69432 Federal Register / Vol. 65, No. 223 / Friday, November 17, 2000 / Rules and Regulations

opportunities for certain small

businesses wishing to grow while

remaining closely held, rather than

make SBIC financing more expensive for

small businesses currently being served

by the program.

For purposes of Executive Order

12988, SBA has determined that this

final rule is drafted, to the extent

practicable, in accordance with the

standards set forth in section 3 of that

Order.

For purposes of Executive Order

13132, SBA has determined that this

final rule has no federalism

implications.

For purposes of the Paperwork

Reduction Act, 44 U.S.C. Ch. 35, SBA

certifies that this final rule contains no

new reporting or recordkeeping

requirements.

List of Subjects in 13 CFR Part 107

Investment companies, Loan

programs-business, Reporting and

recordkeeping requirements, Small

businesses.

For the reasons set forth above, SBA

is amending 13 CFR part 107 as follows:

PART 107—SMALL BUSINESS

INVESTMENT COMPANIES

1. The authority citation for part 107

continues to read as follows:

Authority: 15 U.S.C. 681 et seq., 683,

687(c), 687b, 687d, 687g and 687m.

2. In § 107.815, revise the first

sentence of paragraph (a) to read as

follows:

§ 107.815 Financings in the form of Debt

Securities.

* * * * *

(a) Definitions. Debt Securities are

instruments evidencing a loan with an

option or any other right to acquire

Equity Securities in a Small Business or

its Affiliates, or a loan which by its

terms is convertible into an equity

position, or a loan with a right to receive

royalties that are excluded from the Cost

of Money pursuant to

§ 107.855(g)(12).* * *

* * * * *

3. In § 107.855, revise paragraph

(g)(12), add paragraph (g)(13) and

remove paragraph (i) to read as follows:

§ 107.855 Interest rate ceiling and

limitations on fees charged to Small

Businesses (‘‘Cost of Money’’).

* * * * *

(g) * * *

(12) Royalty payments based on

improvement in the performance of the

Small Business after the date of the

Financing.

(13) Gains realized on the disposition

of Equity Securities issued by the Small

Business.

* * * * *

Dated: November 3, 2000.

Aida Alvarez,

Administrator.

[FR Doc. 00–29522 Filed 11–16–00; 8:45 am]

BILLING CODE 8025–01–P

SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

Small Business Size Standards; Health

Care

AGENCY: Small Business Administration.

ACTION: Final rule.

SUMMARY: The Small Business

Administration is adopting new size

standards for 19 Health Care industries

and retaining the existing $5 million

size standard for the remaining 11

Health Care industries. The North

American Industry Classification

System classifies Health Care industries

under Subsector 621, Ambulatory

Health Care Services; Subsector 622,

Hospitals; and Subsector 623, Nursing

and Residential Care Facilities. These

revisions are made to more

appropriately define the size of

businesses in these industries that SBA

believes should be eligible for Federal

small business assistance programs.

DATES: This final rule is effective on

December 18, 2000.

FOR FURTHER INFORMATION CONTACT: Gary

M. Jackson, Assistant Administrator for

Size Standards, (202) 205–6618.

SUPPLEMENTARY INFORMATION: On May 4,

1999, the Small Business

Administration (SBA) proposed

revisions to 11 size standards for the

Health Care industries (64 FR 23798). At

that time, SBA size standards were

established for industries defined by the

Standard Industrial Classification (SIC)

System. Effective October 1, 2000, SBA

established its size standards based on

industries defined by the new North

American Industry Classification

System (NAICS), and no longer uses the

SIC System (65 FR 30836, dated May 15,

2000). Accordingly, the changes to the

Health Care size standards adopted in

this final rule pertain to the NAICS

industries.

The NAICS makes several noteworthy

changes to the Health Care industries

listed in the SIC System. First, the

NAICS changes the terminology of the

health related industries to ‘‘Health

Care’’ from ‘‘Health Services’’ under the

SIC System. Second, the NAICS

establishes a Sector (equivalent to a

Division in the SIC System) titled

‘‘Health Care and Social Assistance.’’

Health Services was a Major Group

under the Services Division with 19

industries. The Health Care industries

are grouped into three Subsectors

(equivalent to a Major Group in the SIC

System). Third, the number of Health

Care industries increases to 30 NAICS

industries from 19 Health Services SIC

industries.

SBA has decided to adopt the

proposed revisions of May 4, 1999 to the

Health Care size standards. Most SIC

Health Services industries correspond to

a NAICS industry. However, there are

some Health Services industries, or

activities within an industry, that are

combined with other SIC industries to

form a new Health Care NAICS

industry. In these cases, SBA has

followed the guidelines it used to

establish NAICS size standards. These

guidelines are described in the proposed

rule of October 22, 1999 (64 FR 57188)

and the final rule of May 15, 2000 (65

FR 30836). In most cases, the NAICS

size standard is the same as or higher

than the size standard SBA had

proposed for the SIC industry. Two

activities in one Health Services

industry, however, were reclassified

into industries outside of the Health

Care with a size standard lower than

proposed for their SIC industries. The

following table lists the proposed size

standards by SIC industry and adopted

size standards corresponding to the

NAICS industries.

SIC code SIC industry

Proposed size

standard

(millions of

dollars)

NAICS code NAICS industry

Adopted size

standard

(millions of

dollars)

8011 ............ Offices and Clinics of Doctors of

Medicine.

$7.5

Surgical and Emergency Centers ...... ........................ 621493 Freestanding Ambulatory Surgical

and Emergency Centers.

