Most Favored Nation (MFN) Model

CourtCenters For Medicare & Medicaid Services
Citation86 FR 73986
Record Number2021-28225
Publication Date29 December 2021
Federal Register, Volume 86 Issue 247 (Wednesday, December 29, 2021)
[Federal Register Volume 86, Number 247 (Wednesday, December 29, 2021)]
                [Rules and Regulations]
                [Pages 73986-73990]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-28225]
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                DEPARTMENT OF HEALTH AND HUMAN SERVICES
                Centers for Medicare & Medicaid Services
                42 CFR Part 513
                [CMS-5528-F]
                RIN 0938-AT91
                Most Favored Nation (MFN) Model
                AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
                ACTION: Final rule.
                -----------------------------------------------------------------------
                SUMMARY: This final rule rescinds the Most Favored Nation Model interim
                final rule with comment period that appeared in the November 27, 2020,
                Federal Register.
                DATES: This final rule is effective February 28, 2022.
                FOR FURTHER INFORMATION CONTACT: Lara Strawbridge, (410) 786-7400 or
                [email protected].
                I. Background
                 In the August 10, 2021 Federal Register (86 FR 43620), we published
                a proposed rule (86 FR 43618, hereafter, referred to as ``the August
                2021 proposed rule'') that would rescind the Most Favored Nation (MFN)
                Model interim final rule with comment period (85 FR 76180) that
                appeared in the November 27, 2020 Federal Register (hereafter, referred
                to as ``the November 2020 MFN Model interim final rule''). The November
                2020 MFN Model interim final rule established a 7-year nationwide,
                mandatory MFN Model to test an alternative way for Medicare to pay for
                certain Medicare Part B single source drugs and biologicals (including
                biosimilar biologicals), under section 1115A of the Social Security Act
                (the Act), with the model performance period beginning on January 1,
                2021. The MFN Model was not implemented on January 1, 2021 as
                contemplated following four lawsuits and a nationwide preliminary
                injunction. On December 28, 2020, the U.S. District Court for the
                Northern District of California issued a nationwide preliminary
                injunction in California Life Sciences Ass'n v. CMS, No. 3:20-cv-08603,
                which preliminarily enjoined HHS from implementing the MFN Model and
                the November 2020 interim final rule. For additional information on the
                MFN Model and the related lawsuits, see the August 2021 proposed rule,
                the November 2020 MFN Model interim final rule, and the MFN Model
                website.\1\
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                 \1\ See the MFN Model website at https://innovation.cms.gov/innovation-models/most-favored-nation-model.
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                II. Provisions of the Proposed Regulations and Analysis of and
                Responses to Public Comments
                 Given that the nationwide preliminary injunction precluded
                implementation of the MFN Model on January 1, 2021, as contemplated,
                that multiple courts found procedural issues with the November 2020
                interim final rule, and that stakeholders expressed concern about the
                model start date,\2\ in the August 2021 proposed rule (86 FR 43620), we
                proposed to rescind the November 2020 MFN Model interim final rule and
                remove the regulations at 42 CFR part 513 (these actions would withdraw
                the MFN Model), and invited comments on our proposal. We received 34
                timely items of correspondence from health care providers (such as
                health systems, hospitals, physician practices, and infusion centers),
                physician specialty groups, drug manufacturers, pharmaceutical industry
                groups, pharmacy benefit managers, patient advocacy groups, and
                individuals.
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                 \2\ For example, in response to the November 2020 interim final
                rule, commenters stated that the MFN Model should not start during
                the COVID-19 pandemic, and in addition that the model should not
                begin on January 1, 2021, while the public comment period for the
                November 2020 interim final rule was ongoing (until January 26,
                2021). Further, commenters stated that CMS failed to allow MFN
                participants sufficient time to prepare for model start and to
                develop and deploy new systems with distributors and customers to
                exclude model sales from average sales price (ASP) reporting.
