Background

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all Airbus Helicopters Model EC225LP helicopters. The NPRM published in the Federal Register on May 16, 2024 (89 FR 42820).

The NPRM was prompted by a report of water in the oil of an MGB, due to an incorrect installation of the upper M/R mast cover plate. In the NPRM, the FAA proposed to require replacing certain M/R mast upper stops assembly screws. The NPRM also proposed to require inspecting certain M/R mast cover plates and accomplishing MGB oil analyses and, depending on the results, replacing the M/R mast cover plate, accomplishing an additional inspection, or replacing the MGB. The NPRM proposed to prohibit installing certain M/R mast upper stops assembly screws, M/R masts with an affected M/R mast upper stops assembly screw installed, and used M/R mast cover plates on any helicopter. Lastly, the NPRM proposed to prohibit installing affected M/R masts unless the inspections are done. These actions are specified in EASA AD 2022-0104, dated June 9, 2022 (EASA AD 2022-0104).

The FAA is issuing this AD to prevent water in the MGB oil, which, if not addressed, could result in corrosion of the M/R mast and inside the MGB, degradation of the MGB, degradation of the upper stops assembly, failure of a critical part, and subsequent loss of control of the helicopter. You may examine EASA AD 2022-0104 in the AD docket at regulations.gov under Docket No. FAA-2024-1297.

The FAA received no comments on the NPRM or on the determination of the costs.

These products have been approved by the aviation authority of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in its AD referenced above. The FAA reviewed the relevant data and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on these products. Except for minor editorial changes, this AD is adopted as proposed in the NPRM.

EASA AD 2022-0104 requires replacing each M/R mast upper stops assembly screw, except those marked with “BC” on the screw head. For certain helicopters, EASA AD 2022-0104 requires inspecting a certain part- numbered M/R mast cover plate and depending on the results, replacing the cover plate and accomplishing an additional inspection. For those same certain helicopters, EASA AD 2022-0104 also requires accomplishing MGB oil analyses and, depending on the results, accomplishing an additional inspection. Depending on the results of the additional inspection following the M/R mast cover plate inspection or MGB oil analyses, EASA AD 2022-0104 requires replacing the MGB. As an option, EASA AD 2022-0104 allows replacing the MGB as an acceptable alternative method to comply with the required MGB oil sample analyses.

Lastly, EASA AD 2022-0104 prohibits installing M/R mast upper stops assembly screws—except those marked with “BC” on the screw head, M/R masts with an affected M/R mast upper stops assembly screw installed, and used M/R mast cover plates on any helicopter. EASA AD 2022-0104 also prohibits installing an affected M/R mast unless its required inspections are done.

This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

The FAA also reviewed Airbus Helicopters Alert Service Bulletin No. EC225-62A016, Revision 1, dated February 28, 2023. This material specifies procedures for inspecting the M/R mast upper stops assembly screws to determine if they're marked with “BC” on the screw head and depending on the results, replacing those screws one by one. This material also specifies procedures for checking the flatness of the M/R mast cover plate and, depending on the results, removing and discarding that cover plate, installing a flat cover plate, draining the MGB, writing to Airbus Helicopters to do a detailed MGB inspection, and removing the M/R mast. Depending on the detailed MGB inspection results, this material specifies filling the MGB with oil and installing the M/R mast; or replacing the MGB with an airworthy MGB, sending the removed MGB to an approved D-level center for repair, and installing the M/R mast.

This material also specifies procedures for collecting an MGB oil sample and sending the sample to an Airbus Helicopters approved laboratory for water content analysis. Depending on the analysis results, this material specifies draining the MGB, writing to Airbus Helicopters to do a detailed MGB inspection, and removing the M/R mast. Depending on the detailed MGB inspection results, this material specifies filling the MGB with oil and installing the M/R mast; or replacing the MGB with an airworthy MGB, sending the removed MGB to an approved D-level center for repair, and installing the M/R mast.

For certain helicopters, EASA AD 2022-0104 specifies sending oil samples to an Airbus Helicopters approved laboratory for an analysis of the water content, whereas this AD requires sending the main gearbox oil sample for water content analysis. Additionally, for those helicopters, EASA AD 2022-0104 specifies taking and analyzing the second MGB oil sample within 110 FH or 3 months after the initial oil sample, whereas this AD requires collecting the second main gearbox oil sample and sending it for water content analysis within 110 hours time-in-service or 3 months after accomplishing the initial instance of those actions, whichever occurs later. Depending on the results of the cover plate inspection or an oil sample analysis, EASA AD 2022-0104 specifies contacting Airbus Helicopters to request to accomplish a detailed inspection, which shall be accomplished by authorized Airbus Helicopters staff and the Airbus Helicopters qualified staff identify any discrepancies, whereas this AD requires a detailed inspection, which must define what is considered a discrepancy and be done in accordance with a method approved by the FAA, EASA, or Airbus Helicopters' EASA Design Organization Approval.

The FAA estimates that this AD affects 32 helicopters of U.S. Registry. Labor rates are estimated at $85 per work-hour. Based on these numbers, the FAA estimates the following costs to comply with this AD.

Replacing the M/R mast upper stops assembly screws (up to 10 screws) takes up to approximately 0.5 work-hour and parts cost up to approximately $250 (for 10 screws) for an estimated cost of up to $293 per helicopter and $9,376 for the U.S. fleet.

For certain helicopters, inspecting the M/R mast cover plate takes approximately 0.5 work-hour for an estimated cost of $43 per helicopter and up to $1,376 for the U.S. fleet. Collecting an MGB oil sample and sending the MGB oil sample for water content analysis, which is considered a reporting requirement in this AD, takes approximately 1.5 work-hours (0.5 work-hour for collecting and 1 work-hour for sending) for an estimated cost of $128 per helicopter and up to $4,096 for the U.S. fleet, per instance.

If required, replacing the M/R mast cover plate takes approximately 2 work-hours and parts cost approximately $276 for an estimated cost of $446 per helicopter. The detailed inspection that may be needed could vary significantly from helicopter to helicopter. The FAA has no data to determine the costs to accomplish the detailed inspection or the number of helicopters that may need it. Replacing an MGB takes approximately 40 work-hours and parts cost approximately $998,595 (overhauled) for an estimated cost of $1,001,995 per helicopter.

A federal agency may not conduct or sponsor, and a person is not required to respond to, nor shall a person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act unless that collection of information displays a currently valid OMB Control Number. The OMB Control Number for this information collection is 2120-0056. Public reporting for this collection of information is estimated to take approximately 1.5 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. All responses to this collection of information are mandatory. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to: Information Collection Clearance Officer, Federal Aviation Administration, 10101 Hillwood Parkway, Fort Worth, TX 76177-1524.

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

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

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

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

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

(2) Will not affect intrastate aviation in Alaska, and

(3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority, as it amends Class E airspace extending upward from 700 feet above the surface for Claremont Municipal Airport, Claremont, NH.

The FAA published a notice of proposed rulemaking for Docket No. FAA 2024-1650 in the Federal Register (89 FR 49118; June 11, 2024), proposing to amend Class E airspace extending upward from 700 feet above the surface for Claremont Municipal Airport, Claremont, NH. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received.

Class E airspace is published in paragraph 6005 of FAA Order JO 7400.11, Airspace Designations and Reporting Points, which is incorporated by reference in 14 CFR 71.1 on an annual basis. This document amends the current version of that order, FAA Order JO 7400.11J, dated July 31, 2024, and effective September 15, 2024. FAA Order JO 7400.11J is publicly available as listed in the ADDRESSES section of this document. These amendments will be published in the next update to FAA Order JO 7400.11. FAA Order JO 7400.11J lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

This amendment to 14 CFR part 71 amends Class E airspace extending upward from 700 feet above the surface within a 7.3-mile radius (previously 5.5 miles) of Claremont Municipal Airport, Claremont, NH, and within 2 miles on each side of the 093° bearing of the airport, extending from the 7.3-mile radius to 15.1 miles east of the airport. An airspace evaluation caused this action due to the decommissioning of the Claremont NDB. The increased radius encompasses the remaining instrument approaches into this airport. Controlled airspace is necessary for the safety and management of instrument flight rules (IFR) operations in the area.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” paragraph 5-6.5a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant the preparation of an environmental assessment.

In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows:

Authority for This Rulemaking

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it modifies the Air Traffic Service (ATS) route structure as necessary to preserve the safe and efficient flow of air traffic within the NAS.

The FAA published a NPRM for Docket No. FAA 2024-0367 in the Federal Register (89 FR 23532; April 4, 2024), proposing to amend RNAV Route Q-83 in the eastern United States. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received.

Subsequent to publication of the NPRM, the FAA identified that the WHTTL, NC, waypoint (WP) had been inadvertently omitted from the route description of RNAV Route Q-83. This route point is required to be added to the route description of RNAV Route Q-83 as it represents a turn point of one degree or more. The WHTTL, NC, WP is added between the EFFAY, SC, WP and the Greensboro, NC (GSO), Very High Frequency Omnidirectional Range/Tactical Air Navigation (VORTAC) in the description of Q-83. The addition of the WHTTL WP does not substantively alter the route of Q-83.

United States Area Navigation routes (Q-routes) are published in paragraph 2006 of FAA Order JO 7400.11, Airspace Designations and Reporting Points, which is incorporated by reference in 14 CFR 71.1 on an annual basis. This document amends the current version of that order, FAA Order JO 7400.11J, dated July 31, 2024, and effective September 15, 2024. FAA Order JO 7400.11J is publicly available as listed in the ADDRESSES section of this document. These amendments will be published in the next update to FAA Order JO 7400.11.

FAA Order JO 7400.11J lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

This action amends 14 CFR part 71 by amending RNAV Route Q-83 in the eastern United States. This action supports the NEC ACR Optimization Project to improve the efficiency of the NAS. The amendments are described below.

Q-83: Prior to this final rule, Q-83 extended between the JEVED, GA, WP and the SLOJO, SC, WP. The FAA removes the SLOJO WP from the route and extends Q-83 to the north between the EFFAY, SC, WP and the Greensboro, NC (GSO), VORTAC. The proposed RNAV route extension provides more efficient routing for aircraft transitioning between Jacksonville Air Route Traffic Control Center (ARTCC) and Atlanta ARTCC, as the Greensboro VORTAC is located on the boundary between Jacksonville ARTCC and Atlanta ARTCC.

Additionally, the TAALN, GA, WP and the KONEY, SC, WP are removed from the route description as they make up segments that contain a turn of less than one degree. The WHTTL, NC, WP is added between the EFFAY, SC, WP and the Greensboro, NC (GSO), VORTAC as it makes up segments that contain a turn of one degree or more. As amended, the route extends between the JEVED WP and the Greensboro VORTAC.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that only affects air traffic procedures and air navigation, it is certified that this rule, when promulgated, does not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA has determined that this airspace action of amending RNAV Route Q-83 qualifies for categorical exclusion under the National Environmental Policy Act (42 U.S.C. 4321 et seq. ) and its implementing regulations at 40 CFR part 1500, and in accordance with FAA Order 1050.1F, Environmental Impacts: Policies and Procedures, paragraph 5-6.5a, which categorically excludes from further environmental impact review rulemaking actions that designate or modify classes of airspace areas, airways, routes, and reporting points (see 14 CFR part 71, Designation of Class A, B, C, D, and E Airspace Areas; Air Traffic Service Routes; and Reporting Points); and paragraph 5-6.5b, which categorically excludes from further environmental impact review “Actions regarding establishment of jet routes and Federal airways (see 14 CFR 71.15, Designation of jet routes and VOR Federal airways ). . .”. As such, this action is not expected to result in any potentially significant environmental impacts. In accordance with FAA Order 1050.1F, paragraph 5-2 regarding Extraordinary Circumstances, the FAA has reviewed this action for factors and circumstances in which a normally categorically excluded action may have a significant environmental impact requiring further analysis. Accordingly, the FAA has determined that no extraordinary circumstances exist that warrant preparation of an environmental assessment or environmental impact statement.

In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows:

I. Executive Summary

This action extends the expiration date of SFAR No. 117, § 91.1617 of title 14, Code of Federal Regulations (CFR), from October 31, 2024, to October 31, 2027. SFAR No. 117, § 91.1617, prohibits certain flight operations in the Tehran FIR (OIIX) by all: U.S. air carriers; U.S. commercial operators; persons exercising the privileges of an airman certificate issued by the FAA, except when such persons are operating U.S.-registered aircraft for a foreign air carrier; and operators of U.S.-registered civil aircraft, except when the operator of such aircraft is a foreign air carrier. The FAA finds this action necessary to address significant unacceptable safety-of-flight risks to U.S. civil aviation that continue in the Tehran FIR (OIIX) during periods of heightened regional tensions and increased military activities, conditions that led to the January 2020 accidental shootdown of Ukraine International Airlines Flight 752 (PS 752) by Iranian air defense forces. The FAA also republishes the approval process and exemption information for this flight prohibition SFAR, consistent with other recently published flight prohibition SFARs.

The FAA is responsible for the safety of flight in the U.S. and for the safety of U.S. civil operators, U.S.-registered civil aircraft, and U.S.-certificated airmen throughout the world. Section 106(f) of title 49, U.S. Code (U.S.C.), subtitle I, establishes the FAA Administrator's authority to issue rules on aviation safety. Subtitle VII of title 49, Aviation Programs, describes in more detail the scope of the agency's authority. Section 40101(d)(1) provides that the Administrator shall consider in the public interest, among other matters, assigning, maintaining, and enhancing safety and security as the highest priorities in air commerce. Section 40105(b)(1)(A) requires the Administrator to exercise this authority consistently with the obligations of the U.S. Government under international agreements.

The FAA is promulgating this rule under the authority described in 49 U.S.C. 44701, General requirements. Under that section, the FAA is charged broadly with promoting safe flight of U.S. civil aircraft in air commerce by prescribing, among other things, regulations and minimum standards for practices, methods, and procedures that the Administrator finds necessary for safety in air commerce and national security.

This regulation is within the scope of the FAA's authority because it continues to prohibit the persons described in paragraph (a) of SFAR No. 117, § 91.1617, from conducting flight operations in the Tehran FIR (OIIX) due to the continuing significant hazards to the safety of U.S. civil flight operations in the Tehran FIR (OIIX) as described in the preamble to this final rule.

Section 553(b)(B) of title 5, U.S. Code, authorizes agencies to dispense with notice and comment procedures for rules when the agency for “good cause” finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Also, section 553(d) permits agencies, upon a finding of good cause, to issue rules with an effective date less than 30 days from the date of publication. In this instance, the FAA finds good cause to forgo notice and comment and the delayed effective date because they would be impracticable and contrary to the public interest.

Providing notice and the opportunity for the public to comment here would be impracticable. The FAA's flight prohibitions, and any amendments thereto, need to include appropriate boundaries that reflect the agency's current understanding of the risk environment for U.S. civil aviation. This allows the FAA to protect the safety of U.S. operators' aircraft and the lives of their passengers and crews without over-restricting or under-restricting U.S. operators' routing options. However, the risk environment for U.S. civil aviation in airspace managed by other countries with respect to safety of flight is fluid in circumstances involving fighting, violent extremist and militant activity, or periods of heightened tensions, particularly where weapons capable of targeting or otherwise negatively affecting U.S. civil aviation are or may be present. This fluidity, and the potential for rapid changes in the risks to U.S. civil aviation, significantly limits how far in advance of a new or amended flight prohibition the FAA can usefully assess the risk environment. The delay that would be occasioned by providing an opportunity to comment on this action would significantly increase the risk that the resulting final action would not accurately reflect the current risks to U.S. civil aviation associated with the situation and thus would not establish boundaries for the flight prohibition commensurate with those risks.