$7.5

Federal Register / Vol. 65, No. 223 / Friday, November 17, 2000 / Rules and Regulations 69433

SIC code SIC industry

Proposed size

standard

(millions of

dollars)

NAICS code NAICS industry

Adopted size

standard

(millions of

dollars)

HMO Medical Centers ....................... ........................ 621491 HMO Medical Centers ....................... 7.5

Offices of Physicians, Mental Health

Specialists.

........................ 621112 Offices of Physicians, Mental Health

(part).

7.5

Offices of Physicians Except Mental

Health.

........................ 621111 Offices of Physicians (except Mental

Health Specialists) (part).

7.5

8021 ............ Offices and Clinics of Dentists ........... 5.0 621210 Offices of Dentists ............................. 5.0

8031 ............ Offices and Clinics of Dentists ........... 5.0

Offices of Doctors of Osteopathy, Except Mental Health......................... 621111 Offices of Physicians (except Mental

Health Specialists) (part).

7.5

Offices of Doctors of Osteopathy,

Mental Health.

........................ 621112 Offices of Physicians, Mental Health

Specialists (part).

7.5

8041 ............ Offices and Clinics of Chiropractors .. 5.0 621310 Offices of Chiropractors ..................... 5.0

8042 ............ Offices and Clinics of Optometrists ... 5.0 621320 Offices of Optometrists ...................... 5.0

8043 ............ Offices and Clinics of Podiatrists ....... 5.0 621391 Offices of Podiatrists .......................... 5.0

8049 ............ Offices and Clinics of Health Practitioners, NEC.5.0

Mental Health Practitioners, Except

Physicians.

........................ 621330 Offices of Mental Health Practitioners

(except Physicians).

5.0

Offices of Physical, Occupational,

Recreational, and Speech Therapists and Audiologists.

........................ 621340 Offices of Physical, Occupational,

and Speech Therapists Audiologists Offices of All Other.

5.0

Other Offices of Health Practitioners ........................ 621399 Miscellaneous Health Practitioners .... 5.0

8051 ............ Skilled Nursing Care Facilities ........... 10.0

Continuing Care Retirement Communities......................... 623311 Continuing Care Retirement Communities (part).10.0

All Other Skilled Nursing Care Facilities......................... 623110 Nursing Care Facilities (part) ............. 10.0

8052 ............ Intermediate Care Facilities ............... 7.5

Continuing Care Retirement Communities......................... 623311 Continuing Care Retirement Communities (part).10.0

Mental Retardation Facilities ............. ........................ 623210 Residential Mental Retardation Facilities.7.5

8059 ............ Nursing and Personal Care Facilities,

NEC.

5.0

Continuing Care Retirement Communities......................... 623311 Continuing Care Retirement Communities (part).10.0

Other Nursing and Personal Care Facilities......................... 623110 Nursing Care Facilities (part) ............. 10.0

8062 ............ General Medical and Surgical Hospitals.25.0 622110 General Medical and Surgical Hospitals (part).25.0

8063 ............ Psychiatric Hospitals .......................... 25.0 622210 Psychiatric and Substance Abuse

Hospitals (part).

25.0

8069 ............ Specialty Hospitals Except Psychiatric.25.0

Children’s Hospitals ........................... ........................ 622110 General Medical and Surgical Hospitals (part).25.0

Substance Abuse Hospitals ............... ........................ 622210 Psychiatric and Substance Abuse

Hospitals (part).

25.0

Other Specialty Hospitals .................. ........................ 622310 Specialty (except Psychiatric and

Substance Abuse) Hospitals.

25.0

8071 ............ Medical Laboratories ......................... 10.0

Diagnostic Imaging Centers ............... ........................ 621512 Diagnostic Imaging Centers ............... 10.0

Medical Laboratories, Except Diagnostic Imaging Centers......................... 621511 Medical Laboratories .......................... 10.0

8072 ............ Dental Laboratories ........................... 5.0 339116 Dental Laboratories ........................... (1)

8082 ............ Home Health Care Services .............. 10.0 621610 Home Health Care Services .............. 10.0

8092 ............ Kidney Dialysis Centers ..................... 25.0 621492 Kidney Dialysis Centers ..................... 25.0

8093 ............ Specialty Outpatient Facilities, NEC .. 7.5

Family Planning Centers .................... ........................ 621410 Family Planning Centers (part) .......... 7.5

Outpatient Mental Health Facilities .... ........................ 621420 Outpatient Mental Health and Substance Abuse Centers.7.5

Other Specialty Outpatient Facilities ........................ 621498 All Other Outpatient Care Centers .... 7.5

8099 ............ Health and Allied Services, NEC ....... 7.5

Blood and Organ Banks .................... ........................ 621991 Blood and Organ Banks .................... 7.5

Medical Artists .................................... ........................ 541430 Graphic Design Services (part) ......... 5.0

Medical Photography ......................... ........................ 541922 Commercial Photography (part) ......... 5.0

Childbirth Preparation Classes .......... ........................ 621410 Family Planning Centers (part) .......... 7.5

Other Health and Allied Services ...... ........................ 621999 All Other Miscellaneous Ambulatory

Health Care Services.

7.5

1 500 Employees.

69434 Federal Register / Vol. 65, No. 223 / Friday, November 17, 2000 / Rules and Regulations

As shown in the table, the adopted

size standard for doctors of osteopathy

is $7.5 million, although the proposed

size standard for this industry was $5

million. Under the NAICS, SIC 8031

(Offices and Clinics of Doctors of

Osteopathy) was combined into NAICS

621111 (Offices of Physicians) and

NAICS 621112 (Office of Physicians,

Mental Health Specialists). These two

industries were substantially created

from SIC 8011 (Offices and Clinics of

Doctors of Medicine), where SBA

proposed and is adopting $7.5 million.

