Rural Health Care Support Mechanism, 13935-13993 [2013-04040]
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Vol. 78
Friday,
No. 41
March 1, 2013
Part II
Federal Communications Commission
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47 CFR Part 54
Rural Health Care Support Mechanism; Final Rule
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Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations
FEDERAL COMMUNICATIONS
COMMISSION
(202) 863–2898, or via the Internet at
https://www.bcpiweb.com.
47 CFR Part 54
I. Introduction
1. In this Order, the Commission
reforms our universal service support
programs for health care, transitioning
our existing Internet Access and Rural
Health Care Pilot programs into a new,
efficient Healthcare Connect Fund
(Fund). This Fund will expand health
care provider (HCP) access to
broadband, especially in rural areas, and
encourage the creation of state and
regional broadband health care
networks. Broadband connectivity has
become an essential part of 21st century
medical care. Whether it is used for
transmitting electronic health records,
sending X-rays, MRIs, and CAT scans to
specialists at a distant hospital, or for
video conferencing for telemedicine or
training, access to broadband for
medical providers saves lives while
lowering health care costs and
improving patient experiences.
Telemedicine can save stroke patients
lasting damage, prevent premature
births, and provide psychiatric
treatment for patients in rural areas.
Exchange of electronic health records
(EHRs) avoids duplicative medical tests
and errors in prescriptions, and gives
doctors access to all of a patient’s
medical history on a moment’s notice.
Telehealth applications save HCPs
money as well. For example, a South
Carolina HCP consortium funded by the
Commission’s Rural Health Care (RHC)
Pilot Program saved $18 million in
Medicaid costs through telepsychiatry
provided at hospital emergency rooms.
Another Pilot project in the Midwest
saved $1.2 million in patient transport
costs after establishing an electronic
intensive care unit (e-ICU) program.
2. This Order builds on the success of
the RHC Pilot Program. That program
demonstrated the importance of
expanding HCP access to high-capacity
broadband services, which neither the
existing RHC Telecommunications
Program nor the Internet Access
Program have successfully achieved.
The Pilot Program also proved the
benefits of a consortium-focused
program design, encouraging ruralurban collaboration that extended
beyond mere connectivity, while
significantly lowering administrative
costs for both program participants and
the Fund. The Pilot Program funds 50
different health care provider broadband
networks, with a total of 3,822
individual HCP sites, 66 percent of
which are rural. The networks range in
size from 4 to 477, and have received a
total of $364 million in funding
commitments, to be spread out over
[WC Docket No. 02–60; FCC 12–150]
Rural Health Care Support Mechanism
Federal Communications
Commission.
ACTION: Final rule.
AGENCY:
In this document, the Federal
Communications Commission reforms
its universal service support program for
health care, transitioning its existing
Internet Access and Rural Health Care
Pilot programs into a new, efficient
Healthcare Connect Fund. This Fund
will expand health care provider access
to broadband, especially in rural areas,
and encourage the creation of state and
regional broadband health care
networks. Access to broadband for
medical providers saves lives while
lowering health care costs and
improving patient experiences.
DATES: Effective April 1, 2013, except
for added §§ 54.601(b), 54.631(a) and
(c), 54.632, 54.633(c), 54.634(b), 54.636,
54.639(d), 54.640(b), 54.642, 54.643,
54.645, 54.646, 54.647, 54.648(b),
54.675(d), and 54.679, and the
amendments to §§ 54.603(a) and (b),
54.609(d)(2), 54.615(c), 54.619(a)(1) and
(d), and 54.623(a), which contain new or
modified information collection
requirements that will not be effective
until approved by the Office of
Management and Budget. The Federal
Communications Commission will
publish a document in the Federal
Register announcing the effective date
for those sections.
FOR FURTHER INFORMATION CONTACT:
Linda Oliver, Wireline Competition
Bureau at (202) 418–1732 or TTY (202)
418–0484.
SUPPLEMENTARY INFORMATION: This is a
synopsis of the Commission’s Report
and Order (Order) in WC Docket No.
02–60, FCC 12–150, adopted December
12, 2012, and released December 21,
2012. The complete text of this
document is available for inspection
and copying during normal business
hours in the FCC Reference Information
Center, Portals II, 445 12th Street SW.,
Room CY–A257, Washington, DC 20554,
or at the following Internet address:
https://hraunfoss.fcc.gov/edocs_public/
attachmatch/FCC-12-150A1.doc. The
document may also be purchased from
the Commission’s duplicating
contractor, Best Copy and Printing, Inc.,
445 12th Street SW., Room CY–B402,
Washington, DC 20554, telephone (800)
378–3160 or (202) 863–2893, facsimile
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SUMMARY:
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several years. Through bulk buying and
competitive bidding, most HCPs in the
program have been able to obtain
broadband connections of 10 Mbps or
more. The consortia were often
organized and led by large hospitals or
medical centers, which contributed
administrative, technical, and medical
resources to the other, smaller HCPs
providing service to patients in rural
areas.
3. Drawing on these lessons, the
Healthcare Connect Fund will direct
Universal Service Fund (USF) support
to high-capacity broadband services
while encouraging the formation of
efficient state and regional health care
networks. The new Fund will give HCPs
substantial flexibility in network design,
but will require a rigorous, auditable
demonstration that they have chosen the
most cost-effective option through a
competitive bidding process.
4. In particular, like the Pilot Program,
the Healthcare Connect Fund will
permit HCPs to purchase services and
construct their own broadband
infrastructure where it is the most costeffective option. The Healthcare
Connect Fund is thus a hybrid of the
separate infrastructure and services
programs proposed in the Commission’s
July 2010 Notice of Proposed
Rulemaking (NPRM), 75 FR 48236,
August 9, 2010. The self-construction
option will only be available, however,
to HCPs that apply as part of consortia,
which can garner economies of scale
unavailable to individual providers.
With these safeguards, and based on the
experience of the RHC Pilot Program,
we expect the self-construction option
to be used only in limited
circumstances, and often in
combination with services purchased
from commercial providers.
5. Regardless of which approach
providers choose, the Healthcare
Connect Program will match two-forone the cost of broadband services or
facilities that they use for health care
purposes, requiring a 35 percent HCP
contribution. A two-for-one match will
significantly lower the barriers to
connectivity for HCPs nationwide,
while also requiring all program
participants to pay a sufficient share of
their own costs to incent considered and
prudent decisions and the choice of
cost-effective broadband connectivity
solutions. Indeed, with the level of
support the Healthcare Connect Fund
provides, and with the other reforms we
adopt, we expect that HCPs will be able
to obtain higher speed and better quality
broadband connectivity at lower prices,
and that the value for the USF will be
greater, than in the existing RHC
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Telecommunications and Internet
Access Programs.
6. Both rural and non-rural HCPs will
be allowed to participate in the new
program, but non-rural providers may
join only as part of consortia. Moreover,
to ensure that all consortia keep rural
service central to their mission, we will
require that a majority of the HCPs in
each consortium meet our longstanding
definition of rural HCPs, although we
grandfather those Pilot projects with a
lower rural percentage. And to ensure
that the program maintains its focus on
smaller HCPs that serve predominantly
rural populations, we also adopt a rule
limiting support to no more than
$30,000 per year for recurring charges
and no more than $70,000 for nonrecurring charges over a five-year period
for larger HCPs—defined as hospitals
with 400 beds or more.
7. We also adopt a number of reforms
for the Healthcare Connect Fund that
will increase the efficiency of the
program, both by reducing
administrative costs for applicants and
for Universal Service Administrative
Company (USAC), and by adopting
measures to maximize the value
obtained by HCPs from every USF
dollar. In particular, we take a number
of steps in this Order to simplify the
application process, both for individual
HCP applicants and for consortia of
HCPs.
8. As a central component of this
Order, we also adopt express goals and
performance measures for all the
Commission’s health care support
mechanisms. The goals are (1)
increasing access to broadband for
HCPs, particularly those serving rural
areas; (2) fostering the development and
deployment of broadband health care
networks; and (3) maximizing the costeffectiveness of the program. These
goals inform all the choices we make in
this Order. As we implement this Order,
we will collect information to evaluate
the success of our program against each
of these goals.
9. Finally, we create a new Pilot
Program to test whether it is technically
feasible and economically reasonable to
include broadband connectivity for
skilled nursing facilities within the
Healthcare Connect Program. The Pilot
will make available up to $50 million to
be committed over a three-year period
for pilot applicants that propose to use
broadband to improve the quality and
efficiency of health care delivery for
skilled nursing facility patients, who
stand to benefit greatly from
telemedicine and other telehealth
applications. We expect to use the data
gathered through the Pilot to determine
how to proceed on a permanent basis
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with respect to such facilities, which
provide hospital-like services.
10. We note that, with this
comprehensive reform of the RHC
program, the Commission has now
reformed all four USF distribution
programs within the past three years. In
September 2010, the Commission
modernized the Schools and Libraries
support mechanism (E-rate) for the 21st
century, improving broadband access,
streamlining administrative
requirements, and taking measures to
combat waste, fraud and abuse. In
October 2011, the Commission adopted
transformational reforms of the highcost program, creating the Connect
America and Mobility Funds to advance
the deployment of fixed and mobile
broadband networks in rural and
underserved areas, while putting the
high-cost program on an overall budget
for the first time ever. In January 2012,
the Commission transformed the lowincome program, taking major steps to
modernize the program and reduce
waste, fraud, and abuse. In each prior
instance, and again in this Order, we
have made our touchstone aligning the
universal service programs with 21st
century broadband demands, while
improving efficiency, accountability,
and fiscally responsibility.
performance goals for the health care
universal service support mechanism
(both for the RHC Telecommunications
Program and the Healthcare Connect
Fund), which reflect our ongoing
commitment to preserve and advance
universal service for eligible HCPs: (1)
Increase access to broadband for HCPs,
particularly those serving rural areas; (2)
foster development and deployment of
broadband health care networks; and (3)
reduce the burden on the USF by
maximizing the cost-effectiveness of the
health care support mechanism. We also
adopt associated performance
measurements. Throughout this Order,
we have used these goals as guideposts
in developing the Healthcare Connect
Fund, and these goals also will guide
our action as we undertake any future
reform of the Telecommunications
Program.
13. Using the adopted goals and
measures, the Commission will, as
required by GPRA, monitor the
performance of the universal service
health care support mechanism. If the
program is not meeting the performance
goals, we will consider corrective
actions. Likewise, to the extent that the
adopted measures do not help us assess
program performance, we will revisit
them as well.
II. Performance Goals and Measures
11. Clear performance goals and
measures will enable the Commission to
determine whether the health care
universal service support mechanism is
being used for its intended purpose and
whether that funding is accomplishing
the intended results. In the NPRM, the
Commission recognized the importance
of establishing measurable performance
goals, stating that ‘‘[i]t is critical that our
efforts focus on enhancing universal
service for health care providers and
that support is properly targeted to
achieve defined goals.’’ Establishing
performance goals and measures also is
consistent with the Government
Performance and Results Act of 1993
(GPRA), which requires federal agencies
to engage in strategic planning and
performance measurement. In its 2010
report, the Government Accountability
Office (GAO) also emphasized that the
Commission should provide the RHC
support mechanism with ‘‘a solid
performance management foundation’’
by ‘‘establishing effective performance
goals and measures, and planning and
conducting effective program
evaluations.’’
12. Drawing on the Commission’s
experience with the existing RHC
programs and the Pilot Program, and
based on the record developed in this
proceeding, we adopt the following
A. Increase Access to Broadband for
Health Care Providers, Particularly
Those Serving Rural Areas
14. Goal. We adopt as our first goal
increasing access to broadband for
HCPs, particularly those serving rural
areas. This goal implements Congress’s
directive in section 254(h) of the
Communications Act that the
Commission ‘‘enhance access to
advanced telecommunications services
and information services’’ for eligible
HCPs and to provide
telecommunications services necessary
for the provision of health care in rural
areas at rates reasonably comparable to
similar services in urban areas. Access
to the broadband necessary to support
telehealth and Health IT applications is
critical to improving the quality and
reducing the cost of health care in
America, particularly in rural areas.
Broadband enables the efficient
exchange of patient and treatment
information, reduces geography and
time as barriers to care, and provides the
foundation for the next generation of
health innovation.
15. Measurement. We will evaluate
progress towards our first goal by
measuring the extent to which program
participants are subscribing to
increasing levels of broadband service
over time. We also plan to collect data
about participation in the Healthcare
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Connect Fund relative to the universe of
eligible participants. We also will
collect data about the bandwidth
obtained by participants in the program,
and will chart the increase over time in
higher bandwidth levels. We plan to
compare those bandwidth levels with
the minimum bandwidth requirements
recommended in the National
Broadband Plan, March 16, 2010 and
the OBI Technical Paper, August, 2010
to determine how HCP access to
broadband evolves as technology
changes and as HCPs increasingly adopt
telemedicine and electronic health
records. We also expect to measure the
bandwidth obtained by HCPs in the
different statutory categories, as that
information is not administratively
burdensome to collect. To the extent
feasible, we also will endeavor to
compare the bandwidth obtained by
participants in the Commission’s
programs with that used by nonparticipants, by relying on public
sources of information regarding
broadband usage by the health care
industry, and by comparing the
bandwidth obtained by new participants
in the Commission’s programs with
what they were using prior to joining, to
the extent such data is available.
16. HCP needs for higher bandwidth
connections vary based on the types of
telehealth applications used by HCPs
and by the size and nature of their
medical practices. Because of this
variation, and because of potential
constraints on the ability of HCPs to
obtain broadband (due to cost or lack of
broadband availability), we are not
establishing a minimum target
bandwidth as a means to measure
progress toward this goal. We expect,
nevertheless, to compare the bandwidth
obtained by HCPs with the kinds of
bandwidth commonly required to
conduct telemedicine and other
telehealth activities.
17. We direct the Bureau to consult
with the major stakeholders and other
governmental entities in order to
minimize the administrative burden
placed on applicants and on the Fund
Administrator (currently, USAC). We
also direct the Bureau to consult with
the U.S. Department of Health and
Human Services (HHS), including the
Indian Health Service (IHS), and other
relevant federal agencies to ensure the
meaningful and non-burdensome
collection of broadband data from HCPs.
We expect to follow health care trends
(such as use of EHRs and telemedicine)
and to coordinate, to the extent possible,
our monitoring efforts with other federal
agencies. We also direct the Bureau to
engage in dialogue with United States
Department of Health and Human
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Services (HHS) regarding whether and
how to incorporate broader health care
outcomes, including providers’
‘‘meaningful use’’ of EHRs, into our
performance goals and measures in the
future, consistent with our statutory
authority.
18. Finally, in order to further our
progress toward meeting this goal, we
also direct the USAC, working with the
Bureau and with other agencies, to
conduct outreach regarding the
Healthcare Connect Fund with those
HCPs that are most in need of
broadband in order to reach
‘‘meaningful use’’ of EHRs and for other
health care purposes.
B. Foster Development and Deployment
of Broadband Health Care Networks
19. Goal. We adopt as our second goal
fostering development and deployment
of broadband health care networks,
particularly networks that include HCPs
that serve rural areas. This goal is
consistent with the statutory objective of
section 254(h), which is to enhance
access to telecommunications and
advanced services, especially for health
care providers serving rural areas.
Broadband health care networks also
improve the quality and lower the cost
of health care and foster innovation in
telehealth applications, particularly in
rural areas.
20. Measurement. We will evaluate
progress towards this second goal by
measuring the extent to which eligible
HCPs participating in the Healthcare
Connect Fund are connected to other
HCPs through broadband health care
networks. We plan to collect data about
the reach of broadband health care
networks supported by our programs,
including connections to those networks
by eligible and non-eligible HCP sites.
We also will measure how program
participants are using their broadband
connections to health care networks,
including whether and to what extent
HCPs are engaging in telemedicine,
exchange of EHRs, participation in a
health information exchange, remote
training, and other telehealth
applications. Access to high speed
broadband health care networks should
help facilitate adoption of such
applications by HCPs, including those
HCPs serving patients in rural areas. We
direct the Bureau to work with USAC to
implement the reporting requirements
regarding such telehealth applications
in a manner that imposes the least
possible burden on participants, while
enabling us to measure progress toward
this goal. We also direct the Bureau to
coordinate with other federal agencies
to ensure that data collection minimizes
the burden on HCPs, which may already
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be required to track similar data for
other health care regulatory purposes.
To the extent feasible, we also will
endeavor to compare the extent to
which participants in the new program
are using telehealth applications to that
of non-participants, relying on public
sources of information regarding trends
in the health care industry.
C. Maximize Cost-Effectiveness of
Program
21. Goal. We adopt as our third goal
maximizing the cost-effectiveness of the
RHC universal service health care
support mechanism, thereby
minimizing the Fund contribution
burden on consumers and businesses.
This goal includes increasing the
administrative efficiency of the program
(thereby conserving Fund dollars) while
accelerating the delivery of support for
broadband. This goal also includes
ensuring that the maximum value is
received for each dollar of universal
service support provided, by promoting
lower prices and higher speed in the
broadband connections purchased with
Fund support. In addition, we seek to
ensure that funding is being used
consistent with the statute and the
objectives of the RHC support
mechanism, and we adopt throughout
this Order measures to help prevent
waste, fraud and abuse. The goal of
increasing program efficiency is
consistent with section 254(h)(2)(A) of
the Communications Act, which
requires that support to HCPs be
‘‘economically reasonable.’’
22. Measurement. We will evaluate
progress towards this goal both by
measuring the administrative efficiency
of the program and by measuring the
value delivered with each dollar of USF
support. First, we will measure the cost
of administering the program compared
to the program funds disbursed to
recipients. USAC’s cost to administer
the Telecommunications, Internet
Access, and Pilot RHC programs was
nine percent of total funds disbursed in
calendar year 2011, the highest of all
four universal service programs. We
may measure this also in terms of the
percentage of administrative expenses
relative to funds committed, to account
for the fact that administrative expenses
may be higher in years in which USAC
processes a large number of applications
for multi-year funding.
23. Second, we will measure the value
delivered to HCPs with support from the
Healthcare Connect Fund by tracking
the prices and speed of the broadband
connections supported by the program.
As we found in the Pilot Program,
consortium applications, in
combination with competitive bidding
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and other program features, lead to
lower prices and higher speed
broadband. As we did in the Pilot
Evaluation, DA 12–1332, we expect to
measure the prices and speed of
connections obtained under the
Healthcare Connect Fund to determine
whether this goal has been
accomplished, and will examine similar
data from the Telecommunications
Program. In addition, we will monitor
the results of the Administrator’s audits
and other reports to track progress in
reducing improper payments and waste,
fraud and abuse.
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III. Support for Broadband
Connectivity
A. Overview
24. In this Order, we create a new
Healthcare Connect Fund that will
provide universal service support for
broadband connectivity for eligible
HCPs. As designed, the new program
will achieve the goals we have
identified above for the reformed
program: (1) Increasing access to
broadband for HCPs, including those in
rural areas; (2) fostering the
development of broadband health care
networks to deliver innovation in
telehealth applications; and (3)
maximizing the cost-effective use of the
Fund. The Healthcare Connect Fund
replaces the current RHC Internet
Access Program, but the RHC
Telecommunications Program remains
in place.
25. Although we will allow the filing
of both individual and consortium
applications, a primary focus of the
Healthcare Connect Fund will be
encouraging the growth or formation of
statewide, regional, or Tribal broadband
health care networks that will expand
the benefits we observed in the Pilot
Program. Benefits of such networks
include access to specialists; cost
savings from bulk buying capability and
aggregation of administrative functions;
efficient network design; and the
transfer of medical, technical, and
financial resources to smaller HCPs. We
will allow non-rural as well as rural
health care providers to participate and
receive support for critical network
connections if they apply as part of a
consortium, with limitations to ensure
that program funds are used efficiently
and that all consortia include rural
participation.
26. In the NPRM, the Commission
proposed to create two separate
programs: A Health Infrastructure
Program and a Broadband Services
Program. The former would support the
construction of HCP-owned broadband
networks; the latter would support the
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purchase of broadband services. In view
of the real world experience we have
gained from the Pilot Program over the
intervening two years, and based on the
extensive record in this docket from a
broad array of affected stakeholders, we
now conclude that the better approach
is to adopt a single, hybrid program. The
new program will support the cost of (1)
broadband and other advanced services;
(2) upgrading existing facilities to higher
bandwidth; (3) equipment necessary to
create networks of HCPs, as well as
equipment necessary to receive
broadband services; and (4) HCP-owned
infrastructure where shown to be the
most cost-effective option. The hybrid
approach of the Healthcare Connect
Fund provides flexibility for HCPs to
create broadband networks that best
meet their needs and that can most
readily be put to use for innovative and
effective telehealth applications, while
ensuring funds are spent responsibly
and efficiently. The new program will
replace the current Internet Access
Program and provide continuing
support for Pilot Program consortia as
they exhaust any remaining funding
already committed under the Pilot
Program. As discussed in the
Implementation Timeline section, for
administrative convenience, rural HCPs
can continue to participate in the
Internet Access Program during funding
year 2013.
27. We expect that most HCPs will
choose to obtain services from
commercial providers rather than
construct and own network facilities
themselves, just as they did in the Pilot
Program. HCP-owned infrastructure will
be supported under the Healthcare
Connect Fund only when the HCP or
HCP consortium demonstrates,
following a competitive bidding process
that solicits bids for both services and
construction, either that the needed
broadband is unavailable or that the
self-construction approach is the most
cost-effective option. We also impose an
annual cap of $150 million that will
apply, in part, to the funds available for
HCP self-construction, to ensure that
ample funding will remain available for
HCPs choosing to obtain services.
28. To promote fiscal responsibility
and cost-effective purchasing decisions,
we adopt a single, uniform 35 percent
HCP contribution requirement for all
services and infrastructure supported
through the program. Use of a single,
flat rate will facilitate network
applications, encourage efficient
network design, and reduce
administrative expenses for applicants
and the Fund. In requiring a 35 percent
contribution, we balance the need to
provide appropriate incentives to
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encourage resource-constrained HCPs to
participate in health care broadband
networks, while requiring HCPs to have
a sufficient financial stake to ensure that
they obtain the most cost-effective
services possible. We also find that a 35
percent contribution requirement is
economically reasonable and fiscally
responsible, given the $400 million cap
for the health care support mechanism
and the anticipated demand for program
support.
29. We adopt the Healthcare Connect
Fund pursuant to section 254(h)(2)(A) of
the Communications Act, which
requires the Commission to ‘‘establish
competitively neutral rules to * * *
enhance, to the extent technically
feasible and economically reasonable,
access to advanced telecommunications
and information services for all public
and nonprofit * * * health care
providers.’’ The Commission relied on
this statutory authority when it created
the Pilot Program in 2006 to support
HCP-owned infrastructure and services,
including Internet access services, and
the Commission has broad discretion
regarding how to fulfill this statutory
mandate. In Texas Office of Public
Utility Counsel v. FCC, the United
States Court of Appeals for the Fifth
Circuit upheld the Commission’s
authority under section 254(h)(2)(A) to
provide universal service support for
‘‘advanced services’’ to both rural and
non-rural HCPs.
B. A Consortium Approach to Creation
of Broadband Health Care Networks
30. The flexible, consortium-based
approach of the Pilot Program fostered
a wide variety of health care broadband
networks that enabled better care and
lowered costs. Drawing on our Pilot
Program experience, we implement a
Healthcare Connect Fund that will
encourage HCPs to work together to
preserve and advance the development
of health care networks across the
country. The measures we adopt will
simplify the application process for
consortia of HCPs and afford them
flexibility to innovate in the design and
use of their networks, recognizing the
importance of enabling smaller HCPs to
draw on the medical and technical
expertise and administrative resources
of larger HCPs.
31. We conclude that non-rural HCPs
may apply and receive support as part
of consortia in the Healthcare Connect
Fund. To ensure that program support
continues to benefit rural as well as
non-rural HCPs, however, we require
that in each consortium, a majority of
HCP sites (over 50 percent) be rural
HCPs. We also adopt measures to limit
the amount of funding that flows to the
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largest hospitals in the country, to
ensure that funding remains focused on
a broad cross section of providers
serving smaller communities across
America.
32. Separately, we describe the
services and equipment eligible for
support (including services and
equipment necessary for networks), and
we describe the funding process,
including the requirements applicable
to consortia.
1. Key Benefits of a Consortium
Approach
33. Discussion. The Pilot Evaluation
documented in detail the benefits from
the flexible consortium-based approach
used in the Pilot Program, including:
• Administrative Cost Savings:
Applying as a consortium is simpler,
cheaper, and more efficient for the HCPs
and for the Fund. Under the consortium
approach, the expenses associated with
planning the network, applying for
funding, issuing RFPs, contracting with
service providers, and invoicing are
shared among a number of providers.
Consortium applications also allow
USAC to process applications more
efficiently.
• Access to Medical Specialists
through Telemedicine. Consortia that
include both larger medical centers and
members that serve more sparsely
populated areas enable the latter to
obtain access to medical specialists
through telemedicine, thus improving
the quality and reducing the cost of
care.
• Leadership of Consortia. The
organizers and leaders of many Pilot
projects classified as non-rural entities
under the Commission’s longstanding
definition of rural HCPs—especially
hospitals and university medical
centers—were able to shoulder much of
the administrative burden associated
with the consortia, thereby benefiting
smaller, rural HCPs.
• Sources of Technical Expertise.
Larger sites often have the technical
expertise necessary to design networks
and manage the IT aspects of the
network, and also often have greater
expertise than smaller providers in rural
areas in telemedicine, electronic health
records, Health IT, computer systems,
and other broadband telehealth
applications.
• Financial Resources. Many Pilot
projects depend on the financial and
human resources of larger sites to absorb
the administrative costs of participation
in the Pilot, such as the cost of planning
and organizing applications, applying
for funding, preparing RFPs, contracting
for services, and implementing the
projects.
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• Efficiency of Network Design.
Network design in many cases has been
more efficient and less costly in the
Pilot Program than in the
Telecommunications Program, because
the Pilot Program funds all public and
not-for-profit HCPs, even those located
in non-rural areas. Pilot projects were
able to design their networks with
maximum network efficiency in mind
because funding is not negatively
impacted by inclusion of non-rural sites
in those networks.
• Bulk Buying Capability. Consortium
bulk buying capability, when combined
with competitive bidding and multiyear funding commitments, enabled
Pilot projects to obtain higher
bandwidth, lower rates, and better
service quality than would otherwise
have been possible.
34. Commenters generally support a
consortium approach and agree that it
can provide a number of benefits,
including better pricing and
administrative efficiency.
35. In light of these benefits, we adopt
a number of rules to encourage HCPs to
work together in consortia to meet their
broadband connectivity needs. We
conclude that non-rural HCPs may
participate and receive support as part
of consortia, with some limitations. We
also adopt a ‘‘hybrid’’ approach that
allows consortia to receive support
through a single program for services
and, where necessary, self-construction
of infrastructure. We adopt a uniform
HCP contribution percentage applicable
to all HCPs and to all funded costs to
simplify administration. We adopt
additional measures. We make support
for certain costs available only to
consortia—e.g., upfront payments for
build-out costs and indefeasible rights
of use (IRUs), equipment necessary for
the formation of networks, and selfconstruction charges. We also allow
consortia to submit a single application
covering all members, and we provide
additional guidance based on Pilot
Program experience for consortium
applications. Finally, we facilitate group
buying arrangements by providing for
multi-year commitments and allowing
HCPs to ‘‘opt into’’ competitively bid
master service agreements previously
approved by USAC or other federal,
state, Tribal, or local government
agencies, without undergoing additional
competitive bidding solely for the
purposes of receiving Healthcare
Connect Fund support.
2. Eligibility To Participate in Consortia
36. Discussion. We will allow
participation in the Healthcare Connect
Fund consortia by both rural and nonrural eligible HCPs, but with limitations
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to ensure that the health care support
mechanism continues to serve rural as
well as non-rural needs in the future.
The Pilot Program provided support to
both rural and non-rural HCPs under
section 254(h)(2)(A), which directs the
Commission to ‘‘enhance * * * access
to advanced telecommunications and
information services for all public and
non-profit * * * health care providers.’’
As the Fifth Circuit has found, ‘‘the
language in section 254(h)(2)(A)
demonstrates Congress’s intent to
authorize expanding support of
‘advanced services,’ when possible, for
non-rural health providers.’’
37. We expect that including nonrural HCPs in consortia will provide
significant health care benefits to both
rural and non-rural patients, for at least
three reasons.
• First, even primarily rural networks
benefit from the inclusion of larger, nonrural HCPs. Pilot projects state that rural
HCPs value their connections to nonrural HCPs for a number of reasons,
including access to medical specialists;
help in instituting telemedicine
programs; leadership; administrative
resources; and technical expertise.
Many non-rural HCPs in the Pilot
Program devoted resources to organizing
consortia, preparing applications,
designing networks, and preparing
requests for proposal (RFPs). Had these
non-rural HCPs not been eligible for
support, they might not have been
willing to take on a leadership role,
which in turn directly enabled smaller
and more rural HCPs to participate in
Pilot networks. The participation of
non-rural sites has also led to better
prices and more broadband for
participating rural HCPs, due to the
greater bargaining power of consortia
that include larger, non-rural sites.
• Second, the Commission’s
longstanding definition of ‘‘non-rural’’
HCPs encompasses a wide range of
locales, ranging from large cities to
small towns surrounded by rural
countryside. Even within areas that are
primarily rural, HCPs are likely to be
located in the most populated areas.
Many HCPs that are technically
classified as non-rural within our rules
in fact are located in relatively sparsely
populated areas. For example,
Orangeburg County Clinic in Holly Hill,
South Carolina (population 1,277), a
HCP participating in Palmetto State
Providers Network’s Pilot project, is
characterized as non-rural. The largest
cities closest to Holly Hill are
Charleston, SC, and Columbia, SC,
which are respectively 50 and 69 miles
away from Holly Hill. Moreover, even
those hospitals and clinics that are
located in more densely populated
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towns directly serve rural populations
because they are the closest HCP for
many patients who do live in the
surrounding rural areas. For example,
the University of Virginia Medical
Center is a major referral center for
many counties in rural Appalachia.
• Third, even hospitals and clinics
that are located in truly urban areas are
able to provide significantly improved
care by joining broadband networks.
The California Telehealth Network, for
example, states that it ‘‘frequently
encounters urban health care providers
with patient populations that are as
isolated from clinical specialty care as
[the] most rural health care providers,’’
including urban Indian HCPs who could
better serve Native populations through
broadband-centered technologies such
as EHRs and telemedicine. In some
areas of the country, even ‘‘urban’’
communities may be hundreds of miles
away from critical health care services
such as Level 1 Trauma Centers,
academic health centers, and children’s
hospitals. Like HCPs in rural areas,
these ‘‘urban’’ community hospitals may
serve as ‘‘spoke’’ health care facilities
that access services that are available at
larger hospital ‘‘hubs.’’ Eligible public
and not-for-profit HCPs located in
communities that are not classified as
‘‘rural’’ thus have a need for access to
broadband to be able to effectively
deliver health care, just as their ‘‘rural’’
counterparts do.
38. Some commenters express
concern that unlimited non-rural HCP
participation might jeopardize funding
for rural HCPs if the $400 million
annual program cap is reached. We
therefore adopt three simple limitations
that should help ensure a fiscally
responsible reformed health care
program without unduly restricting nonrural participation, consistent with our
statutory mandate to enhance access to
advanced services in an ‘‘economically
reasonable’’ manner. First, non-rural
HCPs may only apply for support as part
of consortia that include rural HCPs;
that is, they may not submit individual
applications. Second, non-rural HCPs
may receive support only if they
participate in consortia that include a
majority (more than 50 percent) of sites
that are rural HCPs. The majority rural
requirement must be reached by a
consortium within three years of the
filing date of its first request for funding
(Form 462) in the Healthcare Connect
Fund. Third, we establish a cap on the
annual funding available to each of the
largest hospitals participating in the
program (those with 400 or more beds).
These requirements will encourage the
formation of health care networks that
include rural HCPs, while generating
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administrative and pricing efficiencies
as well as significant telemedicine and
other telehealth benefits.
39. For purposes of the majority rural
requirement, we ‘‘grandfather’’ nonrural HCP sites that have received a
funding commitment through a Pilot
project that has 50 percent or more nonrural HCP sites with funding
commitments as of the adoption date of
this Order. Such non-rural HCP sites
may continue to receive support
through the Healthcare Connect Fund,
but unless the consortium overall
reaches majority rural status overall, the
project may add new non-rural HCP
sites only if, in the aggregate, the new
(i.e., non-Pilot project) HCP sites remain
majority rural. The grandfathering only
applies to the sites that have received a
Pilot Program funding commitment as of
the adoption date of this Order, and
applies only so long as the
grandfathered non-rural HCP site
continues to participate in that
consortium.
40. We recognize that large,
metropolitan non-profit hospitals are
more likely to provide specialized
services and expertise that HCPs and
patients in less populous areas (both
rural and non-rural) may otherwise be
unable to access, and that may serve a
leadership role under which they
provide significant, often unreimbursed
assistance to other HCPs within the
network. Thus, we see significant value
in having such hospitals participate in
health care broadband networks. At the
same time, however, large metropolitan
hospitals are located in urban areas
where broadband is typically less
expensive than in rural areas. Given that
universal service funds are limited, we
expect larger hospitals to structure their
participation in Healthcare Connect
Fund consortia in a way that
appropriately serves the goals of the
health care program to increase HCP
access to broadband services and health
care broadband networks. In other
words, it would not be economically
reasonable to provide support to larger
hospitals for connections they would
have purchased in any event, outside of
their participation in the consortium.
41. To protect against larger HCPs in
non-rural areas joining the program
merely to obtain support for pre-existing
connections, we require consortium
applicants to describe in their
applications the goals and objectives of
the proposed network and their strategy
for aggregating HCP needs, and to use
program support for the described
purposes. We also impose a limitation
on the amount of funding available to
large metropolitan hospitals, while
recognizing that it is unlikely in the
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near term that large urban hospitals will
consume a disproportionate amount of
funds in the Healthcare Connect Fund.
We require that under the Healthcare
Connect Fund, a non-rural hospital site
with 400 or more licensed patient beds
may receive no more than $30,000 per
year in support for recurring charges
and no more than $70,000 in support for
nonrecurring charges every 5 years
under the Fund, exclusive in both cases
of costs shared by the network. For
purposes of this limit, we ‘‘grandfather’’
non-rural hospitals that have received a
funding commitment through a Pilot
project as of the adoption date of this
Order. We base the amount of these caps
on the average charges that were
supported for non-rural hospitals in the
Pilot Program. The American Hospital
Association (AHA) defines ‘‘large’’
hospitals as those with 400 or more
staffed patient beds. We will use the
AHA classification as a guide for our
own definition of a ‘‘large’’ hospital,
which is any non-rural hospital with
400 or more licensed patient beds.
Based on our experience with the Pilot
Program, it appears that the vast
majority of Pilot participant hospitals
have fewer than 200 beds. We do not
anticipate, therefore, that the funding
caps for large hospitals that we adopt
here will be likely to affect most of the
hospitals that are likely to join consortia
in the Healthcare Connect Fund. We
will monitor use of support by large
hospitals closely in the new program,
and if it appears that such hospitals are
utilizing a disproportionate share of
program funds despite our caps, we may
consider more explicit prioritization
rules to ensure that program dollars are
targeted to the most cost-effective uses.
We plan to conduct a further proceeding
to examine possible approaches to
prioritizing funding.
42. We expect that, on average, the
actual number of rural members in the
consortia will be substantially higher
than 51 percent, as was the case in the
Pilot Program, and we will evaluate this
over time. We will not begin receiving
applications from new consortia until
2014, and based on our experience with
the Pilot Program, we know that it may
take some time for consortia to organize
themselves and apply for funding. We
therefore direct the Bureau to report to
the Commission on rural participation
by September 15, 2015. If we observe
that the trend of rural participation in
the new program does not appear to be
on a comparable path as we observed in
the Pilot Program (where average rural
participation reached 66 percent), we
will open, by the end of 2015, a
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proceeding to expeditiously re-evaluate
the participation requirement.
43. We emphasize that the limitations
do not prevent any non-rural HCP from
participating in a health care broadband
network; entities ineligible for support
may participate in networks if they pay
their ‘‘fair share’’ (i.e. an
‘‘undiscounted’’ rate) of network costs.
Non-profit entities, including non-rural
HCPs, may also serve as consortium
leaders even if they do not receive
universal service support.
44. In light of the limitations, we do
not anticipate that our decision to allow
both rural and non-rural HCPs to receive
support through the Healthcare Connect
Fund will cause program demand to
exceed the $400 million cap in the
foreseeable future, especially in light of
our decision to require a 35 percent
participant contribution and our
adoption of a $150 million annual cap
on support for upfront payments and
multi-year commitments. Furthermore,
the pricing and other efficiencies made
possible through group purchasing
should drive down the cost of
connections as some
Telecommunications Program
participants migrate to the Healthcare
Connect Fund. We will closely monitor
program demand, and stand prepared to
consider whether additional program
changes are necessary, including,
establishing rules that would give
funding priority to certain HCPs.
3. Eligibility of Grandfathered Formerly
‘‘Rural’’ Sites
45. In June 2011, the Commission
adopted an interim rule permitting
participating HCPs that were located in
a ‘‘rural’’ area under the definition used
by the Commission before July 1, 2005,
to continue being treated as if they were
located in a ‘‘rural’’ area for the
purposes of determining eligibility for
support under the RHC program. We
conclude that HCPs that were located in
‘‘rural areas’’ under the pre-July 1, 2005
definition used by the Commission, and
that were participating in the
Commission’s RHC program before July
2005, also will be treated as ‘‘rural’’ for
purposes of the new Healthcare Connect
Fund. Many such facilities play a key
role in providing health care services to
rural and remote areas, and
discontinuing discounted services to
these grandfathered providers could
jeopardize their ability to continue
offering essential health care services to
rural areas. Extending eligibility for
these grandfathered HCPs in the
Healthcare Connect Fund helps ensure
that these valuable services are not lost
in areas that need them, and thus
ensures continuity of health care for
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many rural patients. For similar reasons,
we also have grandfathered those Pilot
projects that do not have the majority
rural HCP membership required of
consortium applicants in the Healthcare
Connect Fund.
C. A Hybrid Infrastructure and Services
Approach
46. Discussion. We conclude that a
hybrid approach that supports both
broadband services and, where
necessary, HCP-constructed and owned
facilities as part of networks, will best
fulfill our goal of developing broadband
networks that enable the delivery of 21st
century health care. In addition to
funding HCP-owned network facilities,
we also include as an essential
component of this hybrid approach the
provision of funding for equipment
needed to support networks of HCPs
and the provision of support for
upgrades that enable HCPs to obtain
higher bandwidth connections.
47. We expect that HCP-owned
infrastructure will be most useful in
providing last-mile broadband
connectivity where it is currently
unavailable and where existing service
providers lack sufficient incentives to
construct it. As the American Hospital
Association observed: ‘‘Although many
rural providers lease broadband
services, some construction is still
needed. For many of the AHA’s rural
members, the ability to ensure access to
‘last mile’ broadband connections to
rural health care facility locations is a
fundamental problem restricting
broadband access.’’ We have learned
that when providers are unable to build
a business case to construct fiber in
rural areas, last-mile fiber selfconstruction may be the only option for
a HCP to get the required connectivity.
We note that other federal programs—
such as the Broadband
Telecommunications Opportunities
Program (BTOP)—have provided
support for construction of ‘‘middle
mile’’ facilities, and if HCPs can obtain
support for last-mile connections from
the Healthcare Connect Fund, they can
take advantage of such middle mile
backbone networks.
48. Providing a self-construction
option will also promote our goal of
ensuring fiscal responsibility and costeffectiveness by placing downward
pressure on the bids for services. As the
Health Information Exchange of
Montana observes, the option to
construct the network may constrain
pricing offered by existing providers,
particularly in areas that have little or
no competition. When an RFP includes
both a services and a self-construction
option, bidders will know that if the
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services prices bid are too high, the
HCPs can choose to build their own
facilities.
49. We adopt safeguards to ensure
that the self-construction option will be
exercised only where it is absolutely
necessary to enable the HCPs to obtain
the needed broadband connectivity.
First, the HCP-owned infrastructure
option may be employed only where
self-construction is demonstrated to be
the most cost-effective option after
competitive bidding. We require USAC
carefully to evaluate this showing;
USAC already has experience in
evaluating cost-effectiveness for largescale projects from the Pilot Program.
Consortia interested in pursuing selfconstruction as an option must solicit
bids both for services and for
construction, in the same posted
Request for Proposals (submitted with
Form 461), so that they will be able to
show either that no vendor has bid to
provides the requested services, or that
the bids for self-construction were the
most cost-effective option. RFPs must
provide sufficient detail so that costeffectiveness can be evaluated over the
useful life of the facility, if the
consortium pursues a self-construction
option. We also permit HCPs that have
received no bids on a services-only
posting to then pursue a selfconstruction option through a second
posting. We discuss the mechanics of
the competitive bidding process and
delegate to the Bureau the authority to
provide administrative guidance for
conducting the competitive bidding
process, for the treatment of hybrid
(services and construction) RFPs, excess
capacity and shared costs, and other
necessary guidelines for effective
operation of this aspect of the
Healthcare Connect Fund.
50. Second, by setting the discount at
the same level regardless of whether
HCPs choose to purchase broadband
services from a provider or construct
their own facilities, we ensure that there
is no cost advantage to choosing selfconstruction. We require that all HCPs
provide a 35 percent contribution to the
cost of supported networks and services,
which will help ensure prudent
investment decisions. Pilot projects
have stated that ownership of newly
constructed facilities only makes
economic sense for them where there
are gaps in availability. And as many
HCPs have stated in this proceeding,
HCPs are generally not interested in
owning or operating broadband
facilities, but rather are focused on the
delivery of health care.
51. Finally, we impose a $150 million
cap on the annual funds that can be
allocated to up-front, non-recurring
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costs, including HCP-owned
infrastructure, and we require that nonrecurring costs that exceed an average of
$50,000 per HCP in a consortium be
prorated over a minimum three-year
period. These measures will help ensure
that the Fund does not devote an
excessive amount of support to large upfront payments for HCP selfconstruction, which could potentially
foreclose HCPs’ ability to use the Fund
for monthly recurring charges for
broadband services. This also addresses
the comments of several parties, who
suggested that providing funding for
infrastructure could put undue pressure
on the Fund.
52. In addition to these safeguards, we
expect that several other mechanisms in
this Order will help create incentives for
commercial service providers to
construct the necessary broadband
facilities, so that HCPs will rarely have
to construct, own, and operate such
facilities themselves. For example, by
allowing consortia to include both rural
and non-rural sites and to design
networks flexibly, we expect to
encourage HCPs to form larger consortia
that are more attractive to commercial
service providers, even if some new
broadband build-out is necessary to win
the contract. Indeed, in the Pilot
Program, we observed that, thanks to
consortium bidding, the majority of
Pilot projects attracted multiple bids
from a range of different service
providers. In addition, as in the Pilot
Program, the Healthcare Connect Fund
will provide support for upfront
payments, multi-year funding
commitments, prepaid leases, and IRUs.
These mechanisms enabled many HCPs
in the Pilot Program to meet their
broadband connectivity needs without
having to construct and own their own
broadband facilities.
53. With the limitations and based on
our experience with the Pilot Program,
we do not expect HCPs to choose to selfconstruct facilities very often, and when
they do, it will be because they have
shown that they have no other costeffective option for obtaining needed
broadband. The self-construction option
was rarely exercised in the Pilot
Program. Only two of 50 projects
entirely self-constructed their networks,
even though the Pilot Program was
originally conceived of as a program
supporting HCP construction of
broadband networks. The six projects
that did self-construct some facilities
used those funds primarily for last-mile
facilities. We believe the hybrid
approach adopted for the Healthcare
Connect Fund will preserve the benefits
of HCP-owned infrastructure while
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minimizing the potential for inefficient,
duplicative construction of facilities.
54. In light of the safeguards we
adopt, we reject arguments that when
HCPs construct their own networks,
rather than purchasing connectivity
from existing commercial service
providers, they remove key anchor
institutions from the public network,
thereby increasing the costs of providing
service in rural areas and creating
disincentives for network investment in
rural areas. Rather, allowing the selfconstruction option should create
incentives for service providers to
charge competitive prices for the
services offered to anchor institutions
such as HCPs, which reduces burden on
the rural health care mechanism.
Moreover, experience under the Pilot
program suggests that a selfconstruction option for HCPs can
provide incentives for commercial
service providers to work cooperatively
together with HCPs to construct new
broadband networks in rural areas, with
each party building a portion of the
network, and providing excess capacity
to the other party under favorable terms,
to the benefit of both the HCPs and the
greater community.
55. We are also unpersuaded by
commenters that argue the Commission
lacks authority to provide universal
service support for construction of HCPowned broadband facilities. As the
Commission concluded in authorizing
the Pilot Program, section 254(h)(2)
provides ample authority for the
Commission to provide universal
service support for HCP ‘‘access to
advanced telecommunications and
information services,’’ including by
providing support to HCP-owned
network facilities. Nothing in the statute
requires that such support be provided
only for carrier-provided services.
Indeed, prohibiting support for HCPowned infrastructure when selfconstruction is the most cost-effective
option, would be contrary to the
command in section 254(h)(2)(A) that
support be ‘‘economically reasonable.’’
56. The Montana
Telecommunications Association
(MTA), which represents
telecommunications providers in
Montana, also argues that funding HCPowned infrastructure violates section
254(h)(3) of the Communications Act,
which provides that
‘‘[t]elecommunications service and
network capacity provided to a public
institutional telecommunications user
under this subsection may not be sold,
resold, or otherwise transferred by such
user in consideration for money or any
other thing of value.’’ MTA’s argument
is unconvincing. As the Commission
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determined in connection with the Pilot
Program, ‘‘the prohibition on resale does
not prohibit for-profit entities, paying
their fair share of network costs, from
participating in a selected participant’s
network.’’ It concluded that the resale
provision is ‘‘not implicated when forprofit entities pay their own costs and
do not receive discounts provided to
eligible health care providers’’ because
only subsidized services and network
capacity can be said to have been
‘‘provided * * * under this
subsection.’’ The protections we adopt
in this Order to ensure that non-eligible
entities pay their fair share of the cost
of health care networks they participate
in will help ensure that this principle is
satisfied. In 2008, the Bureau provided
guidance to the Pilot projects and USAC
regarding excess capacity on network
facilities supported by universal service
funds. We adopt similar guidelines in
this Order for the treatment of excess
capacity on HCP-owned facilities.
Under those guidelines, the use of
excess capacity by non-HCP entities
would not violate the restrictions
against sale, resale, or other transfer
contained in section 254(h)(3) because
HCPs would retain ownership of the
excess capacity and because payments
for that excess capacity may only be
used to support sustainability of the
network. Allowing HCPs to own
network facilities when it is the most
cost-effective option can yield better
prices for the acquired broadband
services or facilities used in the health
care networks, in furtherance of the
objectives of section 254(h)(2) and
responsible management of universal
service funds. Thus, our interpretation
of section 254(h)(3) not only advances
the universal service goals of section
254(h)(2), but is consistent with the
restrictions on subsidies to ineligible
entities incorporated in paragraphs
(h)(3), (h)(4), and (h)(7)(B) of section
254.
D. Health Care Provider Contribution
57. Discussion. We adopt a
requirement that all HCPs receiving
support under the Healthcare Connect
Fund contribute 35 percent towards the
cost of all items for which they seek
support, including services, equipment,
and all expenses related to
infrastructure and construction. A flat,
uniform percentage contribution is
administratively simple, predictable,
and equitable, and has broad support in
the record. Requiring a significant
contribution will provide incentives for
HCPs to choose the most cost-effective
form of connectivity, design their
networks efficiently, and refrain from
purchasing unneeded capacity. Vendors
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will also have an incentive to offer
services at competitive prices, knowing
that HCPs will be unwilling to increase
unnecessarily their out-of-pocket
expenses.
1. Use of a Uniform Contribution
Percentage
58. We adopt a flat-percentage
approach to calculating an HCP’s
contribution under the Healthcare
Connect Fund. This flat rate will apply
uniformly to all eligible expenses and
all eligible HCP sites.
59. The use of a uniform participant
contribution will facilitate consortium
applications and reduce administrative
expenses, both for participating HCPs
and for the Fund Administrator. In the
Telecommunications Program, varying
support levels have historically
discouraged potential applicants due to
‘‘the complexity of * * * identify[ing]
the amount of program reimbursement
associated with the difference between
rural and urban rates.’’ A uniform
participant contribution will eliminate
this complexity. Many commenters
support a flat-rate approach for this
reason. Indeed, based on this record, we
anticipate that the relative
administrative simplicity of the uniform
flat discount approach will help attract
HCPs to the Healthcare Connect Fund
that may have declined to participate in
the Telecommunications Program. We
expect that the use of a uniform flat
discount will therefore further all three
of our program goals—increasing HCP
access to broadband, fostering health
care networks, and maximizing costeffectiveness of the program.
60. A uniform HCP contribution
requirement will also facilitate efficient
network design because support will not
vary based on network configuration. As
the Bureau observed in the Pilot
Evaluation, a uniform HCP contribution
requirement for both services and
infrastructure in the Pilot Program
enabled consortia to design their
networks for maximum network
efficiency because there was no negative
impact on funding from including nodes
with a lesser discount level within the
network. A uniform percentage
contribution requirement will also
ensure that HCPs make purchasing
decisions based on cost-effectiveness,
regardless of the location or type of the
HCP or the services, equipment, or
infrastructure purchased.
61. Adopting a uniform contribution
requirement will also help eligible HCPs
to conduct better long-range planning
for their broadband needs and obtain
better rates. A clear, uniform rate will
allow HCPs to better project anticipated
support over a multi-year period, plan
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accordingly for their broadband
services, and as appropriate, enter into
multi-year contracts to take advantage of
more favorable rates.
62. A flat-rate approach also provides
HCPs with a strong incentive to control
the total cost of the broadband
connectivity, as a participating HCP will
share in each dollar of increased costs
and each dollar of cost savings. In
contrast, in the Telecommunications
Program, an HCP using the rural-urban
differential pays only the urban rate, so
it has little incentive to control the
overall cost of the service (i.e. the rural
rate). Any increases in the overall cost
of the service are borne directly by the
Fund, which pays the difference
between the urban and rural rates.
63. Finally, a flat rate is consistent
with the Act. In 2003, the Commission
concluded that a flat discount for the
Internet Access Program would be
consistent with section 254(b)(5), which
requires support to be ‘‘specific,
sufficient, and predictable.’’ We now
conclude that a flat discount for the
Healthcare Connect Fund is also
consistent with section 254(b)(5).
64. A number of commenters suggest
that the Commission adopt different
HCP contribution percentages
depending on the identity of the health
care provider or based on other factors,
and such an approach was also
recommended in the National
Broadband Plan. The proffered
justification for a varying percentage
contribution requirement is to enable
the targeting of scarce resources to those
HCPs or geographic areas most in need.
Some commenters suggest that discount
rates should be increased for certain
HCPs, such as HCPs located in Health
Professional Shortage Areas or
Medically Underserved Areas, or for
HCPs that are in particular need of
support to achieve ‘‘meaningful use’’ of
electronic health records under the
Affordable Care Act. While supporting
providers in areas with health care
professional shortages and promoting
achievement of meaningful use are both
important public policy goals, we are
not persuaded at this time that
providing a non-uniform discount is
necessary in order to accomplish these
goals. We note that the statutory
categories of eligible HCPs in the Act
already capture many health care
providers who serve underserved
populations, including rural health
clinics, community and migrant health
centers, and community mental health
centers.
2. 35 Percent HCP Contribution
65. Discussion. We find that requiring
a 35 percent HCP contribution
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appropriately balances the objectives of
enhancing access to advanced
telecommunications and information
services with ensuring fiscal
responsibility and maximizing the
efficiency of the program. A 35 percent
HCP contribution results in a 65 percent
discount rate, which represents a
significant increase over the 25 percent
discount provided today for Internet
access, and the 50 percent proposed for
the Broadband Services Program in the
NPRM. We believe that a 35 percent
contribution appropriately balances the
need to provide sufficient incentives for
HCPs to participate in broadband
networks, while simultaneously
ensuring that they have a sufficient
financial stake to seek out the most costeffective method of obtaining broadband
services.
66. We base our conclusion on a
number of factors. First, many state
offices of rural health, which work most
directly with rural HCPs, believe that a
65 percent discount is required to
provide a ‘‘realistic incentive’’ for many
eligible rural HCPs to participate. A 65
percent discount rate is also similar to
the average effective discount rate in the
Telecommunications Program, which is
approximately 69 percent, excluding
Alaska. The effective discount rate in
the Telecommunications Program
provides a reasonable proxy for the
discount rate that will be sufficient to
allow health care providers in rural
areas, which tend to have high
broadband costs, to participate in the
program. The discount level we set also
falls between the proposed discount
levels in the NPRM (50 percent for the
Broadband Services Program and 85
percent for the Health Infrastructure
Program)—a reasonable choice given the
hybrid nature of the program we adopt.
A 35 percent HCP contribution is also
within the range of the match required
in other federal programs subsidizing
broadband infrastructure. For example,
the BTOP program required a 20 percent
match, while the U.S. Department of
Agriculture’s Broadband Initiatives
Program overall provided an average of
58 percent of its funding in the form of
grants, with 32 percent of its funding in
loans (which the recipients ultimately
repay), and 10 percent recipient match.
67. We also expect that the 65 percent
discount will be sufficient to induce
many HCPs to participate in the
Healthcare Connect Fund—both those
currently in the Telecommunications
Program and those that have not
participated in that program before. We
expect that at a 65 percent discount,
eligible HCPs participating in consortia
in the Healthcare Connect Fund will
generally pay less ‘‘out-of-pocket’’ when
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purchasing the higher bandwidth
connections necessary to support
telehealth applications than they would
pay as individual participants in the
Telecommunications Program. The Pilot
Program showed that bulk buying
through consortia, coupled with
competitive bidding, can reduce the
prices that HCPs pay for services and
infrastructure through their increased
buying power.
68. Other attractive features of the
Healthcare Connect Fund include the
lower administrative costs and the
broader eligibility of services and
equipment, relative to the
Telecommunications Program. These
factors may offset to some degree
concerns regarding the size of the
contribution requirement from those
who advocated a lower HCP
contribution. We also note that from a
program efficiency perspective, the
better prices negotiated by consortia in
the Pilot Program, relative to the prices
paid by Telecommunications Program
participants, will mean that USF dollars
will go further in the new program,
particularly as HCPs demand the higher
bandwidth and better service quality
needed for telehealth applications.
69. We recognize that a 35 percent
contribution will be a significant
commitment for many health care
providers, and that many commenters
argued for a lower contribution amount
from HCPs. One of our core objectives,
however, is to ensure that HCPs have a
financial stake in the services and
infrastructure they are purchasing,
thereby providing a strong incentive for
cost-effective decision-making and
promoting the efficient use of universal
service funding.
70. We acknowledge that some
current Pilot participants have argued
that a discount rate lower than 85
percent will preclude new sites from
being added to existing networks and
may even result in existing sites
dropping off the network. We
nonetheless believe a cautious approach
is justified given that the new
Healthcare Connect Fund will expand
eligibility and streamline the
application process compared to the
existing Telecommunications Program,
which we hope will increase the
number of participating HCPs. Even
within the existing program, the number
of participating HCPs has steadily
increased in recent years, averaging just
under 10 percent annual growth for the
past five years. Meanwhile the Pilot
Program has attracted over 3,800 HCPs,
the majority of which were not
previously participating in the RHC
Program.
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71. A 65 percent discount rate will
help keep demand for the overall health
care universal service, including the
Healthcare Connect Fund, below the
$400 million cap for the foreseeable
future, even as program participation
expands. We estimate that there are
approximately 10,000 eligible rural
HCPs nationwide, of which
approximately 54 percent (5,400) are
participating in the RHC
Telecommunications, Internet Access,
or Pilot Programs. If we assume that in
five years (1) the rural HCP participation
rate increases from 54 percent to 75
percent, (2) the number of rural HCPs
participating in the
Telecommunications Program does not
significantly decrease, and (3) the
average annual support per HCP is
$14,895 in the Healthcare Connect Fund
(including support for both recurring
and non-recurring costs), the projected
size of the annual demand for funding
(including non-rural and rural HCPs)
would be approximately $235 million.
We will continue to monitor the effect
of the 35 percent contribution
requirement on participation in the
program and on the USF, and stand
ready to adjust the contribution HCP
requirement or establish additional
prioritization rules, should it prove
necessary.
3. Limits on Eligible Sources of HCP
Contribution
72. Consistent with the Pilot Program,
we limit the sources for HCPs’
contribution (i.e., the non-discounted
portion) to ensure that participants pay
their share of the supported expenses.
Only funds from an eligible source will
apply towards a participant’s required
contribution. In addition, consortium
applicants are required to identify with
specificity their source of funding for
their contribution of eligible expenses in
their submissions to USAC. Requiring
participants to pay their share helps
ensure efficiency and fiscal
responsibility and helps prevent waste,
fraud, and abuse.
73. Eligible sources include the
applicant or eligible HCP participants;
state grants, funding, or appropriations;
federal funding, grants, loans, or
appropriations except for other federal
universal service funding; Tribal
government funding; and other grant
funding, including private grants. Any
other source is not an eligible source of
funding towards the participant’s
required contribution. Examples of
ineligible sources include (but are not
limited to) in-kind or implied
contributions; a local exchange carrier
(LEC) or other telecom carrier, utility,
contractor, consultant, vendor or other
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service provider; and for-profit entities.
We stress that participants that do not
demonstrate that their contribution
comes from an eligible source or whose
contribution is derived from an
ineligible source will be denied funding
by USAC. Moreover, participants may
not obtain any portion of their
contribution from other universal
service support program, such as the
RHC Telecommunications Program.
74. We conclude that these limitations
on eligible sources are necessary to help
safeguard against program manipulation
and to help prevent conflicts of interest
or influence from vendors and for-profit
entities that may lead to waste, fraud,
and abuse. Accordingly, we are
unconvinced by commenters that argue
the eligible sources should include inkind contributions; contributions from
carriers, network service providers, or
other vendors; and contributions from
for-profit entities. First, allowing inkind or implied contributions would
substantially increase the complexity
and burden associated with
administering the program. It would be
difficult to accurately measure the value
of in-kind or implied contributions to
ensure participants are paying their
share, and the costs and challenges
associated with policing in-kind and
implied contributions would likely be
substantial. Second, allowing carrier,
service provider, or other vendor
contributions would distort the
competitive bidding process and reduce
HCPs’ incentives to choose the most
cost-effective bid, leading to potential
waste, fraud, and abuse.
75. Some commenters urge the
Commission to allow for-profit entities
to pay an eligible HCPs contribution
because ‘‘[t]he benefits of improved
telehealth capabilities cannot be fully
achieved if for-profit health care
services providers are not part of the
health care delivery network.’’ This
argument is based on a faulty premise.
To be clear, the prohibition against a
for-profit HCP paying the contribution
of an eligible HCP does not prevent the
for-profit HCP from participating in one
or more networks that receive
Healthcare Connect Fund support, as
long as the for-profit pays its ‘‘fair
share.’’ Rather, the prohibition helps
avoid creating an incentive for
participating eligible HCPs to use
support to benefit ineligible entities
(e.g., for-profit HCPs).
76. Future Revenues from Excess
Capacity as Source of Participant
Contribution. Some consortia may find,
after competitive bidding, that
construction of their own facilities is the
most cost-effective option. Due to the
low additional cost of laying additional
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fiber, some Pilot projects who chose the
‘‘self-construction’’ option found that
they were able to lay more fiber than
needed for their health care network
and use revenues from the excess
capacity as a source for their 15 percent
contribution. We conclude that under
the following limited circumstances,
consortia in the Healthcare Connect
Fund may use future revenues from
excess capacity as a source for their 35
percent match.
• The consortium’s RFP must solicit
bids for both services provided by third
parties and for construction of HCPowned facilities, and must show that
‘‘self-construction’’ is the most costeffective option. Applicants are
prohibited from including the ability to
obtain excess capacity as a criterion for
selecting the most cost-effective bid (e.g.
applicants cannot accord a preference or
award ‘‘bonus points’’ based on a
vendor’s willingness to construct excess
capacity).
• The participant must pay the full
amount of the additional costs for
excess capacity facilities that will not be
part of the supported health care
network. The additional cost for excess
capacity facilities cannot be part of the
participant’s 35 percent contribution,
and cannot be funded by any health care
universal service support funds. The
inclusion of excess capacity facilities
cannot increase the funded cost of the
dedicated network in any way.
• An eligible HCP (typically the
consortium, although it may be an
individual HCP participating in the
consortium) must retain ownership of
the excess capacity facilities. It may
make the facilities available to third
parties only under an IRU or lease
arrangement. The lease or IRU between
the participant and the third party must
be an arm’s length transaction. To
ensure that this is an arm’s length
transaction, neither the vendor that
installed the excess capacity facilities,
nor its affiliate, would be eligible to
enter into an IRU or lease with the
participant.
• The prepaid amount paid by other
entities for use of the excess capacity
facilities (IRU or lease) must be placed
in an escrow account. The participant
can then use the escrow account as an
asset that qualifies for the 35 percent
contribution to the project.
• All revenues from use of the excess
capacity facilities by the third party
must be used for the project’s 35 percent
contribution or for sustainability of the
health care network supported by the
Healthcare Connect Fund. Such network
costs may include administration,
equipment, software, legal fees, or other
costs not covered by the Healthcare
Connect Fund, as long as they are
relevant to sustaining the network.
77. We delegate authority to the
Bureau to specify additional
administrative requirements applicable
to excess capacity, including
requirements to ensure that HCPs have
appropriate incentives for efficient
spending (including, if appropriate, a
minimum contribution from funds other
than revenues from excess capacity),
and to protect against potential waste,
fraud, and abuse, as part of the
infrastructure component of the
program.
IV. Eligible Services and Equipment
78. Overview. We discuss the services
and equipment for which the Healthcare
Connect Fund will provide support. We
also provide examples of services and
equipment that will not be supported.
Section 254(h)(2)(A) of the Act directs
the Commission to establish
competitively neutral rules to ‘‘enhance
* * * access to advanced
telecommunications and information
services * * * for health care
providers.’’ Pursuant to that authority,
we will provide support for services
whether provided on a common carrier
or private carriage basis, reasonable and
customary one-time installation charges
for such services, and network
equipment necessary to make the
broadband service functional. For HCPs
that apply as consortia, we will also
provide support for upfront charges
associated with service provider
deployment of new or upgraded
facilities to provide requested services,
dark or lit fiber leases or IRUs, and selfconstruction where demonstrated to be
the most cost-effective option. Requests
for funding that involve upfront support
of more than $50,000, on average, per
HCP will be subject to certain
limitations. In general, we find that this
approach will ensure the most efficient
use of universal service funding.
79. Immediately below is a chart
summarizing what services and
equipment are eligible for support under
the Healthcare Connect Fund.
ELIGIBLE SERVICES AND EQUIPMENT
INDIVIDUAL
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Eligible Services (§ V.A.1) ...........................................................................................................................................
Reasonable & Customary Installation Charges (§ V.A.6) (≤$5,000 undiscounted cost) ............................................
Lit Fiber Lease (§ V.A.3) ..............................................................................................................................................
Dark Fiber (§ V.A.3)
• Recurring charges (lease of fiber and/or lighting equipment, recurring maintenance charges) ......................
• Upfront payments for IRUs, leases, equipment ...............................................................................................
Connections to Research & Education Networks (§ V.A.4) ........................................................................................
HCP Connections Between Off-Site Data Centers & Administrative Offices (§ V.A.5) ..............................................
Upfront Charges for Deployment of New or Upgraded Facilities (§ V.A.7) ................................................................
HCP-Constructed and Owned Facilities (§ IV.D) .........................................................................................................
Eligible Equipment (§ V.B)
• Equipment necessary to make broadband service functional ..........................................................................
• Equipment necessary to manage, control, or maintain broadband service or dedicated health care
broadband network ...........................................................................................................................................
A. Eligible Services
80. We describe the services that will
be eligible for support under the
Healthcare Connect Fund. We are
guided, among other considerations, by
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our statutory directive to enhance access
to ‘‘advanced telecommunications and
information services’’ in a competitively
neutral fashion. We conclude that
providing flexibility for HCPs to select
a range of services, within certain
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CONSORTIUM
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✓
✓
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✓
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✓
No
✓
✓
No
No
✓
✓
✓
✓
✓
✓
✓
✓
No
✓
defined limits, and in conjunction with
the competitive bidding requirements
we adopt, will maximize the impact of
Fund dollars (and scarce HCP
resources).
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81. Specifically, we will provide
support for advanced services without
limitation as to the type of technology
or provider. We allow HCPs to utilize
both public and private networks, and
different network configurations
(including dedicated connections
between data centers and administrative
offices), and lease or purchase dark
fiber, depending on what is most costeffective. We also provide support for
reasonable and customary installation
charges (up to an undiscounted cost of
$5,000). For consortium applicants, we
will also provide support for upfront
payments to facilitate build-out of
facilities to HCPs. We limit such
funding to consortia because we
anticipate that group buying for such
services and equipment will lead to
lower prices and better bids, resulting in
more efficient use of Fund dollars.
82. We decline to adopt a minimum
bandwidth requirement for the
supported services because many rural
HCPs still lack access to higher
broadband speeds. We will, however,
limit certain types of support to
connections that provide actual speeds
of 1.5 Mbps (symmetrical) or higher, in
order to ensure that we do not invest in
networks based on outdated technology.
1. Definition of Eligible Services
83. Discussion. We adopt a rule to
provide support for any service that
meets the following definition:
Any advanced telecommunications or
information service that enables HCPs
to post their own data, interact with
stored data, generate new data, or
communicate, by providing
connectivity over private dedicated
networks or the public Internet for the
provision of health information
technology.
The definition we adopt differs from
the NPRM proposal in only two
respects. First, because we allow all
HCPs to participate in consortia and
receive support (subject to the
limitations on non-rural HCPs), we have
removed the language referring to
‘‘rural’’ HCPs. Second, we delete the
word ‘‘broadband access’’ from the
definition originally proposed, to make
clear that eligible services include not
only broadband Internet access services,
but also high-speed transmission
services offered on a common carrier or
non-common carrier basis that may not
meet the definition of ‘‘broadband’’ that
the Commission has used in other
contexts. This broad definition allows
HCPs to choose from a wide range of
connectivity solutions, all of which
enhance their access to advanced
services, based on their individual
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health care broadband needs as
available technology evolves over time;
decisions will be made in the
marketplace without regard to
regulatory classification decisions of the
connectivity solutions.
84. Public and Private Networks. We
conclude that eligible HCPs may receive
support for services over both the public
Internet and private networks (i.e.,
dedicated connections that do not touch
the public Internet). As discussed in the
NPRM, access to advanced
telecommunications and information
services for health care delivery is
provided in a variety of ways today. For
example, due to privacy laws and EHR
requirements, HCPs may find that it best
suits their needs to securely transmit
health IT data to other HCPs over a
private dedicated connection. In other
instances (e.g., communicating with
patients via a Web site), HCPs may need
to utilize the public Internet, or it may
simply be more cost-effective to utilize
Dedicated Internet Access services for
certain types of traffic. Several Pilot
projects have determined that a mix of
both public and private networks best
fits the needs of their HCPs.
85. Network Configurations. Under
the new rule, ‘‘eligible services’’ may
include last mile, middle mile, or
backbone services, as long as support for
such services is requested and used by
an eligible HCP for eligible purposes in
compliance with other program rules.
HCPs emphasize that they need the
ability to control the design of their
networks, even if the network relies on
leased services. Our Pilot Program
experience also indicates that HCPs are
likely to tailor their funding requests
based on what services are already
available. For example, if a region
already has a middle mile network
suitable for health care use, the
applicant may choose to focus its
funding request on last mile facilities to
connect to the middle mile or backbone
network. On the other hand, if there is
no pre-existing middle mile connection
between the HCPs in the network,
providers may choose to seek funding to
lease such capacity instead. Therefore,
we find that allowing flexibility in the
network segments supported will best
leverage prior investments by allowing
maximum use of existing infrastructure.
86. In the NPRM, the Commission
proposed that the Broadband Services
Program would subsidize costs for any
advanced telecommunications and
information services that provide
‘‘point-to-point broadband
connectivity.’’ In response to the NPRM,
some commenters expressed concern
that only traditional point-to-point
circuits might be eligible for funding,
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13947
and such a limitation could preclude
use of more cost-effective point-tomultipoint, IP-based, or cloud-based
architectures. Based on our full
consideration of the record, we
conclude that support under the
Healthcare Connect Fund will not be
limited to ‘‘point-to-point’’ services.
Rather, any advanced service is eligible,
and HCPs may request support for any
type of network configuration that
complies with program rules (e.g., is the
most cost-effective). This approach
comports with the statutory directive
that the Commission enhance access to
advanced services in a manner that is
‘‘competitively neutral.’’
87. Technology. Consistent with the
statutory requirement that our rules be
competitively neutral, we conclude that
eligible services may be provided over
any available technology, whether
wireline (copper, fiber, or any other
medium), wireless, or satellite. We also
find that a competitively neutral
approach will best ensure that HCPs can
make cost-effective use of Fund support.
We provide additional guidance
regarding fiber leases, and minimum
bandwidth and service quality
requirements.
2. Minimum Bandwidth and Service
Quality Requirements
88. Discussion. We will not impose
minimum bandwidth and service
quality requirements for the Healthcare
Connect Fund, based on the record in
this proceeding. Commenters agree that
HCPs need certain minimum levels of
reliability, redundancy, and quality of
service, but they note that the exact
requirement may vary depending on the
application, and that not all HCPs will
have access to services that provide a
specified level of reliability and quality.
While our goal is to encourage HCPs to
obtain broadband connections at the
speeds recommended in the National
Broadband Plan, the record indicates
that in some areas of the country, HCPs
face limited options in obtaining speeds
of 4 Mbps or above. Commenters note
that in areas where higher speed
connections are not available,
telemedicine networks have
nevertheless been able to operate with
connections at speeds less than 4 Mbps.
Commenters also state that some of the
smallest rural HCPs simply may not be
able to afford higher bandwidth
connections, even when such
connections are available. These
commenters express concern that a
minimum bandwidth requirement could
result in HCPs either (1) being forced to
buy bandwidths that are not costeffective for their circumstances; or (2)
being unable to receive health care
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universal service discounts (due to the
cost of the required minimumbandwidth connection). We do not wish
to prevent the neediest HCPs from
receiving discounts, especially if they
are able to address their connectivity
needs in the near term by utilizing a
connection below a defined minimum.
After reviewing the record, we conclude
that it would be difficult to set a
minimum speed requirement at this
time that would not have the
unintended effect of potentially
precluding some HCPs from obtaining
connectivity currently appropriate for
their individual needs. We therefore
conclude it would be premature now to
set a minimum threshold speed for
connections that are supported in the
Healthcare Connect Fund.
89. We will continue to provide
support in the Healthcare Connect Fund
for services that have been historically
supported through the Internet Access
Program, including DSL, cable modem,
and other similar forms of Internet
access. We expect recipients to migrate
to services over time that deliver higher
capabilities. We do, however, adopt one
limitation designed to ensure that the
focus of the program remains on
advancing access to the bandwidths that
increasingly will be needed for health
care purposes. No upfront payments
will be eligible for funding for services
that deliver less than 1.5 Mbps
symmetrical (i.e. less than T–1 speeds),
except for reasonable installation costs
under $5,000. We have chosen the 1.5
Mbps threshold because HCPs have
indicated that they can successfully
implement telemedicine services over a
1.5 Mbps connection, if that is the only
practical option. Therefore, we conclude
that 1.5 Mbps is the minimum threshold
at which HCPs should be able to obtain
support for upfront costs for build-out
or infrastructure upgrades.
90. We note that the Pilot Program
allowed most participants to obtain
speeds of 4 Mbps or above, and we
expect that the reforms adopted in this
Order will generally allow HCPs to
obtain access to the bandwidths
recommended in the National
Broadband Plan. We agree with the
National Rural Health Association and
the California Telehealth Network that
we should benchmark actual speeds
obtained under the Healthcare Connect
Fund to determine how well the
program is meeting HCPs’ broadband
needs. Therefore, we will also require
participants to report basic information
regarding bandwidth associated with
the services obtained with universal
service discounts. To enable HCPs to
have the information necessary to file
such reports, we will require all service
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providers participating in the
Healthcare Connect Fund to disclose the
required metrics to their HCP
customers.
3. Dark and Lit Fiber
91. Discussion. Service providers
today provide numerous broadband
services over fiber that the service
provider manages and has ‘‘lit’’ (i.e., the
service provider has furnished the
modulating equipment and activated the
fiber). HCPs are currently able to receive
support for telecommunications services
and Internet access services provided
over such fiber, as are schools and
libraries in the E-rate program. The
Healthcare Connect Fund will continue
to support broadband services provided
over service provider-lit fiber. The
NPRM proposal, however, raised two
additional issues: (1) The eligibility of
dark fiber, and (2) support for costs
associated with dark or lit fiber leases,
including upfront payments associated
with leases or indefeasible right of use
(IRU) arrangements for lit or dark fiber.
92. Eligibility of dark fiber. We
conclude that eligible HCPs may receive
support for ‘‘dark’’ fiber where the
customer, not the service provider,
provides the modulating electronics. In
the NPRM, the Commission noted that
under such an approach, applicants
would, for instance, be able to lease
dark fiber that may be owned by state,
regional or local governmental entities,
when that is the most cost-effective
solution to their connectivity needs.
Consistent with our practice in the Erate program, however, we will only
provide support for dark fiber when it
is ‘‘lit’’ and is actually being used by the
HCP; we will not provide support for
dark fiber that remains unlit.
93. Consistent with Commission
precedent, we find that dark fiber is a
‘‘service’’ that enhances access to
advanced telecommunications and
information services consistent with
section 254(h)(2)(A) of the Act. As in the
E-rate program, we conclude that
supporting dark fiber provides an
additional competitive option to help
HCPs obtain broadband in the most
cost-effective manner available in the
marketplace. HCPs generally support
making dark fiber eligible. For example,
IRHN states that the varying broadband
environments in rural areas throughout
the country need to be ‘‘mined’’ to find
the most cost-effective solution,
including existing fiber infrastructure
that can be brought into use by HCPs
seeking dark fiber. Commenters also
agree that making dark fiber eligible will
allow the cost-effective leveraging of
existing resources and investments,
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including state, regional, and local
networks.
94. As the Commission concluded in
the E-rate context, we are not persuaded
by arguments that entities who are not
telecommunications providers, such as
HCPs, ‘‘have a poor track record making
dark fiber facilities viable for their
services.’’ While dark fiber will not be
an appropriate solution for all HCPs,
Pilot projects have demonstrated that
they can successfully incorporate dark
fiber solutions into a regional or
statewide health care network. We are
also not persuaded by the argument that
dark fiber solutions may not be costeffective. HCPs will be required to
undergo competitive bidding, and our
actions merely ensure that HCPs have
an additional option to consider during
that process. If service providers can
provide comparable, less expensive lit
fiber alternatives, we anticipate that
such providers will bid to provide
services to HCPs, who are required to
select the most cost-effective option. As
the Commission found in the Schools
and Libraries Sixth Report and Order,
75 FR 75393, December 3, 2010, if more
providers bid to provide services, the
resulting competition should better
ensure that applicants—and the Fund—
receive the best price for the most
bandwidth.
95. In order to further ensure that dark
fiber is the most cost-effective solution,
however, we will limit support for dark
fiber in two ways. First, requests for
proposals (RFPs) that allow for dark
fiber solutions must also solicit
proposals to provide the needed
services over lit fiber over a time period
comparable to the duration of the dark
fiber lease or IRU. Second, if an
applicant intends to request support for
equipment and maintenance costs
associated with lighting and operating
dark fiber, it must include such
elements in the same RFP as the dark
fiber so that USAC can review all costs
associated with the fiber when
determining whether the applicant
chose the most cost-effective bid.
96. We are not persuaded that
allowing a HCP to purchase dark fiber
from state, regional, or local government
entities will negate the HCP’s ability to
‘‘maintain a fair and open competitive
bidding environment’’ if the HCP is
‘‘linked’’ to the governmental entity in
question. We adopt requirements that
prohibit potential service providers,
including government entities, from also
acting as either a Consortium Leader or
consultant or providing other types of
specified assistance to HCPs in the
competitive bidding process. Allowing
HCPs to lease dark fiber should increase
competition among fiber providers and
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ensure a more robust bidding process.
HCPs still must demonstrate that the bid
they choose is the most cost-effective.
As the Commission stated in the E-rate
context, we believe our competitive
bidding rules will protect against the
possibility of waste, fraud, or abuse in
that context. To the extent there are
violations of the competitive bidding
rules, such as sharing of inside
information during the competitive
bidding process, USAC will adjust
funding commitments or recover any
disbursed funds through its normal
process. As the Commission concluded
in the E-rate context, our RHC rules and
requirements, including the competitive
bidding rules, apply to all applicants
and service providers, irrespective of
the entity providing the fiber network.
97. Fiber leases and IRUs. As
proposed in the NPRM, eligible HCPs
may receive support for recurring costs
associated with leases or IRUs of dark
(i.e., provided without modulating
equipment and unactivated) or lit fiber.
We conclude that HCPs may not use
fiber leases and IRUs to acquire
unneeded fiber strands or warehouse
excess dark fiber strands for future use.
If a HCP chooses to lease (or obtain an
IRU) for ‘‘dark’’ (i.e., unactivated) fiber,
recurring charges under the lease or IRU
are eligible only for fiber strands that
have been lit within the funding year,
and only once the fiber strand has been
lit.
98. Eligible HCPs applying as
consortia may also receive support for
upfront charges associated with fiber
leases or IRUs, subject to the limitations
applicable to all upfront charges. An
IRU or lease for dark fiber typically
requires a large upfront payment, even
if no new construction is required. In
some cases, however, service providers
may deploy new fiber facilities to serve
HCPs under the lease or IRU, and may
seek to recover all of part of those costs
through non-recurring charges
(sometimes called ‘‘special construction
charges’’). Such ‘‘build-out’’ costs are
eligible for support. Consistent with the
general rule we adopt, we will provide
support for build-out costs from an offpremises fiber network to the service
provider demarcation point. We decline
to provide support for such charges after
the service provider demarcation point,
consistent with the Commission’s
current policy of not supporting internal
connections for HCPs.
99. In the E-rate program, fiber must
be lit within the funding year for nonrecurring charges to be eligible. We
adopt this requirement in the Healthcare
Connect Fund. HCPs, however, unlike
schools, do not have a summer vacation
period during which construction can
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take place without disrupting normal
operations. Furthermore, in some rural
areas, weather conditions can cause
unavoidable delays in construction.
Therefore, we will allow applicants to
receive up to a one-year extension to
light fiber if they provide
documentation to USAC that
construction was unavoidably delayed
due to weather or other reasons.
100. Maintenance Costs. We also find
that HCPs may receive support for
maintenance costs associated with
leases of dark or lit fiber. Only HCPs
applying as consortia may receive
support for upfront payments for
maintenance costs.
101. Equipment. We will provide
support for equipment necessary to
make a broadband service functional.
Consistent with that standard, we find
that HCPs may receive support for the
modulating electronics and other
equipment necessary to light dark fiber.
If equipment is leased for a recurring
monthly (or annual) fee, HCPs may
receive support for those recurring
costs. HCPs applying as consortia may
also receive support for upfront
payments associated with purchasing
equipment, subject to the limitations.
102. Eligible Providers. The
Commission has previously authorized
schools and libraries to lease dark fiber,
and authorizes schools and libraries to
lease any fiber connectivity (not just
dark fiber) from any entity, including
state, municipal or regional research
networks and utility companies. We
will allow HCPs to lease fiber
connectivity from any provider.
4. Connections to Internet2 or National
LambdaRail
103. Discussion. ‘‘Broadband
Services’’ in this context includes
backbone services. We find that the
membership fees charged by Internet2
and NLR are part of the cost of obtaining
access to the backbone services
provided by these organizations, and
thus are eligible for support as recurring
costs for broadband services. We
delegate authority to the Wireline
Competition Bureau to designate as an
eligible expense, upon request,
membership fees for other non-profit
research and education networks similar
to Internet2 and NLR. We further find
that broadband services required to
connect to Internet2 or NLR should be
eligible for support under the
Healthcare Connect Fund, as well as any
broadband services obtained directly
from Internet2 or NLR. Commenters
generally support providing support for
both membership fees and for the
broadband services required to connect
health care networks to Internet2 and
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13949
NLR. In addition, some commenters
believe that these networks may provide
a level of service not available from
commercial providers in certain
situations.