While the FAA sought and responded to public comments, the boundaries of the area in which unacceptable risks to the safety of U.S. civil aviation existed might change due to: evolving military or political circumstances; violent extremist and militant group activity; the introduction, removal, or repositioning of more advanced anti-aircraft weapon systems; or other factors. As a result, if the situation improved while the FAA sought and responded to public comments, the rule the FAA finalized might be over-restrictive, unnecessarily limiting U.S. operators' routing options and potentially causing them to incur unnecessary additional fuel and operations-related costs, as well as potentially causing passengers to incur unnecessarily some costs attributed to their time. Conversely, if the situation deteriorated while the FAA sought and responded to public comments, the rule the FAA finalized might be under-restrictive, allowing U.S. civil aviation to continue operating in areas where unacceptable risks to their safety had developed. Such an outcome would endanger the safety of these aircraft, as well as their passengers and crews, exposing them to unacceptable risks of death, injury, and property damage that could occur if a U.S. operator's aircraft were shot down (or otherwise damaged) while operating in the Tehran FIR (OIIX).

Alternatively, if the FAA made changes to the area in which U.S. civil aviation operations would be prohibited between a notice of proposed rulemaking and a final rule due to changed conditions, the version of the rule the public commented on would no longer reflect the FAA's current assessment of the risk environment for U.S. civil aviation.

In addition, seeking comment would be contrary to the public interest because some of the rational basis for the rulemaking is based upon classified information and controlled unclassified information not authorized for public release. In order to meaningfully provide comment on a proposal, the public would need access to the basis for the agency's decision-making, which the FAA cannot provide. Disclosing classified information or controlled unclassified information not authorized for public release in order to seek meaningful comment on the proposal would harm the public interest. Accordingly, the FAA meaningfully seeking comment on the proposal is contrary to the public interest.

Therefore, providing notice and the opportunity for comment would be impracticable as it would hinder the FAA's ability to maintain appropriate flight prohibitions based on up-to-date risk assessments of the risks to the safety of U.S. civil aviation operations in airspace managed by other countries, and contrary to the public interest, as the FAA cannot protect classified information and controlled unclassified information not authorized for public release and meaningfully seek public comment.

For the same reasons discussed above, the potential safety impacts and the need for prompt action on up-to-date information that is not public would make delaying the effective date impracticable and contrary to the public interest.

Accordingly, the FAA finds good cause exists to forgo notice and comment and any delay in the effective date for this rule.

The FAA originally issued a prohibition on U.S. civil aviation operations in the Tehran FIR (OIIX) after Iran conducted retaliatory ballistic missile strikes targeting U.S. air bases in Iraq on January 7, 2020, following the death of Iranian Revolutionary Guard Corps (IRGC) Quds Force Commander Qassem Soleimani in a U.S. airstrike. 1 Due to the heightened military activities in the region at that time, including the heightened alert status of Iranian military forces, and increased political tensions in the Middle East, which included the potential for further escalation, the FAA determined an unacceptable risk to U.S. civil aviation existed in the Baghdad FIR (ORBB), the Tehran FIR (OIIX), and the overwater areas of the Persian Gulf and the Gulf of Oman due to the potential for miscalculation or misidentification. 2

To address these immediate safety-of-flight hazards, on January 7, 2020, UTC, the FAA issued Notices-to-Airmen (NOTAMs) KICZ A0001/20, A0002/20, and A0003/20, which prohibited U.S. civil flight operations in the Baghdad FIR (ORBB), the Tehran FIR (OIIX), and the overwater airspace above the Persian Gulf and the Gulf of Oman, respectively. 3 Unfortunately, within hours after the FAA issued NOTAM KICZ A0002/20, Iranian air defense forces accidentally shot down PS 752 shortly after its departure from Tehran Imam Khomeini International Airport (OIIE). 4 These forces apparently misidentified the aircraft, which was conducting a regularly scheduled passenger flight, as a missile threat. 5 There were no survivors out of the 176 passengers and crew.

Following this tragedy, there was uncertainty about how long the hazards to civil aviation in the Tehran FIR (OIIX) would persist; whether Iran would be transparent in its investigation into the downing of PS 752; and whether Iran would implement changes in its air defense command and control procedures, airspace de-confliction processes, and rules of engagement for air defense engagements to reduce the risk of further tragedies sufficiently to allow for safe U.S. civil aviation operations in the Tehran FIR (OIIX). The FAA was also concerned about the risks to U.S. civil aviation associated with the wide array of military activities then occurring in, emanating from, or transiting the Tehran FIR (OIIX), in an environment of heightened regional tensions and the potential inadvertent risks from Iranian-fielded GPS and communications jammers. 6 Due to the unacceptable risk environment for U.S. civil aviation in the Tehran FIR (OIIX) created by this confluence of circumstances, on October 29, 2020, the FAA published SFAR No. 117, 14 CFR 91.1617, in the Federal Register , incorporating the flight prohibition for the Tehran FIR (OIIX) contained in NOTAM KICZ A0002/20 into the Code of Federal Regulations. 7

On September 20, 2022, the FAA published a final rule in the Federal Register extending SFAR No. 117, 14 CFR 91.1617, for an additional two years due to continued concerns, described in more detail in the preamble to that final rule, regarding the potential for unannounced Iranian ballistic missile fire, as well as UAS activity, originating from western Iran and targeting sites in the region. 8 The FAA was concerned about the safety-of-flight hazards to civil aviation and airspace de-confliction challenges posed by such activity. 9

The FAA continues to assess the situation in the Tehran FIR (OIIX) as presenting an unacceptable risk to the safety of U.S. civil aviation. Since the early October 2023 Hamas attack on Israel and the initiation of Israeli military operations in the Gaza Strip, which remain ongoing, regional tensions have further escalated, resulting in increased Iranian military activities and heightened alert status of Iranian military forces posing safety-of-flight risk concerns similar to those that led to the tragic shootdown of PS752. The FAA also has not observed any transparent sustained changes to Iran's air defense command and control procedures, airspace de-confliction procedures, and rules of engagement that would sufficiently diminish the risk of another accidental shootdown of a civil aircraft by Iranian air defense units in the Tehran FIR (OIIX) during future periods of heightened tensions for U.S. civil aviation operations to resume safely.

The FAA acknowledges Iranian authorities proactively issued a series of NOTAMs to deconflict and mitigate risks to civil aviation operations prior to the April 13, 2024, retaliatory operations emanating out of western Iran, which represented some level of improved civil-military coordination. Additionally, Iranian authorities took actions to mitigate risks to civil aviation operations during the April 19, 2024, strikes in Isfahan, Iran. However, the FAA continues to closely monitor Iranian activities for indications of sustained and consistent improvements in Iran's ability to proactively mitigate risks to civil aviation operations during periods of heightened regional tensions and increased military operations in, or emanating out of, the Tehran FIR (OIIX).

Additionally, the FAA has continued concerns regarding the potential for unannounced Iranian ballistic missile launches and weaponized UAS activity originating from Iran and targeting sites across the region. For example, in January 2024, Iran conducted uncoordinated cross-border attacks on targets in Syria, Iraq, and Pakistan, using weaponized UAS and missile strikes. These military operations presented airspace deconfliction challenges and safety-of-flight hazards to civil aircraft, including those operating on international air routes in the region. Additionally, the FAA has concerns with the increased level of Global Positioning System (GPS) and communications jamming in the region, which poses additional safety concerns for flight operations in the Tehran FIR (OIIX). In April 2024, Iranian authorities issued a NOTAM to advise operators of the potential for GPS/Global Navigation Satellite System interruptions in the Tehran FIR (OIIX). The FAA acknowledges Iran's provision of safety information to the international civil aviation community in this particular instance; however, the FAA reiterates the need for sustained and consistent improvements in Iran's ability to proactively mitigate risks to civil aviation operations during periods of heightened regional tensions and increased military operations in, or emanating out of, the Tehran FIR (OIIX).

Therefore, as a result of the significant continuing unacceptable risks to the safety of U.S. civil aviation operations in the Tehran FIR (OIIX), the FAA extends the expiration date of SFAR No. 117, § 91.1617, from October 31, 2024, until October 31, 2027.

Further amendments to SFAR No. 117, § 91.1617, might be appropriate if the risk to U.S. civil aviation safety and security changes. In this regard, the FAA will continue to monitor the situation and evaluate the extent to which persons described in paragraph (a) of this rule might be able to operate safely in the Tehran FIR (OIIX).

The FAA also republishes the details concerning the approval and exemption processes in Sections IV and V of this preamble, consistent with other recently published flight prohibition SFARs, to enable interested persons to refer to this final rule for comprehensive information about requesting relief from the FAA from the provisions of SFAR No. 117, § 91.1617.

In some instances, U.S. Government departments, agencies, or instrumentalities may need to engage U.S. civil aviation to support their activities in the Tehran FIR (OIIX). If a department, agency, or instrumentality of the U.S. Government determines that it has a critical need to engage any person described in paragraph (a) of SFAR No. 117, § 91.1617, including a U.S. air carrier or commercial operator, to transport civilian or military passengers or cargo or conduct other operations in the Tehran FIR (OIIX), that department, agency, or instrumentality may request the FAA to approve persons described in paragraph (a) of SFAR No. 117, § 91.1617, to conduct such operations.

The requesting U.S. Government department, agency, or instrumentality must submit the request for approval to the FAA's Associate Administrator for Aviation Safety in a letter signed by an appropriate senior official of the requesting department, agency, or instrumentality. 10 The FAA will not accept or consider requests for approval from anyone other than the requesting U.S. Government department, agency, or instrumentality. In addition, the senior official signing the letter requesting FAA approval must be sufficiently positioned within the requesting department, agency, or instrumentality to demonstrate that the organization's senior leadership supports the request for approval and is committed to taking all necessary steps to minimize aviation safety and security risks to the proposed flights. The senior official must also be in a position to: (1) attest to the accuracy of all representations made to the FAA in the request for approval, and (2) ensure that any support from the requesting U.S. Government department, agency, or instrumentality described in the request for approval is in fact brought to bear and is maintained over time. Unless justified by exigent circumstances, requesting U.S. Government departments, agencies, or instrumentalities must submit requests for approval to the FAA no less than 30 calendar days before the date on which the requesting department, agency, or instrumentality wishes the operator(s) to commence the proposed operation(s).

The requestor must send the request to the Associate Administrator for Aviation Safety, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591. Electronic submissions are acceptable, and the requesting entity may request that the FAA notify it electronically as to whether the FAA grants the request for approval. If a requestor wishes to make an electronic submission to the FAA, the requestor should contact the Washington Operations Center by telephone at (202) 267-3203 or by email at 9-FAA-OverseasFlightProhibitions@faa.gov for submission instructions. The requestor must not submit its letter requesting FAA approval or related supporting documentation to the Washington Operations Center. Rather, the Washington Operations Center will refer the requestor to an appropriate staff member of the Flight Standards Service for further assistance.

A single letter may request approval from the FAA for multiple persons described in SFAR No. 117, § 91.1617, or for multiple flight operations. To the extent known, the letter must identify the person(s) the requester expects the SFAR to cover on whose behalf the U.S. Government department, agency, or instrumentality seeks FAA approval, and it must describe—

• The proposed operation(s), including the nature of the mission being supported;

• The service the person(s) covered by the SFAR will provide;

• To the extent known, the specific locations in the Tehran FIR (OIIX) where the proposed operation(s) will occur, including, but not limited to, the flight path and altitude of the aircraft while it is operating in the Tehran FIR (OIIX) and the airports, airfields, or landing zones at which the aircraft will take off and land; and

• The method by which the requesting department, agency, or instrumentality will provide, or how the operator will otherwise obtain, current threat information and an explanation of how the operator will integrate this information into all phases of the proposed operations ( i.e., the pre-mission planning and briefing, in-flight, and post-flight phases).

The request for approval must also include a list of operators with whom the U.S. Government department, agency, or instrumentality requesting FAA approval has a current contract(s), grant(s), or cooperative agreement(s) (or its prime contractor has a subcontract(s)) for specific flight operations in the Tehran FIR (OIIX). The requestor may identify additional operators to the FAA at any time after the FAA issues its approval. Neither the operators listed in the original request, nor any operators the requestor subsequently seeks to add to the approval, may commence operations under the approval until the FAA issues them an Operations Specification (OpSpec) or Letter of Authorization (LOA), as appropriate, for operations in the Tehran FIR (OIIX). The approval conditions discussed below apply to all operators. Requestors should contact the Washington Operations Center by telephone at (202) 267-3203 or by email at 9-FAA-OverseasFlightProhibitions@faa.gov for instructions on how to submit the names of additional operators the requestor wishes to add to an existing approval to the FAA. The requestor must not submit the names of additional operators it wishes to add to an existing approval to the Washington Operations Center. Rather, the Washington Operations Center will refer the requestor to an appropriate staff member of the Flight Standards Service for further assistance.

If an approval request includes classified information or controlled unclassified information not authorized for public release, requestors may contact the Washington Operations Center for instructions on submitting it to the FAA. The Washington Operations Center's contact information appears in the FOR FURTHER INFORMATION CONTACT section of this final rule.

FAA approval of an operation under SFAR No. 117, § 91.1617, does not relieve persons subject to this SFAR of the responsibility to comply with all other applicable FAA rules and regulations. Operators of civil aircraft must comply with the conditions of their certificates, OpSpecs, and LOAs, as applicable. Operators must also comply with all rules and regulations of other U.S. Government departments, agencies, or instrumentalities that may apply to the proposed operation(s), including, but not limited to, regulations issued by the Transportation Security Administration.

If the FAA approves the request, the FAA's Aviation Safety organization will send an approval letter to the requesting U.S. Government department, agency, or instrumentality informing it that the FAA's approval is subject to all of the following conditions:

(1) The approval will stipulate those procedures and conditions that limit, to the greatest degree possible, the risk to the operator while still allowing the operator to achieve its operational objectives.

(2) Before any approval takes effect, the operator must submit to the FAA:

(a) A written release of the U.S. Government from all damages, claims, and liabilities, including without limitation legal fees and expenses, relating to any event arising out of or related to the approved operations in the Tehran FIR (OIIX); and

(b) The operator's written agreement to indemnify the U.S. Government with respect to any and all third-party damages, claims, and liabilities, including without limitation legal fees and expenses, relating to any event arising out of or related to the approved operations in the Tehran FIR (OIIX).

(3) Other conditions the FAA may specify, including those the FAA might impose in OpSpecs or LOAs, as applicable.

The release and agreement to indemnify do not preclude an operator from raising a claim under an applicable non-premium war risk insurance policy the FAA issues under chapter 443 of title 49, U.S. Code.

If the FAA approves the proposed operation(s), the FAA will issue an OpSpec or LOA, as applicable, to the operator(s) identified in the original request and any operators the requestor subsequently adds to the approval, authorizing them to conduct the approved operation(s). In addition, as stated in paragraph (3) of this section V.B., the FAA notes that it may include additional conditions beyond those contained in the approval letter in any OpSpec or LOA associated with a particular operator operating under this approval, as necessary in the interests of aviation safety. U.S. Government departments, agencies, and instrumentalities requesting FAA approval on behalf of entities with which they have a contract or subcontract, grant, or cooperative agreement should request a copy of the relevant OpSpec or LOA directly from the entity with which they have any of the foregoing types of arrangements, if desired.