Consistent with SBA’s guidelines in

establishing NAICS size standards, the

size standard for the SIC code that

accounted for the greatest amount

activity within the new NAICS is the

size standard adopted for that NAICS

code. The size of the offices and clinics

of medical doctors industry is

significantly larger than the offices and

clinics of doctors of osteopathy

industry.

A similar situation arose with SIC

codes 8052 (Intermediate Care

Facilities) and 8059 (Nursing and

Personal Care Facilities, Not Elsewhere

Classified). SBA proposed $7.5 million

for SIC 8052 and $5 million for SIC

8059. However, most of SIC 8052 and all

of SIC 8059 were combined with SIC

8051 (Skilled Nursing Care Facilities) to

form two NAICS industries—NAICS

623311 (Continuing Care Retirement

Communities) and 623110 (Nursing

Care Facilities). SIC 8051 is much

greater in size than both SIC 8052 and

8059 combined. Thus, the $10 million

size standard proposed for SIC 8051 is

adopted for both NAICS 623311 and

623110.

The size standard for Dental

Laboratories changed to 500 employees

effective October 1, 2000. This industry

involves the manufacture of dentures,

crowns and other dental appliances.

Under the SIC system, the manufacture

of dental appliances was classified as a

manufacturing activity unless the dental

appliances were produced on a custom

or individual basis. The SIC system

classified those latter activities within

the Services Division under the Dental

Laboratories industry (SIC 8072). NAICS

now classifies all manufacturing of

dental appliances as manufacturing, and

placed the Dental Laboratories industry

under the manufacturing sector—NAICS

339116. SBA’s long standing policy has

been to establish a size standard no

lower than 500 employees for a

manufacturing industry. This change

was discussed and proposed in the

October 22, 1999 proposed rule. SBA

received no comments on this change

and adopted the 500 employee size

standard for NAICS 339116 in the May

15, 2000 final rule.

Two activities within SIC 8099,

Health and Allied Services, Not

Elsewhere Classified, were reclassified

to industries in the Professional,

Scientific, and Technical Services

Sector with a size standard lower than

proposed for SIC 8099. The activity of

Medical Artists was combined with SIC

7336, Commercial Art and Graphic

Design to form NAICS 541430, Graphic

Design Services. The $5 million size

standard for SIC 7336 was adopted for

NAICS 541430 since it accounts for

virtually all of the new NAICS industry.

The activity of Medical Photography

was classified into NAICS 541922,

Commercial Photography. That NAICS

industry is the same as the SIC 7335

with the addition of Medical

Photography. The $5 million size

standard of SIC 7335 was adopted for

NAICS 541922 since it accounts for

virtually all the activities within the

NAICS industry.

Background

SBA proposed changes to size

standards based on its analysis of the

latest available economic characteristics

data on the Health Care industries from

the U.S. Bureau of the Census (the

Census Bureau) and Federal contract

award data from the Federal

Procurement Data Center. (At the time

of the proposed rule, these data, and

SBA’s size standards, were based on the

SIC system. To be consistent with the

newly implemented NAICS size

standards, the remainder of this rule

will use the NAICS terminology to refer

to industries affected by this rule. In a

few cases, however, references are made

to SIC industries to ensure the

information discussed is accurate.) With

regard to the economic characteristics

data, SBA evaluated average firm size,

distribution of industry receipts by size

of firm, start-up costs, and industry

competition of firms in the Health Care

industries. SBA compared these

characteristics to the average

characteristics of all industries with a

$5.0 million size standard (the most

common size standard established for

nonmanufacturing industries and

referred to as the ‘‘anchor’’ size standard

for the nonmanufacturing industries).

Doing so enabled SBA to determine

whether it should propose size

standards for the Health Care industries

that would be the same, higher, or lower

than the $5 million anchor size

standard.

In addition to the economic

characteristics data, SBA reviewed the

percent of total Federal contract dollars

awarded to Health Care small

businesses to determine if small

businesses were obtaining a reasonable

share of Federal contracts. For three

industries covering Offices and Clinics

of Medical Doctors, Specialty

Outpatient Facilities, and Health and

Allied Service—Not Elsewhere

Classified (formally SIC codes 8011,

8093, and 8099, respectively), the

proportion of Federal procurement was

so much lower than that of firms at the

anchor size that SBA proposed

increasing those three size standards

from the anchor size of $5 million to

$7.5 million. For a further discussion of

SBA’s size standard methodology and

analyses leading to the proposed size

standards see the proposed rule of May

4, 1999 (64 FR 23798). What follows is

a summary of the comments received

and an explanation of the decision to

adopt the proposed increases to the

Health Care industries.

Discussion of Comments on the

Proposed Rule

SBA received 17 timely comments on

the proposed size standards. Two of

these included comments by others in

their organization. Of the 17 comments,

two were from Federal agencies, one

comment came from an industry

association, and the remainder came

from representatives of Health Care

firms.

In summary, one commenter

supported the proposed size standards

without comment. One hospital

association generally supported the

proposed rule, but had several

recommendations to modify it, which

are discussed below. All of the others

supported an increase in the size

standards, but higher than the ones

proposed by SBA.

