Rural Health Care Program Compliance Remains Key Focus of FCC

With a renewed focus on compliance, enhanced reviews and audits, the slow-motion crisis in the FCC’s Rural Health Care Universal Service Support Program (RHC) has continued to unfold this Spring. In an ongoing effort to combat waste, fraud, and abuse in the RHC Program, earlier this year, the FCC proposed a fine of $18.7M against a service provider, DataConnex, for multiple competitive bid violations and its involvement in a scheme to allegedly defraud the Program. This heightened compliance scrutiny is partly responsible for the delay in RHC funding decisions.

Now, with funding requests for Funding Year 2018 due by June 29, 2018, healthcare providers are down to the last few days when it is even theoretically possible to file a Form 461 or 465 request for supported services. But, the funding shortfalls and prolonged delays that have defined Funding Year 2017 continue to plague USAC, the Administrator of RHC Program, and create uncertainty for healthcare providers, even as the dawn of the new year comes into sight.

Pro Rata Funding Shortfalls. In March 2018, USAC announced that demand for RHC support had again exceeded the program’s antiquated $400 million budget, leading to “pro-rata” funding shortfalls that far exceeded the 7.5% haircut imposed in Funding Year 2016. Individual RHC applicants were hit with a 15.6% shortfall in the expected level of support for which they should have been eligible, while support for healthcare provider consortia fell short by 25.6%.

These reductions have left many rural healthcare providers with surprise liabilities of hundreds, thousands, or in some cases millions of dollars for services they have already received. While the FCC has authorized their service providers to voluntarily forego collection of the unfunded “gap” between the available support and the expected amount, at least some service providers have told customers that they are unable to do so.

Funding Uncertainty and Delays. For FY2017, USAC has committed roughly $225 million in RHC funding, about $130 million less than the FY2106 total, and a closer look at the data reveals a stark contrast between the Healthcare Connect Fund (HCF) and the Telecommunications Program (Telecom Program).

USAC’s accounting for upfront payments and multiyear commitments in the HCF Program make large state-level variations in year-to-year funding amounts common. But, overall, HCF funding commitments are up in FY 2017. Even after accounting for FY 2017’s steep pro-rata funding cuts, USAC has committed about $171 million so far to HCF applicants, a $20 million increase over Funding Year 2016.

Telecom Program funding commitments, however, have fallen dramatically, from over $200 million in FY 2016 to just $53 million so far in FY2017. Much of that decrease is the result of significant delays in USAC’s funding commitment decisions. USAC’s data shows that, with only one month left in FY 2017, over 1,000 Telecom Program funding requests remain “pending” or “in review.” These include more than a third of the funding requests from healthcare providers in Georgia, more than one-quarter of those from Tennessee, about one-fifth of those from Arizona, and over 80 percent of those from Alaska, a state that has historically relied heavily on Telecom Program support.

Overall, the dollar value of FY 2017 Telecom Program funding commitments in those states and others is also sharply lower. In FY 2017, Telecom Program funding commitments have fallen by more than half from FY 2016 levels in Idaho (↓51%), Arizona (↓53%), Mississippi (↓54%), Tennessee (↓72%), Georgia (↓73%), South Dakota (↓85%), Oklahoma (↓97%), and Alaska (99%!).

These figures reflect USAC’s new emphasis on “Enhanced Review” and audits of RHC funding requests, as the FCC, USAC, rural healthcare providers, and service providers alike struggle to apply that program’s antiquated rules to modern telecommunications services and marketplaces. As time ticks away, however, many healthcare providers under “enhanced review” remain stuck in limbo: they have signed binding service contracts, but still do not know whether they will receive a 2017 commitment of support, whether their contract will be given evergreen status, or whether they should (or can) solicit bids for a new contract. And, some healthcare providers continue to wrestle with whether or not to accept installation and begin using the new services, even without a funding decision from USAC.

The RHC Modernization Rulemaking. The FCC’s rulemaking to modernize the Telecom Program will not bring relief soon enough. The comment and reply comment cycles closed in March 2018. The FY18 bidding cycle will close on June 29, 2018 with the old rules still in force, setting the stage for another round of challenging USAC review and funding decisions in the upcoming funding year. For new Telecom Program rules to be in place for Funding Year 2019, the FCC would need to adopt new rules and secure OMB approval within about six months from now. The timeline seems awfully tight, but time will tell.