Any operations not conducted under an approval the FAA issues through the approval process set forth previously may only occur in accordance with an exemption from SFAR No. 117, § 91.1617. A petition for exemption must comply with 14 CFR part 11. The FAA will consider whether exceptional circumstances exist beyond those described in the approval process in the previous section. To determine whether a petition for exemption from the prohibition this SFAR establishes fulfills the standards described in 14 CFR 11.81, the FAA consistently finds necessary the following information:

• The proposed operation(s), including the nature of the operation;

• The service the person(s) covered by the SFAR will provide;

• The specific locations in the Tehran FIR (OIIX) where the proposed operation(s) will occur, including, but not limited to, the flight path and altitude of the aircraft while it is operating in the Tehran FIR (OIIX) and the airports, airfields, or landing zones at which the aircraft will take off and land;

• The method by which the operator will obtain current threat information and an explanation of how the operator will integrate this information into all phases of its proposed operations ( i.e., the pre-mission planning and briefing, in-flight, and post-flight phases); and

• The plans and procedures the operator will use to minimize the risks identified in this preamble to the proposed operations to support the relief sought and demonstrate that granting such relief would not adversely affect safety or would provide a level of safety at least equal to that provided by this SFAR. The FAA has found comprehensive, organized plans and procedures of this nature to be helpful in facilitating the agency's safety evaluation of petitions for exemption from flight prohibition SFARs.

The FAA includes, as a condition of each such exemption it issues, a release and agreement to indemnify, as described previously.

The FAA recognizes that, with the support of the U.S. Government, the governments of other countries could plan operations that may be affected by SFAR No. 117, § 91.1617. While the FAA will not permit these operations through the approval process, the FAA will consider exemption requests for such operations on an expedited basis and in accordance with the order of preference set forth in paragraph (c) of SFAR No. 117, § 91.1617.

If a petition for exemption includes information that is sensitive for security reasons or proprietary information, requestors may contact the Washington Operations Center for instructions on submitting it to the FAA. The Washington Operations Center's contact information is listed in the FOR FURTHER INFORMATION CONTACT section of this final rule. Requestors must not submit their petitions for exemption or related supporting documentation to the Washington Operations Center. Rather, the Washington Operations Center will refer the requestor to the appropriate staff member of the Flight Standards Service or the Office of Rulemaking for further assistance.

Congress authorized the FAA by statute to promote safe flight of civil aircraft in air commerce by prescribing, among other things, regulations and minimum standards for practices, methods, and procedures the Administrator finds necessary for safety in air commerce and national security. 49 U.S.C. 44701. Consistent with that mandate, the FAA is prohibiting certain persons from conducting flight operations in the Tehran FIR (OIIX) due to the continuing hazards to the safety of U.S. civil flight operations. The purpose of this rule is to operate holistically in addressing a range of hazards and needs in the Tehran FIR (OIIX). However, the FAA recognizes that certain provisions focus on unique factors. Therefore, the FAA finds that the various provisions of this final rule are severable and able to operate functionally if severed from each other. In the event a court were to invalidate one or more of this final rule's unique provisions, the remaining provisions should stand, thus allowing the FAA to continue to fulfill its Congressionally authorized role of promoting safe flight of civil aircraft in air commerce.

Federal agencies consider the impacts of regulatory actions under a variety of executive orders and other requirements. First, Executive Order 12866, Executive Order 13563, and Executive Order 14094 (“Modernizing Regulatory Review”), direct that each Federal agency shall propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs. Second, the Regulatory Flexibility Act of 1980 (Pub. L. 96-354), as codified in 5 U.S.C. 603 et seq., requires agencies to analyze the economic impact of regulatory changes on small entities. Third, the Trade Agreements Act of 1979 (Pub. L. 96-39), as codified in 19 U.S.C. Chapter 13, prohibits agencies from setting standards that create unnecessary obstacles to the foreign commerce of the United States. In developing U.S. standards, the Trade Agreements Act requires agencies to consider international standards and, where appropriate, that they be the basis of U.S. standards. Fourth, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), as codified in 2 U.S.C. Chapter 25, requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or Tribal governments, in the aggregate, or by the private sector, of $100 million or more annually (adjusted for inflation with base year of 1995). This portion of the preamble summarizes the FAA's analysis of the economic impacts of this final rule.

In conducting these analyses, the FAA has determined this final rule has benefits that justify its costs. This rule is a significant regulatory action, as defined in section 3(f) of Executive Order 12866 as amended by Executive Order 14094. As 5 U.S.C. 553 does not require notice and comment for this final rule, 5 U.S.C. 603 and 604 do not require regulatory flexibility analyses regarding impacts on small entities. This rule will not create unnecessary obstacles to the foreign commerce of the United States. This rule will not impose an unfunded mandate on State, local, or Tribal governments, or on the private sector, by exceeding the threshold identified previously.

This action extends the expiration date of the SFAR prohibiting certain flight operations in the Tehran FIR (OIIX) for an additional three years due to the significant, continuing risks to U.S. civil aviation detailed in the preamble of this final rule. The FAA acknowledges this flight prohibition might result in additional costs to some U.S. operators, such as increased fuel costs and other operational-related costs. However, the FAA expects the benefits of this action to exceed the costs because it will result in the avoidance of risks of fatalities, injuries, and property damage that could occur if a U.S. operator's aircraft were shot down (or otherwise damaged) while operating in the Tehran FIR (OIIX).

The Regulatory Flexibility Act (RFA), in 5 U.S.C. 603, requires an agency to prepare an initial regulatory flexibility analysis describing impacts on small entities whenever 5 U.S.C. 553 or any other law requires an agency to publish a general notice of proposed rulemaking for any proposed rule. Similarly, 5 U.S.C. 604 requires an agency to prepare a final regulatory flexibility analysis when an agency issues a final rule under 5 U.S.C. 553 after that section or any other law requires publication of a general notice of proposed rulemaking. The FAA concludes good cause exists to forgo notice and comment and to not delay the effective date for this rule. As 5 U.S.C. 553 does not require notice and comment in this situation, 5 U.S.C. 603 and 604 similarly do not require regulatory flexibility analyses.

The Trade Agreements Act of 1979 (Pub. L. 96-39) prohibits Federal agencies from establishing standards or engaging in related activities that create unnecessary obstacles to the foreign commerce of the United States. Pursuant to this Act, the establishment of standards is not considered an unnecessary obstacle to the foreign commerce of the United States, so long as the standard has a legitimate domestic objective, such as the protection of safety, and does not operate in a manner that excludes imports that meet this objective. The statute also requires consideration of international standards and, where appropriate, that they be the basis for U.S. standards.

The FAA has assessed the potential effect of this final rule and determined that its purpose is to protect the safety of U.S. civil aviation from risks to their operations in the Tehran FIR (OIIX), a location outside the U.S. Therefore, the rule complies with the Trade Agreements Act of 1979.

Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed or final agency rule that may result in an expenditure of $100 million or more (in 1995 dollars) in any one year by State, local, and Tribal governments, in the aggregate, or by the private sector; such a mandate is deemed to be a “significant regulatory action.” The FAA currently uses an inflation-adjusted value of $183 million in lieu of $100 million.

This final rule does not contain such a mandate. Therefore, the requirements of Title II of the Act do not apply.

The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires the FAA to consider the impact of paperwork and other information collection burdens it imposes on the public. The FAA has determined no new requirement for information collection is associated with this final rule.

In keeping with U.S. obligations under the Convention on International Civil Aviation, the FAA's policy is to conform to International Civil Aviation Organization (ICAO) Standards and Recommended Practices to the maximum extent practicable. The FAA has determined no ICAO Standards and Recommended Practices correspond to this regulation. The FAA finds this action is fully consistent with the obligations under 49 U.S.C. 40105(b)(1)(A) to ensure the FAA exercises its duties consistently with the obligations of the United States under international agreements.

While the FAA's flight prohibition does not apply to foreign air carriers, DOT codeshare authorizations prohibit foreign air carriers from carrying a U.S. codeshare partner's code on a flight segment that operates in airspace for which the FAA has issued a flight prohibition for U.S. civil aviation. In addition, foreign air carriers and other foreign operators may choose to avoid, or be advised or directed by their civil aviation authorities to avoid, airspace for which the FAA has issued a flight prohibition for U.S. civil aviation.

The FAA has analyzed this action under Executive Order 12114, Environmental Effects Abroad of Major Federal Actions, and DOT Order 5610.1C, Paragraph 16. Executive Order 12114 requires the FAA to be informed of environmental considerations and take those considerations into account when making decisions on major Federal actions that could have environmental impacts anywhere beyond the borders of the United States. The FAA has determined this action is exempt pursuant to Section 2-5(a)(i) of Executive Order 12114 because it does not have the potential for a significant effect on the environment outside the United States.

In accordance with FAA Order 1050.1F, Environmental Impacts: Policies and Procedures, paragraph 8-6(c), the FAA has prepared a memorandum for the record stating the reason(s) for this determination and has placed it in the docket for this rulemaking.

The FAA has analyzed this rule under the principles and criteria of Executive Order 13132. The agency has determined this action will not have a substantial direct effect on the States, or the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, this rule will not have federalism implications.

The FAA analyzed this rule under Executive Order 13211. The agency has determined it is not a “significant energy action” under the executive order and will not be likely to have a significant adverse effect on the supply, distribution, or use of energy.

Executive Order 13609 promotes international regulatory cooperation to meet shared challenges involving health, safety, labor, security, environmental, and other issues and to reduce, eliminate, or prevent unnecessary differences in regulatory requirements. The FAA has analyzed this action under the policies and agency responsibilities of Executive Order 13609 and has determined that this action will have no effect on international regulatory cooperation.

Except for classified and controlled unclassified material not authorized for public release, all documents the FAA considered in developing this rule, including economic analyses and technical reports, may be accessed from the internet through the docket for this rulemaking.

Those documents may be viewed online at https://www.regulations.gov using the docket number listed above. A copy of this rule will be placed in the docket. Electronic retrieval help and guidelines are available on the website. It is available 24 hours each day, 365 days each year. An electronic copy of this document may also be downloaded from the Office of the Federal Register's website at https://www.federalregister.gov and the Government Publishing Office's website at https://www.govinfo.gov. A copy may also be found on the FAA's Regulations and Policies website at https://www.faa.gov/regulations_policies.

Copies may also be obtained by sending a request to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue SW, Washington, DC 20591, or by calling (202) 267-9677.

The Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) (Pub. L. 104-121) (set forth as a note to 5 U.S.C. 601) requires the FAA to comply with small entity requests for information or advice about compliance with statutes and regulations within its jurisdiction. A small entity with questions regarding this document may contact its local FAA official or the persons listed under the FOR FURTHER INFORMATION CONTACT heading at the beginning of the preamble. To find out more about SBREFA on the internet, visit http://www.faa.gov/regulations_policies/rulemaking/sbre_act/.

In consideration of the foregoing, the Federal Aviation Administration amends part 91 of title 14, Code of Federal Regulations, as follows:

This rule is being published as a direct final rule and is effective 15 days after the comment period expires as the Department for good cause finds it is unnecessary to provide for a period of public comment in accordance with 5 U.S.C. 553(b)(B). Alternatively, because this rule relates to the provision of a benefit, it is exempt from the procedural requirements of the Administrative Procedure Act. Id. 553(a)(2). However, the Department is seeking comment from interested persons on the provisions of this rule and will consider all relevant comments in any subsequent rulemaking. If such comments are received, the direct final rule will be withdrawn, and a proposed rule for comments will be published.

This rule implements section 901(i) of title IX of division J of the Further Consolidated Appropriations Act, 2020 (22 U.S.C. 2680b(i)).

In 2016, Department of State employees stationed in Havana, Cuba, began reporting a sudden onset of symptoms, including headaches, pain, nausea, disequilibrium, and hearing loss, in conjunction with sensory events. Federal agencies have called such incidents Anomalous Health Incidents (“AHIs”). Since 2016, Federal employees in numerous countries reported suspected AHIs.

Beginning on December 20, 2019, the Department of State was authorized by statute to pay benefits to employees and their dependents for injuries suffered in the Republic of Cuba, the People's Republic of China, or other foreign countries designated by the Secretary of State incurred after January 1, 2016, in connection with certain hostile or other incidents designated by the Secretary of State (Pub. L. 116-94, Division J, Title IX, section 901) (codified in 22 U.S.C. 2680b). These benefits were limited to Department of State employees only ( e.g., not including other U.S. Government employees under Chief of Mission (COM) authority).

On January 1, 2021, this law was amended, authorizing other Federal Government agency heads (such as the Secretary of Defense) to provide benefits to their own employees under COM authority who suffered similar injuries. (Pub. L. 116-283, div. A, title XI, section 1110).

On October 8, 2021, the President signed the “Helping American Victims Afflicted by Neurological Attacks” (HAVANA) Act of 2021 (Pub. L. 117-46). The HAVANA Act amended section 901 to authorize the heads of Federal Government agencies to compensate affected employees, former employees, and their dependents for qualifying injuries to the brain. The HAVANA Act amendments did not require that the qualifying injury occur in the Republic of Cuba, the People's Republic of China, or another foreign country designated by the Secretary of State. Section 9216 of the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, (Pub. L. 117-263) (codified at 22 U.S.C. 2680b(j)), provided agencies with authority to designate incidents affecting employees or dependents who are not under the security responsibility of the Secretary of State. Section 7803 of the National Defense Authorization Act for Fiscal Year 2024 (Pub. L. 118-31) (50 U.S.C. 3519b note) generally requires each head of an element of the intelligence community to issue regulations and procedures, not later than 180 days after the effective date of the National Defense Authorization Act for Fiscal Year 2024, to implement the authorities in section 901(i) of title IX of division J of the Further Consolidated Appropriations Act, 2020 (22 U.S.C. 2680b(i)) to provide payments to the degree that such authorities are applicable to the head of the element.

This rule implements 22 U.S.C. 2680b(i) as it applies to the Department of Defense. The rule only applies to current and former employees of the DoD, and their dependents as defined in § 49.2 of this rule.

On June 30, 2022, the Department of State published an interim final rule implementing 22 U.S.C. 2680b(i), with an effective date of August 15, 2022. 87 FR 38981 (June 30, 2022) (codified at 22 CFR part 135). The Department of State subsequently published a final rule that became effective on January 25, 2023. 88 FR 4722 (Jan. 25, 2023) (codified at 22 CFR part 135). The Department of Defense has independently reviewed the approach implemented by the Department of State in these rules and has determined that its approach is reasonable and well considered.

Therefore, the Department of Defense will not substantially deviate from the definitions and process established by the Department of State.

The rule defines those who are eligible to receive payments: covered employees (including current and former employees) and covered dependents who on or after January 1, 2016, experience a qualifying brain injury. A “covered employee” includes Department employees who have been appointed in the civil service in accordance with 5 U.S.C. 2105(a)(1), with the exception of employees paid from non-appropriated funds of an instrumentality of the United States under the jurisdiction of the armed forces who are not citizens or nationals of the United States.

An employee's family member is a covered dependent if, on or after January 1, 2016, the family member experiences a qualifying injury. The rule defines the family members who are eligible as certain children, parents residing with the employee sponsor, dependent siblings, and spouses. For the purposes of this rule, the Department also adopts the Department of State's definition of “qualifying injury to the brain.” 22 CFR 135.2. The Department has determined that the Department of State definition is reasonable and well considered. The Department of State consulted with the chief medical officers at other Federal agencies and experts at civilian medical centers of excellence. There is no diagnostic code or criteria for AHIs in the International Classification of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM). Because of the varied symptoms and still nascent understanding of how to test or otherwise screen for AHI impacts, the standard adopted is broadly inclusive of the types of injuries that have been reported to date.

