# Promoting Telehealth in Rural America > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2019-20173 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** October 11, 2019 - **Citation:** 84 FR 54952 ## Text FEDERAL COMMUNICATIONS COMMISSION 47 CFR Part 54 [WC Docket No. 17-310; FCC 19-78] Promoting Telehealth in Rural America AGENCY: Federal Communications Commission. ACTION: Final rule. SUMMARY: In this document, the Federal Communications Commission (Commission) takes a variety of measures to promote transparency and predictability, and further the efficient allocation of limited Rural Health Care Program resources while guarding against waste, fraud and abuse. DATES: Effective November 12, 2019, except for §§ 54.622(d), 54.622(e)(2), 54.622(e)(4), 54.622(e)(5), 54.623(a)(2), 54.623(a)(3), 54.623(a)(4), 54.624, 54.626(b), 54.627(b), 54.631(d), which contain new or modified information collection requirements, as provided in the Report and Order, 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 not yet effective. FOR FURTHER INFORMATION CONTACT: Elizabeth Drogula, Elizabeth.Drogula@fcc.gov, Telecommunications Access Policy Division, Wireline Competition Bureau, (202) 418-1591 or TTY: (202) 418-0484. SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report and Order (R&O) in WC Docket No. 17-310; FCC 19-78, adopted on August 1, 2019 and released on August 20, 2019. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 12th Street SW, Washington, DC 20554 or at the following internet address: https://docs.fcc.gov/public/attachments/FCC-19-78A1.pdf. I. Introduction 1. Nearly 60 million people—roughly 1 out of every 5 Americans—live in a rural area. For these millions of Americans, affordable, quality health care at the local level can be scarce. Geographic isolation, combined with low population densities, make the provision of sustainable local health care in rural areas a challenge. Many rural areas also have witnessed an increasing number of local health care facilities closing in recent years. Inadequate local resources and difficulties in recruiting and retaining physicians further complicate local access to quality health care. As a result, millions of rural Americans are forced to travel long distances to obtain medical treatment, at significant time and expense not only for the patient but also for friends and family. Those unable to bear the expense may forgo treatment altogether and risk a personal health care crisis. Telehealth services are one important solution to the challenge of health care access in rural areas by connecting rural patients with general physicians and medical specialists located outside the patients' communities. The Commission promotes telehealth in rural areas through the Rural Health Care Program (RHC Program or Program), which provides financial support to help rural health care providers obtain broadband and other communications services at discounted rates. These services are in turn used by health care providers to offer telehealth to patients living in and around the communities they serve. 2. As the demand for robust broadband has increased throughout the country, the RHC Program has witnessed a dramatic increase in health care provider participation. This increased demand and resulting administrative challenges required the Commission to take a closer look at whether the current rules and procedures are cost-effective and efficient and adequately protect the Universal Service Fund against waste, fraud, and abuse. Accordingly, in the R&O, the Commission adopted a number of the proposals made in the 2017 Promoting Telehealth Notice of Proposed Rulemaking and Order (2017 Promoting Telehealth NPRM & Order), 83 FR 303, January 3, 2018, to reform the RHC Program rules to promote transparency and predictability, and further the efficient allocation of limited RHC Program resources. II. Discussion 3. Improving Transparency, Predictability, and Efficiency for the Telecom Program. The Telecom Program is rooted in section 254(h)(1)(A) of the Communications Act, as amended by the Telecommunications Act of 1996 (the Act). This statutory provision allows eligible health care providers to obtain telecommunications services in rural areas at rates comparable to the rates charged to customers in urban areas for similar services in a state. Section 254(h)(1)(A) is intended “to ensure that health care providers for rural areas . . . have affordable access to modern telecommunications services that will enable them to provide . . . medical services to all parts of the Nation.” The statute also limits the types of health care providers that can receive the services supported by the RHC Program. Health care providers eligible for discounts include: (1) Post-secondary educational institutions offering health care instruction, teaching hospitals, and medical schools; (2) community health centers or health centers providing health care to migrants; (3) local health departments or agencies; (4) community mental health centers; (5) not-for-profit hospitals; (6) rural health clinics; (7) skilled nursing facilities; and (8) consortia consisting of eligible health care providers. 4. The Telecom Program provides eligible health care providers with a discount on telecommunications services so they can purchase services at rates reasonably comparable to the rates paid for similar services in urban areas as directed by the statute. The amount of the discount is the difference between the urban and rural rate calculated under the Commission's rules. The current system requires health care providers to identify the urban and rural rates for an eligible service and submit that information to the Universal Service Administrative Company (the Administrator) in their funding applications. To do this, health care providers often (and in some cases, must) rely on information obtained from carriers. Ultimately, the urban rate identified by the health care provider is what the health care provider pays for the service. Accordingly, the health care provider has an incentive to identify the lowest urban rate possible for the requested service in the state to minimize its out-of-pocket expense. The Telecom Program compensates carriers for the difference between the rural rate and corresponding urban rate for the service as identified under the Commission's rules. The carrier, therefore, also has an incentive to identify the highest rural rate it can justify to maximize the support received. 5. Under existing Telecom Program rules, the process of determining the urban and rural rates is cumbersome, and the current system lacks transparency. Health care providers individually determine, according to the Commission's rules, the rates used to set the program discount. Health care providers are further required to submit documentation substantiating their requested urban and rural rates to the Administrator with their funding applications; however, the information submitted by a health care provider in support of a particular funding request is not publicly available for review by other service or health care providers looking to compare and scrutinize the rates. Consequently, the Administrator must either accept the rate information submitted by the health care provider or conduct a burdensome investigation of the submitted rates. Conducting such investigations on a case-by-case basis for thousands of Telecom Program funding requests filed each year is a laborious, time-intensive task in a program where the speed of funding decisions may determine vital outcomes. Not conducting investigations, on the other hand, may favor those more willing to manipulate the Commission's current approach, and thus reduces funding otherwise available to other health care providers and thwarts the purpose of the RHC Program to support the delivery of critical health care services to rural America. In short, the current system of Telecom Program rate determinations results in wasteful spending, fraud, and abuse as reflected in recent enforcement actions; is not serving the statute as intended; and is causing a significant drain on the limited resources of the Telecom Program. 