104. We conclude, however, that it is
appropriate to require participants to
seek competitive bids from NLR and
Internet2, or any other research and
education network, through our
standard competitive bidding process.
We recognize and anticipate that in
some cases, Internet2 or NLR services
may be the most cost-effective solution
to meet a HCP’s needs. As noted by
commenters, these networks can
provide many benefits, and the most
cost-effective solution for HCP needs
may come from Internet2 or NLR. There
may be instances, however, under
which a more cost-effective solution is
available from a commercial provider,
or a non-profit provider other than
Internet2 or NLR. Many commenters
opposed the Commission’s proposal to
exempt National LambdaRail and
Internet2 from competitive bidding,
arguing, among other things, that such
an exemption would be anti-competitive
by disadvantaging other
telecommunications providers. A
competitive bidding requirement that
applies equally to all participants will
ensure that HCPs can consider possible
options from all interested service
providers. Because applicants must
already engage in competitive bidding
for all other services, we do not believe
it would be overly burdensome to
require applicants to also include
Internet2 or NLR in their competitive
bidding process. While we encourage all
applicants to fully consider the benefits
of connecting to non-profit research and
education networks such as Internet2
and NLR, we emphasize that it is not a
requirement to connect to Internet2 or
NLR.
5. Off-Site Data Centers and Off-Site
Administrative Offices
105. Discussion. Based on our
experience with the RHC
Telecommunications and Pilot
Programs, we adopt a rule that provides
support under the Healthcare Connect
Fund for the connections and network
equipment associated with off-site data
centers and off-site administrative
offices used by eligible HCPs for their
health care purposes, subject to the
conditions and restrictions. There has
been significant change in how HCPs
use information technology in the
delivery of health care since the
Commission originally adopted the
rules for the Telecommunications
Program that do not provide support for
off-site data centers and administrative
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offices. This new rule appropriately
recognizes ‘‘best practices’’ in health
care facility and infrastructure design
and the way in which HCPs increasingly
accomplish their data storage and
transmission requirements. It also
enables HCPs to use efficient network
connections, rather than having to reroute traffic unnecessarily in order to
obtain support. Many commenters
pointed out the operational and network
efficiency gains from this approach.
106. For purposes of the rule we
adopt, an ‘‘off-site administrative office’’
is a facility that does not provide handson delivery of patient care, but performs
administrative support functions that
are critical to the provision of clinical
care by eligible HCPs. Similarly, an ‘‘offsite data center’’ is a facility that serves
as a centralized repository for the
storage, management, and dissemination
of an eligible HCP’s computer systems,
associated components, and data. Under
the new rule, we expand the
connections that are supported for
already eligible HCPs to include
connections to these locations when
purchased by HCPs in the Healthcare
Connect Fund.
107. Specifically, subject to the
conditions and restrictions, we provide
support in the Healthcare Connect Fund
for connections used by eligible HCPs:
(i) Between eligible HCP sites and offsite data centers or off-site
administrative offices, (ii) between two
off-site data centers, (iii) between two
off-site administrative offices, (iv)
between an off-site data center and the
public Internet or another network, and
(v) between an off-site administrative
office and an off-site data center or the
public Internet or another network. We
also expand the eligibility of network
equipment to provide support for such
equipment when located at an off-site
administrative office or an off-site data
center. In addition, we establish that
support for such connections and/or
network equipment is available both to
single HCP applicants or consortium
applicants under the Healthcare
Connect Fund. Finally, we include
support for connections at such off-site
locations even if they are not owned or
controlled by the HCP.
108. We adopt this rule with certain
conditions and restrictions to ensure the
funding is used to support only eligible
public or non-profit HCPs and to protect
the program from potential waste, fraud,
and abuse. First, the connections and
network equipment must be used solely
for health care purposes. Second, the
connections and network equipment
must be purchased by an eligible HCP
or a public or non-profit health care
system that owns and operates eligible
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HCP sites. Third, if traffic associated
with one or more ineligible HCP sites is
carried by the supported connection
and/or network equipment, the
ineligible HCP sites must allocate the
cost of that connection and/or
equipment between eligible and
ineligible sites, consistent with the ‘‘fair
share’’ principles. These conditions and
requirements should fully address the
concerns of those commenters who fear
that these additional supported
connections may be used long-term for
non-health care purposes.
109. As commenters point out, HCPs
often find increased efficiencies by
locating administrative offices and data
centers apart from the site where patient
care is provided. This is especially true
for groups of HCPs, including smaller
HCPs, who often share administrative
offices and/or data centers, to save
money and pool resources. Furthermore,
it does not make practical sense to
distinguish administrative offices and/
or data centers that are located off-site
but otherwise perform the same
functions as on-site facilities, and which
require the same broadband
connectivity to function effectively.
While off-site administrative offices and
off-site data centers do not provide
‘‘hands on’’ delivery of patient care,
they often perform support functions
that are critical to the provision of
clinical care by HCPs. For example,
administrative offices may coordinate
patient admissions and discharges,
ensure quality control and patient
safety, and maintain the security and
completeness of patients’ medical
records. Administrative offices also
perform ministerial tasks, such as
billing and collection, claims
processing, and regulation compliance.
Without an administrative office
capable of carrying out these functions,
an eligible HCP may not be able to
successfully provide patient care.
110. Similarly, off-site data centers
often perform functions, such as
housing electronic medical records,
which are critical to the delivery of
health care at eligible HCP sites. For
example, the Utah Telehealth Network
uses a primary data center in West
Valley City, Utah with a backup
secondary data center in Ogden, Utah to
deliver approximately 2,500 clinical and
financial applications to eligible HCP
sites. North Carolina Telehealth
Network plans to use data center
connectivity to help public health
agencies comply with ‘‘meaningful use’’
of EHRs.
111. By providing support for the
additional connections (e.g., those
connections beyond the direct
connection to an eligible HCP site) and
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network equipment associated with offsite administrative offices and off-site
data-centers, eligible HCPs will be able
to design their networks more
efficiently. For example, the use of
remote cloud-based EHR systems has
become a ‘‘best practice,’’ especially for
smaller HCPs, for whom that solution is
often more affordable. In such cases, a
direct connection from the HCP off-site
administrative office and/or off-site data
center to the network hosting the remote
cloud-based EHR system enables the
more efficient flow of network traffic. In
comparison, if these additional
connections and network equipment
were not supported, an HCP may be
forced to route traffic from its off-site
administrative office or off-site data
center that is destined for the remote
EHR system back through the eligible
HCP site, potentially resulting in
substantial inefficiency in the use of
funding.
112. After reviewing the record, we
conclude that requiring that an eligible
HCP to have majority ownership or
control over an off-site administrative
office or data center in order for it to be
eligible for support would impose an
unnecessary burden on HCPs seeking to
use broadband effectively to deliver
health care to their patients. Providing
support for eligible expenses associated
with off-site administrative offices and
off-site data centers was widely
endorsed by commenters, but
commenters noted that there is a wide
variation in the way that HCPs structure
their physical facilities. For example,
HHS explains that an HCP often has no
ownership or control of the off-site data
center hosting its health care related
equipment and servers. NCTN suggests
that the Commission identify ‘‘eligible
functions’’ rather than evaluating
ownership. The adopted rule addresses
these concerns and provides eligible
HCPs with the flexibility to use off-site
data centers and administrative offices
irrespective of ownership or control,
subject to the conditions and
requirements.
113. The adopted approach also
accommodates a variety of arrangements
for the operation of off-site
administrative offices and/or off-site
data centers. For instance, one
commenter was concerned that the
NPRM proposal unreasonably excluded
support for the off-site administrative
offices and off-site data centers owned
by a public or non-profit health care
system rather than by one or more
eligible HCP sites. Under the rule we
adopt, the network equipment and
connections associated with these offsite facilities owned by public or nonprofit health care systems are eligible for
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support to the extent they satisfy the
conditions and restrictions. Any
network equipment and connections
shared among a system’s eligible and
ineligible HCP sites may only receive
support to the extent that the expenses
are cost allocated according to the
guidelines. We believe this approach is
consistent with the intent of the statute
and best balances the objectives of fiscal
responsibility and increasing access to
broadband connectivity to eligible
HCPs.
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6. Reasonable and Customary
Installation Charges up to $5,000
114. Discussion. We will provide
support for reasonable and customary
installation charges for broadband
services, up to an undiscounted cost of
$5,000 (i.e., up to $3,250 in support) per
HCP location. Commenters generally
agree with providing support for
installation charges. ACS suggests,
however, that in order to preserve
funds, the Commission should limit the
scope of this funding to only the most
medically underserved areas (i.e., those
with the highest HPSA score). We
conclude, however, that the better
course is to limit the amount of
installation charges per eligible HCP
location. Because our experience with
the RHC Telecommunications and Pilot
Programs indicates that undiscounted
installation charges are typically under
$5,000 per location, we conclude that
setting a cap at this level will ensure
that as many HCPs can obtain the
benefits of broadband connectivity as
possible. HCPs who are subject to
installation charges higher than this
amount may seek upfront support for
eligible services or equipment, if those
charges independently qualify as
eligible expenses (e.g., upfront charges
for service provider deployment of
facilities, costs for HCP-constructed and
owned infrastructure, network
equipment, etc.).
7. Upfront Charges for Service Provider
Deployment of New or Upgraded
Facilities To Serve Eligible Health Care
Providers
115. Discussion. Eligible consortia
may obtain support for upfront charges
for service provider deployment of new
or upgraded facilities to serve eligible
HCP sites that are applying as part of the
consortium, including (but not limited
to) fiber facilities. Although the Pilot
Program has helped thousands of HCPs
to obtain broadband services, many
HCPs in more remote, rural areas still
lack access to broadband connections
that effectively meet their needs. The
Pilot Program demonstrated that many
HCPs prefer not to own the physical
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facilities comprising their networks, but
can still assemble a dedicated health
care network if funds are available for
service provider construction and
upgrades where broadband facilities are
not already available. In a number of
instances, Pilot projects found that
support for upfront charges for
deployment of service provider facilities
allowed them to find the most costeffective services to meet their needs
while obtaining the benefits of
connecting to existing networks.
116. Commenters recommend that the
Healthcare Connect Fund support
service provider build-out charges,
arguing that will result in cost-effective
pricing, which in turn reduces the cost
to the Fund. This solution may be
particularly useful when a health care
network covers a large region served by
multiple vendors, because the network
can maximize the use of existing
infrastructure and seek funding for
build-out only where necessary. For
example, OHN’s multi-vendor leased
line network utilized 151.06 miles of
existing infrastructure, and stimulated
86.41 miles of new middle-mile
connectivity.
117. We adopt a rule to provide
support for service provider deployment
of facilities up to the ‘‘demarcation
point,’’ which is the boundary between
facilities owned or controlled by the
service provider, and facilities owned or
controlled by the customer. In other
words, the demarcation point is the
point at which responsibility for the
connection is ‘‘handed off’’ to the
customer. Thus, charges for ‘‘curb-tobuilding installation’’ or ‘‘on site
wiring’’ are eligible if they are used to
extend service provider facilities to the
point where such facilities meet
customer-owned terminal equipment or
wiring. If the additional build-out is not
owned or controlled by the service
provider, it will not be eligible as
service provider deployment costs. In
contrast, consistent with current RHC
program rules, ‘‘inside wiring’’ and
‘‘internal connections’’ are not eligible
for support.
118. Because upfront charges for
build-out costs can be significant, we
limit eligibility for such upfront charges
to consortium applications. Our
experience of over a decade with the
RHC Telecommunications Program
suggests that individual HCPs are
unlikely to attract multiple bids, which
would constrain prices. As HCPs
themselves acknowledge, and as we
learned in the Pilot Program,
consortium applications are more likely
to attract multiple bidders, due to the
more significant dollar amounts
associated with larger projects.
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13951
Furthermore, we anticipate that
individual HCPs will benefit from
participating in a consortium in
numerous ways, including pooling
administrative resources (e.g. for the
competitive bidding process), and
increased opportunities for cooperation
with other HCPs within their state or
region. Consortia seeking funding for
build-out costs must apply and undergo
the competitive bidding process through
the consortium application process. As
in the Pilot Program, an RFP that
includes a build-out component need
not be limited to such costs (for
example, some HCPs included in the
RFP may not need any additional buildout to be served, but rather only need
discounts on recurring services). We
expect HCPs to select a proposal that
includes carrier build-out costs only if
that proposal is the most cost-effective
option. In addition, upfront charges for
build-out are subject to the limitations.
B. Eligible Equipment
119. Discussion. We will provide
support for network equipment
necessary to make a broadband service
functional in conjunction with
providing support for the broadband
service. In addition, for consortium
applicants, we will provide support for
equipment necessary to manage,
control, or maintain a broadband service
or a dedicated health care broadband
network. Equipment support is not
available for networks that are not
dedicated to health care. We conclude
that providing support for such
equipment is important to advancing
our goals of increasing access to
broadband for HCPs and fostering the
development and maintenance of
broadband health care networks, for
three reasons.
120. First, providing support for
equipment will help HCPs to upgrade to
higher bandwidth services. USAC states
that Pilot Program funding for
equipment allowed such HCPs to
upgrade bandwidth without restrictions
based on what their existing equipment
would allow. We note that small rural
hospitals and clinics often lack the IT
expertise to know that they will need
new equipment to use new or upgraded
broadband connections, and finding
funding to pay for the equipment can
cause delays.
121. Second, support for the
equipment necessary to operate and
manage dedicated broadband health
care networks can facilitate efficient
network design. USAC states that urban
centers, where most specialists are
located, are natural ‘‘hubs’’ for
telemedicine networks, but the cost of
equipment required to serve as a hub
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can be a barrier for these facilities to
serve as hubs. In the Pilot Program,
funding network equipment eliminated
this barrier to entry. OHN explains that
connecting to urban hubs can also
reduce the need for rural sites to manage
firewalls at their locations, which
allows the rural sites to reduce
equipment costs while adhering to
security industry best practices and
standards.
122. Finally, support for network
equipment can also help HCPs ensure
that their broadband connections
maintain the necessary reliability and
quality of service, which can be
challenging even if the HCP has a
service level agreement (SLA) with its
telecommunications provider. Support
for network equipment has enabled
some Pilot projects to set up Network
Operations Centers (NOCs) that can
manage service quality and security in
a cost-effective manner for all of the
HCPs on the network. The NOC can
proactively monitor all circuits and
contact both the service provider and
HCP whenever the status of a link drops
below the conditions specified in the
SLA. This allows proactive monitoring
to find and deal with adverse network
conditions ‘‘in real time and before they
have a chance to impact the delivery of
patient care.’’ A HCP-operated NOC in
some cases may be more cost-effective
for larger networks (e.g., statewide, or
even multi-state networks), particularly
when the NOC may be monitoring and
managing circuits from multiple
vendors.
123. We do not express a preference
for single- or multi-vendor networks
here, nor do we suggest that it is always
more efficient for a dedicated health
broadband network to have its own
NOC. For example, a network that
chooses to obtain a single-vendor
solution and obtain NOC service from
that vendor may receive support for the
NOC service as a broadband service, if
that solution is the most cost-effective.
Our actions simply facilitate the ability
of a consortium to operate its own NOC,
if that is the most cost-effective option.
124. Eligible equipment costs include
the following:
• Equipment that terminates a
carrier’s or other provider’s
transmission facility and any router/
switch that is directly connected to
either the facility or the terminating
equipment. This includes equipment
required to light dark fiber, or
equipment necessary to connect
dedicated health care broadband
networks or individual HCPs to middle
mile or backbone networks;
• Computers, including servers, and
related hardware (e.g., printers,
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scanners, laptops) that are used
exclusively for network management;
• Software used for network
management, maintenance, or other
network operations, and development of
software that supports network
management, maintenance, and other
network operations;
• Costs of engineering, furnishing
(i.e., as delivered from the
manufacturer), and installing network
equipment; and
• Equipment that is a necessary part
of HCP-owned facilities.
125. Support for network equipment
is limited to equipment purchased or
leased by an eligible HCP that is used
for health care purposes. We do not
authorize support, for example, for
network equipment utilized by
telecommunications providers in the
ordinary course of business to operate
and manage networks they use to
provide services to a broader class of
enterprise customers, even if eligible
HCPs are utilizing such services. Nonrecurring costs for equipment purchases
are subject to the limitations on all
upfront charges.
C. Ineligible Costs
126. Services and equipment eligible
for support under the Healthcare
Connect Fund are limited to those listed
in this Order. For administrative clarity,
however, we also list the following
specific examples of costs that are not
supported.
1. Equipment or Services Not Directly
Associated With Broadband Services
127. Discussion. In keeping with our
goals to increase access to broadband,
foster development of broadband health
care networks, and maximize costeffectiveness, we provide support under
the Healthcare Connect Fund for the
cost of equipment or services necessary
to make a broadband service functional,
or to manage, control, or maintain a
broadband service or a dedicated health
care broadband network. Certain
equipment (e.g., switches, routers, and
the like) are necessary to make the
broadband service functional—
conceptually, these are ‘‘inputs’’ into
the broadband service. Other equipment
or services (e.g., telemedicine carts, or
videoconferencing equipment, or even a
simple health care-related application)
‘‘ride over’’ the broadband connection—
i.e., in those cases, the broadband
connectivity is an ‘‘input’’ to making the
equipment or service functional. In this
latter case, the equipment or service is
not eligible for support. This distinction
is consistent with that utilized in the
Pilot Program.
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128. In particular, costs associated
with general computing, software,
applications, and Internet content
development are not supported,
including the following:
• Computers, including servers, and
related hardware (e.g., printers,
scanners, laptops), (unless used
exclusively for network management,
maintenance, or other network
operations);
• End user wireless devices, such as
smartphones and tablets;
• Software (unless used for network
management, maintenance, or other
network operations);
• Software development (excluding
development of software that supports
network management, maintenance, and
other network operations);
• Helpdesk equipment and related
software, or services (unless used
exclusively in support of eligible
services or equipment);
• Web hosting;
• Web site portal development;
• Video/audio/web conferencing
equipment or services; and
• Continuous power source.
129. Furthermore, costs associated
with medical equipment (hardware and
software), and other general HCP
expenses are not supported. For
example, the following is not supported:
• Clinical or medical equipment;
• Telemedicine equipment,
applications, and software;
• Training for use of telemedicine
equipment;
• Electronic medical records systems;
and
• Electronic records management and
expenses.
2. Inside Wiring/Internal Connections
130. Discussion. The American
Telemedicine Association requests that
the Commission provide support for
‘‘internal wiring.’’ The Healthcare
Connect Fund will provide support for
service provider build-out to the
customer demarcation point, and for
network equipment necessary to make a
broadband connection functional. We
conclude that support is better targeted
at this time toward providing broadband
connectivity to the HCP rather than
internal networks within HCP premises.
The record does not indicate that small
HCPs (such as clinics) likely will incur
large expenses for inside wiring or
internal connections in order to utilize
their broadband connectivity. For larger
institutions such as hospitals, however,
the cost of providing discounts for
internal connections could be
substantial. Furthermore, as the
Commission has acknowledged, it can
be difficult to distinguish from ‘‘internal
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connections’’ and ineligible computers
or other peripheral equipment. In the Erate context, the Commission relied on
the congressional directive that the
Fund provide connectivity all the way
to classrooms. There is no similar
statutory directive with respect to HCPs.
For these reasons, we decline to provide
support for inside wiring or internal
connections under the Healthcare
Connect Fund.
3. Administrative Expenses
131. The NPRM proposed to provide
limited support for administrative
expenses under the proposed Health
Infrastructure Program, but not for the
proposed Broadband Services Program.
The Commission acknowledged that
some parties had argued that planning
and designing network infrastructure
deployment can place a burden on
HCPs. The Commission also recognized,
however, that ‘‘the primary focus of the
program should be to fund
infrastructure and not project
administration.’’
132. Discussion. Consistent with the
objectives of streamlining oversight of
the program and ensuring fiscal
responsibility, we decline to fund
administrative expenses associated with
participation in the Healthcare Connect
Fund. We are taking significant steps to
streamline and simplify the application
process, which will lessen the time and
resources needed to participate in the
program. Moreover, because we expect
that most HCPs in the new program will
choose to purchase services rather than
construct and own facilities, the
rationale for funding of administrative
expenses is lessened.
133. The Commission has recognized
that administrative expenses of
organizing networks and applying for
universal service support can be
substantial. In response, we are taking
steps throughout this Order to minimize
the administrative burden of
participating in the Healthcare Connect
Fund. First, we put in place a
streamlined application process that
facilitates consortium applications,
which should enable HCPs to file many
fewer applications and to share the
administrative costs of all aspects of
participation in the program. Second,
we adopt a uniform flat-rate discount to
simplify the calculation of support,
particularly when compared with the
urban/rural differential approach of the
Telecommunications Program. Third,
we enable multi-year funding
commitments, long-term arrangements
(e.g., IRUs and pre-paid leases), and the
use of existing MSAs. Fourth, we
expand eligibility to include all HCPs,
with rules in place to ensure a
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reasonable balance of rural and nonrural sites within health care networks.
In the Pilot Program, HCPs that did not
meet our long-standing definition of
‘‘rural’’ HCPs frequently provided
administrative and technical support to
the consortia, thereby reducing the
burden on individual HCPs. Finally, we
eliminate the competitive bidding
requirement for applicants seeking
support for $10,000 or less of total
undiscounted eligible expenses for a
single year. We find that the
combination of these reforms, among
others, should significantly reduce the
administrative burden on participants in
terms of the complexity, volume, and
frequency of filings, thereby addressing
concerns raised by some commenters
regarding the administrative burdens of
participating in the program. In contrast,
if we were to provide direct support for
administrative expenses, it would
necessitate additional and more
complex application requirements,
guidelines, and other administrative
controls to protect such funding from
waste, fraud, and abuse. This would
significantly increase the administrative
burden on USAC and on applicants as
well.
134. We recognize that many
commenters support the provision of
support for administrative expenses.
Some commenters suggest that the
funding of reasonable administrative
expenses is necessary to ensure
participation in the program. However,
experience with the existing programs
suggests that HCPs will participate even
without the program funding
administrative expenses. Neither the
Telecommunications nor Pilot Programs
fund administrative expenses, but both
programs have significant participation.
The number of participating HCPs in the
Telecommunications Program has
grown by nearly 10 percent year-overyear for the past five years. Similarly,
the Pilot Program has experienced
substantial and sustained interest with
just over 3,800 HCP sites receiving
funding commitments. We expect that
the participation in the RHC support
mechanism will only increase with the
implementation of the Healthcare
Connect Fund and its more streamlined
administrative process.
135. In addition, commenters have
not explained how we could readily
distinguish reasonable from
unreasonable administrative expenses
and ensure fiscal responsibility and cost
effective use of the finite support
available for eligible HCPs. Without a
clear standard, there would be increased
complexity and cost in policing the
reimbursement of these expenses to
guard against waste, fraud, and abuse.
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By reducing the administrative burden,
rather than directly funding
administrative expenses, we seek to
facilitate increased participation while
still ensuring fiscal responsibility and
the efficient use of scarce universal
service funding.
136. Consistent with the approach
taken by the Commission in the Pilot
Program Selection Order, 73 FR 4573,
January 25, 2008, we conclude that
administrative expenses will not be
eligible for support under the
Healthcare Connect Fund. Ineligible
expenses include, but are not limited to,
the following expenses:
• Personnel costs (including salaries
and fringe benefits), except for
personnel costs in a consortium
application that directly relate to
designing, engineering, installing,
constructing, and managing the
dedicated broadband network. Ineligible
costs of this category include, for
example, personnel to perform program
management and coordination, program
administration, and marketing.
• Travel costs, except for travel costs
that are reasonable and necessary for
network design or deployment and that
are specifically identified and justified
as part of a competitive bid for a
construction project.
• Legal costs.
• Training, except for basic training
or instruction directly related to and
required for broadband network
installation and associated network
operations. For example, costs for enduser training, such as training of HCP
personnel in the use of telemedicine
applications, are ineligible.
• Program administration or technical
coordination (e.g., preparing application
materials, obtaining letters of agency,
preparing request for proposals,
negotiating with vendors, reviewing
bids, and working with USAC) that
involves anything other than the design,
engineering, operations, installation, or
construction of the network.
• Administration and marketing costs
(e.g., administrative costs; supplies and
materials (except as part of network
installation/construction); marketing
studies, marketing activities, or outreach
to potential network members;
evaluation and feedback studies).
• Billing expenses (e.g., expense that
service providers may charge for
allocating costs to each HCP in a
network).
• Helpdesk expenses (e.g., equipment
and related software, or services);
technical support services that provide
more than basic maintenance.
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4. Cost Allocation for Ineligible Entities,
Sites, Services, or Equipment
137. Discussion. Costs associated with
ineligible sites or ineligible components
of services or equipment are ineligible
for support, except as otherwise
specified in this Order. Ineligible sites,
however, may participate in consortia
and dedicated broadband health
networks supported through this
program, as long as they pay a fair share
of the undiscounted costs associated
with the consortium’s funding request.
Similarly, an applicant is only eligible
to receive support for the eligible
components of a service or a piece of
equipment.
138. There are a wide variety of
contexts in which it may be more costeffective for eligible HCPs to share costs
with ineligible entities, or to procure a
service or piece of equipment that
includes both eligible and ineligible
components. The Commission has
allowed such cost-sharing in the past in
the RHC Telecommunications Program
and the Pilot Program, and we will
allow it in the Healthcare Connect
Fund. Such permissible cost-sharing
includes the following:
• Sharing with ineligible entities. In
the case of statewide or regional health
care networks, it may be useful for
health care purposes to have both
eligible and ineligible HCPs participate
in the same network, and share certain
backbone or network equipment costs
between all participants in the network.
Having both eligible and ineligible
entities contribute to shared costs may
lead to lower overall costs for the
eligible HCPs, and enables HCPs to
benefit from connections to a greater
number of other HCPs, including forprofit HCPs that are not eligible for
funding under section 254 but
nevertheless play an important role in
the overall health care system. The
Commission has previously found that
the resale prohibition does not prevent
Pilot Program networks from ‘‘sharing’’
facilities with for-profit entities that pay
their ‘‘fair share’’ of network costs (i.e.,
that do not receive discounts provided
to eligible HCPs, but instead pay their
full pro rata undiscounted share as
determined by the portion of network
capacity used).
• Allocating cost between eligible and
ineligible components. A product or
service provided under a single price
may contain both eligible and ineligible
components. For example, a service
provider may provide a broadband
internet access service (eligible) and, as
a component of that service, include
web hosting (ineligible). While it may be
simpler to buy the eligible and ineligible
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components separately, in some
instances it is more cost-effective for
HCPs (and the Fund) to buy the
components as a single product or
service. In such cases, applicants may
need guidance on if, and how, they
should allocate costs between the
eligible and ineligible components.
• Excess capacity in fiber
construction. In the NPRM, the
Commission noted that it is customary
to build excess capacity when deploying
high-capacity fiber networks, because
the cost of adding additional fiber to the
conduit is minimal. In the Pilot
Program, the Commission found that a
Pilot participant could not ‘‘sell’’
network capacity supported by Pilot
funding, but could ‘‘share’’ network
capacity with ineligible entities paying
a fair share of network costs attributable
to the portion of network capacity used.
Consortia that seek support to construct
and own their own fiber networks may
wish to put in extra fiber strands during
construction and make the excess
capacity available to other users.
• Part-time eligible HCPs. Under
current rules, entities that provide
eligible health care services on a parttime basis are allowed to receive
prorated support commensurate with
their provision of eligible health care
services. For example, if a doctor
operates a non-profit rural health clinic
on a non-profit basis in a rural
community one day per week or during
evenings in the local community center,
that community center is eligible to
receive prorated support, because it
serves as a ‘‘rural health clinic’’ on a
part-time basis.
139. We conclude that eligible HCP
sites may share costs with ineligible
sites, as long as the ineligible sites pay
a ‘‘fair share’’ of the costs. We use ‘‘fair
share’’ here as a term of art that, in
general, refers to the price or cost that
an ineligible site must pay to participate
in a supported network, or share
supported services and equipment, with
an eligible HCP. To determine fair share,
an applicant is required to apply the
following principles:
• First, if the service provider charges
a separate and independent price for
each site, an ineligible site must pay the
full undiscounted price. For example, if
a consortium has negotiated certain
rates that are applicable to all sites
within the consortium, an ineligible
HCP site must pay the full price without
receiving a USF discount. Similarly, if
the consortium has received a quote
from the service provider for the
individualized costs of serving each
member of the consortium, an ineligible
member must pay the full cost without
receiving a USF discount.
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• Second, if there is no separate and
independent price for each site, the
applicant must prorate the
undiscounted price for the ‘‘shared’’
facility (including any supported
maintenance and operating costs)
between eligible and ineligible sites on
a proportional fully-distributed basis,
and the applicant may seek support for
only the portion attributable to the
eligible sites. Applicants must make this
cost allocation using a method that is
based on objective criteria and
reasonably reflects the eligible usage of
the shared facility. For example, a
network may choose to divide the
undiscounted price of the shared facility
equally among all member sites, and
require ineligible sites to pay their full
share of the price. Other possible
metrics, depending on the services
utilized, may include time of use,
number of uses, amount of capacity
used, or number of fiber strands. The
applicant bears the burden of
demonstrating the reasonableness of the
allocation method chosen.
140. Because we define eligible
services and equipment for the
Healthcare Connect Fund broadly in
this Order, we do not anticipate that
applicants will encounter many
situations in which they purchase or
lease a single service or piece of
equipment that includes both eligible
and ineligible components. Nonetheless,
we also provide guidelines herein for
allocating costs when a single service or
piece of equipment includes an
ineligible component. Applicants
seeking support for a service or
equipment that includes an ineligible
component must also explicitly request
in their RFP that service providers
should also provide pricing for a
comparable service or piece of
equipment that includes only eligible
components. If the selected provider
also submits a price for the eligible
component on a stand-alone basis, the
support amount is capped at the standalone price of the eligible component. If
the service provider does not offer the
eligible component on a stand-alone
basis, the full price of the entire service
or piece of equipment must be taken
into account, without regard to the
value of the ineligible components,
when determining the most costeffective bid.
141. We delegate authority to the
Bureau to issue further guidelines, as
needed, to interpret the cost allocation
methods or provide guidance on how to
apply the methods to particular factual
situations.
142. Applicants must submit a written
description of their allocation method(s)
to USAC with their funding requests.
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Allocations must be consistent with the
principles. If ineligible entities
participate in a network, the allocation
method must be memorialized in
writing, such as a formal agreement
among network members, a master
services contract, or for smaller
consortia, a letter signed and dated by
all (or each) ineligible entity and the
Consortium Leader. For audit purposes,
applicants must retain any
documentation supporting their cost
allocations for a period consistent with
the recordkeeping rules.
D. Limitations on Upfront Payments
143. Discussion. Support for upfront
payments can play an important part in
ensuring that HCPs can efficiently
obtain the broadband connections they
need in a cost-effective manner. We
therefore adopt a rule providing support
for upfront payments, but include
certain limitations to ensure the most
cost-effective use of Fund support and
to deter waste, fraud, and abuse. The
limitations in this section apply to all
non-recurring costs, other than
reasonable and customary installation
charges of up to $5,000. USAC reports
that in both the ‘‘Primary’’
(Telecommunications and Internet
Access and Pilot Programs, service
providers do not typically assess
‘‘installation charges’’ in excess of
$5,000 if no new build-out is required
to provide a service (i.e., the
‘‘installation charge’’ is entirely for the
cost of ‘‘turning on’’ services over
existing facilities). Therefore, we find
that it is appropriate to treat installation
charges of up to $5,000 as ‘‘ordinary’’
installation charges, and apply
limitations only to charges above that
amount.
144. The limitations are as follows.
First, upfront payments associated with
services providing a bandwidth of less
than 1.5 Mbps (symmetrical) are not
eligible for support. By their nature,
upfront payments are intended to
amortize the cost of new service
deployment or installation that will be
enjoyed for years in the future; in other
words, HCPs should continue to reap
the benefits from the upfront payments
beyond the funding year in which
support is requested. We do not believe
it is an efficient use of the Healthcare
Connect Fund to support upfront
payments for speeds which may
increasingly become inadequate for HCP
needs in the near future.
145. Second, we limit support for
upfront payments to consortium
applications, to create greater incentives
for HCPs to join together in consortia
and thereby obtain the pricing benefits
of group purchasing and economies of
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scale, as demonstrated in the Pilot
Program.
146. Third, we impose a $150 million
annual limitation on total commitments
for upfront payments and multi-year
commitments. We do so in order to limit
major fluctuations in Fund demand,
although we anticipate that the $150
million should be sufficient to meet
demand for upfront payments given the
other limitations we impose. Fourth, we
will require that consortia prorate
support requested for upfront payments
over at least three years if, on average,
more than $50,000 in upfront payments
is requested per HCP site in the
consortium. Fifth, upfront payments
must be part of a multi-year contract. At
$50,000 per site, $50 million per year
would provide upfront support to 1,000
HCP sites. Given that total participation
in the Pilot Program since 2006 has been
approximately 3,900 providers to date,
we believe this is an adequate level of
funding to meet HCP needs in the
immediate future; we can revisit this
conclusion if experience under the new
program proves otherwise.
147. We do not adopt a per-provider
cap for upfront payments at this time.
Although most HCPs in the Pilot
Program were able to obtain any
necessary build-out at a cost below
$50,000, a small percentage of HCPs
incurred very high build-out costs.
Requiring these HCPs to apply as part of
consortia should help them to obtain
service at a lower cost; however,
adopting a per-provider cap could have
the unintended consequence of
excluding the highest-cost HCPs from
such consortia. Although we do not
adopt a per-provider cap, we note that
because the HCP will be responsible for
paying a substantial contribution
towards the cost of services received
(i.e., 35 percent), we anticipate that
consortia will have every incentive to
obtain the lowest prices possible.
148. Finally, consortia that seek
certain types of upfront payments will
be subject to additional reporting
requirements and other safeguards to
ensure effective use of support.
definition of eligible service providers,
and state that allowing a wide variety of
vendors will provide more competing
options and thus will be more costeffective. We note that the Pilot
Program, which allowed similar
flexibility, had over 120 different
vendors win contracts to provide
services.
150. We also adopt the NPRM
proposal to allow eligible HCPs to
receive support for the lease of dark or
lit fiber from any provider, including
dark fiber that may be owned by state,
regional or local governmental entities,
and conclude that eligible vendors are
not limited to telecommunications
carriers or other types of entities
historically regulated by the
Commission. Both non-profit (e.g.,
Internet2 and NLR) and commercial
service providers are eligible to
participate. We will not allow a state
government, private sector, or other
non-profit entity to simultaneously act
as a Consortium Leader/consultant and
potential service provider, in order to
preserve the integrity of the competitive
bidding process. We emphasize that
HCPs must select the most cost-effective
bid, and are under no obligation to
select a particular vendor merely due to
its ‘‘non-profit’’ status or its receipt of
other federal funding (e.g., BTOP grants,
or Connect America Fund support),
although we anticipate that providers
who receive other federal funding may
be in a position to provide services to
HCPs at competitive rates.
E. Eligible Service Providers
149. Discussion. We conclude that
eligible service providers for the
Healthcare Connect Fund shall include
any provider of equipment, facilities, or
services that are eligible for support
under the program, provided that the
HCP selects the most cost-effective
option to meet its health care needs. We
reiterate that eligible services may be
provided through any available
technology, consistent with our
competitive neutrality policy.
Commenters generally support a broad
152. The Healthcare Connect Fund
will provide support for both individual
applications and consortium
applications. With the reforms we
adopt, we encourage eligible entities to
seek funding from the new program by
forming consortia with other HCPs in
order to obtain higher speed and better
quality broadband and to recognize
efficiencies and lower costs. For
purposes of Healthcare Connect Fund, a
‘‘consortium’’ is a group of multiple
HCP sites that choose to request support
as a single entity.
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V. Funding Process
151. USAC shall, working with the
Bureau, develop the necessary
application, competitive bidding,
contractual, and reporting requirements
for participants to implement the
requirements to ensure the objectives of
the program are met.
A. Pre-Application Steps
1. Creation of Consortia
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a. Designation of a Consortium Leader
153. Discussion. Each consortium
seeking support from the Healthcare
Connect Fund must identify an entity or
organization that will be the lead entity
(the ‘‘Consortium Leader’’). As a
preliminary matter, we note that the
consortium and the Consortium Leader
can be the same legal entity, but are not
required to be. For example, the
consortium may prefer to designate one
of its HCP members as the Consortium
Leader or an ineligible state or Tribal
government agency or non-profit
organization.
154. The consortium need not be a
legal entity, although the consortium
members may wish to form as a legal
entity for a number of reasons. For
example, if the consortium itself is to be
legally and financially responsible for
activities supported by the Fund (i.e.
serve as the ‘‘Consortium Leader’’), the
consortium should constitute itself as a
legal entity. In addition, the consortium
may wish to constitute itself as a legally
recognized entity to simplify contracting
with vendors (i.e. if the consortium is
not a legal entity, each individual
participant may need to sign an
individual contract with the service
provider, or one of the consortium
members may need to enter into a
master contract on behalf of all of the
other members).
155. The Consortium Leader may be
the consortium itself (if it is constituted
as a legal entity), an eligible HCP
participating in the consortium, or an
ineligible state organization, public
sector (governmental) entity (including
a Tribal government entity), or nonprofit entity. An eligible HCP may serve
as the Consortium Leader and
simultaneously receive support. If an
ineligible entity serves as the
Consortium Leader, however, the
ineligible entity is prohibited from
receiving support from the Healthcare
Connect Fund, and the full value of any
discounts, funding, or other program
benefits secured by the ineligible entity
must be passed on to the consortium
members that are eligible HCPs.
156. Certain state organizations,
public sector entities (including Tribal
government entities), or non-profit
entities may wish to perform multiple
roles on behalf of consortia, including
(1) serving as lead entities; (2) providing
consulting assistance to consortia; and/
or (3) serving as a service provider
(vendor) of eligible services or
equipment for which consortia are
seeking support. Potential conflict of
interest issues arise in the competitive
bidding process, however, if an entity
serves a dual role as both Consortium
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Leader/consultant and potential service
provider. The potential conflict is that
the selection of the service provider may
not be fair and open but may, in fact,
provide an unfair advantage to the lead
entity as service provider.
157. For that reason, we conclude that
state organizations, public sector
entities, or non-profit entities may serve
as lead entities or provide consulting
assistance to consortia if they do not
participate as potential vendors during
the competitive bidding process.
Conversely, if such entities wish to
provide eligible services or equipment
to consortia, they may not
simultaneously serve as project leaders,
and may not provide consulting or other
expertise to the consortium to assist it
in developing its request for services.
This restriction does not prohibit
eligible HCPs from conducting general
due diligence to determine what
services are needed and to prepare for
an RFP. Part of such due diligence may
involve reaching out to known service
providers—including state or other
public sector entities—that serve the
area to determine what services are
available. Nor does the restriction
prevent a service provider, once
selected through a fair and open
competitive bidding process, from
assisting an eligible HCP with
implementing the purchased services.
158. We recognize that certain state
governmental entities, for example, may
be large enough to institute an
organizational and functional separation
between staff acting as service providers
and staff providing application
assistance. Consistent with current
practice in the E-rate program, we will
allow state organizations, public sector
entities, or non-profit entities, if they so
choose, to obtain an exemption from
this prohibition by making a showing to
USAC that they have set up an
organizational and functional
separation. This exemption, however,
must be obtained before the consortium
begins preparing its request for services.
Examples of appropriate documentation
for such a showing include
organizational flow charts, budgetary
codes, and supervisory administration.
159. The Consortium Leader’s
responsibilities include the following:
• Legal and Financial Responsibility
for Supported Activities. The
Consortium Leader is the legally and
financially responsible entity for the
conduct of activities supported by the
Fund. By default, the Consortium
Leader will be the responsible entity if
audits or other investigations by USAC
or the Commission reveal violations of
the Act or our rules by the consortium,
with the individual consortium
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members being jointly and severally
liable if the Consortium Leader
dissolves, files for bankruptcy, or
otherwise fails to meet its obligations.
We recognize that in some instances, a
consortium may wish to have a
Consortium Leader serve only in an
administrative capacity and to have the
consortium itself, or its individual
members, retain ultimate legal and
financial responsibility. Except for the
responsibilities, we will allow consortia
to have flexibility to allocate legal and
financial responsibility as they see fit,
provided that this allocation is
memorialized in a formal written
agreement between the affected parties
(i.e. the Consortium Leader, and the
consortium as a whole and/or its
individual members), and the written
agreement is submitted to USAC for
approval with or prior to the Request for
Services (Form 461). The agreement
should clearly identify the party(ies)
responsible for repayment if USAC is
required, at a later date, to recover
disbursements to the consortium due to
violations of program rules. USAC is
directed to provide, in writing by the
expiration of the 28-day competitive
bidding period, either approval or an
explanation as to why the agreement
does not provide sufficient clarity on
who will be responsible for repayment.
If USAC provides such comments, it
shall provide the Consortium Leader
with a minimum of 14 calendar days to
respond. USAC is prohibited from
issuing a funding commitment to the
consortium until the Consortium Leader
either takes on the default position as
responsible entity, or provides an
agreement that adequately identifies
alternative responsible party(ies).
• Point of Contact for the FCC and
USAC. The Consortium Leader is
responsible for designating an
individual who will be the ‘‘Project
Coordinator’’ and serve as the point of
contact with the Commission and USAC
for all matters related to the consortium.
The Consortium Leader is responsible
for responding to Commission and
USAC inquiries on behalf of the
consortium members throughout the
application, funding, invoicing, and
post-invoicing period.
• Typical Applicant Functions,
Including Forms and Certifications. The
Consortium Leader is responsible for
submitting program forms and required
documentation and ensuring that all
information and certifications submitted
are true and correct. This responsibility
may not contractually be allocated to
another entity. The Consortium Leader
may be asked during an audit or other
inquiry to provide documentation that
supports information and certifications
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provided. The Consortium Leader must
also collect and retain a Letter of
Agency (LOA) from each member.
• Competitive Bidding and Cost
Allocation. The Consortium Leader is
responsible for ensuring that the
competitive bidding process is fair and
open and otherwise complies with
Commission requirements. If costs are
shared by both eligible and ineligible
entities, the Consortium Leader must
also ensure that costs are allocated in a
manner that ensures that only eligible
entities receive the benefit of program
discounts.
• Invoicing. The Consortium Leader
is responsible for the invoicing process,
including certifying that the participant
contribution has been paid and that the
invoice is accurate.
• Recordkeeping, Site Visits, and
Audits. The Consortium Leader is also
responsible for compliance with the
Commission’s recordkeeping
requirements, and coordinating site
visits and audits for all consortium
members.
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b. Participating Health Care Providers
160. Next, the consortium should
identify all HCPs who will participate.
The Consortium Leader will need to
provide this information to USAC in
order to request program support. We
intend for eligible HCPs to have broad
flexibility in organizing consortia
according to their health care needs. For
example, a consortium may be a preexisting organization formed for reasons
unrelated to universal service support
(e.g. a regional telemedicine network, a
statewide health information exchange),
or a group newly formed for the purpose
of applying for Healthcare Connect
Fund support. Consortium members
may be affiliated (formally or
informally) or unaffiliated. Ineligible
HCPs may participate in consortia,
although they are not eligible to receive
support and must pay full cost (fair
share) for all services received through
the consortium.
c. Letters of Agency
161. Discussion. The letter of agency
requirement helps ensure that
participating entities are eligible to
receive support, and that the HCPs have
given the project leaders the necessary
authorization to act on their behalf.
After considering our experience in the
Pilot Program, and reviewing the
comments filed regarding letters of
agency, we conclude that each
Consortium Leader must secure the
necessary authorizations through an
LOA from each HCP seeking to
participate in the applicant’s network
that is independent of the Consortium
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Leader. LOAs are not required for those
participating HCP sites that are owned
or otherwise controlled by the
Consortium Leader (and thus are not
‘‘independent’’). Similarly, one LOA is
sufficient for multiple HCP sites that are
owned or otherwise controlled by a
single consortium member.
162. We adopt an approach that
creates a two-step process of LOAs: in
the first step, a Consortium Leader must
obtain LOAs from members to seek bids
for services, and in the second step, the
Leader must obtain LOAs to apply for
funding from the program. This twostep approach addresses an issue that
arose in the Pilot Program, where some
prospective member HCPs were
reluctant to provide LOAs that would
commit them to participate in a
consortium network before they knew
the pricing of services from prospective
bidders. Under the Healthcare Connect
Fund, we require that each Consortium
Leader secure authorization, the
required certifications, and any
supporting documentation from each
consortium member (i) to submit the
request for services on its behalf (Form
461) and prepare and post the request
for proposal on behalf of the member for
purposes of the Healthcare Connect
Fund and (ii) to submit the funding
request (Form 462) and manage
invoicing and payments, on behalf of
the member. The first authorization is
required prior to the submission of the
request for services (Form 461), while
the second authorization is only
required prior to the submission of the
request for funding (Form 462). An
applicant may either secure both
required authorizations upfront or
secure each authorization as needed.
Consortium Leaders may also obtain
authorization, the required
certifications, and any supporting
documentation from each member to
submit Form 460, if needed, to certify
the member’s eligibility to participate in
the Healthcare Connect Fund. If the
Consortium Leader does not obtain such
authorization for a given member, that
member will have to submit its own
Form 460. In addition, we delegate
authority to the Bureau to develop
model language for the LOA required for
each authorization.
163. In addition to the necessary
authorizations, the LOA must include,
at a minimum, the name of the entity
filing the application (i.e., lead
applicant or consortium leader); name
of the entity authorizing the filing of the
application (i.e., the participating HCP/
consortium member); the physical
location of the HCP/consortium member
site(s); the relationship of each site
seeking support to the lead entity filing
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13957
the application; the specific timeframe
the LOA covers; the signature, title and
contact information (including phone
number, mailing address, and email
address) of an official who is authorized
to act on behalf of the HCP/consortium
member; signature date; and the type of
services covered by the LOA. For HCPs
located on Tribal lands, if the health
care facility is a contract facility that is
run solely by a Tribal Nation, the
appropriate Tribal leader, such as the
Tribal Chairperson, President, or
Governor, or Chief, shall also sign the
LOA, unless the health care
responsibilities have been duly
delegated to another Tribal government
representative. In all instances,
electronic signatures are permissible.
164. The approach we adopt
addresses many of the concerns
expressed by commenters, while still
ensuring applicants have the necessary
authority to act on behalf of their
members. Some commenters correctly
point out that under the Pilot Program,
an HCP was often reluctant or unable to
execute an LOA that required the HCP
to agree to participate in a network
before accurate pricing was available.
Other commenters stressed that
requiring LOAs as part of the Form 465
submission was a net benefit because it
enabled the project to ‘‘vet’’ the
eligibility of interested HCPs at the
outset of the application process. We
conclude that the adopted approach
provides flexibility to allow consortium
applicants to tailor the LOA process to
meet the needs of their members, within
the necessary constraints.
2. Determination of Health Care
Provider Eligibility
165. Discussion. Consistent with other
measures we adopt to improve the
efficiency and operation of the
Healthcare Connect Fund, we institute a
new process for obtaining faster
eligibility determinations from USAC by
permitting HCPs to submit Form 460 at
any time during the funding year to
certify to the eligibility of particular
sites. By separating the eligibility
determination from the competitive
bidding process, we provide HCPs with
the option of receiving an eligibility
determination before they move forward
with preparing an application for
funding. HCPs who have previously
received an eligibility determination
from USAC (i.e. HCPs who already
participate in the existing rural health
care programs) are not required to
submit a Form 460 prior to submission
of a Form 461. All HCPs, however, are
required to submit an updated Form 460
within 30 days of a material change,
such as a change in the HCP’s name, site
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location, contact information or eligible
entity type, or for non-rural hospitals,
an increase in the number of licensed
patient beds such that the hospital goes
from having fewer than 400 licensed
beds to 400 or more licensed beds.
166. For each HCP listed, applicants
will be required to provide the HCP’s
address and contact information,
identify the eligible HCP type, provide
an address for each physical location
that will receive supported connectivity,
provide a brief explanation for why the
HCP is eligible under the Act and the
Commission’s rules and orders, and
certify to the accuracy of this
information under penalty of perjury.
Consortium leaders should obtain
supporting information and/or
documents to support eligibility for
each HCP when they collect LOAs;
leaders also may be asked for this
information during an audit or
investigation. USAC should notify each
applicant of its determination (or
whether it needs additional time to
process the form) within 30 days of
receipt of Form 460. We caution
applicants that it is their obligation to
submit accurate information and
certifications regarding their eligibility.
Because HCP eligibility is limited by the
Act, the Commission does not have
discretion to waive eligibility
requirements, and must recover any
support erroneously disbursed to
ineligible entities. We direct USAC to
assign a unique identifying number to
each HCP location in order to facilitate
tracking of the location throughout the
application process.
3. Technology Planning
167. Discussion. We encourage all
applicants to carefully evaluate their
connectivity needs before submitting an
application. We decline at this time to
require applicants in the Healthcare
Connect Fund to submit technology
plans with their requests for service, but
we may re-evaluate this decision in the
future based on experience with the
new program. Our goal is reduce
administrative burdens and delay
associated with participating in the
Healthcare Connect Fund, especially for
the HCPs with the fewest resources and
greatest need to participate.
168. The record indicates that HCPs
are a diverse group with a diverse set of
needs. Our intent, consistent with
precedent, is to allow HCPs to identify
their specific broadband needs, which,
together with the competitive bidding
requirements and the required HCP 35
percent contribution, will help ensure
that universal services funds are used
most cost-effectively. We recognize that
the amount of planning required will
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vary depending on a number of factors,
such as the HCP’s size and planned
utilization of health IT, and that the
amount of IT expertise and other
resources available for formal planning
will vary widely between different types
of HCPs. In the planning process,
applicants may wish to consider
questions such as the following:
• What applications do we plan to
use over our broadband connection (e.g.
exchange of EHRs, videoconferencing,
image transfers, and other forms of
telehealth or telemedicine)? How do
these applications fit into our overall
strategy to improve care and/or generate
cost savings? How many users do we
need to support for each application?
• What broadband services do we
need to support the planned
applications and users?
• Do we have a plan to train our staff
to use the applications?
• Do we have the necessary IT
resources to deploy the broadband
services and applications?
• Have we considered the benefits
and drawbacks of short-term versus
multi-year contracts (e.g. cost savings in
long-term contracts versus potential
decreases in prices, technology
advances, and termination fees)?
• How will we pay for the
undiscounted portion of supported
services and equipment, and any
unsupported costs?
• Should we consider joining with
other HCPs to apply as a consortium? If
a consortium, should we include other
HCPs?
• What resources are available to help
us?
169. We encourage prospective
applicants to consult available
resources, including those previously
published by the Commission and
resources available through HHS, in
conducting their technology planning.
4. Preparation for Competitive Bidding
170. Discussion. The Commission has
defined ‘‘cost-effective’’ for purposes of
the existing RHC support mechanism as
‘‘the method that costs the least after
consideration of the features, quality of
transmission, reliability, and other
factors that the HCP deems relevant to
* * * choosing a method of providing
the required health care services.’’ The
Commission does not require HCPs to
use the lowest-cost technology because
factors other than cost, such as
reliability and quality, may be relevant
to fulfill their health care needs.
Furthermore, initially higher cost
options may prove to be lower in the
long-run, by providing useful benefits to
telemedicine in terms of future medical
and technological developments and
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maintenance. Therefore, unlike the Erate program, the RHC program does not
require participants to consider price as
the primary factor in selecting a service
provider. Instead, applicants identify
the factors relevant for health care
purposes, and then select the lowest
price bid that satisfies those
considerations. We conclude that
continuing this approach is appropriate
for the Healthcare Connect Fund.
171. Applicants must develop
appropriate evaluation criteria for
selecting the winning bid before
submitting a request for services to
USAC to initiate competitive bidding.
The evaluation criteria should be based
on the Commission’s definition of ‘‘costeffective,’’ and include the most
important criteria needed to provide
health care, as determined by the
applicant. For smaller applicants (e.g.
those requesting support for recurring
monthly costs for a single T–1 line),
criteria such as bandwidth, quality of
transmission, reliability, previous
experience with the service provider,
and technical support are likely to be
sufficient. For more complex projects
(including projects that involve
designing or constructing a new
network or building upon an existing
network), additional relevant non-cost
factors may include prior experience,
including past performance; personnel
qualifications, including technical
excellence; management capability,
including solicitation compliance; and
environmental objectives (if
appropriate).
172. Typically, an applicant will
develop a scoring matrix, or a list of
weighted evaluation criteria, that it will
use in evaluating bids. Once the
applicant has developed its evaluation
criteria, it should assign a weight to
each in order of importance. No single
factor may receive a weight that is
greater than price. For example, if the
HCP assigns a weight of 40 percent to
cost, other factors must receive a weight
of 40 percent or less individually (with
the total weight equaling 100%). Each
bid received should be scored against
the determined criteria, ensuring they
are all evaluated equally. All applicants
who are not exempt from competitive
bidding will be required to submit bid
evaluation documentation with their
funding requests.
5. Source(s) for Undiscounted Portion of
Costs
173. Although applicants are not
required to submit documentation
regarding sources for the undiscounted
portion of costs until they complete the
competitive bidding process, they
should begin identifying possible
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sources for their 35 percent as early as
possible. This is especially important
for larger consortia that intend to
undertake high-dollar projects. In the
Pilot Program, many projects
experienced delays due, in part, to
difficulty in obtaining the required
contribution.
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6. FCC Registration Number (FRN)
174. All applicants must obtain FCC
registration numbers (FRNs), if they do
not have one already. An FRN is a 10digit number that is assigned to a
business or individual registering with
the FCC, and is used to uniquely
identify the business or individual in all
of its transactions with the FCC.
Obtaining an FRN is a quick, online
process that can typically be completed
in a manner of minutes through the
Commission’s Web site. Consortium
applicants may obtain a single FRN for
the consortium as a whole, if desired
(i.e. instead of requiring each
participating HCP to obtain a separate
FRN).
B. Competitive Bidding
175. Discussion. Competitive bidding
remains a fundamental pillar supporting
our goals for the Healthcare Connect
Fund, as it will allow HCPs to obtain
lower rates (thereby increasing access to
broadband) and increase program
efficiency. The outlines of the
competitive bidding process for the new
program will remain the same as our
existing programs: All HCPs will submit
a request for services for posting by
USAC, wait at least 28 days before
selecting a service provider, and select
the most cost-effective bid. In addition,
in some circumstances, applicants will
be required to prepare a formal request
for proposals as well.
176. While competitive bidding is
essential to the program, we
acknowledge that it is not without
administrative costs to participants and
to the Fund. We conclude that in three
situations, exempting funding requests
from competitive bidding in the
Healthcare Connect Fund will strike a
common-sense balance between
efficient use of program funds and
reducing regulatory costs. First, based
on our experience with the
Telecommunications and Internet
Access Programs, we find that it will be
more administratively efficient to
exempt applicants seeking support for
relatively small amounts. The threshold
for this exemption is $10,000 or less in
total annual undiscounted costs (which,
with a 35 percent applicant
contribution, results in a maximum of
$6,500 annually in Fund support).
Second, if an applicant is purchasing
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services from a master service
agreement negotiated by a governmental
entity on its behalf, and the master
service agreement was awarded
pursuant to applicable federal, state,
Tribal, or local competitive bidding
processes, the applicant is not required
to re-undergo competitive bidding.
Third, we conclude that applicants who
wish to request support under the
Healthcare Connect Fund while
utilizing contracts previously endorsed
by USAC (Master Services Agreements
under the Pilot Program or the
Healthcare Connect Fund, or evergreen
contracts in any of the health care
programs, or master contracts the E-rate
program) may do so without undergoing
additional competitive bidding, as long
as they do not request duplicative
support for the same service and
otherwise comply with all program
requirements. In addition, consistent
with current RHC program policies,
applicants who receive evergreen status
or multi-year commitments under the
Healthcare Connect Fund are exempt
from competitive bidding for the
duration of the contract. Applicants
who are exempt from competitive
bidding can proceed directly to
submitting a funding commitment
request.
1. ‘‘Fair and Open’’ Competitive Bidding
Process
177. Discussion. Unless they qualify
for one of the competitive bidding
exemptions, all entities participating in
the Healthcare Connect Fund must
conduct a fair and open competitive
bidding process prior to submitting a
request for funding Form 462. Although
it is not possible to anticipate all
possible factual circumstances that may
arise during the process, we set forth
here three basic principles and some
specific guidance that should help
applicants comply with this
requirement.
178. First, service providers who
intend to bid should not also
simultaneously help the HCP choose a
winning bidder. More specifically,
service providers who submit bids are
prohibited from (1) preparing, signing or
submitting an applicant’s Form 461
documents; (2) serving as Consortium
Leaders or other points of contact on
behalf of applicants; (3) being involved
in setting bid evaluation criteria; or (4)
participating in the bid evaluation or
vendor selection process (except in their
role as potential vendors). Consultants,
other third-party experts, or applicant
employees who have an ownership
interest, sales commission arrangement,
or other financial stake with respect to
a bidding service provider are also
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prohibited from performing any of the
four functions on behalf of the
applicant. All applicants must submit a
‘‘Declaration of Assistance’’ with their
request for services (Form 461) to help
the Commission and USAC identify
third parties who assisted in the
preparation of the applications.
179. Second, all potential bidders and
service providers must have access to
the same information and must be
treated in the same manner. Any
additions or modifications to the
documents submitted to, and posted by,
USAC must be made available to all
potential service providers at the same
time and using a uniform method. We
direct USAC to facilitate this process by
allowing applicants to submit any
additions or modifications to USAC, for
posting on the same Web page as the
originally posted documents.
180. Finally, as is the case in the
Telecommunications, Internet Access,
and Pilot Programs, all applicants and
service providers must comply with any
applicable state or local competitive
bidding requirements. The
Commission’s requirements apply in
addition to, and are not intended to
preempt, such requirements.
2. Requests for Proposals
181. Discussion. We will require
submission of RFPs with Form 461 for
(1) applicants who are required to issue
an RFP under applicable state, Tribal, or
local procurement rules or regulations;
(2) consortium applications that seek
more than $100,000 in program support
in a funding year; and (3) consortium
applications that seek support for
infrastructure (i.e. HCP-owned facilities)
as well as services. Applicants who seek
support for long-term capital
investments, such as HCP-constructed
infrastructure or fiber IRUs, must also
seek bids in the same RFP from vendors
who propose to meet those needs via
services provided over vendor-owned
facilities, for a time period comparable
to the life of the proposed capital
investment. This is to allow USAC to
determine if the option chosen is the
most cost-effective. In addition, any
applicant is free submit an RFP to USAC
for posting, but all applicants who
utilize an RFP in conjunction with their
competitive bidding process must
submit the RFP to USAC for posting and
provide USAC with any subsequent
changes to the RFP. We conclude that
our requirement strikes a reasonable
balance between ensuring larger
consortia and the Fund benefit from the
cost savings resulting from the RFP
process, while limiting the
administrative burden on individual
HCPs and smaller consortia.
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182. Applicants who have or intend to
issue an RFP must submit a copy of the
RFP with their request for services. We
recognize that a consortium may not
know the exact cost of the project until
after it completes the competitive
bidding process and selects a vendor. If
a consortium chooses to forego an RFP,
however, its support will be capped at
$100,000.
183. The Commission does not
specify requirements for RFPs in the
current RHC program, and USAC does
not approve RFPs. Therefore, applicants
may prepare RFPs in any manner that
complies with program rules and any
applicable state, Tribal, or local
procurement rules or regulations. The
RFP, however, should provide sufficient
information to enable an effective
competitive bidding process, including
describing the HCP’s service needs and
defining the scope of the project and
network costs (if applicable). The RFP
should also specify the period during
which bids will be accepted. The RFP
should also include the scoring criteria
that will be used to evaluate bids for
cost-effectiveness, in accordance with
the requirements and solicit sufficient
information so that the criteria can be
applied effectively. A short, simple RFP
may be appropriate for smaller
consortia, or for consortia whose needs
are less complex. We note that consortia
may choose to submit single or multiple
requests for services (and multiple
RFPs), depending on the structure that
makes most sense for the particular
project.
3. USAC Posting of Request for Services
184. Discussion. Applicants subject to
competitive bidding must submit new
FCC Form 461 and supporting
documentation to USAC. The purpose
of these documents is to provide
sufficient information on the requested
services to enable an effective
competitive bidding process to take
place and to enable USAC to obtain
certifications and other information
necessary to prevent waste, fraud, and
abuse.
185. Documents to be submitted to
USAC with the ‘‘request for services’’
include the following:
• Form 461. Applicants should
submit Form 461, the ‘‘request for
services,’’ to provide information about
the services for which they are seeking
support. On Form 461, applicants will
provide basic information regarding the
HCP(s) on the application (including
contact information for potential
bidders), a brief description of the
desired services, and certifications
designed to ensure compliance with
program rules and minimize waste,
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fraud, and abuse. An applicant must
certify under penalty of perjury that (1)
it is authorized to submit the request
and that all statements of fact in the
application are true to the best of the
signatory’s knowledge; (2) it has
followed any applicable state or local
procurement rules; (3) the supported
services and/or equipment will be used
solely for purposes reasonably related to
the provision of health care service or
instruction that the HCP is legally
authorized to provide under the law of
the state in which the services are
provided and will not be sold, resold, or
transferred in consideration for money
or any other thing of value; and (4) the
HCP or consortium satisfies all program
requirements and will abide by all such
requirements. Applicants not using an
RFP should provide on Form 461
sufficient information regarding the
desired services to enable an effective
competitive bidding process, including,
at a minimum, a summary of their
service needs, the dates for service
(including whether the contract is
potentially for multiple years), and the
dates of the bid evaluation period.
Consortium Leaders should provide the
required information on behalf of all
participating HCPs.
• Applicants who include a particular
service provider’s name, brand, product
or service on Form 461 or in the RFP
must also use the words ‘‘or equivalent’’
in the description, in order to avoid the
appearance that the applicant has preselected the named service provider or
intends to give the service provider
preference in the bidding process. In
addition, an applicant may wish to
describe its needs in general terms (e.g.,
‘‘need to transmit data and medical
images’’ rather than requesting a
specific service or bandwidth), because
the applicant may not be aware of all
potential service providers in its market.
Using general terms can allow an
applicant to avoid inadvertently
excluding a lower-cost bid from a
service provider using a newer
technology.
• Bid Evaluation Criteria. The
requirements for bid evaluation criteria
are discussed.
• Request for Proposal. Certain
applicants must use an RFP in the
competitive bidding process, and any
applicant may use an RFP. Applicants
who use an RFP should submit it (along
with any other relevant bidding
information) as an attachment to Form
461.
• Network Planning for Consortia.
Consortium applicants must submit a
narrative attachment with Form 461 that
includes the following information:
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(1) Goals and objectives of the
proposed network;
(2) Strategy for aggregating the
specific needs of HCPs (including
providers that serve rural areas) within
a state or region;
(3) Strategy for leveraging existing
technology to adopt the most efficient
and cost effective means of connecting
those providers;
(4) How the broadband services will
be used to improve or provide health
care delivery;
(5) Any previous experience in
developing and managing health IT
(including telemedicine) programs; and
(6) A project management plan
outlining the project’s leadership and
management structure, and a work plan,
schedule, and budget.
The network planning requirements
are consistent with those in the Pilot
Program. For purposes of the Healthcare
Connect Fund, however, submission of
this information is a minimum
requirement, not a scoring metric for
choosing funding recipients. We do not
intend for this planning to be an undue
administrative burden, and will
continue to allow consortia to put forth
a variety of strategies for accomplishing
their goals, as the Commission did in
the Pilot Program.
Consortium applicants are required to
use program support. All applicants are
subject to the Commission’s procedures
for audits and other measures to prevent
waste, fraud, and abuse.
• Form 460. Applicants should
submit Form 460 to certify to the
eligibility of HCP(s) listed on the
application, if they have not previously
done so.
• Letters of Agency for Consortium
Applicants. Consortium applicants
should submit letters of agency
demonstrating that the Consortium
Leader is authorized to submit Form
461, including required certifications
and any supporting materials, on behalf
of each participating HCP in the
consortium.
• Declaration of Assistance. As the
Commission did in the Pilot Program,
we require that all applicants identify,
through a declaration of assistance, any
consultants, service providers, or any
other outside experts, whether paid or
unpaid, who aided in the preparation of
their applications. The declaration of
assistance must be filed with the Form
461. Identifying these consultants and
outside experts facilitates the ability of
USAC, the Commission, and law
enforcement officials to identify and
prosecute individuals who may seek to
defraud the program or engage in other
illegal acts. To ensure participants
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comply with the competitive bidding
requirements, they must disclose all of
the types of relationships.
186. Applicants may submit Form 461
starting 180 days before the beginning of
the funding year. Our experience in the
Pilot Program is that it can take as long
as six months for more complex projects
to complete bid evaluation and select a
vendor. To allow sufficient time to
complete this process prior to the
beginning of the funding year, HCPs
should submit Form 461 as soon as
possible after the filing window opens.
USAC may provide applicants with the
opportunity to cure errors on their
submissions, up to the date of posting
of the Form 461 package. The
responsibility to submit complete and
accurate information to USAC, however,
remains at all times the sole
responsibility of the applicant.
4. 28-Day Posting Requirement
187. After the HCP submits Form 461,
USAC will post the form and any
accompanying documents (the Form
461 ‘‘package’’) on its Web site. USAC
may institute reasonable procedures for
processing Form 461 and the associated
documents and may provide applicants
with an opportunity to correct errors in
the submissions. We caution applicants,
however, that they remain ultimately
responsible for ensuring that all forms
and documents submitted comply with
our rules and any other applicable state
or local procurement requirements. We
also remind applicants that they must
certify under penalty of perjury on Form
461 that all statements of facts
contained therein are true to the best of
their knowledge, information, and
belief, and that under federal law,
persons willfully making false
statements on the form can be punished
by fine, forfeiture, or imprisonment. If
an applicant makes any changes to its
RFP post-submission, it is responsible
for ensuring that USAC has a current
version of the RFP for the Web site
posting.
188. The NPRM proposed that
applicants seeking infrastructure bids
should be required to distribute their
RFPs in a method likely to garner
attention from interested vendors. In
keeping with our objective of
minimizing administrative costs to
applicants, however, we decline to
adopt a formal requirement for
applicants to distribute an RFP beyond
the USAC posting process. We do
encourage applicants, however, to
disseminate their requests for services
(Form 461 package) as widely as
possible, in order to maximize the
quality and quantity of bids received.
Such methods could include, for
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example, (1) posting a notice of the
Form 461 package in trade journals or
newspaper advertisements; (2) send the
RFP to known or potential service
providers; (3) posting the Form 461
package (or a link thereto) on the HCP’s
Web page or other Internet sites, or (4)
following other customary and
reasonable solicitation practices used in
competitive bidding.
189. After posting of the Form 461
package, USAC will send confirmation
of the posting to the applicant,
including the posting date and the date
on which the applicant may enter into
a contract with the selected service
provider (the ‘‘Allowable Contract
Selection Date,’’ or ACSD). Once USAC
posts the package, interested bidders
should submit bids directly to the
applicant. Applicants must wait at least
28 calendar days from the date on
which their Form 461 packages are
posted on USAC’s Web site before
making a commitment with a service
provider, so the ACSD is the 29th
calendar day after the posting.
Applicants may not agree to or sign a
contract with a service provider until
the ACSD, but may discuss
requirements, rates, and conditions with
potential service providers prior to that
date. Applicants who select a service
provider before the ACSD will be
denied funding.
190. Applicants are free to extend the
time period for receiving bids beyond 28
days from the posting of Form 461 and
may do so without prior approval. In
addition, some applicants who propose
larger, more complex projects may wish
to undertake an additional ‘‘best and
final offer’’ round of bidding. Allowing
sufficient time and opportunity for all
potential bidders to develop and submit
bids can lead to more and better bids,
and has the potential to enhance the
quality and lower the price of services
ultimately received. We encourage HCPs
contemplating more complex projects
(including those with an infrastructure
component) to utilize a longer bidding
period, as done by many Pilot projects.
If an applicant has plans to utilize a
period longer than 28 days, it should so
indicate clearly on the Form or in
accompanying documentation. An
applicant that decides to extend the
bidding period after USAC’s posting of
Form 461 should notify USAC
promptly, so that USAC can update its
Web site posting with notice of the
extension.
5. Selection of the Most ‘‘Cost-Effective’’
Bid and Contract Negotiation
191. Once the 28-day period expires,
applicants may evaluate bids, select a
winning bidder and negotiate a contract.
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Applicants should develop appropriate
evaluation criteria for selecting the
‘‘most cost-effective’’ bid according to
the Commission’s rules before
submitting a Form 461 package to
USAC. Applicants should follow those
evaluation criteria in evaluating bids
and selecting a service provider. All
applicants subject to competitive
bidding will be required to certify to
USAC that the services and/or
infrastructure selected are, to the best of
the applicant’s knowledge, the most
cost-effective option available.
192. Applicants must submit
documentation to USAC to support their
certification that they have selected the
most cost-effective vendor, including a
copy of each bid received (winning,
losing, and disqualified), the bid
evaluation criteria, and any other
related documents, such as bid
evaluation sheets; a list of people who
evaluated bids (along with their title/
role/relationship to the applicant
organization); memos, board minutes, or
similar documents related to the vendor
selection/award; copies of notices to
winners; and any correspondence with
service providers during the bidding/
evaluation/award phase of the process.
We explain how applicants may seek
confidential treatment for these
documents. We do not require bid
evaluation documents to be in a certain
format, but the level of documentation
should be appropriate for the scale and
scope of the services for which support
is requested. Thus, for example, we
expect that the documentation for a
large network project will be more
extensive than for an individual HCP
seeking support for a single circuit.
Applicants should also retain the
supporting documentation for five years
from the end of the relevant funding
year, pursuant to the recordkeeping
requirements.
193. Certain tariffed or month-tomonth services are typically not
provided pursuant to a signed, written
contract. For all other services, the
contract should be negotiated and
signed before applicants submit a
request for a funding commitment.
Applicants who wish to enter into a
multi-year contract and be exempt from
competitive bidding for the duration of
the contract (‘‘evergreen status’’) should
ensure that the contract identifies both
parties; is signed and dated by the HCP
or Consortium Leader after the
Allowable Contract Selection Date; and
specifies the type, term, and cost of
service(s). Applicants will be required
to submit a copy of the final contract(s)
with their funding requests.
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6. Competitive Bidding Exemptions
194. An applicant that qualifies for
any of the exemptions (and does not
wish to use the competitive bidding
process) is not required to prepare and
post a Form 461. Instead, the applicant
may proceed directly to filing the
request for funding commitment (Form
462). If the applicant has not previously
submitted Form 460 to certify to its
eligibility, it should submit that form at
the same time, or prior to, submitting
Form 462. The exemptions only apply
to participants receiving support
through the Healthcare Connect Fund,
not the existing RHC or Pilot Programs.
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a. Annual Undiscounted Cost of $10,000
or Less
195. Discussion. Based on our
experience with the
Telecommunications and Pilot
programs, we adopt an exemption to the
competitive bidding requirements under
the Healthcare Connect Fund for an
applicant and any related applicants
that seek support for $10,000 or less of
total undiscounted eligible expenses for
a single year (i.e., with a required HCP
contribution of 35 percent, up to $6,500
in Fund support). This exemption does
not apply to multi-year contracts. This
approach recognizes that for applicants
pursuing small dollar value contracts,
the administrative costs associated with
the competitive bidding process may
likely outweigh the potential benefits.
Even with the exemption, however, we
encourage smaller applicants to
consider using the competitive bidding
process to help ensure they are
receiving the best service and pricing
available.
196. The $10,000 annual limit is
based on the average undiscounted
recurring monthly cost of a 1.5 to 3.0
Mbps connection as observed under
both the Telecommunications and Pilot
programs. Based on this limit, small
applicants, typically single HCP sites,
should be able to secure support for a
T–1 line or similar service without
having to go through the competitive
bidding process. A consortium
application seeking support for
undiscounted costs of $10,000 or less is
also exempt from competitive bidding if
the total of all consortium members’
undiscounted costs for which support is
sought, in this and any other application
combined, is not more than $10,000 for
that year. We recognize that as a
practical matter, this will likely prevent
all but the smallest consortia from
qualifying for the exemption, but as
observed under the Pilot Program,
consortia can substantially benefit from
the competitive bidding process in
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terms of better pricing and higher
quality of service.
197. We recognize that an applicant
may not always be able to exactly
predict its annual eligible expenses in
advance. If the applicant chooses to
forego competitive bidding, however, its
annual support will be capped at $6,500
(65 percent of $10,000) for any services
that are not subject to an exemption. If
a qualifying applicant later discovers
that it requires additional services
beyond the $10,000 limit, the applicant
may receive support for the additional
services if it first completes the
competitive bidding process for the
additional services.
b. Government Master Service
Agreements
198. Discussion. We adopt a
competitive bidding exemption for
HCPs who are purchasing services and/
or equipment from MSAs negotiated by
federal, state, Tribal, or local
government entities on behalf of such
HCPs and others, if such MSAs were
awarded pursuant to applicable federal,
state, Tribal, or local competitive
bidding requirements. This exemption
helps streamline the application process
by removing unnecessary and
duplicative government competitive
bidding requirements while still
ensuring fiscal responsibility. Because
these MSAs have government
requirements for competitive bidding,
this fairly ‘‘removes the burden from the
Rural Health Care Provider to conduct
an additional competitive bid.’’ This
exemption only applies to MSAs
negotiated by, or under the direction of,
government entities and subject to
government competitive bidding
requirements. Applicants must submit
documentation demonstrating that they
qualify for the exemption, including a
copy of the MSA and documentation
that it was subject to government
competitive bidding requirements. In
many cases these government contracts
were negotiated on behalf of a large
number of users, so are likely to
generate similar cost efficiencies as
those derived through the Healthcare
Connect Fund competitive bidding
process.
199. Commenters generally support
the adoption of a competitive bidding
exemption that allows applicants to take
services from a government MSA, so
long as the original master contract was
subject to a competitive bidding
process. For instance, CCHCS
‘‘recommends that the Commission
exempt from competitive bidding
requirements State HCPs that are
required to use the State mandated
Master Services Agreements for the
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procurement of telecommunication and/
or broadband services.’’ Similarly,
VAST argues that the ‘‘Commission
should allow eligible Health Care
Providers to take services from a federal
or state Master Service Agreement
(MSA) that has been awarded through a
competitive bidding process.’’
c. Master Service Agreements Approved
Under the Pilot Program or the
Healthcare Connect Fund
200. Discussion. We adopt a
competitive bidding exemption for
HCPs purchasing services or equipment
from an MSA, whether the contract was
originally secured through the
competitive bidding process under the
Pilot Program or in the future through
the Healthcare Connect Fund. As the
Commission stated in the July 2012
Bridge Funding Order, 77 FR 42185,
July 18, 2012, sufficient safeguards are
in place to protect against waste, fraud,
and abuse in these situations because
HCPs have already gone through the
competitive bidding process to identify
and select the most cost-effective service
provider in instituting these contracts.
This exemption also applies to MSAs
that have been secured through
competitive bidding with funding
approved by USAC during the Pilot
Program bridge period. In addition, the
exemption will apply to services or
equipment purchased during an MSA
extension approved by USAC. The
exemption is limited to those MSAs that
were developed and negotiated from an
RFP that specifically sought a
mechanism for adding additional sites
to the network. This exemption does not
extend to MSAs or extensions thereof
that are not approved by USAC.
d. Evergreen Contracts
201. Discussion. As proposed in the
NPRM, and as supported in the record,
we allow contracts to be designated as
‘‘evergreen’’ in the Healthcare Connect
Fund. As stated in the NPRM and
echoed by commenters, evergreen
procedures likely will benefit
participating HCPs by affording them:
(1) lower prices due to longer contract
terms; and (2) reduced administrative
burdens due to fewer required Form
465s.
202. A contract entered into by an
HCP or consortium as a result of
competitive bidding will be designated
as evergreen if it meets all of the
following requirements: (1) Signed by
the individual HCP or consortium lead
entity; (2) specifies the service type,
bandwidth and quantity; (3) specifies
the term of the contract; (4) specifies the
cost of services to be provided; and (5)
includes the physical addresses or other
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identifying information of the HCPs
purchasing from the contract. Consortia
will be permitted to add new HCPs if
the possibility of expanding the network
was contemplated in the competitive
bidding process, and the contract
explicitly provides for such a
possibility. Similarly, service upgrades
will be permitted as part of an evergreen
contract if the contemplated upgrades
are proposed during the competitive
bidding process, and the contract
explicitly provides for the possibility of
service upgrades.
203. Participants may also exercise
voluntary options to extend an
evergreen contract without undergoing
additional competitive bidding, subject
to certain limitations. First, the
voluntary extension(s) must be
memorialized in the evergreen contract.
Second, the decision to extend the
contract must occur before the
participant files its funding request for
the funding year when the contract
would otherwise expire. Third,
voluntary extension(s) may not exceed
five years, after which the service(s)
must be re-bid. We find that this
limitation strikes an appropriate balance
between two competing considerations:
(1) providing HCPs with the price and
administrative savings of entering into a
long-term contract; and (2) ensuring that
HCPs periodically re-evaluate whether
they can obtain better prices through rebidding a service.
204. We also conclude that, if an HCP
has a contract that was designated as
evergreen under Telecommunications
Program or Internet Access Program
procedures prior to January 1, 2014, it
may choose to seek support for services
provided under the evergreen contract
from the Healthcare Connect Fund
instead without undergoing additional
competitive bidding, so long as the
services are eligible for support under
the Healthcare Connect Fund, and the
HCP complies with all other Healthcare
Connect Fund rules and procedures.
The Commission noted in the NPRM
that codifying the evergreen policy
‘‘would maintain consistency while
transitioning from the existing internet
access program to the new health
broadband services program.’’ Allowing
HCPs who have already competitively
bid (and received evergreen status for)
multi-year contracts seamlessly to
transition into the Healthcare Connect
Fund furthers our program goals to
streamline the application process and
promote fiscal responsibility and costeffectiveness. Pilot Program participants
who have negotiated a long-term
contract that extends beyond the period
of their Pilot awards may also seek to
have their contracts designated as
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‘‘evergreen’’ by USAC for purposes of
the Healthcare Connect Fund without
undergoing a new competitive bidding
process, as long as the existing contract
meets the requirements for an evergreen
contract. If an evergreen contract
approved under the
Telecommunications Program, Internet
Access Program, or a Pilot Program
contract designated as evergreen under
the Healthcare Connect Fund includes
voluntary extensions, HCPs utilizing
such contracts in the Healthcare
Connect Fund may also exercise such
voluntary extensions consistent with the
requirements.
e. Contracts Negotiated Under E-Rate
205. Discussion. Consistent with
§ 54.501(c)(1) of our rules, we conclude
that an HCP entering into a consortium
with E-rate participants and becoming a
party to the consortium’s existing
contract should be exempt from the
RHC competitive bidding requirements,
so long as the contract was
competitively bid consistent with E-rate
rules, approved for use in the E-rate
program as a master contract, and the
Healthcare Connect Fund applicant (i.e.
the individual HCP or consortium)
otherwise complies with all Healthcare
Connect Fund rules and procedures. An
applicant utilizing this exemption must
submit documentation with its request
for funding that demonstrates that (1)
the applicant is eligible to take services
under the consortium contract; and (2)
the consortium contract was approved
as a master contract in the E-rate
program. We agree with MiCTA that
such an exemption will reduce HCPs’
individual administrative burdens and
encourage consortia, and likely will
save universal service funds due to the
lower contract prices often associated
with consortia bulk-buying. We thus
find that a competitive bidding
exemption for HCPs entering into
contracts negotiated under the E-rate
program will further our program goals
to streamline the application process,
facilitate consortium applications, and
promote fiscal responsibility and costeffectiveness. We note that an HCP in a
consortium with E-rate participants may
receive support only for services eligible
for support under the RHC programs.
f. No Exemption for Internet2 and
National LambdaRail
206. Discussion. We require
participants to seek competitive bids
from any research and education
networks, including Internet2 and
National LambdaRail, through our
standard competitive bidding process.
There may be instances where a more
cost-effective solution is available from
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a commercial provider, or even a nonprofit provider other than Internet2 or
National LambdaRail, and a competitive
bidding requirement will ensure that
HCPs consider options from all
interested service providers. Many
commenters opposed the Commission’s
proposal to exempt National
LambdaRail and Internet2 from
competitive bidding, arguing, among
other things, that such an exemption
would be anti-competitive by
disadvantaging other
telecommunications providers. We find
that requiring HCPs to seek bids from
National LambdaRail and Internet2
through the normal competitive bidding
process could result in lower-priced
bids, and should therefore be required.
