Title of Regulation: 12VAC5-490. Virginia Radiation Protection Regulations: Fee Schedule (amending 12VAC5-490-10, 12VAC5-490-20, 12VAC5-490-40).

Statutory Authority: §§ 32.1-229 and 32.1-229.1 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: April 8, 2018.

Agency Contact: Steve Harrison, Director, Division of Radiological Health, Virginia Department of Health, 109 Governor Street, Richmond, VA 23219, telephone (804) 864-8151, FAX (804) 864-8155, or email steve.harrison@vdh.virginia.gov.

Basis: Section 32.1-229 of the Code of Virginia authorizes the State Board of Health to establish fee schedules, which shall not exceed comparable U.S. Nuclear Regulatory Commission (NRC) fees, for the licensure and inspection of radioactive materials.

Section 32.1-229.1 of the Code of Virginia requires the State Board of Health to establish fee schedules for registration of machines and for inspections of x-ray machines by Virginia Department of Health (VDH) personnel; however, no fee shall be charged for inspections initiated by VDH.

Section 32.1-229.2 of the Code of Virginia requires the State Board of Health to set inspection fees to minimize competition with the private sector and include all reasonable costs.

Section 32.1-232.1 of the Code of Virginia establishes a special trust fund for radioactive materials facility licensure and inspection fees.

Purpose: The proposed regulatory action addresses fees for two program areas, X-Ray Program (XRP) and Radioactive Materials Program (RMP), and is necessary to maintain program solvency and to provide services and adequate regulatory controls necessary to protect public and worker health and safety and accommodate the elimination of general fund support for the programs and the subsequent spend down of surplus fee revenue since 2015. With one exception, fees for these programs have not increased since 2009 when x-ray fees were adjusted and the RMP was established along with commensurate fees necessary for program operations. At that time, fees were sufficient to cover program and ancillary business expenditures since the fees were supplemented by general funds that were allocated to the Office of Radiological Health (ORH). In fact, the fees generated a surplus. As a result, a 20% decrease in RMP fees went into effect in 2012 due to the overage, the anticipated continuation of general funds, and a petition for small business relief. On July 7, 2017, a change in nonmedical x-ray device registration and inspection fees was adopted. This regulatory action was initiated in early 2015, prior to the loss of general fund support, to help offset the cost of administrative activities involved in the registration, inspection, and certification of nonmedical x-ray equipment, which had not been assessed a registration fee prior to that time.

General funds that were used to support ORH were abolished effective July 1, 2016. The 2015 general fund amount, having been reduced from about $466,000 to $361,000 over several years, constituted 19.3% of ORH's then budgeted resources (revenues) of $1,871,476 and 13.4% of ORH's budgeted expenditures of about $2,700,000. Since that time, the surplus has been used to balance the budget but is projected to be depleted in 2018.

The proposed fee increases were derived based on Office of Financial Management (OFM) revenue and expenditure projections through the year 2021 that have been deemed necessary to maintain the program's solvency, as follows:

X-ray Program:

The XRP is responsible for the registration and inspection of x-ray producing devices in the Commonwealth, in which there are approximately 7,000 registrants with approximately 22,300 x-ray tubes. The XRP also does the U.S. Food and Drug Administration (FDA) Mammography Quality Standards Act (MQSA) facility inspections; performs inspection reviews, correspondence, enforcement and other associated activities; employs staff that maintain specialized training and certifications necessary to conduct XRP activities; reviews the academic and occupational credentials of and certifies private inspectors authorized to conduct business in the Commonwealth and reviews their inspection reports for accuracy; and responds to incidents and emergencies requiring radiological technical expertise and dose characterization. Staff members are emergency response trained, maintain training to perform exposure assessment, and participate in radiological drills and exercises with federal, state, and local stakeholders and responders.