6. The Commission took the following steps to reform the Telecom Program: (1) Clarified the scope of similar services for rate determination; (2) defined the geographic contours of urban and comparable rural areas for rate determination; (3) reassigned to the Universal Service Administrative Company (the Administrator) the task of determining urban and rural rates for similar services from health care and service providers; (4) reformed the determination of rates based on the median of all available rates for functionally similar services; (5) directed the Administrator to create a publicly available database for the posting of urban and rural rates; (6) eliminated the limitation on support for satellite services; and (7) eliminated distance-based support. 7. Defining Similar Services for Determining Rates. The amount of the discount health care providers receive in the Telecom Program is the difference between the urban rate, which must be “reasonably comparable to the rates charged for similar services in urban areas in that State,” and the rural rate— i.e., “the rates for similar services provided to other customers in comparable rural areas.” As the Commission recognized, the currently outdated speed tiers “ha[ve] led to significant variability in how the `similar services' analysis is conducted and is a potential source of waste.” Thus, the Commission, in the R&O, placed the burden of identifying “similar services” for rate determination on the Administrator. This approach will reduce health care provider burdens and will also preclude manipulation of urban and rural rates through ad hoc assessments of service similarity by service and health care providers. It will also promote a more equitable distribution of program funding by ensuring that funding requests for Telecom Program support are consistently evaluated and based on the same parameters. 8. The Commission retained the existing requirement that the similarity of services be determined from the perspective of the end user, rather than technical similarity of the services, and direct the Administrator to evaluate whether services are similar based on that. For purposes of determining functional similarity, the Administrator will consider other services with advertised speeds 30% above or below the speed of the requested service. 9. The current designated speed tiers, in effect since 2003, have failed to keep pace with the rising demand for faster connectivity. A range based on the requested service speed eliminates the need to continually update the speed tiers to reflect advances in technology. Moreover, the Commission anticipates that a 30% range will provide a sufficiently large range of functionally similar services to enable reasonable rate comparisons. While the universe of functional equivalents may be larger in limited cases, depending on the telecommunications service, the Commission found a 30% range strikes the appropriate balance to furthering specific, predictable, and sufficient mechanisms to preserve and advance universal service while ensuring rural health care providers obtain telecommunications services at reasonable comparable rates for similar services. 10. The Commission also found that factors other than bandwidth are relevant to whether a service is functionally similar. Rural health care providers may have mission critical needs requiring highly secure and reliable telecommunications services for which a dedicated service offering is necessary. In these instances, a best-efforts service may not be functionally similar. In future funding years, the Commission expects health care providers to indicate whether they require a dedicated service or other service level guarantees when they seek bids for eligible services. By doing so, the question of whether dedicated and best-efforts services are similar from the perspective of the end user will be in the hands of the end user ( i.e., the health care provider requesting the service). If a health care provider does not indicate a need for dedicated services or is otherwise silent on the subject in its competitive bidding documentation, then the Administrator may reasonably conclude that best-efforts services are sufficient from the perspective of the health care provider. Where a health care provider specifies that it requires a dedicated service or other service level guarantees, the Commission instructed the Administrator to take that into account when identifying functionally similar services for rate comparisons. For the same reasons, the Commission also retained its earlier conclusion that the Administrator should consider whether the requested service is symmetrical or asymmetrical when assessing functional similarity of services for rate comparisons. Depending on the health care provider's identified needs, asymmetrical services would not be functionally similar to the requested service because they would not fulfill those needs. The Commission directed the Wireline Competition Bureau (the Bureau) and the Administrator to work on any appropriate revisions to the competitive bidding forms that will enable health care providers to provide the necessary information. 11. Additionally, the Commission directed the Administrator not to limit the functionally similar inquiry to solely telecommunications services. The Telecom Program is statutorily limited to supporting telecommunications services but determining similarity of services is a technology-agnostic inquiry as to whether there are functionally equivalent substitutes from the end user's viewpoint. The end-user experience is not dictated by regulatory classification. Therefore, the Commission determined that it is appropriate to determine median rates for telecommunications services using non-telecommunications service rates and instructed the Administrator to expand the inquiry beyond telecommunications to other services, including functionally equivalent private carriage and information services. 12. The Commission found that expanding the inquiry not only more closely aligns with the functionally similar standard but also with the statutory language directing the Commission to ensure access to telecommunications services by health care providers at rates “reasonably comparable” to those charged for “similar services in urban areas.” For example, the Commission anticipated that the inclusion of less expensive, information services that are nonetheless functional substitutes will result in lower urban rates than if only similar telecommunications services are considered. Accordingly, health care providers will likely pay less for telecommunications services supported by the Universal Service Fund, reflecting the availability of lower priced alternatives in urban areas. This result should place health care providers on a more equal footing with their urban counterparts, as intended by the statute, than if non-telecommunications services were excluded from the similar services inquiry. 13. And as with urban rates, the Commission found that expanding the similar services inquiry could also serve to lower rural rates by increasing the pool of services to include similar information services when determining the rural rate. A lower rural rate determination, in turn, decreases the support ceiling and thus could further reduce demand on the Universal Service Fund. An expanded inquiry will also alleviate administrative burdens by eliminating the need for the Administrator to identify the regulatory classification of commercially available services when determining urban and rural rates. Lastly, the Commission determined that expanding the similar services inquiry to include other services will further serve the Commission's overall directive to act in a competitively neutral manner. 