This approach furthers our program goal
to promote fiscal responsibility and
cost-effectiveness.
C. Funding Commitment From USAC
207. Once a service provider is
selected, applicants in the current RHC
program submit a ‘‘Funding Request’’
(and supporting documentation) to
provide information about the services
selected and certify that the services
were the most cost-effective offers
received. If USAC approves the
‘‘Request for Funding,’’ it will issue a
‘‘Funding Commitment Letter.’’ USAC’s
role is to review the funding request for
accuracy and completeness. Once an
applicant receives a funding
commitment, it may invoice USAC after
receiving a bill from the service
provider. Applicants do not need to file
a Form 467 to notify USAC that the
service provider began providing
services for which the applicant is
seeking support.
1. Requirements for Service Providers
208. All vendors that participate in
the Healthcare Connect Fund are
required to have a Service Provider
Identification Number (SPIN). The SPIN
is a unique number assigned to each
service provider by USAC, and serves as
USAC’s tool to ensure that support is
directed to the correct service provider.
SPINs must be assigned before USAC
can authorize support payments.
Therefore, all service providers
submitting bids to provide services to
selected participants will need to
complete and submit a Form 498 to
USAC for review and approval if
selected by a participant before funding
commitments can be made.
209. Service providers in the
Healthcare Connect Fund must certify
on Form 498, as a condition of receiving
support, that they will provide to HCPs,
on a timely basis, all information and
documents regarding the supported
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service(s) that are necessary for the HCP
to submit required forms or respond to
FCC or USAC inquiries. In addition,
USAC may withhold disbursements for
the service provider if the service
provider, after written notice from
USAC, fails to comply with this
requirement.
2. Filing Timeline for Applicants
210. Discussion. Unless and until the
Commission adopts other procedures to
prioritize requests for funding, we retain
the rule that requests for funding may be
submitted at any point during the
funding year, and direct USAC to
process and prioritize funding requests
on a rolling basis (according to the date
of receipt) until it reaches the program
cap established by the Commission.
Given the historical utilization of RHC
support and the implementation
timetable for funding year 2013, we do
not currently anticipate that demand
will exceed the $400 million cap in FY
2013 or for the foreseeable future. We
conclude, however, that this
longstanding default rule will apply in
the unlikely event that the cap is
exceeded, unless and until the
Commission adopts a different rule for
prioritizing funding requests. We also
direct USAC to periodically inform the
public, through its Web site, of the total
dollar amounts (1) requested by HCPs
and (2) actually committed by USAC for
the funding year, as well as the amounts
committed in upfront payments (for
purposes of the $150 million cap on
upfront payments).
211. We also direct USAC to establish
a filing window for funding year 2013
and for future funding years as
necessary, for both the
Telecommunications Program and the
Healthcare Connect Fund. When USAC
establishes a filing window, it should
provide notice of the window in
advance via public notice each year.
The filing window may begin prior to
the first day of the funding year, as long
as actual support is only provided for
services provided during the funding
year.
212. As in the Telecommunications
Program, applicants may initiate
services at their own risk during the
funding year pending the processing of
their funding requests, as long as the
services are provided pursuant to a
contract or other service agreement that
complies with program requirements
(including the competitive bidding
process). The contract must be signed
(or the service agreement entered into)
before the applicant submits a funding
request.
213. Funding will be available for
Pilot participants starting July 1, 2013,
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and starting January 1, 2014, for other
applicants.
3. Required Documentation for
Applicants
214. This information should be
submitted to USAC to support a request
for commitment of funds.
215. Form 462. Form 462 is the means
by which an applicant identifies the
service(s), rates, service provider(s), and
date(s) of service provider (vendor)
selection. In the Primary Program,
applicants are required to submit a
separate form for each service or circuit
for which the applicant is seeking
support. In the Healthcare Connect
Fund, we will not require separate
forms for each service or circuit, thereby
lessening administrative burden on
potential Fund recipients. Each
individual applicant will submit a
single form for each service provider
that lists the relevant information for all
service(s) or circuit(s) for which the
individual applicant is seeking support
at the time. Similarly, each consortium
applicant will submit a single form for
each service provider that lists the
relevant information for all consortium
members, including the service(s) or
circuit(s) for which each member is
seeking support at the time.
216. Certifications. Applicants must
provide the following certifications on
Form 462.
• The person signing the application
is authorized to submit the application
on behalf of the applicant, and has
examined the form and all attachments,
and to the best of his or her knowledge,
information, and belief, all statements of
fact contained therein are true.
• Each service provider selected is, to
the best of the applicant’s knowledge,
information, and belief, the most costeffective service provider available, as
defined in the Commission’s rules.
• All Healthcare Connect Fund
support will be used only for the
eligible health care purposes, as
described in this Order and consistent
with the Act and the Commission’s
rules.
• The applicant is not requesting
support for the same service from both
the Telecommunications Program and
the Healthcare Connect Fund.
• The applicant satisfies all of the
requirements under section 254 of the
Act and applicable Commission rules,
and understands that any letter from
USAC that erroneously commits funds
for the benefit of the applicant may be
subject to rescission.
• The applicant has reviewed all
applicable requirements for the program
and will comply with those
requirements.
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• The applicant will maintain
complete billing records for the service
for five years.
217. Contracts or other
documentation. All applicants must
submit a contract or other
documentation that clearly identifies (1)
the vendor(s) selected and the HCP(s)
who will receive the services; (2) the
service, bandwidth, and costs for which
support is being requested; (3) the term
of the service agreement(s) if applicable
(i.e. if services are not being provided on
a month-to-month basis). For services
provided under contract, the applicant
must submit a copy of a contract signed
and dated (after the Allowable Contract
Selection Date) by the individual HCP
or Consortium Leader. If the service is
not being provided under contract, the
applicant must submit a bill, service
offer, letter, or similar document from
the service provider that provides the
required information. In either case,
applicants must ensure that the
documentation provided specifies all
charges for which the applicant is
receiving support (for example, if the
contract does not specify all such
charges, applicants should submit a bill
or other similar documentation to
support their request). In addition,
applicants may wish to submit a
network or circuit diagram for requests
involving multiple vendors or circuits.
218. Competitive bidding documents.
Applicants must submit documentation
to support their certifications that they
have selected the most cost-effective
option. Relevant documentation
includes a copy of each bid received
(winning, losing, and disqualified), the
bid evaluation criteria, and any other
related documents. Applicants who are
exempt from competitive bidding
should also submit any relevant
documentation to allow USAC to verify
that the applicant is eligible for the
exemption (e.g., a copy of the relevant
government MSA and documentation
showing that the applicant is eligible to
purchase from the MSA, or USAC
correspondence identifying and
approving a contract previously
approved for the Pilot Program).
219. Cost allocation for ineligible
entities or components. Applicants who
seek to include ineligible entities within
a consortium, or to obtain support for
services or equipment that include both
eligible and ineligible components,
should submit a description of their cost
allocation methodology per the
requirements. Applicants should also
submit any agreements that memorialize
cost-sharing arrangements with
ineligible entities.
220. Evidence of viable source for 35
percent contribution. Many projects in
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the Pilot Program experienced
implementation delays, in part due to
the difficulty in obtaining their required
contribution. In the NPRM, the
Commission suggested participants in
the proposed infrastructure program be
required to demonstrate they have a
reasonable and viable source for their
contribution by submitting letters of
assurances confirming funds from
eligible sources to meet the contribution
requirement.
221. We require all consortium
applicants to submit, with their funding
requests, evidence of a viable source for
their 35 percent contribution. We adopt
this requirement to minimize
administrative processing of
applications that do not have a source
for the required match, which will
lessen USAC’s administrative costs and
thereby lessen the burden on the Fund.
Applicants, especially those that intend
to undertake high-dollar projects,
should begin identifying potential
sources for their contribution as early as
possible. The funding request is the last
major step in the application process
before applicants receive a funding
commitment, and at this stage
applicants should be well advanced in
determining the amount of their
contribution and the source for that
contribution. We also note that program
participants will be required to submit
a certification that they have paid their
35 percent contribution before USAC
will disburse universal service support,
so it is important for participants to
have a ready source of payment before
they begin receiving services.
222. Consortia may provide evidence
of a viable source by submitting a letter
signed by an officer, director, or other
authorized employee of the Consortium
Leader. The letter should identify the
entity that will provide the 35 percent
contribution, and the type of eligible
source (e.g. HCP budget, grant/loan,
etc.). If the applicant contribution is
dependent on appropriations, grant
funding, or other special conditions, the
applicant should include a description
of any special conditions and general
information regarding those conditions.
If the applicant has already identified
secondary sources of funding, it should
also include information regarding such
sources in its letter. If the source for the
participant contribution is excess
capacity, applicants must identify the
entit(ies) who will pay for the excess
capacity, and submit evidence of
arrangements made to comply with the
requirements.
223. Consortium applicants are not
required to identify the funding source
for each consortium member if each
consortium member will pay its
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contribution individually. Instead, the
Consortium Leader should (1) verify
that each member will pay its
contribution from an eligible source
(e.g., by requesting a certification to that
effect in the consortium member’s LOA)
and (2) submit documentation (e.g.
consortium membership agreement) that
shows that each member has agreed to
pay its own contribution from an
eligible source.
224. We delegate authority to the
Bureau to provide more specific
guidance, if needed, on the content of
the letter and documentation to be
submitted. USAC may, as needed,
request additional documentation from
applicants in order to ensure
compliance with this requirement.
225. Additional documentation for
consortium applicants. Consortium
applicants should submit any revisions
to the project management plan, work
plan, schedule, and budget previously
submitted with the Request for Services
(Form 461). If not previously provided
with the project management plan,
applicants should also provide (or
update) a narrative description of how
the network will be managed, including
all administrative aspects of the network
(including but not limited to invoicing,
contractual matters, and network
operations.) If the consortium is
required to provide a sustainability
plan, the revised budget should include
the budgetary factors discussed in the
sustainability plan requirements.
Finally, consortium applicants will be
required to provide electronically (via a
spreadsheet or similar method) a list of
the participating HCPs and all of their
relevant information, including eligible
(and ineligible, if applicable) cost
information for each participating HCP.
USAC may reject submissions that lack
sufficient specificity to determine that
costs are eligible.
226. Sustainability plans for
applicants requesting support for longterm capital expenses. In the NPRM, the
Commission proposed to require
sustainability plans similar to those
required in the Pilot Program for HCPs
who intended to have an ownership
interest, indefeasible right of use, or
capital lease interest in facilities funded
by the Fund. We adopt the proposal in
the NPRM, and require that consortia
who seek funding to construct and own
their own facilities or obtain IRUs or
capital lease interests to submit a
sustainability plan with their funding
requests demonstrating how they intend
to maintain and operate the facilities
that are supported over the relevant
time period. A sustainability plan for
such projects is appropriate to protect
the Fund’s investment, because such
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projects are requesting support for
capital expenses that are intended to
have long-term benefits.
227. We largely adopt the same
specific requirements for sustainability
plans proposed in the NPRM and
utilized in the Pilot Program. Although
participants are free to include
additional information to demonstrate a
project’s sustainability, the
sustainability plan must, at a minimum,
address the following points:
• Projected sustainability period.
Indicate a reasonable sustainability
period that is at least equal to the useful
life of the funded facility. Although a
sustainability period of 10 years is
generally appropriate, the period of
sustainability should be commensurate
with the investments made from the
health infrastructure program. For
example, if the applicant is purchasing
a 20 year IRU, the sustainability period
should be a minimum of 20 years. The
applicant’s budget should show
projected income and expenses (i.e. for
maintenance) for the project at the
aggregate level, for the sustainability
period.
• Principal factors. Discuss each of
the principal factors that were
considered by the participant to
demonstrate sustainability. This
discussion should include all factors
that show that the proposed network
will be sustainable for the entire
sustainability period. Any factor that
will have a monetary impact on the
network should be reflected in the
applicant’s budget.
• Terms of membership in the
network. Describe generally any
agreements made (or to be entered into)
by network members (e.g., participation
agreements, memoranda of
understanding, usage agreements, or
other documents). If the consortium will
not have agreements with the network
members, it should so indicate in the
sustainability plan. The sustainability
plan should also describe, as applicable:
(1) Financial and time commitments
made by proposed members of the
network; (2) if the project includes
excess bandwidth for growth of the
network, describe how such excess
bandwidth will be financed; and (3) if
the network will include eligible HCPs
and other network members, describe
how fees for joining and using the
network will be assessed.
• Ownership structure. Explain who
will own each material element of the
network (e.g., fiber constructed, network
equipment, end user equipment). For
purposes of responding to this question,
‘‘ownership’’ includes an IRU interest.
Applicants should clearly identify the
legal entity who will own each material
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element so that USAC can verify that
only eligible entities receive the benefits
of program support. Applicants should
also describe any arrangements made to
ensure continued use of such elements
by the network members for the
duration of the sustainability period.
• Sources of future support. If
sustainability is dependent on fees to be
paid by eligible HCPs, then the
sustainability plan should confirm that
the HCPs are committed and have the
ability to pay such fees. If sustainability
is dependent on fees to be paid by
network members that will use the
network for health care purposes, but
are not eligible HCPs under the
Commission’s rules, then the
sustainability plan should identify such
entities. Alternatively, if sustainability
is dependent on revenues from excess
capacity not related to health care
purposes, then the sustainability plan
should identify the proposed users of
such excess capacity. Projects who have
multiple sources of funding should
address each source of funding and the
likelihood of receiving that funding.
Eligible HCPs may not receive support
twice for the same service. For example,
if the Healthcare Connect Fund provides
support for a network to procure an IRU
to be used by its members, and the
network charges its members a fee to
cover the undiscounted cost of the IRU,
the members may not then individually
apply for program support to further
discount the membership fee.
• Management. The applicant’s
management plan should describe the
management structure of the network
for the duration of the sustainability
period, and the applicant’s budget
should describe how management costs
will be funded.
228. The Pilot Program required
projects to submit a copy of their
sustainability plan with every quarterly
report. Based on our experience with
the Pilot Program, we conclude
submission of the sustainability report
on a quarterly basis is unnecessarily
burdensome for applicants, and
provides little useful information to the
Administrator. We therefore conclude
that sustainability reports for the
Healthcare Connect Fund should only
be required to be re-filed if there is a
material change in sources of future
support or management, a change that
would impact projected income or
expenses by the greater of 20 percent or
$100,000 from the previous submission,
or if the applicant submits a funding
request based on a new Form 461 (i.e.,
a new competitively bid contract). In
that event, the revised sustainability
report should be provided to USAC no
later than the end of the relevant
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quarter, clearly showing (i.e., by
redlining or highlighting) what has
changed.
4. Requests for Multi-Year
Commitments
229. In the July 19 Public Notice, 77
FR 43773, July 26, 2012, the Bureau
sought to further develop the record on
issues relating to multi-year contracts,
including issues relating to upfront
payments. Commenters unanimously
supported multi-year commitments as a
measure that would reduce
administrative costs and increase the
value of the services procured.
230. Discussion. We will allow
applicants in the Healthcare Connect
Fund to receive multi-year funding
commitments that cover a period of up
to three funding years. The multi-year
funding commitments we adopt will
reduce uncertainty and administrative
burden by eliminating the need for
HCPs to apply every year for funding, as
is required under the Primary Program,
and reduce administrative expenses
both for the projects and for USAC.
Multi-year funding commitments,
prepaid leases, and IRUs also encourage
term discounts and produce lower rates
from vendors. Multi-year commitments
will also allow consortium applicants to
choose HCP-constructed-and-owned
infrastructure where it is the most costeffective way to obtain broadband.
Applicants receiving support for longterm capital investments whose useful
life extends beyond the period of the
funding commitment may be subject to
additional reporting requirements to
ensure that such facilities continue to be
used for their intended purpose
throughout their useful life. We delegate
authority to the Bureau to issue
administrative guidance to implement
such requirements.
231. Applicants requesting a funding
commitment for a multi-year funding
period should indicate the years for
which funding is required on Form 462
and, for consortia, with the attachment
that lists the HCPs and costs for each
HCP within the network. If a long-term
contract covers a period of more than
three years, the applicant may also have
the contract designated as ‘‘evergreen’’ if
the contract meets the criteria specified,
which will allow the applicant to reapply for a funding commitment under
the contract after three years without
having to undergo additional
competitive bidding. In choosing a
three-year period, we strike a balance
between allowing applicants and the
Fund to reap the benefits of long-term
contracts, reducing administrative
burdens on applicants and the Fund,
and ensuring that applicants are not
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‘‘locked in’’ to long-term contracts
which may prevent them from seeking
more cost-effective options when prices
drop, or they choose to upgrade to
higher bandwidths/newer technologies.
Three years is also consistent with our
requirement that upfront payments
averaging more than $50,000/site be
amortized over at least three years.
Commenters generally support a threeyear period as being reasonable.
Consistent with current rules, a multiyear funding commitment cannot
extend beyond the end of the contract
submitted with the request for funding.
For example, if an applicant submits a
two-year contract and requests a multiyear funding commitment, USAC will
only issue a funding commitment for
two years. Similarly, if a contract ends
in the middle of the funding year, the
funding commitment can only extend to
the end date of the contract.
232. In the NPRM, the Commission
proposed a $100 million cap for
infrastructure projects. We institute a
single cap of $150 million annually that
will apply to all commitments for
upfront payments during the funding
year, and all multi-year commitments
made during a funding year. This
approach for the hybrid infrastructureservices program will provide greater
flexibility than the $100 million cap
proposed in the NPRM for infrastructure
projects; it recognizes that upfront
payments also can be substantial when
purchasing services from a commercial
provider who needs to deploy facilities
to serve the HCP. This cap takes into
account the need for economic
reasonableness and responsible fiscal
management of the program, and will
help prevent large annual fluctuations
in program demand. We direct USAC to
process and prioritize funding requests
for upfront payments and multi-year
commitments on a rolling basis, similar
to the process for funding requests
generally. We also direct USAC to
periodically inform the public, through
its Web site, of the total dollar amounts
subject to the $150 million cap that have
been (1) requested by HCPs (2) actually
committed by USAC for the funding
year. We may consider adjusting the cap
upward if it appears a significant
number of Primary Program participants
are moving to the Healthcare Connect
Fund. Finally, USAC may establish a
filing window tailored toward funding
requests subject to the $150 million cap,
if necessary.
233. Current Commission rules allow
universal service support for state and
federal taxes and surcharges assessed on
eligible services. We recognize that
taxes and surcharges can fluctuate over
a three-year commitment period. In the
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Pilot Program, projects were allowed to
estimate taxes and surcharges over the
commitment period. Similarly, in the
Healthcare Connect Fund, we will take
into account the year-to-year fluctuation
in taxes and surcharges by allowing
HCPs and consortia to estimate the
expense using either current tax rates or
by projecting the tax rate for the
commitment period. Projected taxes and
surcharges shall be limited to no higher
than 110 percent of the current rate at
the time that the HCP or consortium
files a funding request. The funding
commitment will be issued based on the
tax and surcharge rate provided by the
applicant. We note that this does not
lead to an additional potential for waste,
fraud, and abuse, because
disbursements will be based on actual
expenses, not the projections.
5. USAC Processing and Issuance of
Funding Commitment Letters
234. USAC will review funding
requests and, if approved, issue a
funding commitment letter to the
applicant. We allow applicants the
opportunity to cure errors on their
submissions after initial USAC review,
although the responsibility to submit
complete and accurate information
remains at all times the sole
responsibility of the applicant. In order
to expedite HCPs’ ability to initiate
service once they have selected a service
provider, we specify a timeframe for
USAC’s initial review of funding
commitment requests. Within 21
calendar days of receipt of a complete
funding commitment request, USAC
will inform applicants in writing of (1)
any and all ministerial or clerical errors
that it identifies in the funding
commitment request, along with a clear
and specific explanation of how the
selected participants can remedy those
errors; (2) any missing, incomplete, or
deficient certifications; and (3) any
other deficiencies that USAC finds,
including any ineligible network
components or ineligible network
components that are mislabeled in the
funding request. If USAC needs more
than 21 calendar days to complete its
initial review of the funding request, it
should inform the applicant in writing
that it needs additional time, and
provide the applicant with a date on or
before which it expects to provide the
information. We remind applicants that
this 21-day period is not a deadline for
USAC to issue a funding commitment
letter. Instead, it is a timeframe for
USAC to check that information
provided by applicants is complete and
accurate, which will then allow USAC
to subsequently process the funding
request. If an applicant receives a notice
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that its funding request includes
deficiencies, it will have 14 calendar
days from the date of receipt of the
USAC written notice to amend or re-file
its funding request for the sole purpose
of correcting the errors identified by
USAC.
235. For purposes of prioritizing
funding requests, funding requests are
deemed to have been filed when the
applicant submits an application that is
complete. If USAC identifies any errors
or deficiencies during its initial 21-day
review, the application is not
considered to be complete until all such
errors and deficiencies are corrected.
Applicants may make material changes
to their funding requests prior to
USAC’s issuance of a funding
commitment letter, but will be
considered, for priority purposes, to
have filed their applications as of the
date when a complete notice of the
material change (i.e. without the types
of errors or deficiencies identified in the
prior paragraph) is submitted to USAC.
236. Upon completion of its review
process, USAC will send funding
commitment letter or a denial. The
funding commitment letter should
specify whether the contract has been
deemed evergreen (if requested), and
whether a multi-year commitment has
been issued (and if so, the annual
amount of the commitment). Applicants
denied funding for errors other than
ministerial or clerical errors must follow
USAC’s and the Commission’s regular
appeal procedures. Applicants that do
not comply with the terms of this Order,
section 254 of the 1996 Act, and
Commission rules and orders will be
denied funding in whole or in part, as
appropriate.
D. Invoicing and Payment Process
237. Discussion. In Healthcare
Connect Fund, we adopt an invoicing
procedure similar to the one currently
in use by the Pilot Program. In the Pilot
Program, service providers bill HCPs
directly for services that they have
provided. Upon receipt of a service
provider’s bill, the HCP creates and
approves an invoice for the services it
has received, certifies that the invoice is
accurate and that it has paid its
contribution, and sends the invoice to
the service provider. The service
provider then certifies the invoice’s
accuracy and uses it to receive payment
from USAC.
238. This invoicing procedure is
different from the Primary Program in
two principal ways. In the Healthcare
Connect Fund, as in the Pilot Program,
(1) a HCP or Consortium Leader must
certify to USAC that it has paid its
contribution to the service provider
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before the invoice can be sent to USAC
and the service provider can be paid,
and (2) before any invoice is sent to
USAC, both the HCP and service
provider must certify that they have
reviewed the document and that it is
accurate. We believe the adoption of
these requirements in the new program
will help eliminate waste, fraud, and
abuse by making sure that HCPs have
made their required contribution to the
cost of the services they receive and that
the invoice accurately reflects the
services an HCP is receiving and the
support due to the service provider. It
is permissible to certify that these steps
have been taken via electronic signature
of an officer, director, or other
authorized employee of the Consortium
Leader or HCP. All invoices must be
received by the Administrator within
six months of the end date of the
funding commitment.
E. Contract Modifications
239. Discussion. The Universal
Service Fourth Order on
Reconsideration, 63 FR 2094, January
13, 1998, concluded that requiring a
competitive bid for every minor contract
modification would place an undue
burden upon eligible entities. The
Commission found that an eligible
school, library, or rural HCP would be
entitled to make minor modifications to
a contract that was previously approved
for funding without completing an
additional competitive bid process. The
Commission also noted that any service
provided pursuant to a minor contract
modification also must be an eligible
supported service as defined in the
Order to receive support or discounts.
240. Consistent with existing
requirements, HCPs should look to state
or local procurement laws to determine
whether a proposed contract
modification would be considered
minor and therefore exempt from state
or local competitive bidding processes.
If a proposed modification would be
exempt from state or local competitive
bidding requirements, the applicant
likewise would not be required to
undertake an additional competitive
bidding process in connection with the
applicant’s request for discounted
services under the federal universal
service support mechanisms. Similarly,
if a proposed modification would have
to be rebid under state or local
competitive bidding requirements, then
the applicant also would be required to
comply with the Commission’s
competitive bidding requirements
before entering into an agreement
adopting the modification.
241. The Universal Service Fourth
Order on Reconsideration also
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addressed instances in which state and
local procurement laws are silent or are
otherwise inapplicable with respect to
whether a proposed contract
modification must be rebid under state
or local competitive bidding processes.
In such cases, the Commission adopted
the ‘‘cardinal change’’ doctrine as the
standard for determining whether the
contract modification requires
rebidding. The cardinal change doctrine
looks at whether the modified work is
essentially the same as that for which
the parties contracted. A cardinal
change occurs when one party affects an
alteration in the work so drastic that it
effectively requires the contractor to
perform duties materially different from
those originally bargained for. In
determining whether the modified work
is essentially the same as that called for
under the original contract, factors
considered are the extent of any changes
in the type of work, performance period,
and cost terms as a result of the
modification. Ordinarily a modification
falls within the scope of the original
contract if potential offerors reasonably
could have anticipated the modification
under the changes clause of the
contract.
242. The cardinal change doctrine
recognizes that a modification that
exceeds the scope of the original
contract harms disappointed bidders
because it prevents those bidders from
competing for what is essentially a new
contract. The Commission adopted the
cardinal change doctrine as the test for
determining whether a proposed
modification will require rebidding of
the contract, absent direction on this
question from state or local procurement
rules, because it believed this standard
reasonably applies to contracts for
supported services arrived at via
competitive bidding. If a proposed
modification is not a cardinal change,
there is no requirement to undertake the
competitive bidding process again.
243. An eligible HCP seeking to
modify a contract without undertaking a
competitive bidding process should,
within 30 calendar days of signing or
otherwise entering into the contract
modification, file a revised funding
commitment request indicating the
value of the proposed contract
modification so that USAC can track
contract performance. The HCP also
must demonstrate that the modification
is within the original contract’s change
clause or is otherwise a minor
modification that is exempt from the
competitive bidding process. The HCP’s
justification for exemption from the
competitive bidding process will be
subject to audit and will be reviewed by
USAC to determine whether the
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applicant’s request is, in fact, a minor
contract modification that is exempt
from the competitive bidding process.
We note that program participants make
contract modifications without
competitive bidding at their own risk. If
a participant makes a contract
modification without competitive
bidding, and the modification does not
qualify as minor, USAC will not allow
support for the modification.
244. We emphasize that even though
minor modifications will be exempt
from the competitive bidding
requirement, parties are not guaranteed
support with respect to such modified
services. A commitment of funds
pursuant to an initial FCC Form 462
does not ensure that additional funds
will be available to support the
modified services. We conclude that
this approach is reasonable and is
consistent with our effort to adopt the
least burdensome application process
possible while maintaining the ability of
USAC and the Commission to perform
appropriate oversight.
F. Site and Service Substitutions
245. Based on our experience in the
Pilot Program, we adopt a site and
service substitution policy for
participants in the Healthcare Connect
Fund that is similar to that applied in
the Pilot Program. Consortia may make
site substitutions in accordance with the
policy (because individual applicants
are by definition single-site, no site
substitutions are allowed for individual
applicants). Both individual and
consortium applicants may make
service substitutions in accordance with
the policy.
246. As the Commission found in the
Pilot Program, allowing site and service
substitutions minimizes the burden on
consortium participants and increases
administrative efficiency by enabling
HCPs to ask USAC to substitute or
modify the site or service without
modifying the actual commitment letter.
Moreover, this policy recognizes the
changing broadband needs of HCPs by
providing the flexibility to substitute
alternative services within the
constraints. This policy is a more
administratively efficient approach than
the Primary Program, in which any
modification of funding requires a new
application and a new funding
commitment letter for each HCP
impacted. In its July 19 Public Notice,
the Bureau asked for comment on
whether to adopt the Pilot Program
approach to site and service
substitutions in the reformed program.
The commenters generally supported
applying the same approach in the new
program.
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247. The Pilot Program permits site
and service substitutions within a
project in certain specified
circumstances, in order to provide some
amount of flexibility to project
participants. Under the Pilot Program, a
site or service substitution may be
approved if (i) the substitution is
provided for in the contract, within the
change clause, or constitutes a minor
modification, (ii) the site is an eligible
HCP and the service is an eligible
service under the Pilot Program, (iii) the
substitution does not violate any
contract provision or state or local
procurement laws, and (iv) the
requested change is within the scope of
the controlling FCC Form 465, including
any applicable Request for Proposal.
Once USAC has issued a funding
commitment letter, support under the
letter is capped at the amount provided
in the letter. Therefore, support for a
qualifying site and service substitution
is only guaranteed if the substitution
will not cause the total amount of
support under the funding commitment
letter to increase. We adopt these same
criteria for the Healthcare Connect
Fund, which we include in a new rule.
G. Data Collection and Reporting
Requirements
248. Discussion. Data from
participants and from the Fund
Administrator are essential to the
Commission’s ability to evaluate
whether the program is meeting the
performance goals adopted and to
measure progress toward meeting those
goals. We anticipate collecting the
necessary data through a combination of
the application process and annual
reporting requirements. For consortium
participants under the Healthcare
Connect Fund, we require the
submission of annual reports. Annual,
rather than quarterly, reports minimize
the burden on participants and the
Administrator alike while still
supporting performance evaluation and
enabling us to protect against waste,
fraud, and abuse. Because we expect to
be able to collect data from single
applicants in the Healthcare Connect
Fund on forms they already submit, we
do not at this time expect that they will
need to submit an annual report, unless
a report is required for other reasons. To
further minimize the burden on
participants, we direct the Bureau to
work with the Administrator to develop
a simple and streamlined reporting
system that integrates data collected
through the application process, thereby
eliminating the need to resubmit any
information that has already been
provided to the Administrator. We agree
with several commenters that to the
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extent feasible, USAC should collect
information through automated
interfaces.
249. In the Healthcare Connect Fund,
each consortium lead entity must file an
annual report with the Administrator on
or before September 30 for the
preceding funding year (i.e., July 1
through and including June 30). Each
consortium is required to file an annual
report for each funding year in which it
receives support from the Healthcare
Connect Fund. For consortia that
receive large upfront payments, the
reporting requirement extends for the
life of the supported facility. The
Administrator shall make the annual
reports publicly available as soon as
possible after they are filed.
250. All participants are required to
provide the information necessary to
ensure the Commission can assess
progress towards the performance goals
and measures adopted. To track
progress toward the first goal, increasing
access to broadband, we require
participants to report the characteristics,
including bandwidth and price, of the
connections supported by the
Healthcare Connect Fund. To track
progress toward the second goal,
fostering broadband health care
networks, we require participants to
report the number and characteristics of
the eligible and non-eligible sites
connecting to the network. We also
expect participants to report whether
and to what extent the supported
connections are being used for
telemedicine, exchange of EHRs,
participation in a health information
exchange, remote training, and other
telehealth applications. To track
progress toward the third goal,
maximizing the cost-effectiveness of the
program, in addition to the reporting
requirements under the first goal, we
require that participants report the
number and nature of all responsive
bids received through the competitive
bidding process as well as an
explanation of how the winning bid was
chosen.
251. We delegate authority to the
Bureau to provide, and modify as
necessary, further guidance on the
reporting requirements, for both
participants and the Administrator, to
ensure the Commission has the
necessary information to measure
progress towards meeting the
performance goals adopted in this
Order. For consortium applicants, the
consortium leader will be responsible
for preparing and submitting these
annual reports. Some of the data will
already be collected through other forms
that participants will submit through
the funding process. We do not require
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non-consortium applicants to file
annual reports at this time because we
expect to be able to collect information
through forms they already submit in
connection with the application
process, or if necessary, through other
simplified automated interfaces. We
delegate authority to the Bureau to work
with USAC to accomplish these tasks,
and to modify specific reporting
requirements if necessary consistent
with the requirements.
252. We also extend the current Pilot
Program reporting requirement for each
Pilot project through and including the
last funding year in which the project
receives Pilot support, but make it an
annual instead of a quarterly obligation.
We will also make the Pilot Program
reporting requirements the same as the
Healthcare Connect Fund reporting
requirements and delegate to the Bureau
the authority to specify whether any
additional information from the
quarterly report should continue to be
included in the annual report that might
be needed to evaluate the Pilot Program
or to prevent waste, fraud, and abuse in
that program. As of the effective date of
this Order, Pilot projects are no longer
required to file quarterly reports and
instead may file their first annual report
on September 30, 2013. We further
delegate authority to the Bureau to
determine the expiration of any
supplemental Pilot Program reporting
requirements.
253. In specifying these reporting
requirements, we have sought to
simplify and streamline the
requirements as much as possible, in
order to minimize the burden on
participants while still ensuring the
funding is used for its intended
purpose. This furthers all of our
performance goals—expanding access to
broadband and fostering health care
networks while maximizing the costeffectiveness of the program. The data
we collect will also help us to measure
progress toward each of these goals.
VI. Additional Measures To Prevent
Waste, Fraud, and Abuse
254. We adopt additional safeguards
against waste, fraud, and abuse. These
are discussed set forth in new rule
§ 54.648, in various rule provisions
requiring certifications, and elsewhere
in the rules and in this Order. The
safeguards are patterned on the rules for
the Telecommunications Program, and
incorporate many of the provisions that
proved effective in the Pilot Program in
making the program efficient and in
safeguarding against waste, fraud, and
abuse. The provisions we adopt here
also take into account the comments we
received in response to the NPRM.
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13969
These safeguards are in addition to
many of the requirements for the
Healthcare Connect Fund that are also
designed to protect against waste, fraud,
and abuse.
255. In addition to the requirements,
we remind participants in the
Healthcare Connect Fund that they will
be subject to existing Commission rules
governing the exclusion of certain
persons from activities associated with
or relating to the USF support
mechanisms (the ‘‘suspension and
disbarment’’ rules). We also remind
participants that all entities that are
delinquent in debt owed to the
Commission are be prohibited from
receiving support until full payment or
satisfactory arrangement to pay the
delinquent debt(s) is made, pursuant to
the Commission’s ‘‘red light’’ rule
implementing the Debt Collection
Improvement of 1996.
A. Recordkeeping, Audits, and
Certifications
256. As proposed in the NPRM, we
apply all relevant Pilot and
Telecommunications program
requirements regarding recordkeeping,
audits, and certifications to participants
in the Healthcare Connect Fund, as
modified herein, and we recodify those
requirements in a new rule section
applicable to the new program.
257. Recordkeeping. Consistent with
§§ 54.619(a), (b), and (d) of our current
rules, program participants and vendors
in the Healthcare Connect Fund must
maintain for five years certain
documentation related to the purchase
and delivery of services, network
equipment, and participant-owned
facilities funded by the program, and
they will be required to produce these
records upon request. In particular,
participants who receive support for
long-term capital investments in
facilities whose useful life extends
beyond the period of the funding
commitment shall maintain records for
at least 5 years after the end of the
useful life of the facility. The NPRM also
proposed to: (1) Clarify that the
documents to be retained by
participants and vendors must include
all records related to the participant’s
application for, receipt of, and delivery
of discounted services; and (2) mandate
that vendors, upon request, produce the
records kept pursuant to the
Commission’s recordkeeping
requirement. We adopt rules consistent
with these proposals to enable the
Commission and USAC to obtain the
records necessary for effective oversight
of the new Healthcare Connect Fund.
258. Audits and Site Visits. The
Commission will continue to use the
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audit process to ensure there is a
focused and effective system for
identifying and deterring program
abuse. Consistent with existing
§ 54.619(c) of the Commission’s rules,
participants in the Healthcare Connect
Fund will be subject to random audits
to ensure compliance with program
rules and orders.
259. USAC must assess compliance
with the program’s requirements,
including the new requirements
established in this Order for recipients
of RHC support. We direct USAC to
review and revise the Beneficiary/
Contributor Compliance Audit Program
(BCAP) and the Payment Quality
Assurance (PQA) program to take into
account the changes adopted in this
Order when designing procedures for
recipients of funding under the
Healthcare Connect Fund. We further
direct USAC to submit a report to the
Bureau and Office of Managing Director
(OMD), within 60 days of the effective
date of this Order or by May 31, 2013,
whichever is later, proposing changes to
the BCAP and PQA programs consistent
with this Order.
260. We also direct USAC to conduct
random site visits to Healthcare Connect
Fund participants to ensure that support
is being used for its intended purposes,
or as necessary and appropriate based
on USAC’s review of participants’
submissions to USAC. We further direct
USAC to notify the Wireline
Competition Bureau and the Office of
the Managing Director of any site visit
findings and analysis within 45 days of
the site visit.
261. Certifications. We adopt
certification requirements for the
Healthcare Connect Fund that are
similar to those in the existing RHC
programs. Participants in the Healthcare
Connect Fund must certify under oath
to compliance with certain program
requirements, including the
requirements to select the most costeffective bid and to use program support
solely for purposes reasonably related to
the provision of health care services or
instruction.
262. For individual HCP applicants,
required certifications must be provided
and signed by an officer or director of
the HCP, or other authorized employee
of the HCP (electronic signatures are
permitted). For consortium applicants,
an officer, director, or other authorized
employee of the Consortium Leader
must sign the required certifications.
USAC may not knowingly accept
certifications signed by a person who is
not an officer, director, or other
authorized employee of the HCP or
Consortium Leader.
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263. Third parties may submit forms
and other documentation on behalf of
the applicant, including the HCP or
Consortium Leader’s signature and
certifications, if USAC receives, prior to
submission of the forms or
documentation, a written, dated, and
signed authorization from the relevant
officer, director, or other authorized
employee stating that the HCP or
Consortium Leader accepts all potential
liability from any errors, omissions, or
misrepresentations on the forms and/or
documents being submitted by the third
party. Consistent with longstanding
precedent, we find that a HCP or
Consortium Leader may not
contractually reallocate responsibility
for compliance with program
requirements to a consultant or similar
third party.
264. We find that our actions here
will preserve the integrity of the
program by protecting against wasteful
or unlawful use of support.
B. Duplicative Support and Relationship
to Other RHC Programs
265. Discussion. As the Commission
proposed in the NPRM, we adopt a rule
prohibiting HCPs from receiving
universal service support for the same
services from both the
Telecommunications Program and the
Healthcare Connect Fund. This
prohibition is necessary because, in
certain instances, an HCP’s selected
service could be eligible for support
under both the Telecommunications
Program and the Healthcare Connect
Fund. Where this is the case, HCPs will
not be permitted to ‘‘double dip’’ from
the USF for the same connections.
Applicants are prohibited from
submitting a funding request for the
same service in the
Telecommunications Program and the
Healthcare Connect Fund. Further,
consistent with the NPRM, we adopt a
rule prohibiting HCPs from receiving
funds for the same services under either
the Telecommunications or the
reformed RHC program and any other
universal service program. If an HCP is
still receiving support under the Pilot
Program, it also will be subject to this
same restriction on receiving support
from another FCC program for the same
services. Under this rule, an HCP only
will be prohibited from receiving
duplicative support for the same
services—not from receiving
complementary support for different
services.
266. Our action here is consistent
with the Commission’s Pilot Program
requirement that participants cannot
receive support for the same service
from both the Pilot Program and other
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universal service programs. We believe
that the prohibition on using funds from
other Universal Service programs as part
of the HCP’s 35 percent contribution
requirement is equally important in our
reformed RHC program, and that it will
help safeguard against wasteful and
unlawful duplicative distribution of
universal service support.
267. We do not believe, however, that
it is necessary in the Healthcare Connect
Fund to prohibit the use of federal funds
from non-universal service program
sources to be part of the HCP’s 35
percent contribution requirement. Here,
the HCP contribution amount is
significantly greater than in the Pilot
Program (35 percent as opposed to 15
percent in the Pilot Program). While we
are not aware of other sources of federal
funding for HCPs that could be used
towards their 35 percent contribution,
we do not want to preclude the
possibility that a recipient in our
program could use funding from another
federal agency towards its 35 percent
contribution. We anticipate that even if
other federal funding may be available,
HCPs will still be required to secure a
significant portion of the cost of
broadband supported by this program
through their own efforts.
268. We also do not preclude federal
government entities, such as the Indian
Health Service, or other Tribal entities,
from receiving support under the
Healthcare Connect Fund, even though
their 35 percent contribution may come
from federal sources, as does the
balance of the budget of such entities.
We also do not preclude HCPs from
purchasing services from entities that
have received federal funds to assist in
infrastructure construction, such as
through the Broadband
Telecommunications Opportunities
Program or the Rural Utilities Service
Broadband Infrastructure Program.
These programs are intended to develop
broadband infrastructure in geographic
areas that are unserved or underserved
by broadband. It would defeat the value
of federal investment in such facilities
if we were to prohibit such entities from
bidding to provide service under the
Healthcare Connect Fund.
C. Recovery of Funds, Enforcement, and
Debarment
269. Recovery of Funds. Consistent
with the 2007 Program Management
Order, 72 FR 54214, September 24,
2007, Healthcare Connect Fund monies
that are disbursed in violation of a
Commission rule that implements the
Act, or a substantive program goal, will
be recovered. Recovery of funds will be
directed at the party or parties
(including both beneficiaries and
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vendors) who have committed the
statutory or rule violation. If more than
one party shares responsibility for a
statutory or rule violation, recovery
actions may be initiated against both
parties, and pursued until the amount is
satisfied by one of the parties. Failure to
repay recovery amounts may subject
recipients to enforcement action by the
Commission, in addition to any
collection action.
270. Enforcement and Criminal
Sanctions. In the 2007 Program
Management Order, the Commission
also found that sanctions, including
enforcement action, are appropriate in
cases of waste, fraud, and abuse in the
universal service support programs, but
not in cases of clerical or ministerial
errors. If any participant or vendor fails
to comply with Commission rules or
orders, or fails to timely submit filings
required by such rules or orders, the
Commission has the authority to assess
forfeitures for violations of such
Commission rules and orders under
section 503 of the Act. In addition, any
participant or service provider that
willfully makes a false statement(s) can
be punished by fine or forfeiture under
sections 502 and 503 of the
Communications Act, or fine or
imprisonment under Title 18 of the
United States Code (U.S.C.) including,
but not limited to, criminal prosecution
pursuant to section 1001 of Title 18 of
the U.S.C.
271. Debarment. In order to prevent
fraud, and to prevent bad actors from
continuing to participate in the
universal service programs, § 54.8 of the
Commission’s rules provides that the
Commission shall suspend and debar
parties for conviction of, or civil
judgment for, fraud or other criminal
offenses arising out of activities
associated with or related to the
universal service support mechanisms,
absent extraordinary circumstances.
These debarment procedures in § 54.8 of
the Commission’s rules will apply to the
Healthcare Connect Fund, just as they
do to other Commission universal
service programs.
VII. Telecommunications Program
Reform
272. This Order focuses on the
creation of a new, reformed health care
support mechanism. The Healthcare
Connect Fund replaces the current RHC
Internet Access Program. For the time
being, we maintain the current RHC
Telecommunications Program, which
funds the difference between the rural
rate for telecommunications services
and the rate paid for comparable
services in urban areas. In doing so, we
recognize that the RHC
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Telecommunications Program is
particularly important for extremely
remote places like Alaska. However, we
would expect the Healthcare Connect
Fund to prove attractive to many of the
HCPs that currently receive support
under the Telecommunications
Program, as well as to HCPs that do not
currently participate in any RHC
Program. Unlike the
Telecommunications Program, the new
program will provide a flat rate
discount, a simpler application process
for both single and consortium
applicants, flexibility for consortia to
design their networks in a cost-effective
manner to best serve the needs of their
communities, support for certain
network-related expenses, the
availability of multi-year and prepaid
funding arrangements, and the option
for health care provider selfconstruction. And most importantly, we
also expect that many HCPs will be able
to get higher bandwidth service for
lower out-of-pocket costs under the new
program. For all these reasons, we
expect significant migration of HCPs out
of the Telecommunications Program and
into the Healthcare Connect Fund over
time.
273. As the new Healthcare Connect
Fund is implemented, we expect to
consider whether the
Telecommunications Program remains
necessary, and if so whether reforms to
the program are appropriate to ensure
that any continuing support under that
program is provided in a cost-effective
manner. In doing so, we will, in
particular, look at the needs of
extremely remote places like Alaska.
Such reforms could include changes to
ensure subsidies provided under the
program are set at appropriate levels, to
provide greater incentives for costefficient purchasing by program
participants, and to reduce the
administrative costs of the program,
both to participants and to USAC.
274. In the meantime, the current
Telecommunications Program rules and
procedures will continue to apply. In
addition, because we view our health
care universal service programs as
accomplishing the same overarching
goals, we make the performance goals
and measures adopted in this Order
applicable in the Telecommunications
Program as well as to the Healthcare
Connect Fund.
VIII. Pilot Program for Skilled Nursing
Facility Connections
275. Discussion. There is evidence
that skilled nursing facilities are
particularly well-suited to improve
patient outcomes through greater use of
broadband. By their nature, they are
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13971
often remote from doctors and
sophisticated laboratory and testing
facilities, making the availability of
EHRs and telehealth an especially
valuable benefit to convalescents or
patients for whom traveling to see a
doctor, diagnostician, or specialist
would be especially difficult. On the
record before us, however, we are
unable to determine how support for
SNFs can be provided as part of an
ongoing program in a ‘‘technically
feasible and economically reasonable’’
manner, as required by section
254(h)(2)(A). Nor does the record
currently allow us to balance the
potential benefits of supporting SNFs
against the potential impact on Fund
demand. On this record, we reach no
conclusion about whether or under
what circumstances a SNF might qualify
as a health care provider under the
statute. We find, however, that funding
connections used by SNFs in working
with HCPs has the potential to enhance
access to advanced services and to
generate the associated health care
benefits, and that a limited pilot
program would enable us to gain
experience and information that would
allow us to determine whether such
funding could be provided on a
permanent basis in the future.
276. We therefore conclude that it is
both technically feasible and
economically reasonable to launch, as
an initial step, a pilot program to test
how to support broadband connections
for SNFs, with safeguards to ensure that
the support is directed toward SNFs that
are using broadband to help provide
hospital-type care for those patients,
and that are using those broadband
connections for telehealth applications
that improve the quality and efficiency
of health care delivery. The Skilled
Nursing Facilities Pilot Program (SNF
Pilot) will focus on determining how we
can best utilize program support to
assist SNFs that are using broadband
connectivity to work with eligible HCPs
to optimize care for patients in SNFs
through the use of EHRs, telemedicine,
and other broadband-enabled health
care applications. We will fund up to
$50 million for this purpose within the
existing health care support mechanism,
which remains capped at $400 million
annually. We expect to implement this
SNF Pilot in Funding Year 2014. We
conclude that a total of $50 million may
be disbursed for the SNF Pilot over a
funding period not to exceed three
years, which will moderate the annual
impact on Fund demand.
277. We direct the Bureau to develop
scoring criteria for applications for the
SNF Pilot consistent with the program
goals, soliciting input from HHS
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(including IHS) and other stakeholders,
and to specify other requirements for
the SNF Pilot, including safeguards to
ensure that funding is directed towards
facilities that are engaged in the
provision of skilled care comparable to
what is available in a hospital or clinic.
In order to maximize other Fund
investments, only SNFs that do not
currently have broadband services
sufficient to support their intended
telehealth activities are eligible to
participate in the SNF Pilot. The Bureau
shall give a preference to applicants that
partner with existing or new consortia
in the existing Pilot Program or the
Healthcare Connect Fund and to SNFs
located in rural areas, and will require
applicants to demonstrate how
proposed participation of SNFs will
improve the overall provision of health
care by eligible HCPs. The SNF Pilot
Program will seek to collect data on a
number of variables related to the
broadband connections supported and
their health care uses, so that at the
conclusion of the SNF Pilot, the
Commission can use the data gathered
to determine how to proceed with
regard to including SNFs in the
Commission’s health care support
programs on a permanent basis.
278. Once the scoring criteria are
developed, the Bureau shall release a
Public Notice specifying the application
procedures, including dates, deadlines,
and other details of the application
process. Except as necessary to meet the
goals of the SNF Pilot, all requirements
applicable to the Healthcare Connect
Fund, as described in this Order, will
apply to the SNF Pilot. After reviewing
the applications, the Bureau then will
announce the SNF Pilot participants.
We delegate authority to the Bureau to
implement the SNF Pilot consistent
with the framework established in this
Order, and specify that USAC shall
disburse no more than $50 million to
fund the SNF Pilot, as directed by the
Bureau.
279. To be eligible for funding, those
seeking to participate in SNF Pilot
projects must commit to robust data
gathering as well as analysis and sharing
of the data and to submitting an annual
report. Applicants will be expected to
explain what types of data they intend
to gather and how they intend to gather
that data. At the conclusion of the Pilot,
we expect applicants to be prepared to
demonstrate with objective, observable
metrics the health care cost savings and/
or improved quality of patient care that
have been realized through greater use
of broadband to provide telemedicine to
treat the residents of SNFs. We
authorize USAC to use administrative
expenses from the Fund to perform data
gathering and related functions. The
Commission plans to make this data
public for the benefit of all interested
parties, including third parties that may
use such information for their own
studies and observations.
IX. Miscellaneous
A. Implementation Timeline
280. Discussion. In this Order, we
adopt for the Healthcare Connect Fund
the same general funding schedule that
is currently used in the
Telecommunications and Internet
Access Programs. Thus, applicants
seeking support under the Healthcare
Connect Fund may start the competitive
bidding process anytime after January 1
(six months before the July 1 start of the
funding year) and can submit a request
for funding at any time during that
funding year (i.e. between July 1 and
June 30) for services received during
that funding year.
281. For the first funding year of the
Healthcare Connect Fund (FY 2013,
which runs from July 1, 2013 to June 30,
2014), we adopt a schedule in which the
funding for Pilot project applicants and
new applicants begins at different times.
The schedule for Pilot project applicants
will remain unchanged. Starting on July
1, 2013, Pilot projects can seek universal
service support under the Healthcare
Connect Fund at a 65 percent discount
level for existing HCP sites that have
exhausted funding allocated to them as
well as for new sites to be added to Pilot
project networks.
282. For new applicants (either
current Telecommunications or Internet
Access Program participants or HCPs
new to the Commission’s programs), the
funding schedule will be different in FY
2013. For FY 2013 only, the competitive
bidding process for non-Pilot Healthcare
Connect Fund applicants will start in
late summer 2013, with applicants
eligible to receive funds starting on
January 1, 2014. This six-month delay is
necessary to complete administrative
processes relating to the new program,
including obtaining approval for new
forms under the Paperwork Reduction
Act. Starting in FY 2014 (July 1, 2014June 30, 2015), all applicants will be on
the same funding year schedule and will
be able to request funds from USAC
between July 1-June 30, after completing
a competitive bidding process that may
start on or after January 1. In addition,
to ensure a smooth transition and to
minimize the administrative burden,
eligible rural HCPs may continue to
receive support under the RHC Internet
Access Program through the end of
funding year 2013, or through June 30,
2014.
283. A timeline of the funding
schedule for the first year of the
program for both Pilot project applicants
and non-Pilot applicants appears in the
figure below.
FUNDING YEAR 2013 IMPLEMENTATION TIMELINE
Jan.
2013
Feb.
2013
Mar.
2013
Apr.
2013
May
2013
June
2013
Pilot projects determine their service
needs and prepare
RFPs in accordance
with reformed program rules
Non-Pilot Project Applicants
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Pilot Project Applicants .........
New program applicants organize themselves, determine their service needs, and
prepare RFPs
284. As shown in the chart, starting
the competitive bidding process in
summer of 2013 will give non-Pilot
Healthcare Connect Fund applicants
time to organize as consortia, to
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July
2013
Aug.
2013
Sept.
2013
Oct.
2013
Nov.
2013
Competitive bidding
starts during second
quarter 2013
Frm 00038
Jan.
2014
Feb.
2014
Mar.
2014
Apr.
2014
May
2014
June
2014
2013 Funding
Competitive bidding starts during third
quarter 2013 and continues through fourth
quarter 2013
determine their service needs, to design
RFPs, and to complete the competitive
bidding process before requesting funds
from USAC. The experience of Pilot
Program participants suggest that it
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2013 Funding
takes at least six months for consortia to
organize themselves, obtain the
necessary authorizations from
individual health care providers, assess
broadband needs for the members, and
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prepare RFPs. Pilot experience also
suggests that can take approximately six
additional months for a consortium to
post the RFP, receive bids, evaluate bids
properly, and negotiate a contract. If
funding were available July 1, 2013,
new applicants would not have enough
time to complete all these steps. A
possible result could be poorly
organized consortia and ill-considered
network designs, which would be
inconsistent with our overarching
program goals. In order to maximize the
cost-effectiveness of bulk buying and
competitive bidding, it is important to
allow sufficient time for needs
assessment, network design, and RFP
preparation, as well sufficient time to
solicit a range of competitive bids, select
a vendor, and negotiate a contract.
Making funding available beginning
January 1, 2014, will allow time for all
these activities to take place and to
enable applicants to create welldesigned networks and to obtain costeffective bids.
285. This funding cycle also will
encourage individual HCPs to join new
or existing consortia rather than
applying for funding alone. We expect
that some potential single HCP
applicants will receive offers to join
existing Pilot project networks or newlyformed consortia. We encourage this
collaboration. As discussed in the Pilot
Evaluation, consortia are able to obtain
higher bandwidths, lower rates, and
better service quality, and they save on
administrative costs. By making funding
available at the same time for
consortium applicants and single
applicants, there will be more time for
coordination and outreach between
consortia applicants and their
prospective members to occur. In the
meantime, individual HCPs can still
receive support through the
Telecommunications or Internet Access
Programs until they are eligible to seek
funds under the Healthcare Connect
Fund.
286. The same considerations do not
apply to the Pilot projects. They have
already completed the multi-step
process of forming consortia and
conducting competitive bidding.
Allowing them to begin receiving
funding effective July 1, 2013, will
benefit both existing Pilot project HCPs
and HCPs that seek to join existing Pilot
projects. Allowing new sites joining
existing Pilot projects to receive funds
on July 1, 2013, will encourage those
projects to grow and become large-scale
networks. This funding schedule will
also provide sites that will exhaust Pilot
Program funding on or before July 1,
2013, a smooth transition into the new
program. As the Commission observed
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in providing transitional funding to
such Pilot project HCPs in the Bridge
Funding Order, it is important for the
sustainability of these networks that
they are not forced to transition twice to
different RHC programs—first to the
Telecommunications or Internet Access
Programs and then to the Healthcare
Connect Fund. Without an orderly
transition to the new program, some
individual Pilot project HCPs could be
at risk of discontinuing their
participation in their respective
networks. This would be contrary to the
goals of the Pilot Program. Providing
continuing support (albeit at the
discount level applicable under the
Healthcare Connect Fund) will help
protect the investment the Commission
has already made in these networks.
287. Outreach efforts will be essential
in order to maximize potential of the
Healthcare Connect Fund to support
broadband and thereby transform the
provision of health care for both
individual HCPs and consortia. We
therefore direct the Bureau to work with
USAC to develop and execute a range of
outreach activities to make HCPs aware
of the new program and to educate them
about the application process. We
expect the Bureau will consult with
other health care regulatory agencies
(such as HHS); with state, local, and
Tribal governments; with organizations
representing HCPs (especially rural
HCPs); and with other stakeholder
groups to identify the best means to
publicize the new program and to
identify likely beneficiaries of the new
program—both HCPs already
participating in RHC programs and
those that are not. We direct USAC to
produce and disseminate outreach
materials designed to educate eligible
HCPs about the new program. In
addition, we direct USAC to implement
a mechanism for any interested party to
subscribe to an automated alert from
USAC when Healthcare Connect Fund
requests for services or RFPs are posted,
based on available filtering criteria.
B. Pilot Program Transition Process and
Requests for Additional Funds
288. The final deadline for filing
requests for funding commitments in
the RHC Pilot Program was June 30,
2012. As discussed in the Pilot
Evaluation, several projects either
withdrew from the program or merged
with other projects, leaving 50 active
Pilot projects. Every one of these
remaining projects met the June 30
deadline for filing funding commitment
requests. USAC is likely to complete the
processing of all these funding requests
by the end of calendar year 2012.
Projects have up to six years from the
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date of issuance of the initial funding
commitment letter for the applicable
project to complete invoicing. Thus, by
the latter part of calendar year 2017, all
invoicing under the Pilot Program
should be completed.
289. We would expect that as the Pilot
projects and their member HCPs begin
to exhaust Pilot funding, they will
migrate as consortia into the Healthcare
Connect Fund. Pilot participants are at
different points in the process of
implementing their networks and
invoicing for the services or
infrastructure in their projects. As
discussed in the Commission’s Bridge
Funding Order, released in July 2012, a
number of projects began to exhaust
funding for some of their HCP sites in
2012, and the Commission provided
continued funding for those sites
pursuant to that order. Although we
believe the rules we adopt in this Order
should permit an easy transition for the
Pilot Program participants, we delegate
to the Bureau the authority to adopt any
additional procedures and guidelines
that may be necessary to smooth this
process. In the Implementation
Timeline section, we make support
under the Healthcare Connect Fund for
the transitioning Pilot Program
participants effective on July 1, 2013, in
order to ensure that there are no gaps in
support for them. We permit them to
use the same forms they used in the
Pilot Program to secure funding
pursuant to the Bridge Funding Order.
Once their currently committed Pilot
funds are exhausted, they will be
required to provide a 35 percent
contribution (not the 15 percent in the
Pilot Program), and will not be eligible
to receive support for anything that is
not covered under the Healthcare
Connect Fund.
290. Several Pilot projects filed
requests for additional support, asking
the Commission to use funds that were
originally allocated to the Pilot Program,
but were relinquished or unspent by
other Pilot projects that withdrew or did
not use their full awards. In their
requests for additional funding, these
pilot projects argued, among other
things, that remaining Pilot funding
should be redirected to projects that
have demonstrated substantial progress
with their original awards and that these
additional funds would facilitate
expansion of these successful projects.
291. In light of our creation of the new
Healthcare Connect Fund, we deny
these requests for additional Pilot
Program funding. First, we note that
Pilot projects may now seek additional
funding through the Healthcare Connect
Fund, once their current awards are
exhausted, so there is no reason to
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provide these Pilots preferential
treatment over other consortia. Second,
the Pilot Program was just that—a pilot,
or trial, program launched to examine
how the RHC program could be used to
enhance HCP access to advanced
services and to lay the foundation for
the reformed program. It would be
contrary to the limited scope of the Pilot
Program to authorize additional Pilot
Program support at this time. Finally,
disbursement of additional Pilot
program support would be inconsistent
with the Commission’s 2007 directive
that Pilot Program applicants that were
denied funding at that time could
reapply for RHC funding in the
reformed program. The Pilot projects
requesting additional support may
reapply in the reformed program, just as
denied applicants may do. To grant
these requesting Pilot projects
additional support without requiring
new applications would unfairly
advantage them to the detriment of the
denied Pilot applicants. Instead, we
direct USAC to utilize unused Pilot
Program funds for the demand
associated with the Healthcare Connect
Fund.
292. We also dismiss a request by the
Texas Health Information Network
Collaborative (TxHINC) for an extension
of the June 30, 2012, Pilot Program
deadline for projects to choose vendors
and request funding commitment letters
from USAC. In its request, TxHINC
explains that, due to circumstances
unique to Texas, it was delayed in
choosing vendors and submitting
funding requests to USAC. We dismiss
TxHINC’s request, finding it moot
because TxHINC ultimately filed its
request for funding commitments by the
June 30, 2012 deadline.
C. Prioritization of Funding
293. In the NPRM, the Commission
sought comment on whether to establish
an annual cap of $100 million for
support under the proposed Health
Infrastructure Program, and sought
comment on whether to establish
criteria for prioritizing funding should
the infrastructure program exceed that
cap in a particular year. The
Commission stated that it did not
believe that the proposed Health
Broadband Services Program initially
would exceed the amount of available
funds, but sought comment on possible
prioritization procedures in the event
that the total requests for funding under
the Telecommunications and the new
programs were to exceed the
Commission’s established $400 million
annual cap.
294. Discussion. After consideration
of the record received in response to the
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prioritization proposals in the NPRM,
we will continue for the time being to
apply the existing rule for addressing
situations when total requests exceed
the $400 million cap. Demand in this
program has never come close to the
$400 million annual cap, and we believe
that we are unlikely to reach the cap in
the foreseeable future. We direct USAC
to periodically inform the public,
through its web site, of the total dollar
amounts that have been (1) requested by
HCPs, as well as the total dollar
amounts that have been actually
committed by USAC for the funding
year. USAC should post this
information for both the $150 million
cap on multi-year commitments and the
$400 million cap that applies to the
entire rural health care supporty
mechanism. We do intend, however, to
conduct further proceedings and issue
an Order by the end of 2013 regarding
the prioritization of support for all the
RHC universal service programs. In the
meantime, we will continue to rely
upon, as a backstop, the approach
codified in our existing rules, in the
unlikely event that funding requests do
reach the $400 million cap before we
have established other prioritization
procedures.
295. We believe it is unlikely that the
combined health care support programs
will approach the $400 million annual
cap any time soon. It will likely take a
significant amount of time for new
consortia to organize, identify
broadband needs, prepare RFPs,
conduct competitive bidding, and select
vendors, and for that reason it will be
at least a year before funding will begin
to flow to new applicants in the
program. Given the Pilot Program
experience, it will likely take even
longer than that for many consortium
applicants to be ready to seek funding
under the Healthcare Connect Fund. In
addition, our decision to require a 35
percent participant contribution, the
limitations we impose on participation
by non-rural HCPs, and the $150 million
cap on annual funds for upfront
payments all should moderate demand
for funding in the near term. Finally, the
pricing and other efficiencies made
possible through consortium purchase
of a broader array of services also
should help drive down the cost of
connections supported by the RHC
component of the Universal Service
Fund, as some Telecommunications
Program participants migrate to the
reformed program. For that reason, we
project growth in the combined health
care universal service fund to remain
well under the $400 million cap over
the next five years. Because we lack
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historical demand data for the
Healthcare Connect Fund, and because
the new program provides support for
multi-year contracts and other upfront
payments, we direct the Bureau,
working with OMD and with the
Administrator, to project the amounts to
be collected for the USF for the early
period of the new program, until such
time as historical data provides an
adequate basis for projecting demand.
D. Offset Rule
296. In the NPRM, the Commission
explained that, despite its intended
benefits, the offset rule can create
inequities and inefficiencies. Based on
the offset rule’s shortcomings, the
Commission proposed to eliminate the
rule for participants in the Broadband
Services Program (now part of the
Healthcare Connect Fund) and the
existing RHC program, and replace it
with a rule allowing service providers to
receive direct reimbursement from
USAC. The Commission also sought
comment on whether to retain the offset
rule as an option for contributors who
wish to utilize this method.
297. Discussion. While the original
intent of the offset rule was to prevent
waste, fraud, and abuse, we find that
mandatory application of the rule is no
longer necessary or advisable. Our
action here is not the first instance in
which the Commission has recognized
the shortcomings of the offset rule.
Indeed, the Bureau has waived the offset
rule in several instances because strict
application of the rule would have
jeopardized the precarious finances and
operations of some small, rural HCPs
and their service providers. Further,
service providers who are not required
to contribute to the Fund already
receive direct reimbursement. Based on
the wide variety of vendors
participating in the Pilot Program, we
believe that direct reimbursement
encouraged extensive bidding on RFPs
in the Pilot Program. Likewise, we
expect that enabling carriers to elect
direct reimbursement in the Healthcare
Connect Fund will encourage many
more vendors to bid on RFPs than if
offset was mandatory, because they will
not have to wait to receive
reimbursement until they can offset
their universal service contribution
amount.
298. In light of the shortcomings of
the offset rule discussed above, and in
consideration of the relevant comments,
we revise § 54.611 of the Commission’s
rules to eliminate mandatory
application of the offset procedure.
Commenters unanimously support
having the option of direct
reimbursement, arguing, among other
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things, that the offset requirement is
obsolete, outdated, and administratively
burdensome, and that it delays payment
to carriers. We will permit USF
contributors in the Telecommunications
Program and the Healthcare Connect
Fund to elect whether to treat the
amount eligible for support as an offset
against their universal service
contribution obligation, or to receive
direct reimbursement from USAC. We
adopt a new rule for the Healthcare
Connect Fund and the
Telecommunications Program to
effectuate this approach.
299. We note that, while commenters
unanimously support direct
reimbursement, they do not agree on
whether to maintain offset as an option.
TeleQuality recommends that service
providers be given an offset option.
Several other commenters do not
directly advocate for an offset option but
implicitly support it in their support of
our proposed rule which includes an
offset option. Conversely, a few
commenters seek elimination of offset
even as an option, with Charter
Communications asking the
Commission to ‘‘formalize its
recognition of the deficiencies of the
offset rule by eliminating it in the new
RHC programs.’’ While we recognize the
deficiencies of mandatory offset, we
conclude it is appropriate to maintain
offset as an option because it affords
flexibility to carriers that deem offset
simpler or otherwise more beneficial
than direct reimbursement. Further,
while carriers such as Charter and GCI
prefer, and likely will choose, direct
reimbursement, an offset option will not
disadvantage them in any way. Finally,
our revised rule is consistent with the
choice available in the E-rate program,
in which service providers may opt to
use the offset method or receive direct
reimbursement from USAC.
300. Also as we do in the E-rate
program, each January we will require
service providers to elect the method by
which they will be reimbursed, and
require that they remain subject to this
method for the duration of the calendar
year using Form 498, as is the case in
the E-rate program. Form 498 will need
to be revised to accommodate such
elections in the health care support
mechanism, and the revised form is
unlikely to be approved by OMB under
the Paperwork Reduction Act prior to
January 31, 2013. Therefore, once
revised Form 498 is available, we direct
the Bureau to announce via public
notice a 30-day window for service
providers to make their offset/direct
reimbursement election for the health
care support mechanism for 2013. To
the extent that a service provider fails to
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remit its monthly universal service
obligation, however, any support owed
to it under the Healthcare Connect Fund
or the Telecommunications Program
will automatically be applied as an
offset to the service provider’s annual
universal service obligation.
E. Delegation To Revise Rules
301. Given the complexities
associated with modifying existing rules
as well as other reforms adopted in this
Order, we delegate authority to the
Bureau to make any further rule
revisions as necessary to ensure the
reforms adopted in this Order are
reflected in the rules. This includes
correcting any conflicts between the
new and or revised rules and existing
rules as well as addressing any
omissions or oversights. If any such rule
changes are warranted, the Bureau shall
be responsible for such change. We note
that any entity that disagrees with a rule
change made on delegated authority
will have the opportunity to file an
Application for Review by the full
Commission.
X. Procedural Matters
A. Final Regulatory Flexibility
Certification
302. As required by the Regulatory
Flexibility Act of 1980, as amended
(RFA), an Initial Regulatory Flexibility
Analysis (IRFA) was incorporated in the
NPRM. The Commission sought written
public comment on the proposals in the
NPRM, including comment on the IRFA.
This present Final Regulatory Flexibility
Analysis (FRFA) conforms to the RFA.
1. Need for, and Objectives of, the Order
303. The Commission is required by
section 254 of the Communications Act
of 1934, as amended, to promulgate
rules to implement the universal service
provisions of section 254. On May 8,
1997, the Commission adopted rules
that reformed its system of universal
service support mechanisms so that
universal service is preserved and
advanced as markets move toward
competition. Among other programs, the
Commission adopted a program to
provide discounted telecommunications
services to public or non-profit health
care providers (HCPs) that serve persons
in rural areas. The changing
technological landscape in rural health
care over the past decade has prompted
us to propose a new structure for the
rural health care universal service
support mechanism.
304. In this Order, we reform the
Rural Health Care (RHC) Support
Mechanism and adopt the Healthcare
Connect Fund to expand HCP access to
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high-speed broadband capability and
broadband health care networks,
improving the quality and reducing the
cost of health care throughout America,
particularly in rural areas. Additionally,
we adopt a pilot program to be
implemented in 2014 to test how to
support broadband connections for
skilled nursing facilities (SNF Pilot).
305. Building on recommendations
from the Staff Evaluation of the Pilot
Program and comments received in
response to the Commission’s NPRM
and the July 19 Public Notice, the
reforms adopted in this Order build on
the substantial impact the RHC program
has on improving broadband
connectivity to HCPs. Broadband
connectivity generates a number of
benefits and cost savings for HCPs. First,
telemedicine enables patients in rural
areas to access specialists and can
improve the speed and enhance the
quality of health care everywhere.
Second, connectivity enables the
exchange of electronic health records,
which is likely to become more
widespread as more providers adopt
‘‘meaningful use’’ of such records.
Third, connectivity enables the
exchange of large medical images (such
as MRIs and CT scans), which can
improve the speed and quality of
diagnosis and treatment. Fourth,
connectivity enables remote health care
personnel to be trained via
videoconference and to exchange other
technical and medical expertise. Fifth,
these ‘‘telehealth’’ applications have the
potential to greatly reduce the cost of
providing health care, for example by
reducing length of stay or saving on
patient transport costs. Finally,
telemedicine can help rural HCPs keep
and treat patients locally, thus
enhancing revenue streams and helping
rural providers to keep their doors open.
2. Summary of Significant Issues Raised
by Public Comments in Response to the
IRFA
306. No comments were filed in
response to the IFRA attached to the
NPRM. Notwithstanding the foregoing,
some general comments discussing the
impact of the proposed rules on small
businesses were submitted in response
to the NPRM and the July 19 Public
Notice.
307. Several commenters expressed
concern that administrative and
reporting requirements for the new
program might be too burdensome for
small HCPs. Many commenters
suggested abandoning quarterly
reporting requirements in favor of
annual or semi-annual reporting to
reduce administrative burdens. Several
commenters asked for a common
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reporting format, and requested that
reporting requirements not be too
onerous. OHN recommended that the
Commission authorize electronic
signatures for all processes, especially
the invoice approval process; permit
electronic document submission; permit
electronic administrative linkage into
FCC/USAC project tracking systems;
and support web-based electronic
survey and reporting tools to gather,
present, and compare data. Some
commenters also expressed concern that
imposing detailed technical
requirements on health services
infrastructure projects might
‘‘discourage investment in broadband
infrastructure projects and even
foreclose the use of certain
technologies.’’
308. Responses to the NPRM and July
19 Public Notice also emphasized a
streamlined approach to the competitive
bidding requirements through the use of
consortium applications and multiyear
contracts. For example, one commenter
stated that consortium applications
would take the administrative burden
off small HCPs who do not have the
time or resources to apply for funds.
However, one of the Pilot Projects,
PSPN, noted that a mandated multi-year
contract for at least 5 years could be
burdensome to service providers.
309. Finally, one commenter
specifically recommended that the
Commission encourage participation
from small and women-owned
businesses by reducing or waiving
matching contributions requirements for
non-profit small and women-owned
businesses acting as consortium leaders;
streamlining administrative reporting
requirements; and increasing the
performance bond minimum
requirement for contracts of $300,000 or
higher from the $150,000 floor. In
making the determinations reflected in
this Order, we have considered the
impact of our actions on small entities.
3. Description and Estimate of the
Number of Small Entities to Which
Rules Will Apply
310. The RFA directs agencies to
provide a description of, and, where
feasible, an estimate of, the number of
small entities that may be affected by
the rules adopted herein. The RFA
generally defines the term ‘‘small
entity’’ as having the same meaning as
the terms ‘‘small business,’’ ‘‘small
organization,’’ and ‘‘small governmental
jurisdiction.’’ In addition, the term
‘‘small business’’ has the same meaning
as the term ‘‘small business concern’’
under the Small Business Act. A ‘‘small
business concern’’ is one which: (1) Is
independently owned and operated; (2)
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is not dominant in its field of operation;
and (3) satisfies any additional criteria
established by the Small Business
Administration (SBA). In 2009, there
were 27.5 million businesses in the
United States, according to SBA Office
of Advocacy estimates. The latest
available Census data show that there
were 5.9 million firms with employees
in 2008 and 21.4 million without
employees in 2008. Small firms with
fewer than 500 employees represent
99.9 percent of the total (employers and
non-employers), as the most recent data
show there were 18,469 large businesses
in 2008.
311. Small entities potentially
affected by the reforms adopted herein
include eligible non-profit and public
health care providers and the eligible
service providers offering them services,
including telecommunications service
providers, Internet Service Providers
(ISPs), and vendors of the services and
equipment used for dedicated
broadband networks.
i. Health Care Entities
312. As noted earlier, non-profit
businesses and small governmental
units are considered ‘‘small entities’’
within the RFA. In addition, we note
that census categories and associated
generic SBA small business size
categories provide the following
descriptions of small entities. The broad
category of Ambulatory Health Care
Services consists of further categories
and the following SBA small business
size standards. The categories of small
business providers with annual receipts
of $7 million or less consists of: Offices
of Dentists; Offices of Chiropractors;
Offices of Optometrists; Offices of
Mental Health Practitioners (except
Physicians); Offices of Physical,
Occupational and Speech Therapists
and Audiologists; Offices of Podiatrists;
Offices of All Other Miscellaneous
Health Practitioners; and Ambulance
Services. The category of such providers
with $10 million or less in annual
receipts consists of: Offices of
Physicians (except Mental Health
Specialists); Family Planning Centers;
Outpatient Mental Health and
Substance Abuse Centers; Health
Maintenance Organization Medical
Centers; Freestanding Ambulatory
Surgical and Emergency Centers; All
Other Outpatient Care Centers, Blood
and Organ Banks; and All Other
Miscellaneous Ambulatory Health Care
Services. The category of such providers
with $13.5 million or less in annual
receipts consists of: Medical
Laboratories; Diagnostic Imaging
Centers; and Home Health Care
Services. The category of Ambulatory
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Health Care Services providers with
$34.5 million or less in annual receipts
consists of Kidney Dialysis Centers. For
all of these Ambulatory Health Care
Service Providers, census data indicate
that there are a combined total of
368,143 firms that operated for all of
2002. Of these, 356,829 had receipts for
that year of less than $5 million. In
addition, an additional 6,498 firms had
annual receipts of $5 million to $9.99
million; and additional 3,337 firms had
receipts of $10 million to $24.99
million; and an additional 865 had
receipts of $25 million to $49.99
million. We therefore estimate that
virtually all Ambulatory Health Care
Services providers are small, given
SBA’s size categories. We note,
however, that our rules affect non-profit
and public health care providers, and
many of the providers noted above
would not be considered ‘‘public’’ or
‘‘non-profit.’’
313. The broad category of Hospitals
consists of the following categories,
with an SBA small business size
standard of annual receipts of $34.5
million or less: General Medical and
Surgical Hospitals, Psychiatric and
Substance Abuse Hospitals; and
Specialty (Except Psychiatric and
Substance Abuse) Hospitals. For these
health care providers, census data
indicate that there is a combined total
of 3,800 firms that operated for all of
2002, of which 1,651 had revenues of
less than $25 million, and an additional
627 firms had annual receipts of $25
million to $49.99 million. We therefore
estimate that most Hospitals are small,
given SBA’s size categories.
314. The broad category of Nursing
and Residential Care Facilities consists,
inter alia, of the category of Skilled
Nursing Facilities, with a small business
size standard of annual receipts of $13.5
million or less. For these businesses,
census data indicate that there were a
total of 16,479 firms that operated for all
of 2002. All of these firms had annual
receipts of below $1 million. We
therefore estimate that such firms are
small, given SBA’s size standard.
315. The broad category of Social
Assistance consists, inter alia, of the
category of Emergency and Other Relief
Services, with a small business size
standard of annual receipts of $7
million or less. For these health care
providers, census data indicate that
there were a total of 55 firms that
operated for all of 2002. All of these
firms had annual receipts of below $1
million. We therefore estimate that all
such firms are small, given SBA’s size
standard.
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ii. Providers of Telecommunications
and Other Services
a. Telecommunications Service
Providers
316. Wired Telecommunications
Carriers. The SBA has developed a
small business size standard for Wired
Telecommunications Carriers, which
consists of all such companies having
1,500 or fewer employees. According to
Census Bureau data for 2007, there were
a total of 3,188 firms in this category
that operated for the entire year. Of this
total, 3144 firms employed 999 or fewer
employees, and 44 firms employed 1000
employees or more. Thus, under this
size standard, the majority of firms can
be considered small entities that may be
affected by rules adopted pursuant to
this Order.
317. Incumbent Local Exchange
Carriers (LECs). Neither the Commission
nor the SBA has developed a size
standard for small businesses
specifically applicable to local exchange
services. The closest applicable size
standard under SBA rules is for Wired
Telecommunications Carriers. Under
that size standard, such a business is
small if it has 1,500 or fewer employees.
According to Commission data, 1,307
carriers reported that they were
incumbent local exchange service
providers. Of these carriers, an
estimated 1,006 have 1,500 or fewer
employees and 301 have more than
1,500 employees. Consequently, the
Commission estimates that most
providers of local exchange service are
small entities that may be affected by
rules adopted pursuant to this Order.
318. We have included small
incumbent LECs in this present RFA
analysis. A ‘‘small business’’ under the
RFA is one that, inter alia, meets the
pertinent small business size standard
(e.g., a telephone communications
business having 1,500 or fewer
employees), and ‘‘is not dominant in its
field of operation.’’ The SBA’s Office of
Advocacy contends that, for RFA
purposes, small incumbent LECs are not
dominant in their field of operation
because any such dominance is not
‘‘national’’ in scope. We have therefore
included small incumbent LECs in this
RFA analysis, although we emphasize
that this RFA action has no effect on
Commission analyses and
determinations in other, non-RFA
contexts.
319. Competitive Local Exchange
Carriers (competitive LECs),
Competitive Access Providers (CAPs),
Shared-Tenant Service Providers, and
Other Local Service Providers. Neither
the Commission nor the SBA has
developed a small business size
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standard specifically for these service
providers. The closest applicable size
standard under SBA rules is for Wired
Telecommunications Carriers. Under
that size standard, such a business is
small if it has 1,500 or fewer employees.
According to Commission data, 1,442
carriers reported that they were engaged
in the provision of either competitive
local exchange services or competitive
access provider services. Of these
carriers, an estimated 1,256 have 1,500
or fewer employees and 186 have more
than 1,500 employees. In addition, 17
carriers have reported that they are
Shared-Tenant Service Providers, and
all 17 are estimated to have 1,500 or
fewer employees. In addition, 72
carriers have reported that they are
Other Local Service Providers. Of these
72 carriers, an estimated 70 have 1,500
or fewer employees and two have more
than 1,500 employees. Consequently,
the Commission estimates that most
providers of competitive local exchange
service, competitive access providers,
Shared-Tenant Service Providers, and
Other Local Service Providers are small
entities that may be affected by rules
adopted pursuant to this Order.
320. Interexchange Carriers. Neither
the Commission nor the SBA has
developed a size standard for small
businesses specifically applicable to
interexchange services. The closest
applicable size standard under SBA
rules is for Wired Telecommunications
Carriers. Under that size standard, such
a business is small if it has 1,500 or
fewer employees. According to
Commission data, 359 companies
reported that their primary
telecommunications service activity was
the provision of interexchange services.
Of these companies, an estimated 317
have 1,500 or fewer employees and 42
have more than 1,500 employees.
Consequently, the Commission
estimates that the majority of
interexchange service providers are
small entities that may be affected by
rules adopted pursuant to this Order.
321. Wireless Telecommunications
Carriers (except Satellite). Since 2007,
the SBA has recognized wireless firms
within this new, broad, economic
census category. Prior to that time, such
firms were within the now-superseded
categories of ‘‘Paging’’ and ‘‘Cellular and
Other Wireless Telecommunications.’’
Under the present and prior categories,
the SBA has deemed a wireless business
to be small if it has 1,500 or fewer
employees. For this category, census
data for 2007 show that there were 1,383
firms that operated for the entire year.
Of this total, 1,368 firms employed 999
or fewer employees and 15 employed
1000 employees or more. Similarly,
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13977
according to Commission data, 413
carriers reported that they were engaged
in the provision of wireless telephony,
including cellular service, Personal
Communications Service (PCS), and
Specialized Mobile Radio (SMR)
Telephony services. Of these, an
estimated 261 have 1,500 or fewer
employees and 152 have more than
1,500 employees. Consequently, the
Commission estimates that
approximately half or more of these
firms can be considered small. Thus,
using available data, we estimate that
the majority of wireless firms can be
considered small entities that may be
affected by the rules adopted pursuant
to this Order.
322. Wireless Telephony. Wireless
telephony includes cellular, personal
communications services, and
specialized mobile radio telephony
carriers. As noted, the SBA has
developed a small business size
standard for Wireless
Telecommunications Carriers (except
Satellite). Under the SBA small business
size standard, a business is small if it
has 1,500 or fewer employees.
According to the 2008 Trends Report,
434 carriers reported that they were
engaged in wireless telephony. Of these,
an estimated 222 have 1,500 or fewer
employees and 212 have more than
1,500 employees. We have estimated
that 222 of these are small under the
SBA small business size standard.
323. Satellite Telecommunications
and All Other Telecommunications.
Since 2007, the SBA has recognized
satellite firms within this revised
category, with a small business size
standard of $15 million. The most
current Census Bureau data are from the
economic census of 2007, and we will
use those figures to gauge the
prevalence of small businesses in this
category. Those size standards are for
the two census categories of ‘‘Satellite
Telecommunications’’ and ‘‘Other
Telecommunications.’’ Under the
‘‘Satellite Telecommunications’’
category, a business is considered small
if it had $15 million or less in average
annual receipts. Under the ‘‘Other
Telecommunications’’ category, a
business is considered small if it had
$25 million or less in average annual
receipts.
324. The first category of Satellite
Telecommunications ‘‘comprises
establishments primarily engaged in
providing point-to-point
telecommunications services to other
establishments in the
telecommunications and broadcasting
industries by forwarding and receiving
communications signals via a system of
satellites or reselling satellite
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telecommunications.’’ For this category,
Census Bureau data for 2007 show that
there were a total of 512 firms that
operated for the entire year. Of this
total, 464 firms had annual receipts of
under $10 million, and 18 firms had
receipts of $10 million to $24,999,999.
Consequently, we estimate that the
majority of Satellite
Telecommunications firms are small
entities that might be affected by rules
adopted pursuant to this Order.
325. The second category of Other
Telecommunications ‘‘primarily
engaged in providing specialized
telecommunications services, such as
satellite tracking, communications
telemetry, and radar station operation.
This industry also includes
establishments primarily engaged in
providing satellite terminal stations and
associated facilities connected with one
or more terrestrial systems and capable
of transmitting telecommunications to,
and receiving telecommunications from,
satellite systems. Establishments
providing Internet services or voice over
Internet protocol (VoIP) services via
client-supplied telecommunications
connections are also included in this
industry.’’ For this category, Census
Bureau data for 2007 show that there
were a total of 2,383 firms that operated
for the entire year. Of this total, 2,346
firms had annual receipts of under $25
million. Consequently, we estimate that
the majority of Other
Telecommunications firms are small
entities that might be affected by our
action.
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b. Internet Service Providers
326. Internet Service Providers. Since
2007, these services have been defined
within the broad economic census
category of Wired Telecommunications
Carriers; that category is defined as
follows: ‘‘This industry comprises
establishments primarily engaged in
operating and/or providing access to
transmission facilities and infrastructure
that they own and/or lease for the
transmission of voice, data, text, sound,
and video using wired
telecommunications networks.
Transmission facilities may be based on
a single technology or a combination of
technologies.’’ The SBA has developed
a small business size standard of 1,500
or fewer employees. According to
Census Bureau data from 2007, there
were 3,188 firms in this category, total,
that operated for the entire year. Of this
total, 3,144 firms had employment of
999 or fewer employees, and 44 firms
had employment of 1000 employees or
more. Consequently, we estimate that
the majority of these firms are small
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entities that may be affected by rules
adopted pursuant to this Order.
327. Data Processing, Hosting, and
Related Services. Entities in this
category ‘‘primarily * * * provid[e]
infrastructure for hosting or data
processing services.’’ The SBA has
developed a small business size
standard for this category; that size
standard is $25 million or less in
average annual receipts. According to
Census Bureau data for 2007, there were
8,060 firms in this category that
operated for the entire year. Of these,
7,744 had annual receipts of under
$24,999,999. Consequently, we estimate
that the majority of these firms are small
entities that may be affected by rules
adopted pursuant to this Order.
328. All Other Information Services.
The Census Bureau defines this industry
as including ‘‘establishments primarily
engaged in providing other information
services (except news syndicates,
libraries, archives, Internet publishing
and broadcasting, and Web search
portals).’’ Our action pertains to
interconnected VoIP services, which
could be provided by entities that
provide other services such as email,
online gaming, web browsing, video
conferencing, instant messaging, and
other, similar IP-enabled services. The
SBA has developed a small business
size standard for this category; that size
standard is $7.0 million or less in
average annual receipts. According to
Census Bureau data for 2007, there were
367 firms in this category that operated
for the entire year. Of these, 334 had
annual receipts of under $5.0 million,
and an additional 11 firms had receipts
of between $5 million and $9,999,999.
Consequently, we estimate that the
majority of these firms are small entities
that may be affected by rules adopted
pursuant to this Order.
c. Vendors and Equipment
Manufacturers
329. Vendors for Infrastructure
Development or ‘‘Network Buildout’’
Construction. The Commission has not
developed a small business size
standard specifically directed toward
manufacturers of network facilities. The
closest applicable definition of a small
entity are the size standards under the
SBA rules applicable to manufacturers
of ‘‘Radio and Television Broadcasting
and Communications Equipment’’ (RTB)
and ‘‘Other Communications
Equipment.’’
330. Telephone Apparatus
Manufacturing. The Census Bureau
defines this category as follows: ‘‘This
industry comprises establishments
primarily engaged in manufacturing
wire telephone and data
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communications equipment. These
products may be standalone or boardlevel components of a larger system.
Examples of products made by these
establishments are central office
switching equipment, cordless
telephones (except cellular), PBX
equipment, telephones, telephone
answering machines, LAN modems,
multi-user modems, and other data
communications equipment, such as
bridges, routers, and gateways.’’ The
SBA has developed a small business
size standard for Telephone Apparatus
Manufacturing, which is: All such firms
having 1,000 or fewer employees.
According to Census Bureau data for
2002, there were a total of 518
establishments in this category that
operated for the entire year. Of this
total, 511 had employment of under
1,000, and an additional 7 had
employment of 1,000 to 2,499. Thus,
under this size standard, the majority of
firms can be considered small.
331. Radio and Television
Broadcasting and Wireless
Communications Equipment
Manufacturing. The Census Bureau
defines this category as follows: ‘‘This
industry comprises establishments
primarily engaged in manufacturing
radio and television broadcast and
wireless communications equipment.
Examples of products made by these
establishments are: Transmitting and
receiving antennas, cable television
equipment, GPS equipment, pagers,
cellular phones, mobile
communications equipment, and radio
and television studio and broadcasting
equipment.’’ The SBA has developed a
small business size standard for Radio
and Television Broadcasting and
Wireless Communications Equipment
Manufacturing, which is: All such firms
having 750 or fewer employees.
According to Census Bureau data for
2002, there were a total of 1,041
establishments in this category that
operated for the entire year. Of this
total, 1,010 had employment of under
500, and an additional 13 had
employment of 500 to 999. Thus, under
this size standard, the majority of firms
can be considered small.
332. Other Communications
Equipment Manufacturing. The Census
Bureau defines this category as follows:
‘‘This industry comprises
establishments primarily engaged in
manufacturing communications
equipment (except telephone apparatus,
and radio and television broadcast, and
wireless communications equipment).’’
The SBA has developed a small
business size standard for Other
Communications Equipment
Manufacturing, which is: All such firms
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having 750 or fewer employees.
According to Census Bureau data for
2002, there were a total of 503
establishments in this category that
operated for the entire year. Of this
total, 493 had employment of under
500, and an additional 7 had
employment of 500 to 999. Thus, under
this size standard, the majority of firms
can be considered small.
4. Description of Projected Reporting,
Recordkeeping, and Other Compliance
Requirements for Small Entities
333. The reporting and recordkeeping
requirements in this Order could have
an impact on both small and large
entities. However, even though the
impact may be more financially
burdensome for smaller entities, the
Commission believes the impact of such
requirements is outweighed by the
benefit of providing the additional
support necessary to make broadband
available for HCPs to provide health
care to rural and remote areas, and to
make broadband rates for public and
non-profit HCPs lower. Further, these
requirements are necessary to ensure
that the statutory goals of section 254 of
the Telecommunications Act of 1996 are
met without waste, fraud, or abuse.
334. Eligibility Determination. For
each HCP listed, applicants will be
required to provide the HCP’s address
and contact information; identify the
eligible HCP type; provide an address
for each physical location that will
receive supported connectivity; provide
a brief explanation for why the HCP is
eligible under the Act and the
Commission’s rules and orders; and
certify to the accuracy of this
information under penalty of perjury.
335. Consortium Leaders should
obtain supporting information and/or
documents to support eligibility for
each HCP when they collect LOAs.
Consortium applicants must also submit
documentation regarding network
planning as part of the application
process, although the Commission will
monitor experience under the new rule,
and may make adjustments in the
future, if necessary, to ensure that this
requirement is minimally burdensome
while creating appropriate incentives
for applicants to make thoughtful, costeffective purchases. Applicants in the
Healthcare Connect Fund are not
required to submit technology plans
with their requests for service, but the
Commission may re-evaluate this
decision in the future based on
experience with the new program.
336. Process for initiating competitive
bidding for requested services.
Applicants must develop appropriate
evaluation criteria for selecting the
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winning bid before submitting a request
for services to USAC to initiate
competitive bidding. The evaluation
criteria should be based on the
Commission’s definition of ‘‘costeffective,’’ and include the most
important criteria needed to provide
health care, as determined by the
applicant. Applicants should also begin
to identify possible sources for the 35
percent of undiscounted costs.
337. Applicants subject to competitive
bidding must submit new FCC Form 461
and supporting documentation to the
Universal Service Administrative
Company (USAC). On Form 461,
applicants must provide basic
information regarding the HCP(s) on the
application (including contact
information for potential bidders); a
brief description of the desired services;
and certifications designed to ensure
compliance with program rules and
minimize waste, fraud, and abuse.
338. Applicants must supplement
their Form 461 with a Request for
Proposals (RFP) on USAC’s Web site in
the following instances: (1) Consortium
applications that seek more than
$100,000 in program support in a
funding year; (2) applicants who are
required to issue an RFP under
applicable state or local procurement
rules or regulations; and (3) consortium
applications that seek support for
infrastructure (i.e. HCP-owned facilities)
as well as services. In addition, any
applicant is free to post an RFP.
339. Applicants also are required to
submit the following documents, which
will not be publicly posted by USAC.
340. Form 460. Applicants should
submit Form 460 to certify to the
eligibility of HCP(s) listed on the
application, if they have not previously
done so.
341. Letters of Agency for Consortium
Applicants. Consortium applicants
should submit letters of agency
demonstrating that the Consortium
Leader is authorized to submit Forms
460, 461, and 462, as applicable,
including required certifications and
any supporting materials, on behalf of
each participating HCP in the
consortium.
342. Declaration of Assistance. As in
the Pilot Program, all applicants must
identify, through a Declaration of
Assistance, any consultants, service
providers, or any other outside experts,
whether paid or unpaid, who aided in
the preparation of their applications.
The Declaration of Assistance must be
filed with the Form 461. Identifying
these consultants and outside experts
facilitates the ability of USAC, the
Commission, and law enforcement
officials to identify and prosecute
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individuals who may seek to defraud
the program or engage in other illegal
acts. To ensure participants comply
with the competitive bidding
requirements, they must disclose all of
the types of relationships explained
above.
343. Finally, all applicants subject to
competitive bidding must certify to
USAC that the services and/or
infrastructure selected are, to the best of
the applicant’s knowledge, the most
cost-effective option available.
Applicants must submit documentation
to USAC to support their certifications,
including a copy of each bid received
(winning, losing, and disqualified), the
bid evaluation criteria, and any other
related documents, such as bid
evaluation sheets; a list of people who
evaluated bids (along with their title/
role/relationship to the applicant
organization); memos, board minutes, or
similar documents related to the vendor
selection/award; copies of notices to
winners; and any correspondence with
service providers during the bidding/
evaluation/award phase of the process.
Bid evaluation documents need not be
in a certain format, but the level of
documentation should be appropriate
for the scale and scope of the services
for which support is requested.
344. Reporting Requirements. Data
from participants and USAC are
essential to the Commission’s ability to
evaluate whether the program is
meeting its performance goals, and to
measure progress toward meeting those
goals. In the Healthcare Connect
Program, each consortium lead entity
must file an annual report with USAC
on or before July 30 for the preceding
funding year (i.e., July 1 through and
including June 30). Individual HCP
applicants do not have to fine annual
reports, however.
345. Recordkeeping. Consistent with
§§ 54.619(a), (b), and (d) of the
Commission’s current rules, participants
and service providers in the Healthcare
Connect Fund must maintain certain
documentation related to the purchase
and delivery of services funded by the
RHC programs, and will be required to
produce these records upon request.
346. The NPRM also proposed to: (1)
clarify that the documents to be retained
by participants and service providers
must include all records related to the
participant’s application for, receipt of,
and delivery of discounted services; and
(2) amend the existing rules to mandate
that service providers, upon request,
produce the records kept pursuant to
the Commission’s recordkeeping
requirement. This Order adopts rules
consistent with these proposals to
enable the Commission and USAC to
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obtain the records necessary for
effective oversight of the RHC programs.
347. Certifications. Consistent with
§§ 54.603(b) and 54.615(c) of the current
rules, participants in the Healthcare
Connect Fund must certify under oath
to compliance with certain program
requirements, including the
requirements to select the most costeffective bid and to use program support
solely for purposes reasonably related to
the provision of health care services or
instruction. For individual HCP
applicants, required certifications must
be provided and signed by an officer or
director of the HCP, or other authorized
employee of the HCP (electronic
signatures are permitted). For
consortium applicants, an officer,
director, or other authorized employee
of the Consortium Leader must sign the
required certifications.
348. Vendors SPIN Requirement. All
vendors participating in the Healthcare
Connect Fund must obtain a Service
Provider Identification Number (SPIN)
by submitting an FCC Form 498. The
SPIN is a unique number assigned to
each service provider by USAC, and
serves as USAC’s tool to ensure that
support is directed to the correct service
provider. SPINs must be assigned before
USAC can authorize support payments.
Therefore, all service providers
submitting bids to provide services to
selected participants will need to
complete and submit a Form 498 to
USAC for review and approval if
selected by a participant before funding
commitments can be made.
349. Skilled Nursing Facility (SNF)
Pilot. SNF Pilot applicants must
demonstrate how proposed
participation of SNFs will improve the
overall provision of health care by
eligible HCPs. SNF Pilot applicants and
participants must submit data on a
number of variables (to be determined
by the Bureau at a later date) related to
the broadband connections supported
and their health care uses, so that at the
conclusion of the SNF Pilot, the
Commission can use the data gathered
to determine how to proceed with
regard to including SNFs in the
Commission’s health care support
programs on a permanent basis. SNF
Pilot applicants also must commit to
robust data gathering and analysis, and
to submission of an annual report.
Applicants must explain what types of
data they intend to gather and how they
intend to gather that data. At the
conclusion of the Pilot, participants
must demonstrate the health care cost
savings and/or improved quality of
patient care that have been realized
through greater use of broadband to
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provide telemedicine to treat the
residents of SNFs.
5. Steps Taken To Minimize the
Significant Economic Impact on Small
Entities, and Significant Alternatives
Considered
350. The FRFA requires an agency to
describe any significant alternatives that
it has considered in developing its
approach, which may include the
following four alternatives (among
others): ‘‘(1) The establishment of
differing compliance or reporting
requirements or timetables that take into
account the resources available to small
entities; (2) the clarification,
consolidation, or simplification of
compliance and reporting requirements
under the rule for such small entities;
(3) the use of performance rather than
design standards; and (4) an exemption
from coverage of the rule, or any part
thereof, for such small entities.’’
Accordingly, we have taken the
following steps to minimize the impact
on small entities.
351. Consortium approach. Consistent
with support from commenters, this
Order adopts a streamlined application
process that facilitates consortium
applications, which should enable HCPs
to file many fewer applications and to
share the administrative costs of all
aspects of participation in the program.
Each consortium must file only one
application, instead of each individual
HCP filing separate applications.
Applying as a consortium is simpler,
cheaper, and more efficient for small
HCPs. Under the consortium approach
adopted in this Order, the expenses
associated with planning the network,
applying for funding, issuing RFPs,
contracting with service providers, and
invoicing are shared among a number of
providers. This should help ensure that
applicants, including small entities, will
not be deterred from applying for
support due to administrative burdens.
352. Flat-Rate Discount. In order to
encourage participation in the
Healthcare Connect Fund and relieve
planning uncertainties for smaller
entities, this Order adopts a flat-rate
discount of 65 percent, clearly
identifying the level of support that
providers can reasonably expect to
receive. By adopting a flat-rate discount,
the Commission provides a clear and
predictable support amount, thereby
helping eligible HCPs to plan for their
broadband needs. This approach is also
less complex and easier to administer,
which should expedite the application
process and reduce administrative
expenses for small entities.
353. Competitive Bidding Exemptions.
While competitive bidding is essential
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to the program, it is not without
administrative costs to participants. In
three situations, exempting funding
requests from competitive bidding
strikes a common-sense balance
between efficient use of program funds
and reducing regulatory costs. First,
based on our experience in the existing
RHC programs, it will be more
administratively efficient to exempt
applicants seeking support for relatively
small amounts. The threshold for this
exemption is $10,000 or less in total
annual undiscounted costs (which, with
a 35 percent minimum applicant
contribution, results in a maximum of
$6,500 annually in Fund support).
Second, if an applicant is required by
federal, state or local law or regulations
to purchase services from a master
service agreement negotiated by a
governmental entity on its behalf, and
the master service agreement was
awarded pursuant to applicable federal,
state, Tribal, or local competitive
bidding processes, the applicant is not
required to re-undergo competitive
bidding. Third, applicants who wish to
request support under the Healthcare
Connect Fund while utilizing contracts
previously approved by USAC (under
the Pilot Program, the RHC
Telecommunications or Internet Access
Programs, or the E-rate program) may do
so without undergoing additional
competitive bidding, as long as they do
not request duplicative support for the
same service and otherwise comply
with all Healthcare Connect Fund
requirements. In addition, consistent
with current RHC program policies,
applicants who receive evergreen status
or multi-year commitments under the
Healthcare Connect Fund are exempt
from competitive bidding for the
duration of the contract. Applicants
who are exempt from competitive
bidding can proceed directly to
submitting a funding commitment
request.
354. Evergreen Contracts. The existing
RHC program allows ‘‘evergreen’’
contracts, meaning that for the life of a
multi-year contract deemed evergreen
by USAC, HCPs need not annually rebid
the service or post an FCC Form 465. As
stated in the NPRM, codification of
existing evergreen procedures likely
will benefit participating HCPs by
affording them: (1) Lower prices due to
longer contract terms; and (2) reduced
administrative burdens due to fewer
required Form 465s. Commenters
supported the NPRM’s proposal to
codify the Commission’s existing
evergreen procedures, arguing, among
other things, that the evergreen
procedures significantly reduce HCPs’
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administrative and financial burdens.
This Order also makes one change to the
existing evergreen policy to allow
participants to exercise voluntary
options to extend an evergreen contract
without undergoing additional
competitive bidding, subject to certain
limitations.
355. Multi-year funding commitments:
Applicants may receive multi-year
funding commitments that cover a
period of up to three funding years. The
multi-year funding commitments will
reduce uncertainty and administrative
burden by eliminating the need for
HCPs to apply every year for funding, as
is required under the existing RHC
Telecommunications and Internet
Access Programs, and reduce
administrative expenses both for the
projects and for USAC. Multi-year
funding commitments, prepaid leases,
and IRUs also encourage term discounts
and produce lower rates from vendors.
The funding of HCP-constructed-andowned infrastructure has allowed Pilot
projects to choose this option where it
is the most cost-effective way to obtain
broadband.
356. Annual Reporting Requirement:
Participants in the Healthcare Connect
Fund must submit reports on an annual
basis, consistent with suggestions from
commenters to minimize the burdens of
reporting requirements. Submitting
annual, rather than quarterly reports, as
required in the Pilot Program, will
minimize the burden on participants
and USAC alike while still supporting
performance evaluation and enabling
the Commission to evaluate the
prevention of waste, fraud, and abuse.
Because the Commission expects to be
able to collect data from individual
applicants in the Healthcare Connect
Fund on forms they already submit,
individual applicants are not required to
submit annual reports unless a report is
required for other reasons. To further
minimize the burden on participants,
the Order delegates authority to the
Bureau to work with USAC to develop
a simple and streamlined reporting
system that leverages data collected
through the application process,
eliminating the need to resubmit any
information that has already been
provided to USAC.
357. Sustainability plans for
applicants that build their own
infrastructure. In the NPRM, the
Commission proposed to require
sustainability plans similar to those
required in the Pilot Program for HCPs
who intended to have an ownership
interest, indefeasible right of use, or
capital lease interest in supported
facilities. The Pilot Program required
projects to submit a copy of their
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sustainability plan with every quarterly
report. Based on the Pilot Program, the
Commission concludes that submission
of sustainability reports on a quarterly
basis is unnecessarily burdensome for
applicants, and provides little useful
information to USAC. Accordingly,
sustainability reports for the Healthcare
Connect Fund are only required to be refiled if there is a material change that
would impact projected income or
expenses by the greater of 20 percent or
$100,000 from the previous submission,
or if the applicant submits a funding
request based on a new Form 461 (i.e.,
a new competitively bid contract). In
such an event, the revised sustainability
report must be provided to USAC no
later than the end of the relevant
quarter, clearly showing (i.e. by
redlining or highlighting) what has
changed.
358. Skilled Nursing Facility Pilot
Requirements. Participants in the SNF
Pilot must submit data on a number of
variables; gather and analyze data;
submit annual reports; and, at the
conclusion of the Pilot, demonstrate the
health care cost savings and/or
improved quality of patient care that
have been realized through greater use
of broadband. While these requirements
may impact small entities, we have
determined that the benefits of these
requirements—namely, preserving
program integrity and ensuring costeffectiveness—outweigh any costs.
Specifically, we do not believe that
these requirements will have significant
impact on small entities for two reasons.
First, the SNF is a voluntary pilot
program and, as such, entities may
choose whether to apply. Second, the
Bureau will give preference to
applicants that partner with existing or
new consortia in the existing Pilot
Program or the Healthcare Connect
Fund. Small SNFs joining consortia
should experience minimal reporting
burdens as these consortia typically
have the leadership and expertise to
effectively assist their members with
administrative requirements.
359. Report to Congress: The
Commission will send a copy of the
Order, including this FRFA, in a report
to be sent to Congress pursuant to the
Congressional Review Act. In addition,
the Commission will send a copy of the
Order, including this FRFA, to the Chief
Counsel for Advocacy of the SBA. A
copy of the Order (and FRFA summaries
thereof) will also be published in the
Federal Register.
B. Paperwork Reduction Act Analysis
360. This Order contains new
information collection requirements
subject to the Paperwork Reduction Act
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of 1995 (PRA), Public Law 104–13. It
will be submitted to the Office of
Management and Budget (OMB) for
review under section 3507(d) of the
PRA. OMB, the general public, and
other Federal agencies are invited to
comment on the new or modified
information collection requirements
contained in this proceeding. In
addition, we note that pursuant to the
Small Business Paperwork Relief Act of
2002, Public Law 107–198, see 44 U.S.C.
3506(c)(4), we previously sought
specific comment on how the
Commission might further reduce the
information collection burden for small
business concerns with fewer than 25
employees. We describe the impacts
that might affect small businesses,
which include most businesses with
fewer than 25 employees, in the Final
Regulatory Flexibility Analysis.
C. Congressional Review Act
361. The Commission will send a
copy of this order to Congress and the
Government Accountability Office
pursuant to the Congressional Review
Act, see 5 U.S.C. 801(a)(1)(A).
XI. Ordering Clauses
362. Accordingly, it is ordered that,
pursuant to sections 1, 2, 4(i)–(j), 201(b),
and 254 of the Communications Act of
1934, as amended, 47 U.S.C. 151, 152,
154(i), 154(j), 201(b), and 254, this
Report and Order is adopted, and,
pursuant to 5 U.S.C. 553(d)(3) and
§§ 1.4(b)(1), 1.103(a), and 1.427(a) of the
Commission’s rules, 47 CFR 1.4(b)(1),
1.103(a), 1.427(a).
363. It is further ordered that Part 54
of the Commission’s rules, 47 CFR Part
54, is amended as set forth in the
Appendix, and such rules shall become
effective April 1, 2013, except for those
rules and requirements that involve
Paperwork Reduction Act burdens,
which shall become effective
immediately upon announcement in the
Federal Register of OMB approval and
of effective dates of such rules.
364. It is further ordered that pursuant
to 5 U.S.C. 801(a)(1)(A), the Commission
shall send a copy of this Report and
Order to Congress and to the
Government Accountability Office
pursuant to the Congressional Review
Act.
365. It is further ordered that the
Commission’s Consumer and
Governmental Affairs Bureau, Reference
Information Center, shall send a copy of
this Report and Order, including the
Final Regulatory Flexibility Analysis, to
the Chief Counsel for Advocacy of the
Small Business Administration.
366. It is further ordered that,
pursuant to the authority contained in
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sections 1–4 and 254 of the
Communications Act of 1934, as
amended, 47 U.S.C. 151–154 and 254,
the requests for additional Rural Health
Care Pilot Program funding filed by
Oregon Health Network, California
Telehealth Network, Southwest
Telehealth Access Grid, Western New
York Rural Area Health Education
Center, Inc., Palmetto State Providers
Network, and Health Information
Exchange of Montana are denied.
367. It is further ordered that,
pursuant to the authority contained in
sections 1–4 and 254 of the
Communications Act of 1934, as
amended, 47 U.S.C. 151–154 and 254,
the request for an extension of the June
30, 2012, Rural Health Care Pilot
Program deadline filed by the Texas
Health Information Network
Collaborative is dismissed as moot.
368. It is further ordered that,
pursuant to the authority contained in
sections 1–4 and 254 of the
Communications Act of 1934, as
amended, 47 U.S.C. 151–154 and 254,
the requests for waiver of 47 CFR 54.611
of the Commission’s rules filed by
Network Services Solutions, L.L.C., and
Richmond Connections, Inc., are
granted.
369. It is further ordered that,
pursuant to the authority contained in
sections 1–4 and 254 of the
Communications Act of 1934, as
amended, 47 U.S.C. 151–154 and 254,
USAC shall make an initial
reimbursement payment to Network
Services Solutions, L.L.C., and
Richmond Connections, Inc., no later
than December 31, 2012 as described
herein.
370. It is further ordered that,
pursuant to the authority contained in
sections 1–4 and 254 of the
Communications Act of 1934, as
amended, 47 U.S.C. 151–154 and 254,
the requests for stay of enforcement of
47 CFR § 54.611 of the Commission’s
rules filed by Network Services
Solutions, L.L.C., and Richmond
Connections, Inc., are dismissed as
moot.
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List of Subjects in 47 CFR Part 54
Communications common carriers,
Health facilities, Reporting and
recordkeeping requirements,
Telecommunications, Telephone.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Final Rules
For the reasons discussed in the
preamble, the Federal Communications
Commission amends 47 CFR part 54 as
follows:
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PART 54—UNIVERSAL SERVICE
1. The authority citation for part 54
continues to read as follows:
■
Authority: Secs. 5, 48 Stat. 1068, as
amended; 47 U.S.C. 155.
2. In § 54.5, revise the definition of
‘‘rural area’’ to read as follows:
■
§ 54.5
Terms and definitions.
*
*
*
*
*
Rural area. For purposes of the
schools and libraries universal support
mechanism, a ‘‘rural area’’ is a
nonmetropolitan county or county
equivalent, as defined in the Office of
Management and Budget’s (OMB)
Revised Standards for Defining
Metropolitan Areas in the 1990s and
identifiable from the most recent
Metropolitan Statistical Area (MSA) list
released by OMB, or any contiguous
non-urban Census Tract or Block
Numbered Area within an MSA–listed
metropolitan county identified in the
most recent Goldsmith Modification
published by the Office of Rural Health
Policy of the U.S. Department of Health
and Human Services.
*
*
*
*
*
■ 3. Add § 54.600 to subpart G and an
undesignated center heading to read as
follows:
Defined Terms and Eligibility
§ 54.600
Terms and definitions.
As used in this subpart, the following
terms shall be defined as follows:
(a) Health care provider. A ‘‘health
care provider’’ is any:
(1) Post-secondary educational
institution offering health care
instruction, including a teaching
hospital or medical school;
(2) Community health center or health
center providing health care to migrants;
(3) Local health department or agency;
(4) Community mental health center;
(5) Not-for-profit hospital;
(6) Rural health clinic; or
(7) Consortium of health care
providers consisting of one or more
entities described in paragraphs (a)(1)
through (a)(6) of this section.
(b) Rural area. (1) A ‘‘rural area’’ is an
area that is entirely outside of a Core
Based Statistical Area; is within a Core
Based Statistical Area that does not have
any Urban Area with a population of
25,000 or greater; or is in a Core Based
Statistical Area that contains an Urban
Area with a population of 25,000 or
greater, but is within a specific census
tract that itself does not contain any part
of a Place or Urban Area with a
population of greater than 25,000. For
purposes of this rule, ‘‘Core Based
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Statistical Area,’’ ‘‘Urban Area,’’ and
‘‘Place’’ are as identified by the Census
Bureau.
(2) Notwithstanding the definition of
‘‘rural area,’’ any health care provider
that is located in a ‘‘rural area’’ under
the definition used by the Commission
prior to July 1, 2005, and received a
funding commitment from the rural
health care program prior to July 1,
2005, is eligible for support under this
subpart.
(c) Rural health care provider. A
‘‘rural health care provider’’ is an
eligible health care provider site located
in a rural area.
■ 4. Revise § 54.601 to read as follows:
§ 54.601
Health care provider eligibility.
(a) Eligible health care providers. (1)
Only an entity that is either a public or
non-profit health care provider, as
defined in this subpart, shall be eligible
to receive support under this subpart.
(2) Each separate site or location of a
health care provider shall be considered
an individual health care provider for
purposes of calculating and limiting
support under this subpart.
(b) Determination of health care
provider eligibility for the Healthcare
Connect Fund. Health care providers in
the Healthcare Connect Fund may
certify to the eligibility of particular
sites at any time prior to, or
concurrently with, filing a request for
services to initiate competitive bidding
for the site. Applicants who utilize a
competitive bidding exemption must
provide eligibility information for the
site to the Administrator prior to, or
concurrently with, filing a request for
funding for the site. Health care
providers must also notify the
Administrator within 30 days of a
change in the health care provider’s
name, site location, contact information,
or eligible entity type.
■ 5. Add § 54.602 to subpart G to read
as follows:
§ 54.602
Health care support mechanism.
(a) Telecommunications Program.
Rural health care providers may request
support for the difference, if any,
between the urban and rural rates for
telecommunications services, subject to
the provisions and limitations set forth
in §§ 54.600 through 54.625 and
§§ 54.671 through 54.680. This support
is referred to as the
‘‘Telecommunications Program.’’
(b) Healthcare Connect Fund. Eligible
health care providers may request
support for eligible services, equipment,
and infrastructure, subject to the
provisions and limitations set forth in
§§ 54.600 through 54.602 and §§ 54.630
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through 54.680. This support is referred
to as the ‘‘Healthcare Connect Fund.’’
(c) Allocation of discounts. An
eligible health care provider that
engages in both eligible and ineligible
activities or that collocates with an
ineligible entity shall allocate eligible
and ineligible activities in order to
receive prorated support for the eligible
activities only. Health care providers
shall choose a method of cost allocation
that is based on objective criteria and
reasonably reflects the eligible usage of
the facilities.
(d) Health care purposes. Services for
which eligible health care providers
receive support from the
Telecommunications Program or the
Healthcare Connect Fund must be
reasonably related to the provision of
health care services or instruction that
the health care provider is legally
authorized to provide under the law in
the state in which such health care
services or instruction are provided.
6. In § 54.603, add an undesignated
center heading; revise the section
heading and paragraphs (a), (b)(1)
introductory text, and (b)(1)(i) and (ii),
and remove and reserve paragraph
(b)(1)(iii).
The addition and revisions read as
follows:
■
Telecommunications Program
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§ 54.603 Competitive bidding and
certification requirements.
(a) Competitive bidding requirement.
To select the telecommunications
carriers that will provide services
eligible for universal service support to
it under the Telecommunications
Program, each eligible health care
provider shall participate in a
competitive bidding process pursuant to
the requirements established in this
section and any additional and
applicable state, Tribal, local, or other
procurement requirements.
(b) * * *
(1) An eligible health care provider
seeking to receive telecommunications
services eligible for universal service
support under the Telecommunications
Program shall submit a completed FCC
Form 465 to the Administrator. FCC
Form 465 shall be signed by the person
authorized to order telecommunications
services for the health care provider and
shall include, at a minimum, that
person’s certification under oath that:
(i) The requester is a public or nonprofit entity that falls within one of the
seven categories set forth in the
definition of health care provider, listed
in § 54.600(a);
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(ii) The requester is physically located
in a rural area;
*
*
*
*
*
■ 7. In § 54.604, revise the section
heading; redesignate paragraphs (b) and
(c) as paragraphs (d) and (e)
respectively; redesignate paragraph (a)
as paragraph (c) and add new
paragraphs (a) and (b); and revise newly
redesignated paragraph (c) introductory
text to read as follows:
§ 54.604 Consortia, telecommunications
services, and existing contracts.
(a) Consortia. (1) Under the
Telecommunications Program, an
eligible health care provider may join a
consortium with other eligible health
care providers; with schools, libraries,
and library consortia eligible under
subpart F of this part; and with public
sector (governmental) entities to order
telecommunications services. With one
exception, eligible health care providers
participating in consortia with ineligible
private sector members shall not be
eligible for supported services under
this subpart. A consortium may include
ineligible private sector entities if such
consortium is only receiving services at
tariffed rates or at market rates from
those providers who do not file tariffs.
(2) For consortia, universal service
support under the Telecommunications
Program shall apply only to the portion
of eligible services used by an eligible
health care provider.
(b) Telecommunications Services.
Any telecommunications service that is
the subject of a properly completed
bona fide request by a rural health care
provider shall be eligible for universal
service support, subject to the
limitations described in this paragraph.
The length of a supported
telecommunications service may not
exceed the distance between the health
care provider and the point farthest
from that provider on the jurisdictional
boundary of the largest city in a state as
defined in § 54.625(a).
(c) Existing contracts. A signed
contract for services eligible for
Telecommunications Program support
pursuant to this subpart between an
eligible health care provider as defined
under § 54.600 and a
telecommunications carrier shall be
exempt from the competitive bid
requirements set forth in § 54.603(a) as
follows:
*
*
*
*
*
■ 8. In § 54.605, revise paragraph (a) to
read as follows:
§ 54.605
Determining the urban rate.
(a) If a rural health care provider
requests support for an eligible service
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13983
to be funded from the
Telecommunications Program that is to
be provided over a distance that is less
than or equal to the ‘‘standard urban
distance,’’ as defined in paragraph (c) of
this section, for the state in which it is
located, the ‘‘urban rate’’ for that service
shall be a rate no higher than the highest
tariffed or publicly-available rate
charged to a commercial customer for a
functionally similar service in any city
with a population of 50,000 or more in
that state, calculated as if it were
provided between two points within the
city.
*
*
*
*
*
■ 9. In § 54.609, revise paragraphs (a)
introductory text, (a)(1)(iv) and (3),
(d)(1) and (2), and (e)(1) to read as
follows:
§ 54.609
Calculating support.
(a) The amount of universal service
support provided for an eligible service
to be funded from the
Telecommunications Program shall be
the difference, if any, between the urban
rate and the rural rate charged for the
service, as defined herein. In addition,
all reasonable charges that are incurred
by taking such services, such as state
and federal taxes shall be eligible for
universal service support. Charges for
termination liability, penalty
surcharges, and other charges not
included in the cost of taking such
service shall not be covered by the
universal service support mechanisms.
Under the Telecommunications
Program, rural health care providers
may choose one of the following two
support options.
(1) * * *
(iv) A telecommunications carrier that
provides telecommunications service to
a rural health care provider
participating in an eligible health care
consortium, and the consortium must
establish the actual distance-based
charges for the health care provider’s
portion of the shared
telecommunications services.
*
*
*
*
*
(3) Base rate support-consortium. A
telecommunications carrier that
provides telecommunications service to
a rural health care provider
participating in an eligible health care
consortium, and the consortium must
establish the applicable rural base rates
for telecommunications service for the
health care provider’s portion of the
shared telecommunications services, as
well as the applicable urban base rates
for the telecommunications service.
*
*
*
*
*
(d) * * *
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(1) Rural public and non-profit health
care providers may receive support for
rural satellite services under the
Telecommunications Program, even
when another functionally similar
terrestrial-based service is available in
that rural area. Support for satellite
services shall be capped at the amount
the rural health care provider would
have received if they purchased a
functionally similar terrestrial-based
alternative.
(2) Rural health care providers
seeking support from the
Telecommunications Program for
satellite services shall provide to the
Administrator with the Form 466,
documentation of the urban and rural
rates for the terrestrial-based
alternatives.
*
*
*
*
*
(e) * * *
(1) Calculation of support. The
support amount allowed under the
Telecommunications Program for
satellite services provided to mobile
rural health care providers is calculated
by comparing the rate for the satellite
service to the rate for an urban wireline
service with a similar bandwidth.
Support for satellite services shall not
be capped at an amount of a
functionally similar wireline alternative.
Where the mobile rural health care
provider provides service in more than
one state, the calculation shall be based
on the urban areas in each state,
proportional to the number of locations
served in each state.
*
*
*
*
*
§ 54.611
■
[Removed]
10. Remove § 54.611.
§ 54.613
[Amended]
11. In § 54.613, remove and reserve
paragraph (b).
■ 12. In § 54.615, revise paragraphs (b),
(c) introductory text, and (c)(2) and
remove and reserve paragraph (c)(3).
The revisions read as follows:
■
§ 54.615
Obtaining services.
mstockstill on DSK4VPTVN1PROD with RULES2
*
*
*
*
*
(b) Receiving supported rate. Upon
receiving a bona fide request, as defined
in paragraph (c) of this section, from a
rural health care provider for a
telecommunications service that is
eligible for support under the
Telecommunications Program, a
telecommunications carrier shall
provide the service at a rate no higher
than the urban rate, as defined in
§ 54.605, subject to the limitations
applicable to the Telecommunications
Program.
(c) Bona fide request. In order to
receive services eligible for support
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under the Telecommunications
Program, an eligible health care
provider must submit a request for
services to the telecommunications
carrier, signed by an authorized officer
of the health care provider, and shall
include that person’s certification under
oath that:
*
*
*
*
*
(2) The requester is physically located
in a rural area, or if the requester is a
mobile rural health care provider
requesting services under § 54.609(e),
that the requester has certified that it is
serving eligible rural areas;
*
*
*
*
*
§ 54.617
[Removed]
13. Remove § 54.617.
■ 14. In § 54.619, revise paragraphs
(a)(1) and (d) to read as follows:
■
§ 54.619
Audits and recordkeeping.
(a) * * *
(1) Health care providers shall
maintain for their purchases of services
supported under the
Telecommunications Program
documentation for five years from the
end of the funding year sufficient to
establish compliance with all rules in
this subpart. Documentation must
include, among other things, records of
allocations for consortia and entities
that engage in eligible and ineligible
activities, if applicable. Mobile rural
health care providers shall maintain
annual logs indicating: The date and
locations of each clinic stop; and the
number of patients served at each such
clinic stop.
*
*
*
*
*
(d) Service providers. Service
providers shall retain documents related
to the delivery of discounted services
under the Telecommunications Program
for at least 5 years after the last day of
the delivery of discounted services. Any
other document that demonstrates
compliance with the statutory or
regulatory requirements for the rural
health care mechanism shall be retained
as well.
§ 54.621
■
■
[Removed]
15. Remove § 54.621.
16. Revise § 54.623 to read as follows:
§ 54.623 Annual filing and funding
commitment requirement.
(a) Annual filing requirement. Health
care providers seeking support under
the Telecommunications Program shall
file new funding requests for each
funding year.
(b) Long term contracts. Under the
Telecommunications Program, if health
care providers enter into long term
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contracts for eligible services, the
Administrator shall only commit funds
to cover the portion of such a long term
contract scheduled to be delivered
during the funding year for which
universal service support is sought.
■ 17. Revise § 54.625 to read as follows:
§ 54.625 Support for telecommunications
services beyond the maximum supported
distance for rural health care providers.
(a) The maximum support distance for
the Telecommunications Program is the
distance from the health care provider
to the farthest point on the jurisdictional
boundary of the city in that state with
the largest population, as calculated by
the Administrator.
(b) An eligible rural health care
provider may purchase an eligible
telecommunications service supported
under the Telecommunications Program
that is provided over a distance that
exceeds the maximum supported
distance.
(c) If an eligible rural health care
provider purchases an eligible
telecommunications service supported
under the Telecommunications Program
that exceeds the maximum supported
distance, the health care provider must
pay the applicable rural rate for the
distance that such service is carried
beyond the maximum supported
distance.
■ 18. Add § 54.630 and an undesignated
center heading to subpart G to read as
follows:
Healthcare Connect Fund
§ 54.630
Eligible recipients.
(a) Rural health care provider site—
individual and consortium. Under the
Healthcare Connect Fund, an eligible
rural health care provider may receive
universal service support by applying
individually or through a consortium.
For purposes of the Healthcare Connect
Fund, a ‘‘consortium’’ is a group of two
or more health care provider sites that
request support through a single
application. Consortia may include
health care providers who are not
eligible for support under the
Healthcare Connect Fund, but such
health care providers cannot receive
support for their expenses and must
participate pursuant to the cost
allocation guidelines in § 54.639(d).
(b) Limitation on participation of nonrural health care provider sites in a
consortium. An eligible non-rural health
care provider site may receive universal
service support only as part of a
consortium that includes more than 50
percent eligible rural health care
provider sites.
(c) Limitation on large non-rural
hospitals. Each eligible non-rural public
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or non-profit hospital site with 400 or
more licensed patient beds may receive
no more than $30,000 per year in
Healthcare Connect Fund support for
eligible recurring charges and no more
than $70,000 in Healthcare Connect
Fund support every 5 years for eligible
nonrecurring charges, exclusive in both
cases of costs shared by the network.
■ 19. Add § 54.631 to subpart G to read
as follows:
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§ 54.631
Leader.
Designation of Consortium
(a) Identifying a Consortium Leader.
Each consortium seeking support from
the Healthcare Connect Fund must
identify an entity or organization that
will be the lead entity (the ‘‘Consortium
Leader’’).
(b) Consortium Leader eligibility. The
Consortium Leader may be the
consortium itself (if it is a distinct legal
entity); an eligible health care provider
participating in the consortium; or a
state organization, public sector
(governmental) entity (including a
Tribal government entity), or non-profit
entity that is ineligible for Healthcare
Connect Fund support. Ineligible state
organizations, public sector entities, or
non-profit entities may serve as
Consortium Leaders or provide
consulting assistance to consortia only if
they do not participate as potential
vendors during the competitive bidding
process. An ineligible entity that serves
as the Consortium Leader must pass on
the full value of any discounts, funding,
or other program benefits secured to the
consortium members that are eligible
health care providers.
(c) Consortium Leader
responsibilities. The Consortium
Leader’s responsibilities include the
following:
(1) Legal and financial responsibility
for supported activities. The Consortium
Leader is the legally and financially
responsible entity for the activities
supported by the Healthcare Connect
Fund. By default, the Consortium
Leader is the responsible entity if audits
or other investigations by Administrator
or the Commission reveal violations of
the Act or Commission rules, with
individual consortium members being
jointly and severally liable if the
Consortium Leader dissolves, files for
bankruptcy, or otherwise fails to meet
its obligations. Except for the
responsibilities specifically described in
paragraphs (c)(2) through (c)(6) of this
section, consortia may allocate legal and
financial responsibility as they see fit,
provided that this allocation is
memorialized in a formal written
agreement between the affected parties
(i.e., the Consortium Leader, and the
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consortium as a whole and/or its
individual members), and the written
agreement is submitted to the
Administrator for approval with or prior
to the Request for Services. Any such
agreement must clearly identify the
party(ies) responsible for repayment if
the Administrator is required, at a later
date, to recover disbursements to the
consortium due to violations of program
rules.
(2) Point of contact for the FCC and
Administrator. The Consortium Leader
is responsible for designating an
individual who will be the ‘‘Project
Coordinator’’ and serve as the point of
contact with the Commission and the
Administrator for all matters related to
the consortium. The Consortium Leader
is responsible for responding to
Commission and Administrator
inquiries on behalf of the consortium
members throughout the application,
funding, invoicing, and post-invoicing
period.
(3) Typical applicant functions,
including forms and certifications. The
Consortium Leader is responsible for
submitting program forms and required
documentation and ensuring that all
information and certifications submitted
are true and correct. The Consortium
Leader must also collect and retain a
Letter of Agency (LOA) from each
member, pursuant to § 54.632.
(4) Competitive bidding and cost
allocation. The Consortium Leader is
responsible for ensuring that the
competitive bidding process is fair and
open and otherwise complies with
Commission requirements. If costs are
shared by both eligible and ineligible
entities, the Consortium Leader must
ensure that costs are allocated in a
manner that ensures that only eligible
entities receive the benefit of program
discounts.
(5) Invoicing. The Consortium Leader
is responsible for notifying the
Administrator when supported services
have commenced and for submitting
invoices to the Administrator.
(6) Recordkeeping, site visits, and
audits. The Consortium Leader is also
responsible for compliance with the
Commission’s recordkeeping
requirements and for coordinating site
visits and audits for all consortium
members.
■ 20. Add § 54.632 to subpart G to read
as follows:
§ 54.632
Letters of agency (LOA).
(a) Authorizations. Under the
Healthcare Connect Fund, the
Consortium Leader must obtain the
following authorizations.
(1) Prior to the submission of the
request for services, the Consortium
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13985
Leader must obtain authorization, the
necessary certifications, and any
supporting documentation from each
consortium member to permit the
Consortium Leader to submit the
request for services and prepare and
post the request for proposal on behalf
of the member.
(2) Prior to the submission of the
funding request, the Consortium Leader
must secure authorization, the necessary
certifications, and any supporting
documentation from each consortium
member to permit the Consortium
Leader to submit the funding request
and manage invoicing and payments on
behalf of the member.
(b) Optional two-step process. The
Consortium Leader may secure both
required authorizations from each
consortium member in either a single
LOA or in two separate LOAs.
(c) Required Information in LOA. (1)
An LOA must include, at a minimum,
the name of the entity filing the
application (i.e., lead applicant or
Consortium Leader); name of the entity
authorizing the filing of the application
(i.e., the participating health care
provider/consortium member); the
physical location of the health care
provider/consortium member site(s); the
relationship of each site seeking support
to the lead entity filing the application;
the specific timeframe the LOA covers;
the signature, title and contact
information (including phone number,
mailing address, and email address) of
an official who is authorized to act on
behalf of the health care provider/
consortium member; signature date; and
the type of services covered by the LOA.
(2) For HCPs located on Tribal lands,
if the health care facility is a contract
facility that is run solely by the tribe,
the appropriate tribal leader, such as the
tribal chairperson, president, or
governor, shall also sign the LOA,
unless the health care responsibilities
have been duly delegated to another
tribal government representative.
■ 21. Add § 54.633 to subpart G to read
as follows:
§ 54.633
Health care provider contribution.
(a) Health care provider contribution.
All health care providers receiving
support under the Healthcare Connect
Fund shall receive a 65 percent discount
on the cost of eligible expenses and
shall be required to contribute 35
percent of the total cost of all eligible
expenses.
(b) Limits on eligible sources of health
care provider contribution. Only funds
from eligible sources may be applied
toward the health care provider’s
required contribution.
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(1) Eligible sources include the
applicant or eligible health care
provider participants; state grants,
funding, or appropriations; federal
funding, grants, loans, or appropriations
except for other federal universal
service funding; Tribal government
funding; and other grant funding,
including private grants.
(2) Ineligible sources include (but are
not limited to) in-kind or implied
contributions from health care
providers; direct payments from
vendors or other service providers,
including contractors and consultants to
such entities; and for-profit entities.
(c) Disclosure of health care provider
contribution source. Prior to receiving
support, applicants are required to
identify with specificity their sources of
funding for their contribution of eligible
expenses.
(d) Future revenues from excess
capacity as source of health care
provider contribution. A consortium
applicant that receives support for
participant-owned network facilities
under § 54.636 may use future revenues
from excess capacity as a source for the
required health care provider
contribution, subject to the following
limitations.
(1) The consortium’s selection criteria
and evaluation for ‘‘cost-effectiveness’’
pursuant to § 54.642 cannot provide a
preference to bidders that offer to
construct excess capacity.
(2) The applicant must pay the full
amount of the additional costs for
excess capacity facilities that will not be
part of the supported health care
network.
(3) The additional cost of constructing
excess capacity facilities may not count
toward a health care provider’s required
contribution.
(4) The inclusion of excess capacity
facilities cannot increase the funded
cost of the dedicated health care
network in any way.
(5) An eligible health care provider
(typically the consortium, although it
may be an individual health care
provider participating in the
consortium) must retain ownership of
the excess capacity facilities. It may
make the facilities available to third
parties only under an indefeasible right
of use (IRU) or lease arrangement. The
lease or IRU between the participant
and the third party must be an arm’s
length transaction. To ensure that this is
an arm’s length transaction, neither the
vendor that installs the excess capacity
facilities nor its affiliate is eligible to
enter into an IRU or lease with the
participant.
(6) Any amount prepaid for use of the
excess capacity facilities (IRU or lease)
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must be placed in an escrow account.
The participant can then use the escrow
account as an eligible source of funds
for the participant’s 35 percent
contribution to the project.
(7) All revenues from use of the
excess capacity facilities by the third
party must be used for the health care
provider contribution or for
sustainability of the health care network
supported by the Healthcare Connect
Fund. Network costs that may be funded
with any additional revenues that
remain include administration,
equipment, software, legal fees, or other
costs not covered by the Healthcare
Connect Fund, as long as they are
relevant to sustaining the network.
■ 22. Add § 54.634 to subpart G to read
as follows:
§ 54.634
Eligible services.
(a) Eligible services. Subject to the
provisions of §§ 54.600 through 54.602
and §§ 54.630 through 54.680, eligible
health care providers may request
support from the Healthcare Connect
Fund for any advanced
telecommunications or information
service that enables health care
providers to post their own data,
interact with stored data, generate new
data, or communicate, by providing
connectivity over private dedicated
networks or the public Internet for the
provision of health information
technology.
(b) Eligibility of dark fiber. A
consortium of eligible health care
providers may receive support for
‘‘dark’’ fiber where the customer, not the
vendor, provides the modulating
electronics, subject to the following
limitations:
(1) Support for recurring charges
associated with dark fiber is only
available once the dark fiber is ‘‘lit’’ and
actually being used by the health care
provider. Support for non-recurring
charges for dark fiber is only available
for fiber lit within the same funding
year, but applicants may receive up to
a one-year extension to light fiber if they
provide documentation to the
Administrator that construction was
unavoidably delayed due to weather or
other reasons.
(2) Requests for proposals (RFPs) that
solicit dark fiber solutions must also
solicit proposals to provide the needed
services over lit fiber over a time period
comparable to the duration of the dark
fiber lease or indefeasible right of use.
(3) If an applicant intends to request
support for equipment and maintenance
costs associated with lighting and
operating dark fiber, it must include
such elements in the same RFP as the
dark fiber so that the Administrator can
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review all costs associated with the fiber
when determining whether the
applicant chose the most cost-effective
bid.
(c) Dark and lit fiber maintenance
costs. (1) Both individual and
consortium applicants may receive
support for recurring maintenance costs
associated with leases of dark or lit
fiber.
(2) Consortium applicants may
receive support for upfront payments for
maintenance costs associated with
leases of dark or lit fiber, subject to the
limitations in § 54.638.
(d) Reasonable and customary
installation charges. Eligible health care
providers may obtain support for
reasonable and customary installation
charges for eligible services, up to an
undiscounted cost of $5,000 per eligible
site.
(e) Upfront charges for vendor
deployment of new or upgraded
facilities. (1) Participants may obtain
support for upfront charges for vendor
deployment of new or upgraded
facilities to serve eligible sites.
(2) Support is available to extend
vendor deployment of facilities up to
the ‘‘demarcation point,’’ which is the
boundary between facilities owned or
controlled by the vendor, and facilities
owned or controlled by the customer.
■ 23. Add § 54.635 to subpart G to read
as follows:
§ 54.635
Eligible equipment.
(a) Both individual and consortium
applicants may receive support for
network equipment necessary to make
functional an eligible service that is
supported under the Healthcare Connect
Fund.
(b) Consortium applicants may also
receive support for network equipment
necessary to manage, control, or
maintain an eligible service or a
dedicated health care broadband
network. Support for network
equipment is not available for networks
that are not dedicated to health care.
(c) Network equipment eligible for
support includes the following:
(1) Equipment that terminates a
carrier’s or other provider’s
transmission facility and any router/
switch that is directly connected to
either the facility or the terminating
equipment. This includes equipment
required to light dark fiber, or
equipment necessary to connect
dedicated health care broadband
networks or individual health care
providers to middle mile or backbone
networks;
(2) Computers, including servers, and
related hardware (e.g. printers, scanners,
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laptops) that are used exclusively for
network management;
(3) Software used for network
management, maintenance, or other
network operations, and development of
software that supports network
management, maintenance, and other
network operations;
(4) Costs of engineering, furnishing
(i.e. as delivered from the
manufacturer), and installing network
equipment; and
(5) Equipment that is a necessary part
of health care provider-owned network
facilities.
(d) Additional limitations: Support for
network equipment is limited to
equipment:
(1) Purchased or leased by a
Consortium Leader or eligible health
care provider; and
(2) Used for health care purposes.
■ 24. Add § 54.636 to subpart G to read
as follows:
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§ 54.636 Eligible participant-constructed
and owned network facilities for consortium
applicants.
(a) Subject to the funding limitations
under §§ 54.675 and 54.638 and the
following restrictions, consortium
applicants may receive support for
network facilities that will be
constructed and owned by the
consortium (if the consortium is an
eligible health care provider) or eligible
health care providers within the
consortium.
(1) Consortia seeking support to
construct and own network facilities are
required to solicit bids for both:
(i) Services provided over third-party
networks; and
(ii) Construction of participant-owned
network facilities, in the same request
for proposals. Requests for proposals
must provide sufficient detail so that
cost-effectiveness can be evaluated over
the useful life of the proposed network
facility to be constructed.
(2) Support for participantconstructed and owned network
facilities is only available where the
consortium demonstrates that
constructing its own network facilities
is the most cost-effective option after
competitive bidding, pursuant to
§ 54.642.
(b) [Reserved].
■ 25. Add § 54.637 to subpart G to read
as follows:
§ 54.637 Off-site data centers and off-site
administrative offices.
(a) The connections and network
equipment associated with off-site data
centers and off-site administrative
offices used by eligible health care
providers for their health care purposes
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are eligible for support under the
Healthcare Connect Fund, subject to the
conditions and restrictions set forth in
paragraph (b) of this section.
(1) An ‘‘off-site administrative office’’
is a facility that does not provide handson delivery of patient care, but performs
administrative support functions that
are critical to the provision of clinical
care by eligible health care providers.
(2) An ‘‘off-site data center’’ is a
facility that serves as a centralized
repository for the storage, management,
and dissemination of an eligible health
care provider’s computer systems,
associated components, and data,
including (but not limited to) electronic
health records.
(b) Conditions and Restrictions. The
following conditions and restrictions
apply to support provided under this
sections.
(1) Connections eligible for support
are only those that are between:
(i) Eligible health care provider sites
and off-site data centers or off-site
administrative offices,
(ii) Two off-site data centers,
(iii) Two off-site administrative
offices,
(iv) An off-site data center and the
public Internet or another network,
(v) An off-site administrative office
and the public Internet or another
network, or
(vi) An off-site administrative office
and an off-site data center.
(2) The supported connections and
network equipment must be used solely
for health care purposes.
(3) The supported connections and
network equipment must be purchased
by an eligible health care provider or a
public or non-profit health care system
that owns and operates eligible health
care provider sites.
(4) If traffic associated with one or
more ineligible health care provider
sites is carried by the supported
connection and/or network equipment,
the ineligible health care provider sites
must allocate the cost of that connection
and/or equipment between eligible and
ineligible sites, consistent with the ‘‘fair
share’’ principles set forth in
§ 54.639(d).
■ 26. Add § 54.638 to subpart G to read
as follows:
§ 54.638
Upfront payments.
(a) Upfront payments include all nonrecurring costs for services, equipment,
or facilities, other than reasonable and
customary installation charges of up to
$5,000.
(b) The following limitations apply to
all upfront payments:
(1) Upfront payments associated with
services providing a bandwidth of less
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than 1.5 Mbps (symmetrical) are not
eligible for support.
(2) Only consortium applicants are
eligible for support for upfront
payments.
(c) The following limitations apply if
a consortium makes a request for
support for upfront payments that
exceeds, on average, $50,000 per eligible
site in the consortium:
(1) The support for the upfront
payments must be prorated over at least
three years.
(2) The upfront payments must be
part of a multi-year contract.
■ 27. Add § 54.639 to subpart G to read
as follows:
§ 54.639
Ineligible expenses.
(a) Equipment or services not directly
associated with eligible services.
Expenses associated with equipment or
services that are not necessary to make
an eligible service functional, or to
manage, control, or maintain an eligible
service or a dedicated health care
broadband network are ineligible for
support.
Note to Paragraph (a): The following are
examples of ineligible expenses:
1. Costs associated with general
computing, software, applications, and
Internet content development are not
supported, including the following:
i. Computers, including servers, and
related hardware (e.g., printers, scanners,
laptops), unless used exclusively for network
management, maintenance, or other network
operations;
ii. End user wireless devices, such as
smartphones and tablets;
iii. Software, unless used for network
management, maintenance, or other network
operations;
iv. Software development (excluding
development of software that supports
network management, maintenance, and
other network operations);
v. Helpdesk equipment and related
software, or services, unless used exclusively
in support of eligible services or equipment;
vi. Web server hosting;
vii. Web site portal development;
viii. Video/audio/web conferencing
equipment or services; and
ix. Continuous power source.
2. Costs associated with medical
equipment (hardware and software), and
other general health care provider expenses
are not supported, including the following:
i. Clinical or medical equipment;
ii. Telemedicine equipment, applications,
and software;
iii. Training for use of telemedicine
equipment;
iv. Electronic medical records systems; and
v. Electronic records management and
expenses.
(b) Inside wiring/internal connections.
Expenses associated with inside wiring
or internal connections are ineligible for
support under the Healthcare Connect
Fund.
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(c) Administrative expenses.
Administrative expenses are not eligible
for support under the Healthcare
Connect Fund.
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Note to Paragraph (c): Ineligible
administrative expenses include, but not
limited to, the following expenses:
1. Personnel costs (including salaries and
fringe benefits), except for personnel
expenses in a consortium application that
directly relate to designing, engineering,
installing, constructing, and managing a
dedicated broadband network. Ineligible
costs of this category include, for example,
personnel to perform program management
and coordination, program administration,
and marketing;
2. Travel costs, except for travel costs that
are reasonable and necessary for network
design or deployment and that are
specifically identified and justified as part of
a competitive bid for a construction project;
3. Legal costs;
4. Training, except for basic training or
instruction directly related to and required
for broadband network installation and
associated network operations;
5. Program administration or technical
coordination (e.g., preparing application
materials, obtaining letters of agency,
preparing request for proposals, negotiating
with vendors, reviewing bids, and working
with the Administrator) that involves
anything other than the design, engineering,
operations, installation, or construction of
the network;
6. Administration and marketing costs
(e.g., administrative costs; supplies and
materials, except as part of network
installation/construction; marketing studies,
marketing activities, or outreach to potential
network members; evaluation and feedback
studies);
7. Billing expenses (e.g., expense that
vendors may charge for allocating costs to
each health care provider in a network);
8. Helpdesk expenses (e.g., equipment and
related software, or services); and
9. Technical support services that provide
more than basic maintenance.
(d) Cost allocation for ineligible sites,
services, or equipment. (1) Ineligible
sites. Eligible health care provider sites
may share expenses with ineligible
sites, as long as the ineligible sites pay
their fair share of the expenses. An
applicant may seek support for only the
portion of a shared eligible expense
attributable to eligible health care
provider sites. To receive support, the
applicant must ensure that ineligible
sites pay their fair share of the expense.
The fair share is determined as follows:
(i) If the vendor charges a separate
and independent price for each site, an
ineligible site must pay the full
undiscounted price.
(ii) If there is no separate and
independent price for each site, the
applicant must prorate the
undiscounted price for the ‘‘shared’’
service, equipment, or facility between
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eligible and ineligible sites on a
proportional fully-distributed basis.
Applicants must make this cost
allocation using a method that is based
on objective criteria and reasonably
reflects the eligible usage of the shared
service, equipment, or facility. The
applicant bears the burden of
demonstrating the reasonableness of the
allocation method chosen.
(2) Ineligible components of a single
service or piece of equipment.
Applicants seeking support for a service
or piece of equipment that includes an
ineligible component must explicitly
request in their requests for proposals
that vendors include pricing for a
comparable service or piece of
equipment that is comprised of only
eligible components. If the selected
provider also submits a price for the
eligible component on a stand-alone
basis, the support amount is calculated
based on the stand-alone price of the
eligible component on a stand-alone
basis. If the vendor does not offer the
eligible component on a stand-alone
basis, the full price of the entire service
or piece of equipment must be taken
into account, without regard to the
value of the ineligible components,
when determining the most costeffective bid.
(3) Written description. Applicants
must submit a written description of
their allocation method(s) to the
Administrator with their funding
requests.
(4) Written agreement. If ineligible
entities participate in a network, the
allocation method must be
memorialized in writing, such as a
formal agreement among network
members, a master services contract, or
for smaller consortia, a letter signed and
dated by all (or each) ineligible entity
and the Consortium Leader.
■ 28. Add § 54.640 to subpart G to read
as follows:
§ 54.640
Eligible vendors.
(a) Eligibility. For purposes of the
Healthcare Connect Fund, eligible
vendors shall include any provider of
equipment, facilities, or services that are
eligible for support under Healthcare
Connect Fund.
(b) Obligation to assist health care
providers. Vendors in the Healthcare
Connect Fund must certify, as a
condition of receiving support, that they
will provide to health care providers, on
a timely basis, all information and
documents regarding supported
equipment, facilities, or services that are
necessary for the health care provider to
submit required forms or respond to
Commission or Administrator inquiries.
The Administrator may withhold
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disbursements for the vendor if the
vendor, after written notice from the
Administrator, fails to comply with this
requirement.
■ 29. Add § 54.642 to subpart G to read
as follows:
§ 54.642 Competitive bidding requirement
and exemptions.
(a) Competitive bidding requirement.
All applicants are required to engage in
a competitive bidding process for
supported services, facilities, or
equipment consistent with the
requirements set forth in this subpart,
unless they qualify for one or more of
the exemptions in paragraph (h) of this
section. In addition, applicants may
engage in competitive bidding even if
they qualify for an exemption.
Applicants who utilize a competitive
bidding exemption may proceed
directly to filing a funding request as
described in § 54.643.
(b) Fair and open process. (1) All
entities participating in the Healthcare
Connect Fund must conduct a fair and
open competitive bidding process,
consistent with all applicable
requirements.
(2) Vendors who intend to bid to
provide supported services, equipment,
or facilities to a health care provider
may not simultaneously help the health
care provider choose a winning bid.
Any vendor who submits a bid, and any
individual or entity that has a financial
interest in such a vendor, is prohibited
from:
(i) Preparing, signing or submitting an
applicant’s request for services;
(ii) Serving as the Consortium Leader
or other point of contact on behalf of
applicant(s);
(iii) Being involved in setting bid
evaluation criteria; or
(iv) Participating in the bid evaluation
or vendor selection process (except in
their role as potential vendors).
(3) All potential bidders must have
access to the same information and must
be treated in the same manner.
(4) All applicants and vendors must
comply with any applicable state,
Tribal, or local competitive bidding
requirements. The competitive bidding
requirements in this section apply in
addition to state, Tribal, and local
competitive bidding requirements and
are not intended to preempt such state,
Tribal, or local requirements.
(c) Cost-effective. For purposes of the
Healthcare Connect Fund, ‘‘costeffective’’ is defined as the method that
costs the least after consideration of the
features, quality of transmission,
reliability, and other factors that the
health care provider deems relevant to
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choosing a method of providing the
required health care services.
(d) Bid evaluation criteria. Applicants
must develop weighted evaluation
criteria (e.g., scoring matrix) that
demonstrate how the applicant will
choose the most ‘‘cost-effective’’ bid
before submitting a Request for Services.
Price must be a primary factor, but need
not be the only primary factor. A nonprice factor can receive an equal weight
to price, but may not receive a greater
weight than price.
(e) Request for services. Applicants
must submit the following documents to
the Administrator in order to initiate
competitive bidding.
(1) Form 461, including certifications.
The applicant must provide the
following certifications as part of the
request for services.
(i) The person signing the application
is authorized to submit the application
on behalf of the applicant and has
examined the form and all attachments,
and to the best of his or her knowledge,
information, and belief, all statements of
fact contained therein are true.
(ii) The applicant has followed any
applicable state, Tribal, or local
procurement rules.
(iii) All Healthcare Connect Fund
support will be used solely for purposes
reasonably related to the provision of
health care service or instruction that
the HCP is legally authorized to provide
under the law of the state in which the
services are provided and will not be
sold, resold, or transferred in
consideration for money or any other
thing of value.
(iv) The applicant satisfies all of the
requirements under section 254 of the
Act and applicable Commission rules.
(v) The applicant has reviewed all
applicable requirements for the program
and will comply with those
requirements.
(2) Bid evaluation criteria.
Requirements for bid evaluation criteria
are described in paragraph (d) of this
section.
(3) Declaration of assistance. All
applicants must submit a ‘‘Declaration
of Assistance’’ with their Request for
Services. In the Declaration of
Assistance, applicants must identify
each and every consultant, vendor, and
other outside expert, whether paid or
unpaid, who aided in the preparation of
their applications.
(4) Request for proposal (if
applicable). (i) Any applicant may use
a request for proposals (RFP).
Applicants who use an RFP must
submit the RFP and any additional
relevant bidding information to the
Administrator with Form 461.
(ii) An applicant must submit an RFP:
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(A) If it is required to issue an RFP
under applicable State, Tribal, or local
procurement rules or regulations;
(B) If the applicant is a consortium
seeking more than $100,000 in program
support during the funding year,
including applications that seek more
than $100,000 in program support for a
multi-year commitment; or
(C) If the applicant is a consortium
seeking support for participantconstructed and owned network
facilities.
(iii) RFP requirements. (A) An RFP
must provide sufficient information to
enable an effective competitive bidding
process, including describing the health
care provider’s service needs and
defining the scope of the project and
network costs (if applicable).
(B) An RFP must specify the period
during which bids will be accepted.
(C) An RFP must include the bid
evaluation criteria described in
paragraph (d) of this section, and solicit
sufficient information so that the criteria
can be applied effectively.
(D) Consortium applicants seeking
support for long-term capital
investments whose useful life extends
beyond the period of the funding
commitment (e.g., facilities constructed
and owned by the applicant, fiber
indefeasible rights of use) must seek
bids in the same RFP from vendors who
propose to meet those needs via services
provided over vendor-owned facilities,
for a time period comparable to the life
of the proposed capital investment.
(E) Applicants may prepare RFPs in
any manner that complies with the rules
in this subpart and any applicable state,
Tribal, or local procurement rules or
regulations.
(5) Additional requirements for
consortium applicants. (i) Network plan.
Consortium applicants must submit a
narrative describing specific elements of
their network plan with their Request
for Services. Consortia applicants are
required to use program support for the
purposes described in their narrative.
The required elements of the narrative
include:
(A) Goals and objectives of the
network;
(B) Strategy for aggregating the
specific needs of health care providers
(including providers that serve rural
areas) within a state or region;
(C) Strategy for leveraging existing
technology to adopt the most efficient
and cost effective means of connecting
those providers;
(D) How the supported network will
be used to improve or provide health
care delivery;
(E) Any previous experience in
developing and managing health
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information technology (including
telemedicine) programs; and
(F) A project management plan
outlining the project’s leadership and
management structure, and a work plan,
schedule, and budget.
(ii) Letters of agency. Consortium
applicants must submit letters of agency
pursuant to § 54.632.
(f) Public posting by the
Administrator. The Administrator shall
post on its web site the following
competitive bidding documents, as
applicable:
(1) Form 461,
(2) Bid evaluation criteria,
(3) Request for proposal, and
(4) Network plan.
(g) 28-day waiting period. After
posting the documents described in
paragraph (f) of this section on its Web
site, the Administrator shall send
confirmation of the posting to the
applicant. The applicant shall wait at
least 28 days from the date on which its
competitive bidding documents are
posted on the Web site before selecting
and committing to a vendor.
(1) Selection of the most ‘‘costeffective’’ bid and contract negotiation.
Each applicant subject to competitive
bidding is required to certify to the
Administrator that the selected bid is, to
the best of the applicant’s knowledge,
the most cost-effective option available.
Applicants are required to submit the
documentation listed in § 54.643 to
support their certifications.
(2) Applicants who plan to request
evergreen status under § 54.642(h)(4)(ii)
must enter into a contract that identifies
both parties, is signed and dated by the
health care provider or Consortium
Leader after the 28-day waiting period
expires, and specifies the type, term,
and cost of service.
(h) Exemptions to competitive bidding
requirements. (1) Annual undiscounted
cost of $10,000 or less. An applicant that
seeks support for $10,000 or less of total
undiscounted eligible expenses for a
single year is exempt from the
competitive bidding requirements under
this section, if the term of the contract
is one year or less.
(2) Government Master Service
Agreement (MSA). Eligible health care
providers that seek support for services
and equipment purchased from MSAs
negotiated by federal, state, Tribal, or
local government entities on behalf of
such health care providers and others, if
such MSAs were awarded pursuant to
applicable federal, state, Tribal, or local
competitive bidding requirements, are
exempt from the competitive bidding
requirements under this section.
(3) Master Service Agreements
approved under the Pilot Program or
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Healthcare Connect Fund. A eligible
health care provider site may opt into an
existing MSA approved under the Pilot
Program or Healthcare Connect Fund
and seek support for services and
equipment purchased from the MSA
without triggering the competitive
bidding requirements under this
section, if the MSA was developed and
negotiated in response to an RFP that
specifically solicited proposals that
included a mechanism for adding
additional sites to the MSA.
(4) Evergreen contracts. (i) Subject to
the provisions in § 54.644, the
Administrator may designate a multiyear contract as ‘‘evergreen,’’ which
means that the service(s) covered by the
contract need not be re-bid during the
contract term.
(ii) A contract entered into by a health
care provider or consortium as a result
of competitive bidding may be
designated as evergreen if it meets all of
the following requirements:
(A) Is signed by the individual health
care provider or consortium lead entity;
(B) Specifies the service type,
bandwidth and quantity;
(C) Specifies the term of the contract;
(D) Specifies the cost of services to be
provided; and
(E) Includes the physical location or
other identifying information of the
health care provider sites purchasing
from the contract.
(iii) Participants may exercise
voluntary options to extend an
evergreen contract without undergoing
additional competitive bidding, if:
(A) The voluntary extension(s) is
memorialized in the evergreen contract;
(B) The decision to extend the
contract occurs before the participant
files its funding request for the funding
year when the contract would otherwise
expire; and
(C) The voluntary extension(s) do not
exceed five years in the aggregate.
(5) Schools and libraries program
master contracts. Subject to the
provisions in §§ 54.500(g), 54.501(c)(1),
and 54.503, an eligible health care
provider in a consortium with
participants in the schools and libraries
universal service support program and a
party to the consortium’s existing
contract is exempt from the Healthcare
Connect Fund competitive bidding
requirements if the contract was
approved in the schools and libraries
universal service support program as a
master contract. The health care
provider must comply with all
Healthcare Connect Fund rules and
procedures except for those applicable
to competitive bidding.
■ 30. Add § 54.643 to subpart G to read
as follows:
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§ 54.643
Funding commitments.
(a) Once a vendor is selected,
applicants must submit a ‘‘Funding
Request’’ (and supporting
documentation) to provide information
about the services, equipment, or
facilities selected and certify that the
services selected were the most costeffective option of the offers received.
The following information should be
submitted to the Administrator with the
Funding Request.
(1) Request for funding. The applicant
shall submit a request for funding (Form
462) to identify the service(s),
equipment, or facilities; rates; vendor(s);
and date(s) of vendor selection.
(2) Certifications. The applicant must
provide the following certifications as
part of the request for funding:
(i) The person signing the application
is authorized to submit the application
on behalf of the applicant and has
examined the form and all attachments,
and to the best of his or her knowledge,
information, and belief, all statements of
fact contained therein are true.
(ii) Each vendor selected is, to the best
of the applicant’s knowledge,
information and belief, the most costeffective vendor available, as defined in
§ 54.642(c).
(iii) All Healthcare Connect Fund
support will be used only for eligible
health care purposes.
(iv) The applicant is not requesting
support for the same service from both
the Telecommunications Program and
the Healthcare Connect Fund.
(v) The applicant satisfies all of the
requirements under section 254 of the
Act and applicable Commission rules,
and understands that any letter from the
Administrator that erroneously commits
funds for the benefit of the applicant
may be subject to rescission.
(vi) The applicant has reviewed all
applicable requirements for the program
and will comply with those
requirements.
(vii) The applicant will maintain
complete billing records for the service
for five years.
(3) Contracts or other documentation.
All applicants must submit a contract or
other documentation that clearly
identifies the vendor(s) selected and the
health care provider(s) who will receive
the services, equipment, or facilities; the
service, bandwidth, and costs for which
support is being requested; and the term
of the service agreement(s) if applicable
(i.e., if services are not being provided
on a month-to-month basis). For
services, equipment, or facilities
provided under contract, the applicant
must submit a copy of the contract
signed and dated (after the Allowable
Contract Selection Date) by the
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individual health care provider or
Consortium Leader. If the service,
equipment, or facilities are not being
provided under contract, the applicant
must submit a bill, service offer, letter,
or similar document from the vendor
that provides the required information.
(4) Competitive bidding documents.
Applicants must submit documentation
to support their certifications that they
have selected the most cost-effective
option, including a copy of each bid
received (winning, losing, and
disqualified), the bid evaluation criteria,
and the following documents (as
applicable): bid evaluation sheets; a list
of people who evaluated bids (along
with their title/role/relationship to the
applicant organization); memos, board
minutes, or similar documents related to
the vendor selection/award; copies of
notices to winners; and any
correspondence with vendors during the
bidding/evaluation/award phase of the
process. Applicants who claim a
competitive bidding exemption must
submit relevant documentation to allow
the Administrator to verify that the
applicant is eligible for the claimed
exemption.
(5) Cost allocation for ineligible
entities or components. Pursuant to
§ 54.639(d)(3) through (d)(4), where
applicable, applicants must submit a
description of how costs will be
allocated for ineligible entities or
components, as well as any agreements
that memorialize such arrangements
with ineligible entities.
(6) Additional documentation for
consortium applicants. A consortium
applicant must also submit the
following:
(i) Any revisions to the network plan
submitted with the Request for Services
pursuant to § 54.642(e)(5)(i), as
necessary. If not previously submitted,
the consortium should provide a
narrative description of how the
network will be managed, including all
administrative aspects of the network,
including but not limited to invoicing,
contractual matters, and network
operations. If the consortium is required
to provide a sustainability plan as set
forth in § 54.643(a)(6)(iv), the revised
budget should include the budgetary
factors discussed in the sustainability
plan requirements.
(ii) A list of participating health care
providers and all of their relevant
information, including eligible (and
ineligible, if applicable) cost
information for each participating
health care provider.
(iii) Evidence of a viable source for
the undiscounted portion of supported
costs.
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(iv) Sustainability plans for applicants
requesting support for long-term capital
expenses: Consortia that seek funding to
construct and own their own facilities
or obtain indefeasible right of use or
capital lease interests are required to
submit a sustainability plan with their
funding requests demonstrating how
they intend to maintain and operate the
facilities that are supported over the
relevant time period. Applicants may
incorporate by reference other portions
of their applications (e.g., project
management plan, budget). The
sustainability plan must, at a minimum,
address the following points:
(A) Projected sustainability period.
Indicate the sustainability period, which
at a minimum is equal to the useful life
of the funded facility. The consortium’s
budget must show projected income and
expenses (i.e., for maintenance) for the
project at the aggregate level, for the
sustainability period.
(B) Principal factors. Discuss each of
the principal factors that were
considered by the participant to
demonstrate sustainability. This
discussion must include all factors that
show that the proposed network will be
sustainable for the entire sustainability
period. Any factor that will have a
monetary impact on the network must
be reflected in the applicant’s budget.
(C) Terms of membership in the
network. Describe generally any
agreements made (or to be entered into)
by network members (e.g., participation
agreements, memoranda of
understanding, usage agreements, or
other similar agreements). The
sustainability plan must also describe,
as applicable:
(1) Financial and time commitments
made by proposed members of the
network;
(2) If the project includes excess
bandwidth for growth of the network,
describe how such excess bandwidth
will be financed; and
(3) If the network will include
ineligible health care providers and
other network members, describe how
fees for joining and using the network
will be assessed.
(D) Ownership structure. Explain who
will own each material element of the
network (e.g., fiber constructed, network
equipment, end user equipment). For
purposes of this subsection,
‘‘ownership’’ includes an indefeasible
right of use interest. Applicants must
clearly identify the legal entity that will
own each material element. Applicants
must also describe any arrangements
made to ensure continued use of such
elements by the network members for
the duration of the sustainability period.
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(E) Sources of future support.
Describe other sources of future
funding, including fees to be paid by
eligible health care providers and/or
non-eligible entities.
(F) Management. Describe the
management structure of the network
for the duration of the sustainability
period. The applicant’s budget must
describe how management costs will be
funded.
(v) Material change to sustainability
plan. A consortium that is required to
file a sustainability plan must maintain
its accuracy. If there is a material change
to a required sustainability plan that
would impact projected income or
expenses by more than 20 percent or
$100,000 from the previous submission,
or if the applicant submits a funding
request based on a new Form 462 (i.e.,
a new competitively bid contract), the
consortium is required to re-file its
sustainability plan. In the event of a
material change, the applicant must
provide the Administrator with the
revised sustainability plan no later than
the end of the relevant quarter, clearly
showing (i.e., by redlining or
highlighting) what has changed.
(b) [Reserved]
■ 31. Add § 54.644 to subpart G to read
as follows:
§ 54.644
Multi-year commitments.
received by the Administrator within
six months of the end date of the
funding commitment.
■ 33. Add § 54.646 to subpart G to read
as follows:
§ 54.646
§ 54.647
§ 54.645
§ 54.648
Payment process.
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Site and service substitutions.
(a) A Consortium Leader (or health
care provider, if participating
individually) may request a site or
service substitution if:
(1) The substitution is provided for in
the contract, within the change clause,
or constitutes a minor modification;
(2) The site is an eligible health care
provider and the service is an eligible
service under the Healthcare Connect
Fund;
(3) The substitution does not violate
any contract provision or state, Tribal,
or local procurement laws; and
(4) The requested change is within the
scope of the controlling request for
services, including any applicable
request for proposal used in the
competitive bidding process.
(b) Support for a qualifying site and
service substitution will be provided to
the extent the substitution does not
cause the total amount of support under
the applicable funding commitment to
increase.
■ 34. Add § 54.647 to subpart G to read
as follows:
(a) Participants in the Healthcare
Connect Fund are permitted to enter
into multi-year contracts for eligible
expenses and may receive funding
commitments from the Administrator
for a period that covers up to three
funding years.
(b) If a long-term contract covers a
period of more than three years, the
applicant may also have the contract
designated as ‘‘evergreen’’ under
§ 54.642(h)(4) which will allow the
applicant to re-apply for a funding
commitment under the contract after
three years without having to undergo
additional competitive bidding.
■ 32. Add § 54.645 to subpart G to read
as follows:
(a) The Consortium Leader (or health
care provider, if participating
individually) must certify to the
Administrator that it has paid its
contribution to the vendor before the
invoice can be sent to Administrator
and the vendor can be paid.
(b) Before the Administrator may
process and pay an invoice, both the
Consortium Leader (or health care
provider, if participating individually)
and the vendor must certify that they
have reviewed the document and that it
is accurate. All invoices must be
13991
Data collection and reporting.
(a) Each consortium lead entity must
file an annual report with the
Administrator on or before September
30 for the preceding funding year, with
the information and in the form
specified by the Wireline Competition
Bureau.
(b) Each consortium is required to file
an annual report for each funding year
in which it receives support from the
Healthcare Connect Fund.
(c) For consortia that receive large
upfront payments, the reporting
requirement extends for the life of the
supported facility.
■ 35. Add § 54.648 to subpart G to read
as follows:
Audits and recordkeeping.