                ---------------------------------------------------------------------------
                 The following is a summary of the public comments received as well
                as our responses.
                 Comment: In general, the comments on the August 2021 proposed rule
                closely aligned with the comments we received in response to the
                November 2020 MFN Model interim final rule. Several commenters
                expressed general support for lowering drug prices. However, all but
                one of the commenters supported our proposal to rescind the November
                2020 MFN Model interim final rule and remove the associated regulatory
                text at 42 CFR part 513. A commenter supported advancing the MFN Model,
                stating that the model ``is a guarantee to every American that we are
                not overpaying for the life sustaining medications they need. . . .
                [G]ive Americans the same drugs for the same price as the rest of the
                world.'' Several commenters urged us not to implement the MFN Model or
                similar models, such as any model that would test international or
                domestic reference pricing now or in the future. Many commenters
                expressed concerns about the potential for beneficiaries to lose access
                to drugs included in the MFN Model if manufacturers did not lower
                prices to align with the model payment amount, the potential for an MFN
                Model start to exacerbate practice struggles during the COVID-19
                pandemic, and the potential financial hardship and administrative
                burden that hospitals, physician practices, and 340B covered entities
                may experience related to the MFN Model. Some commenters described
                legal concerns that were raised in the model-related lawsuits.
                 Response: We appreciate commenters' support for our proposal to
                rescind the November 2020 MFN Model interim final rule and remove the
                associated regulatory text at 42 CFR part 513 (these actions would
                withdraw the MFN Model). We appreciate the commenter's concern that
                Americans are paying more for drugs than consumers in other countries
                pay, although we disagree with the commenter that the MFN Model would
                guarantee that Americans would pay the exact amount that others pay for
                drugs, as the MFN Model was designed as a 7-year model test that would
                phase in the MFN Price over time, and further, there is no one
                international price that others outside the United States pay. We will
                continue to carefully consider this commenter's feedback and other
                stakeholders' feedback that we received as we explore all options to
                incorporate value into payments for Medicare Part B drugs, improve
                beneficiaries' access to evidence-based care, and reduce drug spending
                for consumers and throughout the health care system. As stated in the
                Department of Health and Human Services' (HHS') Comprehensive Plan for
                Addressing High Drug Prices: A Report in Response to the Executive
                Order on Competition in the American Economy (September 9, 2021), there
                are many administrative tools that could be used to promote competition
                and reduce drug pricing, including testing models in Medicare Part B
                using value-based payments, in which payment for drugs
                [[Page 73987]]
                is directly linked to the clinical value they provide patients.\3\
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                 \3\ https://aspe.hhs.gov/sites/default/files/2021-09/Drug_Pricing_Plan_9-9-2021.pdf.
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                 Comment: Some commenters offered views on potential policies and
                alternative payment models that HHS and CMS could consider.
                 Response: We thank stakeholders for their comments. These topics
                are outside the scope of this rule, but we may consider the comments in
                the future.
                 Final Decision: After considering the comments on our proposal, we
                are finalizing our proposal as proposed. In this final rule, we rescind
                the November 2020 MFN Model interim final rule and remove the
                associated regulatory text at 42 CFR part 513. Thus, as a result of
                this final rule, the MFN Model is withdrawn, effective on the date
                specified in the DATES section of this final rule.
                III. Collection of Information Requirements
                 As stated in section 1115A(d)(3) of the Act, Chapter 35 of title
                44, United States Code shall not apply to the testing and evaluation of
                CMS Innovation Center Models. However, costs incurred through
                information collections were described in sections III.H., III.I.b.,
                and VI.C.5. of the November 2020 MFN Model interim final rule (85 FR
                76221, 76222, and 76244, respectively). We are finalizing the
                provisions of the August 2021 proposed rule, which proposed to rescind
                requirements related to the information collection described in the
                November 2020 MFN Model interim final rule. As such, the estimate of
                the impact of this final rule in section IV.C. of this final rule
                includes the savings from rescinding the information collection
                requirements in the November 2020 MFN Model interim final rule.