14. Defining Geographic Contours for Determining Rates. Section 254(h)(1)(A) of the Act requires carriers to provide rural health care providers, upon receiving a bona fide request, with telecommunications services at rates reasonably comparable to those charged in urban areas of the state. The provisioning carrier is then entitled to receive support in the amount of the difference between the urban rate charged and the “rates for similar services provided to other customers in comparable rural areas in the state.” To determine the urban rate, the Commission determined that it will use the “urbanized areas” as designated by the Census Bureau based on the most recent decennial Census to define the geographic contours of urban areas in a state. The Commission concluded that urbanized areas are appropriate because they include urban cores with at least 50,000 people “along with adjacent territory containing non-residential urban land uses as well as territory with low population density included to link outlying densely settled territory with the densely settled core.” For determining rural rates, the Commission established three tiers of rurality to determine the comparable rural areas in a state or territory: (1) Extremely Rural, areas entirely outside of a Core Based Statistical Area; (2) Rural, areas within a Core Based Statistical Area that does not have an Urban Area with a population of 25,000 or greater; and (3) Less Rural, areas in a Core Based Statistical Area that contains an Urban Area with a population of 25,000 or greater, but are within a specific census tract that itself does not contain any part of a Place or Urban Area with a population of greater than 25,000. In Alaska, however, given the vast number of communities without access to roads and the unique cost considerations they may face for obtaining service, the Commission further bifurcated the Extremely Rural tier into two sub-tiers. That is, areas in Alaska entirely outside of a Core Based Statistical Area that are inaccessible by road will be treated as Frontier areas for purposes of determining comparable rural rates. Communities outside of a Core Based Statistical Area and accessible by road will be in the Extremely Rural tier. 15. Geographic Contours for Urban Areas. The Commission's rules do not explicitly define “urban area” with respect to determining the urban rate. Instead, the rules require the applicant to base the urban rate on rates for similar services charged to a commercial customer in “any city with a population of 50,000 or more” in the state. 16. In the R&O, the Commission retained the current population threshold of 50,000 in defining the geographic contours of urban areas for purposes of the determining the urban rate. Consistent with the Commission's conclusion in 1997, the Commission continued to believe that cities with populations of 50,000 or more are large enough so the rates for telecommunications services in these areas reflect cost reductions associated with high-volume, high-density factors. The Commission concluded, however, that defining urban areas by the jurisdictional boundaries of cities is unrealistic and unnecessarily restrictive because it fails to account for adjacent areas that are socioeconomically tied to the urban core. Failing to include a city's suburban areas runs counter to the goal of using urban rates that reflect the cost reductions associated with higher population density present in urban areas. Omitting such areas is also contrary to how urban areas are designated by the nation's top two Federal agencies on the subject, the Census Bureau and the Office of Management and Budget (OMB), both of which evaluate surrounding areas when considering urban designations regardless of a city's jurisdictional boundary. Accordingly, the Commission updated the contours of urban areas for determining urban rates to: (1) More accurately reflect the socioeconomic realities of metropolitan cities and (2) ensure rates relevant to the urban rate determination are not unnecessarily excluded. 17. The Commission noted that urbanized areas are used by OMB to designate Metropolitan Statistical Areas which the Commission originally referenced when establishing the 50,000 population threshold. The Commission decided, however, to use urbanized area designations as opposed to the Metropolitan Statistical Areas to minimize the potential for the inadvertent inclusion of pocket rural areas. Because Metropolitan Statistical Areas are based on counties and urbanized areas designations consisting of census tracts and blocks, there is a greater likelihood of the less granular Metropolitan Statistical Area containing an area that is rural for purposes of reflecting the costs of deploying telecommunications services. Using urbanized areas thus allows for a more granular designation of high population density areas than attainable with the county-based Metropolitan Statistical Areas. 18. The Commission clarified, however, that consistent with the statute, the Administrator will review public rates in all urbanized areas to the extent those urbanized areas fall within the boundaries of the state where the health care provider is located. For example, in urbanized areas like the Washington, DC-Virginia-Maryland urbanized area that cross multiple state boundaries, this means the Administrator could factor in available rates for determining an urban rate for a service delivered to a health care provider in Virginia from that portion of the urbanized area that falls within the Commonwealth of Virginia. For example, a public rate that is available throughout the urbanized area ( i.e., the rate is the same irrespective of location within the urbanized area) could be part of the determination along with a local cable company rate that is only available in northern Virginia. The Administrator could not, however, factor in a local cable company rate that is only available in portions of the urbanized area outside of Virginia, like neighboring areas in Maryland and the District of Columbia. 19. Geographic Contours for Comparable Rural Areas. Historically, the Commission has defined “comparable rural areas” to mean the immediate rural area in which the health care provider is located. The Commission concluded, however, that the better, more inclusive interpretation of “comparable rural areas” includes not only rural areas in the health care provider's own immediate rural location but all similar rural areas, namely all those within the same rural tier in the health care provider's state. Two rationales support the Commission's shift in interpretation. First, the use of the plural “comparable rural areas” in the Act indicates an intent to encompass rates from more than a single area, including, by default, areas where the health care provider is not located. Second, consideration of available rates for services offered across the health care provider's state provides significantly more service rate data points and thus a more accurate measure of the actual costs of providing services to rural areas. 20. The Commission noted that the existing definition of rural area used for Telecom Program eligibility naturally breaks down into degrees of rurality for the purpose of determining rates in comparable rural areas. Under the existing definition, a rural area is “an area that is entirely outside of a Core Based Statistical Area; is within a Core Based Statistical Area that does not have any Urban Area with a population of 25,000 or greater; or is in a Core Based Statistical Area that contains an Urban Area with a population of 25,000 or greater, but is within a specific census tract that itself does not contain any part of a Place or Urban Area with a population of greater than 25,000.” In the R&O, the Commission established three rural tiers—which it designated Extremely Rural, Rural, and Less Rural, respectively—based on this existing definition. 