The definition of “qualifying injury to the brain” is based on current medical practices related to brain injuries. The individual must have: (1) an acute injury to the brain such as a concussion, a penetrating injury, or an injury as the consequence of an event that leads to permanent alterations in brain function as demonstrated by confirming correlative findings on imaging studies or electroencephalogram (“EEG”); (2) a medical diagnosis of a traumatic brain injury that required active medical treatment for 12 months or more; or (3) the acute onset of new, persistent, disabling neurologic symptoms, as demonstrated by confirming correlative findings on imaging studies, EEG, a physical exam, or other appropriate testing, that required active medical treatment for 12 months or more.

The first component of the definition of “qualifying injury to the brain” set forth in § 49.2 accounts for a variety of observable impacts to an individual, including a concussion or a penetrating injury or, absent either of those, permanent alterations in brain function as confirmed by a board-certified physician's review of a variety of forms of medical imaging evidence. The goal with this standard is to ensure there is some documented evidence of impact to the brain, while minimally circumscribing what that impact entails. The second and third components of the definition in § 49.2 are intended to provide alternative avenues for demonstrating sustained, long-term impact to the individual. This benefit is intended for individuals who experience long-term consequences, potentially including an inability to gainfully work, as a result of a suspected AHI.

The standard is consistent with that employed by other agencies, including the Department of State. A 12-month threshold of active medical treatment is indicative of a long-term injury. For example, the Centers for Disease Control and Prevention (“CDC”) broadly defines chronic diseases “as conditions that last 1 year or more and require ongoing medical attention or limit activities of daily living or both.” CDC, About Chronic Diseases, https://www.cdc.gov/chronic-disease/about/index.html (last reviewed July 11, 2024). The Department notes that applicants who have suffered kinetic or external, physically caused injuries to the brain such as the head striking an object, the brain undergoing an acceleration or deceleration movement, or brain injuries from events such as a blast or explosion, including penetrating injuries, may be eligible if the injuries satisfy the other requirements of this rule.

To be compensable, the injury must have occurred “in connection with war, insurgency, hostile act, terrorist activity, or other incidents designated by the Secretary of State,” and cannot have been “the result of the willful misconduct” of the covered individual. 22 U.S.C. 2680b(e)(4)(A)(ii)-(iii), (e)(4)(B)(ii)-(iii), (i)(1)(D). The Department will work with an applicant upon the applicant's submission of the Department of Defense (DD) Form 3220, “Eligibility Questionnaire for HAVANA Act Payments,” to determine whether the reported incident qualifies.

The definition of “other incident” is a new onset of physical manifestations that cannot otherwise be readily explained and that is designated under 22 U.S.C. 2680b. The Department will review available information on the reported incident. If a physician does not indicate that there is a credible alternative explanation for the individual's symptoms, and if the information the Department has regarding the incident does not provide a credible alternative explanation for the incident, that incident will be recommended for designation. Incidents for which an alternative explanation has been identified will not be recommended for designation. For incidents affecting employees or dependents who are not under the security responsibility of the Secretary of State, the Secretary of Defense will determine whether to designate such incidents.

The Department will make available to its workforce information concerning the regulations, and the process to apply for compensation pursuant to 22 U.S.C. 2680b, or “HAVANA Act payments.” Current employees, former employees, and dependents (as defined in this rule) can apply for consideration. Applicants will be required to provide the necessary documentation so the Department may determine whether they qualify for payment. The DD Form 3220, “Eligibility Questionnaire for HAVANA Act Payments,” is the form associated with collecting the necessary evidence to submit a claim, and it will be available upon request with instructions on how to apply for a HAVANA Act payment. A portion of the form must be filled out by a qualified physician; the rule specifies certain board certification requirements for physicians who can evaluate a qualifying injury to the brain. This information will also be publicly available on the Defense Civilian Personnel Advisory Service website, https://www.dcpas.osd.mil/havana-act-benefits-program, which includes methods of contacting the Department for additional information.

The Department of Defense has determined that the payment scheme set forth in the Department of State's HAVANA Act regulations, 22 CFR 135.3, is well reasoned and provides an effective means of compensating covered employees. Accordingly, the Department has adopted it for purposes of this rulemaking. Pursuant to this direct final rule, the Department, in its discretion, may authorize a one-time, non-taxable, lump sum payment based on Level III of the Executive Schedule. See 5 U.S.C. 5311 et seq. Payment eligibility and the amount of the payment will be at the Department's discretion. A Base payment will be 75 percent of Level III pay, and a Base+ payment will be 100 percent of Level III pay. The specific use of Level III of the Executive Schedule sets the compensation at the maximum annual salary potentially available to most of the Federal workforce. The Department believes this amount is the most it can reasonably compensate each applicant while ensuring funds for the total number of applicants it believes will likely receive payments. The payment is non-taxable pursuant to 22 U.S.C. 2680b(g) and will not count as Supplemental Security Income (SSI) income in the month of receipt and from resources the month after receipt, if retained. The maximum should only be awarded where a condition has a consistent, sustained, and exceptionally severe impact on a victim's quality of life or prevents a victim from successfully performing their work-related duties. The purpose is to compensate individuals only for qualifying brain injuries that meet the criteria set forth in this rule. The following factors will be taken into account to determine the amount of the payment to be authorized: (1) the applicant's responses on the eligibility form; (2) whether the Department of Labor (Office of Workers' Compensation Programs) has determined that the applicant has no reemployment potential for an indefinite future, the Social Security Administration (“SSA”) has approved the applicant for Social Security Disability Insurance or SSI benefits based on disability, or (3) the applicant's board-certified physician has certified that the individual requires a full-time caregiver for activities of daily living, as defined by the Katz Index of Independence in Activities of Daily Living.

If the applicant meets any of the criteria for severe impacts, the applicant will be eligible to receive a Base+ payment. Applicants whose board-certified physician confirms that the definition of qualifying injury to the brain has been met, but who have not met any of the criteria for severe impacts, will be eligible to receive a Base payment. The criteria established for severe impacts are reflective of the Department's objective of ensuring that the individuals most severely affected by AHIs (as indicated by a lack of reemployment potential, an inability to engage in substantial gainful activity, or the need for a full-time caregiver) receive a larger payment. The use of the Department of Labor's or the SSA's determination is to ensure that both Federal employees as well as their dependents have access to a mechanism for this determination.

The Department recognizes that the criteria the Department of Labor and SSA use in their determinations are distinct, as well as the fact that the procedural timelines for seeking and receiving approval may be different between these agencies. The third factor, that a board-certified physician certify that the individual requires a full-time caregiver for activities of daily living, provides an alternative mechanism for all individuals to meet the criteria. Finally, the Department notes that if an applicant who received a Base payment later meets any of the criteria listed for severe impacts, the applicant may apply for an additional payment that will be the difference between the Base and Base+ payment. As the payments are tied to the Executive Schedule payment levels, the amounts will change over time based on changes to the Federal salary schedule. Payments will be based on the Executive Schedule in effect at the time the payment was approved.

While HAVANA Act payments may be in addition to other leave benefits, disability benefits, or workers' compensation payments that the applicant may be receiving or may be entitled to receive that also help augment any loss of income, the Department believes this is an appropriate additional payment. This payment scheme is also consistent with what is being offered by other Federal agencies and will ensure consistency of HAVANA Act benefits among affected individuals.

The Department notes that payments may only be made using amounts appropriated in advance specifically for this purpose in the relevant fiscal year. Therefore, payments are contingent on appropriated funds, and all payments will be paid out on a first-come, first-serve basis.

Under the rule, the Department's procedures for determining whether an incident has been designated under 22 U.S.C. 2680b include, where appropriate, consultation with the Secretary of State. See 22 U.S.C. 2680b(i)(1)(D) (cross-referencing subparagraph 2680b(e)(4)).

DoD is responsible for (1) processing applications by DoD employees and their dependents for payments pursuant to 22 U.S.C. 2680b(i); (2) determining or, as necessary, consulting with the Secretary of State to determine, whether the incident causing the injury may be deemed a designated incident under the statute, see 22 U.S.C. 2680b(j); id. 2680b(i)(1)(D) (cross-referencing subparagraph 2680b(e)(4)); (3) determining eligibility for the benefit, determining the amount of the benefit, and processing payment of the benefit; and (4) notifying applicants upon receipt of their applications and when a decision has been made whether to authorize payment.

The Director, Defense Civilian Personnel Advisory Service, is authorized to approve HAVANA Act payments to DoD employees or their dependents. If payment is denied, the applicant may direct an appeal to the Deputy Assistant Secretary of Defense for Civilian Personnel Policy within 60 days of the notification of denial, but decisions on the amount of payment are not appealable.

This rule is being published as a direct final rule as the Department does not expect to receive any significant adverse comments. If such comments are received, this direct final rule will be withdrawn and a proposed rule for comments will be published. If no such comments are received, this direct final rule will become effective 15 days after the comment period expires.

For purposes of this rulemaking, a significant adverse comment is one that explains (1) why the rule is inappropriate, including challenges to the rule's underlying premise or approach; or (2) why the rule will be ineffective or unacceptable without a change. In determining whether a significant adverse comment necessitates withdrawal of this direct final rule, the Department will consider whether the comment raises an issue serious enough to warrant a substantive response had it been submitted in a standard notice-and-comment process. A comment recommending an addition to the rule will not be considered significant and adverse unless the comment explains how this direct final rule would be ineffective without the addition.

Pursuant to section 2680b of title 22, United States Code, the DoD may provide a monetary benefit to current and former DoD employees and their dependents who have suffered a qualifying injury to the brain as a result war, insurgency, hostile act, terrorist activity, or other incidents designated by the Secretary of State or Secretary of Defense (for designations related to employees or dependents who, at the time of the incident, were not under the security responsibility of the Secretary of State or when operational control of overseas security responsibility for such employees or dependents had been delegated to the Secretary of Defense). The policy promulgated by this rule is vitally important to those who have experienced such injuries. This rule is being published as a direct final rule and is effective 15 days after the comment period expires as the Department for good cause finds it is unnecessary to provide for a period of public comment. 5 U.S.C. 553(b)(B). Alternatively, because this rule relates to the provision of a benefit, it is exempt from the procedural requirements of the Administrative Procedure Act. Id. 553(a)(2). However, the Department is seeking comment from interested persons on the provisions of this rule and will consider all relevant comments in any subsequent rulemaking.

The Office of Information and Regulatory Affairs has determined that this rule does not meet the criteria set forth 5 U.S.C. 804(2) for the purposes of Congressional review of agency rulemaking under the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801-808).

This rule will not result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million in any year; and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

The Department has determined that this rulemaking will not have tribal implications, will not impose substantial direct compliance costs on Indian tribal governments, and will not pre-empt tribal law. Accordingly, the requirements of Executive Order 13175 do not apply to this rulemaking.

The Under Secretary of Defense for Personnel and Readiness (USD(P&R)) certifies that this rulemaking will not have an impact on a substantial number of small entities. A regulatory flexibility analysis is not required under the Regulatory Flexibility Act (5 U.S.C. 601, et seq. ).

The Department of Defense has provided this direct final rule to the Office of Management and Budget (OMB) for its review. OMB has designated this rule as a “significant” regulatory action under Executive Order 12866, as amended. Potential causes of AHI are being investigated but remain unknown. Given the nature of the incidents, it is difficult to accurately estimate future incidents and number of individuals affected. For fiscal year (FY) 2025, the Department estimates it will pay up to $4 million in total. After FY 2025, the Department estimates it will pay up to $3 million each fiscal year.

The Department has also reviewed the rule to ensure its consistency with the regulatory philosophy and principles set forth in Executive Order 12866, Executive Order 13563, and Executive Order 14094, and finds that the benefits of the rule (in providing mechanisms for individuals to obtain compensation for certain injuries) outweigh any costs to the public, which are minimal.

The Department of Defense has reviewed this rule in light of Executive Order 12988 to eliminate ambiguity, minimize litigation, establish clear legal standards, and reduce burden.

This rule will not have substantial direct effect on the states, on the relationships between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. Therefore, in accordance with Executive Order 13132, it is determined that this rule does not have sufficient federalism implications to require consultations or warrant the preparation of a federalism summary impact statement. Executive Order 12372, regarding intergovernmental consultation on federal programs and activities does not apply to this regulation.

This rule imposes reporting and/or recordkeeping requirements under the Paperwork Reduction Act of 1995. DoD has submitted for OMB review and approval the following information collection— Eligibility Questionnaire for HAVANA Act Payments. To review this collection, including all background materials, please visit https://www.reginfo.gov/public/do/PRAMain and use the search function to enter the title of the collection.

The Coast Guard will enforce the regulated areas for the annual San Francisco Bay Navy Fleet Week Parade of Ships and Blue Angels survey flight and demonstration days in 33 CFR 100.1105. This NOE announces the dates and times that the regulated areas will be enforced daily on October 10, 2024, through October 13, 2024, as described in the following paragraphs.

The regulated area “Alpha” in § 100.1105(b)(1) for the Navy Parade of Ships will be enforced from 10 a.m. until noon on October 11, 2024. The regulated area “Bravo” in § 100.1105(b)(2) for the U.S. Navy Blue Angels Activities will be enforced from noon until 5 p.m. daily from October 10, 2024, through October 13, 2024.

Regulated area “Alpha” will be enforced during the Navy Parade of Ships and is bounded by a line connecting the following points and thence along shore to the point of beginning:

Under the provisions of 33 CFR 100.1105, except for persons or vessels authorized by the PATCOM, in regulated area “Alpha” no person or vessels may enter the parade route or remain within 500 yards of any Navy parade vessel. No person or vessels shall anchor, block, loiter in, or impede the through transit of ship parade participants or official patrol vessels in regulated area “Alpha.”

Regulated area “Bravo” will be enforced during the U.S. Navy Blue Angels Demonstration and is bounded by a line connecting the following points:

Except for persons or vessels authorized by the PATCOM, no person or vessel may enter or remain within regulated area “Bravo.”

When hailed or signaled by U.S. Coast Guard patrol personnel by siren, radio, flashing light, or other means, a person or vessel shall come to an immediate stop. Persons or vessels shall comply with all directions given; failure to do so may result in expulsion from the area, citation for failure to comply, or both. The Coast Guard may be assisted by other Federal, State, or local law enforcement agencies in enforcing this regulation. The PATCOM shall be designated by the Captain of the Port (COTP) San Francisco. The PATCOM is empowered to forbid and control the movement of all vessels in the regulated areas.

In addition to this notification of enforcement in the Federal Register , the Coast Guard plans to provide notification of this enforcement period via the Local Notice to Mariners.

I. Table of Abbreviations CFR Code of Federal Regulations COTP Captain of the Port Los Angeles-Long Beach DHS Department of Homeland Security E.O. Executive order FR Federal Register NPRM Notice of proposed rulemaking Pub. L. Public Law § Section U.S.C. United States Code II. Background Information and Regulatory History

The Coast Guard is issuing this temporary rule under the authority in 5 U.S.C. 553(b)(B). This statutory provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” The Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because it is impracticable due to the lack of sufficient time to provide a reasonable comment period and consider those comments before issuing the rule and establishing the safety zone by October 1, 2024. The Coast Guard did not receive final details regarding this event with sufficient notice to issue a proposed rule.

Also, under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delaying the effective date of this rule would be contrary to the public interest because immediate action is needed to address potentially hazardous conditions associated with high-speed maneuvers from aircraft and waterborne vessels for a search and rescue demonstration.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034. The Captain of the Port Los Angels Long Beach (COTP) has determined that potential hazards associated with navigational safety may arise due to multiple low-flying aircraft flight paths and stunt performances over the waters off Huntington Beach. This air show will consist of numerous military and civilian aircraft performing aerobatic maneuvers at high speed within the lateral limits of an aerobatic box that would extend from the surface of the water to 15,000 feet above mean sea level (MSL). The event at Huntington Beach generates over 800 spectator vessels in attendance each year. This safety zone is to ensure the safety of and reduce the risk to the public and mariners in the vicinity of the aerobatic performance.