Current XRP staffing includes six compliance/safety officers and supervisory and office services personnel who perform registrations, certifications, and billing; process and track payments; and provide client contact services. This staff complement, according to the Conference of Radiation Control Program Directors (CRCPD), is performing the workload of a minimum of eight XRP full-time employees for an equivalent program (CRCPD, Criteria for and Adequate Radiation Control Program, Appendix C, May 2014).

The proposed regulatory action will address two sets of fees levied by the XRP: x-ray machine registration fees and x-ray machine inspection fees. With respect to the x-ray machine registration fees, the existing regulation is proposed to be amended due to the increased costs of maintaining a registration program for x-ray producing devices since publication of the overall fee schedule effective March 4, 2009.

The registration fees need to be adjusted to reflect the elimination of general funds. The x-ray machine inspection fees also need to be modified to accommodate increased personnel, overhead, and travel costs to the agency since 2009, which are projected to continue to increase in the coming years. Virginia's current and proposed x-ray registration fees, in comparison to those charged by other nearby states, appears below.

Radioactive Materials Program:

Virginia entered into an agreement with the NRC on March 31, 2009, to assume the responsibilities of regulating the use of radioactive materials in Virginia. 12VAC5-490 was promulgated at that time to supply the monetary means for supporting the RMP by charging application and annual licensing fees.

The RMP is tasked with performing detailed technical reviews of license applications submitted for possession, use, manufacture, and distribution of radioactive materials, as well as any other associated activities requiring licensing by regulations (e.g., decontamination services) prior to approval for possession or operation. Contacts with applicants during the review process are documented through review letters and memoranda. For major operations, facilities subject to increased controls or applicants with no previous history with the RMP, prelicensing visits to examine facilities and equipment may be in order. Procedures are in place to promote thoroughness, technical quality, and uniformity. The RMP requires license amendments for any significant change in authorized radioactive materials, uses, and operations, and an amendment review is equivalent to the license application review. A complete technical review and reauthorization of active licenses comparable to the original licensing process are also conducted at a frequency based on the type of facility, materials, or activities authorized. The program requires the registration of certain devices containing a large quantity of or otherwise hazardous sealed sources of radioactive material that are generally licensed under its regulations and also requires evidence of financial assurance or surety for large quantity licensees with substantial potential for contamination of facilities, equipment, and the environment or that possess large quantities of radioactive material requiring disposal. Inspections are conducted to evaluate compliance with regulatory standards, and inspection reports are generated that follow a uniform format and allow for timely (no later than 30 days after inspection) communication of results to the licensee. These reports summarize the inspection scope, include measurement data with appropriate interpretation, clearly list and categorize as to the severity each item of noncompliance, set a reasonable date for correction of each item, and require a plan for corrective action that includes submission of evidence that corrections have been performed and are effective.

The RMP licenses and inspects approximately 400 specific licensees. The RMP also tracks over 2,900 general licensees that possess over 34,000 general licensed devices; however, general licensees are not subject to inspection. RMP staffing consists of one supervisor who conducts inspections, five program support inspectors, and two administrative program specialists. These personnel maintain the RMP's databases on licensure and inspections; prepare and distribute statistical and informational reports, including monthly reports on the number of inspections (due, past due, and conducted), license applications, amendments, license actions overdue, violations, denials, etc.; receive and process the daily mail, including license applications, amendments, and renewals, inspection letters, and licensing fees; mail out licensing bills, inspection letters, renewal applications, and general information to licensees; contact licensees by telephone regarding licensing fees and renewals; and maintain the licensing file system, including file numbers, licenses, inspection reports, billing notices, and other materials.

According to the CRCPD, RMP professional and technical personnel requirements should consist of eight to 12 inspectors plus management and administrative support (CRCPD, Criteria for and Adequate Radiation Control Program, Appendix C, May 2014).