21. The Commission concluded that using rural area tiers is a more precise means of determining rurality because it prevents rates in the most rural areas from being unfairly reduced by being combined with rates from less rural areas. The Commission based this conclusion on the reasonable assumption that the cost to provide telecommunications services increases as the density of an area decreases, as rates are generally a function of population density. The Commission also found that tying the new rural tiers to the existing three-part definition of “rural area” used for eligibility purposes has the advantage of familiarity, and thus avoids a change that introduces a new concept that may be needlessly complicated. The approach also benefits from the ease with which the new rurality tiers can be employed to determine support. 22. Additionally, the Commission will treat areas outside of a Core Based Statistical Area that are inaccessible by road as a separate tier, i.e., Frontier areas. Areas outside of a Core Based Statistical Area that are accessible by road will be treated as Extremely Rural for purposes of rate determination. To determine communities connected by roads, the Commission will use the data provided by the Alaska Department of Commerce Community and Economic Development; Division of Community and Regional Affairs. This data source will allow participants to determine the appropriate tier for the relevant health care provider and simplifies the administration of this aspect of the program. To ensure that the process used to establish rural tiers is objective, administratively feasible, transparent, and simple to apply, the Commission declined at this time to further sub-divide off-road communities for determining comparable rural areas. 23. The Commission expects that by broadening the scope of comparable rural areas used to compute the rural rate, it will increase the likelihood of identifying available rates for the same or similar services within a state to determine rural rates, which addresses a concern raised by some commenters. Moreover, because the Commission now requires consideration of available rates outside the health care provider applicant's immediate rural area (but within similarly tiered rural areas within the health care provider's state), the approach reflects a more faithful interpretation of the statutory obligation to reimburse carriers using rates for similar services provided to other customers in “comparable rural areas” in the state. 24. Ensuring Reasonable Comparable Urban Rates. Based on the record and the Commission's past experiences with the Telecom Program, the Commission found that the current process for determining urban rates does not adequately advance the goals of the statute and requires reform. The Commission thus revised its rules to require the Administrator to determine the urban rate based on a median of available rates for similar services across all urbanized areas in a state. The Commission also directed the Administrator to create a publicly available database to post the urban rates for each state for program participants. These changes will: (1) Eliminate incentives by health care and service providers to manipulate the urban rate determination; (2) promote rate determination transparency and consistency; (3) provide health care providers with predictability on the urban rates prior to choosing among service offerings; and (4) decrease administrative burdens for rural health care providers participating in the Telecom Program. 25. The Commission's rules currently place a ceiling on the amount a health care provider is required to pay for a requested service, stating the urban rate “shall be a rate no higher than the highest publicly-available rate charged to a commercial customer for a functionally similar service in any city with a population of 50,000 or more in that state.” The current process for determining urban rates contributes to the inefficient increase in support demand. As the data shows, health care providers are increasingly paying less and less for eligible services. For example, the Telecom Program commitments increased in size by more than 80% from approximately $116 million in funding year 2012 to approximately $211 million in funding year 2016. Gross demand for Telecom Program requests respectively totaled approximately $272 million and $206 million for funding years 2017 and 2018. The overall out-of-pocket expenses for health care providers, however, have decreased from approximately $23 million in funding year 2012 to approximately $12 million in funding year 2017. The overall effective discount rate thus rose steadily during this period to 92% in funding year 2017, meaning health care providers were collectively paying only 8% of the total cost of the service. In many cases, individual health care providers paid as little as 1% or less for the services they received. In funding year 2016, 5% of participating health care providers in the Telecom Program received 62% of the committed funding, i.e., $131 million, with an effective discount rate of 99% and above. As a result, health care providers increasingly have less incentive, because they have increasingly less money invested, to cost-effectively obtain services to minimize strain on the Universal Service Fund. 26. The Commission is also concerned that urban rates submitted on the Telecom Program's request for funding form (FCC Form 466) are being held artificially low and may not reflect the comparable urban rates charged for services in urban areas. For example, after comparing available information for the E-Rate Program, the median rates reported by rural health care providers are in many cases far less than the median rates paid by schools and libraries in urbanized areas of the state for the same or similar services. 27. Accurately determining the urban rate is imperative to the integrity of the Telecom Program. The urban rate is not only key to incentivizing health care providers to make service choices in a cost-efficient manner but is also critical to determining the level of universal service support provided to participants. Based on review of the record and program data, the Commission found that the existing approach for determining urban rates is not producing reasonably comparable urban rates and required reform to reflect the rates actually being charged in urban areas of the state more accurately than the current methodology. The Commission also was concerned that the current methodology fails to provide adequate incentives for health care providers to act in the best interests of the Universal Service Fund and is susceptible to rate manipulation. Therefore, the Commission found that reforming the urban rate determination necessary to further the intent of Congress of ensuring that rural health care providers are placed on equal footing with their urban counterparts, and to preserve and advance the Universal Service Fund. 28. To this end, in the R&O, the Commission changed course and now requires that the Administrator calculate urban rates based on the available rates, including data available from the E-Rate Open Data Platform, for functionally similar services offered across all urbanized areas of the state. The Commission found that this approach will more likely produce a reasonably comparable urban rate than the current approach by taking into account a wider range of urban rates. In addition, the Commission requires the Administrator to determine the urban rate by using the median of the available rates for functionally similar services. Having the Administrator conduct the rate determination, as opposed to the health care provider, will further eliminate any potential incentives to manipulate rates and will provide transparency and predictability to the rate determination process as well as ease burdens on health care providers. 