This rule establishes a safety zone daily from 9:30 a.m. to 5 p.m. on October 01, 2024, through on October 06, 2024. Based on the safety risks described above, the Coast Guard is proposing to establish a safety zone in the vicinity of Huntington Beach for the Pacific Air Show. The safety zone would encompass all navigable waters from the surface to the sea floor in an area bound by the following coordinates: 33°38.367′ N 117°58.817′ W, 33°38.005′ N 117°59.187′ W, 33°39.182′ N 118°1.089′ W, 33°39.583′ N 118°0.667′ W.

All coordinates displayed are referenced by North American Datum of 1983. The duration of the zone is intended to ensure the safety of vessels and these navigable waters before, during, and after the scheduled airshow. No vessel or person will be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative.

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

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under section 3(f) of Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on the size, location, and duration of the safety zone. The size of the zone is the minimum necessary to provide adequate protection for the waterway's users, adjoining areas, and the public. The zone will be enforced during the scheduled times of 9:30 a.m. to 5:00 p.m. on six days. Commercial vessel traffic will not be affected by the establishment of the safety zone due to its overall proximity to the shore. Recreational water users will be able to transit around the safety zone.

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

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

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

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

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

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

Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

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

We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone encompassing an area in vicinity of Huntington Beach and the Huntington Beach Pier. It is categorically excluded from further review under paragraph L60(a), in table 3-1 of U.S. Coast Guard Environmental Planning Implementing Procedures. It is categorically excluded from further review under paragraph L60(a) of appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 01. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble.

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

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

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

The Coast Guard is issuing this temporary rule under the authority in 5 U.S.C. 553(b)(B). This statutory provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” The Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because pollution response operations have begun for the discharge of pollutants into Smith Canal on September 27, 2024, and the Coast Guard must limit vessel traffic to ensure the safety of pollution removal personnel, mariners, and the environment. It is impracticable to publish an NPRM because we must establish this safety zone on September 29, 2024.

Also, under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delaying the effective date of this rule would be impracticable because immediate action is needed to respond to the potential safety hazards associated with the pollution removal operations beginning on September 29, 2024.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034. The Captain of the Port (COTP) San Francisco has determined that the potential hazards associated with the pollution removal operations on Smith Canal will be a safety concern to anyone within the waters of the canal. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone during pollution removal operations.

This rule establishes a safety zone from 11:30 a.m. on September 29, 2024, until 11:59 p.m. on October 5, 2024. The safety zone will cover all navigable waters of Smith Canal extending from the entrance to the canal at Louis Park in the east to American Legion Park in the west. No vessel or person will be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative.

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

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under section 3(f) of Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on the size, location, and duration of the safety zone. Smith Canal is a connecting waterway to the San Joaquin River; recreational traffic may interfere with the pollution removal operations. The Coast Guard will issue Safety Marine Information Bulletins and conduct public outreach through the Unified Command to inform the public and limit impacts from the zone to vessel traffic.

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

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

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

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

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

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

Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

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

We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone that will prohibit entry of vessels into Smith Canal in Stockon, CA. It is categorically excluded from further review under paragraph L[60c] of appendix A, table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1.

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

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

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

The Coast Guard is issuing this temporary rule under authority in 5 U.S.C. 553(b)(B). This statutory provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” The Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because prompt action is needed to respond to the potential safety hazards associated with the salvage operations of a sunken vessel. It is impracticable to publish an NPRM because salvage operations may begin as soon as October 1, 2024.

Also, under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delaying the effective date of this rule would be impracticable because prompt action is needed to respond to the potential safety hazards associated with the salvage operations of a sunken vessel.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034. The Captain of the Port Sector Delaware Bay (COTP) has determined that potential hazards associated with the salvage operations of the sunken vessel, will be a safety concern for the vessels involved with the salvage operations and anyone within a 500-yard radius of salvage operations. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone while the salvage operations are being conducted.

This rule establishes a temporary safety zone which will be in effect from October 1, 2024, through October 31, 2024. The rule will only be subject to enforcement, however, for a seven-day period within the time the rule will be in effect. There needs to be a seven-day window of good weather for salvage operations to be conducted safely. The safety zone will only be enforced upon issuance of a Broadcast Notice to Mariners by the COTP, as well as on-scene notice. The safety zone will cover all navigable waters, on a portion of the Atlantic Ocean, within 500 yards of the sunken vessel being salvaged, in position latitude 40°05′32.3″ N, longitude 74°01′28.4″ W. This coordinate is based on Datum WGS 84. The duration of the zone is intended to protect personnel, vessels, and the marine environment in these navigable waters during the salvage operations. No vessel or person will be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative.

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

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under section 3(f) of Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on the size, duration, and location of the temporary safety zone. The safety zone is effective for 30 days but will only be enforced for 7 days during active salvage operations. Vessel traffic will be able to safely transit around the safety zone while the safety zone is being enforced. Moreover, the Coast Guard will release the details of the zone via a Broadcast Notice to Mariners on VHF-FM radio channel 16.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, does not apply to rules not subject to notice and comment. As the Coast Guard has, for good cause, waived notice and comment requirement that would otherwise apply to this rulemaking, the Regulatory Flexibility Act's provisions do not apply here.

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

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

Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

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

We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone lasting 7 days that will prohibit entry within 500 yards of salvage operations of a sunken vessel. It is categorically excluded from further review under paragraph L60(a) of appendix A, table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble.

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

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

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

On February 26 and July 8, 2024, IEPA submitted revisions to the SIP that update Part 243 in Title 35 of the Illinois Administrative Code (IAC). The SIP submissions update section 243.108 of Title 35 by incorporating EPA's updated “List of Designated Reference and Equivalent Methods,” which is used to determine compliance with the NAAQS (fine particulate matter and coarse particulate matter, sulfur dioxide (SO 2 ), carbon monoxide, lead, oxides of nitrogen, and ozone). The February 2024 submission includes EPA's designation of one new equivalent method for measuring concentrations of fine particulate matter (PM 2.5 ) in ambient air. 1 This designation was enacted and effective on October 5, 2023. The July 2024 submission incorporates EPA's designation of a new equivalent method for measuring Particulate Matter (PM 10 ) in ambient air, also found in section 243.108. 2 The designation was enacted and effective May 16, 2024.

The July 2024 submission also incorporates references to EPA's updated ozone absorption cross-section value, 3 which is a standard parameter used to measure concentrations of ozone, and makes corrections to section 243.125(b)(3) to reflect word style used by EPA in past NAAQS amendments.

EPA evaluates various methods for monitoring the concentrations of criteria pollutants under the NAAQS. Equivalent methods for measuring criteria pollutants are designated by EPA as monitoring methods that meet specific requirements for determining compliance with the NAAQS under 40 CFR part 58.

On October 28, 2022, EPA designated one new equivalent method for measuring concentrations of PM 2.5 in ambient air. 4 The new method, EQPM-0922-260 “Ambilabs Model 2WIN PM 2.5 FEM Monitor,” is an automated method (analyzer) utilizing an optically based measurement principle.

On November 6, 2023, EPA designated a new equivalent method for measuring concentrations of PM 10 in ambient air. 5 The new method, EQPM-0923-262 “Vashti Instruments Pvt. Ltd Vair-9009 p.m. 10 Monitor,” is an automated monitoring method (monitor) utilizing the measurement principle based on beta-ray attenuation.

On October 5, 2023, EPA updated the ozone absorption cross-section value, which is used in ultraviolet-based ozone analyzers and Standard Reference Photometers. The new value represents an increased accuracy of surface ozone monitoring measurements and reduced uncertainty in ozone measured concentrations. 6 EPA updated references in the regulations regarding this value  7 and Illinois's July 2024 submittal amends the existing corresponding state rules to provide consistency with the Federal regulations.

Section 243.108—Incorporation by Reference incorporates EPA's updates to its “List of Designated Reference and Equivalent Methods” for measuring ambient concentrations to demonstrate compliance with the NAAQS. The SIP revision would update section 243.108 to incorporate the changes from EPA's actions dated October 28, 2022 (87 FR 65203) and November 6, 2023 (88 FR 76212).

Section 243.125—Ozone incorporates EPA's references to the updated ozone absorption cross-section value. The SIP revision would update word style in section 243.125 and would make a minor correction to a reference to an EPA regulation regarding the measurement of ozone (40 CFR part 50, appendix D).

EPA has reviewed the state revisions and finds that they are equivalent to EPA requirements and strengthen the Illinois SIP.

EPA is approving the revisions to 35 IAC 243.108 as outlined in Illinois' February 26, 2024, and July 8, 2024, submittals.

We are publishing this action without prior proposal because we view these as noncontroversial amendments and anticipate no adverse comments. However, in the proposed rules section of this Federal Register publication, we are publishing a separate document that will serve as the proposal to approve the state plan if relevant adverse written comments are filed. This rule will be effective December 2, 2024 without further notice unless we receive relevant adverse written comments by November 4, 2024. If we receive such comments, we will withdraw this action before the effective date by publishing a subsequent document that will withdraw the final action. All public comments received will then be addressed in a subsequent final rule based on the proposed action. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment. If we do not receive any comments, this action will be effective December 2, 2024.

In this rule, EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is finalizing the incorporation by reference of the Illinois regulations described in section I of this preamble and set forth in the amendments to 40 CFR part 52 below. EPA has made, and will continue to make, these documents generally available through www.regulations.gov and at the EPA Region 5 Office (please contact the person identified in the FOR FURTHER INFORMATION CONTACT section of this preamble for more information). Therefore, these materials have been approved by EPA for inclusion in the SIP, have been incorporated by reference by EPA into that plan, are fully federally enforceable under sections 110 and 113 of the CAA as of the effective date of the final rulemaking of EPA's approval, and will be incorporated by reference in the next update to the SIP compilation. 8

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

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

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

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

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

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

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

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

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

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

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

IEPA did not evaluate EJ considerations as part of its SIP submittals; the CAA and applicable implementing regulations neither prohibit nor require such an evaluation. EPA did not perform an EJ analysis and did not consider EJ in this action. Consideration of EJ is not required as part of this action, and there is no information in the record inconsistent with the stated goal of E.O. 12898 of achieving EJ for communities with EJ concerns.

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

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by December 2, 2024. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. Parties with objections to this direct final rule are encouraged to file a comment in response to the parallel notice of proposed rulemaking for this action published in the proposed rules section of this Federal Register , rather than file an immediate petition for judicial review of this direct final rule, so that EPA can withdraw this direct final rule and address the comment in the proposed rulemaking. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

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

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that website to view public comments. CMS will not post on Regulations.gov public comments that make threats to individuals or institutions or suggest that the commenter will take actions to harm an individual. CMS continues to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other comments.

Section 1886(d) of the Social Security Act (the Act) sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to use a prospective payment system (PPS) to pay for the capital-related costs of inpatient hospital services for these “subsection (d) hospitals.” Under these PPSs, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs).

The base payment rate is comprised of a standardized amount that is divided into a labor-related share and a nonlabor-related share. The labor-related share is adjusted by the wage index applicable to the area where the hospital is located. If the hospital is located in Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-living adjustment factor. This base payment rate is multiplied by the DRG relative weight.

If the hospital treats a high percentage of certain low-income patients, it receives a percentage add-on payment applied to the DRG-adjusted base payment rate. This add-on payment, known as the disproportionate share hospital (DSH) adjustment, provides for a percentage increase in Medicare payments to hospitals that qualify under either of two statutory formulas designed to identify hospitals that serve a disproportionate share of low-income patients. For qualifying hospitals, the amount of this adjustment varies based on the outcome of the statutory calculations. The Affordable Care Act revised the Medicare DSH payment methodology and provides for an additional Medicare payment beginning on October 1, 2013, that considers the amount of uncompensated care furnished by the hospital relative to all other qualifying hospitals.

If the hospital is training residents in an approved residency program(s), it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds.

Additional payments may be made for cases that involve new technologies or medical services that have been approved for special add-on payments. In general, to qualify, a new technology or medical service must demonstrate that it is a substantial clinical improvement over technologies or services otherwise available, and that, absent an add-on payment, it would be inadequately paid under the regular DRG payment. In addition, certain transformative new devices and certain antimicrobial products may qualify under an alternative inpatient new technology add-on payment pathway by demonstrating that, absent an add-on payment, they would be inadequately paid under the regular DRG payment.

The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any eligible outlier payment is added to the DRG-adjusted base payment rate, plus any DSH, IME, and new technology or medical service add-on adjustments and, beginning in FY 2023 for Indian Health Service (IHS) and Tribal hospitals and hospitals located in Puerto Rico, the new supplemental payment.

Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid in whole or in part based on their hospital-specific rate, which is determined from their costs in a base year. For example, sole community hospitals (SCHs) receive the higher of a hospital-specific rate based on their costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the standardized amount. SCHs are the sole source of care in their areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is located more than 35 road miles from another hospital or that, by reason of factors such as an isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of hospital inpatient services reasonably available to Medicare beneficiaries. In addition, certain rural hospitals previously designated by the Secretary as essential access community hospitals are considered SCHs.

With the enactment of section 307 of the Consolidated Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), under current law, the Medicare-dependent, small rural hospital (MDH) program is effective through December 31, 2024. For discharges occurring on or after October 1, 2007, but before January 1, 2025, an MDH receives the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major source of care for Medicare beneficiaries in their areas. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area (or, as amended by the Bipartisan Budget Act of 2018, a hospital located in a State with no rural area that meets certain statutory criteria), has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years). As section 307 of the CAA, 2024, extended the MDH program through the first quarter of FY 2025 only, beginning on January 1, 2025, the MDH program will no longer be in effect absent a change in law. Because the MDH program is not authorized by statute beyond December 31, 2024, beginning January 1, 2025, all hospitals that previously qualified for MDH status under section 1886(d)(5)(G) of the Act will no longer have MDH status and will be paid based on the IPPS Federal rate.

Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services in accordance with a prospective payment system established by the Secretary. The basic methodology for determining capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital IPPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Capital IPPS payments are also adjusted for IME and DSH, similar to the adjustments made under the operating IPPS. In addition, hospitals may receive outlier payments for those cases that have unusually high costs.

The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR part 412, subparts A through M.

The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Act, effective for cost reporting periods beginning on or after October 1, 2002. The LTCH PPS was established under the authority of section 123 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 and section 307(b) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (as codified under section 1886(m)(1) of the Act). Section 1206(a) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) established the site neutral payment rate under the LTCH PPS, which made the LTCH PPS a dual rate payment system. Under this statute, effective for LTCH cost reporting periods beginning in FY 2016, LTCHs are generally paid for discharges at the site neutral payment rate unless the discharge meets the patient criteria for payment at the LTCH PPS standard Federal payment rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR part 412, subpart O. Beginning October 1, 2009, we issue the annual updates to the LTCH PPS in the same documents that update the IPPS.

Section 1886(d)(3)(E) of the Act requires that, as part of the methodology for determining prospective payments to hospitals, the Secretary adjust the standardized amounts for area differences in hospital wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level. We currently define hospital labor market areas based on the delineations of statistical areas established by the Office of Management and Budget (OMB). A discussion of the FY 2025 hospital wage index based on the statistical areas can be found in section III.B. of the preamble of the FY 2025 IPPS/LTCH PPS final rule (89 FR 69252).

Section 1886(d)(3)(E) of the Act requires the Secretary to update the wage index annually and to base the update on a survey of wages and wage-related costs of short-term, acute care hospitals. CMS collects these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-3, Parts II, III, IV. The OMB control number for this information collection request is 0938-0050, which expires on September 30, 2025. Section 1886(d)(3)(E) of the Act also requires that any updates or adjustments to the wage index be made in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index.