This proposed regulatory action seeks to continue to assess RMP fees equitably across all license categories by using the fee structure adopted in 2009 upon Virginia's becoming an agreement state, while also incorporating the regulatory changes adopted on November 22, 2012, to accommodate small business relief. Using this approach, revenue generation is estimated to be about $1,248,500, which will approximate OFM's projected expenditures of about $1,248,300. It is also important to note that this proposal does not suggest establishing an hourly rate for initial license application and amendment reviews as does the NRC, which is currently $263 per hour for such reviews. A comparison of the NRC's existing fees to VDH's proposed fees, as well as a sampling of other agreement state fees, appears below:

The fee schedule continues to be designed on the premise that all licensees will pay a fair share of the program costs. One fee is set per category of licensee based on time and effort. When the Commonwealth's program was developed, the NRC fee schedule was referenced and then adjusted for expected time and effort involved in RMP staff managing each license category. Unlike the NRC program, the RMP did not include a reduced rate for small business licensees as the size of the business (i.e., licensee) did not correlate with the time and effort involved. However, a Petition for Rulemaking was submitted to the Virginia Regulatory Town Hall on August 17, 2009, requesting the radioactive material licensing fees be lowered to accommodate this provision to the extent possible. That change took effect on November 22, 2012, and as a result, 19 of 54 licensees were assessed a higher licensing fee by VDH than they paid to the NRC while 35 were lower than the NRC fee. The same category and fee structure applied at that time was followed for this proposal. Using the 2017 NRC small business fees in comparison to the VDH proposed fees, 14 businesses would be charged a fee higher than the NRC small business fee, while 48 would be charged less, as shown below:

Other Actual and Anticipated Cost Increases:

It is important to note that VDH's Office of Financial Management's expenditure budget forecast assumes no reductions in staff or operating costs and the following future cost impact assumptions through 2021:

1. Health insurance: Likely 8.0% increase in fiscal year (FY) 2018 (based on statewide central appropriation planning in Appropriation Act).

2. Health insurance: Additional conservative individual FY 2019 - FY 2021 increases of 5.0%, 2.0%, and 2.0%.

3. Virginia Information Technologies Agency: Annual conservative 1.0% increase in each FY.

4. State compensation: Conservative 3.0% annual salary cost impact factored in FY 2018 and beyond (FY 2018 and future fiscal years speculative).

5. Office of Financial Management (OFM) forecasts XRP expenditures of about $1,065,000 by the year 2021, while revenue is expected to remain constant at about $713,000, unless fees are raised.

6. OFM forecasts RMP expenditures of about $1,250,000 by the year 2021, while revenue is expected to remain constant at about $750,000, unless fees are raised.

OFM also provided information on various cost increases since the RMP fee reduction of 2012 went into effect. Specifically:

a. FY 2018: 3.0% legislated raise in staff compensation.

b. FY 2014: 2.0% legislated raise in staff compensation.

c. FY 2013 and FY 2014: Health insurance employer premium increases each year (individual plan increases vary; average increased in 3.0-8.0% range annually).

d. FY 2011 and FY 2012: Modest health insurance employer premium increase

There were additional net contributions required of agency non-general funds or cash balances that were used to support the Virginia Retirement System's pension liability.

Substance: 12VAC5-490-10 is proposed to be amended to increase the x-ray machine registration fee for operators or owners of diagnostic x-ray machines used in the healing arts and capable of producing radiation as well as operators or owners of therapeutic x-ray, particle accelerators, and teletherapy machines used in the healing arts that are capable of producing radiation, and for nonmedical x-ray devices.

12VAC5-490-20 is proposed to be amended to increase fees charged for surveys (inspections) requested by a registrant and performed by a VDH inspector.

12VAC5-490-40 is proposed to revise the annual fees for entities issued a radioactive materials license pursuant to 12VAC5-481, as necessary, to support the licensing and inspection program under the Commonwealth's authority as a NRC agreement state. Since the 2012 revision, fee collection by the RMP has averaged about $750,000 while expenses have averaged about $950,000. This action is expected to increase the RMP revenue generation to be in line with current and anticipated future expenditures.