29. The Commission will no longer allow health care providers to determine the urban rate from the rates available in any particular city in the state. In 2003, the Commission expanded the geographical boundaries from which urban rates could be considered from the nearest city with a population of 50,000 or more to any such city in the state with the goal that rural health care providers “benefit from the lowest rates for service in the State.” The Commission reasoned the largest cities in a state likely have significantly lower rates and more service options than the city nearest to the rural health care provider with a population of least 50,000. The Commission now concludes that this approach goes beyond the intent of Congress of providing “reasonably comparable” urban rates to rural health care providers and leads to funding inefficiencies. This approach is no longer tenable given the growing demand for program funding. 30. The median urban rate for a particular service will be the sole urban rate that a health care provider may use on its FCC Form 466 application to request Telecom Program support. The Commission believes that using multiple price points to determine the urban rate will bring restraint and discipline to the Program and will minimize opportunities for rate manipulation. The Commission is concerned, however, with using an average because rates may be skewed by a very high or very low rate for that service in some location. For example, in Texas for funding year 2017, health care providers reported on the FCC Form 466 urban rates for voice grade business circuits ranging from about $938 to $9 at the high and low ends but with a large majority of the urban rates falling in the $40 to $400 range. The high and low rates in this scenario could skew the average upwards or downwards depending on the other rates in the data set whereas a median mutes these potential outliers. The potential for intentionally manipulating the urban rate determination, by interjecting available outlier rates, is thus lessened. 31. Eliminate “No Higher Than” Standard. In moving to a median urban rate determination conducted by the Administrator, the Commission eliminated the “no higher than the highest publicly available rate” restriction on the urban rate determination. In practice, the existing ceiling has no effect as a health care provider would be unlikely to ever determine and report an urban rate that is higher than the highest available rate in any city in the state. Moreover, the median urban rate adopted is by definition a rate that is no higher than the highest available rate. Accordingly, the Commission eliminated the “no higher than” restriction and instead requires health care providers to use the median urban rate identified by the Administrator for the relevant eligible service when submitting FCC Form 466 filings. 32. Eliminate the Standard Urban Distance. The Commission eliminated the standard urban distance demarcation contained in the current urban rate rule. The current rule provides two methods for determining the urban rate depending on whether the requested service is provided over a distance that is either less than or equal to, or else greater than the “standard urban distance.” Based on the current rules, a rural health care provider's rate for services provided over a distance greater than the standard urban distance would be no greater than the urban rate for services provided over the standard urban distance, while the rate for services provided at a distance equal to or less than the standard urban distance would be equal to the urban rate for services provided over the actual distance to be covered. Because the urban rate adopted is determined using rate data from all urbanized areas in the state, the Commission believes it will reflect a reasonably comparable rate for the particular service regardless of the distance actually covered, and as a result, a distance measure is no longer relevant. 33. Reforming the Determination of Rural Rates. To simplify rural rate determinations, encourage transparency and predictability, and minimize the risk of rate manipulation, the Commission revised the rules to establish a single method for determining the rural rate, which will be the median of all available rates charged for the same or functionally similar service in the rural tier where the health care provider is located within the state. The Commission also directed the Administrator to determine the rural rate for each eligible service and rural tier in each state and publish the rural rates in a publicly available database. The Commission further established a standard of review for carriers that wish to seek a waiver of a rural rate determined pursuant to these steps that requires a demonstration that the carrier will be unable to recover its economically reasonable costs of supplying service, as defined in the following, if it is limited to the rural rates determined by the Administrator. 34. The Commission's rules currently permit three methods for calculating the rural rate depending on each health care provider's situation: (1) Averaging the rates that the carrier actually charges to non-health care provider commercial customers for the same or similar services provided in the rural area where the health care provider is located; (2) averaging publicly available rates charged by other service providers for the same or similar services over the same distance in the rural area where the health care provider is located (applicable in cases where the service provider does not provide service to the health care provider's rural area); or (3) requesting approval of a cost-based rate from the Commission (for interstate services) or a state commission (for intrastate services) if there are no rates for same or similar services in that rural area or the carrier believes the calculated rural rate is unfair. Applicants must justify the rural rate calculation on which they rely when seeking Telecom Program support by using one of these three methods. 35. Like the urban rate, the rural rate has proven to be difficult for health care and service providers to calculate and is susceptible to manipulation. The complexity of the rural rate rules has caused health care providers to frequently rely on consultants or their service providers to navigate the rules, which AT&T observes has “made it easy for unscrupulous parties to create artificially high `rural rates,' and, in some cases, artificially low `urban rates' thus maximizing the alleged disparity between rural and urban rates.” Indeed, the risk of artificially inflated rural rates is very real under the Commission's existing framework. When a carrier sets the rural rate by averaging the rates of identical or similar services, the service rates of other carriers are not considered by design (in cases where the carrier offers commercial service to the health care provider's rural location) or may not be considered by selective omission (in cases where the carrier does not offer commercial service to the health care provider's location). Either way, the lack of consideration of competitors' offerings can lead to a rural rate that does not reflect the true rate of service available at the health care provider's location and which can be manipulated upwards because the service provider is incentivized to do so. In each of the foregoing examples, health care providers have no countervailing incentive