We also take into account the geographic reclassification of hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B), 1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions.

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through 42339), we finalized a policy to address increasing of wage index disparities, based in part on comments we received in response to our request for information included in our FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20372 through 20377). In the FY 2020 IPPS/LTCH PPS final rule, based on those public comments and the growing disparities between wage index values for high- and low-wage-index hospitals, we explained that those growing disparities are likely caused, at least in part, by the use of historical wage data to prospectively set hospitals' wage indexes. That lag between when hospitals increase wages and when those wage increases are reflected in the historical data creates barriers to hospitals with low wage index values being able to increase employee compensation, because those hospitals will not receive corresponding increases in their Medicare payment for several years (84 FR 42327). Accordingly, we finalized a policy that provided certain low wage index hospitals with an opportunity to increase employee compensation without the usual lag in those increases being reflected in the calculation of the wage index (as they would expect to do if not for the lag). 1 We accomplished this by temporarily increasing the wage index values for certain hospitals with low wage index values and doing so in a budget neutral manner through an adjustment applied to the standardized amounts for all hospitals. We increased the wage index for hospitals with a wage index value below the 25th percentile wage index value for a fiscal year by half the difference between the otherwise applicable final wage index value for a year for that hospital and the 25th percentile wage index value for that year across all hospitals (the low wage index hospital policy). As explained in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19396) and final rule (84 FR 42329), we indicated that the Secretary has authority to implement the low wage index hospital policy proposal under both section 1886(d)(3)(E) of the Act and section 1886(d)(5)(I) of the Act.

When we adopted the low wage index hospital policy in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 through 42328), we stated our intention that this policy would be effective for at least 4 years, beginning in FY 2020, to allow employee compensation increases implemented by these hospitals sufficient time to be reflected in the wage index calculation. We also stated we intended to revisit the issue of the duration of this policy in future rulemaking as we gained experience under the policy. For FY 2024, we continued to apply the low wage index hospital policy and the related budget neutrality adjustment (88 FR 58977 through 58980). In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69301 through 69308), we adopted an extension of the low wage index hospital policy and the related budget neutrality adjustment effective for at least three more years, beginning in FY 2025, in order for sufficient wage data from after the end of the COVID-19 Public Health Emergency to become available.

In that same FY 2025 IPPS/LTCH PPS final rule (89 FR 69302), we also noted that the FY 2020 low wage index hospital policy and the related budget neutrality adjustment are the subject of pending litigation in multiple courts, and that on July 23, 2024, the Court of Appeals for the D.C. Circuit held that the Secretary lacked authority under section 1886(d)(3)(E) of the Act or under the “adjustments” language of section 1886(d)(5)(I)(i) of the Act to adopt the low wage index hospital policy for FY 2020, and that the policy and related budget neutrality adjustment must be vacated. Bridgeport Hosp. v. Becerra, 108 F.4th 882, 887-91 & n.6 (D.C. Cir. 2024). We also stated that as of the date of that final rule's publication, the time to seek further review of the D.C. Circuit's decision in Bridgeport Hospital had not expired (see Fed. R. App. P. 40(a)(1)) and the government was evaluating the decision and considering options for next steps.

Although we respectfully disagree with the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra and continue to believe that the low wage index hospital policy and the related budget neutrality adjustment should be effective for at least three more years for the reasons stated in the FY 2025 IPPS rulemaking, after considering the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra, in this IFC we are recalculating the IPPS hospital wage index to remove the low wage index hospital policy for FY 2025. Because we are now no longer applying the low wage index hospital policy in FY 2025, we are also removing the low wage index budget neutrality factor from the FY 2025 standardized amounts.

In the past, we have established temporary transition policies when there have been significant changes to payment policies, and we have limited the duration of each transition in order to phase in the effects of those payment policy changes. In taking this temporary approach in the past, we have sought to mitigate short-term instability and payment fluctuations that can negatively impact hospitals. For example, CMS has recognized that hospitals in certain areas may experience a negative impact on their IPPS payment due to the adoption of revised OMB delineations for wage index purposes and has finalized transition policies to mitigate negative financial impacts and provide stability to year-to-year wage index variations. We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49956 through 49962) for a discussion of the transition period finalized when CMS adopted revised OMB delineations after the 2010 decennial census. For FY 2025, consistent with our past practice, we believe it is appropriate to establish a transition policy for hospitals significantly impacted by the removal of the FY 2025 low wage index hospital policy using our authority under section 1886(d)(5)(I) of the Act.

We currently have a wage index cap policy at 42 CFR 412.64(h)(7), under which we apply a 5-percent cap on any decrease to a hospital's wage index from its wage index in the prior FY in a budget neutral manner, regardless of the circumstances causing the decline, so that a hospital's final wage index for the upcoming fiscal year will not be less than 95 percent of its final wage index from the prior fiscal year. In accordance with 42 CFR 412.64(e)(1)(ii), CMS applies a budget neutrality adjustment to offset the increase in total payments resulting from the application of that cap.

Some hospitals that benefitted from the low wage index hospital policy previously will experience decreases of 5 percent or more from their FY 2024 wage index to the FY 2025 wage index established in this IFC. Similar to how 42 CFR 412.64(h)(7) would operate, we are applying a one-time, transitional adjustment to create a narrow transitional exception to the calculation of FY 2025 payments. The wage index cap policy at 42 CFR 412.64(h)(7) would have mitigated these FY 2025 decreases but would have done so in a budget neutral manner under our current regulations. Because section 1886(d)(5)(I) of the Act lacks any general budget neutrality requirement, we are not required by the statute to budget neutralize this transition policy. In some circumstances CMS has exercised discretion under section 1886(d)(5)(I) of the Act twice over—first to adopt an exception or adjustment, and then again to make that exception and adjustment budget neutral. 2 However, under the unique circumstances and due to the timing of the appellate court's decision so close to the beginning of FY 2025, we do not deem it appropriate to provide a second exception or adjustment that would budget neutralize the transition policy we are establishing in this IFC. Unlike most policies relevant to the calculation of the hospital wage index, the timing of the court's decision shortly before the beginning of the fiscal year necessitated swift action by the agency via an IFC, rather than providing for prior notice and opportunity for comment. The agency's action in this IFC is intended to promote certainty regarding FY 2025 IPPS payments in light of the reasoning of Bridgeport and its application to the low wage index hospital policy in FY 2025, which would create ongoing confusion for hospitals extending into FY 2025 about the amount of their IPPS payments and would constitute an inefficient use of agency resources. In this instance, the lack of an opportunity prior to the effective date for interested parties to comment on the transition policy weighs in favor of an approach that does not adversely affect the significant majority of hospitals. Because section 1886(d)(5)(I) lacks any general budget neutrality requirement, we are not required by the statute to budget neutralize this transition policy. For these reasons, we decline to budget neutralize the transition policy in this case.

Therefore, we are using our authority under section 1886(d)(5)(I)(i) of the Act to create a narrow transitional exception to the calculation of FY 2025 IPPS payments for low wage index hospitals significantly impacted by the removal of the low wage index hospital policy. 3 4

The transitional exception policy we are establishing in this IFC applies to hospitals that benefitted from the FY 2024 low wage index hospital policy. For those hospitals, we compare the hospital's FY 2025 wage index established in this IFC to the hospital's FY 2024 wage index. If the hospital is significantly impacted by the removal of the low wage index hospital policy, meaning the hospital's FY 2025 wage index established in this IFC is decreasing by more than 5 percent from the hospital's FY 2024 wage index, then the transitional payment exception for FY 2025 for that hospital is equal to the additional FY 2025 amount the hospital would be paid under the IPPS if its FY 2025 wage index were equal to 95 percent of its FY 2024 wage index. 5

For example, assume the FY 2024 wage index for a hospital that benefitted from the low wage index hospital policy is 0.7600, and the hospital's FY 2025 wage index established in this IFC is 0.7100. The hospital's FY 2025 wage index established in this IFC is decreasing by more than 5 percent from the hospital's FY 2024 wage index [that is, 0.7100 < 0.7220 where 0.7220 = (0.95 times .7600)]. The transitional payment exception for FY 2025 for this hospital is equal to the additional amount the hospital would be paid under the IPPS if its FY 2025 wage index were equal to 0.7220, which is 95 percent of 0.7600, its FY 2024 wage index.

Because the need to provide for payment stability and promote predictability is satisfied by the transitional payment exception under this IFC, we are using our authority under section 1886(d)(5)(I)(i) of the Act to except hospitals that are eligible for this transition policy for the removal of the FY 2025 low wage index hospital policy for FY 2025 from the application of the wage index cap policy at 42 CFR 412.64(h)(7).

Under the capital IPPS, the adjustment for local cost variation is based on the hospital wage index value that is applicable to the hospital under the operating IPPS. We adjust the capital standard Federal rate so that the effects of the annual changes in the geographic adjustment factor (GAF) are budget neutral. The low wage index hospital policy has been reflected in the capital IPPS GAFs since FY 2020 (84 FR 42638). The removal of the low wage index hospital policy for FY 2025 also affects the FY 2025 GAFs. Because we are now no longer applying the low wage index hospital policy in FY 2025, we are also no longer making an adjustment to the FY 2025 capital standard Federal rate to ensure budget neutrality for the low wage index hospital policy.

As discussed previously, for FY 2025 we believe it is appropriate to establish a transition policy for low wage hospitals significantly impacted by the removal of the low wage index hospital policy. Since FY 2023, the GAFs reflect the wage index cap policy that limits any decrease to a hospital's wage index from its wage index in the prior FY, regardless of the circumstances causing the decline, to 95 percent of its prior year value (87 FR 49435). As described previously, some low wage index hospitals would experience decreases of 5 percent or more in their FY 2025 wage index established in this IFC compared to their FY 2024 wage index. As such, we are establishing a transitional payment exception to the calculation of FY 2025 IPPS payments for low wage index hospitals impacted by the removal of the low wage index hospital policy. In this IFC, we are making a non-budget neutral equivalent exception under the capital IPPS.

The FY 2025 IPPS/LTCH PPS final rule appeared in the August 28, 2024, Federal Register (89 FR 68986), as corrected in a document scheduled for publication in the Federal Register on October 2, 2024 (hereinafter referred to as the FY 2025 IPPS/LTCH PPS final rule correction). In section II. of the Addendum of the FY 2025 IPPS/LTCH PPS final rule (89 FR 69938) as corrected in FY 2025 IPPS/LTCH PPS final rule correction, we set forth a description of the methods and data we used to determine the prospective payment rates for Medicare hospital inpatient operating costs for FY 2025 for acute care hospitals.

Budget neutrality is determined by comparing aggregate IPPS payments before and after making changes that are required to be budget neutral (for example, changes to MS-DRG classifications, recalibration of the MS-DRG relative weights, updates to the wage index, and different geographic reclassifications). We include outlier payments in the simulations because they may be affected by changes in these parameters. In the FY 2025 IPPS/LTCH PPS final rule, as corrected, the budget neutrality factors were calculated in the order in which they are discussed in the Addendum and shown in the table “Summary of FY 2025 Budget Neutrality Factors” (see 89 FR 69944 through 69948) with the FY 2025 IPPS/ LTCH PPS final rule correction. Specifically, in determining the prospective payment rates for FY 2025 in that final rule, as corrected, the budget neutrality factors were calculated in the following order (after applying the applicable percentage increases):

• Reclassification and Recalibration of MS-DRG Relative Weights Before Cap (MS-DRG Reclassification and Recalibration Budget Neutrality Factor).

• Reclassification and Recalibration of MS DRG Relative Weights With Cap (Cap Policy MS-DRG Weights Budget Neutrality Factor).

• Updated Wage Index (Wage Index Budget Neutrality Factor).

• Reclassified Hospitals (Reclassification Budget Neutrality Factor).

• Rural Floor (Rural Floor Budget Neutrality Factor).

• Continuation of the Low Wage Index Hospital Policy (Low Wage Index Hospital Policy Budget Neutrality Factor).

• Cap Policy for Wage Index (Cap Policy for Wage Index Budget Neutrality Factor).

• Rural Community Hospital Demonstration Program (Rural Demonstration Budget Neutrality Factor).

We note the Rural Floor Budget Neutrality Factor is applied to the national wage indexes while the rest of the budget neutrality adjustments are applied to the standardized amounts.

Based on the order of our budget neutrality calculations, the removal of the low wage index hospital policy and application of the transitional exception policy do not impact the calculation of the first five budget neutrality factors (that is, MS-DRG Reclassification and Recalibration Budget Neutrality Factor, Cap Policy MS-DRG Weights Budget Neutrality Factor, Wage Index Budget Neutrality Factor, Reclassification Budget Neutrality Factor, and the Rural Floor Budget Neutrality Factor). Under the provisions of this IFC, we are no longer making a budget neutrality adjustment to the standardized amount for the low wage index hospital policy. Accordingly, in this IFC we recalculated the cap policy for wage index budget neutrality factor and rural demonstration budget neutrality factor used for determining the standardized amounts for FY 2025. We also calculated the FY 2025 outlier threshold to reflect the provisions of this IFC along with changes to these budget neutrality factors. In addition, as described in section IV. of this IFC, we made updates to the calculation of Factor 3 of the uncompensated care payment methodology for all DSH-eligible hospitals to reflect the updated information for the hospitals that are no longer projected to receive interim uncompensated care payments for FY 2025. We also revised the amount of the total uncompensated care payment calculated for each DSH-eligible hospital, and we updated the list that we published for the FY 2025 IPPS/LTCH PPS final rule, as corrected, of hospitals that we identified to be subsection (d) hospitals and subsection (d) Puerto Rico hospitals projected to be eligible to receive interim uncompensated care payments for FY 2025.

As discussed earlier, we are establishing a transitional exception policy for certain hospitals that benefitted from the low wage index hospital policy adjustment during FY 2024. Because we are applying this transitional exception in a non-budget neutral manner, we first determined which hospitals would be eligible for this transition policy (that is, identified those that had received a higher wage index under the low wage index hospital policy in FY 2024). We then applied the transitional payment exception for eligible hospitals as described in section II. A of this IFC. As discussed earlier, hospitals that are eligible for the new transitional exception policy are excepted from the wage index cap policy at 42 CFR 412.64(h)(7), which is budget neutral by design.

The FY 2025 budget neutrality factors that we recalculated in this IFC were calculated using data described in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69941 through 69948), with the FY 2025 IPPS/LTCH PPS final rule correction. The budget neutrality factor for the wage index cap policy at 42 CFR 412.64(h)(7) was calculated in accordance with the existing methodology. As noted earlier, hospitals that are eligible for the transitional exception policy are excepted from the wage index cap policy at 42 CFR 412.64(h)(7) in FY 2025. To calculate a wage index cap budget neutrality adjustment factor for FY 2025, we used FY 2023 discharge data to simulate payments and compared the following:

• Aggregate payments without the wage index cap policy at 42 CFR 412.64(h)(7) using the FY 2025 labor related share percentages, the new OMB labor market area delineations for FY 2025, the FY 2025 relative weights, and applied the proxy FY 2025 hospital readmissions payment adjustments and the proxy FY 2025 hospital value-based purchasing (VBP) payment adjustments.

• Aggregate payments with the wage index cap at 42 CFR 412.64(h)(7) using the FY 2025 labor related share percentages, the new OMB labor market area delineations for FY 2025, the FY 2025 relative weights, and applied the same proxy FY 2025 hospital readmissions payment adjustments and the proxy FY 2025 hospital VBP payment adjustments applied previously.

The budget neutrality factor for the rural community hospital demonstration program was calculated using the methodology described in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69947 through 69948). We note, as mentioned earlier, that we recalculated the rural demonstration budget neutrality factor; however, when rounded to the sixth decimal, the factor (0.999811) did not change from the corrected factor as set forth in the FY 2025 IPPS/LTCH PPS correction.