                Further, the August 2021 proposed rule and this final rule do 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 did not receive comments on the discussion of information
                collection in the proposed rule.
                IV. Regulatory Impact Analysis
                A. Statement of Need
                 The purpose of this final rule is to finalize the rescission of the
                Most Favored Nation Model interim final rule with comment period that
                appeared in the November 27, 2020 Federal Register, and remove the
                associated regulatory text at 42 CFR part 513 (these actions will
                withdraw the MFN Model).
                B. Overall Impact
                 We have examined the impact of this rule 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), 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 (5 U.S.C. 804(2)).
                 Executive Orders 12866 and 13563 direct agencies to assess all
                costs and benefits of available regulatory alternatives and, if
                regulation is necessary, to select regulatory approaches that maximize
                net benefits (including potential economic, environmental, public
                health and safety effects, distributive impacts, and equity). Section
                3(f) of Executive Order 12866 defines a ``significant regulatory
                action'' as an action that is likely to result in a rule: (1) Having an
                annual effect on the economy of $100 million or more in any one year,
                or adversely and materially affecting a sector of the economy,
                productivity, competition, jobs, the environment, public health or
                safety, or state, local or tribal governments or communities (also
                referred to as ``economically significant''); (2) creating a serious
                inconsistency or otherwise interfering with an action taken or planned
                by another agency; (3) materially altering the budgetary impacts of
                entitlement grants, user fees, or loan programs or the rights and
                obligations of recipients thereof; or (4) raising novel legal or policy
                issues arising out of legal mandates, the President's priorities, or
                the principles set forth in the Executive Order.
                 Based on our estimates, OMB's Office of Information and Regulatory
                Affairs has determined this rulemaking is ``economically significant''
                as measured by the $100 million threshold, and hence also a major rule
                under Subtitle E of the Small Business Regulatory Enforcement Fairness
                Act of 1996 (also known as the Congressional Review Act). Accordingly,
                we have prepared a regulatory impact analysis that to the best of our
                ability presents the costs and benefits of the rulemaking.
                C. Detailed Economic Analysis
                 Removing the regulatory text at 42 CFR part 513, which withdraws
                the MFN Model, prevents realization of the annualized/monetized
                estimates of costs and transfers presented in the November 2020 MFN
                Model interim final rule (85 FR 76235 through 76248). The RIA of the
                November 2020 MFN Model interim final rule estimated that the MFN Model
                would result in substantial overall savings for the Medicare program,
                the Medicaid program, and beneficiaries, and that model participants
                would experience costs associated with complying with the regulations,
                survey completion, and potential requests for a financial hardship
                exemption.
                 In the November 2020 MFN Model interim final rule, we presented
                estimates from the CMS Office of the Actuary (OACT) (85 FR 76236) and
                the HHS Office of the Assistant Secretary for Planning and Evaluation
                (ASPE) (85 FR 76240). We noted that there is much uncertainty around
                the assumptions for both the OACT and ASPE estimates, and refer readers
                to section VI.C. of the November 2020 MFN Model interim final rule for
                a more complete discussion of the estimated impacts of the MFN Model.
                These potential impacts were estimated to occur beginning January 2021
                through December 2028, in alignment with a January 1, 2021 model start.
                However, because the MFN Model was not implemented on January 1, 2021,
                as contemplated in the November 2020 MFN Model interim final rule, such
                effects have not occurred.
                [[Page 73988]]
                 Nevertheless and notwithstanding the nationwide preliminary
                injunction, this analysis uses a baseline in which the November 2020
                MFN Model interim final rule was implemented on January 1, 2021, to
                calculate the monetized estimates of the effects of this final rule. We
                maintain the analytical approach described in the RIA of the November
                2020 MFN Model interim final rule and August 2021 proposed rule, and
                for the purpose of quantifying the effects of this final rule, assume
                that the regulations added by the November 2020 MFN Model interim final
                rule would remain in full effect if this final rule was not finalized.