The Atomic Energy Act of 1954, as amended, provides the statutory basis by which the NRC relinquishes portions of its regulatory authority to license and regulate radioactive material to a state that agrees to accept that responsibility. Through the agreement state program, 37 states, including Virginia, have signed formal agreements for inspection and enforcement authority with the NRC. The NRC retains an oversight role and periodically reviews agreement state programs for continued adequacy to protect public health and safety through their Integrated Materials Performance Evaluation Program (IMPEP). All IMPEP reviews use common performance indicators in the assessment. For most IMPEP reviews, no action other than issuance of the final report is needed. In cases where additional action is needed, the NRC may consider monitoring, heightened oversight, probation, suspension, or termination. Suspension and termination are considered when a program is deemed inadequate to protect public health and safety. In these situations, the state's authority is revoked and oversight authority reverts back to the NRC, and the state's revenue stream normally generated by program fees would be eliminated.

In November 2014, the NRC's IMPEP review team evaluated Virginia's RMP and found "the Program experienced a backlog in inspections due, in part, to having a shortage of qualified staff to complete inspections within the required timeframe." Since that time, the RMP has hired and trained two new inspectors and completed the overdue inspection backlog, thus avoiding monitoring, probation, or forfeiture. The NRC warned, however, that a loss of even one inspector could create an environment for recurrence due to the absence of staffing depth. The NRC also noted that the administrative assistant responsible for maintaining the database had been filled three times since 2010 and was vacant again at the time of the review. ORH explained that efforts would be undertaken to request the conversion of that position to a full-time equivalent, which was granted in 2015 and subsequently filled.

The RMP, through its registration fees, currently provides for about 30% of ORH's overall revenue and supports administration, the RMP supervisor, RMP inspectors, and business staff salaries, as well as some office-wide equipment purchases and emergency response capabilities. A loss of the RMP and the revenue it generates, even temporarily, would challenge the viability of the office at large.

Issues: The primary advantage of this change to the public and the regulated community is that registering all x-ray machines allows ORH to maintain an accurate database of the devices, track inspections, and ensure that the machines are functioning properly so as to minimize the risk of equipment malfunction and accidental overexposures.

The primary advantage to the public is that the x-ray machine registration and inspection fees rely on owners or operators of the x-ray equipment. Similarly, radioactive materials licensing fees rely on the owners or operators of radioactive materials sources and devices. There are no disadvantages to the public in promulgating the proposed fee schedule.

The primary advantage to the agency and the Commonwealth is that approving the proposed fee structure allows the Commonwealth to recover more of the costs associated with carrying out the legislative mandate. There are no disadvantages to the agency and Commonwealth in promulgating the proposed fee schedule.

Other pertinent matters of interest to the regulated community include that x-ray machine registrants and radioactive materials licensees have an interest in keeping inspection fees as low as possible. Potential concerns may be expressed by private x-ray device inspectors whose fees are independent of VDH's inspection fees and are negotiated between individual private inspectors and the registrants. Section 32.1-229.2 of the Code of Virginia requires the agency to establish inspection fees to minimize competition with the private inspector and recover its costs. X-ray machine registrants may also express concerns that the proposed inspection fees are excessive. Similarly, VDH may anticipate objection from the radioactive materials licensees due to a proposed increase, even though the proposed fee schedule for radioactive materials will remain below the NRC's fees for equivalent (non-agreement state) services.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Board of Health (Board) proposes to raise registration and inspection fees in the X-ray Program (XRP) as well as licensing fees in the Radioactive Materials Program (RMP).

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. The Board proposes to raise the fees in XRP for device registrations and inspections and in RMP for licensing. The General Fund support for XRP and RMP were abolished effective July 1, 2016, which reduced funding for the programs by $361,000 in total. Even with the General Fund support the programs were not generating enough fee revenue to cover their costs. In addition, new positions were created in the Office of Radiological Health for the RMP in 2015 to accommodate inspections and business functions because the U.S. Nuclear Regulatory Commission had expressed concerns about an inspection backlog in a preceding program assessment. Furthermore, health insurance premiums, information technology costs, employee compensation, equipment rental costs, etc. have increased and are anticipated to increase in the future. The Virginia Department of Health (VDH) projects a $351,729 shortfall between revenues and expenditures in XRP and a $498,278 shortfall in RMP by fiscal year 2021. The proposed fee increases are intended to make both programs self-sufficient.