The commenters raised eight major

issues concerning the proposed size

standards. Because of the comments, we

reevaluated the data before adopting the

proposed size standards. The issues are:

(1) What are the true small business

contracting opportunities in the Health

Care industries; (2) do the proposed size

standards provide for an appropriate

increase to the existing size standards;

(3) whether there should be a common

size standard for all Health Care

industries; (4) whether there should be

an employee-based size standard; (5)

whether we should establish a new

industry code for Health Maintenance

Organizations; (6) whether we should

have the same size standard for doctors

of medicine as for doctors of osteopathy;

(7) whether Medicare and Medicaid

distributions should be counted as

Federal procurements; and (8) whether

the receipts of affiliated health care

services should be included in gross

Federal Register / Vol. 65, No. 223 / Friday, November 17, 2000 / Rules and Regulations 69435

income. Below we explain our response

to each issue.

What Are the True Small Business

Contracting Opportunities in the Health

Care Industries?

The supporters of size standards

higher than those proposed most often

gave reasons relating to Federal

contracting as the basis for a change.

Commenters stated that firms at the

proposed size standard are not large

enough to compete successfully for the

size and type of contracts offered in

today’s procurement environment. They

stated that in recent years Federal

contracts have grown progressively

larger and more comprehensive. These

contracts are generally multi-year and

regional and often include services

other than health care such as

establishing, recruiting, and monitoring

doctor or dentist practices. These

commenters argued that size standards

higher than those proposed are needed

to recognize the size of small firms that

can perform on these newer contracts.

Specifically, comments expressed a

consistent and serious concern that the

proposed size standard of $7.5 million

for Offices and Clinics of Doctors of

Medicine (SIC 8011), Intermediate Care

Facilities (SIC 8052), Specialty and

Outpatient Facilities (SIC 8093), and

Health and Allied Services, NEC (SIC

8099) would preclude most firms from

Federal procurement. They contended

that the impact of keeping the size

standards as low as proposed would be

that few firms could qualify as small

given the size of the health care

contracts, and those that did, would

quickly outgrow their small business

status. Likewise, some Federal

contracting officials expressed concern

that the government would lose ‘‘stellar

performers’’ who would no longer be

considered small after receiving just two

or three contracts.

In addition, several comments raised

the issue that very few hospitals would

qualify as small with the proposed $25

million size standard. They believed

that if this size standard were adopted

for hospitals, Federal agencies would be

limited in their ability to support small

business programs, such as the small

business set-aside program.

Procuring agencies’ comments

opposing the ‘‘low’’ proposed size

standards for hospitals also stated that

they currently have problems meeting

their commitment to include more small

businesses because finding for-profit

hospitals in some areas is difficult. If the

for-profit hospitals (that is hospitals that

qualify as businesses) are usually larger

than the proposed $25 million size

standard, agencies will not be able to set

aside contracts for health care services.

SBA acknowledges that Federal

agencies are issuing larger contracts

than in the past. However, contract

award data from the Federal

Procurement Data System do not

substantiate that large dollar contracts

dominate Federal contracting to an

extent that significantly limits small

business opportunities. The vast

majority of Federal contract awards are

still within a size that small businesses

should be capable of performing.

Without verifiable data showing that

large contracts adversely impact small

business opportunities, these comments

do not support establishing size

standards to accommodate what appears

to be a small proportion of overall

contracting. Nonetheless, we are

researching Federal procurement

patterns and trends in greater detail to

determine whether a separate size

standard for Federal procurement of

Health Care may be justified in the

future.

Do the Proposed Size Standards

Provide for an Appropriate Increase to

the Existing Size Standards?

Most of the comments addressed the

question of what size standard should

be adopted for all of the Health Care

industries. All of the comments agreed

that the size standard should be

increased, but most of the comments

disagreed with the proposed size

standards. Most of the comments

supporting an increased size standard

substantiated their comments with

reasons related to Federal procurement.

However, other reasons were also given

for supporting higher size standards in

the industry, such as the mergers and

affiliations with Health Maintenance

Organizations (HMOs) that were

generally not a force in the health care

industries just a decade ago.

Commenters also pointed out that an

increased size standard is justified

because the cost of entry into these

industries has also increased over time,

especially technology costs. These

technology costs include costs for

specialty diagnostic and treatment

equipment such as computer-aided

imaging. Commenters cited high startup costs because of the specialty

equipment and the high-paid staff

needed to operate them as reasons for

increasing size standards in the

industries. They pointed out that not all

doctors’ offices are similar, some are

‘‘high-risk’’ specialties such as

radiology, obstetrics and gynecology,

and anesthesiology. These types of

offices have high start-up and operating

costs in addition to the physician and

nursing compensation. Therefore, if all

of the specialties have the same size

standard, some offices within the same

industry will be at a bigger disadvantage

to remain within the ‘‘small’’ status.

SBA is not convinced, at this time,

that an additional increase over the size

standards proposed is justified. Many of

the factors discussed above are reflected

in the Census Bureau data that SBA uses

to evaluate industry size standards.

Later this year SBA will receive the

1997 Economic Census on the Health

Care industries. If any significant

differences are observed between the

1992 and 1997 data, SBA will consider

a larger size standard where

appropriate.

Whether There Should Be a Common

Size Standard for All Health Care

Industries?

A majority of the commenting firms

and both Government agencies argued

for a common size standard all Health

Care industries. The most often

mentioned size standard was $25

million. The basis for these comments

was the merger, affiliation and HMO

activity that has integrated the various

industries more so than in the past. For

example, hospitals have home health

care businesses, HMOs link formerly

independent private offices together

into larger networks, and independents

(that decide not to join an HMO) may

merge or affiliate to continue to be

viable in this new environment. These

firms integrate the skills of each

profession to offer quality services to

their clients.