                By rescinding the regulations added by the November 2020 MFN Model
                interim final rule, this final rule prevents the occurrence of the
                estimated costs and transfers presented in the November 2020 MFN Model
                interim final rule. As presented in the August 2021 proposed rule (86
                FR 43621), we summarize this result in Tables 1 and 2, which
                illustrate, inversely, the monetized estimates contained in Table 17
                (85 FR 76247) and Table 18 (85 FR 76248) of the November 2020 MFN Model
                interim final rule. The period covered shown in Tables 1 and 2 begins
                January 2021 in alignment with the accounting statements and tables
                presented in the November 2020 MFN Model interim final rule and in the
                August 2021 proposed rule. This approach illustrates that this final
                rule prevents the realization of the annualized/monetized estimates of
                costs and transfers that were presented in the November 2020 MFN Model
                interim final rule. Because the MFN Model was not implemented, readers
                should understand that this final rule does not affect conditions in
                the past.
                Table 1--Accounting Statement: Estimated Impacts From CY 2021 to CY 2028 as a Result of Provisions of This Final
                 Rule Based on the OACT Estimate
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                 Units
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                 Category Estimates Discount rate
                 Year dollar (%) Period covered
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                Costs:
                 Annualized Monetized ($million/ -29.4 2018 7 January 2021-December
                 year). 2028.
                 -27.1 2018 3 January 2021-December
                 2028.
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                To Whom............................... Hospital/physicians.
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                 Annualized Monetized ($million/ -0.4 2018 7 January 2021-December
                 year). 2027.
                 -0.4 2018 3 January 2021-December
                 2027.
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                Transfers:
                 Annualized Monetized ($million/ 11,502.5 2018 7 January 2021-December
                 year). 2027.
                 11,906.3 2018 3 January 2021-December
                 2027.
                 -------------------------------------------------------------------------
                From Whom to Whom..................... Federal Government to hospitals/physicians and MA plans.
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                 Annualized Monetized ($million/ 4,087.2 2018 7 January 2021-December
                 year). 2027.
                 4,228.3 2018 3 January 2021-December
                 2027.
                 -------------------------------------------------------------------------
                From Whom to Whom..................... Beneficiaries to hospitals/physicians and MA plans.
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                 Annualized Monetized ($million/ 577.5 2018 7 January 2021-December
                 year). 2027.
                 596.5 2018 3 January 2021-December
                 2027.
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                From Whom to Whom..................... States to hospitals/physicians and MA plans
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                 Table 2--Accounting Statement: Estimated Impacts From CY 2021 to CY 2028 as a Result of the Provisions of This
                 Final Rule Based on the ASPE Estimate
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                 Units
                 ---------------------------------------------------------
                 Category Estimates Discount rate
                 Year dollar (%) Period covered
                ----------------------------------------------------------------------------------------------------------------
                Costs:
                 Annualized Monetized ($million/ -29.4 2018 7 January 2021-December
                 year). 2028.
                 -27.1 2018 3 January 2021-December
                 2028.
                 -------------------------------------------------------------------------
                To Whom............................... Hospital/physicians.
                 -------------------------------------------------------------------------
                 Annualized Monetized ($million/ -0.4 2018 7 January 2021-December
                 year). 2027.
                 -0.4 2018 3 January 2021-December
                 2027.
                 -------------------------------------------------------------------------
                Transfers:
                 Annualized Monetized ($million/ 7,058.3 2018 7 January 2021-December
                 year). 2027.
                 7,276.5 2018 3 January 2021-December
                 2027.
                 -------------------------------------------------------------------------
                From Whom to Whom..................... Federal Government to hospitals/physicians and MA plans.
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                [[Page 73989]]
                
                 Annualized Monetized ($million/ 4,504.9 2018 7 January 2021-December
                 year). 2027.