There are two types of fees in the XRP. One for registration and one for inspection. The amount of the fees and frequency of inspections depend on the facility type. Medical facilities, hospitals, and chiropractors are subject to a one-year inspection cycle. Dental, podiatry, and veterinary facilities are subject to a three-year inspection cycle. Current periodic registration fees are $20 for baggage x-ray facilities, $25 for cabinet/analytical x-ray facilities, and $50 for all the of remaining types of facilities. The proposed registration fees are double the current registration fees (i.e., $40, $50, and $100 respectively). Current inspection fees range from $90 every three years to $230 every year. The proposed fees range from $100 every three years to $250 every year. There are no fee increases in four categories of facility types. The increases in other categories range from 9% to 39% depending on the facility type.

VDH researched the amount of similar fees charged in Tennessee, Maryland, and North Carolina. Comparison with those states reveals that the proposed fees are either similar or in most cases below the fees charged in those three states.

There are 43 different types of licenses in RMP covering possession, use, processing, distribution, manufacturing, and repair of any devices or products that contain radioactive materials. The current license fees range from $200 to $100,000 depending upon the specific application. However, all but one of the fees are below $12,000.  The proposed increases are between 50% and 60% for three fee categories, between 70% and 74% for 38 fee categories, and at 80% for two fee categories.

VDH also compared the proposed RMP fees to those charged by the federal Nuclear Regulatory Commission, Pennsylvania, Tennessee, Kentucky, and North Carolina. The proposed license fees are much lower than what the federal Nuclear Regulatory Commission charges and are also similar to the fees charged by the comparison states.

With the proposed fee increases, XRP and RMP will be able to maintain their operations providing a check on safety of radioactive equipment and materials.  In addition, if RMP failed to hire additional staff to address the inspection backlog, the Nuclear Regulatory Commission would have revoked Virginia's authority to issue licenses and take over the licensing authority. The fees charged by the Nuclear Regulatory Commission are considerably higher than the proposed RMP fees.

Financing of 100% of XRP and RMP expenses through user fees should improve allocative efficiency of economic resources. In general, if the benefits accrue broadly to the public, then the program should be financed by taxes paid by the public. In contrast, if the benefits accrue to a limited number of private individuals or organizations, then the program should be financed by charges paid by the private beneficiaries. Charging the marginal cost of a service ensures that just the right amount of that service will be produced and consumed. For example, charging less than the full cost may encourage some entities to obtain an unneeded x-ray machines. Similarly, charging more than the actual cost may unnecessarily discourage some entities from obtaining a needed x-ray equipment.

The same principle also applies to the distribution of program costs among various types or categories of registrants and licensees. VDH notes that the proposed fees for different categories are generally set based on time and effort it takes to regulate that specific category.

The proposed regulation will likely also indirectly affect private x-ray inspectors and facilities that hire those inspectors. Currently, only about 10% of the inspections are conducted by XRP staff. An increase in XRP fee schedule will likely result in some additional registrants seeking services of private inspectors, which may lead to an increase in fees charged by them.

In summary, the main economic impact of the proposed regulation is to ensure that XRP and RMP have enough resources to support their operations and continue to protect the public from health and safety risks posed by radioactive equipment and materials.

Businesses and Entities Affected. In the XRP program, there are about 7,000 registrants with approximately 21,000 x-ray tubes. The types of registrants include but are not limited to medical, industrial, and academic facilities. Program staff inspect about 1,000 facilities and 2,100 machines per year. The remaining facilities are inspected through private inspectors.

In the RMP program, there are about 400 specific licensees. The licensees include large nuclear power generation and shipyard facilities and smaller medical and engineering facilities. The program staff conduct approximately 400 inspections and licensing actions annually. RMP also tracks over 2,900 general licensees which possess over 34,000 general licensed devices.