to check carrier pricing because they pay only the lower urban rate without regard to the rural rate. 36. Additionally, it is a matter of record that rural rates are rising sharply, as reflected in the increasing combined levels of Telecom Program funding commitments over the past several years. The aggregate rural rate in 2004, for example, was $42 million. That aggregate figure climbed steadily over the next seven years to $142 million by funding year 2011, and then increased again by $80 million over the next five years to $222 million. The rural rate is not only increasing in the aggregate, it is increasing on an individual basis as well. Between funding year 2011 and funding year 2016, as the rural rate increased in the aggregate by $80 million, the number of health care provider sites requesting support decreased by 30%. These numbers equate to an average rural rate (per individual health care provider site) that more than doubled from $37,755 in 2011 to $84,797 in 2016. Although some of the increase in the rural rate can be attributed to legitimate causes such as a health care provider's location, demand for and availability of higher speed services, and limited access to high speed middle-mile transport capacity, that appears to be only part of the story. Given the widely divergent rates for the same services the Commission has seen, it appears much of the increase results from the lack of adequate transparency, standardization, and enforceability in the existing method of determining rural rates, collectively opening the door to rate manipulation. The Administrator currently must examine each funding request individually to determine if the associated rural rate was properly calculated and substantiated, and whether the substantiated rate complies with the requirements under the Commission's rules. This task requires access either to all of the service providers' rates or to available rates for the applicable rural area. Because this information is not readily available to the Administrator in-house, it has come to rely on rate data provided by the very parties, namely carriers, with the greatest interest in keeping rural rates high. This can lead to rural rates inconsistently calculated, artificially inflated, and difficult to verify against public data sources. It also results in review process delays that understandably tax the patience of RHC Program participants waiting for final support determinations and funding commitments. Inefficiency and waste of this type is especially problematic now given the extreme demands on limited RHC Program funds. For these reasons, the Commission was compelled to make the programmatic changes to the rural rate rules. 37. Modifying the Rural Rate Calculation. The Commission's rules require health care and service providers to justify the requested rural rate by using one of three methods that require, depending on the circumstances, either averaging rates offered by the service provider, averaging rates offered by carriers other than the service provider, or conducting a cost-based analysis. In the R&O, the Commission adopted a new method of calculating rural rates, applicable in all cases, to be applied and publicly maintained by the Administrator. The rural rate will be the median of available rates for the same or similar services offered within the health care provider's rural tier ( i.e., Extremely Rural, Rural, or Less Rural) in the state. For example, the maximum rural rate for a particular service requested by a health care provider located in an Extremely Rural area would be the median rate charged for that same or similar service in all areas within the health care provider's state that are deemed Extremely Rural. 38. As with the median urban rate, the relevant rates to be used when determining the median rural rate will be broadly inclusive and comprised of the service provider's own available rates to other non-health care providers, as well as other available rates in the rural area, including rates posted on service providers' websites, rate cards, contracts such as state master contracts, undiscounted rates charged to E-Rate Program applicants, prior funding year RHC Program pricing data, and National Exchange Carrier Association (NECA) tariff rates. In the unlikely event that a health care provider's rural tier includes no available rates for a particular service, the Commission directed the Administrator to use the available rates for that service available from the tier next lowest in rurality in the health care provider's state ( i.e., the Administrator will use the rates from the Rural tier if no rates are available in the Extremely Rural tier, and from the Less Rural tier if no rates are available in the Rural tier). 39. The new standardized approach to determining the rural rate will eliminate the problem of rate inconsistency that results from the current method. For example, three rural health care providers in Alamosa, Colorado, requested support for T1 service for funding year 2017. These health care providers, located within less than two miles of each other, included rural rates of $294.24, $827.00, and $2,077.65. Discrepancies such as these arise under the existing rate-setting framework because health care and service providers are left to their own devices to select the data required to make rate determinations for each funding request and would have to conduct exhaustive research on their own to ensure that the data is comprehensive. Indeed, because any number of variables can affect rates for the same service offering, health care and service providers have had to grapple with an inconsistent process that lacks the controls, transparency, and predictability necessary to ensure a fair and reliable allocation of scarce Telecom Program funds. 40. The Commission adopted a median-based approach for rate determinations in lieu of rate averaging to account for the significant effect that a small number of outlier rates ( i.e., those that are very high or very low in cost) can have on the average rural rate. If a rural tier within a state has few service providers offering a certain service, there may be incentives to publicize artificially high rates to influence the rural rate. This incentive is stronger if the average rural rate is used rather than the median rate because the average rate can be more easily manipulated. The median figure established by the Commission's new approach represents a rate “ceiling,” in that the Commission will not provide support in excess of the median rate. Health care providers may of course enter into contracts with carriers at a rate lower than the median rural rate. If the health care provider enters into a contract with a carrier at a rate that falls below the median rural rate determined pursuant to its new rules, the health care provider should enter the lower of the two rates into the FCC Form 466 funding application that it submits to the Administrator. The Commission believes that this approach balances the pro-competitive advantages of market-based rates with protections against possible rate manipulation in circumstances where insufficient levels of competition exist. 41. Several commenters favored using only competitive bidding to set a fair market rate. To these parties, reliance on market forces offers several benefits, including a check on outlier pricing that keeps prices low and no need to depend on rates that they assert are often unavailable. The Commission did not agree with these commenters that there are sufficient competing service alternatives in all rural areas to allow for the exclusive reliance on market-based methods of rate determination. Indeed, there is a striking lack of competition in the Telecom Program. In funding year 2017, of a total of 7,357 Telecom Program funding requests received by the Administrator, 6,699 requests included no bids, and 242 requests included only one bid, from carriers. In other words, nearly 95% of requests for Telecom Program support were submitted without an effective competitive bidding process. Given these numbers, competitive bidding alone cannot be expected to set efficient rural rates. Nor would the Commission expect carriers to compete on rural rates in their bids. After all, rural health care providers do not pay the rural rate—they pay the urban rate. So, while the Commission cannot discount some possibility that competition could lower rural rates, the far greater likelihood is that carriers compete (in those discrete instances where they do compete) on urban rates and the non-price characteristics of the service. 42. The Commission believes that a uniformly applied standard for determining rural rates based on a state-wide pool of available rates significantly enhances the efficiency of the Telecom Program in several ways. First, a definitively determined rural rate will facilitate rate transparency, thereby reducing rural rate inconsistencies and simplifying the review process, thus expediting funding commitment determinations and encouraging more competition from service providers. Second, by limiting rate determinations to available rates, rural rates are more predictable and easily verifiable, and harder for service providers to artificially inflate or otherwise manipulate. Third, the ability to determine a rural rate using available rates from other parts of the health care provider's state (under conditions where sufficient data is not available in the provider's rural area) eliminates the need for resource-intensive cost-based rural rate reviews by the Commission. 43. Allowing Cost-Based Rates Only Via Waiver. Under the current rules, carriers may request approval of a cost-based rate from the Commission (for interstate services) or a state commission (for intrastate services) if there are no rates for same or similar services in that rural area or the carrier reasonably determines that the calculated rural rate is unfair. The Commission adopted the cost-based mechanism when it created the Telecom Program in 1997, but the cost-based rural rate mechanism was only invoked for the first time in funding year 2017, and since then, only a small number of carriers have attempted to use it. 44. The Commission eliminated the cost-based support mechanism. To the extent the Commission created it in anticipation of rates for same or similar services not being available in some rural areas, the Commission found that such circumstances have not materialized on a significant scale, given how infrequently the cost-based mechanism has been invoked. Moreover, commenters generally disfavor the cost-based method for determining rural rates, which they view as challenging to calculate and difficult to obtain approval for due to the burdensome itemized cost summaries that the method requires. Further, the rural rate methodology that the Commission adopted in the R&O will include rates from a geographic range that is broader than a health care provider's immediate rural area, making it unlikely that the data necessary to determine a rural rate for a particular service will not be available. 45. The Commission concluded that cost-based reviews should not be an alternative method of determining a rural rate under its rules but should be reserved for extreme cases where a carrier can demonstrate that determining Telecom Program support under the new rural rate rules adopted by the R&O would result in an objective, measurable economic injury. Parties that seek exemptions from the requirements of the Commission's rules for the other universal service support mechanisms do so through petitions for waiver. To that end, the Commission established specific evidentiary requirements for carriers that seek waivers of its new rural rate rules in order to use a cost-based rate. 46. A petition seeking such a waiver will only be granted if, based on documentary evidence, the carrier demonstrates that application of the rural rate published by the Administrator would result in a projected rate of return on the net investment in the assets used to provide the rural health care service that is less than the Commission-prescribed rate of return for incumbent rate of return local exchange carriers (LECs). This demonstration will constitute “good cause” to support a waiver of the rural rate rules. 47. The Commission emphasized that this standard of review constitutes a specific application of the “good cause” standard that generally applies to petitions for waiver of its program rules. All such waiver requests must articulate the specific facts that demonstrate that the good cause waiver standard has been met, substantiated through documentary evidence as stated in the following, to demonstrate that granting the waiver would be in the public interest. Further, a petition for such a waiver will not be entertained if it does not also set forth a rural rate that the carrier demonstrates will permit it to obtain no more than the current Commission prescribed rate of return authorized for incumbent rate-of-return LECs. The Commission concluded that the current prescribed rate of return authorized for incumbent rate-of-return LECs is compensatory for carriers in the Telecom Program, and the Commission will not approve a rural rate that yields a higher return through the waiver process. 48. Evidentiary Requirements. All petitions seeking such a waiver must include all financial data and other information to verify the service provider's assertions, including, at a minimum, the following information: (1) Company-wide and rural health care service gross investment, accumulated depreciation, deferred state and federal income taxes, and net investment; capital costs by category expressed as annual figures ( e.g., depreciation expense, state and federal income tax expense, return on net investment); operating expenses by category ( e.g., maintenance expense, administrative and other overhead expenses, and tax expense other than income tax expense); the applicable state and federal income tax rates; fixed charges ( e.g., interest expense); and any income tax adjustments; (2) An explanation and a set of detailed spreadsheets showing the direct assignment of costs to the rural health care service and how company-wide common costs are allocated among the company's services, including the rural health care service, and the result of these direct assignments and allocations as necessary to develop a rate for the rural health care service; (3) The company-wide and rural health care service costs for the most recent calendar year for which full-time actual, historical cost data are available; (4) Projections of the company-wide and rural health care service costs for the funding year in question and an explanation of these projections; (5) Actual monthly demand data for the rural health care service for the most recent three calendar years (if applicable); (6) Projections of the monthly demand for the rural health care service for the funding year in question, and the data and details on the methodology used to make that projection; (7) The annual revenue requirement (capital costs and operating expenses expressed as an annual number plus a return on net investment) and the rate for the funded service (annual revenue requirement divided by annual demand divided by 12 equals the monthly rate for the service), assuming one rate element for the service, based on the projected rural health care service costs and demands; (8) Audited financial statements and notes to the financial statements, if available, and otherwise unaudited financial statements for the most recent three fiscal years, specifically, the cash flow statement, income statement, and balance sheets. Such statements shall include information regarding costs and revenues associated with, or used as a starting point to develop, the rural health care service rate; and (9) Density characteristics of the rural area or other relevant geographical areas including square miles, road miles, mountains, bodies of water, lack of roads, remoteness, challenges and costs associated with transporting fuel, satellite and backhaul availability, extreme weather conditions, challenging topography, short construction season, or any other characteristics that contribute to the high cost of servicing the health care providers. 