(a) Random audits. Participants shall
be subject to random compliance audits
and other investigations to ensure
compliance with program rules and
orders.
(b) Recordkeeping. (1) Participants,
including Consortium Leaders and
health care providers, shall maintain
records to document compliance with
program rules and orders for at least 5
years after the last day of service
delivered in a particular funding year.
Participants who receive support for
long-term capital investments in
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facilities whose useful life extends
beyond the period of the funding
commitment shall maintain records for
at least 5 years after the end of the
useful life of the facility. Participants
shall maintain asset and inventory
records of supported network
equipment to verify the actual location
of such equipment for a period of 5
years after purchase.
(2) Vendors shall retain records
related to the delivery of supported
services, facilities, or equipment to
document compliance with program
rules and orders for at least 5 years after
the last day of the delivery of supported
services, equipment, or facilities in a
particular funding year.
(3) Both participants and vendors
shall produce such records at the
request of the Commission, any auditor
appointed by the Administrator or the
Commission, or of any other state or
federal agency with jurisdiction.
■ 36. Add § 54.649 to subpart G to read
as follows:
§ 54.649
Certifications.
For individual health care provider
applicants, required certifications must
be provided and signed by an officer or
director of the health care provider, or
other authorized employee of the health
care provider. For consortium
applicants, an officer, director, or other
authorized employee of the Consortium
Leader must sign the required
certifications. Pursuant to § 54.680,
electronic signatures are permitted for
all required certifications.
■ 37. Add § 54.671 to subpart G and an
undesignated center heading to read as
follows:
General Provisions
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§ 54.671
Resale.
(a) Prohibition on resale. Services
purchased pursuant to universal service
support mechanisms under this subpart
shall not be sold, resold, or transferred
in consideration for money or any other
thing of value.
(b) Permissible fees. The prohibition
on resale set forth in paragraph (a) of
this section shall not prohibit a health
care provider from charging normal fees
for health care services, including
instruction related to services purchased
with support provided under this
subpart.
■ 38. Add § 54.672 to subpart G to read
as follows:
§ 54.672
Duplicate support.
(a) Eligible health care providers that
seek support under the Healthcare
Connect Fund for telecommunications
services may not also request support
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from the Telecommunications Program
for the same services.
(b) Eligible health care providers that
seek support under the
Telecommunications Program or the
Healthcare Connect Fund may not also
request support from any other
universal service program for the same
expenses.
■ 39. Add § 54.675 to subpart G to read
as follows:
§ 54.675
Cap.
(a) Amount of the annual cap. The
aggregate annual cap on federal
universal service support for health care
providers shall be $400 million per
funding year, of which up to $150
million per funding year will be
available to support upfront payments
and multi-year commitments under the
Healthcare Connect Fund.
(b) Funding year. A funding year for
purposes of the health care providers
cap shall be the period July 1 through
June 30.
(c) Requests. Funds shall be available
as follows:
(1) Generally, funds shall be available
to eligible health care providers on a
first-come-first-served basis, with
requests accepted beginning on the first
of January prior to each funding year.
(2) For the Telecommunications
Program and the Healthcare Connect
Fund, the Administrator shall
implement a filing window period that
treats all eligible health care providers
filing within the window period as if
their applications were simultaneously
received.
(3) [Reserved]
(4) The deadline to submit a funding
commitment request under the
Telecommunications Program and the
Healthcare Connect Fund is June 30 for
the funding year that begins on the
previous July 1.
(d) Annual filing requirement. Health
care providers shall file new funding
requests for each funding year, except
for health care providers who have
received a multi-year funding
commitment under § 54.644.
(e) Long-term contracts. If health care
providers enter into long-term contracts
for eligible services, the Administrator
shall only commit funds to cover the
portion of such a long-term contract
scheduled to be delivered during the
funding year for which universal service
support is sought, except for multi-year
funding commitments as described in
§ 54.644.
(f) Pro-rata reductions for
Telecommunications Program support.
The Administrator shall act in
accordance with this section when a
filing window period for the
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Telecommunications Program and the
Healthcare Connect Fund, as described
in paragraph (c)(2) of this section, is in
effect. When a filing window period
described in paragraph (c)(2) of this
section closes, the Administrator shall
calculate the total demand for
Telecommunications Program and
Healthcare Connect Fund support
submitted by all applicants during the
filing window period. If the total
demand during a filing window period
exceeds the total remaining support
available for the funding year, the
Administrator shall take the following
steps:
(1) The Administrator shall divide the
total remaining funds available for the
funding year by the total amount of
Telecommunications Program and
Healthcare Connect Fund support
requested by each applicant that has
filed during the window period, to
produce a pro-rata factor.
(2) The Administrator shall calculate
the amount of Telecommunications
Program and Healthcare Connect Fund
support requested by each applicant
that has filed during the filing window.
(3) The Administrator shall multiply
the pro-rata factor by the total dollar
amount requested by each applicant
filing during the window period.
Administrator shall then commit funds
to each applicant for
Telecommunications Program and
Healthcare Connect Fund support
consistent with this calculation.
■ 40. Add § 54.679 to subpart G to read
as follows:
§ 54.679 Election to offset support against
annual universal service fund contribution.
(a) A service provider that contributes
to the universal service support
mechanisms under subpart H of this
part and also provides services eligible
for support under this subpart to eligible
health care providers may, at the
election of the contributor:
(1) Treat the amount eligible for
support under this subpart as an offset
against the contributor’s universal
service support obligation for the year in
which the costs for providing eligible
services were incurred; or
(2) Receive direct reimbursement from
the Administrator for that amount.
(b) Service providers that are
contributors shall elect in January of
each year the method by which they
will be reimbursed and shall remain
subject to that method for the duration
of the calendar year. Any support
amount that is owed a service provider
that fails to remit its monthly universal
service contribution obligation,
however, shall first be applied as an
offset to that contributor’s contribution
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obligation. Such a service provider shall
remain subject to the offsetting method
for the remainder of the calendar year in
which it failed to remit its monthly
universal service obligation. A service
provider that continues to be in arrears
on its universal service contribution
obligations at the end of a calendar year
shall remain subject to the offsetting
method for the next calendar year.
(c) If a service provider providing
services eligible for support under this
subpart elects to treat that support
amount as an offset against its universal
service contribution obligation and the
total amount of support owed exceeds
its universal service obligation,
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calculated on an annual basis, the
service provider shall receive a direct
reimbursement in the amount of the
difference. Any such reimbursement
due a service provider shall be provided
by the Administrator no later than the
end of the first quarter of the calendar
year following the year in which the
costs were incurred and the offset
against the contributor’s universal
service obligation was applied.
41. Add § 54.680 to subpart G to read
as follows:
■
§ 54.680
Validity of electronic signatures.
(a) For the purposes of this subpart,
an electronic signature (defined by the
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13993
Electronic Signatures in Global and
National Commerce Act, as an
electronic sound, symbol, or process,
attached to or logically associated with
a contract or other record and executed
or adopted by a person with the intent
to sign the record) has the same legal
effect as a written signature.
(b) For the purposes of this subpart,
an electronic record (defined by the
Electronic Signatures in Global and
National Commerce Act, as a contract or
other record created, generated, sent,
communicated, received, or stored by
electronic means) constitutes a record.
[FR Doc. 2013–04040 Filed 2–28–13; 8:45 am]
BILLING CODE 6712–01–P
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Agencies
[Federal Register Volume 78, Number 41 (Friday, March 1, 2013)]
[Rules and Regulations]
[Pages 13935-13993]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-04040]
[[Page 13935]]
Vol. 78
Friday,
No. 41
March 1, 2013
Part II
Federal Communications Commission
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47 CFR Part 54
Rural Health Care Support Mechanism; Final Rule
Federal Register / Vol. 78 , No. 41 / Friday, March 1, 2013 / Rules
and Regulations
[[Page 13936]]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 54
[WC Docket No. 02-60; FCC 12-150]
Rural Health Care Support Mechanism
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In this document, the Federal Communications Commission
reforms its universal service support program for health care,
transitioning its existing Internet Access and Rural Health Care Pilot
programs into a new, efficient Healthcare Connect Fund. This Fund will
expand health care provider access to broadband, especially in rural
areas, and encourage the creation of state and regional broadband
health care networks. Access to broadband for medical providers saves
lives while lowering health care costs and improving patient
experiences.
DATES: Effective April 1, 2013, except for added Sec. Sec. 54.601(b),
54.631(a) and (c), 54.632, 54.633(c), 54.634(b), 54.636, 54.639(d),
54.640(b), 54.642, 54.643, 54.645, 54.646, 54.647, 54.648(b),
54.675(d), and 54.679, and the amendments to Sec. Sec. 54.603(a) and
(b), 54.609(d)(2), 54.615(c), 54.619(a)(1) and (d), and 54.623(a),
which contain new or modified information collection requirements that
will not be effective until approved by the Office of Management and
Budget. The Federal Communications Commission will publish a document
in the Federal Register announcing the effective date for those
sections.
FOR FURTHER INFORMATION CONTACT: Linda Oliver, Wireline Competition
Bureau at (202) 418-1732 or TTY (202) 418-0484.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Report and Order (Order) in WC Docket No. 02-60, FCC 12-150, adopted
December 12, 2012, and released December 21, 2012. The complete text of
this document is available for inspection and copying during normal
business hours in the FCC Reference Information Center, Portals II, 445
12th Street SW., Room CY-A257, Washington, DC 20554, or at the
following Internet address: https://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-12-150A1.doc. The document may also be purchased from
the Commission's duplicating contractor, Best Copy and Printing, Inc.,
445 12th Street SW., Room CY-B402, Washington, DC 20554, telephone
(800) 378-3160 or (202) 863-2893, facsimile (202) 863-2898, or via the
Internet at https://www.bcpiweb.com.
I. Introduction
1. In this Order, the Commission reforms our universal service
support programs for health care, transitioning our existing Internet
Access and Rural Health Care Pilot programs into a new, efficient
Healthcare Connect Fund (Fund). This Fund will expand health care
provider (HCP) access to broadband, especially in rural areas, and
encourage the creation of state and regional broadband health care
networks. Broadband connectivity has become an essential part of 21st
century medical care. Whether it is used for transmitting electronic
health records, sending X-rays, MRIs, and CAT scans to specialists at a
distant hospital, or for video conferencing for telemedicine or
training, access to broadband for medical providers saves lives while
lowering health care costs and improving patient experiences.
Telemedicine can save stroke patients lasting damage, prevent premature
births, and provide psychiatric treatment for patients in rural areas.
Exchange of electronic health records (EHRs) avoids duplicative medical
tests and errors in prescriptions, and gives doctors access to all of a
patient's medical history on a moment's notice. Telehealth applications
save HCPs money as well. For example, a South Carolina HCP consortium
funded by the Commission's Rural Health Care (RHC) Pilot Program saved
$18 million in Medicaid costs through telepsychiatry provided at
hospital emergency rooms. Another Pilot project in the Midwest saved
$1.2 million in patient transport costs after establishing an
electronic intensive care unit (e-ICU) program.
2. This Order builds on the success of the RHC Pilot Program. That
program demonstrated the importance of expanding HCP access to high-
capacity broadband services, which neither the existing RHC
Telecommunications Program nor the Internet Access Program have
successfully achieved. The Pilot Program also proved the benefits of a
consortium-focused program design, encouraging rural-urban
collaboration that extended beyond mere connectivity, while
significantly lowering administrative costs for both program
participants and the Fund. The Pilot Program funds 50 different health
care provider broadband networks, with a total of 3,822 individual HCP
sites, 66 percent of which are rural. The networks range in size from 4
to 477, and have received a total of $364 million in funding
commitments, to be spread out over several years. Through bulk buying
and competitive bidding, most HCPs in the program have been able to
obtain broadband connections of 10 Mbps or more. The consortia were
often organized and led by large hospitals or medical centers, which
contributed administrative, technical, and medical resources to the
other, smaller HCPs providing service to patients in rural areas.
3. Drawing on these lessons, the Healthcare Connect Fund will
direct Universal Service Fund (USF) support to high-capacity broadband
services while encouraging the formation of efficient state and
regional health care networks. The new Fund will give HCPs substantial
flexibility in network design, but will require a rigorous, auditable
demonstration that they have chosen the most cost-effective option
through a competitive bidding process.
4. In particular, like the Pilot Program, the Healthcare Connect
Fund will permit HCPs to purchase services and construct their own
broadband infrastructure where it is the most cost-effective option.
The Healthcare Connect Fund is thus a hybrid of the separate
infrastructure and services programs proposed in the Commission's July
2010 Notice of Proposed Rulemaking (NPRM), 75 FR 48236, August 9, 2010.
The self-construction option will only be available, however, to HCPs
that apply as part of consortia, which can garner economies of scale
unavailable to individual providers. With these safeguards, and based
on the experience of the RHC Pilot Program, we expect the self-
construction option to be used only in limited circumstances, and often
in combination with services purchased from commercial providers.
5. Regardless of which approach providers choose, the Healthcare
Connect Program will match two-for-one the cost of broadband services
or facilities that they use for health care purposes, requiring a 35
percent HCP contribution. A two-for-one match will significantly lower
the barriers to connectivity for HCPs nationwide, while also requiring
all program participants to pay a sufficient share of their own costs
to incent considered and prudent decisions and the choice of cost-
effective broadband connectivity solutions. Indeed, with the level of
support the Healthcare Connect Fund provides, and with the other
reforms we adopt, we expect that HCPs will be able to obtain higher
speed and better quality broadband connectivity at lower prices, and
that the value for the USF will be greater, than in the existing RHC
[[Page 13937]]
Telecommunications and Internet Access Programs.
6. Both rural and non-rural HCPs will be allowed to participate in
the new program, but non-rural providers may join only as part of
consortia. Moreover, to ensure that all consortia keep rural service
central to their mission, we will require that a majority of the HCPs
in each consortium meet our longstanding definition of rural HCPs,
although we grandfather those Pilot projects with a lower rural
percentage. And to ensure that the program maintains its focus on
smaller HCPs that serve predominantly rural populations, we also adopt
a rule limiting support to no more than $30,000 per year for recurring
charges and no more than $70,000 for non-recurring charges over a five-
year period for larger HCPs--defined as hospitals with 400 beds or
more.
7. We also adopt a number of reforms for the Healthcare Connect
Fund that will increase the efficiency of the program, both by reducing
administrative costs for applicants and for Universal Service
Administrative Company (USAC), and by adopting measures to maximize the
value obtained by HCPs from every USF dollar. In particular, we take a
number of steps in this Order to simplify the application process, both
for individual HCP applicants and for consortia of HCPs.
8. As a central component of this Order, we also adopt express
goals and performance measures for all the Commission's health care
support mechanisms. The goals are (1) increasing access to broadband
for HCPs, particularly those serving rural areas; (2) fostering the
development and deployment of broadband health care networks; and (3)
maximizing the cost-effectiveness of the program. These goals inform
all the choices we make in this Order. As we implement this Order, we
will collect information to evaluate the success of our program against
each of these goals.
9. Finally, we create a new Pilot Program to test whether it is
technically feasible and economically reasonable to include broadband
connectivity for skilled nursing facilities within the Healthcare
Connect Program. The Pilot will make available up to $50 million to be
committed over a three-year period for pilot applicants that propose to
use broadband to improve the quality and efficiency of health care
delivery for skilled nursing facility patients, who stand to benefit
greatly from telemedicine and other telehealth applications. We expect
to use the data gathered through the Pilot to determine how to proceed
on a permanent basis with respect to such facilities, which provide
hospital-like services.
10. We note that, with this comprehensive reform of the RHC
program, the Commission has now reformed all four USF distribution
programs within the past three years. In September 2010, the Commission
modernized the Schools and Libraries support mechanism (E-rate) for the
21st century, improving broadband access, streamlining administrative
requirements, and taking measures to combat waste, fraud and abuse. In
October 2011, the Commission adopted transformational reforms of the
high-cost program, creating the Connect America and Mobility Funds to
advance the deployment of fixed and mobile broadband networks in rural
and underserved areas, while putting the high-cost program on an
overall budget for the first time ever. In January 2012, the Commission
transformed the low-income program, taking major steps to modernize the
program and reduce waste, fraud, and abuse. In each prior instance, and
again in this Order, we have made our touchstone aligning the universal
service programs with 21st century broadband demands, while improving
efficiency, accountability, and fiscally responsibility.
II. Performance Goals and Measures
11. Clear performance goals and measures will enable the Commission
to determine whether the health care universal service support
mechanism is being used for its intended purpose and whether that
funding is accomplishing the intended results. In the NPRM, the
Commission recognized the importance of establishing measurable
performance goals, stating that ``[i]t is critical that our efforts
focus on enhancing universal service for health care providers and that
support is properly targeted to achieve defined goals.'' Establishing
performance goals and measures also is consistent with the Government
Performance and Results Act of 1993 (GPRA), which requires federal
agencies to engage in strategic planning and performance measurement.
In its 2010 report, the Government Accountability Office (GAO) also
emphasized that the Commission should provide the RHC support mechanism
with ``a solid performance management foundation'' by ``establishing
effective performance goals and measures, and planning and conducting
effective program evaluations.''
12. Drawing on the Commission's experience with the existing RHC
programs and the Pilot Program, and based on the record developed in
this proceeding, we adopt the following performance goals for the
health care universal service support mechanism (both for the RHC
Telecommunications Program and the Healthcare Connect Fund), which
reflect our ongoing commitment to preserve and advance universal
service for eligible HCPs: (1) Increase access to broadband for HCPs,
particularly those serving rural areas; (2) foster development and
deployment of broadband health care networks; and (3) reduce the burden
on the USF by maximizing the cost-effectiveness of the health care
support mechanism. We also adopt associated performance measurements.
Throughout this Order, we have used these goals as guideposts in
developing the Healthcare Connect Fund, and these goals also will guide
our action as we undertake any future reform of the Telecommunications
Program.
13. Using the adopted goals and measures, the Commission will, as
required by GPRA, monitor the performance of the universal service
health care support mechanism. If the program is not meeting the
performance goals, we will consider corrective actions. Likewise, to
the extent that the adopted measures do not help us assess program
performance, we will revisit them as well.
A. Increase Access to Broadband for Health Care Providers, Particularly
Those Serving Rural Areas
14. Goal. We adopt as our first goal increasing access to broadband
for HCPs, particularly those serving rural areas. This goal implements
Congress's directive in section 254(h) of the Communications Act that
the Commission ``enhance access to advanced telecommunications services
and information services'' for eligible HCPs and to provide
telecommunications services necessary for the provision of health care
in rural areas at rates reasonably comparable to similar services in
urban areas. Access to the broadband necessary to support telehealth
and Health IT applications is critical to improving the quality and
reducing the cost of health care in America, particularly in rural
areas. Broadband enables the efficient exchange of patient and
treatment information, reduces geography and time as barriers to care,
and provides the foundation for the next generation of health
innovation.
15. Measurement. We will evaluate progress towards our first goal
by measuring the extent to which program participants are subscribing
to increasing levels of broadband service over time. We also plan to
collect data about participation in the Healthcare
[[Page 13938]]
Connect Fund relative to the universe of eligible participants. We also
will collect data about the bandwidth obtained by participants in the
program, and will chart the increase over time in higher bandwidth
levels. We plan to compare those bandwidth levels with the minimum
bandwidth requirements recommended in the National Broadband Plan,
March 16, 2010 and the OBI Technical Paper, August, 2010 to determine
how HCP access to broadband evolves as technology changes and as HCPs
increasingly adopt telemedicine and electronic health records. We also
expect to measure the bandwidth obtained by HCPs in the different
statutory categories, as that information is not administratively
burdensome to collect. To the extent feasible, we also will endeavor to
compare the bandwidth obtained by participants in the Commission's
programs with that used by non-participants, by relying on public
sources of information regarding broadband usage by the health care
industry, and by comparing the bandwidth obtained by new participants
in the Commission's programs with what they were using prior to
joining, to the extent such data is available.
16. HCP needs for higher bandwidth connections vary based on the
types of telehealth applications used by HCPs and by the size and
nature of their medical practices. Because of this variation, and
because of potential constraints on the ability of HCPs to obtain
broadband (due to cost or lack of broadband availability), we are not
establishing a minimum target bandwidth as a means to measure progress
toward this goal. We expect, nevertheless, to compare the bandwidth
obtained by HCPs with the kinds of bandwidth commonly required to
conduct telemedicine and other telehealth activities.
17. We direct the Bureau to consult with the major stakeholders and
other governmental entities in order to minimize the administrative
burden placed on applicants and on the Fund Administrator (currently,
USAC). We also direct the Bureau to consult with the U.S. Department of
Health and Human Services (HHS), including the Indian Health Service
(IHS), and other relevant federal agencies to ensure the meaningful and
non-burdensome collection of broadband data from HCPs. We expect to
follow health care trends (such as use of EHRs and telemedicine) and to
coordinate, to the extent possible, our monitoring efforts with other
federal agencies. We also direct the Bureau to engage in dialogue with
United States Department of Health and Human Services (HHS) regarding
whether and how to incorporate broader health care outcomes, including
providers' ``meaningful use'' of EHRs, into our performance goals and
measures in the future, consistent with our statutory authority.
18. Finally, in order to further our progress toward meeting this
goal, we also direct the USAC, working with the Bureau and with other
agencies, to conduct outreach regarding the Healthcare Connect Fund
with those HCPs that are most in need of broadband in order to reach
``meaningful use'' of EHRs and for other health care purposes.
B. Foster Development and Deployment of Broadband Health Care Networks
19. Goal. We adopt as our second goal fostering development and
deployment of broadband health care networks, particularly networks
that include HCPs that serve rural areas. This goal is consistent with
the statutory objective of section 254(h), which is to enhance access
to telecommunications and advanced services, especially for health care
providers serving rural areas. Broadband health care networks also
improve the quality and lower the cost of health care and foster
innovation in telehealth applications, particularly in rural areas.
20. Measurement. We will evaluate progress towards this second goal
by measuring the extent to which eligible HCPs participating in the
Healthcare Connect Fund are connected to other HCPs through broadband
health care networks. We plan to collect data about the reach of
broadband health care networks supported by our programs, including
connections to those networks by eligible and non-eligible HCP sites.
We also will measure how program participants are using their broadband
connections to health care networks, including whether and to what
extent HCPs are engaging in telemedicine, exchange of EHRs,
participation in a health information exchange, remote training, and
other telehealth applications. Access to high speed broadband health
care networks should help facilitate adoption of such applications by
HCPs, including those HCPs serving patients in rural areas. We direct
the Bureau to work with USAC to implement the reporting requirements
regarding such telehealth applications in a manner that imposes the
least possible burden on participants, while enabling us to measure
progress toward this goal. We also direct the Bureau to coordinate with
other federal agencies to ensure that data collection minimizes the
burden on HCPs, which may already be required to track similar data for
other health care regulatory purposes. To the extent feasible, we also
will endeavor to compare the extent to which participants in the new
program are using telehealth applications to that of non-participants,
relying on public sources of information regarding trends in the health
care industry.
C. Maximize Cost-Effectiveness of Program
21. Goal. We adopt as our third goal maximizing the cost-
effectiveness of the RHC universal service health care support
mechanism, thereby minimizing the Fund contribution burden on consumers
and businesses. This goal includes increasing the administrative
efficiency of the program (thereby conserving Fund dollars) while
accelerating the delivery of support for broadband. This goal also
includes ensuring that the maximum value is received for each dollar of
universal service support provided, by promoting lower prices and
higher speed in the broadband connections purchased with Fund support.
In addition, we seek to ensure that funding is being used consistent
with the statute and the objectives of the RHC support mechanism, and
we adopt throughout this Order measures to help prevent waste, fraud
and abuse. The goal of increasing program efficiency is consistent with
section 254(h)(2)(A) of the Communications Act, which requires that
support to HCPs be ``economically reasonable.''
22. Measurement. We will evaluate progress towards this goal both
by measuring the administrative efficiency of the program and by
measuring the value delivered with each dollar of USF support. First,
we will measure the cost of administering the program compared to the
program funds disbursed to recipients. USAC's cost to administer the
Telecommunications, Internet Access, and Pilot RHC programs was nine
percent of total funds disbursed in calendar year 2011, the highest of
all four universal service programs. We may measure this also in terms
of the percentage of administrative expenses relative to funds
committed, to account for the fact that administrative expenses may be
higher in years in which USAC processes a large number of applications
for multi-year funding.
23. Second, we will measure the value delivered to HCPs with
support from the Healthcare Connect Fund by tracking the prices and
speed of the broadband connections supported by the program. As we
found in the Pilot Program, consortium applications, in combination
with competitive bidding
[[Page 13939]]
and other program features, lead to lower prices and higher speed
broadband. As we did in the Pilot Evaluation, DA 12-1332, we expect to
measure the prices and speed of connections obtained under the
Healthcare Connect Fund to determine whether this goal has been
accomplished, and will examine similar data from the Telecommunications
Program. In addition, we will monitor the results of the
Administrator's audits and other reports to track progress in reducing
improper payments and waste, fraud and abuse.
III. Support for Broadband Connectivity
A. Overview
24. In this Order, we create a new Healthcare Connect Fund that
will provide universal service support for broadband connectivity for
eligible HCPs. As designed, the new program will achieve the goals we
have identified above for the reformed program: (1) Increasing access
to broadband for HCPs, including those in rural areas; (2) fostering
the development of broadband health care networks to deliver innovation
in telehealth applications; and (3) maximizing the cost-effective use
of the Fund. The Healthcare Connect Fund replaces the current RHC
Internet Access Program, but the RHC Telecommunications Program remains
in place.
25. Although we will allow the filing of both individual and
consortium applications, a primary focus of the Healthcare Connect Fund
will be encouraging the growth or formation of statewide, regional, or
Tribal broadband health care networks that will expand the benefits we
observed in the Pilot Program. Benefits of such networks include access
to specialists; cost savings from bulk buying capability and
aggregation of administrative functions; efficient network design; and
the transfer of medical, technical, and financial resources to smaller
HCPs. We will allow non-rural as well as rural health care providers to
participate and receive support for critical network connections if
they apply as part of a consortium, with limitations to ensure that
program funds are used efficiently and that all consortia include rural
participation.
26. In the NPRM, the Commission proposed to create two separate
programs: A Health Infrastructure Program and a Broadband Services
Program. The former would support the construction of HCP-owned
broadband networks; the latter would support the purchase of broadband
services. In view of the real world experience we have gained from the
Pilot Program over the intervening two years, and based on the
extensive record in this docket from a broad array of affected
stakeholders, we now conclude that the better approach is to adopt a
single, hybrid program. The new program will support the cost of (1)
broadband and other advanced services; (2) upgrading existing
facilities to higher bandwidth; (3) equipment necessary to create
networks of HCPs, as well as equipment necessary to receive broadband
services; and (4) HCP-owned infrastructure where shown to be the most
cost-effective option. The hybrid approach of the Healthcare Connect
Fund provides flexibility for HCPs to create broadband networks that
best meet their needs and that can most readily be put to use for
innovative and effective telehealth applications, while ensuring funds
are spent responsibly and efficiently. The new program will replace the
current Internet Access Program and provide continuing support for
Pilot Program consortia as they exhaust any remaining funding already
committed under the Pilot Program. As discussed in the Implementation
Timeline section, for administrative convenience, rural HCPs can
continue to participate in the Internet Access Program during funding
year 2013.
27. We expect that most HCPs will choose to obtain services from
commercial providers rather than construct and own network facilities
themselves, just as they did in the Pilot Program. HCP-owned
infrastructure will be supported under the Healthcare Connect Fund only
when the HCP or HCP consortium demonstrates, following a competitive
bidding process that solicits bids for both services and construction,
either that the needed broadband is unavailable or that the self-
construction approach is the most cost-effective option. We also impose
an annual cap of $150 million that will apply, in part, to the funds
available for HCP self-construction, to ensure that ample funding will
remain available for HCPs choosing to obtain services.
28. To promote fiscal responsibility and cost-effective purchasing
decisions, we adopt a single, uniform 35 percent HCP contribution
requirement for all services and infrastructure supported through the
program. Use of a single, flat rate will facilitate network
applications, encourage efficient network design, and reduce
administrative expenses for applicants and the Fund. In requiring a 35
percent contribution, we balance the need to provide appropriate
incentives to encourage resource-constrained HCPs to participate in
health care broadband networks, while requiring HCPs to have a
sufficient financial stake to ensure that they obtain the most cost-
effective services possible. We also find that a 35 percent
contribution requirement is economically reasonable and fiscally
responsible, given the $400 million cap for the health care support
mechanism and the anticipated demand for program support.
29. We adopt the Healthcare Connect Fund pursuant to section
254(h)(2)(A) of the Communications Act, which requires the Commission
to ``establish competitively neutral rules to * * * enhance, to the
extent technically feasible and economically reasonable, access to
advanced telecommunications and information services for all public and
nonprofit * * * health care providers.'' The Commission relied on this
statutory authority when it created the Pilot Program in 2006 to
support HCP-owned infrastructure and services, including Internet
access services, and the Commission has broad discretion regarding how
to fulfill this statutory mandate. In Texas Office of Public Utility
Counsel v. FCC, the United States Court of Appeals for the Fifth
Circuit upheld the Commission's authority under section 254(h)(2)(A) to
provide universal service support for ``advanced services'' to both
rural and non-rural HCPs.
B. A Consortium Approach to Creation of Broadband Health Care Networks
30. The flexible, consortium-based approach of the Pilot Program
fostered a wide variety of health care broadband networks that enabled
better care and lowered costs. Drawing on our Pilot Program experience,
we implement a Healthcare Connect Fund that will encourage HCPs to work
together to preserve and advance the development of health care
networks across the country. The measures we adopt will simplify the
application process for consortia of HCPs and afford them flexibility
to innovate in the design and use of their networks, recognizing the
importance of enabling smaller HCPs to draw on the medical and
technical expertise and administrative resources of larger HCPs.
31. We conclude that non-rural HCPs may apply and receive support
as part of consortia in the Healthcare Connect Fund. To ensure that
program support continues to benefit rural as well as non-rural HCPs,
however, we require that in each consortium, a majority of HCP sites
(over 50 percent) be rural HCPs. We also adopt measures to limit the
amount of funding that flows to the
[[Page 13940]]
largest hospitals in the country, to ensure that funding remains
focused on a broad cross section of providers serving smaller
communities across America.
32. Separately, we describe the services and equipment eligible for
support (including services and equipment necessary for networks), and
we describe the funding process, including the requirements applicable
to consortia.
1. Key Benefits of a Consortium Approach
33. Discussion. The Pilot Evaluation documented in detail the
benefits from the flexible consortium-based approach used in the Pilot
Program, including:
Administrative Cost Savings: Applying as a consortium is
simpler, cheaper, and more efficient for the HCPs and for the Fund.
Under the consortium approach, the expenses associated with planning
the network, applying for funding, issuing RFPs, contracting with
service providers, and invoicing are shared among a number of
providers. Consortium applications also allow USAC to process
applications more efficiently.
Access to Medical Specialists through Telemedicine.
Consortia that include both larger medical centers and members that
serve more sparsely populated areas enable the latter to obtain access
to medical specialists through telemedicine, thus improving the quality
and reducing the cost of care.
Leadership of Consortia. The organizers and leaders of
many Pilot projects classified as non-rural entities under the
Commission's longstanding definition of rural HCPs--especially
hospitals and university medical centers--were able to shoulder much of
the administrative burden associated with the consortia, thereby
benefiting smaller, rural HCPs.
Sources of Technical Expertise. Larger sites often have
the technical expertise necessary to design networks and manage the IT
aspects of the network, and also often have greater expertise than
smaller providers in rural areas in telemedicine, electronic health
records, Health IT, computer systems, and other broadband telehealth
applications.
Financial Resources. Many Pilot projects depend on the
financial and human resources of larger sites to absorb the
administrative costs of participation in the Pilot, such as the cost of
planning and organizing applications, applying for funding, preparing
RFPs, contracting for services, and implementing the projects.
Efficiency of Network Design. Network design in many cases
has been more efficient and less costly in the Pilot Program than in
the Telecommunications Program, because the Pilot Program funds all
public and not-for-profit HCPs, even those located in non-rural areas.
Pilot projects were able to design their networks with maximum network
efficiency in mind because funding is not negatively impacted by
inclusion of non-rural sites in those networks.
Bulk Buying Capability. Consortium bulk buying capability,
when combined with competitive bidding and multi-year funding
commitments, enabled Pilot projects to obtain higher bandwidth, lower
rates, and better service quality than would otherwise have been
possible.
34. Commenters generally support a consortium approach and agree
that it can provide a number of benefits, including better pricing and
administrative efficiency.
35. In light of these benefits, we adopt a number of rules to
encourage HCPs to work together in consortia to meet their broadband
connectivity needs. We conclude that non-rural HCPs may participate and
receive support as part of consortia, with some limitations. We also
adopt a ``hybrid'' approach that allows consortia to receive support
through a single program for services and, where necessary, self-
construction of infrastructure. We adopt a uniform HCP contribution
percentage applicable to all HCPs and to all funded costs to simplify
administration. We adopt additional measures. We make support for
certain costs available only to consortia--e.g., upfront payments for
build-out costs and indefeasible rights of use (IRUs), equipment
necessary for the formation of networks, and self-construction charges.
We also allow consortia to submit a single application covering all
members, and we provide additional guidance based on Pilot Program
experience for consortium applications. Finally, we facilitate group
buying arrangements by providing for multi-year commitments and
allowing HCPs to ``opt into'' competitively bid master service
agreements previously approved by USAC or other federal, state, Tribal,
or local government agencies, without undergoing additional competitive
bidding solely for the purposes of receiving Healthcare Connect Fund
support.
2. Eligibility To Participate in Consortia
36. Discussion. We will allow participation in the Healthcare
Connect Fund consortia by both rural and non-rural eligible HCPs, but
with limitations to ensure that the health care support mechanism
continues to serve rural as well as non-rural needs in the future. The
Pilot Program provided support to both rural and non-rural HCPs under
section 254(h)(2)(A), which directs the Commission to ``enhance * * *
access to advanced telecommunications and information services for all
public and non-profit * * * health care providers.'' As the Fifth
Circuit has found, ``the language in section 254(h)(2)(A) demonstrates
Congress's intent to authorize expanding support of `advanced
services,' when possible, for non-rural health providers.''
37. We expect that including non-rural HCPs in consortia will
provide significant health care benefits to both rural and non-rural
patients, for at least three reasons.
First, even primarily rural networks benefit from the
inclusion of larger, non-rural HCPs. Pilot projects state that rural
HCPs value their connections to non-rural HCPs for a number of reasons,
including access to medical specialists; help in instituting
telemedicine programs; leadership; administrative resources; and
technical expertise. Many non-rural HCPs in the Pilot Program devoted
resources to organizing consortia, preparing applications, designing
networks, and preparing requests for proposal (RFPs). Had these non-
rural HCPs not been eligible for support, they might not have been
willing to take on a leadership role, which in turn directly enabled
smaller and more rural HCPs to participate in Pilot networks. The
participation of non-rural sites has also led to better prices and more
broadband for participating rural HCPs, due to the greater bargaining
power of consortia that include larger, non-rural sites.
Second, the Commission's longstanding definition of ``non-
rural'' HCPs encompasses a wide range of locales, ranging from large
cities to small towns surrounded by rural countryside. Even within
areas that are primarily rural, HCPs are likely to be located in the
most populated areas. Many HCPs that are technically classified as non-
rural within our rules in fact are located in relatively sparsely
populated areas. For example, Orangeburg County Clinic in Holly Hill,
South Carolina (population 1,277), a HCP participating in Palmetto
State Providers Network's Pilot project, is characterized as non-rural.
The largest cities closest to Holly Hill are Charleston, SC, and
Columbia, SC, which are respectively 50 and 69 miles away from Holly
Hill. Moreover, even those hospitals and clinics that are located in
more densely populated
[[Page 13941]]
towns directly serve rural populations because they are the closest HCP
for many patients who do live in the surrounding rural areas. For
example, the University of Virginia Medical Center is a major referral
center for many counties in rural Appalachia.
Third, even hospitals and clinics that are located in
truly urban areas are able to provide significantly improved care by
joining broadband networks. The California Telehealth Network, for
example, states that it ``frequently encounters urban health care
providers with patient populations that are as isolated from clinical
specialty care as [the] most rural health care providers,'' including
urban Indian HCPs who could better serve Native populations through
broadband-centered technologies such as EHRs and telemedicine. In some
areas of the country, even ``urban'' communities may be hundreds of
miles away from critical health care services such as Level 1 Trauma
Centers, academic health centers, and children's hospitals. Like HCPs
in rural areas, these ``urban'' community hospitals may serve as
``spoke'' health care facilities that access services that are
available at larger hospital ``hubs.'' Eligible public and not-for-
profit HCPs located in communities that are not classified as ``rural''
thus have a need for access to broadband to be able to effectively
deliver health care, just as their ``rural'' counterparts do.
38. Some commenters express concern that unlimited non-rural HCP
participation might jeopardize funding for rural HCPs if the $400
million annual program cap is reached. We therefore adopt three simple
limitations that should help ensure a fiscally responsible reformed
health care program without unduly restricting non-rural participation,
consistent with our statutory mandate to enhance access to advanced
services in an ``economically reasonable'' manner. First, non-rural
HCPs may only apply for support as part of consortia that include rural
HCPs; that is, they may not submit individual applications. Second,
non-rural HCPs may receive support only if they participate in
consortia that include a majority (more than 50 percent) of sites that
are rural HCPs. The majority rural requirement must be reached by a
consortium within three years of the filing date of its first request
for funding (Form 462) in the Healthcare Connect Fund. Third, we
establish a cap on the annual funding available to each of the largest
hospitals participating in the program (those with 400 or more beds).
These requirements will encourage the formation of health care networks
that include rural HCPs, while generating administrative and pricing
efficiencies as well as significant telemedicine and other telehealth
benefits.
39. For purposes of the majority rural requirement, we
``grandfather'' non-rural HCP sites that have received a funding
commitment through a Pilot project that has 50 percent or more non-
rural HCP sites with funding commitments as of the adoption date of
this Order. Such non-rural HCP sites may continue to receive support
through the Healthcare Connect Fund, but unless the consortium overall
reaches majority rural status overall, the project may add new non-
rural HCP sites only if, in the aggregate, the new (i.e., non-Pilot
project) HCP sites remain majority rural. The grandfathering only
applies to the sites that have received a Pilot Program funding
commitment as of the adoption date of this Order, and applies only so
long as the grandfathered non-rural HCP site continues to participate
in that consortium.
40. We recognize that large, metropolitan non-profit hospitals are
more likely to provide specialized services and expertise that HCPs and
patients in less populous areas (both rural and non-rural) may
otherwise be unable to access, and that may serve a leadership role
under which they provide significant, often unreimbursed assistance to
other HCPs within the network. Thus, we see significant value in having
such hospitals participate in health care broadband networks. At the
same time, however, large metropolitan hospitals are located in urban
areas where broadband is typically less expensive than in rural areas.
Given that universal service funds are limited, we expect larger
hospitals to structure their participation in Healthcare Connect Fund
consortia in a way that appropriately serves the goals of the health
care program to increase HCP access to broadband services and health
care broadband networks. In other words, it would not be economically
reasonable to provide support to larger hospitals for connections they
would have purchased in any event, outside of their participation in
the consortium.
41. To protect against larger HCPs in non-rural areas joining the
program merely to obtain support for pre-existing connections, we
require consortium applicants to describe in their applications the
goals and objectives of the proposed network and their strategy for
aggregating HCP needs, and to use program support for the described
purposes. We also impose a limitation on the amount of funding
available to large metropolitan hospitals, while recognizing that it is
unlikely in the near term that large urban hospitals will consume a
disproportionate amount of funds in the Healthcare Connect Fund. We
require that under the Healthcare Connect Fund, a non-rural hospital
site with 400 or more licensed patient beds may receive no more than
$30,000 per year in support for recurring charges and no more than
$70,000 in support for nonrecurring charges every 5 years under the
Fund, exclusive in both cases of costs shared by the network. For
purposes of this limit, we ``grandfather'' non-rural hospitals that
have received a funding commitment through a Pilot project as of the
adoption date of this Order. We base the amount of these caps on the
average charges that were supported for non-rural hospitals in the
Pilot Program. The American Hospital Association (AHA) defines
``large'' hospitals as those with 400 or more staffed patient beds. We
will use the AHA classification as a guide for our own definition of a
``large'' hospital, which is any non-rural hospital with 400 or more
licensed patient beds. Based on our experience with the Pilot Program,
it appears that the vast majority of Pilot participant hospitals have
fewer than 200 beds. We do not anticipate, therefore, that the funding
caps for large hospitals that we adopt here will be likely to affect
most of the hospitals that are likely to join consortia in the
Healthcare Connect Fund. We will monitor use of support by large
hospitals closely in the new program, and if it appears that such
hospitals are utilizing a disproportionate share of program funds
despite our caps, we may consider more explicit prioritization rules to
ensure that program dollars are targeted to the most cost-effective
uses. We plan to conduct a further proceeding to examine possible
approaches to prioritizing funding.
42. We expect that, on average, the actual number of rural members
in the consortia will be substantially higher than 51 percent, as was
the case in the Pilot Program, and we will evaluate this over time. We
will not begin receiving applications from new consortia until 2014,
and based on our experience with the Pilot Program, we know that it may
take some time for consortia to organize themselves and apply for
funding. We therefore direct the Bureau to report to the Commission on
rural participation by September 15, 2015. If we observe that the trend
of rural participation in the new program does not appear to be on a
comparable path as we observed in the Pilot Program (where average
rural participation reached 66 percent), we will open, by the end of
2015, a
[[Page 13942]]
proceeding to expeditiously re-evaluate the participation requirement.
43. We emphasize that the limitations do not prevent any non-rural
HCP from participating in a health care broadband network; entities
ineligible for support may participate in networks if they pay their
``fair share'' (i.e. an ``undiscounted'' rate) of network costs. Non-
profit entities, including non-rural HCPs, may also serve as consortium
leaders even if they do not receive universal service support.
44. In light of the limitations, we do not anticipate that our
decision to allow both rural and non-rural HCPs to receive support
through the Healthcare Connect Fund will cause program demand to exceed
the $400 million cap in the foreseeable future, especially in light of
our decision to require a 35 percent participant contribution and our
adoption of a $150 million annual cap on support for upfront payments
and multi-year commitments. Furthermore, the pricing and other
efficiencies made possible through group purchasing should drive down
the cost of connections as some Telecommunications Program participants
migrate to the Healthcare Connect Fund. We will closely monitor program
demand, and stand prepared to consider whether additional program
changes are necessary, including, establishing rules that would give
funding priority to certain HCPs.
3. Eligibility of Grandfathered Formerly ``Rural'' Sites
45. In June 2011, the Commission adopted an interim rule permitting
participating HCPs that were located in a ``rural'' area under the
definition used by the Commission before July 1, 2005, to continue
being treated as if they were located in a ``rural'' area for the
purposes of determining eligibility for support under the RHC program.
We conclude that HCPs that were located in ``rural areas'' under the
pre-July 1, 2005 definition used by the Commission, and that were
participating in the Commission's RHC program before July 2005, also
will be treated as ``rural'' for purposes of the new Healthcare Connect
Fund. Many such facilities play a key role in providing health care
services to rural and remote areas, and discontinuing discounted
services to these grandfathered providers could jeopardize their
ability to continue offering essential health care services to rural
areas. Extending eligibility for these grandfathered HCPs in the
Healthcare Connect Fund helps ensure that these valuable services are
not lost in areas that need them, and thus ensures continuity of health
care for many rural patients. For similar reasons, we also have
grandfathered those Pilot projects that do not have the majority rural
HCP membership required of consortium applicants in the Healthcare
Connect Fund.
C. A Hybrid Infrastructure and Services Approach
46. Discussion. We conclude that a hybrid approach that supports
both broadband services and, where necessary, HCP-constructed and owned
facilities as part of networks, will best fulfill our goal of
developing broadband networks that enable the delivery of 21st century
health care. In addition to funding HCP-owned network facilities, we
also include as an essential component of this hybrid approach the
provision of funding for equipment needed to support networks of HCPs
and the provision of support for upgrades that enable HCPs to obtain
higher bandwidth connections.
47. We expect that HCP-owned infrastructure will be most useful in
providing last-mile broadband connectivity where it is currently
unavailable and where existing service providers lack sufficient
incentives to construct it. As the American Hospital Association
observed: ``Although many rural providers lease broadband services,
some construction is still needed. For many of the AHA's rural members,
the ability to ensure access to `last mile' broadband connections to
rural health care facility locations is a fundamental problem
restricting broadband access.'' We have learned that when providers are
unable to build a business case to construct fiber in rural areas,
last-mile fiber self-construction may be the only option for a HCP to
get the required connectivity. We note that other federal programs--
such as the Broadband Telecommunications Opportunities Program (BTOP)--
have provided support for construction of ``middle mile'' facilities,
and if HCPs can obtain support for last-mile connections from the
Healthcare Connect Fund, they can take advantage of such middle mile
backbone networks.
48. Providing a self-construction option will also promote our goal
of ensuring fiscal responsibility and cost-effectiveness by placing
downward pressure on the bids for services. As the Health Information
Exchange of Montana observes, the option to construct the network may
constrain pricing offered by existing providers, particularly in areas
that have little or no competition. When an RFP includes both a
services and a self-construction option, bidders will know that if the
services prices bid are too high, the HCPs can choose to build their
own facilities.
49. We adopt safeguards to ensure that the self-construction option
will be exercised only where it is absolutely necessary to enable the
HCPs to obtain the needed broadband connectivity. First, the HCP-owned
infrastructure option may be employed only where self-construction is
demonstrated to be the most cost-effective option after competitive
bidding. We require USAC carefully to evaluate this showing; USAC
already has experience in evaluating cost-effectiveness for large-scale
projects from the Pilot Program. Consortia interested in pursuing self-
construction as an option must solicit bids both for services and for
construction, in the same posted Request for Proposals (submitted with
Form 461), so that they will be able to show either that no vendor has
bid to provides the requested services, or that the bids for self-
construction were the most cost-effective option. RFPs must provide
sufficient detail so that cost-effectiveness can be evaluated over the
useful life of the facility, if the consortium pursues a self-
construction option. We also permit HCPs that have received no bids on
a services-only posting to then pursue a self-construction option
through a second posting. We discuss the mechanics of the competitive
bidding process and delegate to the Bureau the authority to provide
administrative guidance for conducting the competitive bidding process,
for the treatment of hybrid (services and construction) RFPs, excess
capacity and shared costs, and other necessary guidelines for effective
operation of this aspect of the Healthcare Connect Fund.
50. Second, by setting the discount at the same level regardless of
whether HCPs choose to purchase broadband services from a provider or
construct their own facilities, we ensure that there is no cost
advantage to choosing self-construction. We require that all HCPs
provide a 35 percent contribution to the cost of supported networks and
services, which will help ensure prudent investment decisions. Pilot
projects have stated that ownership of newly constructed facilities
only makes economic sense for them where there are gaps in
availability. And as many HCPs have stated in this proceeding, HCPs are
generally not interested in owning or operating broadband facilities,
but rather are focused on the delivery of health care.
51. Finally, we impose a $150 million cap on the annual funds that
can be allocated to up-front, non-recurring
[[Page 13943]]
costs, including HCP-owned infrastructure, and we require that non-
recurring costs that exceed an average of $50,000 per HCP in a
consortium be prorated over a minimum three-year period. These measures
will help ensure that the Fund does not devote an excessive amount of
support to large up-front payments for HCP self-construction, which
could potentially foreclose HCPs' ability to use the Fund for monthly
recurring charges for broadband services. This also addresses the
comments of several parties, who suggested that providing funding for
infrastructure could put undue pressure on the Fund.
52. In addition to these safeguards, we expect that several other
mechanisms in this Order will help create incentives for commercial
service providers to construct the necessary broadband facilities, so
that HCPs will rarely have to construct, own, and operate such
facilities themselves. For example, by allowing consortia to include
both rural and non-rural sites and to design networks flexibly, we
expect to encourage HCPs to form larger consortia that are more
attractive to commercial service providers, even if some new broadband
build-out is necessary to win the contract. Indeed, in the Pilot
Program, we observed that, thanks to consortium bidding, the majority
of Pilot projects attracted multiple bids from a range of different
service providers. In addition, as in the Pilot Program, the Healthcare
Connect Fund will provide support for upfront payments, multi-year
funding commitments, prepaid leases, and IRUs. These mechanisms enabled
many HCPs in the Pilot Program to meet their broadband connectivity
needs without having to construct and own their own broadband
facilities.
53. With the limitations and based on our experience with the Pilot
Program, we do not expect HCPs to choose to self-construct facilities
very often, and when they do, it will be because they have shown that
they have no other cost-effective option for obtaining needed
broadband. The self-construction option was rarely exercised in the
Pilot Program. Only two of 50 projects entirely self-constructed their
networks, even though the Pilot Program was originally conceived of as
a program supporting HCP construction of broadband networks. The six
projects that did self-construct some facilities used those funds
primarily for last-mile facilities. We believe the hybrid approach
adopted for the Healthcare Connect Fund will preserve the benefits of
HCP-owned infrastructure while minimizing the potential for
inefficient, duplicative construction of facilities.
54. In light of the safeguards we adopt, we reject arguments that
when HCPs construct their own networks, rather than purchasing
connectivity from existing commercial service providers, they remove
key anchor institutions from the public network, thereby increasing the
costs of providing service in rural areas and creating disincentives
for network investment in rural areas. Rather, allowing the self-
construction option should create incentives for service providers to
charge competitive prices for the services offered to anchor
institutions such as HCPs, which reduces burden on the rural health
care mechanism. Moreover, experience under the Pilot program suggests
that a self-construction option for HCPs can provide incentives for
commercial service providers to work cooperatively together with HCPs
to construct new broadband networks in rural areas, with each party
building a portion of the network, and providing excess capacity to the
other party under favorable terms, to the benefit of both the HCPs and
the greater community.
55. We are also unpersuaded by commenters that argue the Commission
lacks authority to provide universal service support for construction
of HCP-owned broadband facilities. As the Commission concluded in
authorizing the Pilot Program, section 254(h)(2) provides ample
authority for the Commission to provide universal service support for
HCP ``access to advanced telecommunications and information services,''
including by providing support to HCP-owned network facilities. Nothing
in the statute requires that such support be provided only for carrier-
provided services. Indeed, prohibiting support for HCP-owned
infrastructure when self-construction is the most cost-effective
option, would be contrary to the command in section 254(h)(2)(A) that
support be ``economically reasonable.''
56. The Montana Telecommunications Association (MTA), which
represents telecommunications providers in Montana, also argues that
funding HCP-owned infrastructure violates section 254(h)(3) of the
Communications Act, which provides that ``[t]elecommunications service
and network capacity provided to a public institutional
telecommunications user under this subsection may not be sold, resold,
or otherwise transferred by such user in consideration for money or any
other thing of value.'' MTA's argument is unconvincing. As the
Commission determined in connection with the Pilot Program, ``the
prohibition on resale does not prohibit for-profit entities, paying
their fair share of network costs, from participating in a selected
participant's network.'' It concluded that the resale provision is
``not implicated when for-profit entities pay their own costs and do
not receive discounts provided to eligible health care providers''
because only subsidized services and network capacity can be said to
have been ``provided * * * under this subsection.'' The protections we
adopt in this Order to ensure that non-eligible entities pay their fair
share of the cost of health care networks they participate in will help
ensure that this principle is satisfied. In 2008, the Bureau provided
guidance to the Pilot projects and USAC regarding excess capacity on
network facilities supported by universal service funds. We adopt
similar guidelines in this Order for the treatment of excess capacity
on HCP-owned facilities. Under those guidelines, the use of excess
capacity by non-HCP entities would not violate the restrictions against
sale, resale, or other transfer contained in section 254(h)(3) because
HCPs would retain ownership of the excess capacity and because payments
for that excess capacity may only be used to support sustainability of
the network. Allowing HCPs to own network facilities when it is the
most cost-effective option can yield better prices for the acquired
broadband services or facilities used in the health care networks, in
furtherance of the objectives of section 254(h)(2) and responsible
management of universal service funds. Thus, our interpretation of
section 254(h)(3) not only advances the universal service goals of
section 254(h)(2), but is consistent with the restrictions on subsidies
to ineligible entities incorporated in paragraphs (h)(3), (h)(4), and
(h)(7)(B) of section 254.
D. Health Care Provider Contribution
57. Discussion. We adopt a requirement that all HCPs receiving
support under the Healthcare Connect Fund contribute 35 percent towards
the cost of all items for which they seek support, including services,
equipment, and all expenses related to infrastructure and construction.
A flat, uniform percentage contribution is administratively simple,
predictable, and equitable, and has broad support in the record.
Requiring a significant contribution will provide incentives for HCPs
to choose the most cost-effective form of connectivity, design their
networks efficiently, and refrain from purchasing unneeded capacity.
Vendors
[[Page 13944]]
will also have an incentive to offer services at competitive prices,
knowing that HCPs will be unwilling to increase unnecessarily their
out-of-pocket expenses.
1. Use of a Uniform Contribution Percentage
58. We adopt a flat-percentage approach to calculating an HCP's
contribution under the Healthcare Connect Fund. This flat rate will
apply uniformly to all eligible expenses and all eligible HCP sites.
59. The use of a uniform participant contribution will facilitate
consortium applications and reduce administrative expenses, both for
participating HCPs and for the Fund Administrator. In the
Telecommunications Program, varying support levels have historically
discouraged potential applicants due to ``the complexity of * * *
identify[ing] the amount of program reimbursement associated with the
difference between rural and urban rates.'' A uniform participant
contribution will eliminate this complexity. Many commenters support a
flat-rate approach for this reason. Indeed, based on this record, we
anticipate that the relative administrative simplicity of the uniform
flat discount approach will help attract HCPs to the Healthcare Connect
Fund that may have declined to participate in the Telecommunications
Program. We expect that the use of a uniform flat discount will
therefore further all three of our program goals--increasing HCP access
to broadband, fostering health care networks, and maximizing cost-
effectiveness of the program.
60. A uniform HCP contribution requirement will also facilitate
efficient network design because support will not vary based on network
configuration. As the Bureau observed in the Pilot Evaluation, a
uniform HCP contribution requirement for both services and
infrastructure in the Pilot Program enabled consortia to design their
networks for maximum network efficiency because there was no negative
impact on funding from including nodes with a lesser discount level
within the network. A uniform percentage contribution requirement will
also ensure that HCPs make purchasing decisions based on cost-
effectiveness, regardless of the location or type of the HCP or the
services, equipment, or infrastructure purchased.
61. Adopting a uniform contribution requirement will also help
eligible HCPs to conduct better long-range planning for their broadband
needs and obtain better rates. A clear, uniform rate will allow HCPs to
better project anticipated support over a multi-year period, plan
accordingly for their broadband services, and as appropriate, enter
into multi-year contracts to take advantage of more favorable rates.
62. A flat-rate approach also provides HCPs with a strong incentive
to control the total cost of the broadband connectivity, as a
participating HCP will share in each dollar of increased costs and each
dollar of cost savings. In contrast, in the Telecommunications Program,
an HCP using the rural-urban differential pays only the urban rate, so
it has little incentive to control the overall cost of the service
(i.e. the rural rate). Any increases in the overall cost of the service
are borne directly by the Fund, which pays the difference between the
urban and rural rates.
63. Finally, a flat rate is consistent with the Act. In 2003, the
Commission concluded that a flat discount for the Internet Access
Program would be consistent with section 254(b)(5), which requires
support to be ``specific, sufficient, and predictable.'' We now
conclude that a flat discount for the Healthcare Connect Fund is also
consistent with section 254(b)(5).
64. A number of commenters suggest that the Commission adopt
different HCP contribution percentages depending on the identity of the
health care provider or based on other factors, and such an approach
was also recommended in the National Broadband Plan. The proffered
justification for a varying percentage contribution requirement is to
enable the targeting of scarce resources to those HCPs or geographic
areas most in need. Some commenters suggest that discount rates should
be increased for certain HCPs, such as HCPs located in Health
Professional Shortage Areas or Medically Underserved Areas, or for HCPs
that are in particular need of support to achieve ``meaningful use'' of
electronic health records under the Affordable Care Act. While
supporting providers in areas with health care professional shortages
and promoting achievement of meaningful use are both important public
policy goals, we are not persuaded at this time that providing a non-
uniform discount is necessary in order to accomplish these goals. We
note that the statutory categories of eligible HCPs in the Act already
capture many health care providers who serve underserved populations,
including rural health clinics, community and migrant health centers,
and community mental health centers.
2. 35 Percent HCP Contribution
65. Discussion. We find that requiring a 35 percent HCP
contribution appropriately balances the objectives of enhancing access
to advanced telecommunications and information services with ensuring
fiscal responsibility and maximizing the efficiency of the program. A
35 percent HCP contribution results in a 65 percent discount rate,
which represents a significant increase over the 25 percent discount
provided today for Internet access, and the 50 percent proposed for the
Broadband Services Program in the NPRM. We believe that a 35 percent
contribution appropriately balances the need to provide sufficient
incentives for HCPs to participate in broadband networks, while
simultaneously ensuring that they have a sufficient financial stake to
seek out the most cost-effective method of obtaining broadband
services.
66. We base our conclusion on a number of factors. First, many
state offices of rural health, which work most directly with rural
HCPs, believe that a 65 percent discount is required to provide a
``realistic incentive'' for many eligible rural HCPs to participate. A
65 percent discount rate is also similar to the average effective
discount rate in the Telecommunications Program, which is approximately
69 percent, excluding Alaska. The effective discount rate in the
Telecommunications Program provides a reasonable proxy for the discount
rate that will be sufficient to allow health care providers in rural
areas, which tend to have high broadband costs, to participate in the
program. The discount level we set also falls between the proposed
discount levels in the NPRM (50 percent for the Broadband Services
Program and 85 percent for the Health Infrastructure Program)--a
reasonable choice given the hybrid nature of the program we adopt. A 35
percent HCP contribution is also within the range of the match required
in other federal programs subsidizing broadband infrastructure. For
example, the BTOP program required a 20 percent match, while the U.S.
Department of Agriculture's Broadband Initiatives Program overall
provided an average of 58 percent of its funding in the form of grants,
with 32 percent of its funding in loans (which the recipients
ultimately repay), and 10 percent recipient match.
67. We also expect that the 65 percent discount will be sufficient
to induce many HCPs to participate in the Healthcare Connect Fund--both
those currently in the Telecommunications Program and those that have
not participated in that program before. We expect that at a 65 percent
discount, eligible HCPs participating in consortia in the Healthcare
Connect Fund will generally pay less ``out-of-pocket'' when
[[Page 13945]]
purchasing the higher bandwidth connections necessary to support
telehealth applications than they would pay as individual participants
in the Telecommunications Program. The Pilot Program showed that bulk
buying through consortia, coupled with competitive bidding, can reduce
the prices that HCPs pay for services and infrastructure through their
increased buying power.
68. Other attractive features of the Healthcare Connect Fund
include the lower administrative costs and the broader eligibility of
services and equipment, relative to the Telecommunications Program.
These factors may offset to some degree concerns regarding the size of
the contribution requirement from those who advocated a lower HCP
contribution. We also note that from a program efficiency perspective,
the better prices negotiated by consortia in the Pilot Program,
relative to the prices paid by Telecommunications Program participants,
will mean that USF dollars will go further in the new program,
particularly as HCPs demand the higher bandwidth and better service
quality needed for telehealth applications.
69. We recognize that a 35 percent contribution will be a
significant commitment for many health care providers, and that many
commenters argued for a lower contribution amount from HCPs. One of our
core objectives, however, is to ensure that HCPs have a financial stake
in the services and infrastructure they are purchasing, thereby
providing a strong incentive for cost-effective decision-making and
promoting the efficient use of universal service funding.
70. We acknowledge that some current Pilot participants have argued
that a discount rate lower than 85 percent will preclude new sites from
being added to existing networks and may even result in existing sites
dropping off the network. We nonetheless believe a cautious approach is
justified given that the new Healthcare Connect Fund will expand
eligibility and streamline the application process compared to the
existing Telecommunications Program, which we hope will increase the
number of participating HCPs. Even within the existing program, the
number of participating HCPs has steadily increased in recent years,
averaging just under 10 percent annual growth for the past five years.
Meanwhile the Pilot Program has attracted over 3,800 HCPs, the majority
of which were not previously participating in the RHC Program.
71. A 65 percent discount rate will help keep demand for the
overall health care universal service, including the Healthcare Connect
Fund, below the $400 million cap for the foreseeable future, even as
program participation expands. We estimate that there are approximately
10,000 eligible rural HCPs nationwide, of which approximately 54
percent (5,400) are participating in the RHC Telecommunications,
Internet Access, or Pilot Programs. If we assume that in five years (1)
the rural HCP participation rate increases from 54 percent to 75
percent, (2) the number of rural HCPs participating in the
Telecommunications Program does not significantly decrease, and (3) the
average annual support per HCP is $14,895 in the Healthcare Connect
Fund (including support for both recurring and non-recurring costs),
the projected size of the annual demand for funding (including non-
rural and rural HCPs) would be approximately $235 million. We will
continue to monitor the effect of the 35 percent contribution
requirement on participation in the program and on the USF, and stand
ready to adjust the contribution HCP requirement or establish
additional prioritization rules, should it prove necessary.
3. Limits on Eligible Sources of HCP Contribution
72. Consistent with the Pilot Program, we limit the sources for
HCPs' contribution (i.e., the non-discounted portion) to ensure that
participants pay their share of the supported expenses. Only funds from
an eligible source will apply towards a participant's required
contribution. In addition, consortium applicants are required to
identify with specificity their source of funding for their
contribution of eligible expenses in their submissions to USAC.
Requiring participants to pay their share helps ensure efficiency and
fiscal responsibility and helps prevent waste, fraud, and abuse.
73. Eligible sources include the applicant or eligible HCP
participants; state grants, funding, or appropriations; federal
funding, grants, loans, or appropriations except for other federal
universal service funding; Tribal government funding; and other grant
funding, including private grants. Any other source is not an eligible
source of funding towards the participant's required contribution.
Examples of ineligible sources include (but are not limited to) in-kind
or implied contributions; a local exchange carrier (LEC) or other
telecom carrier, utility, contractor, consultant, vendor or other
service provider; and for-profit entities. We stress that participants
that do not demonstrate that their contribution comes from an eligible
source or whose contribution is derived from an ineligible source will
be denied funding by USAC. Moreover, participants may not obtain any
portion of their contribution from other universal service support
program, such as the RHC Telecommunications Program.
74. We conclude that these limitations on eligible sources are
necessary to help safeguard against program manipulation and to help
prevent conflicts of interest or influence from vendors and for-profit
entities that may lead to waste, fraud, and abuse. Accordingly, we are
unconvinced by commenters that argue the eligible sources should
include in-kind contributions; contributions from carriers, network
service providers, or other vendors; and contributions from for-profit
entities. First, allowing in-kind or implied contributions would
substantially increase the complexity and burden associated with
administering the program. It would be difficult to accurately measure
the value of in-kind or implied contributions to ensure participants
are paying their share, and the costs and challenges associated with
policing in-kind and implied contributions would likely be substantial.
Second, allowing carrier, service provider, or other vendor
contributions would distort the competitive bidding process and reduce
HCPs' incentives to choose the most cost-effective bid, leading to
potential waste, fraud, and abuse.
75. Some commenters urge the Commission to allow for-profit
entities to pay an eligible HCPs contribution because ``[t]he benefits
of improved telehealth capabilities cannot be fully achieved if for-
profit health care services providers are not part of the health care
delivery network.'' This argument is based on a faulty premise. To be
clear, the prohibition against a for-profit HCP paying the contribution
of an eligible HCP does not prevent the for-profit HCP from
participating in one or more networks that receive Healthcare Connect
Fund support, as long as the for-profit pays its ``fair share.''
Rather, the prohibition helps avoid creating an incentive for
participating eligible HCPs to use support to benefit ineligible
entities (e.g., for-profit HCPs).
76. Future Revenues from Excess Capacity as Source of Participant
Contribution. Some consortia may find, after competitive bidding, that
construction of their own facilities is the most cost-effective option.
Due to the low additional cost of laying additional
[[Page 13946]]
fiber, some Pilot projects who chose the ``self-construction'' option
found that they were able to lay more fiber than needed for their
health care network and use revenues from the excess capacity as a
source for their 15 percent contribution. We conclude that under the
following limited circumstances, consortia in the Healthcare Connect
Fund may use future revenues from excess capacity as a source for their
35 percent match.
The consortium's RFP must solicit bids for both services
provided by third parties and for construction of HCP-owned facilities,
and must show that ``self-construction'' is the most cost-effective
option. Applicants are prohibited from including the ability to obtain
excess capacity as a criterion for selecting the most cost-effective
bid (e.g. applicants cannot accord a preference or award ``bonus
points'' based on a vendor's willingness to construct excess capacity).
The participant must pay the full amount of the additional
costs for excess capacity facilities that will not be part of the
supported health care network. The additional cost for excess capacity
facilities cannot be part of the participant's 35 percent contribution,
and cannot be funded by any health care universal service support
funds. The inclusion of excess capacity facilities cannot increase the
funded cost of the dedicated network in any way.
An eligible HCP (typically the consortium, although it may
be an individual HCP participating in the consortium) must retain
ownership of the excess capacity facilities. It may make the facilities
available to third parties only under an IRU or lease arrangement. The
lease or IRU between the participant and the third party must be an
arm's length transaction. To ensure that this is an arm's length
transaction, neither the vendor that installed the excess capacity
facilities, nor its affiliate, would be eligible to enter into an IRU
or lease with the participant.
The prepaid amount paid by other entities for use of the
excess capacity facilities (IRU or lease) must be placed in an escrow
account. The participant can then use the escrow account as an asset
that qualifies for the 35 percent contribution to the project.
All revenues from use of the excess capacity facilities by
the third party must be used for the project's 35 percent contribution
or for sustainability of the health care network supported by the
Healthcare Connect Fund. Such network costs may include administration,
equipment, software, legal fees, or other costs not covered by the
Healthcare Connect Fund, as long as they are relevant to sustaining the
network.
77. We delegate authority to the Bureau to specify additional
administrative requirements applicable to excess capacity, including
requirements to ensure that HCPs have appropriate incentives for
efficient spending (including, if appropriate, a minimum contribution
from funds other than revenues from excess capacity), and to protect
against potential waste, fraud, and abuse, as part of the
infrastructure component of the program.
IV. Eligible Services and Equipment
78. Overview. We discuss the services and equipment for which the
Healthcare Connect Fund will provide support. We also provide examples
of services and equipment that will not be supported. Section
254(h)(2)(A) of the Act directs the Commission to establish
competitively neutral rules to ``enhance * * * access to advanced
telecommunications and information services * * * for health care
providers.'' Pursuant to that authority, we will provide support for
services whether provided on a common carrier or private carriage
basis, reasonable and customary one-time installation charges for such
services, and network equipment necessary to make the broadband service
functional. For HCPs that apply as consortia, we will also provide
support for upfront charges associated with service provider deployment
of new or upgraded facilities to provide requested services, dark or
lit fiber leases or IRUs, and self-construction where demonstrated to
be the most cost-effective option. Requests for funding that involve
upfront support of more than $50,000, on average, per HCP will be
subject to certain limitations. In general, we find that this approach
will ensure the most efficient use of universal service funding.
79. Immediately below is a chart summarizing what services and
equipment are eligible for support under the Healthcare Connect Fund.
Eligible Services and Equipment
------------------------------------------------------------------------
INDIVIDUAL CONSORTIUM
Applicants Applicants
------------------------------------------------------------------------
Eligible Services (Sec. V.A.1)......... [check] [check]
Reasonable & Customary Installation [check] [check]
Charges (Sec. V.A.6) (<=$5,000
undiscounted cost)......................
Lit Fiber Lease (Sec. V.A.3)........... [check] [check]
Dark Fiber (Sec. V.A.3)
Recurring charges (lease of [check] [check]
fiber and/or lighting equipment,
recurring maintenance charges)......
Upfront payments for IRUs, No [check]
leases, equipment...................
Connections to Research & Education [check] [check]
Networks (Sec. V.A.4).................
HCP Connections Between Off-Site Data [check] [check]
Centers & Administrative Offices (Sec.
V.A.5)..................................
Upfront Charges for Deployment of New or No [check]
Upgraded Facilities (Sec. V.A.7)......
HCP-Constructed and Owned Facilities No [check]
(Sec. IV.D)...........................
Eligible Equipment (Sec. V.B)
Equipment necessary to make [check] [check]
broadband service functional........
Equipment necessary to No [check]
manage, control, or maintain
broadband service or dedicated
health care broadband network.......
------------------------------------------------------------------------
A. Eligible Services
80. We describe the services that will be eligible for support
under the Healthcare Connect Fund. We are guided, among other
considerations, by our statutory directive to enhance access to
``advanced telecommunications and information services'' in a
competitively neutral fashion. We conclude that providing flexibility
for HCPs to select a range of services, within certain defined limits,
and in conjunction with the competitive bidding requirements we adopt,
will maximize the impact of Fund dollars (and scarce HCP resources).
[[Page 13947]]
81. Specifically, we will provide support for advanced services
without limitation as to the type of technology or provider. We allow
HCPs to utilize both public and private networks, and different network
configurations (including dedicated connections between data centers
and administrative offices), and lease or purchase dark fiber,
depending on what is most cost-effective. We also provide support for
reasonable and customary installation charges (up to an undiscounted
cost of $5,000). For consortium applicants, we will also provide
support for upfront payments to facilitate build-out of facilities to
HCPs. We limit such funding to consortia because we anticipate that
group buying for such services and equipment will lead to lower prices
and better bids, resulting in more efficient use of Fund dollars.
82. We decline to adopt a minimum bandwidth requirement for the
supported services because many rural HCPs still lack access to higher
broadband speeds. We will, however, limit certain types of support to
connections that provide actual speeds of 1.5 Mbps (symmetrical) or
higher, in order to ensure that we do not invest in networks based on
outdated technology.
1. Definition of Eligible Services
83. Discussion. We adopt a rule to provide support for any service
that meets the following definition:
Any advanced telecommunications or information service that enables
HCPs to post their own data, interact with stored data, generate new
data, or communicate, by providing connectivity over private dedicated
networks or the public Internet for the provision of health information
technology.
The definition we adopt differs from the NPRM proposal in only two
respects. First, because we allow all HCPs to participate in consortia
and receive support (subject to the limitations on non-rural HCPs), we
have removed the language referring to ``rural'' HCPs. Second, we
delete the word ``broadband access'' from the definition originally
proposed, to make clear that eligible services include not only
broadband Internet access services, but also high-speed transmission
services offered on a common carrier or non-common carrier basis that
may not meet the definition of ``broadband'' that the Commission has
used in other contexts. This broad definition allows HCPs to choose
from a wide range of connectivity solutions, all of which enhance their
access to advanced services, based on their individual health care
broadband needs as available technology evolves over time; decisions
will be made in the marketplace without regard to regulatory
classification decisions of the connectivity solutions.
84. Public and Private Networks. We conclude that eligible HCPs may
receive support for services over both the public Internet and private
networks (i.e., dedicated connections that do not touch the public
Internet). As discussed in the NPRM, access to advanced
telecommunications and information services for health care delivery is
provided in a variety of ways today. For example, due to privacy laws
and EHR requirements, HCPs may find that it best suits their needs to
securely transmit health IT data to other HCPs over a private dedicated
connection. In other instances (e.g., communicating with patients via a
Web site), HCPs may need to utilize the public Internet, or it may
simply be more cost-effective to utilize Dedicated Internet Access
services for certain types of traffic. Several Pilot projects have
determined that a mix of both public and private networks best fits the
needs of their HCPs.
85. Network Configurations. Under the new rule, ``eligible
services'' may include last mile, middle mile, or backbone services, as
long as support for such services is requested and used by an eligible
HCP for eligible purposes in compliance with other program rules. HCPs
emphasize that they need the ability to control the design of their
networks, even if the network relies on leased services. Our Pilot
Program experience also indicates that HCPs are likely to tailor their
funding requests based on what services are already available. For
example, if a region already has a middle mile network suitable for
health care use, the applicant may choose to focus its funding request
on last mile facilities to connect to the middle mile or backbone
network. On the other hand, if there is no pre-existing middle mile
connection between the HCPs in the network, providers may choose to
seek funding to lease such capacity instead. Therefore, we find that
allowing flexibility in the network segments supported will best
leverage prior investments by allowing maximum use of existing
infrastructure.
86. In the NPRM, the Commission proposed that the Broadband
Services Program would subsidize costs for any advanced
telecommunications and information services that provide ``point-to-
point broadband connectivity.'' In response to the NPRM, some
commenters expressed concern that only traditional point-to-point
circuits might be eligible for funding, and such a limitation could
preclude use of more cost-effective point-to-multipoint, IP-based, or
cloud-based architectures. Based on our full consideration of the
record, we conclude that support under the Healthcare Connect Fund will
not be limited to ``point-to-point'' services. Rather, any advanced
service is eligible, and HCPs may request support for any type of
network configuration that complies with program rules (e.g., is the
most cost-effective). This approach comports with the statutory
directive that the Commission enhance access to advanced services in a
manner that is ``competitively neutral.''
87. Technology. Consistent with the statutory requirement that our
rules be competitively neutral, we conclude that eligible services may
be provided over any available technology, whether wireline (copper,
fiber, or any other medium), wireless, or satellite. We also find that
a competitively neutral approach will best ensure that HCPs can make
cost-effective use of Fund support. We provide additional guidance
regarding fiber leases, and minimum bandwidth and service quality
requirements.
2. Minimum Bandwidth and Service Quality Requirements
88. Discussion. We will not impose minimum bandwidth and service
quality requirements for the Healthcare Connect Fund, based on the
record in this proceeding. Commenters agree that HCPs need certain
minimum levels of reliability, redundancy, and quality of service, but
they note that the exact requirement may vary depending on the
application, and that not all HCPs will have access to services that
provide a specified level of reliability and quality. While our goal is
to encourage HCPs to obtain broadband connections at the speeds
recommended in the National Broadband Plan, the record indicates that
in some areas of the country, HCPs face limited options in obtaining
speeds of 4 Mbps or above. Commenters note that in areas where higher
speed connections are not available, telemedicine networks have
nevertheless been able to operate with connections at speeds less than
4 Mbps. Commenters also state that some of the smallest rural HCPs
simply may not be able to afford higher bandwidth connections, even
when such connections are available. These commenters express concern
that a minimum bandwidth requirement could result in HCPs either (1)
being forced to buy bandwidths that are not cost-effective for their
circumstances; or (2) being unable to receive health care
[[Page 13948]]
universal service discounts (due to the cost of the required minimum-
bandwidth connection). We do not wish to prevent the neediest HCPs from
receiving discounts, especially if they are able to address their
connectivity needs in the near term by utilizing a connection below a
defined minimum. After reviewing the record, we conclude that it would
be difficult to set a minimum speed requirement at this time that would
not have the unintended effect of potentially precluding some HCPs from
obtaining connectivity currently appropriate for their individual
needs. We therefore conclude it would be premature now to set a minimum
threshold speed for connections that are supported in the Healthcare
Connect Fund.
89. We will continue to provide support in the Healthcare Connect
Fund for services that have been historically supported through the
Internet Access Program, including DSL, cable modem, and other similar
forms of Internet access. We expect recipients to migrate to services
over time that deliver higher capabilities. We do, however, adopt one
limitation designed to ensure that the focus of the program remains on
advancing access to the bandwidths that increasingly will be needed for
health care purposes. No upfront payments will be eligible for funding
for services that deliver less than 1.5 Mbps symmetrical (i.e. less
than T-1 speeds), except for reasonable installation costs under
$5,000. We have chosen the 1.5 Mbps threshold because HCPs have
indicated that they can successfully implement telemedicine services
over a 1.5 Mbps connection, if that is the only practical option.
Therefore, we conclude that 1.5 Mbps is the minimum threshold at which
HCPs should be able to obtain support for upfront costs for build-out
or infrastructure upgrades.
90. We note that the Pilot Program allowed most participants to
obtain speeds of 4 Mbps or above, and we expect that the reforms
adopted in this Order will generally allow HCPs to obtain access to the
bandwidths recommended in the National Broadband Plan. We agree with
the National Rural Health Association and the California Telehealth
Network that we should benchmark actual speeds obtained under the
Healthcare Connect Fund to determine how well the program is meeting
HCPs' broadband needs. Therefore, we will also require participants to
report basic information regarding bandwidth associated with the
services obtained with universal service discounts. To enable HCPs to
have the information necessary to file such reports, we will require
all service providers participating in the Healthcare Connect Fund to
disclose the required metrics to their HCP customers.
3. Dark and Lit Fiber
91. Discussion. Service providers today provide numerous broadband
services over fiber that the service provider manages and has ``lit''
(i.e., the service provider has furnished the modulating equipment and
activated the fiber). HCPs are currently able to receive support for
telecommunications services and Internet access services provided over
such fiber, as are schools and libraries in the E-rate program. The
Healthcare Connect Fund will continue to support broadband services
provided over service provider-lit fiber. The NPRM proposal, however,
raised two additional issues: (1) The eligibility of dark fiber, and
(2) support for costs associated with dark or lit fiber leases,
including upfront payments associated with leases or indefeasible right
of use (IRU) arrangements for lit or dark fiber.
92. Eligibility of dark fiber. We conclude that eligible HCPs may
receive support for ``dark'' fiber where the customer, not the service
provider, provides the modulating electronics. In the NPRM, the
Commission noted that under such an approach, applicants would, for
instance, be able to lease dark fiber that may be owned by state,
regional or local governmental entities, when that is the most cost-
effective solution to their connectivity needs. Consistent with our
practice in the E-rate program, however, we will only provide support
for dark fiber when it is ``lit'' and is actually being used by the
HCP; we will not provide support for dark fiber that remains unlit.
93. Consistent with Commission precedent, we find that dark fiber
is a ``service'' that enhances access to advanced telecommunications
and information services consistent with section 254(h)(2)(A) of the
Act. As in the E-rate program, we conclude that supporting dark fiber
provides an additional competitive option to help HCPs obtain broadband
in the most cost-effective manner available in the marketplace. HCPs
generally support making dark fiber eligible. For example, IRHN states
that the varying broadband environments in rural areas throughout the
country need to be ``mined'' to find the most cost-effective solution,
including existing fiber infrastructure that can be brought into use by
HCPs seeking dark fiber. Commenters also agree that making dark fiber
eligible will allow the cost-effective leveraging of existing resources
and investments, including state, regional, and local networks.
94. As the Commission concluded in the E-rate context, we are not
persuaded by arguments that entities who are not telecommunications
providers, such as HCPs, ``have a poor track record making dark fiber
facilities viable for their services.'' While dark fiber will not be an
appropriate solution for all HCPs, Pilot projects have demonstrated
that they can successfully incorporate dark fiber solutions into a
regional or statewide health care network. We are also not persuaded by
the argument that dark fiber solutions may not be cost-effective. HCPs
will be required to undergo competitive bidding, and our actions merely
ensure that HCPs have an additional option to consider during that
process. If service providers can provide comparable, less expensive
lit fiber alternatives, we anticipate that such providers will bid to
provide services to HCPs, who are required to select the most cost-
effective option. As the Commission found in the Schools and Libraries
Sixth Report and Order, 75 FR 75393, December 3, 2010, if more
providers bid to provide services, the resulting competition should
better ensure that applicants--and the Fund--receive the best price for
the most bandwidth.
95. In order to further ensure that dark fiber is the most cost-
effective solution, however, we will limit support for dark fiber in
two ways. First, requests for proposals (RFPs) that allow for dark
fiber solutions must also solicit proposals to provide the needed
services over lit fiber over a time period comparable to the duration
of the dark fiber lease or IRU. Second, if an applicant intends to
request support for equipment and maintenance costs associated with
lighting and operating dark fiber, it must include such elements in the
same RFP as the dark fiber so that USAC can review all costs associated
with the fiber when determining whether the applicant chose the most
cost-effective bid.
96. We are not persuaded that allowing a HCP to purchase dark fiber
from state, regional, or local government entities will negate the
HCP's ability to ``maintain a fair and open competitive bidding
environment'' if the HCP is ``linked'' to the governmental entity in
question. We adopt requirements that prohibit potential service
providers, including government entities, from also acting as either a
Consortium Leader or consultant or providing other types of specified
assistance to HCPs in the competitive bidding process. Allowing HCPs to
lease dark fiber should increase competition among fiber providers and
[[Page 13949]]
ensure a more robust bidding process. HCPs still must demonstrate that
the bid they choose is the most cost-effective. As the Commission
stated in the E-rate context, we believe our competitive bidding rules
will protect against the possibility of waste, fraud, or abuse in that
context. To the extent there are violations of the competitive bidding
rules, such as sharing of inside information during the competitive
bidding process, USAC will adjust funding commitments or recover any
disbursed funds through its normal process. As the Commission concluded
in the E-rate context, our RHC rules and requirements, including the
competitive bidding rules, apply to all applicants and service
providers, irrespective of the entity providing the fiber network.