The proposed changes will also directly affect XRP and RMP by providing funding for their operations. Currently, there are a total of 20 full-time equivalents that serve those programs, either directly in supervisory or inspection positions, or in support functions (i.e., business, billing, and management).

Finally, there are 171 private inspectors and their customers may be indirectly affected as noted above.

Localities Particularly Affected. The proposed changes do not disproportionately affect particular localities.

Projected Impact on Employment. The proposed fee increases will maintain the current level of full-time positions at VDH for XRP and RMP.

Effects on the Use and Value of Private Property. The proposed fee increases are probably relatively small compared to asset values of the affected businesses. Thus, no significant impact on the use and value of private property is expected.

Real Estate Development Costs. No impact on real estate development costs is expected.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The majority of registrants in the XRP (dental facilities, chiropractic facilities, podiatry offices, medical facilities/offices, veterinary facilities) are likely to be small businesses while hospitals, of which there are about 100, generally are not. The 62 registrants in RMP are likely small businesses. The costs and other effects on small businesses are the same as discussed above. The current fees for categories in RMP where most of the entities are small businesses (e.g., medical offices, portable gauge users, and industrial radiographers) are lower to provide small business relief. The proposed fees, while higher than the current fees, continue to provide relief to most of the small businesses.

Alternative Method that Minimizes Adverse Impact. There is no alternative source of funds that would finance XRP and RMP operations.

Adverse Impacts:

Businesses. Most of the affected hospitals in the XRP and several licensees in the RMP are not small providers. The costs and other effects on them are the same as discussed above.

Localities. Localities are exempt from x-ray registration fees. However, they must pay x-ray inspection fees and radioactive material license fees.

Other Entities.

The proposed amendments will not directly adversely affect other entities. However, the proposed regulation may indirectly adversely affect those registrants using private inspectors. The proposed XRP fee increases would likely enable private inspectors to increase the fees they charge, adversely affecting their customers.

Agency's Response to Economic Impact Analysis: The Virginia Department of Health concurs with the results of the economic impact analysis.

Summary:

The proposed amendments increase fees in the fee schedule used by the X-Ray Program for device registrations and inspections and in the fee schedule used by the Radioactive Materials Program for charging annual licensing fees to maintain program solvency and provide adequate regulatory controls.

12VAC5-490-10. Registration fees.

A. All operators or owners of diagnostic x-ray machines used in the healing arts and capable of producing radiation shall pay the following registration fee:

1. $50 $100 for each machine and additional tube(s) tubes that have a required annual inspection, collected annually; and

2. $60 $100 for each machine and additional tube(s) tubes that have a required inspection every three years, collected every three years.

B. All operators or owners of therapeutic x-ray, particle accelerators, and teletherapy machines used in the healing arts capable of producing radiation shall pay the following annual registration fee:

1. $50 $100 for each machine with a maximum beam energy of less than 500 KVp;

2. $50 $100 for each machine with a maximum beam energy of 500 KVp or greater.

C. All operators or owners of baggage, cabinet or analytical, or industrial x-ray machines capable of producing radiation shall pay the following annual registration fee:

1. $20 $40 for each machine used for baggage inspection;

2. $25 $50 for each machine identified as cabinet or analytical; and

3. $50 $100 for each machine used for industrial radiography.

D. Where the operator or owner of the aforementioned machines is a state agency or local government, that agency is exempt from the payment of the registration fee.

12VAC5-490-20. Inspection fees and inspection frequencies for x-ray machines.

The following table lists the fees that shall be charged for surveys requested by the registrant and performed by a Department of Health inspector, as well as the required inspection frequencies for each type of x-ray machine:

12VAC5-490-40. Application and licensing fees for radioactive materials licenses.

The application fee for a radioactive materials license and annual fees for persons issued a radioactive materials license pursuant to 12VAC5-481 are listed in the following table: