THE UNIVERSAL SERVICE FUND AND HEALTHCARE CONNECT FUND THE UNIVERSAL SERVICE FUND AND HEALTHCARE CONNECT FUND Summary The Healthcare Connect Fund ("HCF") was established by the Federal Communications Commission ("FCC") to expand health care provider ("HCP") access to broadband, especially in rural areas, and encourage the creation of state and regional broadband health care networks. Through the establishment of the HCF, the FCC has reserved $150 million to fund the design, development and acquisition of eligible services. Background The Telecommunications Act of 1996 (the "Act") established the Universal Service Fund ("USF") to ensure access to telecommunication services for all. One of the charges of the USF is to provide communications services to public and nonprofit health care providers that serve persons who reside in rural areas. Consistent with this Congressional directive, the FCC established the "Telecommunications Program" in 1997 to ensure that rural HCPs pay no more than their urban counterparts for telecommunications services. The Telecommunications Program enables eligible rural HCPs to obtain a rate for each supported service that is no higher than the highest tariffed or publicly available commercial rate for a similar service in the closest urban center – in effect, providing a discount to the HCP in the amount of the “rural‐urban differential.” Next, in 2003, the FCC created the RHC Internet Access Program which provides a twenty‐five percent (25%) discount off the cost of monthly Internet access for eligible rural HCPs. Together the Telecommunications and Internet Access Programs are commonly referred to as the “Primary Program,” to distinguish them from the RHC Pilot Program (discussed below). In September 2006, the Commission established the RHC Pilot Program ("Pilot Program") to provide funding to support state or regional broadband networks designed to bring the benefits of innovative telehealth and telemedicine services to areas of the country where the need for those benefits is most acute. The Pilot Program is providing funding for a limited period of time for up to eighty‐five percent (85%) of the costs associated with: (1) the construction of state or regional health care broadband networks, and the advanced telecommunications and information services provided over those networks; (2) connecting to nationwide backbone providers Internet2 or National LambdaRail (NLR); and (3) connecting to the public Internet. Additionally, the Pilot Program allowed participants to use funding to purchase items that are not eligible for support under the Primary Program such as equipment (e.g. servers, routers, firewalls, switches, and other devices or equipment necessary for the broadband connection), or to upgrade their existing equipment and increase bandwidth. Today there are 50 active Pilot projects covering 38 states; many of these projects are state‐wide or regional networks of HCPs. They range in size from 4 HCPs to 477 HCPs. As of November 15, 2012, USAC had committed $364.4 million in funds to approximately 3,822 individual HCP sites. Healthcare Connect Fund Drawing on these lessons, the Healthcare Connect Fund provides support for high‐capacity broadband services and the formation of state and regional health care networks. 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 Program will match two‐for‐one (65% funding) the cost of broadband services or facilities, requiring a thirty‐five percent (35%) HCP contribution. Both rural and non‐rural HCPs will be allowed to participate in the new program, but non‐rural providers may join only as THE UNIVERSAL SERVICE FUND AND HEALTHCARE CONNECT FUND part of consortia. A more detailed outline of the HCF is included below. Recipients of HCF funding are obligated to participate in the FCC’s data gathering activities. The FCC has expressed the goals of the HCF to be (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 USF program. The FCC will collect information from participants to evaluate the success of the HCF against each of these goals. The FCC also created 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. How Hall Render Can Assist Hall Render works with a broad array of clients to assist them with participation in the USF programs as well as other FCC and rural health care grant and loan programs. Annually, Hall Render works with hospitals, health systems, rural health associations and their telecommunications billing agents to identify and pursue savings opportunities under the Primary Program. In addition, Hall Render assisted or advised clients in forming, applying for and managing Pilot Projects in multiple states. Hall Render has also worked with health systems and other governmental and tribal entities in the development, construction and contracting for regional and multi‐state fiber networks. If you have any questions regarding the USF programs, the HCF or feasibility of an HCF project in your area, we would be happy to discuss these items with you. Michael T. Batt, Esq. Hall, Render, Killian, Heath & Lyman, P.C. One American Square, Suite 2000 Indianapolis, IN 46282 Phone: (317) 977‐1417 Mobile: (317) 440‐8104 THE UNIVERSAL SERVICE FUND AND HEALTHCARE CONNECT FUND Detailed Summary of the Healthcare Connect Fund I) HCF Participants. A) Individual HCP 1) Eligibility criteria applies to healthcare providers on a per physical address basis, designated by the FCC to be a "HCP." (a) A HCP must be a governmental; not‐for‐profit; or ER department of a for‐profit entity that is: (i) Post‐secondary educational institution offering health care instruction, including a teaching hospital or medical school; (ii) Community health center or health center providing health care to migrants; (iii) Local health department or agency; (iv) Community mental health center; (v) Not‐for‐profit hospital; (vi) Rural health clinic; or (vii) Consortium of health care providers consisting of one or more entities described in paragraphs (a)(1) through (a)(6) of this section. (b) For purposes of determining whether an HCP qualifies as rural, 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. B) Consortium. 1) Composition. A consortium may be comprised of HCPs, schools, libraries, public sector and ineligible health care providers. 2) Majority Rural. In order for an HCP to be eligible for Healthcare Connect Fund, a majority of HCP sites (over 50 percent) within the Consortium must be rural HCPs. 3) Large HCP. Large (400+ beds) urban HCP are limited to (1) $30,000 per year for recurring charges and (2) $70,000 in non‐recurring charges over a 5 year period. The limitation excludes costs shared by the network. 4) Consortium Leader. Each Consortim must identify a leader that will be the lead entity. The Consortium Leader may be the consortium itself (if it is a distinct legal entity); an eligible health care provider, or a public or tribal entity or a non‐profit entity that is ineligible for the Healthcare Connect Fund support (such as a hospital association). A Consortium Leader may not participate as a potential vendor and must pass on the full value of any funding to secure benefits to the Consortium members that are eligible HCPs. The Consortium Leader is the legally and financially responsible entity for the activities supported by the HCF, and is therefore the entity responsible if audits or other investigations reveal violations of the Act or FCC rules (individual members are jointly and severally liable only if the Consortium Leader dissolves, files for bankruptcy, or otherwise fails to meet its obligations). II) Scope of Funding A) Eligible Services and Equipment. Subject to various limitations, the HCF is available for any advanced THE UNIVERSAL SERVICE FUND AND HEALTHCARE CONNECT FUND 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. 1) Reasonable and customary installation charges less than $5,000. 2) Lit fiber lease. 3) Dark fiber recurring charges for all and upfront IRU, lease and equipment only for a consortium. 4) Upfront charges for new or upgraded facilities (Consortia only). 5) Construction of Facilities (Consortia only). 6) Network management equipment (Consortia only). 7) All components (e.g. last mile, middle mile, backbone) and all types (e.g. copper, fiber, cloud, wireless or satellite) of networks are eligible. B) Ineligible Expenses. The following expenses are not eligible 1) 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; 2) inside wiring and internal connections; and 3) administrative expenses.