SBA agrees with the desirability of

establishing the same size standard for

industries in the same Subsector

provided that industry-specific factors

are reasonably consistent within that

Subsector. However, neither the

industry characteristic data nor the

Federal procurement data supports one

size standard for all Health Care

industries. For example, we could find

no justification in the economic

characteristics data to continue the same

size standard of $5 million for general

medical and surgical hospitals and

physician’s offices. Accordingly, SBA

does not believe that there should be a

common size standard for all Health

Care industries. Because the data

support different levels, whichever one

was selected would only fit some of the

industries. Furthermore, based on the

data, no case could be made to support

that a $25 million size standard would

be appropriate for all Health Care.

69436 Federal Register / Vol. 65, No. 223 / Friday, November 17, 2000 / Rules and Regulations

Whether There Should Be an EmployeeBased Size Standard?

Two comments recommended that

SBA adopt an employee-based size

standard for all Health Care industries

rather than a receipts-based size

standard. The comments provided no

supporting evidence showing why

number of employees is a better

measure of size than receipts. The Small

Business Act requires us to use receipts

as the basis for size standards in the

service industries (Small Business Act

(§ 3(a)(2)(C))). In addition, SBA’s policy

has been to use employee-based size

standards for manufacturing, mining

and wholesale, and receipts-based size

standards for most non-manufacturing

industries. Therefore, SBA will continue

to use receipts as the basis for size

standards in the Health Care industries.

Whether We Should Establish a New

Industry Code for HMOs?

Some of the comments expressed the

need for a new industry to cover the

HMO industry. On October 1, 2000,

SBA implemented size standards based

on NAICS industries. The NAICS lists

three codes for HMOs—(1) facilities

actually providing health care listed as

an ‘‘HMO Medical Center’’ (NAICS

621491), (2) health practitioners

contracting to provide their services to

subscribers of prepaid health plans

within ‘‘Offices of Physicians’’ (NAICS

62111), and (3) organizations that

underwrite and administer health and

medical insurance policies, but which

do not directly provide health care

services as ‘‘Direct Health and Medical

Insurance Carriers’’ (NAICS 524114).

Because HMOs have not previously

been designated as a separate industry,

the Census Bureau has not collected the

same data for HMOs as it has collected

for SIC industries. Now that the NAICS

has identified specific industries for

HMOs, the 1997 Economic Census will

have data on HMOs. We expect to have

that data later this year and will review

the HMO size standards at that time.

Whether We Whould Have the Same

Size Standard for Doctors of Medicine

as for Doctors of Osteopathy?

In response to SBA’s review of the

Health Care size standards and to our

proposal to increase the size standards

for doctors of medicine, we received

comments recommending that doctors

of medicine and doctors of osteopathy

have the same size standards. The

commenters stated that both health care

providers basically meet the same

educational requirements and perform

the same services. The proposed rule

included doctors of osteopathy in the

group of health care services remaining

at the $5 million while the size standard

for doctors of medicine was proposed to

be $7.5 million.

Based on the comments, we agree that

the same standard should be adopted for

doctors of osteopathy and doctors of

medicine recognizing that the two

professions should be considered as one

for most purposes. Furthermore, NAICS

recognizes that these two types of

practitioners should be considered the

same and combined doctors of

osteopathy and doctors of medicine into

a new industry titled ‘‘Offices of

Physicians’’ (NAICS code 62111). As

previously discussed, $7.5 million is

being adopted for this industry and

results in the same size standard being

applicable to doctors of medicine and

doctors of osteopathy.

Whether Medicare and Medicaid

Distributions Should Be Counted as

Federal Procurements?

Although we specifically requested

comments on this issue in the proposed

rule, we received only one comment. A

hospital association representing nearly

5,000 hospitals took a strong stand

against this approach. It contended that

the payments are to and for health care

beneficiaries, not the health care

provider. As such, these payments are

not discretionary but mandatory

payments for services obtained by

beneficiaries. In addition, it stated that

health care services are purchased by

beneficiaries based on consumer

preference in a competitive

environment. SBA agrees and does not

believe the distribution of Medicare and

Medicaid funds should influence the

establishment of size standards.

Whether the Receipts of Affiliated

Health Care Services Should Be

Included in Gross Income?

The Health Care industries are

continuing to evolve. Since the advent

of managed care changed the Health

Care landscape, other networks and

alliances have emerged to respond to

this new environment. Many hospitals

own or control home health services,

physician clinics, medical laboratories

or dialysis centers. SBA’s regulations

require that the income of all affiliates

be included when calculating average

annual receipts. We received one

comment on this subject. A hospital

association recommended that income

from such hospital affiliates not be

taken in consideration when calculating

either the average annual receipts of the

hospital or the home health services,

physician clinics, medical laboratories

or dialysis centers so that hospital

affiliates could qualify as small

businesses.

Affiliation is a key concept in

determining which businesses are small.

One of the criteria for being a small

business under the Small Business Act

(§ 3(a)) is that it be independently

owned and operated. Businesses owned

or controlled by other concerns have

access (actual or potential) to resources

not available to other similar businesses.

The Census Bureau data we use to

evaluate size standards captures

affiliation through ownership among

businesses. Other new relationships in

terms of networks and alliances may

have to be looked at on a case-by-case

basis. We believe our current affiliation

regulations are adequate to distinguish

relationships that lead to control, and,

thus, when we should consider

businesses affiliated (see 13 CFR

121.103).

Why We Are Adopting These Size

Standards?

Comments to the proposed rule

generally argued for higher size

standards because of trends in Federal

procurement. They also argued that the

proposed size standards were not high

enough to effectively help small

businesses obtain additional Federal

contracting opportunities. They

recommended that we adopt a much

higher size standard, such as $25

million, but did not identify supporting

data.

In view of these comments, SBA had

three viable options; (1) adopt the

proposed standards, (2) revise the size

standards upward based on comments

without supporting data, or (3) suspend

action on the size standards and wait for

more current data.

