# Rural Health Care Support Mechanism > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2013-04040 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** March 1, 2013 - **Citation:** 78 FR 13936 ## Text 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 §§ 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: http://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 http://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 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 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 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 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 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 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 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 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 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 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 Applicants CONSORTIUM Applicants 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 No ✓ 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) No ✓ HCP-Constructed and Owned Facilities (§ IV.D) No ✓ 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 No ✓ 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). 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 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 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 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 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 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-o [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2013-04040. Public record. Not legal advice.