health concerns and the 
harms from the implementation of the SUNSET final rule alleged by the 
Plaintiffs and echoed in the comments to the SUNSET proposed rule and 
the Withdrawal NPRM, and the dearth of countervailing harms from 
extending the effective date, the balance of equities and the public 
interest favor the extension of the stay of the effective date of the 
SUNSET final rule to preserve the status quo and allow for judicial 
review of its legality before any implementation.
    Accordingly, HHS is issuing this further stay of the effective date 
of this final rule pending judicial review. This postponement applies 
to all of the regulations established under the SUNSET final rule. As 
noted above, the Complaint alleges that the SUNSET final rule suffers 
from a variety of defects, including procedural defects related to its 
promulgation. The Department believes it is appropriate to review the 
entire rule in light of the claims raised in the litigation, which it 
continues to actively evaluate in conjunction with its consideration of 
the comments to the Withdrawal NPRM and its efforts to develop a final 
rule. Thus, this postponement reaches the full rule, consistent with 
the Complaint's prayer for relief.

Xavier Becerra,
Secretary.
[FR Doc. 2022-04524 Filed 3-3-22; 8:45 am]
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