The standardized amounts set forth in Tables 1A, 1B, and 1C for FY 2025 that are listed and published in section IV. of this IFC (and available via the internet on the CMS website) reflect these factors.

In the Addendum of the FY 2025 IPPS/LTCH PPS final rule (89 FR 69948 through 66962), with the FY 2025 IPPS/LTCH PPS final rule correction, we discuss outlier payments for cases involving extraordinarily high costs and the methodology for determining the FY 2025 outlier threshold. To calculate the FY 2025 outlier fixed-loss amount that reflects the provisions of this IFC, we used the methodology (data, factors, etc.) as described in the FY 2025 IPPS/LTCH PPS final rule, as corrected, in conjunction with the wage index values, transitional payment exception policy for the removal of the low wage index hospital policy and other rates and factors established in this IFC (as described previously). For example, we used the following to calculate the FY 2025 outlier fixed-loss amount in this IFC:

• Targeted an outlier threshold at 5.14 percent [5.1 percent − (− 0.04 percent)] as reflected in the FY 2025 IPPS/LTCH PPS final rule.

• Applied the charge inflation factor of 4.1 percent (1.04118) (or 8.4 percent (1.08406) over 2 years) as reflected in the FY 2025 IPPS/LTCH PPS final rule.

• Applied the national average case-weighted operating and capital CCR adjustment factors of 1.015192 and 0.997234 respectively as reflected in the FY 2025 IPPS/LTCH PPS correction notice.

• Used the estimated per-discharge uncompensated care payment and estimated per-discharge supplemental payment updated in this IFC.

• Used the applicable standardized amounts in Tables 1A-1C of this IFC.

• Used the FY 2025 wage index values established in this IFC.

• Applied the transitional payment exception policy described in section II.A. of this IFC, where applicable.

For FY 2025, we determined a threshold of $46,217 and calculated total outlier payments of $4,354,709,696 and total operating Federal payments of $80,366,934,481. (We note that, if calculated without applying our methodology for incorporating an estimate of outlier reconciliation in the determination of the outlier threshold, the threshold would be $46,567.) For FY 2025, the outlier fixed-loss cost threshold is equal to the prospective payment rate for the MS-DRG, plus any IME, empirically justified Medicare DSH payments, estimated uncompensated care payment, estimated supplemental payment for eligible Indian Health Service (IHS)/Tribal hospitals and Puerto Rico hospitals, and any add on payments for new technology, plus $46,217. The outlier adjustment factor that is applied to the operating standardized amount based on the FY 2025 outlier threshold is 0.949 (as established in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69961)).

As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69961), we establish an outlier threshold that is applicable to both hospital inpatient operating costs and hospital inpatient capital-related costs. When we modeled the combined operating and capital outlier payments, we found that using a common threshold resulted in a higher percentage of outlier payments for capital-related costs than for operating costs. We project that the threshold for FY 2025 (which reflects our methodology to incorporate an estimate of operating outlier reconciliation (see 89 FR 69948 through 69953) would result in outlier payments that would equal 5.1 percent of operating DRG payments and we estimate that capital outlier payments would equal 4.23 percent of capital payments based on the capital Federal rate established in section II.C. of this IFC (and which reflects our methodology to incorporate an estimate of capital outlier reconciliation as discussed in the FY 2025 IPPS/LTCH PPS final rule (see 89 FR 69953 through 69955)).

In accordance with section 1886(d)(3)(B) of the Act, we reduce the FY 2025 standardized amount by 5.1 percent to account for the projected proportion of payments paid as outliers.

The outlier adjustment factors that would be applied to the operating standardized amount and capital Federal rate based on the FY 2025 outlier threshold are as follows:

We are applying the outlier adjustment factors to the FY 2025 payment rates after removing the effects of the FY 2024 outlier adjustment factors on the standardized amount.

The adjusted standardized amount is divided into labor-related and nonlabor-related portions. Tables 1A and 1B listed and published in section IV. of this IFC (and available via the internet on the CMS website) contain the national standardized amounts that we are applying to all hospitals, except hospitals located in Puerto Rico, for FY 2025. The standardized amount for hospitals in Puerto Rico is shown in Table 1C listed and published in section IV. of this IFC (and available via the internet on the CMS website).

The following table illustrates the changes from the FY 2024 national standardized amounts to the FY 2025 national standardized amounts. The second through fifth columns display the changes from the FY 2024 standardized amounts for each applicable FY 2025 standardized amount. The first row of the table shows the updated (through FY 2024) average standardized amount after restoring the FY 2024 offsets for outlier payments, geographic reclassification, rural demonstration, lowest quartile, and budget neutrality for the wage index cap policy at 42 CFR 412.64(h)(7). The MS-DRG reclassification and recalibration wage index, and stem cell acquisition budget neutrality factors are cumulative (that is, we have not restored the offsets). Accordingly, those FY 2024 adjustment factors have not been removed from the base rate in the following table.

In section III. of the Addendum of the FY 2025 IPPS/LTCH PPS final rule (89 FR 69966 through 69971) as corrected in the FY 2025 IPPS/LTCH PPS final rule correction, we set forth a description of the methods and data we used to determine the prospective payment rates for Medicare hospital inpatient capital-related costs for FY 2025 for acute care hospitals. In that final rule (89 FR 69966 through 69970) the FY 2025 IPPS/LTCH PPS final rule correction, we discuss the factors we use for determining the capital Federal rate for FY 2025. Similar to the discussion of the operating IPPS payment rates previously, the removal of the low wage index hospital policy and the establishment of a transitional exception policy as discussed in section II.B. of this IFC impacts the calculation of certain budget neutrality adjustment factors used for determining the capital Federal rate for FY 2025. In addition, as discussed previously, we also calculated the FY 2025 outlier threshold to reflect the provisions of this IFC along with the corresponding changes to the IPPS payment rates. Accordingly, in this IFC we are establishing the following factors used for determining the capital Federal rate for FY 2025:

• The outlier payment adjustment factor.

• The portion of the budget neutrality adjustment factor for changes in the geographic adjustment factor (GAF) for the 5-percent cap on wage index decreases policy. (Under the provisions of this IFC, this factor would no longer reflect the low wage index hospital policy.)

As we discuss in this section, in general, these factors were calculated using the data and calculation methodology described in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69968 through 69971) with the FY 2025 IPPS/LTCH PPS final rule correction, except for the methodology for calculating the GAF budget neutrality factor which we are modifying to reflect the provisions of this IFC.

As discussed previously, a shared threshold is used to identify outlier cases for both inpatient operating and inpatient capital-related payments. Based on the threshold discussed in section II.B. of this IFC, we estimate that prior to taking into account projected capital outlier reconciliation payments, outlier payments for capital-related costs will equal 4.26 percent of inpatient capital-related payments based on the capital Federal rate in FY 2025. As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69968), we estimate that taking into account projected capital outlier reconciliation payments will decrease the estimated percentage of FY 2025 capital outlier payments by 0.03 percent. Therefore, accounting for estimated capital outlier reconciliation, the estimated outlier payments for capital-related PPS payments will equal 4.23 percent (4.26 percent−0.03 percent) of inpatient capital-related payments based on the capital Federal rate in FY 2025. Accordingly, we applied an outlier adjustment factor of 0.9577 in determining the capital Federal rate for FY 2025. As we noted in the final rule, the capital Federal rate is calculated using unrounded budget neutrality and outlier adjustment factors. The unrounded FY 2025 outlier adjustment factor was revised because of the removal of the low wage index hospital policy and transitional payment exception. However, after rounding this factor to 4 decimal places (as displayed in the final rule and this IFC), the rounded factor was unchanged from the final rule.

The capital Federal rate is adjusted so that aggregate payments for the fiscal year based on the capital Federal rate, after any changes resulting from the annual DRG reclassification and recalibration and changes in the GAF, are projected to equal aggregate payments that would have been made on the basis of the capital Federal rate without such changes. As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69969 through 69970), for FY 2025 we use a 2-step methodology for computing the budget neutrality factor for changes in the GAFs in light of the effect of wage index changes on the GAFs. In the first step, we first calculate a factor to ensure budget neutrality for changes to the GAFs due to the update to the wage data, wage index reclassifications and redesignations, and application of the rural floor policy, consistent with our historical GAF budget neutrality factor methodology. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69969) with the FY 2025 IPPS/LTCH PPS final rule correction, we calculated an incremental adjustment factor for changes in the GAFs for FY 2025 due to the update to the wage data, wage index reclassifications and redesignations, and application of the rural floor policy of 0.9884. The provisions of this IFC do not impact this budget neutrality factor. Also in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69969 through 69970), as corrected with the FY 2025 IPPS/LTCH PPS final rule correction, we calculated an incremental adjustment factor for the FY 2025 MS-DRG reclassification and recalibration and for changes in the FY 2025 GAFs due to the update to the wage data, wage index reclassifications and redesignations, and application of the rural floor policy of 0.9854 (0.9969 × 0.9884). This incremental adjustment factor is not impacted by the provisions of this IFC.

Due to the removal of the low wage index hospital policy (discussed previously in section II.B. of this IFC and also referred as the lowest quartile hospital wage index adjustment in the discussion of the 2-step methodology in the FY 2025 IPPS/LTCH PPS final rule), we are modifying the second step of our 2-step methodology for computing the budget neutrality factor for changes in the GAFs in light of the effect of wage index changes on the GAFs. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69968 through 69970) we calculated a factor in the second step of our methodology that ensured budget neutrality for changes to the GAFs due to the lowest quartile hospital wage index adjustment and the 5-percent cap on wage index decreases policy (our policy to place a 5 percent cap on any decrease in a hospital's wage index from the hospital's final wage index in the prior fiscal year under 42 CFR 412.64(h)(7)). In this IFC, we are modifying this budget neutrality factor to now ensure budget neutrality for changes to the GAFs due only to the 5-percent cap on wage index decreases policy. As discussed previously in section II.B. of this IFC, we are establishing a non-budget neutral transitional exception policy for hospitals that benefitted from the low wage index hospital policy during FY 2024. Hospitals that are eligible for the transitional exception policy are excepted from the wage index cap policy for FY 2025 under this IFC. Therefore, under the provisions of this IFC, the second step of our calculation of the budget neutrality factor for changes in the GAFs in light of the effect of wage index changes on the GAFs only accounts for the application of the 5-percent cap on wage index decreases for hospitals that did not receive the low wage index hospital policy adjustment in FY 2024. For this IFC, we compared estimated aggregate capital Federal rate payments based on the FY 2025 GAFs with and without the 5-percent cap on wage index decreases policy (which was applied only to hospitals that are not eligible for the transitional exception policy). For this calculation, estimated aggregate capital Federal rate payments were calculated using the FY 2025 MS-DRG classifications and relative weights (after application of the 10-percent cap) and the GAFs included the imputed floor, out-migration, and Frontier state adjustments. To achieve budget neutrality for the effects of the 5-percent cap on wage index decreases policy we calculated an incremental GAF budget neutrality adjustment factor of 0.9992.

As a result of factors established in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69971) with the FY 2025 IPPS/LTCH PPS final rule correction and the outlier adjustment factor and the budget neutrality factor for the effects of the 5-percent cap on wage index decreases established in this IFC (as discussed previously), we are establishing a national capital Federal rate of $512.14 for FY 2025. The national capital Federal rate for FY 2025 was calculated as shown in the following table. The combined effect of all the changes will increase the national capital Federal rate by approximately 1.65 percent, compared to the FY 2024 national capital Federal rate.

In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69987), we established that the applicable HCO threshold for site neutral payment rate cases for FY 2025 is the sum of the site neutral payment rate for the case and the IPPS fixed-loss amount. As discussed previously in section II.B.2. of this IFC, the provisions of this IFC result in the recalculation of the IPPS fixed-loss amount for FY 2025. Therefore, in this IFC, for FY 2025 we are establishing a fixed-loss amount for site neutral payment rate cases of $46,217, which is the same as the FY 2025 IPPS fixed-loss amount discussed in section II.B.2. of this IFC. Accordingly, under this policy, for FY 2025, we will calculate an HCO payment for site neutral payment rate cases with costs that exceed the HCO threshold amount that is equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the site neutral payment rate payment and the fixed-loss amount for site neutral payment rate cases of $46,217).

Under 5 U.S.C. 553(b) of the Administrative Procedure Act (APA), the agency is required to publish a notice of the proposed rulemaking in the Federal Register before the provisions of a rule take effect. Similarly, section 1871(b)(1) of the Act requires the Secretary to provide for notice of the proposed rulemaking in the Federal Register and provide a period of not less than 60 days for public comment. In addition, section 553(d) of the APA, and section 1871(e)(1)(B)(i) of the Act mandate a 30-day delay in effective date after issuance or publication of a rule. Sections 553(b)(B) and 553(d)(3) of the APA provide for exceptions from the notice and comment and delay in effective date APA requirements; in cases in which these exceptions apply, sections 1871(b)(2)(C) and 1871(e)(1)(B)(ii) of the Act provide exceptions from the notice and 60-day comment period and delay in effective date requirements of the Act as well. Section 553(b)(B) of the APA and section 1871(b)(2)(C) of the Act authorize an agency to dispense with normal rulemaking requirements for good cause if the agency makes a finding that the notice and comment process are impracticable, unnecessary, or contrary to the public interest. In addition, both section 553(d)(3) of the APA and section 1871(e)(1)(B)(ii) of the Act allow the agency to avoid the 30-day delay in effective date where such delay is contrary to the public interest and an agency includes a statement of support.

As discussed earlier, in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69302), we noted that the FY 2020 low wage index hospital policy and the related budget neutrality adjustment were the subject of pending litigation in multiple courts, and that on July 23, 2024, the Court of Appeals for the D.C. Circuit held that the Secretary lacked authority under section 1886(d)(3)(E) of the Act or under the “adjustments” language of section 1886(d)(5)(I)(i) of the Act to adopt the low wage index hospital policy for FY 2020, and that the policy and related budget neutrality adjustment must be vacated. Bridgeport Hosp. v. Becerra, 108 F.4th 882, 887-91 & n.6 (D.C. Cir. 2024). We also stated that as of the date of that final rule's publication, the time to seek further review of the D.C. Circuit's decision in Bridgeport Hospital had not expired (see Fed. R. App. P. 40(a)(1)) and the government was evaluating the decision and considering options for next steps. There was a limited amount of time between July 23, 2024, and the beginning of FY 2025 on October 1, 2024, to consider options for the low wage index hospital policy for FY 2025 in the context of the D.C. Circuit's reasoning in Bridgeport Hospital. If the FY 2025 IPPS (and certain LTCH PPS) payment rates including the FY 2025 low wage index hospital policy were to go into effect on October 1, 2024, it is possible given the D.C. Circuit's decision regarding the FY 2020 low wage index hospital policy and potential further litigation developments that those FY 2025 payments would need to be revised, creating the potential need to reprocess significant numbers of FY 2025 claims and unnecessarily change FY 2025 payments retroactively for all IPPS and LTCH PPS hospitals. This would constitute an inefficient use of limited agency resources. It would also create legal uncertainty for the public and ongoing confusion for hospitals extending into FY 2025 about the amount of their IPPS and LTCH PPS payments, which runs counter to the prospective nature of these payment systems. Removing the FY 2025 low wage index hospital policy and associated budget neutrality adjustment through an IFC rather than through the notice and comment rulemaking cycle and waiving the delay of the effective date will allow these changes to be applied to FY 2025 IPPS payment rates (and certain LTCH PPS rates) at the beginning of the fiscal year on October 1, 2025, avoiding these issues. Therefore, we find good cause to waive the notice of proposed rulemaking requirements as well as the delay of the effective date and to issue this final rule on an interim basis. Even though we are waiving notice of proposed rulemaking requirements and are issuing these provisions on an interim final basis, we are providing a 60-day public comment period.