SBA decided to go with option one—

adopt the size standards as proposed.

SBA does not believe that the reasons

given by the comments for a $25 million

size standard, in the absence of

supporting data, are sufficient to

support that level. SBA cannot follow

larger and larger Federal contracts with

increasing size standards when industry

characteristics do not otherwise support

the action. Also, size standards are used

for purposes other than Federal

procurement, such as regulatory

flexibility analyses and SBA financial

assistance programs. Thus, we need to

ensure that size standards are viable for

a variety of uses.

Because most of the comments

expressed concerns in the Federal

procurement area, we recognize that we

need to consider establishing a size

standard just for the purpose of Federal

procurement of Health Care. Our

preliminary work on this approach

Federal Register / Vol. 65, No. 223 / Friday, November 17, 2000 / Rules and Regulations 69437

shows that more research is needed to

determine if size standards larger than

adopted by this final rule are

supportable and how to best describe

Federal procurements for Health Care. If

we believe a different standard(s) is

justified, a new proposed rule will be

issued. Meanwhile, firms in these

industries will benefit from the increase

made in this final rule. SBA chose not

to suspend action on the proposed size

standards until we have more current

data because the proposed higher size

standards will make more opportunities

available for small businesses than

retaining the current size standards and

all of the commenters supported higher

size standards for the Health Care

industries.

Compliance With Executive Orders

12866, 12988, and 13132, the

Regulatory Flexibility Act (5 U.S.C.

601–612), and the Paperwork

Reduction Act (44 U.S.C. Ch. 35)

The Office of Management and Budget

(OMB) reviewed this rule under

Executive Order 12866.

This is not a major rule under the

Congressional Review Act, 5 U.S.C. 800.

Under the Regulatory Flexibility Act

(RFA), this rule may have a significant

impact on a substantial number of small

entities. Immediately below, SBA sets

forth a final regulatory flexibility

analysis (FRFA) of this final rule

addressing the following questions: (1)

What is the need for and objective of the

rule, (2) what are the significant issues

raised by the commenters in response to

the initial regulatory flexibility analysis

(IRFA), (3) what is SBA’s assessment of

those IFRA issues, (4) what changes if

any are made from the proposed rule as

a result of the comments on IFRA, (5)

what is SBA’s description and estimate

of the number of small entities to which

the rule will apply, (6) what is the

projected reporting, record keeping, and

other compliance requirements of the

rule, and an estimate of the classes of

small entities which will be subject to

the requirements, (7) what type of type

of professional skills are necessary to

prepare the required reports or records,

(8) what are the steps SBA has taken to

minimize the economic impact on small

entities, (9) what are the legal policies

or factual reasons for selecting the

alternative adopted in the final rule, and

(10) what alternatives did SBA reject.

(1) What Is the Need for and Objective

of the Rule?

These revisions are made to more

appropriately define the size of

businesses in these industries that SBA

believes should be eligible for Federal

small business assistance programs.

(2) What Are the Significant Issues

Raised by the Commenters in Response

to the IRFA?

The comments raised eight major

issues concerning the proposed size

standards, but none of the comments

addressed the IRFA in the proposed

rule.

(3) What Is SBA’s Assessment of Those

IFRA Issues?

No issues were raised in response to

the IFRA, so SBA had no issues to

assess.

(4) What Changes if any Are Made From

the Proposed Rule as a Result of the

Comments on IFRA?

None, since no comments were

received on the proposed rule

concerning the IRFA.

(5) What Is SBA’s Description and

Estimate of the Number of Small

Entities to Which the Rule Will Apply?

SBA estimates that 4,700 additional

firms will be considered small as a

result of this final rule. These firms will

be eligible to seek available SBA

assistance provided that they meet other

program requirements. Of the additional

firms gaining eligibility, more than half

would be Offices and Clinics of Doctors

of Medicine, and Skilled Nursing Care

Facilities. Firms becoming eligible for

SBA assistance as a result of this rule

cumulatively generate more than $50

billion in annual sales; total sales in all

twelve industries receiving a size

standards increase are $544 billion.

(6) What Is the Projected Reporting,

Record Keeping, and Other Compliance

Requirements of the Rule and an

Estimate of the classes of small entities

Which Will Be Subject to the

Requirements?

The new size standards are not

expected to impose any additional

reporting, record keeping or compliance

requirements on small entities because

a change in size standards does not

affect their business operations.

Increasing size standards provides more

access to SBA programs that assist small

businesses, but does not impose a

regulatory burden as they neither

regulate nor control business behavior.

(7) What Type of Professional Skills Are

Necessary to Prepare the Required

Reports or Records?

No reports or records are required as

a result of changing the size standards.

(8) What Are the Steps SBA Has Taken

to Minimize the Economic Impact on

Small Entities?

Most of the economic impact on small

entities will be positive. The most

significant benefits to businesses that

would obtain small business status as a

result of adoption of this final rule are:

(1) Eligibility for the Federal

Government’s procurement preference

programs for small businesses 8(a)

firms, small disadvantaged businesses

and small businesses located in

Historically Underutilized Business

Zones) and (2) the eligibility for SBA’s

financial assistance programs such as

7(a) and 504 business loans. SBA

estimates that firms gaining small

business status could potentially obtain

Federal contracts worth $325 million

per year under the small business setaside program, the 8(a) program or

unrestricted contracts. This represents

7.4 percent of the $4.4 billion the

Federal government awarded in these

nineteen Health Care industries during

fiscal year 1999. Under SBA’s 7(a)

Guaranteed Loan Program and Certified

Development Company (504) Program,

SBA estimated that less than $4 million

in new loans could be made to these

newly defined small businesses. During

fiscal year 1999, $600 million in loans

were guaranteed by SBA under these

two financial programs for firms in the

Health Care industries. Because of the

size of the loan guarantees, most loans

are made to small businesses well below

the size standard. (For example, more

than 95% of the 1999 loans were made

to firms with less than $3.5 million in

receipts.) Thus, increasing the size

standard would likely result in only a

small increase in small business

guaranteed loans to businesses in these

Health Care industries.