97. Fiber leases and IRUs. As proposed in the NPRM, eligible HCPs
may receive support for recurring costs associated with leases or IRUs
of dark (i.e., provided without modulating equipment and unactivated)
or lit fiber. We conclude that HCPs may not use fiber leases and IRUs
to acquire unneeded fiber strands or warehouse excess dark fiber
strands for future use. If a HCP chooses to lease (or obtain an IRU)
for ``dark'' (i.e., unactivated) fiber, recurring charges under the
lease or IRU are eligible only for fiber strands that have been lit
within the funding year, and only once the fiber strand has been lit.
98. Eligible HCPs applying as consortia may also receive support
for upfront charges associated with fiber leases or IRUs, subject to
the limitations applicable to all upfront charges. An IRU or lease for
dark fiber typically requires a large upfront payment, even if no new
construction is required. In some cases, however, service providers may
deploy new fiber facilities to serve HCPs under the lease or IRU, and
may seek to recover all of part of those costs through non-recurring
charges (sometimes called ``special construction charges''). Such
``build-out'' costs are eligible for support. Consistent with the
general rule we adopt, we will provide support for build-out costs from
an off-premises fiber network to the service provider demarcation
point. We decline to provide support for such charges after the service
provider demarcation point, consistent with the Commission's current
policy of not supporting internal connections for HCPs.
99. In the E-rate program, fiber must be lit within the funding
year for non-recurring charges to be eligible. We adopt this
requirement in the Healthcare Connect Fund. HCPs, however, unlike
schools, do not have a summer vacation period during which construction
can take place without disrupting normal operations. Furthermore, in
some rural areas, weather conditions can cause unavoidable delays in
construction. Therefore, we will allow applicants to receive up to a
one-year extension to light fiber if they provide documentation to USAC
that construction was unavoidably delayed due to weather or other
reasons.
100. Maintenance Costs. We also find that HCPs may receive support
for maintenance costs associated with leases of dark or lit fiber. Only
HCPs applying as consortia may receive support for upfront payments for
maintenance costs.
101. Equipment. We will provide support for equipment necessary to
make a broadband service functional. Consistent with that standard, we
find that HCPs may receive support for the modulating electronics and
other equipment necessary to light dark fiber. If equipment is leased
for a recurring monthly (or annual) fee, HCPs may receive support for
those recurring costs. HCPs applying as consortia may also receive
support for upfront payments associated with purchasing equipment,
subject to the limitations.
102. Eligible Providers. The Commission has previously authorized
schools and libraries to lease dark fiber, and authorizes schools and
libraries to lease any fiber connectivity (not just dark fiber) from
any entity, including state, municipal or regional research networks
and utility companies. We will allow HCPs to lease fiber connectivity
from any provider.
4. Connections to Internet2 or National LambdaRail
103. Discussion. ``Broadband Services'' in this context includes
backbone services. We find that the membership fees charged by
Internet2 and NLR are part of the cost of obtaining access to the
backbone services provided by these organizations, and thus are
eligible for support as recurring costs for broadband services. We
delegate authority to the Wireline Competition Bureau to designate as
an eligible expense, upon request, membership fees for other non-profit
research and education networks similar to Internet2 and NLR. We
further find that broadband services required to connect to Internet2
or NLR should be eligible for support under the Healthcare Connect
Fund, as well as any broadband services obtained directly from
Internet2 or NLR. Commenters generally support providing support for
both membership fees and for the broadband services required to connect
health care networks to Internet2 and NLR. In addition, some commenters
believe that these networks may provide a level of service not
available from commercial providers in certain situations.
104. We conclude, however, that it is appropriate to require
participants to seek competitive bids from NLR and Internet2, or any
other research and education network, through our standard competitive
bidding process. We recognize and anticipate that in some cases,
Internet2 or NLR services may be the most cost-effective solution to
meet a HCP's needs. As noted by commenters, these networks can provide
many benefits, and the most cost-effective solution for HCP needs may
come from Internet2 or NLR. There may be instances, however, under
which a more cost-effective solution is available from a commercial
provider, or a non-profit provider other than Internet2 or NLR. Many
commenters opposed the Commission's proposal to exempt National
LambdaRail and Internet2 from competitive bidding, arguing, among other
things, that such an exemption would be anti-competitive by
disadvantaging other telecommunications providers. A competitive
bidding requirement that applies equally to all participants will
ensure that HCPs can consider possible options from all interested
service providers. Because applicants must already engage in
competitive bidding for all other services, we do not believe it would
be overly burdensome to require applicants to also include Internet2 or
NLR in their competitive bidding process. While we encourage all
applicants to fully consider the benefits of connecting to non-profit
research and education networks such as Internet2 and NLR, we emphasize
that it is not a requirement to connect to Internet2 or NLR.
5. Off-Site Data Centers and Off-Site Administrative Offices
105. Discussion. Based on our experience with the RHC
Telecommunications and Pilot Programs, we adopt a rule that provides
support under the Healthcare Connect Fund for the connections and
network equipment associated with off-site data centers and off-site
administrative offices used by eligible HCPs for their health care
purposes, subject to the conditions and restrictions. There has been
significant change in how HCPs use information technology in the
delivery of health care since the Commission originally adopted the
rules for the Telecommunications Program that do not provide support
for off-site data centers and administrative
[[Page 13950]]
offices. This new rule appropriately recognizes ``best practices'' in
health care facility and infrastructure design and the way in which
HCPs increasingly accomplish their data storage and transmission
requirements. It also enables HCPs to use efficient network
connections, rather than having to re-route traffic unnecessarily in
order to obtain support. Many commenters pointed out the operational
and network efficiency gains from this approach.
106. For purposes of the rule we adopt, an ``off-site
administrative office'' is a facility that does not provide hands-on
delivery of patient care, but performs administrative support functions
that are critical to the provision of clinical care by eligible HCPs.
Similarly, an ``off-site data center'' is a facility that serves as a
centralized repository for the storage, management, and dissemination
of an eligible HCP's computer systems, associated components, and data.
Under the new rule, we expand the connections that are supported for
already eligible HCPs to include connections to these locations when
purchased by HCPs in the Healthcare Connect Fund.
107. Specifically, subject to the conditions and restrictions, we
provide support in the Healthcare Connect Fund for connections used by
eligible HCPs: (i) Between eligible HCP sites and off-site data centers
or off-site administrative offices, (ii) between two off-site data
centers, (iii) between two off-site administrative offices, (iv)
between an off-site data center and the public Internet or another
network, and (v) between an off-site administrative office and an off-
site data center or the public Internet or another network. We also
expand the eligibility of network equipment to provide support for such
equipment when located at an off-site administrative office or an off-
site data center. In addition, we establish that support for such
connections and/or network equipment is available both to single HCP
applicants or consortium applicants under the Healthcare Connect Fund.
Finally, we include support for connections at such off-site locations
even if they are not owned or controlled by the HCP.
108. We adopt this rule with certain conditions and restrictions to
ensure the funding is used to support only eligible public or non-
profit HCPs and to protect the program from potential waste, fraud, and
abuse. First, the connections and network equipment must be used solely
for health care purposes. Second, the connections and network equipment
must be purchased by an eligible HCP or a public or non-profit health
care system that owns and operates eligible HCP sites. Third, if
traffic associated with one or more ineligible HCP sites is carried by
the supported connection and/or network equipment, the ineligible HCP
sites must allocate the cost of that connection and/or equipment
between eligible and ineligible sites, consistent with the ``fair
share'' principles. These conditions and requirements should fully
address the concerns of those commenters who fear that these additional
supported connections may be used long-term for non-health care
purposes.
109. As commenters point out, HCPs often find increased
efficiencies by locating administrative offices and data centers apart
from the site where patient care is provided. This is especially true
for groups of HCPs, including smaller HCPs, who often share
administrative offices and/or data centers, to save money and pool
resources. Furthermore, it does not make practical sense to distinguish
administrative offices and/or data centers that are located off-site
but otherwise perform the same functions as on-site facilities, and
which require the same broadband connectivity to function effectively.
While off-site administrative offices and off-site data centers do not
provide ``hands on'' delivery of patient care, they often perform
support functions that are critical to the provision of clinical care
by HCPs. For example, administrative offices may coordinate patient
admissions and discharges, ensure quality control and patient safety,
and maintain the security and completeness of patients' medical
records. Administrative offices also perform ministerial tasks, such as
billing and collection, claims processing, and regulation compliance.
Without an administrative office capable of carrying out these
functions, an eligible HCP may not be able to successfully provide
patient care.
110. Similarly, off-site data centers often perform functions, such
as housing electronic medical records, which are critical to the
delivery of health care at eligible HCP sites. For example, the Utah
Telehealth Network uses a primary data center in West Valley City, Utah
with a backup secondary data center in Ogden, Utah to deliver
approximately 2,500 clinical and financial applications to eligible HCP
sites. North Carolina Telehealth Network plans to use data center
connectivity to help public health agencies comply with ``meaningful
use'' of EHRs.
111. By providing support for the additional connections (e.g.,
those connections beyond the direct connection to an eligible HCP site)
and network equipment associated with off-site administrative offices
and off-site data-centers, eligible HCPs will be able to design their
networks more efficiently. For example, the use of remote cloud-based
EHR systems has become a ``best practice,'' especially for smaller
HCPs, for whom that solution is often more affordable. In such cases, a
direct connection from the HCP off-site administrative office and/or
off-site data center to the network hosting the remote cloud-based EHR
system enables the more efficient flow of network traffic. In
comparison, if these additional connections and network equipment were
not supported, an HCP may be forced to route traffic from its off-site
administrative office or off-site data center that is destined for the
remote EHR system back through the eligible HCP site, potentially
resulting in substantial inefficiency in the use of funding.
112. After reviewing the record, we conclude that requiring that an
eligible HCP to have majority ownership or control over an off-site
administrative office or data center in order for it to be eligible for
support would impose an unnecessary burden on HCPs seeking to use
broadband effectively to deliver health care to their patients.
Providing support for eligible expenses associated with off-site
administrative offices and off-site data centers was widely endorsed by
commenters, but commenters noted that there is a wide variation in the
way that HCPs structure their physical facilities. For example, HHS
explains that an HCP often has no ownership or control of the off-site
data center hosting its health care related equipment and servers. NCTN
suggests that the Commission identify ``eligible functions'' rather
than evaluating ownership. The adopted rule addresses these concerns
and provides eligible HCPs with the flexibility to use off-site data
centers and administrative offices irrespective of ownership or
control, subject to the conditions and requirements.
113. The adopted approach also accommodates a variety of
arrangements for the operation of off-site administrative offices and/
or off-site data centers. For instance, one commenter was concerned
that the NPRM proposal unreasonably excluded support for the off-site
administrative offices and off-site data centers owned by a public or
non-profit health care system rather than by one or more eligible HCP
sites. Under the rule we adopt, the network equipment and connections
associated with these off-site facilities owned by public or non-profit
health care systems are eligible for
[[Page 13951]]
support to the extent they satisfy the conditions and restrictions. Any
network equipment and connections shared among a system's eligible and
ineligible HCP sites may only receive support to the extent that the
expenses are cost allocated according to the guidelines. We believe
this approach is consistent with the intent of the statute and best
balances the objectives of fiscal responsibility and increasing access
to broadband connectivity to eligible HCPs.
6. Reasonable and Customary Installation Charges up to $5,000
114. Discussion. We will provide support for reasonable and
customary installation charges for broadband services, up to an
undiscounted cost of $5,000 (i.e., up to $3,250 in support) per HCP
location. Commenters generally agree with providing support for
installation charges. ACS suggests, however, that in order to preserve
funds, the Commission should limit the scope of this funding to only
the most medically underserved areas (i.e., those with the highest HPSA
score). We conclude, however, that the better course is to limit the
amount of installation charges per eligible HCP location. Because our
experience with the RHC Telecommunications and Pilot Programs indicates
that undiscounted installation charges are typically under $5,000 per
location, we conclude that setting a cap at this level will ensure that
as many HCPs can obtain the benefits of broadband connectivity as
possible. HCPs who are subject to installation charges higher than this
amount may seek upfront support for eligible services or equipment, if
those charges independently qualify as eligible expenses (e.g., upfront
charges for service provider deployment of facilities, costs for HCP-
constructed and owned infrastructure, network equipment, etc.).
7. Upfront Charges for Service Provider Deployment of New or Upgraded
Facilities To Serve Eligible Health Care Providers
115. Discussion. Eligible consortia may obtain support for upfront
charges for service provider deployment of new or upgraded facilities
to serve eligible HCP sites that are applying as part of the
consortium, including (but not limited to) fiber facilities. Although
the Pilot Program has helped thousands of HCPs to obtain broadband
services, many HCPs in more remote, rural areas still lack access to
broadband connections that effectively meet their needs. The Pilot
Program demonstrated that many HCPs prefer not to own the physical
facilities comprising their networks, but can still assemble a
dedicated health care network if funds are available for service
provider construction and upgrades where broadband facilities are not
already available. In a number of instances, Pilot projects found that
support for upfront charges for deployment of service provider
facilities allowed them to find the most cost-effective services to
meet their needs while obtaining the benefits of connecting to existing
networks.
116. Commenters recommend that the Healthcare Connect Fund support
service provider build-out charges, arguing that will result in cost-
effective pricing, which in turn reduces the cost to the Fund. This
solution may be particularly useful when a health care network covers a
large region served by multiple vendors, because the network can
maximize the use of existing infrastructure and seek funding for build-
out only where necessary. For example, OHN's multi-vendor leased line
network utilized 151.06 miles of existing infrastructure, and
stimulated 86.41 miles of new middle-mile connectivity.
117. We adopt a rule to provide support for service provider
deployment of facilities up to the ``demarcation point,'' which is the
boundary between facilities owned or controlled by the service
provider, and facilities owned or controlled by the customer. In other
words, the demarcation point is the point at which responsibility for
the connection is ``handed off'' to the customer. Thus, charges for
``curb-to-building installation'' or ``on site wiring'' are eligible if
they are used to extend service provider facilities to the point where
such facilities meet customer-owned terminal equipment or wiring. If
the additional build-out is not owned or controlled by the service
provider, it will not be eligible as service provider deployment costs.
In contrast, consistent with current RHC program rules, ``inside
wiring'' and ``internal connections'' are not eligible for support.
118. Because upfront charges for build-out costs can be
significant, we limit eligibility for such upfront charges to
consortium applications. Our experience of over a decade with the RHC
Telecommunications Program suggests that individual HCPs are unlikely
to attract multiple bids, which would constrain prices. As HCPs
themselves acknowledge, and as we learned in the Pilot Program,
consortium applications are more likely to attract multiple bidders,
due to the more significant dollar amounts associated with larger
projects. Furthermore, we anticipate that individual HCPs will benefit
from participating in a consortium in numerous ways, including pooling
administrative resources (e.g. for the competitive bidding process),
and increased opportunities for cooperation with other HCPs within
their state or region. Consortia seeking funding for build-out costs
must apply and undergo the competitive bidding process through the
consortium application process. As in the Pilot Program, an RFP that
includes a build-out component need not be limited to such costs (for
example, some HCPs included in the RFP may not need any additional
build-out to be served, but rather only need discounts on recurring
services). We expect HCPs to select a proposal that includes carrier
build-out costs only if that proposal is the most cost-effective
option. In addition, upfront charges for build-out are subject to the
limitations.
B. Eligible Equipment
119. Discussion. We will provide support for network equipment
necessary to make a broadband service functional in conjunction with
providing support for the broadband service. In addition, for
consortium applicants, we will provide support for equipment necessary
to manage, control, or maintain a broadband service or a dedicated
health care broadband network. Equipment support is not available for
networks that are not dedicated to health care. We conclude that
providing support for such equipment is important to advancing our
goals of increasing access to broadband for HCPs and fostering the
development and maintenance of broadband health care networks, for
three reasons.
120. First, providing support for equipment will help HCPs to
upgrade to higher bandwidth services. USAC states that Pilot Program
funding for equipment allowed such HCPs to upgrade bandwidth without
restrictions based on what their existing equipment would allow. We
note that small rural hospitals and clinics often lack the IT expertise
to know that they will need new equipment to use new or upgraded
broadband connections, and finding funding to pay for the equipment can
cause delays.
121. Second, support for the equipment necessary to operate and
manage dedicated broadband health care networks can facilitate
efficient network design. USAC states that urban centers, where most
specialists are located, are natural ``hubs'' for telemedicine
networks, but the cost of equipment required to serve as a hub
[[Page 13952]]
can be a barrier for these facilities to serve as hubs. In the Pilot
Program, funding network equipment eliminated this barrier to entry.
OHN explains that connecting to urban hubs can also reduce the need for
rural sites to manage firewalls at their locations, which allows the
rural sites to reduce equipment costs while adhering to security
industry best practices and standards.
122. Finally, support for network equipment can also help HCPs
ensure that their broadband connections maintain the necessary
reliability and quality of service, which can be challenging even if
the HCP has a service level agreement (SLA) with its telecommunications
provider. Support for network equipment has enabled some Pilot projects
to set up Network Operations Centers (NOCs) that can manage service
quality and security in a cost-effective manner for all of the HCPs on
the network. The NOC can proactively monitor all circuits and contact
both the service provider and HCP whenever the status of a link drops
below the conditions specified in the SLA. This allows proactive
monitoring to find and deal with adverse network conditions ``in real
time and before they have a chance to impact the delivery of patient
care.'' A HCP-operated NOC in some cases may be more cost-effective for
larger networks (e.g., statewide, or even multi-state networks),
particularly when the NOC may be monitoring and managing circuits from
multiple vendors.
123. We do not express a preference for single- or multi-vendor
networks here, nor do we suggest that it is always more efficient for a
dedicated health broadband network to have its own NOC. For example, a
network that chooses to obtain a single-vendor solution and obtain NOC
service from that vendor may receive support for the NOC service as a
broadband service, if that solution is the most cost-effective. Our
actions simply facilitate the ability of a consortium to operate its
own NOC, if that is the most cost-effective option.
124. Eligible equipment costs include the following:
Equipment that terminates a carrier's or other provider's
transmission facility and any router/switch that is directly connected
to either the facility or the terminating equipment. This includes
equipment required to light dark fiber, or equipment necessary to
connect dedicated health care broadband networks or individual HCPs to
middle mile or backbone networks;
Computers, including servers, and related hardware (e.g.,
printers, scanners, laptops) that are used exclusively for network
management;
Software used for network management, maintenance, or
other network operations, and development of software that supports
network management, maintenance, and other network operations;
Costs of engineering, furnishing (i.e., as delivered from
the manufacturer), and installing network equipment; and
Equipment that is a necessary part of HCP-owned
facilities.
125. Support for network equipment is limited to equipment
purchased or leased by an eligible HCP that is used for health care
purposes. We do not authorize support, for example, for network
equipment utilized by telecommunications providers in the ordinary
course of business to operate and manage networks they use to provide
services to a broader class of enterprise customers, even if eligible
HCPs are utilizing such services. Non-recurring costs for equipment
purchases are subject to the limitations on all upfront charges.
C. Ineligible Costs
126. Services and equipment eligible for support under the
Healthcare Connect Fund are limited to those listed in this Order. For
administrative clarity, however, we also list the following specific
examples of costs that are not supported.
1. Equipment or Services Not Directly Associated With Broadband
Services
127. Discussion. In keeping with our goals to increase access to
broadband, foster development of broadband health care networks, and
maximize cost-effectiveness, we provide support under the Healthcare
Connect Fund for the cost of equipment or services necessary to make a
broadband service functional, or to manage, control, or maintain a
broadband service or a dedicated health care broadband network. Certain
equipment (e.g., switches, routers, and the like) are necessary to make
the broadband service functional--conceptually, these are ``inputs''
into the broadband service. Other equipment or services (e.g.,
telemedicine carts, or videoconferencing equipment, or even a simple
health care-related application) ``ride over'' the broadband
connection--i.e., in those cases, the broadband connectivity is an
``input'' to making the equipment or service functional. In this latter
case, the equipment or service is not eligible for support. This
distinction is consistent with that utilized in the Pilot Program.
128. In particular, costs associated with general computing,
software, applications, and Internet content development are not
supported, including the following:
Computers, including servers, and related hardware (e.g.,
printers, scanners, laptops), (unless used exclusively for network
management, maintenance, or other network operations);
End user wireless devices, such as smartphones and
tablets;
Software (unless used for network management, maintenance,
or other network operations);
Software development (excluding development of software
that supports network management, maintenance, and other network
operations);
Helpdesk equipment and related software, or services
(unless used exclusively in support of eligible services or equipment);
Web hosting;
Web site portal development;
Video/audio/web conferencing equipment or services; and
Continuous power source.
129. Furthermore, costs associated with medical equipment (hardware
and software), and other general HCP expenses are not supported. For
example, the following is not supported:
Clinical or medical equipment;
Telemedicine equipment, applications, and software;
Training for use of telemedicine equipment;
Electronic medical records systems; and
Electronic records management and expenses.
2. Inside Wiring/Internal Connections
130. Discussion. The American Telemedicine Association requests
that the Commission provide support for ``internal wiring.'' The
Healthcare Connect Fund will provide support for service provider
build-out to the customer demarcation point, and for network equipment
necessary to make a broadband connection functional. We conclude that
support is better targeted at this time toward providing broadband
connectivity to the HCP rather than internal networks within HCP
premises. The record does not indicate that small HCPs (such as
clinics) likely will incur large expenses for inside wiring or internal
connections in order to utilize their broadband connectivity. For
larger institutions such as hospitals, however, the cost of providing
discounts for internal connections could be substantial. Furthermore,
as the Commission has acknowledged, it can be difficult to distinguish
from ``internal
[[Page 13953]]
connections'' and ineligible computers or other peripheral equipment.
In the E-rate context, the Commission relied on the congressional
directive that the Fund provide connectivity all the way to classrooms.
There is no similar statutory directive with respect to HCPs. For these
reasons, we decline to provide support for inside wiring or internal
connections under the Healthcare Connect Fund.
3. Administrative Expenses
131. The NPRM proposed to provide limited support for
administrative expenses under the proposed Health Infrastructure
Program, but not for the proposed Broadband Services Program. The
Commission acknowledged that some parties had argued that planning and
designing network infrastructure deployment can place a burden on HCPs.
The Commission also recognized, however, that ``the primary focus of
the program should be to fund infrastructure and not project
administration.''
132. Discussion. Consistent with the objectives of streamlining
oversight of the program and ensuring fiscal responsibility, we decline
to fund administrative expenses associated with participation in the
Healthcare Connect Fund. We are taking significant steps to streamline
and simplify the application process, which will lessen the time and
resources needed to participate in the program. Moreover, because we
expect that most HCPs in the new program will choose to purchase
services rather than construct and own facilities, the rationale for
funding of administrative expenses is lessened.
133. The Commission has recognized that administrative expenses of
organizing networks and applying for universal service support can be
substantial. In response, we are taking steps throughout this Order to
minimize the administrative burden of participating in the Healthcare
Connect Fund. First, we put in place a streamlined application process
that facilitates consortium applications, which should enable HCPs to
file many fewer applications and to share the administrative costs of
all aspects of participation in the program. Second, we adopt a uniform
flat-rate discount to simplify the calculation of support, particularly
when compared with the urban/rural differential approach of the
Telecommunications Program. Third, we enable multi-year funding
commitments, long-term arrangements (e.g., IRUs and pre-paid leases),
and the use of existing MSAs. Fourth, we expand eligibility to include
all HCPs, with rules in place to ensure a reasonable balance of rural
and non-rural sites within health care networks. In the Pilot Program,
HCPs that did not meet our long-standing definition of ``rural'' HCPs
frequently provided administrative and technical support to the
consortia, thereby reducing the burden on individual HCPs. Finally, we
eliminate the competitive bidding requirement for applicants seeking
support for $10,000 or less of total undiscounted eligible expenses for
a single year. We find that the combination of these reforms, among
others, should significantly reduce the administrative burden on
participants in terms of the complexity, volume, and frequency of
filings, thereby addressing concerns raised by some commenters
regarding the administrative burdens of participating in the program.
In contrast, if we were to provide direct support for administrative
expenses, it would necessitate additional and more complex application
requirements, guidelines, and other administrative controls to protect
such funding from waste, fraud, and abuse. This would significantly
increase the administrative burden on USAC and on applicants as well.
134. We recognize that many commenters support the provision of
support for administrative expenses. Some commenters suggest that the
funding of reasonable administrative expenses is necessary to ensure
participation in the program. However, experience with the existing
programs suggests that HCPs will participate even without the program
funding administrative expenses. Neither the Telecommunications nor
Pilot Programs fund administrative expenses, but both programs have
significant participation. The number of participating HCPs in the
Telecommunications Program has grown by nearly 10 percent year-over-
year for the past five years. Similarly, the Pilot Program has
experienced substantial and sustained interest with just over 3,800 HCP
sites receiving funding commitments. We expect that the participation
in the RHC support mechanism will only increase with the implementation
of the Healthcare Connect Fund and its more streamlined administrative
process.
135. In addition, commenters have not explained how we could
readily distinguish reasonable from unreasonable administrative
expenses and ensure fiscal responsibility and cost effective use of the
finite support available for eligible HCPs. Without a clear standard,
there would be increased complexity and cost in policing the
reimbursement of these expenses to guard against waste, fraud, and
abuse. By reducing the administrative burden, rather than directly
funding administrative expenses, we seek to facilitate increased
participation while still ensuring fiscal responsibility and the
efficient use of scarce universal service funding.
136. Consistent with the approach taken by the Commission in the
Pilot Program Selection Order, 73 FR 4573, January 25, 2008, we
conclude that administrative expenses will not be eligible for support
under the Healthcare Connect Fund. Ineligible expenses include, but are
not limited to, the following expenses:
Personnel costs (including salaries and fringe benefits),
except for personnel costs in a consortium application that directly
relate to designing, engineering, installing, constructing, and
managing the dedicated broadband network. Ineligible costs of this
category include, for example, personnel to perform program management
and coordination, program administration, and marketing.
Travel costs, except for travel costs that are reasonable
and necessary for network design or deployment and that are
specifically identified and justified as part of a competitive bid for
a construction project.
Legal costs.
Training, except for basic training or instruction
directly related to and required for broadband network installation and
associated network operations. For example, costs for end-user
training, such as training of HCP personnel in the use of telemedicine
applications, are ineligible.
Program administration or technical coordination (e.g.,
preparing application materials, obtaining letters of agency, preparing
request for proposals, negotiating with vendors, reviewing bids, and
working with USAC) that involves anything other than the design,
engineering, operations, installation, or construction of the network.
Administration and marketing costs (e.g., administrative
costs; supplies and materials (except as part of network installation/
construction); marketing studies, marketing activities, or outreach to
potential network members; evaluation and feedback studies).
Billing expenses (e.g., expense that service providers may
charge for allocating costs to each HCP in a network).
Helpdesk expenses (e.g., equipment and related software,
or services); technical support services that provide more than basic
maintenance.
[[Page 13954]]
4. Cost Allocation for Ineligible Entities, Sites, Services, or
Equipment
137. Discussion. Costs associated with ineligible sites or
ineligible components of services or equipment are ineligible for
support, except as otherwise specified in this Order. Ineligible sites,
however, may participate in consortia and dedicated broadband health
networks supported through this program, as long as they pay a fair
share of the undiscounted costs associated with the consortium's
funding request. Similarly, an applicant is only eligible to receive
support for the eligible components of a service or a piece of
equipment.
138. There are a wide variety of contexts in which it may be more
cost-effective for eligible HCPs to share costs with ineligible
entities, or to procure a service or piece of equipment that includes
both eligible and ineligible components. The Commission has allowed
such cost-sharing in the past in the RHC Telecommunications Program and
the Pilot Program, and we will allow it in the Healthcare Connect Fund.
Such permissible cost-sharing includes the following:
Sharing with ineligible entities. In the case of statewide
or regional health care networks, it may be useful for health care
purposes to have both eligible and ineligible HCPs participate in the
same network, and share certain backbone or network equipment costs
between all participants in the network. Having both eligible and
ineligible entities contribute to shared costs may lead to lower
overall costs for the eligible HCPs, and enables HCPs to benefit from
connections to a greater number of other HCPs, including for-profit
HCPs that are not eligible for funding under section 254 but
nevertheless play an important role in the overall health care system.
The Commission has previously found that the resale prohibition does
not prevent Pilot Program networks from ``sharing'' facilities with
for-profit entities that pay their ``fair share'' of network costs
(i.e., that do not receive discounts provided to eligible HCPs, but
instead pay their full pro rata undiscounted share as determined by the
portion of network capacity used).
Allocating cost between eligible and ineligible
components. A product or service provided under a single price may
contain both eligible and ineligible components. For example, a service
provider may provide a broadband internet access service (eligible)
and, as a component of that service, include web hosting (ineligible).
While it may be simpler to buy the eligible and ineligible components
separately, in some instances it is more cost-effective for HCPs (and
the Fund) to buy the components as a single product or service. In such
cases, applicants may need guidance on if, and how, they should
allocate costs between the eligible and ineligible components.
Excess capacity in fiber construction. In the NPRM, the
Commission noted that it is customary to build excess capacity when
deploying high-capacity fiber networks, because the cost of adding
additional fiber to the conduit is minimal. In the Pilot Program, the
Commission found that a Pilot participant could not ``sell'' network
capacity supported by Pilot funding, but could ``share'' network
capacity with ineligible entities paying a fair share of network costs
attributable to the portion of network capacity used. Consortia that
seek support to construct and own their own fiber networks may wish to
put in extra fiber strands during construction and make the excess
capacity available to other users.
Part-time eligible HCPs. Under current rules, entities
that provide eligible health care services on a part-time basis are
allowed to receive prorated support commensurate with their provision
of eligible health care services. For example, if a doctor operates a
non-profit rural health clinic on a non-profit basis in a rural
community one day per week or during evenings in the local community
center, that community center is eligible to receive prorated support,
because it serves as a ``rural health clinic'' on a part-time basis.
139. We conclude that eligible HCP sites may share costs with
ineligible sites, as long as the ineligible sites pay a ``fair share''
of the costs. We use ``fair share'' here as a term of art that, in
general, refers to the price or cost that an ineligible site must pay
to participate in a supported network, or share supported services and
equipment, with an eligible HCP. To determine fair share, an applicant
is required to apply the following principles:
First, if the service provider charges a separate and
independent price for each site, an ineligible site must pay the full
undiscounted price. For example, if a consortium has negotiated certain
rates that are applicable to all sites within the consortium, an
ineligible HCP site must pay the full price without receiving a USF
discount. Similarly, if the consortium has received a quote from the
service provider for the individualized costs of serving each member of
the consortium, an ineligible member must pay the full cost without
receiving a USF discount.
Second, if there is no separate and independent price for
each site, the applicant must prorate the undiscounted price for the
``shared'' facility (including any supported maintenance and operating
costs) between eligible and ineligible sites on a proportional fully-
distributed basis, and the applicant may seek support for only the
portion attributable to the eligible sites. Applicants must make this
cost allocation using a method that is based on objective criteria and
reasonably reflects the eligible usage of the shared facility. For
example, a network may choose to divide the undiscounted price of the
shared facility equally among all member sites, and require ineligible
sites to pay their full share of the price. Other possible metrics,
depending on the services utilized, may include time of use, number of
uses, amount of capacity used, or number of fiber strands. The
applicant bears the burden of demonstrating the reasonableness of the
allocation method chosen.
140. Because we define eligible services and equipment for the
Healthcare Connect Fund broadly in this Order, we do not anticipate
that applicants will encounter many situations in which they purchase
or lease a single service or piece of equipment that includes both
eligible and ineligible components. Nonetheless, we also provide
guidelines herein for allocating costs when a single service or piece
of equipment includes an ineligible component. Applicants seeking
support for a service or equipment that includes an ineligible
component must also explicitly request in their RFP that service
providers should also provide pricing for a comparable service or piece
of equipment that includes only eligible components. If the selected
provider also submits a price for the eligible component on a stand-
alone basis, the support amount is capped at the stand-alone price of
the eligible component. If the service provider does not offer the
eligible component on a stand-alone basis, the full price of the entire
service or piece of equipment must be taken into account, without
regard to the value of the ineligible components, when determining the
most cost-effective bid.
141. We delegate authority to the Bureau to issue further
guidelines, as needed, to interpret the cost allocation methods or
provide guidance on how to apply the methods to particular factual
situations.
142. Applicants must submit a written description of their
allocation method(s) to USAC with their funding requests.
[[Page 13955]]
Allocations must be consistent with the principles. If ineligible
entities participate in a network, the allocation method must be
memorialized in writing, such as a formal agreement among network
members, a master services contract, or for smaller consortia, a letter
signed and dated by all (or each) ineligible entity and the Consortium
Leader. For audit purposes, applicants must retain any documentation
supporting their cost allocations for a period consistent with the
recordkeeping rules.
D. Limitations on Upfront Payments
143. Discussion. Support for upfront payments can play an important
part in ensuring that HCPs can efficiently obtain the broadband
connections they need in a cost-effective manner. We therefore adopt a
rule providing support for upfront payments, but include certain
limitations to ensure the most cost-effective use of Fund support and
to deter waste, fraud, and abuse. The limitations in this section apply
to all non-recurring costs, other than reasonable and customary
installation charges of up to $5,000. USAC reports that in both the
``Primary'' (Telecommunications and Internet Access and Pilot Programs,
service providers do not typically assess ``installation charges'' in
excess of $5,000 if no new build-out is required to provide a service
(i.e., the ``installation charge'' is entirely for the cost of
``turning on'' services over existing facilities). Therefore, we find
that it is appropriate to treat installation charges of up to $5,000 as
``ordinary'' installation charges, and apply limitations only to
charges above that amount.
144. The limitations are as follows. First, upfront payments
associated with services providing a bandwidth of less than 1.5 Mbps
(symmetrical) are not eligible for support. By their nature, upfront
payments are intended to amortize the cost of new service deployment or
installation that will be enjoyed for years in the future; in other
words, HCPs should continue to reap the benefits from the upfront
payments beyond the funding year in which support is requested. We do
not believe it is an efficient use of the Healthcare Connect Fund to
support upfront payments for speeds which may increasingly become
inadequate for HCP needs in the near future.
145. Second, we limit support for upfront payments to consortium
applications, to create greater incentives for HCPs to join together in
consortia and thereby obtain the pricing benefits of group purchasing
and economies of scale, as demonstrated in the Pilot Program.
146. Third, we impose a $150 million annual limitation on total
commitments for upfront payments and multi-year commitments. We do so
in order to limit major fluctuations in Fund demand, although we
anticipate that the $150 million should be sufficient to meet demand
for upfront payments given the other limitations we impose. Fourth, we
will require that consortia prorate support requested for upfront
payments over at least three years if, on average, more than $50,000 in
upfront payments is requested per HCP site in the consortium. Fifth,
upfront payments must be part of a multi-year contract. At $50,000 per
site, $50 million per year would provide upfront support to 1,000 HCP
sites. Given that total participation in the Pilot Program since 2006
has been approximately 3,900 providers to date, we believe this is an
adequate level of funding to meet HCP needs in the immediate future; we
can revisit this conclusion if experience under the new program proves
otherwise.
147. We do not adopt a per-provider cap for upfront payments at
this time. Although most HCPs in the Pilot Program were able to obtain
any necessary build-out at a cost below $50,000, a small percentage of
HCPs incurred very high build-out costs. Requiring these HCPs to apply
as part of consortia should help them to obtain service at a lower
cost; however, adopting a per-provider cap could have the unintended
consequence of excluding the highest-cost HCPs from such consortia.
Although we do not adopt a per-provider cap, we note that because the
HCP will be responsible for paying a substantial contribution towards
the cost of services received (i.e., 35 percent), we anticipate that
consortia will have every incentive to obtain the lowest prices
possible.
148. Finally, consortia that seek certain types of upfront payments
will be subject to additional reporting requirements and other
safeguards to ensure effective use of support.
E. Eligible Service Providers
149. Discussion. We conclude that eligible service providers for
the Healthcare Connect Fund shall include any provider of equipment,
facilities, or services that are eligible for support under the
program, provided that the HCP selects the most cost-effective option
to meet its health care needs. We reiterate that eligible services may
be provided through any available technology, consistent with our
competitive neutrality policy. Commenters generally support a broad
definition of eligible service providers, and state that allowing a
wide variety of vendors will provide more competing options and thus
will be more cost-effective. We note that the Pilot Program, which
allowed similar flexibility, had over 120 different vendors win
contracts to provide services.
150. We also adopt the NPRM proposal to allow eligible HCPs to
receive support for the lease of dark or lit fiber from any provider,
including dark fiber that may be owned by state, regional or local
governmental entities, and conclude that eligible vendors are not
limited to telecommunications carriers or other types of entities
historically regulated by the Commission. Both non-profit (e.g.,
Internet2 and NLR) and commercial service providers are eligible to
participate. We will not allow a state government, private sector, or
other non-profit entity to simultaneously act as a Consortium Leader/
consultant and potential service provider, in order to preserve the
integrity of the competitive bidding process. We emphasize that HCPs
must select the most cost-effective bid, and are under no obligation to
select a particular vendor merely due to its ``non-profit'' status or
its receipt of other federal funding (e.g., BTOP grants, or Connect
America Fund support), although we anticipate that providers who
receive other federal funding may be in a position to provide services
to HCPs at competitive rates.
V. Funding Process
151. USAC shall, working with the Bureau, develop the necessary
application, competitive bidding, contractual, and reporting
requirements for participants to implement the requirements to ensure
the objectives of the program are met.
A. Pre-Application Steps
1. Creation of Consortia
152. The Healthcare Connect Fund will provide support for both
individual applications and consortium applications. With the reforms
we adopt, we encourage eligible entities to seek funding from the new
program by forming consortia with other HCPs in order to obtain higher
speed and better quality broadband and to recognize efficiencies and
lower costs. For purposes of Healthcare Connect Fund, a ``consortium''
is a group of multiple HCP sites that choose to request support as a
single entity.
[[Page 13956]]
a. Designation of a Consortium Leader
153. Discussion. Each consortium seeking support from the
Healthcare Connect Fund must identify an entity or organization that
will be the lead entity (the ``Consortium Leader''). As a preliminary
matter, we note that the consortium and the Consortium Leader can be
the same legal entity, but are not required to be. For example, the
consortium may prefer to designate one of its HCP members as the
Consortium Leader or an ineligible state or Tribal government agency or
non-profit organization.
154. The consortium need not be a legal entity, although the
consortium members may wish to form as a legal entity for a number of
reasons. For example, if the consortium itself is to be legally and
financially responsible for activities supported by the Fund (i.e.
serve as the ``Consortium Leader''), the consortium should constitute
itself as a legal entity. In addition, the consortium may wish to
constitute itself as a legally recognized entity to simplify
contracting with vendors (i.e. if the consortium is not a legal entity,
each individual participant may need to sign an individual contract
with the service provider, or one of the consortium members may need to
enter into a master contract on behalf of all of the other members).
155. The Consortium Leader may be the consortium itself (if it is
constituted as a legal entity), an eligible HCP participating in the
consortium, or an ineligible state organization, public sector
(governmental) entity (including a Tribal government entity), or non-
profit entity. An eligible HCP may serve as the Consortium Leader and
simultaneously receive support. If an ineligible entity serves as the
Consortium Leader, however, the ineligible entity is prohibited from
receiving support from the Healthcare Connect Fund, and the full value
of any discounts, funding, or other program benefits secured by the
ineligible entity must be passed on to the consortium members that are
eligible HCPs.
156. Certain state organizations, public sector entities (including
Tribal government entities), or non-profit entities may wish to perform
multiple roles on behalf of consortia, including (1) serving as lead
entities; (2) providing consulting assistance to consortia; and/or (3)
serving as a service provider (vendor) of eligible services or
equipment for which consortia are seeking support. Potential conflict
of interest issues arise in the competitive bidding process, however,
if an entity serves a dual role as both Consortium Leader/consultant
and potential service provider. The potential conflict is that the
selection of the service provider may not be fair and open but may, in
fact, provide an unfair advantage to the lead entity as service
provider.
157. For that reason, we conclude that state organizations, public
sector entities, or non-profit entities may serve as lead entities or
provide consulting assistance to consortia if they do not participate
as potential vendors during the competitive bidding process.
Conversely, if such entities wish to provide eligible services or
equipment to consortia, they may not simultaneously serve as project
leaders, and may not provide consulting or other expertise to the
consortium to assist it in developing its request for services. This
restriction does not prohibit eligible HCPs from conducting general due
diligence to determine what services are needed and to prepare for an
RFP. Part of such due diligence may involve reaching out to known
service providers--including state or other public sector entities--
that serve the area to determine what services are available. Nor does
the restriction prevent a service provider, once selected through a
fair and open competitive bidding process, from assisting an eligible
HCP with implementing the purchased services.
158. We recognize that certain state governmental entities, for
example, may be large enough to institute an organizational and
functional separation between staff acting as service providers and
staff providing application assistance. Consistent with current
practice in the E-rate program, we will allow state organizations,
public sector entities, or non-profit entities, if they so choose, to
obtain an exemption from this prohibition by making a showing to USAC
that they have set up an organizational and functional separation. This
exemption, however, must be obtained before the consortium begins
preparing its request for services. Examples of appropriate
documentation for such a showing include organizational flow charts,
budgetary codes, and supervisory administration.
159. The Consortium Leader's responsibilities include the
following:
Legal and Financial Responsibility for Supported
Activities. The Consortium Leader is the legally and financially
responsible entity for the conduct of activities supported by the Fund.
By default, the Consortium Leader will be the responsible entity if
audits or other investigations by USAC or the Commission reveal
violations of the Act or our rules by the consortium, with the
individual consortium members being jointly and severally liable if the
Consortium Leader dissolves, files for bankruptcy, or otherwise fails
to meet its obligations. We recognize that in some instances, a
consortium may wish to have a Consortium Leader serve only in an
administrative capacity and to have the consortium itself, or its
individual members, retain ultimate legal and financial responsibility.
Except for the responsibilities, we will allow consortia to have
flexibility to allocate legal and financial responsibility as they see
fit, provided that this allocation is memorialized in a formal written
agreement between the affected parties (i.e. the Consortium Leader, and
the consortium as a whole and/or its individual members), and the
written agreement is submitted to USAC for approval with or prior to
the Request for Services (Form 461). The agreement should clearly
identify the party(ies) responsible for repayment if USAC is required,
at a later date, to recover disbursements to the consortium due to
violations of program rules. USAC is directed to provide, in writing by
the expiration of the 28-day competitive bidding period, either
approval or an explanation as to why the agreement does not provide
sufficient clarity on who will be responsible for repayment. If USAC
provides such comments, it shall provide the Consortium Leader with a
minimum of 14 calendar days to respond. USAC is prohibited from issuing
a funding commitment to the consortium until the Consortium Leader
either takes on the default position as responsible entity, or provides
an agreement that adequately identifies alternative responsible
party(ies).
Point of Contact for the FCC and USAC. The Consortium
Leader is responsible for designating an individual who will be the
``Project Coordinator'' and serve as the point of contact with the
Commission and USAC for all matters related to the consortium. The
Consortium Leader is responsible for responding to Commission and USAC
inquiries on behalf of the consortium members throughout the
application, funding, invoicing, and post-invoicing period.
Typical Applicant Functions, Including Forms and
Certifications. The Consortium Leader is responsible for submitting
program forms and required documentation and ensuring that all
information and certifications submitted are true and correct. This
responsibility may not contractually be allocated to another entity.
The Consortium Leader may be asked during an audit or other inquiry to
provide documentation that supports information and certifications
[[Page 13957]]
provided. The Consortium Leader must also collect and retain a Letter
of Agency (LOA) from each member.
Competitive Bidding and Cost Allocation. The Consortium
Leader is responsible for ensuring that the competitive bidding process
is fair and open and otherwise complies with Commission requirements.
If costs are shared by both eligible and ineligible entities, the
Consortium Leader must also ensure that costs are allocated in a manner
that ensures that only eligible entities receive the benefit of program
discounts.
Invoicing. The Consortium Leader is responsible for the
invoicing process, including certifying that the participant
contribution has been paid and that the invoice is accurate.
Recordkeeping, Site Visits, and Audits. The Consortium
Leader is also responsible for compliance with the Commission's
recordkeeping requirements, and coordinating site visits and audits for
all consortium members.
b. Participating Health Care Providers
160. Next, the consortium should identify all HCPs who will
participate. The Consortium Leader will need to provide this
information to USAC in order to request program support. We intend for
eligible HCPs to have broad flexibility in organizing consortia
according to their health care needs. For example, a consortium may be
a pre-existing organization formed for reasons unrelated to universal
service support (e.g. a regional telemedicine network, a statewide
health information exchange), or a group newly formed for the purpose
of applying for Healthcare Connect Fund support. Consortium members may
be affiliated (formally or informally) or unaffiliated. Ineligible HCPs
may participate in consortia, although they are not eligible to receive
support and must pay full cost (fair share) for all services received
through the consortium.
c. Letters of Agency
161. Discussion. The letter of agency requirement helps ensure that
participating entities are eligible to receive support, and that the
HCPs have given the project leaders the necessary authorization to act
on their behalf. After considering our experience in the Pilot Program,
and reviewing the comments filed regarding letters of agency, we
conclude that each Consortium Leader must secure the necessary
authorizations through an LOA from each HCP seeking to participate in
the applicant's network that is independent of the Consortium Leader.
LOAs are not required for those participating HCP sites that are owned
or otherwise controlled by the Consortium Leader (and thus are not
``independent''). Similarly, one LOA is sufficient for multiple HCP
sites that are owned or otherwise controlled by a single consortium
member.
162. We adopt an approach that creates a two-step process of LOAs:
in the first step, a Consortium Leader must obtain LOAs from members to
seek bids for services, and in the second step, the Leader must obtain
LOAs to apply for funding from the program. This two-step approach
addresses an issue that arose in the Pilot Program, where some
prospective member HCPs were reluctant to provide LOAs that would
commit them to participate in a consortium network before they knew the
pricing of services from prospective bidders. Under the Healthcare
Connect Fund, we require that each Consortium Leader secure
authorization, the required certifications, and any supporting
documentation from each consortium member (i) to submit the request for
services on its behalf (Form 461) and prepare and post the request for
proposal on behalf of the member for purposes of the Healthcare Connect
Fund and (ii) to submit the funding request (Form 462) and manage
invoicing and payments, on behalf of the member. The first
authorization is required prior to the submission of the request for
services (Form 461), while the second authorization is only required
prior to the submission of the request for funding (Form 462). An
applicant may either secure both required authorizations upfront or
secure each authorization as needed. Consortium Leaders may also obtain
authorization, the required certifications, and any supporting
documentation from each member to submit Form 460, if needed, to
certify the member's eligibility to participate in the Healthcare
Connect Fund. If the Consortium Leader does not obtain such
authorization for a given member, that member will have to submit its
own Form 460. In addition, we delegate authority to the Bureau to
develop model language for the LOA required for each authorization.
163. In addition to the necessary authorizations, the LOA must
include, at a minimum, the name of the entity filing the application
(i.e., lead applicant or consortium leader); name of the entity
authorizing the filing of the application (i.e., the participating HCP/
consortium member); the physical location of the HCP/consortium member
site(s); the relationship of each site seeking support to the lead
entity filing the application; the specific timeframe the LOA covers;
the signature, title and contact information (including phone number,
mailing address, and email address) of an official who is authorized to
act on behalf of the HCP/consortium member; signature date; and the
type of services covered by the LOA. For HCPs located on Tribal lands,
if the health care facility is a contract facility that is run solely
by a Tribal Nation, the appropriate Tribal leader, such as the Tribal
Chairperson, President, or Governor, or Chief, shall also sign the LOA,
unless the health care responsibilities have been duly delegated to
another Tribal government representative. In all instances, electronic
signatures are permissible.
164. The approach we adopt addresses many of the concerns expressed
by commenters, while still ensuring applicants have the necessary
authority to act on behalf of their members. Some commenters correctly
point out that under the Pilot Program, an HCP was often reluctant or
unable to execute an LOA that required the HCP to agree to participate
in a network before accurate pricing was available. Other commenters
stressed that requiring LOAs as part of the Form 465 submission was a
net benefit because it enabled the project to ``vet'' the eligibility
of interested HCPs at the outset of the application process. We
conclude that the adopted approach provides flexibility to allow
consortium applicants to tailor the LOA process to meet the needs of
their members, within the necessary constraints.
2. Determination of Health Care Provider Eligibility
165. Discussion. Consistent with other measures we adopt to improve
the efficiency and operation of the Healthcare Connect Fund, we
institute a new process for obtaining faster eligibility determinations
from USAC by permitting HCPs to submit Form 460 at any time during the
funding year to certify to the eligibility of particular sites. By
separating the eligibility determination from the competitive bidding
process, we provide HCPs with the option of receiving an eligibility
determination before they move forward with preparing an application
for funding. HCPs who have previously received an eligibility
determination from USAC (i.e. HCPs who already participate in the
existing rural health care programs) are not required to submit a Form
460 prior to submission of a Form 461. All HCPs, however, are required
to submit an updated Form 460 within 30 days of a material change, such
as a change in the HCP's name, site
[[Page 13958]]
location, contact information or eligible entity type, or for non-rural
hospitals, an increase in the number of licensed patient beds such that
the hospital goes from having fewer than 400 licensed beds to 400 or
more licensed beds.
166. For each HCP listed, applicants will be required to provide
the HCP's address and contact information, identify the eligible HCP
type, provide an address for each physical location that will receive
supported connectivity, provide a brief explanation for why the HCP is
eligible under the Act and the Commission's rules and orders, and
certify to the accuracy of this information under penalty of perjury.
Consortium leaders should obtain supporting information and/or
documents to support eligibility for each HCP when they collect LOAs;
leaders also may be asked for this information during an audit or
investigation. USAC should notify each applicant of its determination
(or whether it needs additional time to process the form) within 30
days of receipt of Form 460. We caution applicants that it is their
obligation to submit accurate information and certifications regarding
their eligibility. Because HCP eligibility is limited by the Act, the
Commission does not have discretion to waive eligibility requirements,
and must recover any support erroneously disbursed to ineligible
entities. We direct USAC to assign a unique identifying number to each
HCP location in order to facilitate tracking of the location throughout
the application process.
3. Technology Planning
167. Discussion. We encourage all applicants to carefully evaluate
their connectivity needs before submitting an application. We decline
at this time to require applicants in the Healthcare Connect Fund to
submit technology plans with their requests for service, but we may re-
evaluate this decision in the future based on experience with the new
program. Our goal is reduce administrative burdens and delay associated
with participating in the Healthcare Connect Fund, especially for the
HCPs with the fewest resources and greatest need to participate.
168. The record indicates that HCPs are a diverse group with a
diverse set of needs. Our intent, consistent with precedent, is to
allow HCPs to identify their specific broadband needs, which, together
with the competitive bidding requirements and the required HCP 35
percent contribution, will help ensure that universal services funds
are used most cost-effectively. We recognize that the amount of
planning required will vary depending on a number of factors, such as
the HCP's size and planned utilization of health IT, and that the
amount of IT expertise and other resources available for formal
planning will vary widely between different types of HCPs. In the
planning process, applicants may wish to consider questions such as the
following:
What applications do we plan to use over our broadband
connection (e.g. exchange of EHRs, videoconferencing, image transfers,
and other forms of telehealth or telemedicine)? How do these
applications fit into our overall strategy to improve care and/or
generate cost savings? How many users do we need to support for each
application?
What broadband services do we need to support the planned
applications and users?
Do we have a plan to train our staff to use the
applications?
Do we have the necessary IT resources to deploy the
broadband services and applications?
Have we considered the benefits and drawbacks of short-
term versus multi-year contracts (e.g. cost savings in long-term
contracts versus potential decreases in prices, technology advances,
and termination fees)?
How will we pay for the undiscounted portion of supported
services and equipment, and any unsupported costs?
Should we consider joining with other HCPs to apply as a
consortium? If a consortium, should we include other HCPs?
What resources are available to help us?
169. We encourage prospective applicants to consult available
resources, including those previously published by the Commission and
resources available through HHS, in conducting their technology
planning.
4. Preparation for Competitive Bidding
170. Discussion. The Commission has defined ``cost-effective'' for
purposes of the existing RHC support mechanism as ``the method that
costs the least after consideration of the features, quality of
transmission, reliability, and other factors that the HCP deems
relevant to * * * choosing a method of providing the required health
care services.'' The Commission does not require HCPs to use the
lowest-cost technology because factors other than cost, such as
reliability and quality, may be relevant to fulfill their health care
needs. Furthermore, initially higher cost options may prove to be lower
in the long-run, by providing useful benefits to telemedicine in terms
of future medical and technological developments and maintenance.
Therefore, unlike the E-rate program, the RHC program does not require
participants to consider price as the primary factor in selecting a
service provider. Instead, applicants identify the factors relevant for
health care purposes, and then select the lowest price bid that
satisfies those considerations. We conclude that continuing this
approach is appropriate for the Healthcare Connect Fund.
171. Applicants must develop appropriate evaluation criteria for
selecting the winning bid before submitting a request for services to
USAC to initiate competitive bidding. The evaluation criteria should be
based on the Commission's definition of ``cost-effective,'' and include
the most important criteria needed to provide health care, as
determined by the applicant. For smaller applicants (e.g. those
requesting support for recurring monthly costs for a single T-1 line),
criteria such as bandwidth, quality of transmission, reliability,
previous experience with the service provider, and technical support
are likely to be sufficient. For more complex projects (including
projects that involve designing or constructing a new network or
building upon an existing network), additional relevant non-cost
factors may include prior experience, including past performance;
personnel qualifications, including technical excellence; management
capability, including solicitation compliance; and environmental
objectives (if appropriate).
172. Typically, an applicant will develop a scoring matrix, or a
list of weighted evaluation criteria, that it will use in evaluating
bids. Once the applicant has developed its evaluation criteria, it
should assign a weight to each in order of importance. No single factor
may receive a weight that is greater than price. For example, if the
HCP assigns a weight of 40 percent to cost, other factors must receive
a weight of 40 percent or less individually (with the total weight
equaling 100%). Each bid received should be scored against the
determined criteria, ensuring they are all evaluated equally. All
applicants who are not exempt from competitive bidding will be required
to submit bid evaluation documentation with their funding requests.
5. Source(s) for Undiscounted Portion of Costs
173. Although applicants are not required to submit documentation
regarding sources for the undiscounted portion of costs until they
complete the competitive bidding process, they should begin identifying
possible
[[Page 13959]]
sources for their 35 percent as early as possible. This is especially
important for larger consortia that intend to undertake high-dollar
projects. In the Pilot Program, many projects experienced delays due,
in part, to difficulty in obtaining the required contribution.
6. FCC Registration Number (FRN)
174. All applicants must obtain FCC registration numbers (FRNs), if
they do not have one already. An FRN is a 10-digit number that is
assigned to a business or individual registering with the FCC, and is
used to uniquely identify the business or individual in all of its
transactions with the FCC. Obtaining an FRN is a quick, online process
that can typically be completed in a manner of minutes through the
Commission's Web site. Consortium applicants may obtain a single FRN
for the consortium as a whole, if desired (i.e. instead of requiring
each participating HCP to obtain a separate FRN).
B. Competitive Bidding
175. Discussion. Competitive bidding remains a fundamental pillar
supporting our goals for the Healthcare Connect Fund, as it will allow
HCPs to obtain lower rates (thereby increasing access to broadband) and
increase program efficiency. The outlines of the competitive bidding
process for the new program will remain the same as our existing
programs: All HCPs will submit a request for services for posting by
USAC, wait at least 28 days before selecting a service provider, and
select the most cost-effective bid. In addition, in some circumstances,
applicants will be required to prepare a formal request for proposals
as well.
176. While competitive bidding is essential to the program, we
acknowledge that it is not without administrative costs to participants
and to the Fund. We conclude that in three situations, exempting
funding requests from competitive bidding in the Healthcare Connect
Fund will strike a common-sense balance between efficient use of
program funds and reducing regulatory costs. First, based on our
experience with the Telecommunications and Internet Access Programs, we
find that it will be more administratively efficient to exempt
applicants seeking support for relatively small amounts. The threshold
for this exemption is $10,000 or less in total annual undiscounted
costs (which, with a 35 percent applicant contribution, results in a
maximum of $6,500 annually in Fund support). Second, if an applicant is
purchasing services from a master service agreement negotiated by a
governmental entity on its behalf, and the master service agreement was
awarded pursuant to applicable federal, state, Tribal, or local
competitive bidding processes, the applicant is not required to re-
undergo competitive bidding. Third, we conclude that applicants who
wish to request support under the Healthcare Connect Fund while
utilizing contracts previously endorsed by USAC (Master Services
Agreements under the Pilot Program or the Healthcare Connect Fund, or
evergreen contracts in any of the health care programs, or master
contracts the E-rate program) may do so without undergoing additional
competitive bidding, as long as they do not request duplicative support
for the same service and otherwise comply with all program
requirements. In addition, consistent with current RHC program
policies, applicants who receive evergreen status or multi-year
commitments under the Healthcare Connect Fund are exempt from
competitive bidding for the duration of the contract. Applicants who
are exempt from competitive bidding can proceed directly to submitting
a funding commitment request.
1. ``Fair and Open'' Competitive Bidding Process
177. Discussion. Unless they qualify for one of the competitive
bidding exemptions, all entities participating in the Healthcare
Connect Fund must conduct a fair and open competitive bidding process
prior to submitting a request for funding Form 462. Although it is not
possible to anticipate all possible factual circumstances that may
arise during the process, we set forth here three basic principles and
some specific guidance that should help applicants comply with this
requirement.
178. First, service providers who intend to bid should not also
simultaneously help the HCP choose a winning bidder. More specifically,
service providers who submit bids are prohibited from (1) preparing,
signing or submitting an applicant's Form 461 documents; (2) serving as
Consortium Leaders or other points of contact on behalf of applicants;
(3) being involved in setting bid evaluation criteria; or (4)
participating in the bid evaluation or vendor selection process (except
in their role as potential vendors). Consultants, other third-party
experts, or applicant employees who have an ownership interest, sales
commission arrangement, or other financial stake with respect to a
bidding service provider are also prohibited from performing any of the
four functions on behalf of the applicant. All applicants must submit a
``Declaration of Assistance'' with their request for services (Form
461) to help the Commission and USAC identify third parties who
assisted in the preparation of the applications.
179. Second, all potential bidders and service providers must have
access to the same information and must be treated in the same manner.
Any additions or modifications to the documents submitted to, and
posted by, USAC must be made available to all potential service
providers at the same time and using a uniform method. We direct USAC
to facilitate this process by allowing applicants to submit any
additions or modifications to USAC, for posting on the same Web page as
the originally posted documents.
180. Finally, as is the case in the Telecommunications, Internet
Access, and Pilot Programs, all applicants and service providers must
comply with any applicable state or local competitive bidding
requirements. The Commission's requirements apply in addition to, and
are not intended to preempt, such requirements.
2. Requests for Proposals
181. Discussion. We will require submission of RFPs with Form 461
for (1) applicants who are required to issue an RFP under applicable
state, Tribal, or local procurement rules or regulations; (2)
consortium applications that seek more than $100,000 in program support
in a funding year; and (3) consortium applications that seek support
for infrastructure (i.e. HCP-owned facilities) as well as services.
Applicants who seek support for long-term capital investments, such as
HCP-constructed infrastructure or fiber IRUs, must also seek bids in
the same RFP from vendors who propose to meet those needs via services
provided over vendor-owned facilities, for a time period comparable to
the life of the proposed capital investment. This is to allow USAC to
determine if the option chosen is the most cost-effective. In addition,
any applicant is free submit an RFP to USAC for posting, but all
applicants who utilize an RFP in conjunction with their competitive
bidding process must submit the RFP to USAC for posting and provide
USAC with any subsequent changes to the RFP. We conclude that our
requirement strikes a reasonable balance between ensuring larger
consortia and the Fund benefit from the cost savings resulting from the
RFP process, while limiting the administrative burden on individual
HCPs and smaller consortia.
[[Page 13960]]
182. Applicants who have or intend to issue an RFP must submit a
copy of the RFP with their request for services. We recognize that a
consortium may not know the exact cost of the project until after it
completes the competitive bidding process and selects a vendor. If a
consortium chooses to forego an RFP, however, its support will be
capped at $100,000.
183. The Commission does not specify requirements for RFPs in the
current RHC program, and USAC does not approve RFPs. Therefore,
applicants may prepare RFPs in any manner that complies with program
rules and any applicable state, Tribal, or local procurement rules or
regulations. The RFP, however, should provide sufficient information to
enable an effective competitive bidding process, including describing
the HCP's service needs and defining the scope of the project and
network costs (if applicable). The RFP should also specify the period
during which bids will be accepted. The RFP should also include the
scoring criteria that will be used to evaluate bids for cost-
effectiveness, in accordance with the requirements and solicit
sufficient information so that the criteria can be applied effectively.
A short, simple RFP may be appropriate for smaller consortia, or for
consortia whose needs are less complex. We note that consortia may
choose to submit single or multiple requests for services (and multiple
RFPs), depending on the structure that makes most sense for the
particular project.
3. USAC Posting of Request for Services
184. Discussion. Applicants subject to competitive bidding must
submit new FCC Form 461 and supporting documentation to USAC. The
purpose of these documents is to provide sufficient information on the
requested services to enable an effective competitive bidding process
to take place and to enable USAC to obtain certifications and other
information necessary to prevent waste, fraud, and abuse.
185. Documents to be submitted to USAC with the ``request for
services'' include the following:
Form 461. Applicants should submit Form 461, the ``request
for services,'' to provide information about the services for which
they are seeking support. On Form 461, applicants will provide basic
information regarding the HCP(s) on the application (including contact
information for potential bidders), a brief description of the desired
services, and certifications designed to ensure compliance with program
rules and minimize waste, fraud, and abuse. An applicant must certify
under penalty of perjury that (1) it is authorized to submit the
request and that all statements of fact in the application are true to
the best of the signatory's knowledge; (2) it has followed any
applicable state or local procurement rules; (3) the supported services
and/or equipment will be used solely for purposes reasonably related to
the provision of health care service or instruction that the HCP is
legally authorized to provide under the law of the state in which the
services are provided and will not be sold, resold, or transferred in
consideration for money or any other thing of value; and (4) the HCP or
consortium satisfies all program requirements and will abide by all
such requirements. Applicants not using an RFP should provide on Form
461 sufficient information regarding the desired services to enable an
effective competitive bidding process, including, at a minimum, a
summary of their service needs, the dates for service (including
whether the contract is potentially for multiple years), and the dates
of the bid evaluation period. Consortium Leaders should provide the
required information on behalf of all participating HCPs.
Applicants who include a particular service provider's
name, brand, product or service on Form 461 or in the RFP must also use
the words ``or equivalent'' in the description, in order to avoid the
appearance that the applicant has pre-selected the named service
provider or intends to give the service provider preference in the
bidding process. In addition, an applicant may wish to describe its
needs in general terms (e.g., ``need to transmit data and medical
images'' rather than requesting a specific service or bandwidth),
because the applicant may not be aware of all potential service
providers in its market. Using general terms can allow an applicant to
avoid inadvertently excluding a lower-cost bid from a service provider
using a newer technology.
Bid Evaluation Criteria. The requirements for bid
evaluation criteria are discussed.
Request for Proposal. Certain applicants must use an RFP
in the competitive bidding process, and any applicant may use an RFP.
Applicants who use an RFP should submit it (along with any other
relevant bidding information) as an attachment to Form 461.
Network Planning for Consortia. Consortium applicants must
submit a narrative attachment with Form 461 that includes the following
information:
(1) Goals and objectives of the proposed network;
(2) Strategy for aggregating the specific needs of HCPs (including
providers that serve rural areas) within a state or region;
(3) Strategy for leveraging existing technology to adopt the most
efficient and cost effective means of connecting those providers;
(4) How the broadband services will be used to improve or provide
health care delivery;
(5) Any previous experience in developing and managing health IT
(including telemedicine) programs; and
(6) A project management plan outlining the project's leadership
and management structure, and a work plan, schedule, and budget.
The network planning requirements are consistent with those in the
Pilot Program. For purposes of the Healthcare Connect Fund, however,
submission of this information is a minimum requirement, not a scoring
metric for choosing funding recipients. We do not intend for this
planning to be an undue administrative burden, and will continue to
allow consortia to put forth a variety of strategies for accomplishing
their goals, as the Commission did in the Pilot Program.
Consortium applicants are required to use program support. All
applicants are subject to the Commission's procedures for audits and
other measures to prevent waste, fraud, and abuse.
Form 460. Applicants should submit Form 460 to certify to
the eligibility of HCP(s) listed on the application, if they have not
previously done so.
Letters of Agency for Consortium Applicants. Consortium
applicants should submit letters of agency demonstrating that the
Consortium Leader is authorized to submit Form 461, including required
certifications and any supporting materials, on behalf of each
participating HCP in the consortium.
Declaration of Assistance. As the Commission did in the
Pilot Program, we require that all applicants identify, through a
declaration of assistance, any consultants, service providers, or any
other outside experts, whether paid or unpaid, who aided in the
preparation of their applications. The declaration of assistance must
be filed with the Form 461. Identifying these consultants and outside
experts facilitates the ability of USAC, the Commission, and law
enforcement officials to identify and prosecute individuals who may
seek to defraud the program or engage in other illegal acts. To ensure
participants
[[Page 13961]]
comply with the competitive bidding requirements, they must disclose
all of the types of relationships.
186. Applicants may submit Form 461 starting 180 days before the
beginning of the funding year. Our experience in the Pilot Program is
that it can take as long as six months for more complex projects to
complete bid evaluation and select a vendor. To allow sufficient time
to complete this process prior to the beginning of the funding year,
HCPs should submit Form 461 as soon as possible after the filing window
opens. USAC may provide applicants with the opportunity to cure errors
on their submissions, up to the date of posting of the Form 461
package. The responsibility to submit complete and accurate information
to USAC, however, remains at all times the sole responsibility of the
applicant.
4. 28-Day Posting Requirement
187. After the HCP submits Form 461, USAC will post the form and
any accompanying documents (the Form 461 ``package'') on its Web site.
USAC may institute reasonable procedures for processing Form 461 and
the associated documents and may provide applicants with an opportunity
to correct errors in the submissions. We caution applicants, however,
that they remain ultimately responsible for ensuring that all forms and
documents submitted comply with our rules and any other applicable
state or local procurement requirements. We also remind applicants that
they must certify under penalty of perjury on Form 461 that all
statements of facts contained therein are true to the best of their
knowledge, information, and belief, and that under federal law, persons
willfully making false statements on the form can be punished by fine,
forfeiture, or imprisonment. If an applicant makes any changes to its
RFP post-submission, it is responsible for ensuring that USAC has a
current version of the RFP for the Web site posting.
188. The NPRM proposed that applicants seeking infrastructure bids
should be required to distribute their RFPs in a method likely to
garner attention from interested vendors. In keeping with our objective
of minimizing administrative costs to applicants, however, we decline
to adopt a formal requirement for applicants to distribute an RFP
beyond the USAC posting process. We do encourage applicants, however,
to disseminate their requests for services (Form 461 package) as widely
as possible, in order to maximize the quality and quantity of bids
received. Such methods could include, for example, (1) posting a notice
of the Form 461 package in trade journals or newspaper advertisements;
(2) send the RFP to known or potential service providers; (3) posting
the Form 461 package (or a link thereto) on the HCP's Web page or other
Internet sites, or (4) following other customary and reasonable
solicitation practices used in competitive bidding.
189. After posting of the Form 461 package, USAC will send
confirmation of the posting to the applicant, including the posting
date and the date on which the applicant may enter into a contract with
the selected service provider (the ``Allowable Contract Selection
Date,'' or ACSD). Once USAC posts the package, interested bidders
should submit bids directly to the applicant. Applicants must wait at
least 28 calendar days from the date on which their Form 461 packages
are posted on USAC's Web site before making a commitment with a service
provider, so the ACSD is the 29th calendar day after the posting.
Applicants may not agree to or sign a contract with a service provider
until the ACSD, but may discuss requirements, rates, and conditions
with potential service providers prior to that date. Applicants who
select a service provider before the ACSD will be denied funding.
190. Applicants are free to extend the time period for receiving
bids beyond 28 days from the posting of Form 461 and may do so without
prior approval. In addition, some applicants who propose larger, more
complex projects may wish to undertake an additional ``best and final
offer'' round of bidding. Allowing sufficient time and opportunity for
all potential bidders to develop and submit bids can lead to more and
better bids, and has the potential to enhance the quality and lower the
price of services ultimately received. We encourage HCPs contemplating
more complex projects (including those with an infrastructure
component) to utilize a longer bidding period, as done by many Pilot
projects. If an applicant has plans to utilize a period longer than 28
days, it should so indicate clearly on the Form or in accompanying
documentation. An applicant that decides to extend the bidding period
after USAC's posting of Form 461 should notify USAC promptly, so that
USAC can update its Web site posting with notice of the extension.
5. Selection of the Most ``Cost-Effective'' Bid and Contract
Negotiation
191. Once the 28-day period expires, applicants may evaluate bids,
select a winning bidder and negotiate a contract. Applicants should
develop appropriate evaluation criteria for selecting the ``most cost-
effective'' bid according to the Commission's rules before submitting a
Form 461 package to USAC. Applicants should follow those evaluation
criteria in evaluating bids and selecting a service provider. All
applicants subject to competitive bidding will be required to certify
to USAC that the services and/or infrastructure selected are, to the
best of the applicant's knowledge, the most cost-effective option
available.
192. Applicants must submit documentation to USAC to support their
certification that they have selected the most cost-effective vendor,
including a copy of each bid received (winning, losing, and
disqualified), the bid evaluation criteria, and any other related
documents, such as bid evaluation sheets; a list of people who
evaluated bids (along with their title/role/relationship to the
applicant organization); memos, board minutes, or similar documents
related to the vendor selection/award; copies of notices to winners;
and any correspondence with service providers during the bidding/
evaluation/award phase of the process. We explain how applicants may
seek confidential treatment for these documents. We do not require bid
evaluation documents to be in a certain format, but the level of
documentation should be appropriate for the scale and scope of the
services for which support is requested. Thus, for example, we expect
that the documentation for a large network project will be more
extensive than for an individual HCP seeking support for a single
circuit. Applicants should also retain the supporting documentation for
five years from the end of the relevant funding year, pursuant to the
recordkeeping requirements.
193. Certain tariffed or month-to-month services are typically not
provided pursuant to a signed, written contract. For all other
services, the contract should be negotiated and signed before
applicants submit a request for a funding commitment. Applicants who
wish to enter into a multi-year contract and be exempt from competitive
bidding for the duration of the contract (``evergreen status'') should
ensure that the contract identifies both parties; is signed and dated
by the HCP or Consortium Leader after the Allowable Contract Selection
Date; and specifies the type, term, and cost of service(s). Applicants
will be required to submit a copy of the final contract(s) with their
funding requests.
[[Page 13962]]
6. Competitive Bidding Exemptions
194. An applicant that qualifies for any of the exemptions (and
does not wish to use the competitive bidding process) is not required
to prepare and post a Form 461. Instead, the applicant may proceed
directly to filing the request for funding commitment (Form 462). If
the applicant has not previously submitted Form 460 to certify to its
eligibility, it should submit that form at the same time, or prior to,
submitting Form 462. The exemptions only apply to participants
receiving support through the Healthcare Connect Fund, not the existing
RHC or Pilot Programs.
a. Annual Undiscounted Cost of $10,000 or Less
195. Discussion. Based on our experience with the
Telecommunications and Pilot programs, we adopt an exemption to the
competitive bidding requirements under the Healthcare Connect Fund for
an applicant and any related applicants that seek support for $10,000
or less of total undiscounted eligible expenses for a single year
(i.e., with a required HCP contribution of 35 percent, up to $6,500 in
Fund support). This exemption does not apply to multi-year contracts.
This approach recognizes that for applicants pursuing small dollar
value contracts, the administrative costs associated with the
competitive bidding process may likely outweigh the potential benefits.
Even with the exemption, however, we encourage smaller applicants to
consider using the competitive bidding process to help ensure they are
receiving the best service and pricing available.
196. The $10,000 annual limit is based on the average undiscounted
recurring monthly cost of a 1.5 to 3.0 Mbps connection as observed
under both the Telecommunications and Pilot programs. Based on this
limit, small applicants, typically single HCP sites, should be able to
secure support for a T-1 line or similar service without having to go
through the competitive bidding process. A consortium application
seeking support for undiscounted costs of $10,000 or less is also
exempt from competitive bidding if the total of all consortium members'
undiscounted costs for which support is sought, in this and any other
application combined, is not more than $10,000 for that year. We
recognize that as a practical matter, this will likely prevent all but
the smallest consortia from qualifying for the exemption, but as
observed under the Pilot Program, consortia can substantially benefit
from the competitive bidding process in terms of better pricing and
higher quality of service.
197. We recognize that an applicant may not always be able to
exactly predict its annual eligible expenses in advance. If the
applicant chooses to forego competitive bidding, however, its annual
support will be capped at $6,500 (65 percent of $10,000) for any
services that are not subject to an exemption. If a qualifying
applicant later discovers that it requires additional services beyond
the $10,000 limit, the applicant may receive support for the additional
services if it first completes the competitive bidding process for the
additional services.
b. Government Master Service Agreements
198. Discussion. We adopt a competitive bidding exemption for HCPs
who are purchasing services and/or equipment from MSAs negotiated by
federal, state, Tribal, or local government entities on behalf of such
HCPs and others, if such MSAs were awarded pursuant to applicable
federal, state, Tribal, or local competitive bidding requirements. This
exemption helps streamline the application process by removing
unnecessary and duplicative government competitive bidding requirements
while still ensuring fiscal responsibility. Because these MSAs have
government requirements for competitive bidding, this fairly ``removes
the burden from the Rural Health Care Provider to conduct an additional
competitive bid.'' This exemption only applies to MSAs negotiated by,
or under the direction of, government entities and subject to
government competitive bidding requirements. Applicants must submit
documentation demonstrating that they qualify for the exemption,
including a copy of the MSA and documentation that it was subject to
government competitive bidding requirements. In many cases these
government contracts were negotiated on behalf of a large number of
users, so are likely to generate similar cost efficiencies as those
derived through the Healthcare Connect Fund competitive bidding
process.
199. Commenters generally support the adoption of a competitive
bidding exemption that allows applicants to take services from a
government MSA, so long as the original master contract was subject to
a competitive bidding process. For instance, CCHCS ``recommends that
the Commission exempt from competitive bidding requirements State HCPs
that are required to use the State mandated Master Services Agreements
for the procurement of telecommunication and/or broadband services.''
Similarly, VAST argues that the ``Commission should allow eligible
Health Care Providers to take services from a federal or state Master
Service Agreement (MSA) that has been awarded through a competitive
bidding process.''
c. Master Service Agreements Approved Under the Pilot Program or the
Healthcare Connect Fund
200. Discussion. We adopt a competitive bidding exemption for HCPs
purchasing services or equipment from an MSA, whether the contract was
originally secured through the competitive bidding process under the
Pilot Program or in the future through the Healthcare Connect Fund. As
the Commission stated in the July 2012 Bridge Funding Order, 77 FR
42185, July 18, 2012, sufficient safeguards are in place to protect
against waste, fraud, and abuse in these situations because HCPs have
already gone through the competitive bidding process to identify and
select the most cost-effective service provider in instituting these
contracts. This exemption also applies to MSAs that have been secured
through competitive bidding with funding approved by USAC during the
Pilot Program bridge period. In addition, the exemption will apply to
services or equipment purchased during an MSA extension approved by
USAC. The exemption is limited to those MSAs that were developed and
negotiated from an RFP that specifically sought a mechanism for adding
additional sites to the network. This exemption does not extend to MSAs
or extensions thereof that are not approved by USAC.
d. Evergreen Contracts
201. Discussion. As proposed in the NPRM, and as supported in the
record, we allow contracts to be designated as ``evergreen'' in the
Healthcare Connect Fund. As stated in the NPRM and echoed by
commenters, evergreen procedures likely will benefit participating HCPs
by affording them: (1) lower prices due to longer contract terms; and
(2) reduced administrative burdens due to fewer required Form 465s.
202. A contract entered into by an HCP or consortium as a result of
competitive bidding will be designated as evergreen if it meets all of
the following requirements: (1) Signed by the individual HCP or
consortium lead entity; (2) specifies the service type, bandwidth and
quantity; (3) specifies the term of the contract; (4) specifies the
cost of services to be provided; and (5) includes the physical
addresses or other
[[Page 13963]]
identifying information of the HCPs purchasing from the contract.
Consortia will be permitted to add new HCPs if the possibility of
expanding the network was contemplated in the competitive bidding
process, and the contract explicitly provides for such a possibility.
Similarly, service upgrades will be permitted as part of an evergreen
contract if the contemplated upgrades are proposed during the
competitive bidding process, and the contract explicitly provides for
the possibility of service upgrades.
203. Participants may also exercise voluntary options to extend an
evergreen contract without undergoing additional competitive bidding,
subject to certain limitations. First, the voluntary extension(s) must
be memorialized in the evergreen contract. Second, the decision to
extend the contract must occur before the participant files its funding
request for the funding year when the contract would otherwise expire.
Third, voluntary extension(s) may not exceed five years, after which
the service(s) must be re-bid. We find that this limitation strikes an
appropriate balance between two competing considerations: (1) providing
HCPs with the price and administrative savings of entering into a long-
term contract; and (2) ensuring that HCPs periodically re-evaluate
whether they can obtain better prices through re-bidding a service.
204. We also conclude that, if an HCP has a contract that was
designated as evergreen under Telecommunications Program or Internet
Access Program procedures prior to January 1, 2014, it may choose to
seek support for services provided under the evergreen contract from
the Healthcare Connect Fund instead without undergoing additional
competitive bidding, so long as the services are eligible for support
under the Healthcare Connect Fund, and the HCP complies with all other
Healthcare Connect Fund rules and procedures. The Commission noted in
the NPRM that codifying the evergreen policy ``would maintain
consistency while transitioning from the existing internet access
program to the new health broadband services program.'' Allowing HCPs
who have already competitively bid (and received evergreen status for)
multi-year contracts seamlessly to transition into the Healthcare
Connect Fund furthers our program goals to streamline the application
process and promote fiscal responsibility and cost-effectiveness. Pilot
Program participants who have negotiated a long-term contract that
extends beyond the period of their Pilot awards may also seek to have
their contracts designated as ``evergreen'' by USAC for purposes of the
Healthcare Connect Fund without undergoing a new competitive bidding
process, as long as the existing contract meets the requirements for an
evergreen contract. If an evergreen contract approved under the
Telecommunications Program, Internet Access Program, or a Pilot Program
contract designated as evergreen under the Healthcare Connect Fund
includes voluntary extensions, HCPs utilizing such contracts in the
Healthcare Connect Fund may also exercise such voluntary extensions
consistent with the requirements.
e. Contracts Negotiated Under E-Rate
205. Discussion. Consistent with Sec. 54.501(c)(1) of our rules,
we conclude that an HCP entering into a consortium with E-rate
participants and becoming a party to the consortium's existing contract
should be exempt from the RHC competitive bidding requirements, so long
as the contract was competitively bid consistent with E-rate rules,
approved for use in the E-rate program as a master contract, and the
Healthcare Connect Fund applicant (i.e. the individual HCP or
consortium) otherwise complies with all Healthcare Connect Fund rules
and procedures. An applicant utilizing this exemption must submit
documentation with its request for funding that demonstrates that (1)
the applicant is eligible to take services under the consortium
contract; and (2) the consortium contract was approved as a master
contract in the E-rate program. We agree with MiCTA that such an
exemption will reduce HCPs' individual administrative burdens and
encourage consortia, and likely will save universal service funds due
to the lower contract prices often associated with consortia bulk-
buying. We thus find that a competitive bidding exemption for HCPs
entering into contracts negotiated under the E-rate program will
further our program goals to streamline the application process,
facilitate consortium applications, and promote fiscal responsibility
and cost-effectiveness. We note that an HCP in a consortium with E-rate
participants may receive support only for services eligible for support
under the RHC programs.
f. No Exemption for Internet2 and National LambdaRail
206. Discussion. We require participants to seek competitive bids
from any research and education networks, including Internet2 and
National LambdaRail, through our standard competitive bidding process.
