The FCC’S Newly Reformed Rural Healthcare Program

The Commission’s Rural Healthcare (RHC) Program is divided into two parts: (1) the Telecommunications (Telecom) Program; and (2) the Healthcare Connect Fund Program. The Telecom Program, established in 1997, subsidizes the difference between urban and rural rates for telecommunications services. The Healthcare Connect Fund, which was created in 2012, provides a 65% discount on many advanced telecommunications and information services, and allows for the use of urban-rural buying consortia, as long as the consortia are majority rural. In June 2018, following two years in which RHC Program demand exceeded its FCC-imposed $400 million cap, the Commission increased the cap to $571 million for funding year (FY) 2017 and indexed the fund for inflation. However, even with an increased cap of $581 million for FY2018, demand again exceeded the cap.

Against this background, on August 1, 2019, the FCC adopted an Order which will significantly change the RHC program. The changes to the Telecom Program will be more profound in that they directly affect the amounts paid to talk communications providers, but there will also be a number changes to the Healthcare Connect Fund.

Changes to Telecom Program Rate Structure, effective FY2021:

• Under the current Telecom Program rules, HCPs can choose an urban rate from any city with a population of 50,000 or more in their state. Beginning in FY2021, USAC will prepare a must-use database of urban rates.
• Under the current Telecom Program rules the rural rate is set by each individual carrier based on rates for comparable services or a cost-based rate approved by a state commission or the FCC. Beginning in FY2021, USAC will prepare a must-use database of rural rates.

Changes to the Proration Regimen, effective FY2020:

• Under the current rules, if demand on the fund exceeds the fund amount, grants are prorated evenly across all HCP’s. Beginning in FY2020, the proration rules will be replaced with a new process that prioritizes funding based on the rurality of the site location and whether the area is considered medically underserved.

Changes to the Competitive Bidding Rules, effective FY2020:

• Applicants must list the requested services for which they seek bids (e.g., Internet access, bandwidth) rather than merely listing what those services are intended to do (e.g., transmit x-rays).
• Price be the primary factor (as opposed to a primary factor) when making service provider selections.
• Applicants will be required to provide, contemporaneously with their requests for services, the following certifications: (1) the health care provider seeking supported services is a public or nonprofit entity that falls within one of the seven categories set forth in the definition of health care provider; (2) the health care provider seeking supported services is physically located in a rural area, or is a member of a Healthcare Connect Fund Program consortium; (3) the person signing the application is authorized to submit the application on behalf of the applicant, has examined the form and attachments, and to the best of his or her knowledge, information, and belief, all statements contained therein are true; (4) the applicant has complied with any applicable state, Tribal, or local procurement rules; (5) RHC Program support will be used solely for purposes reasonably related to the provision of health care service or instruction; (6) the applicant satisfies all requirements under section 254 of the Act and applicable Commission rules; and (7) the applicant has reviewed and is compliant with all applicable RHC Program requirements.
• Both Telecom Program and Healthcare Connect Fund Program applicants must submit weighted bid evaluation criteria as before, but must also specify on their bid evaluation worksheet/scoring matrix their minimum requirements for each criteria and record on their worksheet/matrix each service provider’s proposed service levels for the established criteria. Applicants of both programs must also specify their disqualification factors, if any, that they will use to remove bids or bidders from further consideration.
• Both Telecom Program applicants and Healthcare Connect Fund Program applicants must submit a declaration of assistance identifying each paid or unpaid consultant, vendor, and other outside expert who aided in the preparation of their application. Applicants must also describe the nature of the relationship they have with any such outside entity identified in their declaration of assistance.
• The Telecom Program competitive bidding process must now be “fair and open.” Specifically: (1) all potential bidders and service providers must have access to the same information and must be treated in the same manner throughout the procurement process; (2) vendors who intend to bid on supported services may not simultaneously help the applicant complete its request for proposal (RFP) or request for services form; and (3) vendors who intend to bid on supported services may not simultaneously help the applicant evaluate submitted bids or select the winning bid. In addition, applicants must respond to all service providers that have submitted questions or proposals during the procurement process.
• It is a violation of the Commission’s “fair and open” competitive bidding standard if: (1) a vendor, or any individual that has a financial or ownership interest in such a vendor, submits a bid and also prepares, signs, or submits the applicant’s request for services (2) a vendor, or any individual that has a financial or ownership interest in such a vendor, submits a bid and also participates in the applicant’s bid evaluation or vendor selection process in any way; (3) the applicant has a relationship with a vendor that would unfairly influence the outcome of a competition or would furnish the vendor with “inside” information; (4) the applicant’s RFP or request for services form does not describe the desired products and services with sufficient specificity to enable interested parties to submit responsive bids; (5) a vendor representative is listed as the contact person on the applicant’s request for services and that vendor also participates in the competitive bidding process; or (6) the applicant’s consultant is affiliated with the vendor selected to provide the requested services.

If you have any questions about the Commission’s latest Rural Healthcare Program Order or any of the Commission’s other universal service programs, do not hesitate to contact Steve Rosen or Colleen Boothby.