The competitive effects of size

standard revisions differ from those

normally associated with other

regulations which typically burden

smaller firms to a greater degree than

larger firms in areas such as prices,

costs, profits, growth, innovation and

mergers. The change to size standards is

not anticipated to have any appreciable

affect on any of these factors. Firms

affected by this rule-making would be

eligible to seek available SBA assistance

provided that they meet other program

requirements. However, small

businesses, 8(a) firms, or small

disadvantaged businesses much smaller

than the size standard for their

industries may be less successful in

competing for some Federal

procurement opportunities due to the

presence of larger newly defined small

businesses. On the other hand, with

69438 Federal Register / Vol. 65, No. 223 / Friday, November 17, 2000 / Rules and Regulations

more and larger small businesses

competing for small business set-aside

and 8(a) procurements, contracting

agencies are likely to increase the

overall number of contracting

opportunities available under these

programs.

(9) What Were the Legal Policies or

Factual Reasons for Selecting the

Alternative Adopted in the Final Rule?

As stated in 15 U.S.C. 632(a)(3) and

13 CFR 121.102, SBA is to consider the

differences in industries when

establishing size standards. SBA is not

convinced, at this time, that an

additional increase over the size

standards proposed is justified. Many of

the factors discussed in the comments

are reflected in the Census Bureau data

that SBA uses to evaluate industry size

standards, so they are already included

in our analysis published in the

proposed rule. Later this year SBA will

receive the 1997 Economic Census on

the Health Care industries. If any

significant differences are observed

between the 1992 and 1997 data, SBA

will consider new size standards where

appropriate. Nonetheless, we are

researching Federal procurement

patterns and trends in greater detail and

will evaluate the 1997 Economic Survey

data to determine whether an increased

size standard for Federal procurement of

Health Care is justified.

(10) What Alternatives Did SBA Reject?

SBA acknowledges that Federal

agencies are issuing larger contracts

than in the past. However, contract

award data from the Federal

Procurement Data System do not

substantiate that large dollar contracts

dominate Federal contracting to an

extent that significantly limits small

business opportunities. The vast

majority of Federal contract awards are

still within a size that small businesses

should be capable of performing.

Without verifiable data showing that

large contracts adversely impact small

business opportunities, these comments

do not support establishing size

standards to accommodate what appears

to be a small proportion of overall

contracting.

For purposes of Executive Order

13132, SBA has determined that this

rule does not have any federalism

implications warranting the preparation

of a Federalism Assessment.

For purposes of Executive Order

12988, SBA certifies that this rule is

drafted, to the extent practicable, in

accordance with the standards set forth

in section 3 of the order.

For the purposes of the Paperwork

Reduction Act, 44 U.S.C. Ch. 35, SBA

certifies that this rule does not impose

new reporting or recordkeeping

requirements.

List of Subjects in 13 CFR Part 121

Administrative procedure and

practice, Government procurement,

Government property, Grant programs—

business, Loan programs—business,

Reporting and recordkeeping

requirements, Small businesses.

For reason stated in the preamble,

SBA is amending 13 CFR Part 121 as

follows:

PART 121—SMALL BUSINESS SIZE

REGULATIONS

1. The authority citation of Part 121

continues to read as follows:

Authority: 15 U.S.C. 632(a), 634(b)(6),

637(a), 644(c), and 662(5); and Sec. 304, Pub.

L. 103–403, 108 Stat. 4175, 4188.

2. In § 121.201, amend the table ‘‘SIZE

STANDRDS BY NAICS INDUSTRY,’’

under the heading SECTOR 62—Health

Care and Social Assistance, revise the

entries Subsector 621—Ambulatory

Health Care Services, Subsector 622—

Hospitals, and Subsector 623—Nursing

and Residential Care Facilities, to read

as follows:

§ 121.201 What size standards has SBA

identified by North American Industry

Classification codes?

* * * * *

SIZE STANDARD BY NAICS INDUSTRY

NAICS codes Description

(N.E.C.=Not elsewhere classified)

Size standards in

number of

employees or

millions of

dollars

*******

Sector 62—Health Care and Social Assistance

*******

Subsector 621—Ambulatory Health Care Services

621111 .................... Offices of Physicians (except Mental Health Specialists) ........................................................................ $7.5

621112 .................... Offices of Physicians, Mental Health Specialists ..................................................................................... $7.5

621210 .................... Offices of Dentists .................................................................................................................................... $5.0

621310 .................... Offices of Chiropractors ............................................................................................................................ $5.0

621320 .................... Offices of Optometrists ............................................................................................................................. $5.0

621330 .................... Offices of Mental Health Practitioners (except Physicians) ..................................................................... $5.0

621340 .................... Offices of Physical, Occupational and Speech Therapists and Audiologists ........................................... $5.0

621391 .................... Offices of Podiatrists ................................................................................................................................. $5.0

621399 .................... Offices of All Other Miscellaneous Health Practitioners ........................................................................... $5.0

621410 .................... Family Planning Centers .......................................................................................................................... $7.5

621420 .................... Outpatient Mental Health and Substance Abuse Centers ....................................................................... $7.5