                 4,638.6 2018 3 January 2021-December
                 2027.
                 -------------------------------------------------------------------------
                From Whom to Whom..................... Beneficiaries to hospitals/physicians and MA plans.
                 -------------------------------------------------------------------------
                 Annualized Monetized ($million/ 342.4 2018 7 January 2021-December
                 year). 2027.
                 351.6 2018 3 January 2021-December
                 2027.
                 -------------------------------------------------------------------------
                From Whom to Whom..................... States to hospitals/physicians and MA plans.
                ----------------------------------------------------------------------------------------------------------------
                 Comment: A few commenters stated that, based on their own or
                others' analyses, the OACT and ASPE estimates shown in the November
                2020 MFN Model interim final rule underestimate the negative financial
                impact that certain healthcare providers would likely experience had
                the MFN Model been implemented. Many commenters expressed concern that
                some of the estimated savings would be related to reduced access to
                care. We did not receive comments on our approach to illustrate,
                inversely, the monetized estimates contained in Table 17 (85 FR 76247)
                and Table 18 (85 FR 76248) of the November 2020 MFN Model interim final
                rule in Table 1 and Table 2 of the August 2021 proposed rule,
                respectively.
                 Response: We thank stakeholders for their comments. As we noted in
                the November 2020 MFN Model interim final rule and the August 2021
                proposed rule, there is much uncertainty around the assumptions for
                both the OACT and ASPE estimates that were presented in those rules.
                 Final Decision: After considering the comments on the RIA of our
                proposal, and because we are finalizing our proposal as proposed, we
                are finalizing the RIA without change; that is, as presented in the
                August 2021 proposed rule.
                D. Regulatory Flexibility Act (RFA)
                 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 governmental
                jurisdictions. Most hospitals and most other providers and suppliers
                are small entities, either by nonprofit status or by having revenues of
                less than $8 million to $41.5 million in any 1 year. Individuals and
                States are not included in the definition of a small entity. For
                details, see the Small Business Administration's ``Table of Small
                Business Size Standards'' at https://www.sba.gov/document/support-table-size-standards. The rule of thumb used by HHS for determining
                whether an impact is ``significant'' is an adverse effect equal to 3
                percent or more of total annual revenues.
                 This final rule affects the vast majority of Medicare-participating
                providers and suppliers that submit claims for separately payable
                Medicare Part B drugs by preventing the impacts described in the
                November 2020 MFN Model interim final rule (85 FR 76246) from being
                realized. Over 20,000 small entities would have been included or
                affected by the MFN Model if the model had been implemented. We refer
                readers to Table 3 and Table 8 in the November 2020 MFN Model interim
                final rule (85 FR 76195 and 76219, respectively) to see the number of
                entities, as well as the types of providers and suppliers, that most
                likely would have been impacted by the MFN Model had it been
                implemented. This final rule withdraws the MFN Model, and therefore
                likely impacts these same entities. Accordingly, we have determined
                that a Regulatory Flexibility Analysis is required. As its measure of
                significant economic impact on a substantial number of small entities,
                HHS uses a change in revenue of more than 3 to 5 percent. We believe
                that this threshold will be reached by the requirements in this final
                rule. Therefore, the Secretary has certified that the August 2021
                proposed rule and this final rule will have a significant economic
                impact on a substantial number of small entities. The Regulatory
                Flexibility Analysis presented in the November 2020 MFN Model interim
                final rule (85 FR 76245) describes the potential impact of the MFN
                Model, if it had been implemented, on small entities. This final rule
                prevents those impacts from being realized. Specifically, the lower
                drug payments and alternative add-on payments described in section
                III.F. of the November 2020 MFN Model interim final rule will not
                occur. Instead, payment for submitted claims will be made under the
                applicable Medicare payment methodology. This Regulatory Flexibility
                Analysis, together with the preamble, constitutes the required
                analysis.