There may be instances where a more cost-effective solution is
available from a commercial provider, or even a non-profit provider
other than Internet2 or National LambdaRail, and a competitive bidding
requirement will ensure that HCPs consider options from all interested
service providers. Many commenters opposed the Commission's proposal to
exempt National LambdaRail and Internet2 from competitive bidding,
arguing, among other things, that such an exemption would be anti-
competitive by disadvantaging other telecommunications providers. We
find that requiring HCPs to seek bids from National LambdaRail and
Internet2 through the normal competitive bidding process could result
in lower-priced bids, and should therefore be required. This approach
furthers our program goal to promote fiscal responsibility and cost-
effectiveness.
C. Funding Commitment From USAC
207. Once a service provider is selected, applicants in the current
RHC program submit a ``Funding Request'' (and supporting documentation)
to provide information about the services selected and certify that the
services were the most cost-effective offers received. If USAC approves
the ``Request for Funding,'' it will issue a ``Funding Commitment
Letter.'' USAC's role is to review the funding request for accuracy and
completeness. Once an applicant receives a funding commitment, it may
invoice USAC after receiving a bill from the service provider.
Applicants do not need to file a Form 467 to notify USAC that the
service provider began providing services for which the applicant is
seeking support.
1. Requirements for Service Providers
208. All vendors that participate in the Healthcare Connect Fund
are required to have a Service Provider Identification Number (SPIN).
The SPIN is a unique number assigned to each service provider by USAC,
and serves as USAC's tool to ensure that support is directed to the
correct service provider. SPINs must be assigned before USAC can
authorize support payments. Therefore, all service providers submitting
bids to provide services to selected participants will need to complete
and submit a Form 498 to USAC for review and approval if selected by a
participant before funding commitments can be made.
209. Service providers in the Healthcare Connect Fund must certify
on Form 498, as a condition of receiving support, that they will
provide to HCPs, on a timely basis, all information and documents
regarding the supported
[[Page 13964]]
service(s) that are necessary for the HCP to submit required forms or
respond to FCC or USAC inquiries. In addition, USAC may withhold
disbursements for the service provider if the service provider, after
written notice from USAC, fails to comply with this requirement.
2. Filing Timeline for Applicants
210. Discussion. Unless and until the Commission adopts other
procedures to prioritize requests for funding, we retain the rule that
requests for funding may be submitted at any point during the funding
year, and direct USAC to process and prioritize funding requests on a
rolling basis (according to the date of receipt) until it reaches the
program cap established by the Commission. Given the historical
utilization of RHC support and the implementation timetable for funding
year 2013, we do not currently anticipate that demand will exceed the
$400 million cap in FY 2013 or for the foreseeable future. We conclude,
however, that this longstanding default rule will apply in the unlikely
event that the cap is exceeded, unless and until the Commission adopts
a different rule for prioritizing funding requests. We also direct USAC
to periodically inform the public, through its Web site, of the total
dollar amounts (1) requested by HCPs and (2) actually committed by USAC
for the funding year, as well as the amounts committed in upfront
payments (for purposes of the $150 million cap on upfront payments).
211. We also direct USAC to establish a filing window for funding
year 2013 and for future funding years as necessary, for both the
Telecommunications Program and the Healthcare Connect Fund. When USAC
establishes a filing window, it should provide notice of the window in
advance via public notice each year. The filing window may begin prior
to the first day of the funding year, as long as actual support is only
provided for services provided during the funding year.
212. As in the Telecommunications Program, applicants may initiate
services at their own risk during the funding year pending the
processing of their funding requests, as long as the services are
provided pursuant to a contract or other service agreement that
complies with program requirements (including the competitive bidding
process). The contract must be signed (or the service agreement entered
into) before the applicant submits a funding request.
213. Funding will be available for Pilot participants starting July
1, 2013, and starting January 1, 2014, for other applicants.
3. Required Documentation for Applicants
214. This information should be submitted to USAC to support a
request for commitment of funds.
215. Form 462. Form 462 is the means by which an applicant
identifies the service(s), rates, service provider(s), and date(s) of
service provider (vendor) selection. In the Primary Program, applicants
are required to submit a separate form for each service or circuit for
which the applicant is seeking support. In the Healthcare Connect Fund,
we will not require separate forms for each service or circuit, thereby
lessening administrative burden on potential Fund recipients. Each
individual applicant will submit a single form for each service
provider that lists the relevant information for all service(s) or
circuit(s) for which the individual applicant is seeking support at the
time. Similarly, each consortium applicant will submit a single form
for each service provider that lists the relevant information for all
consortium members, including the service(s) or circuit(s) for which
each member is seeking support at the time.
216. Certifications. Applicants must provide the following
certifications on Form 462.
The person signing the application is authorized to submit
the application on behalf of the applicant, and has examined the form
and all attachments, and to the best of his or her knowledge,
information, and belief, all statements of fact contained therein are
true.
Each service provider selected is, to the best of the
applicant's knowledge, information, and belief, the most cost-effective
service provider available, as defined in the Commission's rules.
All Healthcare Connect Fund support will be used only for
the eligible health care purposes, as described in this Order and
consistent with the Act and the Commission's rules.
The applicant is not requesting support for the same
service from both the Telecommunications Program and the Healthcare
Connect Fund.
The applicant satisfies all of the requirements under
section 254 of the Act and applicable Commission rules, and understands
that any letter from USAC that erroneously commits funds for the
benefit of the applicant may be subject to rescission.
The applicant has reviewed all applicable requirements for
the program and will comply with those requirements.
The applicant will maintain complete billing records for
the service for five years.
217. Contracts or other documentation. All applicants must submit a
contract or other documentation that clearly identifies (1) the
vendor(s) selected and the HCP(s) who will receive the services; (2)
the service, bandwidth, and costs for which support is being requested;
(3) the term of the service agreement(s) if applicable (i.e. if
services are not being provided on a month-to-month basis). For
services provided under contract, the applicant must submit a copy of a
contract signed and dated (after the Allowable Contract Selection Date)
by the individual HCP or Consortium Leader. If the service is not being
provided under contract, the applicant must submit a bill, service
offer, letter, or similar document from the service provider that
provides the required information. In either case, applicants must
ensure that the documentation provided specifies all charges for which
the applicant is receiving support (for example, if the contract does
not specify all such charges, applicants should submit a bill or other
similar documentation to support their request). In addition,
applicants may wish to submit a network or circuit diagram for requests
involving multiple vendors or circuits.
218. Competitive bidding documents. Applicants must submit
documentation to support their certifications that they have selected
the most cost-effective option. Relevant documentation includes a copy
of each bid received (winning, losing, and disqualified), the bid
evaluation criteria, and any other related documents. Applicants who
are exempt from competitive bidding should also submit any relevant
documentation to allow USAC to verify that the applicant is eligible
for the exemption (e.g., a copy of the relevant government MSA and
documentation showing that the applicant is eligible to purchase from
the MSA, or USAC correspondence identifying and approving a contract
previously approved for the Pilot Program).
219. Cost allocation for ineligible entities or components.
Applicants who seek to include ineligible entities within a consortium,
or to obtain support for services or equipment that include both
eligible and ineligible components, should submit a description of
their cost allocation methodology per the requirements. Applicants
should also submit any agreements that memorialize cost-sharing
arrangements with ineligible entities.
220. Evidence of viable source for 35 percent contribution. Many
projects in
[[Page 13965]]
the Pilot Program experienced implementation delays, in part due to the
difficulty in obtaining their required contribution. In the NPRM, the
Commission suggested participants in the proposed infrastructure
program be required to demonstrate they have a reasonable and viable
source for their contribution by submitting letters of assurances
confirming funds from eligible sources to meet the contribution
requirement.
221. We require all consortium applicants to submit, with their
funding requests, evidence of a viable source for their 35 percent
contribution. We adopt this requirement to minimize administrative
processing of applications that do not have a source for the required
match, which will lessen USAC's administrative costs and thereby lessen
the burden on the Fund. Applicants, especially those that intend to
undertake high-dollar projects, should begin identifying potential
sources for their contribution as early as possible. The funding
request is the last major step in the application process before
applicants receive a funding commitment, and at this stage applicants
should be well advanced in determining the amount of their contribution
and the source for that contribution. We also note that program
participants will be required to submit a certification that they have
paid their 35 percent contribution before USAC will disburse universal
service support, so it is important for participants to have a ready
source of payment before they begin receiving services.
222. Consortia may provide evidence of a viable source by
submitting a letter signed by an officer, director, or other authorized
employee of the Consortium Leader. The letter should identify the
entity that will provide the 35 percent contribution, and the type of
eligible source (e.g. HCP budget, grant/loan, etc.). If the applicant
contribution is dependent on appropriations, grant funding, or other
special conditions, the applicant should include a description of any
special conditions and general information regarding those conditions.
If the applicant has already identified secondary sources of funding,
it should also include information regarding such sources in its
letter. If the source for the participant contribution is excess
capacity, applicants must identify the entit(ies) who will pay for the
excess capacity, and submit evidence of arrangements made to comply
with the requirements.
223. Consortium applicants are not required to identify the funding
source for each consortium member if each consortium member will pay
its contribution individually. Instead, the Consortium Leader should
(1) verify that each member will pay its contribution from an eligible
source (e.g., by requesting a certification to that effect in the
consortium member's LOA) and (2) submit documentation (e.g. consortium
membership agreement) that shows that each member has agreed to pay its
own contribution from an eligible source.
224. We delegate authority to the Bureau to provide more specific
guidance, if needed, on the content of the letter and documentation to
be submitted. USAC may, as needed, request additional documentation
from applicants in order to ensure compliance with this requirement.
225. Additional documentation for consortium applicants. Consortium
applicants should submit any revisions to the project management plan,
work plan, schedule, and budget previously submitted with the Request
for Services (Form 461). If not previously provided with the project
management plan, applicants should also provide (or update) a narrative
description of how the network will be managed, including all
administrative aspects of the network (including but not limited to
invoicing, contractual matters, and network operations.) If the
consortium is required to provide a sustainability plan, the revised
budget should include the budgetary factors discussed in the
sustainability plan requirements. Finally, consortium applicants will
be required to provide electronically (via a spreadsheet or similar
method) a list of the participating HCPs and all of their relevant
information, including eligible (and ineligible, if applicable) cost
information for each participating HCP. USAC may reject submissions
that lack sufficient specificity to determine that costs are eligible.
226. Sustainability plans for applicants requesting support for
long-term capital expenses. In the NPRM, the Commission proposed to
require sustainability plans similar to those required in the Pilot
Program for HCPs who intended to have an ownership interest,
indefeasible right of use, or capital lease interest in facilities
funded by the Fund. We adopt the proposal in the NPRM, and require that
consortia who seek funding to construct and own their own facilities or
obtain IRUs or capital lease interests to submit a sustainability plan
with their funding requests demonstrating how they intend to maintain
and operate the facilities that are supported over the relevant time
period. A sustainability plan for such projects is appropriate to
protect the Fund's investment, because such projects are requesting
support for capital expenses that are intended to have long-term
benefits.
227. We largely adopt the same specific requirements for
sustainability plans proposed in the NPRM and utilized in the Pilot
Program. Although participants are free to include additional
information to demonstrate a project's sustainability, the
sustainability plan must, at a minimum, address the following points:
Projected sustainability period. Indicate a reasonable
sustainability period that is at least equal to the useful life of the
funded facility. Although a sustainability period of 10 years is
generally appropriate, the period of sustainability should be
commensurate with the investments made from the health infrastructure
program. For example, if the applicant is purchasing a 20 year IRU, the
sustainability period should be a minimum of 20 years. The applicant's
budget should show projected income and expenses (i.e. for maintenance)
for the project at the aggregate level, for the sustainability period.
Principal factors. Discuss each of the principal factors
that were considered by the participant to demonstrate sustainability.
This discussion should include all factors that show that the proposed
network will be sustainable for the entire sustainability period. Any
factor that will have a monetary impact on the network should be
reflected in the applicant's budget.
Terms of membership in the network. Describe generally any
agreements made (or to be entered into) by network members (e.g.,
participation agreements, memoranda of understanding, usage agreements,
or other documents). If the consortium will not have agreements with
the network members, it should so indicate in the sustainability plan.
The sustainability plan should also describe, as applicable: (1)
Financial and time commitments made by proposed members of the network;
(2) if the project includes excess bandwidth for growth of the network,
describe how such excess bandwidth will be financed; and (3) if the
network will include eligible HCPs and other network members, describe
how fees for joining and using the network will be assessed.
Ownership structure. Explain who will own each material
element of the network (e.g., fiber constructed, network equipment, end
user equipment). For purposes of responding to this question,
``ownership'' includes an IRU interest. Applicants should clearly
identify the legal entity who will own each material
[[Page 13966]]
element so that USAC can verify that only eligible entities receive the
benefits of program support. Applicants should also describe any
arrangements made to ensure continued use of such elements by the
network members for the duration of the sustainability period.
Sources of future support. If sustainability is dependent
on fees to be paid by eligible HCPs, then the sustainability plan
should confirm that the HCPs are committed and have the ability to pay
such fees. If sustainability is dependent on fees to be paid by network
members that will use the network for health care purposes, but are not
eligible HCPs under the Commission's rules, then the sustainability
plan should identify such entities. Alternatively, if sustainability is
dependent on revenues from excess capacity not related to health care
purposes, then the sustainability plan should identify the proposed
users of such excess capacity. Projects who have multiple sources of
funding should address each source of funding and the likelihood of
receiving that funding. Eligible HCPs may not receive support twice for
the same service. For example, if the Healthcare Connect Fund provides
support for a network to procure an IRU to be used by its members, and
the network charges its members a fee to cover the undiscounted cost of
the IRU, the members may not then individually apply for program
support to further discount the membership fee.
Management. The applicant's management plan should
describe the management structure of the network for the duration of
the sustainability period, and the applicant's budget should describe
how management costs will be funded.
228. The Pilot Program required projects to submit a copy of their
sustainability plan with every quarterly report. Based on our
experience with the Pilot Program, we conclude submission of the
sustainability report on a quarterly basis is unnecessarily burdensome
for applicants, and provides little useful information to the
Administrator. We therefore conclude that sustainability reports for
the Healthcare Connect Fund should only be required to be re-filed if
there is a material change in sources of future support or management,
a change that would impact projected income or expenses by the greater
of 20 percent or $100,000 from the previous submission, or if the
applicant submits a funding request based on a new Form 461 (i.e., a
new competitively bid contract). In that event, the revised
sustainability report should be provided to USAC no later than the end
of the relevant quarter, clearly showing (i.e., by redlining or
highlighting) what has changed.
4. Requests for Multi-Year Commitments
229. In the July 19 Public Notice, 77 FR 43773, July 26, 2012, the
Bureau sought to further develop the record on issues relating to
multi-year contracts, including issues relating to upfront payments.
Commenters unanimously supported multi-year commitments as a measure
that would reduce administrative costs and increase the value of the
services procured.
230. Discussion. We will allow applicants in the Healthcare Connect
Fund to receive multi-year funding commitments that cover a period of
up to three funding years. The multi-year funding commitments we adopt
will reduce uncertainty and administrative burden by eliminating the
need for HCPs to apply every year for funding, as is required under the
Primary Program, and reduce administrative expenses both for the
projects and for USAC. Multi-year funding commitments, prepaid leases,
and IRUs also encourage term discounts and produce lower rates from
vendors. Multi-year commitments will also allow consortium applicants
to choose HCP-constructed-and-owned infrastructure where it is the most
cost-effective way to obtain broadband. Applicants receiving support
for long-term capital investments whose useful life extends beyond the
period of the funding commitment may be subject to additional reporting
requirements to ensure that such facilities continue to be used for
their intended purpose throughout their useful life. We delegate
authority to the Bureau to issue administrative guidance to implement
such requirements.
231. Applicants requesting a funding commitment for a multi-year
funding period should indicate the years for which funding is required
on Form 462 and, for consortia, with the attachment that lists the HCPs
and costs for each HCP within the network. If a long-term contract
covers a period of more than three years, the applicant may also have
the contract designated as ``evergreen'' if the contract meets the
criteria specified, which will allow the applicant to re-apply for a
funding commitment under the contract after three years without having
to undergo additional competitive bidding. In choosing a three-year
period, we strike a balance between allowing applicants and the Fund to
reap the benefits of long-term contracts, reducing administrative
burdens on applicants and the Fund, and ensuring that applicants are
not ``locked in'' to long-term contracts which may prevent them from
seeking more cost-effective options when prices drop, or they choose to
upgrade to higher bandwidths/newer technologies. Three years is also
consistent with our requirement that upfront payments averaging more
than $50,000/site be amortized over at least three years. Commenters
generally support a three-year period as being reasonable. Consistent
with current rules, a multi-year funding commitment cannot extend
beyond the end of the contract submitted with the request for funding.
For example, if an applicant submits a two-year contract and requests a
multi-year funding commitment, USAC will only issue a funding
commitment for two years. Similarly, if a contract ends in the middle
of the funding year, the funding commitment can only extend to the end
date of the contract.
232. In the NPRM, the Commission proposed a $100 million cap for
infrastructure projects. We institute a single cap of $150 million
annually that will apply to all commitments for upfront payments during
the funding year, and all multi-year commitments made during a funding
year. This approach for the hybrid infrastructure-services program will
provide greater flexibility than the $100 million cap proposed in the
NPRM for infrastructure projects; it recognizes that upfront payments
also can be substantial when purchasing services from a commercial
provider who needs to deploy facilities to serve the HCP. This cap
takes into account the need for economic reasonableness and responsible
fiscal management of the program, and will help prevent large annual
fluctuations in program demand. We direct USAC to process and
prioritize funding requests for upfront payments and multi-year
commitments on a rolling basis, similar to the process for funding
requests generally. We also direct USAC to periodically inform the
public, through its Web site, of the total dollar amounts subject to
the $150 million cap that have been (1) requested by HCPs (2) actually
committed by USAC for the funding year. We may consider adjusting the
cap upward if it appears a significant number of Primary Program
participants are moving to the Healthcare Connect Fund. Finally, USAC
may establish a filing window tailored toward funding requests subject
to the $150 million cap, if necessary.
233. Current Commission rules allow universal service support for
state and federal taxes and surcharges assessed on eligible services.
We recognize that taxes and surcharges can fluctuate over a three-year
commitment period. In the
[[Page 13967]]
Pilot Program, projects were allowed to estimate taxes and surcharges
over the commitment period. Similarly, in the Healthcare Connect Fund,
we will take into account the year-to-year fluctuation in taxes and
surcharges by allowing HCPs and consortia to estimate the expense using
either current tax rates or by projecting the tax rate for the
commitment period. Projected taxes and surcharges shall be limited to
no higher than 110 percent of the current rate at the time that the HCP
or consortium files a funding request. The funding commitment will be
issued based on the tax and surcharge rate provided by the applicant.
We note that this does not lead to an additional potential for waste,
fraud, and abuse, because disbursements will be based on actual
expenses, not the projections.
5. USAC Processing and Issuance of Funding Commitment Letters
234. USAC will review funding requests and, if approved, issue a
funding commitment letter to the applicant. We allow applicants the
opportunity to cure errors on their submissions after initial USAC
review, although the responsibility to submit complete and accurate
information remains at all times the sole responsibility of the
applicant. In order to expedite HCPs' ability to initiate service once
they have selected a service provider, we specify a timeframe for
USAC's initial review of funding commitment requests. Within 21
calendar days of receipt of a complete funding commitment request, USAC
will inform applicants in writing of (1) any and all ministerial or
clerical errors that it identifies in the funding commitment request,
along with a clear and specific explanation of how the selected
participants can remedy those errors; (2) any missing, incomplete, or
deficient certifications; and (3) any other deficiencies that USAC
finds, including any ineligible network components or ineligible
network components that are mislabeled in the funding request. If USAC
needs more than 21 calendar days to complete its initial review of the
funding request, it should inform the applicant in writing that it
needs additional time, and provide the applicant with a date on or
before which it expects to provide the information. We remind
applicants that this 21-day period is not a deadline for USAC to issue
a funding commitment letter. Instead, it is a timeframe for USAC to
check that information provided by applicants is complete and accurate,
which will then allow USAC to subsequently process the funding request.
If an applicant receives a notice that its funding request includes
deficiencies, it will have 14 calendar days from the date of receipt of
the USAC written notice to amend or re-file its funding request for the
sole purpose of correcting the errors identified by USAC.
235. For purposes of prioritizing funding requests, funding
requests are deemed to have been filed when the applicant submits an
application that is complete. If USAC identifies any errors or
deficiencies during its initial 21-day review, the application is not
considered to be complete until all such errors and deficiencies are
corrected. Applicants may make material changes to their funding
requests prior to USAC's issuance of a funding commitment letter, but
will be considered, for priority purposes, to have filed their
applications as of the date when a complete notice of the material
change (i.e. without the types of errors or deficiencies identified in
the prior paragraph) is submitted to USAC.
236. Upon completion of its review process, USAC will send funding
commitment letter or a denial. The funding commitment letter should
specify whether the contract has been deemed evergreen (if requested),
and whether a multi-year commitment has been issued (and if so, the
annual amount of the commitment). Applicants denied funding for errors
other than ministerial or clerical errors must follow USAC's and the
Commission's regular appeal procedures. Applicants that do not comply
with the terms of this Order, section 254 of the 1996 Act, and
Commission rules and orders will be denied funding in whole or in part,
as appropriate.
D. Invoicing and Payment Process
237. Discussion. In Healthcare Connect Fund, we adopt an invoicing
procedure similar to the one currently in use by the Pilot Program. In
the Pilot Program, service providers bill HCPs directly for services
that they have provided. Upon receipt of a service provider's bill, the
HCP creates and approves an invoice for the services it has received,
certifies that the invoice is accurate and that it has paid its
contribution, and sends the invoice to the service provider. The
service provider then certifies the invoice's accuracy and uses it to
receive payment from USAC.
238. This invoicing procedure is different from the Primary Program
in two principal ways. In the Healthcare Connect Fund, as in the Pilot
Program, (1) a HCP or Consortium Leader must certify to USAC that it
has paid its contribution to the service provider before the invoice
can be sent to USAC and the service provider can be paid, and (2)
before any invoice is sent to USAC, both the HCP and service provider
must certify that they have reviewed the document and that it is
accurate. We believe the adoption of these requirements in the new
program will help eliminate waste, fraud, and abuse by making sure that
HCPs have made their required contribution to the cost of the services
they receive and that the invoice accurately reflects the services an
HCP is receiving and the support due to the service provider. It is
permissible to certify that these steps have been taken via electronic
signature of an officer, director, or other authorized employee of the
Consortium Leader or HCP. All invoices must be received by the
Administrator within six months of the end date of the funding
commitment.
E. Contract Modifications
239. Discussion. The Universal Service Fourth Order on
Reconsideration, 63 FR 2094, January 13, 1998, concluded that requiring
a competitive bid for every minor contract modification would place an
undue burden upon eligible entities. The Commission found that an
eligible school, library, or rural HCP would be entitled to make minor
modifications to a contract that was previously approved for funding
without completing an additional competitive bid process. The
Commission also noted that any service provided pursuant to a minor
contract modification also must be an eligible supported service as
defined in the Order to receive support or discounts.
240. Consistent with existing requirements, HCPs should look to
state or local procurement laws to determine whether a proposed
contract modification would be considered minor and therefore exempt
from state or local competitive bidding processes. If a proposed
modification would be exempt from state or local competitive bidding
requirements, the applicant likewise would not be required to undertake
an additional competitive bidding process in connection with the
applicant's request for discounted services under the federal universal
service support mechanisms. Similarly, if a proposed modification would
have to be rebid under state or local competitive bidding requirements,
then the applicant also would be required to comply with the
Commission's competitive bidding requirements before entering into an
agreement adopting the modification.
241. The Universal Service Fourth Order on Reconsideration also
[[Page 13968]]
addressed instances in which state and local procurement laws are
silent or are otherwise inapplicable with respect to whether a proposed
contract modification must be rebid under state or local competitive
bidding processes. In such cases, the Commission adopted the ``cardinal
change'' doctrine as the standard for determining whether the contract
modification requires rebidding. The cardinal change doctrine looks at
whether the modified work is essentially the same as that for which the
parties contracted. A cardinal change occurs when one party affects an
alteration in the work so drastic that it effectively requires the
contractor to perform duties materially different from those originally
bargained for. In determining whether the modified work is essentially
the same as that called for under the original contract, factors
considered are the extent of any changes in the type of work,
performance period, and cost terms as a result of the modification.
Ordinarily a modification falls within the scope of the original
contract if potential offerors reasonably could have anticipated the
modification under the changes clause of the contract.
242. The cardinal change doctrine recognizes that a modification
that exceeds the scope of the original contract harms disappointed
bidders because it prevents those bidders from competing for what is
essentially a new contract. The Commission adopted the cardinal change
doctrine as the test for determining whether a proposed modification
will require rebidding of the contract, absent direction on this
question from state or local procurement rules, because it believed
this standard reasonably applies to contracts for supported services
arrived at via competitive bidding. If a proposed modification is not a
cardinal change, there is no requirement to undertake the competitive
bidding process again.
243. An eligible HCP seeking to modify a contract without
undertaking a competitive bidding process should, within 30 calendar
days of signing or otherwise entering into the contract modification,
file a revised funding commitment request indicating the value of the
proposed contract modification so that USAC can track contract
performance. The HCP also must demonstrate that the modification is
within the original contract's change clause or is otherwise a minor
modification that is exempt from the competitive bidding process. The
HCP's justification for exemption from the competitive bidding process
will be subject to audit and will be reviewed by USAC to determine
whether the applicant's request is, in fact, a minor contract
modification that is exempt from the competitive bidding process. We
note that program participants make contract modifications without
competitive bidding at their own risk. If a participant makes a
contract modification without competitive bidding, and the modification
does not qualify as minor, USAC will not allow support for the
modification.
244. We emphasize that even though minor modifications will be
exempt from the competitive bidding requirement, parties are not
guaranteed support with respect to such modified services. A commitment
of funds pursuant to an initial FCC Form 462 does not ensure that
additional funds will be available to support the modified services. We
conclude that this approach is reasonable and is consistent with our
effort to adopt the least burdensome application process possible while
maintaining the ability of USAC and the Commission to perform
appropriate oversight.
F. Site and Service Substitutions
245. Based on our experience in the Pilot Program, we adopt a site
and service substitution policy for participants in the Healthcare
Connect Fund that is similar to that applied in the Pilot Program.
Consortia may make site substitutions in accordance with the policy
(because individual applicants are by definition single-site, no site
substitutions are allowed for individual applicants). Both individual
and consortium applicants may make service substitutions in accordance
with the policy.
246. As the Commission found in the Pilot Program, allowing site
and service substitutions minimizes the burden on consortium
participants and increases administrative efficiency by enabling HCPs
to ask USAC to substitute or modify the site or service without
modifying the actual commitment letter. Moreover, this policy
recognizes the changing broadband needs of HCPs by providing the
flexibility to substitute alternative services within the constraints.
This policy is a more administratively efficient approach than the
Primary Program, in which any modification of funding requires a new
application and a new funding commitment letter for each HCP impacted.
In its July 19 Public Notice, the Bureau asked for comment on whether
to adopt the Pilot Program approach to site and service substitutions
in the reformed program. The commenters generally supported applying
the same approach in the new program.
247. The Pilot Program permits site and service substitutions
within a project in certain specified circumstances, in order to
provide some amount of flexibility to project participants. Under the
Pilot Program, a site or service substitution may be approved if (i)
the substitution is provided for in the contract, within the change
clause, or constitutes a minor modification, (ii) the site is an
eligible HCP and the service is an eligible service under the Pilot
Program, (iii) the substitution does not violate any contract provision
or state or local procurement laws, and (iv) the requested change is
within the scope of the controlling FCC Form 465, including any
applicable Request for Proposal. Once USAC has issued a funding
commitment letter, support under the letter is capped at the amount
provided in the letter. Therefore, support for a qualifying site and
service substitution is only guaranteed if the substitution will not
cause the total amount of support under the funding commitment letter
to increase. We adopt these same criteria for the Healthcare Connect
Fund, which we include in a new rule.
G. Data Collection and Reporting Requirements
248. Discussion. Data from participants and from the Fund
Administrator are essential to the Commission's ability to evaluate
whether the program is meeting the performance goals adopted and to
measure progress toward meeting those goals. We anticipate collecting
the necessary data through a combination of the application process and
annual reporting requirements. For consortium participants under the
Healthcare Connect Fund, we require the submission of annual reports.
Annual, rather than quarterly, reports minimize the burden on
participants and the Administrator alike while still supporting
performance evaluation and enabling us to protect against waste, fraud,
and abuse. Because we expect to be able to collect data from single
applicants in the Healthcare Connect Fund on forms they already submit,
we do not at this time expect that they will need to submit an annual
report, unless a report is required for other reasons. To further
minimize the burden on participants, we direct the Bureau to work with
the Administrator to develop a simple and streamlined reporting system
that integrates data collected through the application process, thereby
eliminating the need to resubmit any information that has already been
provided to the Administrator. We agree with several commenters that to
the
[[Page 13969]]
extent feasible, USAC should collect information through automated
interfaces.
249. In the Healthcare Connect Fund, each consortium lead entity
must file an annual report with the Administrator on or before
September 30 for the preceding funding year (i.e., July 1 through and
including June 30). Each consortium is required to file an annual
report for each funding year in which it receives support from the
Healthcare Connect Fund. For consortia that receive large upfront
payments, the reporting requirement extends for the life of the
supported facility. The Administrator shall make the annual reports
publicly available as soon as possible after they are filed.
250. All participants are required to provide the information
necessary to ensure the Commission can assess progress towards the
performance goals and measures adopted. To track progress toward the
first goal, increasing access to broadband, we require participants to
report the characteristics, including bandwidth and price, of the
connections supported by the Healthcare Connect Fund. To track progress
toward the second goal, fostering broadband health care networks, we
require participants to report the number and characteristics of the
eligible and non-eligible sites connecting to the network. We also
expect participants to report whether and to what extent the supported
connections are being used for telemedicine, exchange of EHRs,
participation in a health information exchange, remote training, and
other telehealth applications. To track progress toward the third goal,
maximizing the cost-effectiveness of the program, in addition to the
reporting requirements under the first goal, we require that
participants report the number and nature of all responsive bids
received through the competitive bidding process as well as an
explanation of how the winning bid was chosen.
251. We delegate authority to the Bureau to provide, and modify as
necessary, further guidance on the reporting requirements, for both
participants and the Administrator, to ensure the Commission has the
necessary information to measure progress towards meeting the
performance goals adopted in this Order. For consortium applicants, the
consortium leader will be responsible for preparing and submitting
these annual reports. Some of the data will already be collected
through other forms that participants will submit through the funding
process. We do not require non-consortium applicants to file annual
reports at this time because we expect to be able to collect
information through forms they already submit in connection with the
application process, or if necessary, through other simplified
automated interfaces. We delegate authority to the Bureau to work with
USAC to accomplish these tasks, and to modify specific reporting
requirements if necessary consistent with the requirements.
252. We also extend the current Pilot Program reporting requirement
for each Pilot project through and including the last funding year in
which the project receives Pilot support, but make it an annual instead
of a quarterly obligation. We will also make the Pilot Program
reporting requirements the same as the Healthcare Connect Fund
reporting requirements and delegate to the Bureau the authority to
specify whether any additional information from the quarterly report
should continue to be included in the annual report that might be
needed to evaluate the Pilot Program or to prevent waste, fraud, and
abuse in that program. As of the effective date of this Order, Pilot
projects are no longer required to file quarterly reports and instead
may file their first annual report on September 30, 2013. We further
delegate authority to the Bureau to determine the expiration of any
supplemental Pilot Program reporting requirements.
253. In specifying these reporting requirements, we have sought to
simplify and streamline the requirements as much as possible, in order
to minimize the burden on participants while still ensuring the funding
is used for its intended purpose. This furthers all of our performance
goals--expanding access to broadband and fostering health care networks
while maximizing the cost-effectiveness of the program. The data we
collect will also help us to measure progress toward each of these
goals.
VI. Additional Measures To Prevent Waste, Fraud, and Abuse
254. We adopt additional safeguards against waste, fraud, and
abuse. These are discussed set forth in new rule Sec. 54.648, in
various rule provisions requiring certifications, and elsewhere in the
rules and in this Order. The safeguards are patterned on the rules for
the Telecommunications Program, and incorporate many of the provisions
that proved effective in the Pilot Program in making the program
efficient and in safeguarding against waste, fraud, and abuse. The
provisions we adopt here also take into account the comments we
received in response to the NPRM. These safeguards are in addition to
many of the requirements for the Healthcare Connect Fund that are also
designed to protect against waste, fraud, and abuse.
255. In addition to the requirements, we remind participants in the
Healthcare Connect Fund that they will be subject to existing
Commission rules governing the exclusion of certain persons from
activities associated with or relating to the USF support mechanisms
(the ``suspension and disbarment'' rules). We also remind participants
that all entities that are delinquent in debt owed to the Commission
are be prohibited from receiving support until full payment or
satisfactory arrangement to pay the delinquent debt(s) is made,
pursuant to the Commission's ``red light'' rule implementing the Debt
Collection Improvement of 1996.
A. Recordkeeping, Audits, and Certifications
256. As proposed in the NPRM, we apply all relevant Pilot and
Telecommunications program requirements regarding recordkeeping,
audits, and certifications to participants in the Healthcare Connect
Fund, as modified herein, and we recodify those requirements in a new
rule section applicable to the new program.
257. Recordkeeping. Consistent with Sec. Sec. 54.619(a), (b), and
(d) of our current rules, program participants and vendors in the
Healthcare Connect Fund must maintain for five years certain
documentation related to the purchase and delivery of services, network
equipment, and participant-owned facilities funded by the program, and
they will be required to produce these records upon request. In
particular, participants who receive support for long-term capital
investments in facilities whose useful life extends beyond the period
of the funding commitment shall maintain records for at least 5 years
after the end of the useful life of the facility. The NPRM also
proposed to: (1) Clarify that the documents to be retained by
participants and vendors must include all records related to the
participant's application for, receipt of, and delivery of discounted
services; and (2) mandate that vendors, upon request, produce the
records kept pursuant to the Commission's recordkeeping requirement. We
adopt rules consistent with these proposals to enable the Commission
and USAC to obtain the records necessary for effective oversight of the
new Healthcare Connect Fund.
258. Audits and Site Visits. The Commission will continue to use
the
[[Page 13970]]
audit process to ensure there is a focused and effective system for
identifying and deterring program abuse. Consistent with existing Sec.
54.619(c) of the Commission's rules, participants in the Healthcare
Connect Fund will be subject to random audits to ensure compliance with
program rules and orders.
259. USAC must assess compliance with the program's requirements,
including the new requirements established in this Order for recipients
of RHC support. We direct USAC to review and revise the Beneficiary/
Contributor Compliance Audit Program (BCAP) and the Payment Quality
Assurance (PQA) program to take into account the changes adopted in
this Order when designing procedures for recipients of funding under
the Healthcare Connect Fund. We further direct USAC to submit a report
to the Bureau and Office of Managing Director (OMD), within 60 days of
the effective date of this Order or by May 31, 2013, whichever is
later, proposing changes to the BCAP and PQA programs consistent with
this Order.
260. We also direct USAC to conduct random site visits to
Healthcare Connect Fund participants to ensure that support is being
used for its intended purposes, or as necessary and appropriate based
on USAC's review of participants' submissions to USAC. We further
direct USAC to notify the Wireline Competition Bureau and the Office of
the Managing Director of any site visit findings and analysis within 45
days of the site visit.
261. Certifications. We adopt certification requirements for the
Healthcare Connect Fund that are similar to those in the existing RHC
programs. Participants in the Healthcare Connect Fund must certify
under oath to compliance with certain program requirements, including
the requirements to select the most cost-effective bid and to use
program support solely for purposes reasonably related to the provision
of health care services or instruction.
262. For individual HCP applicants, required certifications must be
provided and signed by an officer or director of the HCP, or other
authorized employee of the HCP (electronic signatures are permitted).
For consortium applicants, an officer, director, or other authorized
employee of the Consortium Leader must sign the required
certifications. USAC may not knowingly accept certifications signed by
a person who is not an officer, director, or other authorized employee
of the HCP or Consortium Leader.
263. Third parties may submit forms and other documentation on
behalf of the applicant, including the HCP or Consortium Leader's
signature and certifications, if USAC receives, prior to submission of
the forms or documentation, a written, dated, and signed authorization
from the relevant officer, director, or other authorized employee
stating that the HCP or Consortium Leader accepts all potential
liability from any errors, omissions, or misrepresentations on the
forms and/or documents being submitted by the third party. Consistent
with longstanding precedent, we find that a HCP or Consortium Leader
may not contractually reallocate responsibility for compliance with
program requirements to a consultant or similar third party.
264. We find that our actions here will preserve the integrity of
the program by protecting against wasteful or unlawful use of support.
B. Duplicative Support and Relationship to Other RHC Programs
265. Discussion. As the Commission proposed in the NPRM, we adopt a
rule prohibiting HCPs from receiving universal service support for the
same services from both the Telecommunications Program and the
Healthcare Connect Fund. This prohibition is necessary because, in
certain instances, an HCP's selected service could be eligible for
support under both the Telecommunications Program and the Healthcare
Connect Fund. Where this is the case, HCPs will not be permitted to
``double dip'' from the USF for the same connections. Applicants are
prohibited from submitting a funding request for the same service in
the Telecommunications Program and the Healthcare Connect Fund.
Further, consistent with the NPRM, we adopt a rule prohibiting HCPs
from receiving funds for the same services under either the
Telecommunications or the reformed RHC program and any other universal
service program. If an HCP is still receiving support under the Pilot
Program, it also will be subject to this same restriction on receiving
support from another FCC program for the same services. Under this
rule, an HCP only will be prohibited from receiving duplicative support
for the same services--not from receiving complementary support for
different services.
266. Our action here is consistent with the Commission's Pilot
Program requirement that participants cannot receive support for the
same service from both the Pilot Program and other universal service
programs. We believe that the prohibition on using funds from other
Universal Service programs as part of the HCP's 35 percent contribution
requirement is equally important in our reformed RHC program, and that
it will help safeguard against wasteful and unlawful duplicative
distribution of universal service support.
267. We do not believe, however, that it is necessary in the
Healthcare Connect Fund to prohibit the use of federal funds from non-
universal service program sources to be part of the HCP's 35 percent
contribution requirement. Here, the HCP contribution amount is
significantly greater than in the Pilot Program (35 percent as opposed
to 15 percent in the Pilot Program). While we are not aware of other
sources of federal funding for HCPs that could be used towards their 35
percent contribution, we do not want to preclude the possibility that a
recipient in our program could use funding from another federal agency
towards its 35 percent contribution. We anticipate that even if other
federal funding may be available, HCPs will still be required to secure
a significant portion of the cost of broadband supported by this
program through their own efforts.
268. We also do not preclude federal government entities, such as
the Indian Health Service, or other Tribal entities, from receiving
support under the Healthcare Connect Fund, even though their 35 percent
contribution may come from federal sources, as does the balance of the
budget of such entities. We also do not preclude HCPs from purchasing
services from entities that have received federal funds to assist in
infrastructure construction, such as through the Broadband
Telecommunications Opportunities Program or the Rural Utilities Service
Broadband Infrastructure Program. These programs are intended to
develop broadband infrastructure in geographic areas that are unserved
or underserved by broadband. It would defeat the value of federal
investment in such facilities if we were to prohibit such entities from
bidding to provide service under the Healthcare Connect Fund.
C. Recovery of Funds, Enforcement, and Debarment
269. Recovery of Funds. Consistent with the 2007 Program Management
Order, 72 FR 54214, September 24, 2007, Healthcare Connect Fund monies
that are disbursed in violation of a Commission rule that implements
the Act, or a substantive program goal, will be recovered. Recovery of
funds will be directed at the party or parties (including both
beneficiaries and
[[Page 13971]]
vendors) who have committed the statutory or rule violation. If more
than one party shares responsibility for a statutory or rule violation,
recovery actions may be initiated against both parties, and pursued
until the amount is satisfied by one of the parties. Failure to repay
recovery amounts may subject recipients to enforcement action by the
Commission, in addition to any collection action.
270. Enforcement and Criminal Sanctions. In the 2007 Program
Management Order, the Commission also found that sanctions, including
enforcement action, are appropriate in cases of waste, fraud, and abuse
in the universal service support programs, but not in cases of clerical
or ministerial errors. If any participant or vendor fails to comply
with Commission rules or orders, or fails to timely submit filings
required by such rules or orders, the Commission has the authority to
assess forfeitures for violations of such Commission rules and orders
under section 503 of the Act. In addition, any participant or service
provider that willfully makes a false statement(s) can be punished by
fine or forfeiture under sections 502 and 503 of the Communications
Act, or fine or imprisonment under Title 18 of the United States Code
(U.S.C.) including, but not limited to, criminal prosecution pursuant
to section 1001 of Title 18 of the U.S.C.
271. Debarment. In order to prevent fraud, and to prevent bad
actors from continuing to participate in the universal service
programs, Sec. 54.8 of the Commission's rules provides that the
Commission shall suspend and debar parties for conviction of, or civil
judgment for, fraud or other criminal offenses arising out of
activities associated with or related to the universal service support
mechanisms, absent extraordinary circumstances. These debarment
procedures in Sec. 54.8 of the Commission's rules will apply to the
Healthcare Connect Fund, just as they do to other Commission universal
service programs.
VII. Telecommunications Program Reform
272. This Order focuses on the creation of a new, reformed health
care support mechanism. The Healthcare Connect Fund replaces the
current RHC Internet Access Program. For the time being, we maintain
the current RHC Telecommunications Program, which funds the difference
between the rural rate for telecommunications services and the rate
paid for comparable services in urban areas. In doing so, we recognize
that the RHC Telecommunications Program is particularly important for
extremely remote places like Alaska. However, we would expect the
Healthcare Connect Fund to prove attractive to many of the HCPs that
currently receive support under the Telecommunications Program, as well
as to HCPs that do not currently participate in any RHC Program. Unlike
the Telecommunications Program, the new program will provide a flat
rate discount, a simpler application process for both single and
consortium applicants, flexibility for consortia to design their
networks in a cost-effective manner to best serve the needs of their
communities, support for certain network-related expenses, the
availability of multi-year and prepaid funding arrangements, and the
option for health care provider self-construction. And most
importantly, we also expect that many HCPs will be able to get higher
bandwidth service for lower out-of-pocket costs under the new program.
For all these reasons, we expect significant migration of HCPs out of
the Telecommunications Program and into the Healthcare Connect Fund
over time.
273. As the new Healthcare Connect Fund is implemented, we expect
to consider whether the Telecommunications Program remains necessary,
and if so whether reforms to the program are appropriate to ensure that
any continuing support under that program is provided in a cost-
effective manner. In doing so, we will, in particular, look at the
needs of extremely remote places like Alaska. Such reforms could
include changes to ensure subsidies provided under the program are set
at appropriate levels, to provide greater incentives for cost-efficient
purchasing by program participants, and to reduce the administrative
costs of the program, both to participants and to USAC.
274. In the meantime, the current Telecommunications Program rules
and procedures will continue to apply. In addition, because we view our
health care universal service programs as accomplishing the same
overarching goals, we make the performance goals and measures adopted
in this Order applicable in the Telecommunications Program as well as
to the Healthcare Connect Fund.
VIII. Pilot Program for Skilled Nursing Facility Connections
275. Discussion. There is evidence that skilled nursing facilities
are particularly well-suited to improve patient outcomes through
greater use of broadband. By their nature, they are often remote from
doctors and sophisticated laboratory and testing facilities, making the
availability of EHRs and telehealth an especially valuable benefit to
convalescents or patients for whom traveling to see a doctor,
diagnostician, or specialist would be especially difficult. On the
record before us, however, we are unable to determine how support for
SNFs can be provided as part of an ongoing program in a ``technically
feasible and economically reasonable'' manner, as required by section
254(h)(2)(A). Nor does the record currently allow us to balance the
potential benefits of supporting SNFs against the potential impact on
Fund demand. On this record, we reach no conclusion about whether or
under what circumstances a SNF might qualify as a health care provider
under the statute. We find, however, that funding connections used by
SNFs in working with HCPs has the potential to enhance access to
advanced services and to generate the associated health care benefits,
and that a limited pilot program would enable us to gain experience and
information that would allow us to determine whether such funding could
be provided on a permanent basis in the future.
276. We therefore conclude that it is both technically feasible and
economically reasonable to launch, as an initial step, a pilot program
to test how to support broadband connections for SNFs, with safeguards
to ensure that the support is directed toward SNFs that are using
broadband to help provide hospital-type care for those patients, and
that are using those broadband connections for telehealth applications
that improve the quality and efficiency of health care delivery. The
Skilled Nursing Facilities Pilot Program (SNF Pilot) will focus on
determining how we can best utilize program support to assist SNFs that
are using broadband connectivity to work with eligible HCPs to optimize
care for patients in SNFs through the use of EHRs, telemedicine, and
other broadband-enabled health care applications. We will fund up to
$50 million for this purpose within the existing health care support
mechanism, which remains capped at $400 million annually. We expect to
implement this SNF Pilot in Funding Year 2014. We conclude that a total
of $50 million may be disbursed for the SNF Pilot over a funding period
not to exceed three years, which will moderate the annual impact on
Fund demand.
277. We direct the Bureau to develop scoring criteria for
applications for the SNF Pilot consistent with the program goals,
soliciting input from HHS
[[Page 13972]]
(including IHS) and other stakeholders, and to specify other
requirements for the SNF Pilot, including safeguards to ensure that
funding is directed towards facilities that are engaged in the
provision of skilled care comparable to what is available in a hospital
or clinic. In order to maximize other Fund investments, only SNFs that
do not currently have broadband services sufficient to support their
intended telehealth activities are eligible to participate in the SNF
Pilot. The Bureau shall give a preference to applicants that partner
with existing or new consortia in the existing Pilot Program or the
Healthcare Connect Fund and to SNFs located in rural areas, and will
require applicants to demonstrate how proposed participation of SNFs
will improve the overall provision of health care by eligible HCPs. The
SNF Pilot Program will seek to collect data on a number of variables
related to the broadband connections supported and their health care
uses, so that at the conclusion of the SNF Pilot, the Commission can
use the data gathered to determine how to proceed with regard to
including SNFs in the Commission's health care support programs on a
permanent basis.
278. Once the scoring criteria are developed, the Bureau shall
release a Public Notice specifying the application procedures,
including dates, deadlines, and other details of the application
process. Except as necessary to meet the goals of the SNF Pilot, all
requirements applicable to the Healthcare Connect Fund, as described in
this Order, will apply to the SNF Pilot. After reviewing the
applications, the Bureau then will announce the SNF Pilot participants.
We delegate authority to the Bureau to implement the SNF Pilot
consistent with the framework established in this Order, and specify
that USAC shall disburse no more than $50 million to fund the SNF
Pilot, as directed by the Bureau.
279. To be eligible for funding, those seeking to participate in
SNF Pilot projects must commit to robust data gathering as well as
analysis and sharing of the data and to submitting an annual report.
Applicants will be expected to explain what types of data they intend
to gather and how they intend to gather that data. At the conclusion of
the Pilot, we expect applicants to be prepared to demonstrate with
objective, observable metrics the health care cost savings and/or
improved quality of patient care that have been realized through
greater use of broadband to provide telemedicine to treat the residents
of SNFs. We authorize USAC to use administrative expenses from the Fund
to perform data gathering and related functions. The Commission plans
to make this data public for the benefit of all interested parties,
including third parties that may use such information for their own
studies and observations.
IX. Miscellaneous
A. Implementation Timeline
280. Discussion. In this Order, we adopt for the Healthcare Connect
Fund the same general funding schedule that is currently used in the
Telecommunications and Internet Access Programs. Thus, applicants
seeking support under the Healthcare Connect Fund may start the
competitive bidding process anytime after January 1 (six months before
the July 1 start of the funding year) and can submit a request for
funding at any time during that funding year (i.e. between July 1 and
June 30) for services received during that funding year.
281. For the first funding year of the Healthcare Connect Fund (FY
2013, which runs from July 1, 2013 to June 30, 2014), we adopt a
schedule in which the funding for Pilot project applicants and new
applicants begins at different times. The schedule for Pilot project
applicants will remain unchanged. Starting on July 1, 2013, Pilot
projects can seek universal service support under the Healthcare
Connect Fund at a 65 percent discount level for existing HCP sites that
have exhausted funding allocated to them as well as for new sites to be
added to Pilot project networks.
282. For new applicants (either current Telecommunications or
Internet Access Program participants or HCPs new to the Commission's
programs), the funding schedule will be different in FY 2013. For FY
2013 only, the competitive bidding process for non-Pilot Healthcare
Connect Fund applicants will start in late summer 2013, with applicants
eligible to receive funds starting on January 1, 2014. This six-month
delay is necessary to complete administrative processes relating to the
new program, including obtaining approval for new forms under the
Paperwork Reduction Act. Starting in FY 2014 (July 1, 2014-June 30,
2015), all applicants will be on the same funding year schedule and
will be able to request funds from USAC between July 1-June 30, after
completing a competitive bidding process that may start on or after
January 1. In addition, to ensure a smooth transition and to minimize
the administrative burden, eligible rural HCPs may continue to receive
support under the RHC Internet Access Program through the end of
funding year 2013, or through June 30, 2014.
283. A timeline of the funding schedule for the first year of the
program for both Pilot project applicants and non-Pilot applicants
appears in the figure below.
Funding Year 2013 Implementation Timeline
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June
2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Pilot Project Applicants...... Pilot projects determine
their service needs and
prepare RFPs in
accordance with reformed
program rules
Competitive bidding
starts during second
quarter 2013
2013 Funding
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Pilot Project Applicants.. New program applicants organize themselves,
determine their service needs, and prepare RFPs
Competitive bidding starts during third quarter 2013
and continues through fourth quarter 2013
2013 Funding
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
284. As shown in the chart, starting the competitive bidding
process in summer of 2013 will give non-Pilot Healthcare Connect Fund
applicants time to organize as consortia, to determine their service
needs, to design RFPs, and to complete the competitive bidding process
before requesting funds from USAC. The experience of Pilot Program
participants suggest that it takes at least six months for consortia to
organize themselves, obtain the necessary authorizations from
individual health care providers, assess broadband needs for the
members, and
[[Page 13973]]
prepare RFPs. Pilot experience also suggests that can take
approximately six additional months for a consortium to post the RFP,
receive bids, evaluate bids properly, and negotiate a contract. If
funding were available July 1, 2013, new applicants would not have
enough time to complete all these steps. A possible result could be
poorly organized consortia and ill-considered network designs, which
would be inconsistent with our overarching program goals. In order to
maximize the cost-effectiveness of bulk buying and competitive bidding,
it is important to allow sufficient time for needs assessment, network
design, and RFP preparation, as well sufficient time to solicit a range
of competitive bids, select a vendor, and negotiate a contract. Making
funding available beginning January 1, 2014, will allow time for all
these activities to take place and to enable applicants to create well-
designed networks and to obtain cost-effective bids.
285. This funding cycle also will encourage individual HCPs to join
new or existing consortia rather than applying for funding alone. We
expect that some potential single HCP applicants will receive offers to
join existing Pilot project networks or newly-formed consortia. We
encourage this collaboration. As discussed in the Pilot Evaluation,
consortia are able to obtain higher bandwidths, lower rates, and better
service quality, and they save on administrative costs. By making
funding available at the same time for consortium applicants and single
applicants, there will be more time for coordination and outreach
between consortia applicants and their prospective members to occur. In
the meantime, individual HCPs can still receive support through the
Telecommunications or Internet Access Programs until they are eligible
to seek funds under the Healthcare Connect Fund.
286. The same considerations do not apply to the Pilot projects.
They have already completed the multi-step process of forming consortia
and conducting competitive bidding. Allowing them to begin receiving
funding effective July 1, 2013, will benefit both existing Pilot
project HCPs and HCPs that seek to join existing Pilot projects.
Allowing new sites joining existing Pilot projects to receive funds on
July 1, 2013, will encourage those projects to grow and become large-
scale networks. This funding schedule will also provide sites that will
exhaust Pilot Program funding on or before July 1, 2013, a smooth
transition into the new program. As the Commission observed in
providing transitional funding to such Pilot project HCPs in the Bridge
Funding Order, it is important for the sustainability of these networks
that they are not forced to transition twice to different RHC
programs--first to the Telecommunications or Internet Access Programs
and then to the Healthcare Connect Fund. Without an orderly transition
to the new program, some individual Pilot project HCPs could be at risk
of discontinuing their participation in their respective networks. This
would be contrary to the goals of the Pilot Program. Providing
continuing support (albeit at the discount level applicable under the
Healthcare Connect Fund) will help protect the investment the
Commission has already made in these networks.
287. Outreach efforts will be essential in order to maximize
potential of the Healthcare Connect Fund to support broadband and
thereby transform the provision of health care for both individual HCPs
and consortia. We therefore direct the Bureau to work with USAC to
develop and execute a range of outreach activities to make HCPs aware
of the new program and to educate them about the application process.
We expect the Bureau will consult with other health care regulatory
agencies (such as HHS); with state, local, and Tribal governments; with
organizations representing HCPs (especially rural HCPs); and with other
stakeholder groups to identify the best means to publicize the new
program and to identify likely beneficiaries of the new program--both
HCPs already participating in RHC programs and those that are not. We
direct USAC to produce and disseminate outreach materials designed to
educate eligible HCPs about the new program. In addition, we direct
USAC to implement a mechanism for any interested party to subscribe to
an automated alert from USAC when Healthcare Connect Fund requests for
services or RFPs are posted, based on available filtering criteria.
B. Pilot Program Transition Process and Requests for Additional Funds
288. The final deadline for filing requests for funding commitments
in the RHC Pilot Program was June 30, 2012. As discussed in the Pilot
Evaluation, several projects either withdrew from the program or merged
with other projects, leaving 50 active Pilot projects. Every one of
these remaining projects met the June 30 deadline for filing funding
commitment requests. USAC is likely to complete the processing of all
these funding requests by the end of calendar year 2012. Projects have
up to six years from the date of issuance of the initial funding
commitment letter for the applicable project to complete invoicing.
Thus, by the latter part of calendar year 2017, all invoicing under the
Pilot Program should be completed.
289. We would expect that as the Pilot projects and their member
HCPs begin to exhaust Pilot funding, they will migrate as consortia
into the Healthcare Connect Fund. Pilot participants are at different
points in the process of implementing their networks and invoicing for
the services or infrastructure in their projects. As discussed in the
Commission's Bridge Funding Order, released in July 2012, a number of
projects began to exhaust funding for some of their HCP sites in 2012,
and the Commission provided continued funding for those sites pursuant
to that order. Although we believe the rules we adopt in this Order
should permit an easy transition for the Pilot Program participants, we
delegate to the Bureau the authority to adopt any additional procedures
and guidelines that may be necessary to smooth this process. In the
Implementation Timeline section, we make support under the Healthcare
Connect Fund for the transitioning Pilot Program participants effective
on July 1, 2013, in order to ensure that there are no gaps in support
for them. We permit them to use the same forms they used in the Pilot
Program to secure funding pursuant to the Bridge Funding Order. Once
their currently committed Pilot funds are exhausted, they will be
required to provide a 35 percent contribution (not the 15 percent in
the Pilot Program), and will not be eligible to receive support for
anything that is not covered under the Healthcare Connect Fund.
290. Several Pilot projects filed requests for additional support,
asking the Commission to use funds that were originally allocated to
the Pilot Program, but were relinquished or unspent by other Pilot
projects that withdrew or did not use their full awards. In their
requests for additional funding, these pilot projects argued, among
other things, that remaining Pilot funding should be redirected to
projects that have demonstrated substantial progress with their
original awards and that these additional funds would facilitate
expansion of these successful projects.
291. In light of our creation of the new Healthcare Connect Fund,
we deny these requests for additional Pilot Program funding. First, we
note that Pilot projects may now seek additional funding through the
Healthcare Connect Fund, once their current awards are exhausted, so
there is no reason to
[[Page 13974]]
provide these Pilots preferential treatment over other consortia.
Second, the Pilot Program was just that--a pilot, or trial, program
launched to examine how the RHC program could be used to enhance HCP
access to advanced services and to lay the foundation for the reformed
program. It would be contrary to the limited scope of the Pilot Program
to authorize additional Pilot Program support at this time. Finally,
disbursement of additional Pilot program support would be inconsistent
with the Commission's 2007 directive that Pilot Program applicants that
were denied funding at that time could reapply for RHC funding in the
reformed program. The Pilot projects requesting additional support may
reapply in the reformed program, just as denied applicants may do. To
grant these requesting Pilot projects additional support without
requiring new applications would unfairly advantage them to the
detriment of the denied Pilot applicants. Instead, we direct USAC to
utilize unused Pilot Program funds for the demand associated with the
Healthcare Connect Fund.
292. We also dismiss a request by the Texas Health Information
Network Collaborative (TxHINC) for an extension of the June 30, 2012,
Pilot Program deadline for projects to choose vendors and request
funding commitment letters from USAC. In its request, TxHINC explains
that, due to circumstances unique to Texas, it was delayed in choosing
vendors and submitting funding requests to USAC. We dismiss TxHINC's
request, finding it moot because TxHINC ultimately filed its request
for funding commitments by the June 30, 2012 deadline.
C. Prioritization of Funding
293. In the NPRM, the Commission sought comment on whether to
establish an annual cap of $100 million for support under the proposed
Health Infrastructure Program, and sought comment on whether to
establish criteria for prioritizing funding should the infrastructure
program exceed that cap in a particular year. The Commission stated
that it did not believe that the proposed Health Broadband Services
Program initially would exceed the amount of available funds, but
sought comment on possible prioritization procedures in the event that
the total requests for funding under the Telecommunications and the new
programs were to exceed the Commission's established $400 million
annual cap.
294. Discussion. After consideration of the record received in
response to the prioritization proposals in the NPRM, we will continue
for the time being to apply the existing rule for addressing situations
when total requests exceed the $400 million cap. Demand in this program
has never come close to the $400 million annual cap, and we believe
that we are unlikely to reach the cap in the foreseeable future. We
direct USAC to periodically inform the public, through its web site, of
the total dollar amounts that have been (1) requested by HCPs, as well
as the total dollar amounts that have been actually committed by USAC
for the funding year. USAC should post this information for both the
$150 million cap on multi-year commitments and the $400 million cap
that applies to the entire rural health care supporty mechanism. We do
intend, however, to conduct further proceedings and issue an Order by
the end of 2013 regarding the prioritization of support for all the RHC
universal service programs. In the meantime, we will continue to rely
upon, as a backstop, the approach codified in our existing rules, in
the unlikely event that funding requests do reach the $400 million cap
before we have established other prioritization procedures.
295. We believe it is unlikely that the combined health care
support programs will approach the $400 million annual cap any time
soon. It will likely take a significant amount of time for new
consortia to organize, identify broadband needs, prepare RFPs, conduct
competitive bidding, and select vendors, and for that reason it will be
at least a year before funding will begin to flow to new applicants in
the program. Given the Pilot Program experience, it will likely take
even longer than that for many consortium applicants to be ready to
seek funding under the Healthcare Connect Fund. In addition, our
decision to require a 35 percent participant contribution, the
limitations we impose on participation by non-rural HCPs, and the $150
million cap on annual funds for upfront payments all should moderate
demand for funding in the near term. Finally, the pricing and other
efficiencies made possible through consortium purchase of a broader
array of services also should help drive down the cost of connections
supported by the RHC component of the Universal Service Fund, as some
Telecommunications Program participants migrate to the reformed
program. For that reason, we project growth in the combined health care
universal service fund to remain well under the $400 million cap over
the next five years. Because we lack historical demand data for the
Healthcare Connect Fund, and because the new program provides support
for multi-year contracts and other upfront payments, we direct the
Bureau, working with OMD and with the Administrator, to project the
amounts to be collected for the USF for the early period of the new
program, until such time as historical data provides an adequate basis
for projecting demand.
D. Offset Rule
296. In the NPRM, the Commission explained that, despite its
intended benefits, the offset rule can create inequities and
inefficiencies. Based on the offset rule's shortcomings, the Commission
proposed to eliminate the rule for participants in the Broadband
Services Program (now part of the Healthcare Connect Fund) and the
existing RHC program, and replace it with a rule allowing service
providers to receive direct reimbursement from USAC. The Commission
also sought comment on whether to retain the offset rule as an option
for contributors who wish to utilize this method.
297. Discussion. While the original intent of the offset rule was
to prevent waste, fraud, and abuse, we find that mandatory application
of the rule is no longer necessary or advisable. Our action here is not
the first instance in which the Commission has recognized the
shortcomings of the offset rule. Indeed, the Bureau has waived the
offset rule in several instances because strict application of the rule
would have jeopardized the precarious finances and operations of some
small, rural HCPs and their service providers. Further, service
providers who are not required to contribute to the Fund already
receive direct reimbursement. Based on the wide variety of vendors
participating in the Pilot Program, we believe that direct
reimbursement encouraged extensive bidding on RFPs in the Pilot
Program. Likewise, we expect that enabling carriers to elect direct
reimbursement in the Healthcare Connect Fund will encourage many more
vendors to bid on RFPs than if offset was mandatory, because they will
not have to wait to receive reimbursement until they can offset their
universal service contribution amount.
298. In light of the shortcomings of the offset rule discussed
above, and in consideration of the relevant comments, we revise Sec.
54.611 of the Commission's rules to eliminate mandatory application of
the offset procedure. Commenters unanimously support having the option
of direct reimbursement, arguing, among other
[[Page 13975]]
things, that the offset requirement is obsolete, outdated, and
administratively burdensome, and that it delays payment to carriers. We
will permit USF contributors in the Telecommunications Program and the
Healthcare Connect Fund to elect whether to treat the amount eligible
for support as an offset against their universal service contribution
obligation, or to receive direct reimbursement from USAC. We adopt a
new rule for the Healthcare Connect Fund and the Telecommunications
Program to effectuate this approach.
299. We note that, while commenters unanimously support direct
reimbursement, they do not agree on whether to maintain offset as an
option. TeleQuality recommends that service providers be given an
offset option. Several other commenters do not directly advocate for an
offset option but implicitly support it in their support of our
proposed rule which includes an offset option. Conversely, a few
commenters seek elimination of offset even as an option, with Charter
Communications asking the Commission to ``formalize its recognition of
the deficiencies of the offset rule by eliminating it in the new RHC
programs.'' While we recognize the deficiencies of mandatory offset, we
conclude it is appropriate to maintain offset as an option because it
affords flexibility to carriers that deem offset simpler or otherwise
more beneficial than direct reimbursement. Further, while carriers such
as Charter and GCI prefer, and likely will choose, direct
reimbursement, an offset option will not disadvantage them in any way.
Finally, our revised rule is consistent with the choice available in
the E-rate program, in which service providers may opt to use the
offset method or receive direct reimbursement from USAC.
300. Also as we do in the E-rate program, each January we will
require service providers to elect the method by which they will be
reimbursed, and require that they remain subject to this method for the
duration of the calendar year using Form 498, as is the case in the E-
rate program. Form 498 will need to be revised to accommodate such
elections in the health care support mechanism, and the revised form is
unlikely to be approved by OMB under the Paperwork Reduction Act prior
to January 31, 2013. Therefore, once revised Form 498 is available, we
direct the Bureau to announce via public notice a 30-day window for
service providers to make their offset/direct reimbursement election
for the health care support mechanism for 2013. To the extent that a
service provider fails to remit its monthly universal service
obligation, however, any support owed to it under the Healthcare
Connect Fund or the Telecommunications Program will automatically be
applied as an offset to the service provider's annual universal service
obligation.
E. Delegation To Revise Rules
301. Given the complexities associated with modifying existing
rules as well as other reforms adopted in this Order, we delegate
authority to the Bureau to make any further rule revisions as necessary
to ensure the reforms adopted in this Order are reflected in the rules.
This includes correcting any conflicts between the new and or revised
rules and existing rules as well as addressing any omissions or
oversights. If any such rule changes are warranted, the Bureau shall be
responsible for such change. We note that any entity that disagrees
with a rule change made on delegated authority will have the
opportunity to file an Application for Review by the full Commission.
X. Procedural Matters
A. Final Regulatory Flexibility Certification
302. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the NPRM. The Commission sought written public comment
on the proposals in the NPRM, including comment on the IRFA. This
present Final Regulatory Flexibility Analysis (FRFA) conforms to the
RFA.
1. Need for, and Objectives of, the Order
303. The Commission is required by section 254 of the
Communications Act of 1934, as amended, to promulgate rules to
implement the universal service provisions of section 254. On May 8,
1997, the Commission adopted rules that reformed its system of
universal service support mechanisms so that universal service is
preserved and advanced as markets move toward competition. Among other
programs, the Commission adopted a program to provide discounted
telecommunications services to public or non-profit health care
providers (HCPs) that serve persons in rural areas. The changing
technological landscape in rural health care over the past decade has
prompted us to propose a new structure for the rural health care
universal service support mechanism.
304. In this Order, we reform the Rural Health Care (RHC) Support
Mechanism and adopt the Healthcare Connect Fund to expand HCP access to
high-speed broadband capability and broadband health care networks,
improving the quality and reducing the cost of health care throughout
America, particularly in rural areas. Additionally, we adopt a pilot
program to be implemented in 2014 to test how to support broadband
connections for skilled nursing facilities (SNF Pilot).
305. Building on recommendations from the Staff Evaluation of the
Pilot Program and comments received in response to the Commission's
NPRM and the July 19 Public Notice, the reforms adopted in this Order
build on the substantial impact the RHC program has on improving
broadband connectivity to HCPs. Broadband connectivity generates a
number of benefits and cost savings for HCPs. First, telemedicine
enables patients in rural areas to access specialists and can improve
the speed and enhance the quality of health care everywhere. Second,
connectivity enables the exchange of electronic health records, which
is likely to become more widespread as more providers adopt
``meaningful use'' of such records. Third, connectivity enables the
exchange of large medical images (such as MRIs and CT scans), which can
improve the speed and quality of diagnosis and treatment. Fourth,
connectivity enables remote health care personnel to be trained via
videoconference and to exchange other technical and medical expertise.
Fifth, these ``telehealth'' applications have the potential to greatly
reduce the cost of providing health care, for example by reducing
length of stay or saving on patient transport costs. Finally,
telemedicine can help rural HCPs keep and treat patients locally, thus
enhancing revenue streams and helping rural providers to keep their
doors open.
2. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
306. No comments were filed in response to the IFRA attached to the
NPRM. Notwithstanding the foregoing, some general comments discussing
the impact of the proposed rules on small businesses were submitted in
response to the NPRM and the July 19 Public Notice.
307. Several commenters expressed concern that administrative and
reporting requirements for the new program might be too burdensome for
small HCPs. Many commenters suggested abandoning quarterly reporting
requirements in favor of annual or semi-annual reporting to reduce
administrative burdens. Several commenters asked for a common
[[Page 13976]]
reporting format, and requested that reporting requirements not be too
onerous. OHN recommended that the Commission authorize electronic
signatures for all processes, especially the invoice approval process;
permit electronic document submission; permit electronic administrative
linkage into FCC/USAC project tracking systems; and support web-based
electronic survey and reporting tools to gather, present, and compare
data. Some commenters also expressed concern that imposing detailed
technical requirements on health services infrastructure projects might
``discourage investment in broadband infrastructure projects and even
foreclose the use of certain technologies.''
308. Responses to the NPRM and July 19 Public Notice also
emphasized a streamlined approach to the competitive bidding
requirements through the use of consortium applications and multiyear
contracts. For example, one commenter stated that consortium
applications would take the administrative burden off small HCPs who do
not have the time or resources to apply for funds. However, one of the
Pilot Projects, PSPN, noted that a mandated multi-year contract for at
least 5 years could be burdensome to service providers.
309. Finally, one commenter specifically recommended that the
Commission encourage participation from small and women-owned
businesses by reducing or waiving matching contributions requirements
for non-profit small and women-owned businesses acting as consortium
leaders; streamlining administrative reporting requirements; and
increasing the performance bond minimum requirement for contracts of
$300,000 or higher from the $150,000 floor. In making the
determinations reflected in this Order, we have considered the impact
of our actions on small entities.
3. Description and Estimate of the Number of Small Entities to Which
Rules Will Apply
310. The RFA directs agencies to provide a description of, and,
where feasible, an estimate of, the number of small entities that may
be affected by the rules adopted herein. The RFA generally defines the
term ``small entity'' as having the same meaning as the terms ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A ``small business concern'' is one which: (1) Is independently
owned and operated; (2) is not dominant in its field of operation; and
(3) satisfies any additional criteria established by the Small Business
Administration (SBA). In 2009, there were 27.5 million businesses in
the United States, according to SBA Office of Advocacy estimates. The
latest available Census data show that there were 5.9 million firms
with employees in 2008 and 21.4 million without employees in 2008.
Small firms with fewer than 500 employees represent 99.9 percent of the
total (employers and non-employers), as the most recent data show there
were 18,469 large businesses in 2008.
311. Small entities potentially affected by the reforms adopted
herein include eligible non-profit and public health care providers and
the eligible service providers offering them services, including
telecommunications service providers, Internet Service Providers
(ISPs), and vendors of the services and equipment used for dedicated
broadband networks.
i. Health Care Entities
312. As noted earlier, non-profit businesses and small governmental
units are considered ``small entities'' within the RFA. In addition, we
note that census categories and associated generic SBA small business
size categories provide the following descriptions of small entities.
The broad category of Ambulatory Health Care Services consists of
further categories and the following SBA small business size standards.
The categories of small business providers with annual receipts of $7
million or less consists of: Offices of Dentists; Offices of
Chiropractors; Offices of Optometrists; Offices of Mental Health
Practitioners (except Physicians); Offices of Physical, Occupational
and Speech Therapists and Audiologists; Offices of Podiatrists; Offices
of All Other Miscellaneous Health Practitioners; and Ambulance
Services. The category of such providers with $10 million or less in
annual receipts consists of: Offices of Physicians (except Mental
Health Specialists); Family Planning Centers; Outpatient Mental Health
and Substance Abuse Centers; Health Maintenance Organization Medical
Centers; Freestanding Ambulatory Surgical and Emergency Centers; All
Other Outpatient Care Centers, Blood and Organ Banks; and All Other
Miscellaneous Ambulatory Health Care Services. The category of such
providers with $13.5 million or less in annual receipts consists of:
Medical Laboratories; Diagnostic Imaging Centers; and Home Health Care
Services. The category of Ambulatory Health Care Services providers
with $34.5 million or less in annual receipts consists of Kidney
Dialysis Centers. For all of these Ambulatory Health Care Service
Providers, census data indicate that there are a combined total of
368,143 firms that operated for all of 2002. Of these, 356,829 had
receipts for that year of less than $5 million. In addition, an
additional 6,498 firms had annual receipts of $5 million to $9.99
million; and additional 3,337 firms had receipts of $10 million to
$24.99 million; and an additional 865 had receipts of $25 million to
$49.99 million. We therefore estimate that virtually all Ambulatory
Health Care Services providers are small, given SBA's size categories.
We note, however, that our rules affect non-profit and public health
care providers, and many of the providers noted above would not be
considered ``public'' or ``non-profit.''
313. The broad category of Hospitals consists of the following
categories, with an SBA small business size standard of annual receipts
of $34.5 million or less: General Medical and Surgical Hospitals,
Psychiatric and Substance Abuse Hospitals; and Specialty (Except
Psychiatric and Substance Abuse) Hospitals. For these health care
providers, census data indicate that there is a combined total of 3,800
firms that operated for all of 2002, of which 1,651 had revenues of
less than $25 million, and an additional 627 firms had annual receipts
of $25 million to $49.99 million. We therefore estimate that most
Hospitals are small, given SBA's size categories.
314. The broad category of Nursing and Residential Care Facilities
consists, inter alia, of the category of Skilled Nursing Facilities,
with a small business size standard of annual receipts of $13.5 million
or less. For these businesses, census data indicate that there were a
total of 16,479 firms that operated for all of 2002. All of these firms
had annual receipts of below $1 million. We therefore estimate that
such firms are small, given SBA's size standard.
315. The broad category of Social Assistance consists, inter alia,
of the category of Emergency and Other Relief Services, with a small
business size standard of annual receipts of $7 million or less. For
these health care providers, census data indicate that there were a
total of 55 firms that operated for all of 2002. All of these firms had
annual receipts of below $1 million. We therefore estimate that all
such firms are small, given SBA's size standard.
[[Page 13977]]
ii. Providers of Telecommunications and Other Services
a. Telecommunications Service Providers
316. Wired Telecommunications Carriers. The SBA has developed a
small business size standard for Wired Telecommunications Carriers,
which consists of all such companies having 1,500 or fewer employees.
According to Census Bureau data for 2007, there were a total of 3,188
firms in this category that operated for the entire year. Of this
total, 3144 firms employed 999 or fewer employees, and 44 firms
employed 1000 employees or more. Thus, under this size standard, the
majority of firms can be considered small entities that may be affected
by rules adopted pursuant to this Order.
317. Incumbent Local Exchange Carriers (LECs). Neither the
Commission nor the SBA has developed a size standard for small
businesses specifically applicable to local exchange services. The
closest applicable size standard under SBA rules is for Wired
Telecommunications Carriers. Under that size standard, such a business
is small if it has 1,500 or fewer employees. According to Commission
data, 1,307 carriers reported that they were incumbent local exchange
service providers. Of these carriers, an estimated 1,006 have 1,500 or
fewer employees and 301 have more than 1,500 employees. Consequently,
the Commission estimates that most providers of local exchange service
are small entities that may be affected by rules adopted pursuant to
this Order.
318. We have included small incumbent LECs in this present RFA
analysis. A ``small business'' under the RFA is one that, inter alia,
meets the pertinent small business size standard (e.g., a telephone
communications business having 1,500 or fewer employees), and ``is not
dominant in its field of operation.'' The SBA's Office of Advocacy
contends that, for RFA purposes, small incumbent LECs are not dominant
in their field of operation because any such dominance is not
``national'' in scope. We have therefore included small incumbent LECs
in this RFA analysis, although we emphasize that this RFA action has no
effect on Commission analyses and determinations in other, non-RFA
contexts.
319. Competitive Local Exchange Carriers (competitive LECs),
Competitive Access Providers (CAPs), Shared-Tenant Service Providers,
and Other Local Service Providers. Neither the Commission nor the SBA
has developed a small business size standard specifically for these
service providers. The closest applicable size standard under SBA rules
is for Wired Telecommunications Carriers. Under that size standard,
such a business is small if it has 1,500 or fewer employees. According
to Commission data, 1,442 carriers reported that they were engaged in
the provision of either competitive local exchange services or
competitive access provider services. Of these carriers, an estimated
1,256 have 1,500 or fewer employees and 186 have more than 1,500
employees. In addition, 17 carriers have reported that they are Shared-
Tenant Service Providers, and all 17 are estimated to have 1,500 or
fewer employees. In addition, 72 carriers have reported that they are
Other Local Service Providers. Of these 72 carriers, an estimated 70
have 1,500 or fewer employees and two have more than 1,500 employees.
Consequently, the Commission estimates that most providers of
competitive local exchange service, competitive access providers,
Shared-Tenant Service Providers, and Other Local Service Providers are
small entities that may be affected by rules adopted pursuant to this
Order.
320. Interexchange Carriers. Neither the Commission nor the SBA has
developed a size standard for small businesses specifically applicable
to interexchange services. The closest applicable size standard under
SBA rules is for Wired Telecommunications Carriers. Under that size
standard, such a business is small if it has 1,500 or fewer employees.
According to Commission data, 359 companies reported that their primary
telecommunications service activity was the provision of interexchange
services. Of these companies, an estimated 317 have 1,500 or fewer
employees and 42 have more than 1,500 employees. Consequently, the
Commission estimates that the majority of interexchange service
providers are small entities that may be affected by rules adopted
pursuant to this Order.
321. Wireless Telecommunications Carriers (except Satellite). Since
2007, the SBA has recognized wireless firms within this new, broad,
economic census category. Prior to that time, such firms were within
the now-superseded categories of ``Paging'' and ``Cellular and Other
Wireless Telecommunications.'' Under the present and prior categories,
the SBA has deemed a wireless business to be small if it has 1,500 or
fewer employees. For this category, census data for 2007 show that
there were 1,383 firms that operated for the entire year. Of this
total, 1,368 firms employed 999 or fewer employees and 15 employed 1000
employees or more. Similarly, according to Commission data, 413
carriers reported that they were engaged in the provision of wireless
telephony, including cellular service, Personal Communications Service
(PCS), and Specialized Mobile Radio (SMR) Telephony services. Of these,
an estimated 261 have 1,500 or fewer employees and 152 have more than
1,500 employees. Consequently, the Commission estimates that
approximately half or more of these firms can be considered small.
Thus, using available data, we estimate that the majority of wireless
firms can be considered small entities that may be affected by the
rules adopted pursuant to this Order.
322. Wireless Telephony. Wireless telephony includes cellular,
personal communications services, and specialized mobile radio
telephony carriers. As noted, the SBA has developed a small business
size standard for Wireless Telecommunications Carriers (except
Satellite). Under the SBA small business size standard, a business is
small if it has 1,500 or fewer employees. According to the 2008 Trends
Report, 434 carriers reported that they were engaged in wireless
telephony. Of these, an estimated 222 have 1,500 or fewer employees and
212 have more than 1,500 employees. We have estimated that 222 of these
are small under the SBA small business size standard.
323. Satellite Telecommunications and All Other Telecommunications.
Since 2007, the SBA has recognized satellite firms within this revised
category, with a small business size standard of $15 million. The most
current Census Bureau data are from the economic census of 2007, and we
will use those figures to gauge the prevalence of small businesses in
this category. Those size standards are for the two census categories
of ``Satellite Telecommunications'' and ``Other Telecommunications.''
Under the ``Satellite Telecommunications'' category, a business is
considered small if it had $15 million or less in average annual
receipts. Under the ``Other Telecommunications'' category, a business
is considered small if it had $25 million or less in average annual
receipts.
324. The first category of Satellite Telecommunications ``comprises
establishments primarily engaged in providing point-to-point
telecommunications services to other establishments in the
telecommunications and broadcasting industries by forwarding and
receiving communications signals via a system of satellites or
reselling satellite
[[Page 13978]]
telecommunications.'' For this category, Census Bureau data for 2007
show that there were a total of 512 firms that operated for the entire
year. Of this total, 464 firms had annual receipts of under $10
million, and 18 firms had receipts of $10 million to $24,999,999.
Consequently, we estimate that the majority of Satellite
Telecommunications firms are small entities that might be affected by
rules adopted pursuant to this Order.
325. The second category of Other Telecommunications ``primarily
engaged in providing specialized telecommunications services, such as
satellite tracking, communications telemetry, and radar station
operation. This industry also includes establishments primarily engaged
in providing satellite terminal stations and associated facilities
connected with one or more terrestrial systems and capable of
transmitting telecommunications to, and receiving telecommunications
from, satellite systems. Establishments providing Internet services or
voice over Internet protocol (VoIP) services via client-supplied
telecommunications connections are also included in this industry.''
For this category, Census Bureau data for 2007 show that there were a
total of 2,383 firms that operated for the entire year. Of this total,
2,346 firms had annual receipts of under $25 million. Consequently, we
estimate that the majority of Other Telecommunications firms are small
entities that might be affected by our action.
b. Internet Service Providers
326. Internet Service Providers. Since 2007, these services have
been defined within the broad economic census category of Wired
Telecommunications Carriers; that category is defined as follows:
``This industry comprises establishments primarily engaged in operating
and/or providing access to transmission facilities and infrastructure
that they own and/or lease for the transmission of voice, data, text,
sound, and video using wired telecommunications networks. Transmission
facilities may be based on a single technology or a combination of
technologies.'' The SBA has developed a small business size standard of
1,500 or fewer employees. According to Census Bureau data from 2007,
there were 3,188 firms in this category, total, that operated for the
entire year. Of this total, 3,144 firms had employment of 999 or fewer
employees, and 44 firms had employment of 1000 employees or more.
Consequently, we estimate that the majority of these firms are small
entities that may be affected by rules adopted pursuant to this Order.
327. Data Processing, Hosting, and Related Services. Entities in
this category ``primarily * * * provid[e] infrastructure for hosting or
data processing services.'' The SBA has developed a small business size
standard for this category; that size standard is $25 million or less
in average annual receipts. According to Census Bureau data for 2007,
there were 8,060 firms in this category that operated for the entire
year. Of these, 7,744 had annual receipts of under $24,999,999.
Consequently, we estimate that the majority of these firms are small
entities that may be affected by rules adopted pursuant to this Order.
328. All Other Information Services. The Census Bureau defines this
industry as including ``establishments primarily engaged in providing
other information services (except news syndicates, libraries,
archives, Internet publishing and broadcasting, and Web search
portals).'' Our action pertains to interconnected VoIP services, which
could be provided by entities that provide other services such as
email, online gaming, web browsing, video conferencing, instant
messaging, and other, similar IP-enabled services. The SBA has
developed a small business size standard for this category; that size
standard is $7.0 million or less in average annual receipts. According
to Census Bureau data for 2007, there were 367 firms in this category
that operated for the entire year. Of these, 334 had annual receipts of
under $5.0 million, and an additional 11 firms had receipts of between
$5 million and $9,999,999. Consequently, we estimate that the majority
of these firms are small entities that may be affected by rules adopted
pursuant to this Order.
c. Vendors and Equipment Manufacturers
329. Vendors for Infrastructure Development or ``Network Buildout''
Construction. The Commission has not developed a small business size
standard specifically directed toward manufacturers of network
facilities. The closest applicable definition of a small entity are the
size standards under the SBA rules applicable to manufacturers of
``Radio and Television Broadcasting and Communications Equipment''
(RTB) and ``Other Communications Equipment.''
330. Telephone Apparatus Manufacturing. The Census Bureau defines
this category as follows: ``This industry comprises establishments
primarily engaged in manufacturing wire telephone and data
communications equipment. These products may be standalone or board-
level components of a larger system. Examples of products made by these
establishments are central office switching equipment, cordless
telephones (except cellular), PBX equipment, telephones, telephone
answering machines, LAN modems, multi-user modems, and other data
communications equipment, such as bridges, routers, and gateways.'' The
SBA has developed a small business size standard for Telephone
Apparatus Manufacturing, which is: All such firms having 1,000 or fewer
employees. According to Census Bureau data for 2002, there were a total
of 518 establishments in this category that operated for the entire
year. Of this total, 511 had employment of under 1,000, and an
additional 7 had employment of 1,000 to 2,499. Thus, under this size
standard, the majority of firms can be considered small.
331. Radio and Television Broadcasting and Wireless Communications
Equipment Manufacturing. The Census Bureau defines this category as
follows: ``This industry comprises establishments primarily engaged in
manufacturing radio and television broadcast and wireless
communications equipment. Examples of products made by these
establishments are: Transmitting and receiving antennas, cable
television equipment, GPS equipment, pagers, cellular phones, mobile
communications equipment, and radio and television studio and
broadcasting equipment.'' The SBA has developed a small business size
standard for Radio and Television Broadcasting and Wireless
Communications Equipment Manufacturing, which is: All such firms having
750 or fewer employees. According to Census Bureau data for 2002, there
were a total of 1,041 establishments in this category that operated for
the entire year. Of this total, 1,010 had employment of under 500, and
an additional 13 had employment of 500 to 999. Thus, under this size
standard, the majority of firms can be considered small.
332. Other Communications Equipment Manufacturing. The Census
Bureau defines this category as follows: ``This industry comprises
establishments primarily engaged in manufacturing communications
equipment (except telephone apparatus, and radio and television
broadcast, and wireless communications equipment).'' The SBA has
developed a small business size standard for Other Communications
Equipment Manufacturing, which is: All such firms
[[Page 13979]]
having 750 or fewer employees. According to Census Bureau data for
2002, there were a total of 503 establishments in this category that
operated for the entire year. Of this total, 493 had employment of
under 500, and an additional 7 had employment of 500 to 999. Thus,
under this size standard, the majority of firms can be considered
small.
4. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements for Small Entities
333. The reporting and recordkeeping requirements in this Order
could have an impact on both small and large entities. However, even
though the impact may be more financially burdensome for smaller
entities, the Commission believes the impact of such requirements is
outweighed by the benefit of providing the additional support necessary
to make broadband available for HCPs to provide health care to rural
and remote areas, and to make broadband rates for public and non-profit
HCPs lower. Further, these requirements are necessary to ensure that
the statutory goals of section 254 of the Telecommunications Act of
1996 are met without waste, fraud, or abuse.
334. Eligibility Determination. For each HCP listed, applicants
will be required to provide the HCP's address and contact information;
identify the eligible HCP type; provide an address for each physical
location that will receive supported connectivity; provide a brief
explanation for why the HCP is eligible under the Act and the
Commission's rules and orders; and certify to the accuracy of this
information under penalty of perjury.
335. Consortium Leaders should obtain supporting information and/or
documents to support eligibility for each HCP when they collect LOAs.
Consortium applicants must also submit documentation regarding network
planning as part of the application process, although the Commission
will monitor experience under the new rule, and may make adjustments in
the future, if necessary, to ensure that this requirement is minimally
burdensome while creating appropriate incentives for applicants to make
thoughtful, cost-effective purchases. Applicants in the Healthcare
Connect Fund are not required to submit technology plans with their
requests for service, but the Commission may re-evaluate this decision
in the future based on experience with the new program.
336. Process for initiating competitive bidding for requested
services. Applicants must develop appropriate evaluation criteria for
selecting the winning bid before submitting a request for services to
USAC to initiate competitive bidding. The evaluation criteria should be
based on the Commission's definition of ``cost-effective,'' and include
the most important criteria needed to provide health care, as
determined by the applicant. Applicants should also begin to identify
possible sources for the 35 percent of undiscounted costs.
337. Applicants subject to competitive bidding must submit new FCC
Form 461 and supporting documentation to the Universal Service
Administrative Company (USAC). On Form 461, applicants must provide
basic information regarding the HCP(s) on the application (including
contact information for potential bidders); a brief description of the
desired services; and certifications designed to ensure compliance with
program rules and minimize waste, fraud, and abuse.
338. Applicants must supplement their Form 461 with a Request for
Proposals (RFP) on USAC's Web site in the following instances: (1)
Consortium applications that seek more than $100,000 in program support
in a funding year; (2) applicants who are required to issue an RFP
under applicable state or local procurement rules or regulations; and
(3) consortium applications that seek support for infrastructure (i.e.
HCP-owned facilities) as well as services. In addition, any applicant
is free to post an RFP.
339. Applicants also are required to submit the following
documents, which will not be publicly posted by USAC.
340. Form 460. Applicants should submit Form 460 to certify to the
eligibility of HCP(s) listed on the application, if they have not
previously done so.
341. Letters of Agency for Consortium Applicants. Consortium
applicants should submit letters of agency demonstrating that the
Consortium Leader is authorized to submit Forms 460, 461, and 462, as
applicable, including required certifications and any supporting
materials, on behalf of each participating HCP in the consortium.
342. Declaration of Assistance. As in the Pilot Program, all
applicants must identify, through a Declaration of Assistance, any
consultants, service providers, or any other outside experts, whether
paid or unpaid, who aided in the preparation of their applications. The
Declaration of Assistance must be filed with the Form 461. Identifying
these consultants and outside experts facilitates the ability of USAC,
the Commission, and law enforcement officials to identify and prosecute
individuals who may seek to defraud the program or engage in other
illegal acts. To ensure participants comply with the competitive
bidding requirements, they must disclose all of the types of
relationships explained above.
343. Finally, all applicants subject to competitive bidding must
certify to USAC that the services and/or infrastructure selected are,
to the best of the applicant's knowledge, the most cost-effective
option available. Applicants must submit documentation to USAC to
support their certifications, including a copy of each bid received
(winning, losing, and disqualified), the bid evaluation criteria, and
any other related documents, such as bid evaluation sheets; a list of
people who evaluated bids (along with their title/role/relationship to
the applicant organization); memos, board minutes, or similar documents
related to the vendor selection/award; copies of notices to winners;
and any correspondence with service providers during the bidding/
evaluation/award phase of the process. Bid evaluation documents need
not be in a certain format, but the level of documentation should be
appropriate for the scale and scope of the services for which support
is requested.
344. Reporting Requirements. Data from participants and USAC are
essential to the Commission's ability to evaluate whether the program
is meeting its performance goals, and to measure progress toward
meeting those goals. In the Healthcare Connect Program, each consortium
lead entity must file an annual report with USAC on or before July 30
for the preceding funding year (i.e., July 1 through and including June
30). Individual HCP applicants do not have to fine annual reports,
however.
345. Recordkeeping. Consistent with Sec. Sec. 54.619(a), (b), and
(d) of the Commission's current rules, participants and service
providers in the Healthcare Connect Fund must maintain certain
documentation related to the purchase and delivery of services funded
by the RHC programs, and will be required to produce these records upon
request.
346. The NPRM also proposed to: (1) clarify that the documents to
be retained by participants and service providers must include all
records related to the participant's application for, receipt of, and
delivery of discounted services; and (2) amend the existing rules to
mandate that service providers, upon request, produce the records kept
pursuant to the Commission's recordkeeping requirement. This Order
adopts rules consistent with these proposals to enable the Commission
and USAC to
[[Page 13980]]
obtain the records necessary for effective oversight of the RHC
programs.
347. Certifications. Consistent with Sec. Sec. 54.603(b) and
54.615(c) of the current rules, participants in the Healthcare Connect
Fund must certify under oath to compliance with certain program
requirements, including the requirements to select the most cost-
effective bid and to use program support solely for purposes reasonably
related to the provision of health care services or instruction. For
individual HCP applicants, required certifications must be provided and
signed by an officer or director of the HCP, or other authorized
employee of the HCP (electronic signatures are permitted). For
consortium applicants, an officer, director, or other authorized
employee of the Consortium Leader must sign the required
certifications.
348. Vendors SPIN Requirement. All vendors participating in the
Healthcare Connect Fund must obtain a Service Provider Identification
Number (SPIN) by submitting an FCC Form 498. The SPIN is a unique
number assigned to each service provider by USAC, and serves as USAC's
tool to ensure that support is directed to the correct service
provider. SPINs must be assigned before USAC can authorize support
payments. Therefore, all service providers submitting bids to provide
services to selected participants will need to complete and submit a
Form 498 to USAC for review and approval if selected by a participant
before funding commitments can be made.
349. Skilled Nursing Facility (SNF) Pilot. SNF Pilot applicants
must demonstrate how proposed participation of SNFs will improve the
overall provision of health care by eligible HCPs. SNF Pilot applicants
and participants must submit data on a number of variables (to be
determined by the Bureau at a later date) related to the broadband
connections supported and their health care uses, so that at the
conclusion of the SNF Pilot, the Commission can use the data gathered
to determine how to proceed with regard to including SNFs in the
Commission's health care support programs on a permanent basis. SNF
Pilot applicants also must commit to robust data gathering and
analysis, and to submission of an annual report. Applicants must
explain what types of data they intend to gather and how they intend to
gather that data. At the conclusion of the Pilot, participants must
demonstrate the health care cost savings and/or improved quality of
patient care that have been realized through greater use of broadband
to provide telemedicine to treat the residents of SNFs.
5. Steps Taken To Minimize the Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
350. The FRFA requires an agency to describe any significant
alternatives that it has considered in developing its approach, which
may include the following four alternatives (among others): ``(1) The
establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance and reporting requirements under the rule for such small
entities; (3) the use of performance rather than design standards; and
(4) an exemption from coverage of the rule, or any part thereof, for
such small entities.'' Accordingly, we have taken the following steps
to minimize the impact on small entities.
351. Consortium approach. Consistent with support from commenters,
this Order adopts a streamlined application process that facilitates
consortium applications, which should enable HCPs to file many fewer
applications and to share the administrative costs of all aspects of
participation in the program. Each consortium must file only one
application, instead of each individual HCP filing separate
applications. Applying as a consortium is simpler, cheaper, and more
efficient for small HCPs. Under the consortium approach adopted in this
Order, the expenses associated with planning the network, applying for
funding, issuing RFPs, contracting with service providers, and
invoicing are shared among a number of providers. This should help
ensure that applicants, including small entities, will not be deterred
from applying for support due to administrative burdens.
352. Flat-Rate Discount. In order to encourage participation in the
Healthcare Connect Fund and relieve planning uncertainties for smaller
entities, this Order adopts a flat-rate discount of 65 percent, clearly
identifying the level of support that providers can reasonably expect
to receive. By adopting a flat-rate discount, the Commission provides a
clear and predictable support amount, thereby helping eligible HCPs to
plan for their broadband needs. This approach is also less complex and
easier to administer, which should expedite the application process and
reduce administrative expenses for small entities.
353. Competitive Bidding Exemptions. While competitive bidding is
essential to the program, it is not without administrative costs to
participants. In three situations, exempting funding requests from
competitive bidding strikes a common-sense balance between efficient
use of program funds and reducing regulatory costs. First, based on our
experience in the existing RHC programs, it will be more
administratively efficient to exempt applicants seeking support for
relatively small amounts. The threshold for this exemption is $10,000
or less in total annual undiscounted costs (which, with a 35 percent
minimum applicant contribution, results in a maximum of $6,500 annually
in Fund support). Second, if an applicant is required by federal, state
or local law or regulations to purchase services from a master service
agreement negotiated by a governmental entity on its behalf, and the
master service agreement was awarded pursuant to applicable federal,
state, Tribal, or local competitive bidding processes, the applicant is
not required to re-undergo competitive bidding. Third, applicants who
wish to request support under the Healthcare Connect Fund while
utilizing contracts previously approved by USAC (under the Pilot
Program, the RHC Telecommunications or Internet Access Programs, or the
E-rate program) may do so without undergoing additional competitive
bidding, as long as they do not request duplicative support for the
same service and otherwise comply with all Healthcare Connect Fund
requirements. In addition, consistent with current RHC program
policies, applicants who receive evergreen status or multi-year
commitments under the Healthcare Connect Fund are exempt from
competitive bidding for the duration of the contract. Applicants who
are exempt from competitive bidding can proceed directly to submitting
a funding commitment request.
354. Evergreen Contracts. The existing RHC program allows
``evergreen'' contracts, meaning that for the life of a multi-year
contract deemed evergreen by USAC, HCPs need not annually rebid the
service or post an FCC Form 465. As stated in the NPRM, codification of
existing evergreen procedures likely will benefit participating HCPs by
affording them: (1) Lower prices due to longer contract terms; and (2)
reduced administrative burdens due to fewer required Form 465s.
Commenters supported the NPRM's proposal to codify the Commission's
existing evergreen procedures, arguing, among other things, that the
evergreen procedures significantly reduce HCPs'
[[Page 13981]]
administrative and financial burdens. This Order also makes one change
to the existing evergreen policy to allow participants to exercise
voluntary options to extend an evergreen contract without undergoing
additional competitive bidding, subject to certain limitations.
355. Multi-year funding commitments: Applicants may receive multi-
year funding commitments that cover a period of up to three funding
years. The multi-year funding commitments will reduce uncertainty and
administrative burden by eliminating the need for HCPs to apply every
year for funding, as is required under the existing RHC
Telecommunications and Internet Access Programs, and reduce
administrative expenses both for the projects and for USAC. Multi-year
funding commitments, prepaid leases, and IRUs also encourage term
discounts and produce lower rates from vendors. The funding of HCP-
constructed-and-owned infrastructure has allowed Pilot projects to
choose this option where it is the most cost-effective way to obtain
broadband.
356. Annual Reporting Requirement: Participants in the Healthcare
Connect Fund must submit reports on an annual basis, consistent with
suggestions from commenters to minimize the burdens of reporting
requirements. Submitting annual, rather than quarterly reports, as
required in the Pilot Program, will minimize the burden on participants
and USAC alike while still supporting performance evaluation and
enabling the Commission to evaluate the prevention of waste, fraud, and
abuse. Because the Commission expects to be able to collect data from
individual applicants in the Healthcare Connect Fund on forms they
already submit, individual applicants are not required to submit annual
reports unless a report is required for other reasons. To further
minimize the burden on participants, the Order delegates authority to
the Bureau to work with USAC to develop a simple and streamlined
reporting system that leverages data collected through the application
process, eliminating the need to resubmit any information that has
already been provided to USAC.
357. Sustainability plans for applicants that build their own
infrastructure. In the NPRM, the Commission proposed to require
sustainability plans similar to those required in the Pilot Program for
HCPs who intended to have an ownership interest, indefeasible right of
use, or capital lease interest in supported facilities. The Pilot
Program required projects to submit a copy of their sustainability plan
with every quarterly report. Based on the Pilot Program, the Commission
concludes that submission of sustainability reports on a quarterly
basis is unnecessarily burdensome for applicants, and provides little
useful information to USAC. Accordingly, sustainability reports for the
Healthcare Connect Fund are only required to be re-filed if there is a
material change that would impact projected income or expenses by the
greater of 20 percent or $100,000 from the previous submission, or if
the applicant submits a funding request based on a new Form 461 (i.e.,
a new competitively bid contract). In such an event, the revised
sustainability report must be provided to USAC no later than the end of
the relevant quarter, clearly showing (i.e. by redlining or
highlighting) what has changed.
358. Skilled Nursing Facility Pilot Requirements. Participants in
the SNF Pilot must submit data on a number of variables; gather and
analyze data; submit annual reports; and, at the conclusion of the
Pilot, demonstrate the health care cost savings and/or improved quality
of patient care that have been realized through greater use of
broadband. While these requirements may impact small entities, we have
determined that the benefits of these requirements--namely, preserving
program integrity and ensuring cost-effectiveness--outweigh any costs.
Specifically, we do not believe that these requirements will have
significant impact on small entities for two reasons. First, the SNF is
a voluntary pilot program and, as such, entities may choose whether to
apply. Second, the Bureau will give preference to applicants that
partner with existing or new consortia in the existing Pilot Program or
the Healthcare Connect Fund. Small SNFs joining consortia should
experience minimal reporting burdens as these consortia typically have
the leadership and expertise to effectively assist their members with
administrative requirements.
359. Report to Congress: The Commission will send a copy of the
Order, including this FRFA, in a report to be sent to Congress pursuant
to the Congressional Review Act. In addition, the Commission will send
a copy of the Order, including this FRFA, to the Chief Counsel for
Advocacy of the SBA. A copy of the Order (and FRFA summaries thereof)
will also be published in the Federal Register.
B. Paperwork Reduction Act Analysis
360. This Order contains new information collection requirements
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-
13. It will be submitted to the Office of Management and Budget (OMB)
for review under section 3507(d) of the PRA. OMB, the general public,
and other Federal agencies are invited to comment on the new or
modified information collection requirements contained in this
proceeding. In addition, we note that pursuant to the Small Business
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C.
3506(c)(4), we previously sought specific comment on how the Commission
might further reduce the information collection burden for small
business concerns with fewer than 25 employees. We describe the impacts
that might affect small businesses, which include most businesses with
fewer than 25 employees, in the Final Regulatory Flexibility Analysis.
C. Congressional Review Act
361. The Commission will send a copy of this order to Congress and
the Government Accountability Office pursuant to the Congressional
Review Act, see 5 U.S.C. 801(a)(1)(A).
XI. Ordering Clauses
362. Accordingly, it is ordered that, pursuant to sections 1, 2,
4(i)-(j), 201(b), and 254 of the Communications Act of 1934, as
amended, 47 U.S.C. 151, 152, 154(i), 154(j), 201(b), and 254, this
Report and Order is adopted, and, pursuant to 5 U.S.C. 553(d)(3) and
Sec. Sec. 1.4(b)(1), 1.103(a), and 1.427(a) of the Commission's rules,
47 CFR 1.4(b)(1), 1.103(a), 1.427(a).
363. It is further ordered that Part 54 of the Commission's rules,
47 CFR Part 54, is amended as set forth in the Appendix, and such rules
shall become effective April 1, 2013, except for those rules and
requirements that involve Paperwork Reduction Act burdens, which shall
become effective immediately upon announcement in the Federal Register
of OMB approval and of effective dates of such rules.
364. It is further ordered that pursuant to 5 U.S.C. 801(a)(1)(A),
the Commission shall send a copy of this Report and Order to Congress
and to the Government Accountability Office pursuant to the
Congressional Review Act.
365. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Report and Order, including the Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration.
366. It is further ordered that, pursuant to the authority
contained in
[[Page 13982]]
sections 1-4 and 254 of the Communications Act of 1934, as amended, 47
U.S.C. 151-154 and 254, the requests for additional Rural Health Care
Pilot Program funding filed by Oregon Health Network, California
Telehealth Network, Southwest Telehealth Access Grid, Western New York
Rural Area Health Education Center, Inc., Palmetto State Providers
Network, and Health Information Exchange of Montana are denied.
367. It is further ordered that, pursuant to the authority
contained in sections 1-4 and 254 of the Communications Act of 1934, as
amended, 47 U.S.C. 151-154 and 254, the request for an extension of the
June 30, 2012, Rural Health Care Pilot Program deadline filed by the
Texas Health Information Network Collaborative is dismissed as moot.
368. It is further ordered that, pursuant to the authority
contained in sections 1-4 and 254 of the Communications Act of 1934, as
amended, 47 U.S.C. 151-154 and 254, the requests for waiver of 47 CFR
54.611 of the Commission's rules filed by Network Services Solutions,
L.L.C., and Richmond Connections, Inc., are granted.
369. It is further ordered that, pursuant to the authority
contained in sections 1-4 and 254 of the Communications Act of 1934, as
amended, 47 U.S.C. 151-154 and 254, USAC shall make an initial
reimbursement payment to Network Services Solutions, L.L.C., and
Richmond Connections, Inc., no later than December 31, 2012 as
described herein.
370. It is further ordered that, pursuant to the authority
contained in sections 1-4 and 254 of the Communications Act of 1934, as
amended, 47 U.S.C. 151-154 and 254, the requests for stay of
enforcement of 47 CFR Sec. 54.611 of the Commission's rules filed by
Network Services Solutions, L.L.C., and Richmond Connections, Inc., are
dismissed as moot.
List of Subjects in 47 CFR Part 54
Communications common carriers, Health facilities, Reporting and
recordkeeping requirements, Telecommunications, Telephone.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Final Rules
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR part 54 as follows:
PART 54--UNIVERSAL SERVICE
0
1. The authority citation for part 54 continues to read as follows:
Authority: Secs. 5, 48 Stat. 1068, as amended; 47 U.S.C. 155.
0
2. In Sec. 54.5, revise the definition of ``rural area'' to read as
follows:
Sec. 54.5 Terms and definitions.
* * * * *
Rural area. For purposes of the schools and libraries universal
support mechanism, a ``rural area'' is a nonmetropolitan county or
county equivalent, as defined in the Office of Management and Budget's
(OMB) Revised Standards for Defining Metropolitan Areas in the 1990s
and identifiable from the most recent Metropolitan Statistical Area
(MSA) list released by OMB, or any contiguous non-urban Census Tract or
Block Numbered Area within an MSA-listed metropolitan county identified
in the most recent Goldsmith Modification published by the Office of
Rural Health Policy of the U.S. Department of Health and Human
Services.
* * * * *
0
3. Add Sec. 54.600 to subpart G and an undesignated center heading to
read as follows:
Defined Terms and Eligibility
Sec. 54.600 Terms and definitions.
As used in this subpart, the following terms shall be defined as
follows:
(a) Health care provider. A ``health care provider'' is any:
(1) Post-secondary educational institution offering health care
instruction, including a teaching hospital or medical school;
(2) Community health center or health center providing health care
to migrants;
(3) Local health department or agency;
(4) Community mental health center;
(5) Not-for-profit hospital;
(6) Rural health clinic; or
(7) Consortium of health care providers consisting of one or more
entities described in paragraphs (a)(1) through (a)(6) of this section.
(b) Rural area. (1) A ``rural area'' is an area that is entirely
outside of a Core Based Statistical Area; is within a Core Based
Statistical Area that does not have any Urban Area with a population of
25,000 or greater; or is in a Core Based Statistical Area that contains
an Urban Area with a population of 25,000 or greater, but is within a
specific census tract that itself does not contain any part of a Place
or Urban Area with a population of greater than 25,000. For purposes of
this rule, ``Core Based Statistical Area,'' ``Urban Area,'' and
``Place'' are as identified by the Census Bureau.
(2) Notwithstanding the definition of ``rural area,'' any health
care provider that is located in a ``rural area'' under the definition
used by the Commission prior to July 1, 2005, and received a funding
commitment from the rural health care program prior to July 1, 2005, is
eligible for support under this subpart.
(c) Rural health care provider. A ``rural health care provider'' is
an eligible health care provider site located in a rural area.
0
4. Revise Sec. 54.601 to read as follows:
Sec. 54.601 Health care provider eligibility.
(a) Eligible health care providers. (1) Only an entity that is
either a public or non-profit health care provider, as defined in this
subpart, shall be eligible to receive support under this subpart.
(2) Each separate site or location of a health care provider shall
be considered an individual health care provider for purposes of
calculating and limiting support under this subpart.
(b) Determination of health care provider eligibility for the
Healthcare Connect Fund. Health care providers in the Healthcare
Connect Fund may certify to the eligibility of particular sites at any
time prior to, or concurrently with, filing a request for services to
initiate competitive bidding for the site. Applicants who utilize a
competitive bidding exemption must provide eligibility information for
the site to the Administrator prior to, or concurrently with, filing a
request for funding for the site. Health care providers must also
notify the Administrator within 30 days of a change in the health care
provider's name, site location, contact information, or eligible entity
type.
0
5. Add Sec. 54.602 to subpart G to read as follows:
Sec. 54.602 Health care support mechanism.
(a) Telecommunications Program. Rural health care providers may
request support for the difference, if any, between the urban and rural
rates for telecommunications services, subject to the provisions and
limitations set forth in Sec. Sec. 54.600 through 54.625 and
Sec. Sec. 54.671 through 54.680. This support is referred to as the
``Telecommunications Program.''
(b) Healthcare Connect Fund. Eligible health care providers may
request support for eligible services, equipment, and infrastructure,
subject to the provisions and limitations set forth in Sec. Sec.
54.600 through 54.602 and Sec. Sec. 54.630
[[Page 13983]]
through 54.680. This support is referred to as the ``Healthcare Connect
Fund.''
(c) Allocation of discounts. An eligible health care provider that
engages in both eligible and ineligible activities or that collocates
with an ineligible entity shall allocate eligible and ineligible
activities in order to receive prorated support for the eligible
activities only. Health care providers shall choose a method of cost
allocation that is based on objective criteria and reasonably reflects
the eligible usage of the facilities.
(d) Health care purposes. Services for which eligible health care
providers receive support from the Telecommunications Program or the
Healthcare Connect Fund must be reasonably related to the provision of
health care services or instruction that the health care provider is
legally authorized to provide under the law in the state in which such
health care services or instruction are provided.
0
6. In Sec. 54.603, add an undesignated center heading; revise the
section heading and paragraphs (a), (b)(1) introductory text, and
(b)(1)(i) and (ii), and remove and reserve paragraph (b)(1)(iii).
The addition and revisions read as follows:
Telecommunications Program
Sec. 54.603 Competitive bidding and certification requirements.
(a) Competitive bidding requirement. To select the
telecommunications carriers that will provide services eligible for
universal service support to it under the Telecommunications Program,
each eligible health care provider shall participate in a competitive
bidding process pursuant to the requirements established in this
section and any additional and applicable state, Tribal, local, or
other procurement requirements.
(b) * * *
(1) An eligible health care provider seeking to receive
telecommunications services eligible for universal service support
under the Telecommunications Program shall submit a completed FCC Form
465 to the Administrator. FCC Form 465 shall be signed by the person
authorized to order telecommunications services for the health care
provider and shall include, at a minimum, that person's certification
under oath that:
(i) The requester is a public or non-profit entity that falls
within one of the seven categories set forth in the definition of
health care provider, listed in Sec. 54.600(a);
(ii) The requester is physically located in a rural area;
* * * * *
0
7. In Sec. 54.604, revise the section heading; redesignate paragraphs
(b) and (c) as paragraphs (d) and (e) respectively; redesignate
paragraph (a) as paragraph (c) and add new paragraphs (a) and (b); and
revise newly redesignated paragraph (c) introductory text to read as
follows:
Sec. 54.604 Consortia, telecommunications services, and existing
contracts.
(a) Consortia. (1) Under the Telecommunications Program, an
eligible health care provider may join a consortium with other eligible
health care providers; with schools, libraries, and library consortia
eligible under subpart F of this part; and with public sector
(governmental) entities to order telecommunications services. With one
exception, eligible health care providers participating in consortia
with ineligible private sector members shall not be eligible for
supported services under this subpart. A consortium may include
ineligible private sector entities if such consortium is only receiving
services at tariffed rates or at market rates from those providers who
do not file tariffs.
(2) For consortia, universal service support under the
Telecommunications Program shall apply only to the portion of eligible
services used by an eligible health care provider.
(b) Telecommunications Services. Any telecommunications service
that is the subject of a properly completed bona fide request by a
rural health care provider shall be eligible for universal service
support, subject to the limitations described in this paragraph. The
length of a supported telecommunications service may not exceed the
distance between the health care provider and the point farthest from
that provider on the jurisdictional boundary of the largest city in a
state as defined in Sec. 54.625(a).
(c) Existing contracts. A signed contract for services eligible for
Telecommunications Program support pursuant to this subpart between an
eligible health care provider as defined under Sec. 54.600 and a
telecommunications carrier shall be exempt from the competitive bid
requirements set forth in Sec. 54.603(a) as follows:
* * * * *
0
8. In Sec. 54.605, revise paragraph (a) to read as follows:
Sec. 54.605 Determining the urban rate.
(a) If a rural health care provider requests support for an
eligible service to be funded from the Telecommunications Program that
is to be provided over a distance that is less than or equal to the
``standard urban distance,'' as defined in paragraph (c) of this
section, for the state in which it is located, the ``urban rate'' for
that service shall be a rate no higher than the highest tariffed or
publicly-available rate charged to a commercial customer for a
functionally similar service in any city with a population of 50,000 or
more in that state, calculated as if it were provided between two
points within the city.
* * * * *
0
9. In Sec. 54.609, revise paragraphs (a) introductory text, (a)(1)(iv)
and (3), (d)(1) and (2), and (e)(1) to read as follows:
Sec. 54.609 Calculating support.
(a) The amount of universal service support provided for an
eligible service to be funded from the Telecommunications Program shall
be the difference, if any, between the urban rate and the rural rate
charged for the service, as defined herein. In addition, all reasonable
charges that are incurred by taking such services, such as state and
federal taxes shall be eligible for universal service support. Charges
for termination liability, penalty surcharges, and other charges not
included in the cost of taking such service shall not be covered by the
universal service support mechanisms. Under the Telecommunications
Program, rural health care providers may choose one of the following
two support options.
(1) * * *
(iv) A telecommunications carrier that provides telecommunications
service to a rural health care provider participating in an eligible
health care consortium, and the consortium must establish the actual
distance-based charges for the health care provider's portion of the
shared telecommunications services.
* * * * *
(3) Base rate support-consortium. A telecommunications carrier that
provides telecommunications service to a rural health care provider
participating in an eligible health care consortium, and the consortium
must establish the applicable rural base rates for telecommunications
service for the health care provider's portion of the shared
telecommunications services, as well as the applicable urban base rates
for the telecommunications service.
* * * * *
(d) * * *
[[Page 13984]]
(1) Rural public and non-profit health care providers may receive
support for rural satellite services under the Telecommunications
Program, even when another functionally similar terrestrial-based
service is available in that rural area. Support for satellite services
shall be capped at the amount the rural health care provider would have
received if they purchased a functionally similar terrestrial-based
alternative.
(2) Rural health care providers seeking support from the
Telecommunications Program for satellite services shall provide to the
Administrator with the Form 466, documentation of the urban and rural
rates for the terrestrial-based alternatives.
* * * * *
(e) * * *
(1) Calculation of support. The support amount allowed under the
Telecommunications Program for satellite services provided to mobile
rural health care providers is calculated by comparing the rate for the
satellite service to the rate for an urban wireline service with a
similar bandwidth. Support for satellite services shall not be capped
at an amount of a functionally similar wireline alternative. Where the
mobile rural health care provider provides service in more than one
state, the calculation shall be based on the urban areas in each state,
proportional to the number of locations served in each state.
* * * * *
Sec. 54.611 [Removed]
0
10. Remove Sec. 54.611.
Sec. 54.613 [Amended]
0
11. In Sec. 54.613, remove and reserve paragraph (b).
0
12. In Sec. 54.615, revise paragraphs (b), (c) introductory text, and
(c)(2) and remove and reserve paragraph (c)(3).
The revisions read as follows:
Sec. 54.615 Obtaining services.
* * * * *
(b) Receiving supported rate. Upon receiving a bona fide request,
as defined in paragraph (c) of this section, from a rural health care
provider for a telecommunications service that is eligible for support
under the Telecommunications Program, a telecommunications carrier
shall provide the service at a rate no higher than the urban rate, as
defined in Sec. 54.605, subject to the limitations applicable to the
Telecommunications Program.
(c) Bona fide request. In order to receive services eligible for
support under the Telecommunications Program, an eligible health care
provider must submit a request for services to the telecommunications
carrier, signed by an authorized officer of the health care provider,
and shall include that person's certification under oath that:
* * * * *
(2) The requester is physically located in a rural area, or if the
requester is a mobile rural health care provider requesting services
under Sec. 54.609(e), that the requester has certified that it is
serving eligible rural areas;
* * * * *
Sec. 54.617 [Removed]
0
13. Remove Sec. 54.617.
0
14. In Sec. 54.619, revise paragraphs (a)(1) and (d) to read as
follows:
Sec. 54.619 Audits and recordkeeping.
(a) * * *
(1) Health care providers shall maintain for their purchases of
services supported under the Telecommunications Program documentation
for five years from the end of the funding year sufficient to establish
compliance with all rules in this subpart. Documentation must include,
among other things, records of allocations for consortia and entities
that engage in eligible and ineligible activities, if applicable.
Mobile rural health care providers shall maintain annual logs
indicating: The date and locations of each clinic stop; and the number
of patients served at each such clinic stop.
* * * * *
(d) Service providers. Service providers shall retain documents
related to the delivery of discounted services under the
Telecommunications Program for at least 5 years after the last day of
the delivery of discounted services. Any other document that
demonstrates compliance with the statutory or regulatory requirements
for the rural health care mechanism shall be retained as well.
Sec. 54.621 [Removed]
0
15. Remove Sec. 54.621.
0
16. Revise Sec. 54.623 to read as follows:
Sec. 54.623 Annual filing and funding commitment requirement.
(a) Annual filing requirement. Health care providers seeking
support under the Telecommunications Program shall file new funding
requests for each funding year.
(b) Long term contracts. Under the Telecommunications Program, if
health care providers enter into long term contracts for eligible
services, the Administrator shall only commit funds to cover the
portion of such a long term contract scheduled to be delivered during
the funding year for which universal service support is sought.
0
17. Revise Sec. 54.625 to read as follows:
Sec. 54.625 Support for telecommunications services beyond the
maximum supported distance for rural health care providers.
(a) The maximum support distance for the Telecommunications Program
is the distance from the health care provider to the farthest point on
the jurisdictional boundary of the city in that state with the largest
population, as calculated by the Administrator.
(b) An eligible rural health care provider may purchase an eligible
telecommunications service supported under the Telecommunications
Program that is provided over a distance that exceeds the maximum
supported distance.
(c) If an eligible rural health care provider purchases an eligible
telecommunications service supported under the Telecommunications
Program that exceeds the maximum supported distance, the health care
provider must pay the applicable rural rate for the distance that such
service is carried beyond the maximum supported distance.
0
18. Add Sec. 54.630 and an undesignated center heading to subpart G to
read as follows:
Healthcare Connect Fund
Sec. 54.630 Eligible recipients.
(a) Rural health care provider site--individual and consortium.
Under the Healthcare Connect Fund, an eligible rural health care
provider may receive universal service support by applying individually
or through a consortium. For purposes of the Healthcare Connect Fund, a
``consortium'' is a group of two or more health care provider sites
that request support through a single application. Consortia may
include health care providers who are not eligible for support under
the Healthcare Connect Fund, but such health care providers cannot
receive support for their expenses and must participate pursuant to the
cost allocation guidelines in Sec. 54.639(d).
(b) Limitation on participation of non-rural health care provider
sites in a consortium. An eligible non-rural health care provider site
may receive universal service support only as part of a consortium that
includes more than 50 percent eligible rural health care provider
sites.
(c) Limitation on large non-rural hospitals. Each eligible non-
rural public
[[Page 13985]]
or non-profit hospital site with 400 or more licensed patient beds may
receive no more than $30,000 per year in Healthcare Connect Fund
support for eligible recurring charges and no more than $70,000 in
Healthcare Connect Fund support every 5 years for eligible nonrecurring
charges, exclusive in both cases of costs shared by the network.
0
19. Add Sec. 54.631 to subpart G to read as follows:
Sec. 54.631 Designation of Consortium Leader.
(a) Identifying a Consortium Leader. Each consortium seeking
support from the Healthcare Connect Fund must identify an entity or
organization that will be the lead entity (the ``Consortium Leader'').
(b) Consortium Leader eligibility. The Consortium Leader may be the
consortium itself (if it is a distinct legal entity); an eligible
health care provider participating in the consortium; or a state
organization, public sector (governmental) entity (including a Tribal
government entity), or non-profit entity that is ineligible for
Healthcare Connect Fund support. Ineligible state organizations, public
sector entities, or non-profit entities may serve as Consortium Leaders
or provide consulting assistance to consortia only if they do not
participate as potential vendors during the competitive bidding
process. An ineligible entity that serves as the Consortium Leader must
pass on the full value of any discounts, funding, or other program
benefits secured to the consortium members that are eligible health
care providers.
(c) Consortium Leader responsibilities. The Consortium Leader's
responsibilities include the following:
(1) Legal and financial responsibility for supported activities.
The Consortium Leader is the legally and financially responsible entity
for the activities supported by the Healthcare Connect Fund. By
default, the Consortium Leader is the responsible entity if audits or
other investigations by Administrator or the Commission reveal
violations of the Act or Commission rules, with individual consortium
members being jointly and severally liable if the Consortium Leader
dissolves, files for bankruptcy, or otherwise fails to meet its
obligations. Except for the responsibilities specifically described in
paragraphs (c)(2) through (c)(6) of this section, consortia may
allocate legal and financial responsibility as they see fit, provided
that this allocation is memorialized in a formal written agreement
between the affected parties (i.e., the Consortium Leader, and the
consortium as a whole and/or its individual members), and the written
agreement is submitted to the Administrator for approval with or prior
to the Request for Services. Any such agreement must clearly identify
the party(ies) responsible for repayment if the Administrator is
required, at a later date, to recover disbursements to the consortium
due to violations of program rules.
(2) Point of contact for the FCC and Administrator. The Consortium
Leader is responsible for designating an individual who will be the
``Project Coordinator'' and serve as the point of contact with the
Commission and the Administrator for all matters related to the
consortium. The Consortium Leader is responsible for responding to
Commission and Administrator inquiries on behalf of the consortium
members throughout the application, funding, invoicing, and post-
invoicing period.
(3) Typical applicant functions, including forms and
certifications. The Consortium Leader is responsible for submitting
program forms and required documentation and ensuring that all
information and certifications submitted are true and correct. The
Consortium Leader must also collect and retain a Letter of Agency (LOA)
from each member, pursuant to Sec. 54.632.
(4) Competitive bidding and cost allocation. The Consortium Leader
is responsible for ensuring that the competitive bidding process is
fair and open and otherwise complies with Commission requirements. If
costs are shared by both eligible and ineligible entities, the
Consortium Leader must ensure that costs are allocated in a manner that
ensures that only eligible entities receive the benefit of program
discounts.
(5) Invoicing. The Consortium Leader is responsible for notifying
the Administrator when supported services have commenced and for
submitting invoices to the Administrator.
(6) Recordkeeping, site visits, and audits. The Consortium Leader
is also responsible for compliance with the Commission's recordkeeping
requirements and for coordinating site visits and audits for all
consortium members.
0
20. Add Sec. 54.632 to subpart G to read as follows:
Sec. 54.632 Letters of agency (LOA).
(a) Authorizations. Under the Healthcare Connect Fund, the
Consortium Leader must obtain the following authorizations.
(1) Prior to the submission of the request for services, the
Consortium Leader must obtain authorization, the necessary
certifications, and any supporting documentation from each consortium
member to permit the Consortium Leader to submit the request for
services and prepare and post the request for proposal on behalf of the
member.
(2) Prior to the submission of the funding request, the Consortium
Leader must secure authorization, the necessary certifications, and any
supporting documentation from each consortium member to permit the
Consortium Leader to submit the funding request and manage invoicing
and payments on behalf of the member.
(b) Optional two-step process. The Consortium Leader may secure
both required authorizations from each consortium member in either a
single LOA or in two separate LOAs.
(c) Required Information in LOA. (1) An LOA must include, at a
minimum, the name of the entity filing the application (i.e., lead
applicant or Consortium Leader); name of the entity authorizing the
filing of the application (i.e., the participating health care
provider/consortium member); the physical location of the health care
provider/consortium member site(s); the relationship of each site
seeking support to the lead entity filing the application; the specific
timeframe the LOA covers; the signature, title and contact information
(including phone number, mailing address, and email address) of an
official who is authorized to act on behalf of the health care
provider/consortium member; signature date; and the type of services
covered by the LOA.
(2) For HCPs located on Tribal lands, if the health care facility
is a contract facility that is run solely by the tribe, the appropriate
tribal leader, such as the tribal chairperson, president, or governor,
shall also sign the LOA, unless the health care responsibilities have
been duly delegated to another tribal government representative.
0
21. Add Sec. 54.633 to subpart G to read as follows:
Sec. 54.633 Health care provider contribution.
(a) Health care provider contribution. All health care providers
receiving support under the Healthcare Connect Fund shall receive a 65
percent discount on the cost of eligible expenses and shall be required
to contribute 35 percent of the total cost of all eligible expenses.
(b) Limits on eligible sources of health care provider
contribution. Only funds from eligible sources may be applied toward
the health care provider's required contribution.
[[Page 13986]]
(1) Eligible sources include the applicant or eligible health care
provider participants; state grants, funding, or appropriations;
federal funding, grants, loans, or appropriations except for other
federal universal service funding; Tribal government funding; and other
grant funding, including private grants.
(2) Ineligible sources include (but are not limited to) in-kind or
implied contributions from health care providers; direct payments from
vendors or other service providers, including contractors and
consultants to such entities; and for-profit entities.
(c) Disclosure of health care provider contribution source. Prior
to receiving support, applicants are required to identify with
specificity their sources of funding for their contribution of eligible
expenses.
(d) Future revenues from excess capacity as source of health care
provider contribution. A consortium applicant that receives support for
participant-owned network facilities under Sec. 54.636 may use future
revenues from excess capacity as a source for the required health care
provider contribution, subject to the following limitations.
(1) The consortium's selection criteria and evaluation for ``cost-
effectiveness'' pursuant to Sec. 54.642 cannot provide a preference to
bidders that offer to construct excess capacity.
(2) The applicant must pay the full amount of the additional costs
for excess capacity facilities that will not be part of the supported
health care network.
(3) The additional cost of constructing excess capacity facilities
may not count toward a health care provider's required contribution.
(4) The inclusion of excess capacity facilities cannot increase the
funded cost of the dedicated health care network in any way.
(5) An eligible health care provider (typically the consortium,
although it may be an individual health care provider participating in
the consortium) must retain ownership of the excess capacity
facilities. It may make the facilities available to third parties only
under an indefeasible right of use (IRU) or lease arrangement. The
lease or IRU between the participant and the third party must be an
arm's length transaction. To ensure that this is an arm's length
transaction, neither the vendor that installs the excess capacity
facilities nor its affiliate is eligible to enter into an IRU or lease
with the participant.
(6) Any amount prepaid for use of the excess capacity facilities
(IRU or lease) must be placed in an escrow account. The participant can
then use the escrow account as an eligible source of funds for the
participant's 35 percent contribution to the project.
(7) All revenues from use of the excess capacity facilities by the
third party must be used for the health care provider contribution or
for sustainability of the health care network supported by the
Healthcare Connect Fund. Network costs that may be funded with any
additional revenues that remain include administration, equipment,
software, legal fees, or other costs not covered by the Healthcare
Connect Fund, as long as they are relevant to sustaining the network.
0
22. Add Sec. 54.634 to subpart G to read as follows:
Sec. 54.634 Eligible services.
(a) Eligible services. Subject to the provisions of Sec. Sec.
54.600 through 54.602 and Sec. Sec. 54.630 through 54.680, eligible
health care providers may request support from the Healthcare Connect
Fund for any advanced telecommunications or information service that
enables health care providers to post their own data, interact with
stored data, generate new data, or communicate, by providing
connectivity over private dedicated networks or the public Internet for
the provision of health information technology.
(b) Eligibility of dark fiber. A consortium of eligible health care
providers may receive support for ``dark'' fiber where the customer,
not the vendor, provides the modulating electronics, subject to the
following limitations:
(1) Support for recurring charges associated with dark fiber is
only available once the dark fiber is ``lit'' and actually being used
by the health care provider. Support for non-recurring charges for dark
fiber is only available for fiber lit within the same funding year, but
applicants may receive up to a one-year extension to light fiber if
they provide documentation to the Administrator that construction was
unavoidably delayed due to weather or other reasons.
(2) Requests for proposals (RFPs) that solicit dark fiber solutions
must also solicit proposals to provide the needed services over lit
fiber over a time period comparable to the duration of the dark fiber
lease or indefeasible right of use.
(3) If an applicant intends to request support for equipment and
maintenance costs associated with lighting and operating dark fiber, it
must include such elements in the same RFP as the dark fiber so that
the Administrator can review all costs associated with the fiber when
determining whether the applicant chose the most cost-effective bid.
(c) Dark and lit fiber maintenance costs. (1) Both individual and
consortium applicants may receive support for recurring maintenance
costs associated with leases of dark or lit fiber.
(2) Consortium applicants may receive support for upfront payments
for maintenance costs associated with leases of dark or lit fiber,
subject to the limitations in Sec. 54.638.
(d) Reasonable and customary installation charges. Eligible health
care providers may obtain support for reasonable and customary
installation charges for eligible services, up to an undiscounted cost
of $5,000 per eligible site.
(e) Upfront charges for vendor deployment of new or upgraded
facilities. (1) Participants may obtain support for upfront charges for
vendor deployment of new or upgraded facilities to serve eligible
sites.
(2) Support is available to extend vendor deployment of facilities
up to the ``demarcation point,'' which is the boundary between
facilities owned or controlled by the vendor, and facilities owned or
controlled by the customer.
0
23. Add Sec. 54.635 to subpart G to read as follows:
Sec. 54.635 Eligible equipment.
(a) Both individual and consortium applicants may receive support
for network equipment necessary to make functional an eligible service
that is supported under the Healthcare Connect Fund.
(b) Consortium applicants may also receive support for network
equipment necessary to manage, control, or maintain an eligible service
or a dedicated health care broadband network. Support for network
equipment is not available for networks that are not dedicated to
health care.
(c) Network equipment eligible for support includes the following:
(1) Equipment that terminates a carrier's or other provider's
transmission facility and any router/switch that is directly connected
to either the facility or the terminating equipment. This includes
equipment required to light dark fiber, or equipment necessary to
connect dedicated health care broadband networks or individual health
care providers to middle mile or backbone networks;
(2) Computers, including servers, and related hardware (e.g.
printers, scanners,
[[Page 13987]]
laptops) that are used exclusively for network management;
(3) Software used for network management, maintenance, or other
network operations, and development of software that supports network
management, maintenance, and other network operations;
(4) Costs of engineering, furnishing (i.e. as delivered from the
manufacturer), and installing network equipment; and
(5) Equipment that is a necessary part of health care provider-
owned network facilities.
(d) Additional limitations: Support for network equipment is
limited to equipment:
(1) Purchased or leased by a Consortium Leader or eligible health
care provider; and
(2) Used for health care purposes.
0
24. Add Sec. 54.636 to subpart G to read as follows:
Sec. 54.636 Eligible participant-constructed and owned network
facilities for consortium applicants.
(a) Subject to the funding limitations under Sec. Sec. 54.675 and
54.638 and the following restrictions, consortium applicants may
receive support for network facilities that will be constructed and
owned by the consortium (if the consortium is an eligible health care
provider) or eligible health care providers within the consortium.
(1) Consortia seeking support to construct and own network
facilities are required to solicit bids for both:
(i) Services provided over third-party networks; and
(ii) Construction of participant-owned network facilities, in the
same request for proposals. Requests for proposals must provide
sufficient detail so that cost-effectiveness can be evaluated over the
useful life of the proposed network facility to be constructed.
(2) Support for participant-constructed and owned network
facilities is only available where the consortium demonstrates that
constructing its own network facilities is the most cost-effective
option after competitive bidding, pursuant to Sec. 54.642.
(b) [Reserved].
0
25. Add Sec. 54.637 to subpart G to read as follows:
Sec. 54.637 Off-site data centers and off-site administrative
offices.
(a) The connections and network equipment associated with off-site
data centers and off-site administrative offices used by eligible
health care providers for their health care purposes are eligible for
support under the Healthcare Connect Fund, subject to the conditions
and restrictions set forth in paragraph (b) of this section.
(1) An ``off-site administrative office'' is a facility that does
not provide hands-on delivery of patient care, but performs
administrative support functions that are critical to the provision of
clinical care by eligible health care providers.
(2) An ``off-site data center'' is a facility that serves as a
centralized repository for the storage, management, and dissemination
of an eligible health care provider's computer systems, associated
components, and data, including (but not limited to) electronic health
records.
(b) Conditions and Restrictions. The following conditions and
restrictions apply to support provided under this sections.
(1) Connections eligible for support are only those that are
between:
(i) Eligible health care provider sites and off-site data centers
or off-site administrative offices,
(ii) Two off-site data centers,
(iii) Two off-site administrative offices,
(iv) An off-site data center and the public Internet or another
network,
(v) An off-site administrative office and the public Internet or
another network, or
(vi) An off-site administrative office and an off-site data center.
(2) The supported connections and network equipment must be used
solely for health care purposes.
(3) The supported connections and network equipment must be
purchased by an eligible health care provider or a public or non-profit
health care system that owns and operates eligible health care provider
sites.
(4) If traffic associated with one or more ineligible health care
provider sites is carried by the supported connection and/or network
equipment, the ineligible health care provider sites must allocate the
cost of that connection and/or equipment between eligible and
ineligible sites, consistent with the ``fair share'' principles set
forth in Sec. 54.639(d).
0
26. Add Sec. 54.638 to subpart G to read as follows:
Sec. 54.638 Upfront payments.
(a) Upfront payments include all non-recurring costs for services,
equipment, or facilities, other than reasonable and customary
installation charges of up to $5,000.
(b) The following limitations apply to all upfront payments:
(1) Upfront payments associated with services providing a bandwidth
of less than 1.5 Mbps (symmetrical) are not eligible for support.
(2) Only consortium applicants are eligible for support for upfront
payments.
(c) The following limitations apply if a consortium makes a request
for support for upfront payments that exceeds, on average, $50,000 per
eligible site in the consortium:
(1) The support for the upfront payments must be prorated over at
least three years.
(2) The upfront payments must be part of a multi-year contract.
0
27. Add Sec. 54.639 to subpart G to read as follows:
Sec. 54.639 Ineligible expenses.
(a) Equipment or services not directly associated with eligible
services. Expenses associated with equipment or services that are not
necessary to make an eligible service functional, or to manage,
control, or maintain an eligible service or a dedicated health care
broadband network are ineligible for support.
Note to Paragraph (a): The following are examples of ineligible
expenses:
1. Costs associated with general computing, software,
applications, and Internet content development are not supported,
including the following:
i. Computers, including servers, and related hardware (e.g.,
printers, scanners, laptops), unless used exclusively for network
management, maintenance, or other network operations;
ii. End user wireless devices, such as smartphones and tablets;
iii. Software, unless used for network management, maintenance,
or other network operations;
iv. Software development (excluding development of software that
supports network management, maintenance, and other network
operations);
v. Helpdesk equipment and related software, or services, unless
used exclusively in support of eligible services or equipment;
vi. Web server hosting;
vii. Web site portal development;
viii. Video/audio/web conferencing equipment or services; and
ix. Continuous power source.
2. Costs associated with medical equipment (hardware and
software), and other general health care provider expenses are not
supported, including the following:
i. Clinical or medical equipment;
ii. Telemedicine equipment, applications, and software;
iii. Training for use of telemedicine equipment;
iv. Electronic medical records systems; and
v. Electronic records management and expenses.
(b) Inside wiring/internal connections. Expenses associated with
inside wiring or internal connections are ineligible for support under
the Healthcare Connect Fund.
[[Page 13988]]
(c) Administrative expenses. Administrative expenses are not
eligible for support under the Healthcare Connect Fund.
Note to Paragraph (c): Ineligible administrative expenses
include, but not limited to, the following expenses:
1. Personnel costs (including salaries and fringe benefits),
except for personnel expenses in a consortium application that
directly relate to designing, engineering, installing, constructing,
and managing a dedicated broadband network. Ineligible costs of this
category include, for example, personnel to perform program
management and coordination, program administration, and marketing;
2. Travel costs, except for travel costs that are reasonable and
necessary for network design or deployment and that are specifically
identified and justified as part of a competitive bid for a
construction project;
3. Legal costs;
4. Training, except for basic training or instruction directly
related to and required for broadband network installation and
associated network operations;
5. Program administration or technical coordination (e.g.,
preparing application materials, obtaining letters of agency,
preparing request for proposals, negotiating with vendors, reviewing
bids, and working with the Administrator) that involves anything
other than the design, engineering, operations, installation, or
construction of the network;
6. Administration and marketing costs (e.g., administrative
costs; supplies and materials, except as part of network
installation/construction; marketing studies, marketing activities,
or outreach to potential network members; evaluation and feedback
studies);
7. Billing expenses (e.g., expense that vendors may charge for
allocating costs to each health care provider in a network);
8. Helpdesk expenses (e.g., equipment and related software, or
services); and
9. Technical support services that provide more than basic
maintenance.
(d) Cost allocation for ineligible sites, services, or equipment.
(1) Ineligible sites. Eligible health care provider sites may share
expenses with ineligible sites, as long as the ineligible sites pay
their fair share of the expenses. An applicant may seek support for
only the portion of a shared eligible expense attributable to eligible
health care provider sites. To receive support, the applicant must
ensure that ineligible sites pay their fair share of the expense. The
fair share is determined as follows:
(i) If the vendor charges a separate and independent price for each
site, an ineligible site must pay the full undiscounted price.
(ii) If there is no separate and independent price for each site,
the applicant must prorate the undiscounted price for the ``shared''
service, equipment, or facility between eligible and ineligible sites
on a proportional fully-distributed basis. Applicants must make this
cost allocation using a method that is based on objective criteria and
reasonably reflects the eligible usage of the shared service,
equipment, or facility. The applicant bears the burden of demonstrating
the reasonableness of the allocation method chosen.
(2) Ineligible components of a single service or piece of
equipment. Applicants seeking support for a service or piece of
equipment that includes an ineligible component must explicitly request
in their requests for proposals that vendors include pricing for a
comparable service or piece of equipment that is comprised of only
eligible components. If the selected provider also submits a price for
the eligible component on a stand-alone basis, the support amount is
calculated based on the stand-alone price of the eligible component on
a stand-alone basis. If the vendor does not offer the eligible
component on a stand-alone basis, the full price of the entire service
or piece of equipment must be taken into account, without regard to the
value of the ineligible components, when determining the most cost-
effective bid.
(3) Written description. Applicants must submit a written
description of their allocation method(s) to the Administrator with
their funding requests.
(4) Written agreement. If ineligible entities participate in a
network, the allocation method must be memorialized in writing, such as
a formal agreement among network members, a master services contract,
or for smaller consortia, a letter signed and dated by all (or each)
ineligible entity and the Consortium Leader.
0
28. Add Sec. 54.640 to subpart G to read as follows:
Sec. 54.640 Eligible vendors.
(a) Eligibility. For purposes of the Healthcare Connect Fund,
eligible vendors shall include any provider of equipment, facilities,
or services that are eligible for support under Healthcare Connect
Fund.
(b) Obligation to assist health care providers. Vendors in the
Healthcare Connect Fund must certify, as a condition of receiving
support, that they will provide to health care providers, on a timely
basis, all information and documents regarding supported equipment,
facilities, or services that are necessary for the health care provider
to submit required forms or respond to Commission or Administrator
inquiries. The Administrator may withhold disbursements for the vendor
if the vendor, after written notice from the Administrator, fails to
comply with this requirement.
0
29. Add Sec. 54.642 to subpart G to read as follows:
Sec. 54.642 Competitive bidding requirement and exemptions.
(a) Competitive bidding requirement. All applicants are required to
engage in a competitive bidding process for supported services,
facilities, or equipment consistent with the requirements set forth in
this subpart, unless they qualify for one or more of the exemptions in
paragraph (h) of this section. In addition, applicants may engage in
competitive bidding even if they qualify for an exemption. Applicants
who utilize a competitive bidding exemption may proceed directly to
filing a funding request as described in Sec. 54.643.
(b) Fair and open process. (1) All entities participating in the
Healthcare Connect Fund must conduct a fair and open competitive
bidding process, consistent with all applicable requirements.
(2) Vendors who intend to bid to provide supported services,
equipment, or facilities to a health care provider may not
simultaneously help the health care provider choose a winning bid. Any
vendor who submits a bid, and any individual or entity that has a
financial interest in such a vendor, is prohibited from:
(i) Preparing, signing or submitting an applicant's request for
services;
(ii) Serving as the Consortium Leader or other point of contact on
behalf of applicant(s);
(iii) Being involved in setting bid evaluation criteria; or
(iv) Participating in the bid evaluation or vendor selection
process (except in their role as potential vendors).
(3) All potential bidders must have access to the same information
and must be treated in the same manner.
(4) All applicants and vendors must comply with any applicable
state, Tribal, or local competitive bidding requirements. The
competitive bidding requirements in this section apply in addition to
state, Tribal, and local competitive bidding requirements and are not
intended to preempt such state, Tribal, or local requirements.
(c) Cost-effective. For purposes of the Healthcare Connect Fund,
``cost-effective'' is defined as the method that costs the least after
consideration of the features, quality of transmission, reliability,
and other factors that the health care provider deems relevant to
[[Page 13989]]
choosing a method of providing the required health care services.
(d) Bid evaluation criteria. Applicants must develop weighted
evaluation criteria (e.g., scoring matrix) that demonstrate how the
applicant will choose the most ``cost-effective'' bid before submitting
a Request for Services. Price must be a primary factor, but need not be
the only primary factor. A non-price factor can receive an equal weight
to price, but may not receive a greater weight than price.
(e) Request for services. Applicants must submit the following
documents to the Administrator in order to initiate competitive
bidding.
(1) Form 461, including certifications. The applicant must provide
the following certifications as part of the request for services.
(i) The person signing the application is authorized to submit the
application on behalf of the applicant and has examined the form and
all attachments, and to the best of his or her knowledge, information,
and belief, all statements of fact contained therein are true.
(ii) The applicant has followed any applicable state, Tribal, or
local procurement rules.
(iii) All Healthcare Connect Fund support will be used solely for
purposes reasonably related to the provision of health care service or
instruction that the HCP is legally authorized to provide under the law
of the state in which the services are provided and will not be sold,
resold, or transferred in consideration for money or any other thing of
value.
(iv) The applicant satisfies all of the requirements under section
254 of the Act and applicable Commission rules.
(v) The applicant has reviewed all applicable requirements for the
program and will comply with those requirements.
(2) Bid evaluation criteria. Requirements for bid evaluation
criteria are described in paragraph (d) of this section.
(3) Declaration of assistance. All applicants must submit a
``Declaration of Assistance'' with their Request for Services. In the
Declaration of Assistance, applicants must identify each and every
consultant, vendor, and other outside expert, whether paid or unpaid,
who aided in the preparation of their applications.
(4) Request for proposal (if applicable). (i) Any applicant may use
a request for proposals (RFP). Applicants who use an RFP must submit
the RFP and any additional relevant bidding information to the
Administrator with Form 461.
(ii) An applicant must submit an RFP:
(A) If it is required to issue an RFP under applicable State,
Tribal, or local procurement rules or regulations;
(B) If the applicant is a consortium seeking more than $100,000 in
program support during the funding year, including applications that
seek more than $100,000 in program support for a multi-year commitment;
or
(C) If the applicant is a consortium seeking support for
participant-constructed and owned network facilities.
(iii) RFP requirements. (A) An RFP must provide sufficient
information to enable an effective competitive bidding process,
including describing the health care provider's service needs and
defining the scope of the project and network costs (if applicable).
(B) An RFP must specify the period during which bids will be
accepted.
(C) An RFP must include the bid evaluation criteria described in
paragraph (d) of this section, and solicit sufficient information so
that the criteria can be applied effectively.
(D) Consortium applicants seeking support for long-term capital
investments whose useful life extends beyond the period of the funding
commitment (e.g., facilities constructed and owned by the applicant,
fiber indefeasible rights of use) must seek bids in the same RFP from
vendors who propose to meet those needs via services provided over
vendor-owned facilities, for a time period comparable to the life of
the proposed capital investment.
(E) Applicants may prepare RFPs in any manner that complies with
the rules in this subpart and any applicable state, Tribal, or local
procurement rules or regulations.
(5) Additional requirements for consortium applicants. (i) Network
plan. Consortium applicants must submit a narrative describing specific
elements of their network plan with their Request for Services.
Consortia applicants are required to use program support for the
purposes described in their narrative. The required elements of the
narrative include:
(A) Goals and objectives of the network;
(B) Strategy for aggregating the specific needs of health care
providers (including providers that serve rural areas) within a state
or region;
(C) Strategy for leveraging existing technology to adopt the most
efficient and cost effective means of connecting those providers;
(D) How the supported network will be used to improve or provide
health care delivery;
(E) Any previous experience in developing and managing health
information technology (including telemedicine) programs; and
(F) A project management plan outlining the project's leadership
and management structure, and a work plan, schedule, and budget.
(ii) Letters of agency. Consortium applicants must submit letters
of agency pursuant to Sec. 54.632.
(f) Public posting by the Administrator. The Administrator shall
post on its web site the following competitive bidding documents, as
applicable:
(1) Form 461,
(2) Bid evaluation criteria,
(3) Request for proposal, and
(4) Network plan.
(g) 28-day waiting period. After posting the documents described in
paragraph (f) of this section on its Web site, the Administrator shall
send confirmation of the posting to the applicant. The applicant shall
wait at least 28 days from the date on which its competitive bidding
documents are posted on the Web site before selecting and committing to
a vendor.
(1) Selection of the most ``cost-effective'' bid and contract
negotiation. Each applicant subject to competitive bidding is required
to certify to the Administrator that the selected bid is, to the best
of the applicant's knowledge, the most cost-effective option available.
Applicants are required to submit the documentation listed in Sec.
54.643 to support their certifications.
(2) Applicants who plan to request evergreen status under Sec.
54.642(h)(4)(ii) must enter into a contract that identifies both
parties, is signed and dated by the health care provider or Consortium
Leader after the 28-day waiting period expires, and specifies the type,
term, and cost of service.
(h) Exemptions to competitive bidding requirements. (1) Annual
undiscounted cost of $10,000 or less. An applicant that seeks support
for $10,000 or less of total undiscounted eligible expenses for a
single year is exempt from the competitive bidding requirements under
this section, if the term of the contract is one year or less.
(2) Government Master Service Agreement (MSA). Eligible health care
providers that seek support for services and equipment purchased from
MSAs negotiated by federal, state, Tribal, or local government entities
on behalf of such health care providers and others, if such MSAs were
awarded pursuant to applicable federal, state, Tribal, or local
competitive bidding requirements, are exempt from the competitive
bidding requirements under this section.
(3) Master Service Agreements approved under the Pilot Program or
[[Page 13990]]
Healthcare Connect Fund. A eligible health care provider site may opt
into an existing MSA approved under the Pilot Program or Healthcare
Connect Fund and seek support for services and equipment purchased from
the MSA without triggering the competitive bidding requirements under
this section, if the MSA was developed and negotiated in response to an
RFP that specifically solicited proposals that included a mechanism for
adding additional sites to the MSA.
(4) Evergreen contracts. (i) Subject to the provisions in Sec.
54.644, the Administrator may designate a multi-year contract as
``evergreen,'' which means that the service(s) covered by the contract
need not be re-bid during the contract term.
(ii) A contract entered into by a health care provider or
consortium as a result of competitive bidding may be designated as
evergreen if it meets all of the following requirements:
(A) Is signed by the individual health care provider or consortium
lead entity;
(B) Specifies the service type, bandwidth and quantity;
(C) Specifies the term of the contract;
(D) Specifies the cost of services to be provided; and
(E) Includes the physical location or other identifying information
of the health care provider sites purchasing from the contract.
(iii) Participants may exercise voluntary options to extend an
evergreen contract without undergoing additional competitive bidding,
if:
(A) The voluntary extension(s) is memorialized in the evergreen
contract;
(B) The decision to extend the contract occurs before the
participant files its funding request for the funding year when the
contract would otherwise expire; and
(C) The voluntary extension(s) do not exceed five years in the
aggregate.
(5) Schools and libraries program master contracts. Subject to the
provisions in Sec. Sec. 54.500(g), 54.501(c)(1), and 54.503, an
eligible health care provider in a consortium with participants in the
schools and libraries universal service support program and a party to
the consortium's existing contract is exempt from the Healthcare
Connect Fund competitive bidding requirements if the contract was
approved in the schools and libraries universal service support program
as a master contract. The health care provider must comply with all
Healthcare Connect Fund rules and procedures except for those
applicable to competitive bidding.
0
30. Add Sec. 54.643 to subpart G to read as follows:
Sec. 54.643 Funding commitments.
(a) Once a vendor is selected, applicants must submit a ``Funding
Request'' (and supporting documentation) to provide information about
the services, equipment, or facilities selected and certify that the
services selected were the most cost-effective option of the offers
received. The following information should be submitted to the
Administrator with the Funding Request.
(1) Request for funding. The applicant shall submit a request for
funding (Form 462) to identify the service(s), equipment, or
facilities; rates; vendor(s); and date(s) of vendor selection.
(2) Certifications. The applicant must provide the following
certifications as part of the request for funding:
(i) The person signing the application is authorized to submit the
application on behalf of the applicant and has examined the form and
all attachments, and to the best of his or her knowledge, information,
and belief, all statements of fact contained therein are true.
(ii) Each vendor selected is, to the best of the applicant's
knowledge, information and belief, the most cost-effective vendor
available, as defined in Sec. 54.642(c).
(iii) All Healthcare Connect Fund support will be used only for
eligible health care purposes.
(iv) The applicant is not requesting support for the same service
from both the Telecommunications Program and the Healthcare Connect
Fund.
(v) The applicant satisfies all of the requirements under section
254 of the Act and applicable Commission rules, and understands that
any letter from the Administrator that erroneously commits funds for
the benefit of the applicant may be subject to rescission.
(vi) The applicant has reviewed all applicable requirements for the
program and will comply with those requirements.
(vii) The applicant will maintain complete billing records for the
service for five years.
(3) Contracts or other documentation. All applicants must submit a
contract or other documentation that clearly identifies the vendor(s)
selected and the health care provider(s) who will receive the services,
equipment, or facilities; the service, bandwidth, and costs for which
support is being requested; and the term of the service agreement(s) if
applicable (i.e., if services are not being provided on a month-to-
month basis). For services, equipment, or facilities provided under
contract, the applicant must submit a copy of the contract signed and
dated (after the Allowable Contract Selection Date) by the individual
health care provider or Consortium Leader. If the service, equipment,
or facilities are not being provided under contract, the applicant must
submit a bill, service offer, letter, or similar document from the
vendor that provides the required information.
(4) Competitive bidding documents. Applicants must submit
documentation to support their certifications that they have selected
the most cost-effective option, including a copy of each bid received
(winning, losing, and disqualified), the bid evaluation criteria, and
the following documents (as applicable): bid evaluation sheets; a list
of people who evaluated bids (along with their title/role/relationship
to the applicant organization); memos, board minutes, or similar
documents related to the vendor selection/award; copies of notices to
winners; and any correspondence with vendors during the bidding/
evaluation/award phase of the process. Applicants who claim a
competitive bidding exemption must submit relevant documentation to
allow the Administrator to verify that the applicant is eligible for
the claimed exemption.
(5) Cost allocation for ineligible entities or components. Pursuant
to Sec. 54.639(d)(3) through (d)(4), where applicable, applicants must
submit a description of how costs will be allocated for ineligible
entities or components, as well as any agreements that memorialize such
arrangements with ineligible entities.
(6) Additional documentation for consortium applicants. A
consortium applicant must also submit the following:
(i) Any revisions to the network plan submitted with the Request
for Services pursuant to Sec. 54.642(e)(5)(i), as necessary. If not
previously submitted, the consortium should provide a narrative
description of how the network will be managed, including all
administrative aspects of the network, including but not limited to
invoicing, contractual matters, and network operations. If the
consortium is required to provide a sustainability plan as set forth in
Sec. 54.643(a)(6)(iv), the revised budget should include the budgetary
factors discussed in the sustainability plan requirements.
(ii) A list of participating health care providers and all of their
relevant information, including eligible (and ineligible, if
applicable) cost information for each participating health care
provider.
(iii) Evidence of a viable source for the undiscounted portion of
supported costs.
[[Page 13991]]
(iv) Sustainability plans for applicants requesting support for
long-term capital expenses: Consortia that seek funding to construct
and own their own facilities or obtain indefeasible right of use or
capital lease interests are required to submit a sustainability plan
with their funding requests demonstrating how they intend to maintain
and operate the facilities that are supported over the relevant time
period. Applicants may incorporate by reference other portions of their
applications (e.g., project management plan, budget). The
sustainability plan must, at a minimum, address the following points:
(A) Projected sustainability period. Indicate the sustainability
period, which at a minimum is equal to the useful life of the funded
facility. The consortium's budget must show projected income and
expenses (i.e., for maintenance) for the project at the aggregate
level, for the sustainability period.
(B) Principal factors. Discuss each of the principal factors that
were considered by the participant to demonstrate sustainability. This
discussion must include all factors that show that the proposed network
will be sustainable for the entire sustainability period. Any factor
that will have a monetary impact on the network must be reflected in
the applicant's budget.
(C) Terms of membership in the network. Describe generally any
agreements made (or to be entered into) by network members (e.g.,
participation agreements, memoranda of understanding, usage agreements,
or other similar agreements). The sustainability plan must also
describe, as applicable:
(1) Financial and time commitments made by proposed members of the
network;
(2) If the project includes excess bandwidth for growth of the
network, describe how such excess bandwidth will be financed; and
(3) If the network will include ineligible health care providers
and other network members, describe how fees for joining and using the
network will be assessed.
(D) Ownership structure. Explain who will own each material element
of the network (e.g., fiber constructed, network equipment, end user
equipment). For purposes of this subsection, ``ownership'' includes an
indefeasible right of use interest. Applicants must clearly identify
the legal entity that will own each material element. Applicants must
also describe any arrangements made to ensure continued use of such
elements by the network members for the duration of the sustainability
period.
(E) Sources of future support. Describe other sources of future
funding, including fees to be paid by eligible health care providers
and/or non-eligible entities.
(F) Management. Describe the management structure of the network
for the duration of the sustainability period. The applicant's budget
must describe how management costs will be funded.
(v) Material change to sustainability plan. A consortium that is
required to file a sustainability plan must maintain its accuracy. If
there is a material change to a required sustainability plan that would
impact projected income or expenses by more than 20 percent or $100,000
from the previous submission, or if the applicant submits a funding
request based on a new Form 462 (i.e., a new competitively bid
contract), the consortium is required to re-file its sustainability
plan. In the event of a material change, the applicant must provide the
Administrator with the revised sustainability plan no later than the
end of the relevant quarter, clearly showing (i.e., by redlining or
highlighting) what has changed.
(b) [Reserved]
0
31. Add Sec. 54.644 to subpart G to read as follows:
Sec. 54.644 Multi-year commitments.
(a) Participants in the Healthcare Connect Fund are permitted to
enter into multi-year contracts for eligible expenses and may receive
funding commitments from the Administrator for a period that covers up
to three funding years.
(b) If a long-term contract covers a period of more than three
years, the applicant may also have the contract designated as
``evergreen'' under Sec. 54.642(h)(4) which will allow the applicant
to re-apply for a funding commitment under the contract after three
years without having to undergo additional competitive bidding.
0
32. Add Sec. 54.645 to subpart G to read as follows:
Sec. 54.645 Payment process.
(a) The Consortium Leader (or health care provider, if
participating individually) must certify to the Administrator that it
has paid its contribution to the vendor before the invoice can be sent
to Administrator and the vendor can be paid.
(b) Before the Administrator may process and pay an invoice, both
the Consortium Leader (or health care provider, if participating
individually) and the vendor must certify that they have reviewed the
document and that it is accurate. All invoices must be received by the
Administrator within six months of the end date of the funding
commitment.
0
33. Add Sec. 54.646 to subpart G to read as follows:
Sec. 54.646 Site and service substitutions.
(a) A Consortium Leader (or health care provider, if participating
individually) may request a site or service substitution if:
(1) The substitution is provided for in the contract, within the
change clause, or constitutes a minor modification;
(2) The site is an eligible health care provider and the service is
an eligible service under the Healthcare Connect Fund;
(3) The substitution does not violate any contract provision or
state, Tribal, or local procurement laws; and
(4) The requested change is within the scope of the controlling
request for services, including any applicable request for proposal
used in the competitive bidding process.
(b) Support for a qualifying site and service substitution will be
provided to the extent the substitution does not cause the total amount
of support under the applicable funding commitment to increase.
0
34. Add Sec. 54.647 to subpart G to read as follows:
Sec. 54.647 Data collection and reporting.
(a) Each consortium lead entity must file an annual report with the
Administrator on or before September 30 for the preceding funding year,
with the information and in the form specified by the Wireline
Competition Bureau.
(b) Each consortium is required to file an annual report for each
funding year in which it receives support from the Healthcare Connect
Fund.
(c) For consortia that receive large upfront payments, the
reporting requirement extends for the life of the supported facility.
0
35. Add Sec. 54.648 to subpart G to read as follows:
Sec. 54.648 Audits and recordkeeping.
(a) Random audits. Participants shall be subject to random
compliance audits and other investigations to ensure compliance with
program rules and orders.
(b) Recordkeeping. (1) Participants, including Consortium Leaders
and health care providers, shall maintain records to document
compliance with program rules and orders for at least 5 years after the
last day of service delivered in a particular funding year.
Participants who receive support for long-term capital investments in
[[Page 13992]]
facilities whose useful life extends beyond the period of the funding
commitment shall maintain records for at least 5 years after the end of
the useful life of the facility. Participants shall maintain asset and
inventory records of supported network equipment to verify the actual
location of such equipment for a period of 5 years after purchase.
(2) Vendors shall retain records related to the delivery of
supported services, facilities, or equipment to document compliance
with program rules and orders for at least 5 years after the last day
of the delivery of supported services, equipment, or facilities in a
particular funding year.
(3) Both participants and vendors shall produce such records at the
request of the Commission, any auditor appointed by the Administrator
or the Commission, or of any other state or federal agency with
jurisdiction.
0
36. Add Sec. 54.649 to subpart G to read as follows:
Sec. 54.649 Certifications.
For individual health care provider applicants, required
certifications must be provided and signed by an officer or director of
the health care provider, or other authorized employee of the health
care provider. For consortium applicants, an officer, director, or
other authorized employee of the Consortium Leader must sign the
required certifications. Pursuant to Sec. 54.680, electronic
signatures are permitted for all required certifications.
0
37. Add Sec. 54.671 to subpart G and an undesignated center heading to
read as follows:
General Provisions
Sec. 54.671 Resale.
(a) Prohibition on resale. Services purchased pursuant to universal
service support mechanisms under this subpart shall not be sold,
resold, or transferred in consideration for money or any other thing of
value.
(b) Permissible fees. The prohibition on resale set forth in
paragraph (a) of this section shall not prohibit a health care provider
from charging normal fees for health care services, including
instruction related to services purchased with support provided under
this subpart.
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38. Add Sec. 54.672 to subpart G to read as follows:
Sec. 54.672 Duplicate support.
(a) Eligible health care providers that seek support under the
Healthcare Connect Fund for telecommunications services may not also
request support from the Telecommunications Program for the same
services.
(b) Eligible health care providers that seek support under the
Telecommunications Program or the Healthcare Connect Fund may not also
request support from any other universal service program for the same
expenses.
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39. Add Sec. 54.675 to subpart G to read as follows:
Sec. 54.675 Cap.
(a) Amount of the annual cap. The aggregate annual cap on federal
universal service support for health care providers shall be $400
million per funding year, of which up to $150 million per funding year
will be available to support upfront payments and multi-year
commitments under the Healthcare Connect Fund.
(b) Funding year. A funding year for purposes of the health care
providers cap shall be the period July 1 through June 30.
(c) Requests. Funds shall be available as follows:
(1) Generally, funds shall be available to eligible health care
providers on a first-come-first-served basis, with requests accepted
beginning on the first of January prior to each funding year.
(2) For the Telecommunications Program and the Healthcare Connect
Fund, the Administrator shall implement a filing window period that
treats all eligible health care providers filing within the window
period as if their applications were simultaneously received.
(3) [Reserved]
(4) The deadline to submit a funding commitment request under the
Telecommunications Program and the Healthcare Connect Fund is June 30
for the funding year that begins on the previous July 1.
(d) Annual filing requirement. Health care providers shall file new
funding requests for each funding year, except for health care
providers who have received a multi-year funding commitment under Sec.
54.644.
(e) Long-term contracts. If health care providers enter into long-
term contracts for eligible services, the Administrator shall only
commit funds to cover the portion of such a long-term contract
scheduled to be delivered during the funding year for which universal
service support is sought, except for multi-year funding commitments as
described in Sec. 54.644.
(f) Pro-rata reductions for Telecommunications Program support. The
Administrator shall act in accordance with this section when a filing
window period for the Telecommunications Program and the Healthcare
Connect Fund, as described in paragraph (c)(2) of this section, is in
effect. When a filing window period described in paragraph (c)(2) of
this section closes, the Administrator shall calculate the total demand
for Telecommunications Program and Healthcare Connect Fund support
submitted by all applicants during the filing window period. If the
total demand during a filing window period exceeds the total remaining
support available for the funding year, the Administrator shall take
the following steps:
(1) The Administrator shall divide the total remaining funds
available for the funding year by the total amount of
Telecommunications Program and Healthcare Connect Fund support
requested by each applicant that has filed during the window period, to
produce a pro-rata factor.
(2) The Administrator shall calculate the amount of
Telecommunications Program and Healthcare Connect Fund support
requested by each applicant that has filed during the filing window.
(3) The Administrator shall multiply the pro-rata factor by the
total dollar amount requested by each applicant filing during the
window period. Administrator shall then commit funds to each applicant
for Telecommunications Program and Healthcare Connect Fund support
consistent with this calculation.
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40. Add Sec. 54.679 to subpart G to read as follows:
Sec. 54.679 Election to offset support against annual universal
service fund contribution.
(a) A service provider that contributes to the universal service
support mechanisms under subpart H of this part and also provides
services eligible for support under this subpart to eligible health
care providers may, at the election of the contributor:
(1) Treat the amount eligible for support under this subpart as an
offset against the contributor's universal service support obligation
for the year in which the costs for providing eligible services were
incurred; or
(2) Receive direct reimbursement from the Administrator for that
amount.
(b) Service providers that are contributors shall elect in January
of each year the method by which they will be reimbursed and shall
remain subject to that method for the duration of the calendar year.
Any support amount that is owed a service provider that fails to remit
its monthly universal service contribution obligation, however, shall
first be applied as an offset to that contributor's contribution
[[Page 13993]]
obligation. Such a service provider shall remain subject to the
offsetting method for the remainder of the calendar year in which it
failed to remit its monthly universal service obligation. A service
provider that continues to be in arrears on its universal service
contribution obligations at the end of a calendar year shall remain
subject to the offsetting method for the next calendar year.
(c) If a service provider providing services eligible for support
under this subpart elects to treat that support amount as an offset
against its universal service contribution obligation and the total
amount of support owed exceeds its universal service obligation,
calculated on an annual basis, the service provider shall receive a
direct reimbursement in the amount of the difference. Any such
reimbursement due a service provider shall be provided by the
Administrator no later than the end of the first quarter of the
calendar year following the year in which the costs were incurred and
the offset against the contributor's universal service obligation was
applied.
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41. Add Sec. 54.680 to subpart G to read as follows:
Sec. 54.680 Validity of electronic signatures.
(a) For the purposes of this subpart, an electronic signature
(defined by the Electronic Signatures in Global and National Commerce
Act, as an electronic sound, symbol, or process, attached to or
logically associated with a contract or other record and executed or
adopted by a person with the intent to sign the record) has the same
legal effect as a written signature.
(b) For the purposes of this subpart, an electronic record (defined
by the Electronic Signatures in Global and National Commerce Act, as a
contract or other record created, generated, sent, communicated,
received, or stored by electronic means) constitutes a record.
[FR Doc. 2013-04040 Filed 2-28-13; 8:45 am]
BILLING CODE 6712-01-P