This section lists the tables referred to throughout this IFC. As stated in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69989), for the FY 2025 rulemaking cycle, the IPPS and LTCH PPS tables will not be published in the Federal Register in the annual IPPS/LTCH PPS proposed and final rules and will be on the CMS website. Specifically, all IPPS tables listed in this IFC, with the exception of IPPS Tables 1A, 1B, 1C, and 1D, will generally be available on the CMS website. IPPS Tables 1A, 1B, 1C, and 1D are displayed at the end of this section.

Readers who experience any problems accessing any of the tables that are posted on the CMS websites identified in this IFC should contact Michael Treitel at (410) 786-4552.

The following IPPS tables for this IFC are generally available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the left side of the screen titled “FY 2025 IPPS Final Rule Home Page” or “Acute Inpatient-Files-for Download.”

Table 18.—FY 2025 Interim Final Rule with Comment Period Medicare DSH Uncompensated Care Payment Factor 3. We note that we made updates to the calculation of Factor 3 of the uncompensated care payment methodology for all DSH-eligible hospitals to reflect the updated information for the hospitals that are no longer projected to receive interim uncompensated care payments for FY 2025. More specifically, because the Factor 3 calculated for each hospital reflects that hospital's uncompensated care amount relative to the uncompensated care amount for all subsection (d) hospitals that receive a DSH payment for the fiscal year, we recalculated Factor 3 for all DSH-eligible hospitals. The hospital-specific Factor 3 determines the total amount of the uncompensated care payment a hospital is eligible to receive for the fiscal year. Accordingly, we also recalculated the total uncompensated care amount for all DSH-eligible hospitals to reflect these updates. Each hospital's total uncompensated care payment amount is then used to calculate the amount of the interim uncompensated care payments a hospital receives per discharge. Given the very narrowly targeted update to the information used in the calculation of Factor 3, the change to the previously calculated Factor 3 is of limited magnitude for the majority of hospitals.

For the FY 2025 IPPS/LTCH PPS final rule, as corrected, we published a list of hospitals that we identified to be subsection (d) hospitals and subsection (d) Puerto Rico hospitals projected to be eligible to receive interim uncompensated care payments for FY 2025. We are updating this list and the calculations of Factor 3 of the uncompensated care payment methodology to reflect our updated interim uncompensated care eligibility projections. As noted earlier in this section, we are revising Factor 3 for all DSH-eligible hospitals to reflect these updates, and we are revising the amount of the total uncompensated care payment calculated for each DSH-eligible hospital.

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

We have examined the impacts of this IFC as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), Executive Order 14094 on Modernizing Regulatory Review (April 6, 2023), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (CRA) (5 U.S.C. 804(2)).

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

A regulatory impact analysis (RIA) is prepared for a regulatory action to document the economic impact and determine if a regulatory action is significant under section 3(f)(1). Based on our estimates, OMB'S Office of Information and Regulatory Affairs (OIRA) has determined this rulemaking is not significant under section 3(f)(1) of E.O. 12866. Accordingly, we have prepared a regulatory impact analysis that to the best of our ability presents the costs and benefits of the rulemaking. Pursuant to Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (also known as the Congressional Review Act), OIRA has also determined that this rule meets the criteria set forth in 5 U.S.C. OMB has reviewed this IFC, and the Departments have provided the following assessment of their impact. The analysis in this section, in conjunction with the remainder of this document, demonstrates that this IFC is consistent with the regulatory philosophy and principles identified in Executive Orders 12866 and 13563, the RFA, and section 1102(b) of the Act. This IFC would affect payments to a substantial number of small rural hospitals, as well as other classes of hospitals, and the effects on some hospitals may be significant. Finally, in accordance with the provisions of Executive Order 12866, the Office of Management and Budget has reviewed this IFC.

The following quantitative analysis presents the projected effects of the policy changes established in this IFC, as well as changes effective for FY 2025 established in the FY 2025 IPPS/LTCH PPS final rule and correction notice, on various hospital groups.

To illustrate the effects of the provisions of this IFC on hospitals' FY 2025 payments, this impact analysis was developed by comparing the total estimated change in payments under this FY 2025 IPPS/LTCH PPS IFC and the total estimated change in payments from the FY 2025 IPPS/LTCH PPS final rule (89 FR 69991) as corrected in the FY 2025 IPPS/LTCH PPS final rule correction. Specifically, our analysis shows the effects of the removal of the low wage index hospital policy and the application of the transition policy (discussed in sections II.A. and B. of this IFC) by comparing the following:

• The total estimated change in payments based on FY 2025 policies relative to payments based on FY 2024 policies as calculated in our impact analysis in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69991) as corrected in FY 2025 IPPS/LTCH PPS final rule correction, which included the low wage index hospital policy.

• The total estimated change in payments based on FY 2025 policies after removing the low wage index hospital policy and applying the transitional exception policy (discussed in sections II.A. and II.B. of this IFC) relative to payments based on FY 2024 policies.

A comparison of these two isolates the estimated impact of removing the low wage index hospital policy and the application of the transition policy on FY 2025 payments as discussed later in this section.

Other than removing the low wage index hospital policy and applying the transitional exception policy, this impact analysis was developed using the same data and methodology described in the FY 2025 IPPS/LTCH PPS final rule and correction notice in conjunction with the rates and factors (for example, outlier threshold, interim uncompensated care per discharge payments amounts) established in this IFC, as discussed in sections II.A. and II.B. of this IFC. For ease of discussion, references to the removal of the low wage index hospital policy and the application of the transitional exception policy also include the conforming changes to the rates and factors established in this IFC (for example, outlier threshold, interim uncompensated care per discharge payments amounts).

Table I displays the results of our analysis of the changes for FY 2025 before and after the removal of the low wage index hospital policy and the application of the transitional exception policy, and then uses this information to isolate the impact of the provisions of this IFC. The table categorizes hospitals by various geographic and special payment consideration groups to illustrate the varying impacts on different types of hospitals, which are described in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69996).

Column A shows our estimate of the change in payments per discharge from FY 2024 to FY 2025 resulting from all changes reflected in the FY 2025 IPPS/LTCH PPS final rule, as corrected, including the estimated effects of the continuation of the low wage index hospital policy in FY 2025. For complete details refer to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69994 through 70002) and FY 2025 IPPS/LTCH PPS final rule correction.

As in Column A, Column B also shows our estimate of the change in payments per discharge from FY 2024 to FY 2025 resulting from all changes reflected in the FY 2025 IPPS/LTCH PPS final rule, as corrected, except instead of including the estimated effects of the continuation of the low wage index hospital policy in FY 2025, it includes the estimated effects in FY 2025 of removing the low wage index hospital policy and applying the transitional exception policy.

This column compares Column B, reflecting the removal of the low wage index hospital policy and the application of the transition policy in FY 2025, to Column A, reflecting the continuation of the low wage index hospital policy in FY 2025, to isolate the impact of removing the low wage index hospital policy and applying the transition policy. Specifically, it shows the changes in FY 2025 payments from the FY 2025 final rule, as corrected, to the FY 2025 payments under this IFC. These changes are entirely attributable to the effects of (1) the removal of the low wage index hospital policy and (2) the application of the transitional exception policy (as described in section II.B. of this IFC), because those are the only policy differences between the FY 2025 IPPS/LTCH PPS final rule as corrected, and this IFC. As noted earlier, other than those policy changes, this impact analysis was developed using the same data and methodology described in the FY 2025 IPPS/LTCH PPS final rule and the FY 2025 IPPS/LTCH PPS final rule correction.

The average change in FY 2025 payments under the IPPS for all hospitals due to the provisions of this IFC is approximately 0.0 percent to the nearest tenth of a percent. Although the non-budget neutral transition policy is estimated to increase IPPS operating payments by approximately $37 million, this amount represents less than a tenth of a percent of IPPS payments.

As a result of the provisions of this IFC, overall 768 hospitals will receive a lower wage index in FY 2025 than their FY 2025 wage index in the FY 2025 IPPS/LTCH PPS final rule, as corrected, and 2,315 hospitals will experience no change in their FY 2025 wage index. Hospitals in urban areas will experience a 0.1 percent increase in their FY 2025 estimated payments relative to the FY 2025 estimated payments in the FY 2025 IPPS/LTCH PPS final rule, as corrected. We estimate that 445 urban hospitals will receive a lower FY 2025 wage index than their FY 2025 wage index in the FY 2025 IPPS/LTCH PPS final rule, as corrected, while 1,947 urban hospitals will experience no change to their FY 2025 wage index. Hospitals in rural areas will experience a −0.4 percent decrease in their FY 2025 estimated payments relative to the FY 2025 estimated payments in the FY 2025 IPPS/LTCH PPS final rule, as corrected. We estimate that 323 rural hospitals will receive a lower FY 2025 wage index than their FY 2025 wage index in the FY 2025 IPPS/LTCH PPS final rule, as corrected, while 368 rural hospitals will experience no change to their FY 2025 wage index. We estimate that 113 hospitals (85 urban and 28 rural) will receive the transitional exception policy.

The comparisons by region show that the change in payments for urban areas range from a 1.4 percent decrease for the East South Central urban region to a 0.2 percent increase for New England, Middle Atlantic, East North Central, Mountain, and Pacific urban regions. Meanwhile, the change in payments for rural areas range from a 1.8 percent decrease for the East South Central rural region to increases of 0.2 percent for the New England and Middle Atlantic rural regions. IPPS payments to hospitals located in Puerto Rico are projected to decrease by 2.8 percent. These changes reflect the fact that different regions have different proportions of low wage hospitals, with the highest relative concentrations of low wage hospitals in Puerto Rico and the East South Central region. Regions that have relatively few low wage hospitals compared to non-low wage hospitals are projected to experience payment increases due to the removal of the low wage index hospital budget neutrality adjustment.

The approach for estimating the effect of the provisions of this IFC on capital IPPS payments parallels the approach taken for IPPS operating payments. Table II displays the results of our analysis of the changes for FY 2025 before and after the removal of the low wage index hospital policy and the application of the transition policy, and then uses this information to isolate the impact of the provisions of this IFC.

The average change in FY 2025 capital IPPS payments per case for all hospitals due to the provisions of this IFC is approximately 0.1 percent to the nearest tenth of a percent. The non-budget neutral transitional exception policy is estimated to increase capital IPPS payments by approximately $3 million. (We note that the difference in the average change for all hospitals between operating and capital is primarily due to rounding.) Capital IPPS payments per case will increase by an estimated 0.1 percent for hospitals in urban areas compared to the FY 2025 IPPS/LTCH PPS final rule as corrected while payments to hospitals in rural areas will decrease by 0.5 percent.

The comparisons by region show that the change in capital payments per case for urban areas range from a 1.7 percent decrease for the East South Central urban region to a 0.3 percent increase for the New England, Middle Atlantic, and Pacific urban regions. Meanwhile, the change in capital payments per case for rural areas range from a 2.6 percent decrease for the East South Central rural region to a 0.4 percent increase for the New England, Middle Atlantic, and Pacific rural regions. Capital payments per case for hospitals located in Puerto Rico are projected to decrease by an estimated 3.6 percent. As with operating payments, these regional changes reflect the fact that different regions have different proportions of low wage hospitals, with the highest relative concentrations of low wage hospitals in Puerto Rico and the East South Central region. Regions that have relatively few low wage hospitals compared to non-low wage hospitals are projected to experience payment increases due to the removal of the low wage index hospital budget neutrality adjustment.

Acute care hospitals are estimated to experience an increase of approximately $41 million in FY 2025 due to the provisions of this IFC. This change is primarily due to the application of the non-budget neutral transitional payment exception policy. The estimated change in operating payments is approximately $37 million (discussed in section VI.A. of this IFC). The estimated change in capital payments is approximately $3 million (discussed in section VI.B. of this IFC). The total differs from the sum of the components due to rounding.

Table I of section VI.A. of this IFC and Table II of section VI.B. of this IFC demonstrate the estimated redistributional impacts of the provisions of this IFC. Discussions presented in the previous pages, in combination with the remainder of this IFC, constitute the regulatory impact analysis.

As required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf ), in Table V. of this IFC, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this IFC as they relate to acute care hospitals. This table provides our best estimate of the change in Medicare payments to providers as a result of the changes to the IPPS presented in this IFC relative to the FY 2025 IPPS/LTCH PPS final rule as corrected in the FY 2025 IPPS/LTCH PPS final rule correction. All expenditures are classified as transfers to Medicare providers.

As shown in Table V., the net costs to the Federal Government associated with the policies in this IFC are estimated at $41 million.

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

For purposes of the RFA, all hospitals and other providers and suppliers are considered to be small entities. Because all hospitals are considered to be small entities for purposes of the RFA, the hospital impacts described in this IFC are impacts on small entities. Individuals and States are not included in the definition of a small entity. MACs are not considered to be small entities because they do not meet the SBA definition of a small business. HHS's practice in interpreting the RFA is to consider effects economically “significant” if greater than 5 percent of providers reach a threshold of 3 to 5 percent or more of total revenue or total costs. Although less than 5 percent of providers are estimated to reach a threshold of 3 to 5 percent of total revenue or total costs, the provisions of this IFC relating to IPPS hospitals would have an economically significant impact on many small entities as explained in this IFC. For example, as discussed in section VI.A. of this IFC, we estimate 113 hospitals will receive the transitional exception policy due to being significantly impacted by the removal of the low wage index hospital policy.

This IFC provides descriptions of the provisions that are addressed, identifies the finalized policies, and presents rationales for our decisions. The analyses discussed in this IFC constitutes our regulatory flexibility analysis. We solicit public comments on our estimates and analysis of the impact of our policies on small entities.

Section 1102(b) of the Act requires us to prepare a regulatory impact analysis for any proposed or final rule that may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain New England counties as belonging to the adjacent urban area. Thus, for purposes of the IPPS, we continue to classify these hospitals as urban hospitals.

As shown in Table I. in section VI.A. of this IFC, rural IPPS hospitals with 0-49 beds (341 hospitals) are expected to experience a decrease in payments of −0.4 percent, and rural IPPS hospitals with 50-99 beds (182 hospitals) are expected to experience a decrease in payments of −0.1 percent relative to the FY 2025 IPPS/LTCH PPS final rule as corrected by the FY 2025 IPPS/LTCH PPS final rule correction. These changes are due to the removal of the low wage index hospital policy in conjunction with the application of the transition policy. We refer readers to Table I. in section VI.A. of this IFC for additional information on the quantitative effects of the policy changes under the IPPS for operating costs.

Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2024, that threshold level is approximately $183 million. This IFC would not mandate any requirements that meet the threshold for State, local, or tribal governments, nor would it affect private sector costs.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a rule that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has federalism implications. This IFC would not have a substantial direct effect on state or local governments, preempt states, or otherwise have a federalism implication.

Executive Order 13175 directs agencies to consult with Tribal officials prior to the formal promulgation of regulations having tribal implications. Section 1880(a) of the Act states that a hospital of the Indian Health Service, whether operated by such Service or by an Indian tribe or tribal organization, is eligible for Medicare payments so long as it meets all of the conditions and requirements for such payments which are applicable generally to hospitals. Consistent with section 1880(a) of the Act, this IFC contains general provisions also applicable to hospitals and facilities operated by the Indian Health Service or Tribes or Tribal organizations under the Indian Self-Determination and Education Assistance Act. We continue to engage in consultations with Tribal officials on IPPS issues of interest. We use input received from these consultations, as well as the comments on this IFC, to inform our rulemaking.

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