                 In addition, section 1102(b) of the Act requires us to prepare an
                RIA if a rule may have a significant impact on the operations of a
                substantial number of small rural hospitals. This analysis must conform
                to the provisions of section 604 of the RFA. For purposes of section
                1102(b) of the Act, we define a small rural hospital as a hospital that
                is located outside of a Metropolitan Statistical Area for Medicare
                payment regulations and has fewer than 100 beds. We estimate that this
                final rule will have a significant impact on small rural hospitals by
                preventing the impacts described in the November 2020 MFN Model interim
                final rule (85 FR 76246) from being realized. Specifically, these rural
                entities will not experience drug payment reductions and overall
                payment reductions. Instead, payment for submitted claims will be made
                under the applicable Medicare payment methodology. We estimate that
                this final rule will have a parallel significant impact on urban
                entities.
                 We welcomed comments on our estimate of significantly affected
                providers and suppliers and the magnitude of estimated effects for the
                proposed rule.
                 Comment: Several commenters stated that our estimate of
                significantly affected providers and suppliers and the magnitude of
                estimated effects presented in the November 2020 MFN Model interim
                final rule underestimated the potential financial losses and
                operational impacts that health care
                [[Page 73990]]
                providers, such as hospitals, physicians and infusion centers, would
                have experienced had the MFN Model been implemented as contemplated.
                 Response: We thank stakeholders for their comments. As we noted in
                the November 2020 MFN Model interim final rule and the August 2021
                proposed rule, there is much uncertainty around the assumptions for
                both the OACT and ASPE estimates that were presented in those rules.
                 Final Decision: After considering the comments on the estimate of
                significantly affected providers and suppliers and the magnitude of
                estimated effects of our proposal, and because we are finalizing our
                proposal as proposed, we maintain our analysis, as presented in the
                August 2021 proposed rule, for this final rule.
                E. Unfunded Mandates Reform Act (UMRA)
                 Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 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 2021, that
                threshold is approximately $158 million. As discussed in section V.C.
                of the August 2021 proposed rule and section IV.C. of this final rule,
                the financial impacts for States (that is, an estimated overall
                reduction in State spending) presented in the November 2020 MFN Model
                interim final rule (85 FR 76235 through 76248) will not be realized.
                The August 2021 proposed rule and this final rule did not mandate any
                spending by State, local, or tribal governments, or by the private
                sector, and hence an UMRA analysis is not required.
                F. Federalism
                 Executive Order 13132 establishes certain requirements that an
                agency must meet when it promulgates a proposed rule (and subsequent
                final rule) that imposes substantial direct requirement costs on State
                and local governments, preempts State law, or otherwise has Federalism
                implications. As discussed in section V.C. of the August 2021 proposed
                rule and section IV.C. of this final rule, the financial impacts for
                States (that is, an estimated overall reduction in State spending)
                presented in the November 2020 MFN Model interim final rule (85 FR
                76235 through 76248) will not be realized. Since this rule does not
                impose any costs on State or local governments, preempt State law, or
                otherwise have Federalism implications, the requirements of Executive
                Order 13132 are not applicable.
                 In accordance with the provisions of Executive Order 12866, this
                final rule was reviewed by the Office of Management and Budget.
                 Chiquita Brooks-LaSure, Administrator of the Centers for Medicare &
                Medicaid Services, approved this document on December 14, 2021.
                List of Subjects for 42 CFR 513
                 Administrative practice and procedure, Health facilities, Medicare,
                Reporting and recordkeeping requirements.
                PART 513--[REMOVED]
                0
                For the reasons set forth in the preamble and under the authority at 5
                U.S.C. 301, the Centers for Medicare & Medicaid Services removes 42 CFR
                part 513.
                 Dated: December 21, 2021.
                Xavier Becerra,
                Secretary, Department of Health and Human Services.
                [FR Doc. 2021-28225 Filed 12-27-21; 4:15 pm]
                BILLING CODE 4120-01-P
                

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