621491 .................... HMO Medical Centers .............................................................................................................................. $7.5

621492 .................... Kidney Dialysis Centers ............................................................................................................................ $25.0

621493 .................... Freestanding Ambulatory Surgical and Emergency Centers ................................................................... $7.5

621498 .................... All Other Outpatient Care Centers ........................................................................................................... $7.5

621511 .................... Medical Laboratories ................................................................................................................................ $10.0

621512 .................... Diagnostic Imaging Centers ..................................................................................................................... $10.0

621610 .................... Home Health Care Services ..................................................................................................................... $10.0

Federal Register / Vol. 65, No. 223 / Friday, November 17, 2000 / Rules and Regulations 69439

SIZE STANDARD BY NAICS INDUSTRY—Continued

NAICS codes Description

(N.E.C.=Not elsewhere classified)

Size standards in

number of

employees or

millions of

dollars

621910 .................... Ambulance Services ................................................................................................................................. $5.0

621991 .................... Blood and Organ Banks ........................................................................................................................... $7.5

621999 .................... All Other Miscellaneous Ambulatory Health Care Services ..................................................................... $7.5

Subsector 622—Hospitals

622110 .................... General Medical and Surgical Hospitals .................................................................................................. $25.0

622210 .................... Psychiatric and Substance Abuse Hospitals ............................................................................................ $25.0

622310 .................... Specialty (except Psychiatric and Substance Abuse) Hospitals .............................................................. $5.0

Subsector 623—Nursing and Residential Care Facilities

623110 .................... Nursing Care Facilities ............................................................................................................................. $10.0

623210 .................... Residential Mental Retardation Facilities ................................................................................................. $7.5

623220 .................... Residential Mental Health and Substance Abuse Facilities ..................................................................... $5.0

623311 .................... Continuing Care Retirement Communities ............................................................................................... $10.0

623312 .................... Homes for the Elderly ............................................................................................................................... $5.0

623990 .................... Other Residential Care Facilities .............................................................................................................. $5.0

*******

Dated: November 9, 2000.

Aida Alvarez,

Administrator.

[FR Doc. 00–29523 Filed 11–16–00; 8:45 am]

BILLING CODE 8025–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 2000–NM–364–AD; Amendment

39–11985; AD 2000–23–13]

RIN 2120–AA64

Airworthiness Directives; Israel

Aircraft Industries, Ltd., Model 1121,

1121A, 1121B, 1123, 1124, and 1124A

Series Airplanes

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Final rule; request for

comments.

SUMMARY: This amendment adopts a

new airworthiness directive (AD) that is

applicable to all Israel Aircraft

Industries, Ltd., Model 1121, 1121A,

1121B, 1123, 1124, and 1124A series

airplanes. This action requires a onetime inspection, and corrective action if

necessary, to ensure the proper

installation of the tie rod through the

dust shield and both jackscrew

assemblies on the horizontal stabilizer

trim actuator. This action is necessary to

prevent jamming or disconnection of the

horizontal stabilizer trim actuator,

which could result in reduced pitch

control of the airplane. This action is

intended to address the identified

unsafe condition.

DATES: Effective December 4, 2000.

The incorporation by reference of

certain publications listed in the

regulations is approved by the Director

of the Federal Register as of December

4, 2000.

Comments for inclusion in the Rules

Docket must be received on or before

December 18, 2000.

ADDRESSES: Submit comments in

triplicate to the Federal Aviation

Administration (FAA), Transport

Airplane Directorate, ANM–114,

Attention: Rules Docket No. 2000–NM–

364–AD, 1601 Lind Avenue, SW.,

Renton, Washington 98055–4056.

Comments may be inspected at this

location between 9:00 a.m. and 3:00

p.m., Monday through Friday, except

Federal holidays.

Comments may be submitted via fax

to (425) 227–1232. Comments may also

be sent via the Internet using the

following address: 9-anmiarcomment@faa.gov. Comments sent

via fax or the Internet must contain

‘‘Docket No. 2000–NM–364–AD’’ in the

subject line and need not be submitted

in triplicate. Comments sent via the

Internet as attached electronic files must

be formatted in Microsoft Word 97 for

Windows or ASCII text.

The service information referenced in

this AD may be obtained from Galaxy

Aerospace Corporation, One Galaxy

Way, Fort Worth Alliance Airport, Fort

Worth, Texas 76177. This information

may be examined at the FAA, Transport

Airplane Directorate, 1601 Lind

Avenue, SW., Renton, Washington; or at

the Office of the Federal Register, 800

North Capitol Street, NW., suite 700,

Washington, DC.

FOR FURTHER INFORMATION CONTACT: Tim

Dulin, Aerospace Engineer,

International Branch, ANM–116, FAA,

1601 Lind Avenue, SW., Renton,

Washington 98055–4056; telephone

(425) 227–2141; fax (425) 227–1149.

SUPPLEMENTARY INFORMATION: The Civil

Aviation Administration of Israel

(CAAI), which is the airworthiness

authority for Israel, recently notified the

FAA that an unsafe condition may exist

on all Israel Aircraft Industries, Ltd.,

Model 1121, 1121A, 1121B, 1123, 1124,

and 1124A series airplanes. The CAAI

advises that the horizontal stabilizer

trim actuator can jam or disconnect due

to incorrect installation, maintenance,

or inspection. The CAAI reports one

case of incorrect installation of the trim

actuator tie rod and dust shield, which

may have caused an accident. Jamming

or disconnection of the actuator, if not

corrected, could result in reduced pitch

control of the airplane.

Explanation of Relevant Service

Information

Israel Aircraft Industries, Ltd., has

issued the following alert service

bulletins: