The FCC Expands Eligibility for Discounts on Charges for Telecommunications Services Supporting Rural Health Care

The Federal Communications Commission ("FCC") has expanded the eligibility criteria for participation in the Universal Service Fund program providing subsidies on telecommunications services for rural health care providers.

In 1996, Congress enacted a program to allow rural health care providers to access funds to discount the costs of modern telecommunications services for medical and health maintenance purposes. The program was designed to ensure affordable rates for the modern telecommunications and information services necessary for telemedicine and instruction relating to rural health care services. Under this program, rural health care providers can access telecommunications services at rates equal to those charged for similar services in urban areas.

The FCC decided to expand the scope of entities eligible to receive discounted services because it found that the available funds were being underused. During the 2001 funding year, participants requested only $14 million, or 3.5%, of the $400 million available for rural health care support. Accordingly, in November 2003, the FCC adopted changes to the program to expand the scope of entities eligible to receive discounts, to provide support for Internet access, and to modify the way the FCC calculates discounts to offer health care providers more flexibility.

How the Program Works. Under the Telecommunications Act of 1996, telecommunications carriers are required to provide discounted telecommunications services to any public or non-profit health care provider that serves rural areas in a state. The term health care provider is defined as:

(1) Post secondary educational institutions offering health care instruction, teaching hospitals, and medical schools;
(2) Community health centers or health centers providing health care to migrants;
(3) Local health departments or agencies;
(4) Community mental health centers;
(5) Not-for-profit hospitals;
(6) Rural health clinics; and
(7) Consortia of health care providers consisting of one or more entities described in the above 1-6.

Changes to Provider Eligibility. In November 2003, the FCC expanded the categories of entities that can be included as public health care providers. Dedicated emergency departments of rural for-profit hospitals that participate in Medicare are now deemed "public" health care providers and are eligible to receive prorated rural health care support. Under this policy, eligible emergency departments in rural for-profit hospitals are deemed to fall into category (6) above, "rural health clinics."

Moreover, non-profit entities that provide both eligible and ineligible services, even on a primary basis, will now be able to receive prorated support commensurate with their provision of eligible rural health care services. Thus, an entity that only provides part-time eligible services will be able to receive prorated support.

Changes to Eligible Services. The FCC also expanded the categories of services that can be used under the program. Rural health care providers can now use funding to obtain Internet access. The FCC decided that support equal to a flat discount of 25% of the monthly cost for any form of Internet access reasonably related to the health care needs of the facility should be provided to rural health care providers. Eligible Internet access is defined as "an information service that enables rural health care providers to post their own data, interact with stored data, generate new data, or communicate over the World Wide Web." Health providers must certify that the particular Internet-access service selected is the most cost-effective way of meeting the facility's health care needs.

The rural health care support mechanism also provides support for toll charges incurred by rural health care providers that cannot obtain toll-free access to an Internet Service Provider, limited to the lesser of $180.00 or 30 hours of usage per month.

Methodology for Calculating Discounts. The FCC has adopted a new method for calculating discounts. To date, discounts for telecommunications services have been calculated based on the difference between the urban and rural rates for "technically similar" services. The FCC's new policy allows rural health care providers to compare the urban and rural rates for "functionally similar" services as viewed from the perspective of the end user. In order to receive the discount, eligible health care providers must purchase telecommunications services and compare their service to a functionally equivalent telecommunications service. The FCC has established "safe harbor" categories of functionally equivalent services based on the speed and nature of the service.

The types of cities eligible for rate comparison have also been expanded. The "urban" rate used in rate comparisons previously was based on rates in the "nearest large city," defined as "the city located in the eligible health care provider's state, with a population of at least 50,000, that is nearest to the healthcare provider's location, measuring point-to-point, from the health care provider's location to the point on that city's jurisdictional boundary closest to the health care provider's location." The FCC has decided to allow rural health care providers to compare rural rates to urban rates in any city with a population of at least 50,000 in the state, not just the nearest city.

In keeping with its decision to allow rural health care provides to rely on rates in any city within the state, the FCC has also modified the Maximum Allowable Distance ("MAD") used as the maximum amount of recovery on distance-based charges. In the future, the MAD will be the distance between the rural health care provider and the farthest point on the jurisdictional boundary of the largest city in the state. Qualifying rural health care providers can recover a portion of distance-based charges over any distance greater than the Standard Urban Distance (the average of the longest diameters of all cities in the state with populations of at least 50,000) but less than the MAD.

Access to Satellite Services. The FCC also now allows rural health care providers to receive discounts on rates for satellite services even where alternative terrestrial-based services may be available. These discounts will be capped at the amount providers would have received if they purchased functionally similar terrestrial based alternatives.

Recordkeeping. The FCC requires fund users to keep certain records, and these recordkeeping requirements also changed in the November 2003 decision. The revised rules require eligible providers to allocate discounts to prevent discounts from flowing to ineligible activities or providers of service. Providers that engage in both eligible and ineligible activities must allocate costs based on objective criteria, and must keep documentation explaining their allocation methods for five years and present that information to Universal Service Administrative Company ("USAC") upon request. Health care providers must maintain records for their purchases of supported services for at least five years sufficient to document their compliance with all FCC requirements.

Applying for Funds. E-certification for rural health care provider support is available by filing FCC Form 465. The modifications detailed above will be implemented beginning with funding year 2004, beginning July 1, 2004.