49. Failure to provide the listed information shall be grounds for dismissal without prejudice. The petitioner also shall respond and provide any additional information as requested by Commission staff. Such petitions will be placed on public notice for comment. The Bureau is directed to approve or deny all or part of requests for waiver of the rural rate rules adopted in the R&O. 50. Establishing an Urban and Rural Rate Database. In the R&O, the Commission directed the Administrator to create a publicly available database that lists the eligible services in the Telecom Program, the median urban rate and rural rate for each such service in each state, and the underlying rate data used by the Administrator to determine the median rates. The urban and rural rates shall be based on available rates ( e.g., rates posted on service providers' websites, rate cards, publicly available contracts ( i.e., state master contracts), undiscounted E-Rate Program data, tariffs ( i.e., intrastate tariffs filed with state commissions, FCC's Electronic Tariff Filing System), and prior funding year Telecom Program rate data). The Commission directed the Administrator to determine the median urban and rural rate for eligible services as described in the R&O. The Commission further directed the Administrator to establish the database and post its first set of median urban and rural rates on its website as soon as possible, but no later than July 1, 2020, and to update the rates periodically based on market and technology changes. Rural health care providers generally will be required to use the currently posted median rates as their urban and rural rates when requesting funding on FCC Form 466 once the Administrator posts median urban and rural rates for the relevant services. In cases where a rural health care provider enters into a service agreement with a carrier featuring a rural rate lower than the rate posted by the Administrator, however, the health care provider should enter the lower rural rate. 51. The new urban and rural rate database to be established by the Administrator will provide several benefits. By centralizing and categorizing rate information in one place and by providing rural health care providers with pre-determined median urban and rural rates based on the information, the process will increase transparency compared to the current RHC Program. The database will allow quick identification of the median rates for a particular service within any state and how these rates were determined, ensuring that urban and rural rates are applied consistently and fairly to similarly situated health care providers seeking Telecom Program support for the same or similar services. In addition, because the database is publicly available, it will also promote predictability in the rate-setting process. The new database approach should also lessen the risk of rate manipulation. Requiring rural health care providers to use the median rates as determined by the Administrator will prevent the health care provider and its carrier from using urban rates that are artificially low and rural rates that are artificially high, thereby safeguarding the integrity of the Telecom Program. 52. The Commission also believes that having rates determined by the Administrator will greatly lessen the administrative burden that rural health care providers (and their carriers) currently experience. The Commission's new approach removes the onus of determining rates from Telecom Program participants and places this function in the hands of a single expert entity without a financial interest in the outcome. And while the Administrator will have to determine the median rates, it will not have to verify individually the rates on each funding request application other than to confirm that the rates match those on the website. This approach should ultimately result in and a more efficient, transparent, and timely funding decision process. 53. Two Commissioners dissent from these decisions, contending that the Commission should defer from implementing the rules for determining urban and rural rates in the Telecom Program because the Commission does not “describe,” “analyze,” “test[ ],” “model[ ],” or “assess[ ]” the impact of those rules on the rural health care facilities that rely on the program today. This contention is somewhat curious. For one, the Commission describes, analyzes, and assesses the impacts of the rules adopted. For example, the Commission finds that the rules adopted will provide more certain and transparent funding for rural health care providers across the board—more “predictable,” in the words of section 254 of the Act. To the extent that the current rules subject rural health care providers to wildly varying urban rates for the same service (recall that urban rates in Texas for voice grade business circuits ranged from $9 to $938), the impact of using a statewide urban median will be to eliminate outliers and ensure that all rural health care providers pay what Congress mandated: “rates that are reasonably comparable to rates charged for similar services in urban areas in that State.” And as discussed in the document, the Commission concludes that existing rules have led to widely divergent rural rates, thus imposing wasteful inefficiencies on the program and its administration. In contrast, the rules adopted by the Commission will eliminate divergent rural rates in similar areas, eliminating problematic incentives and the real costs this imposes on rural health care providers and the Universal Service Fund. Or to put it a different way (and as fully explained in the R&O), the Commission has exercised its predictive judgment to develop an approach to developing both urban and rural rates of the analysis suggestion is reasonable, that takes into account and balances the relevant considerations, and that fully satisfies the requirements of section 254 while safeguarding the Universal Service Fund from wasteful spending. 54. For another, these critiques ignore the real costs of delayed implementation. As described more fully in the R&O, current rules have enabled waste, fraud, and abuse in the Telecom Program and yielded results that appear contrary to Congress's mandate. After all, how could rates of $9 and $938 for the same service be considered “reasonably comparable” to each other, let alone the urban rates in a single state? How could rural rates ranging from $420 to $4,308 for the same service in the same county (Tulare County, California) be a faithful implementation of Congress's command that the rural rate be based on “rates for services provided to health care providers for rural areas in a State and the rates for similar services provided to other customers in comparable rural areas in that State”? These discrepancies threaten the ability of the Telecom Program to fund the telecommunications services that health care providers need to deliver critical health care services to their rural communities from the Program's limited resources. Program data establishes that commitments in the Telecom Program grew by more than 80% between funding year 2012 and funding year 2016. And yet, as explained in the R&O, more and more of the program's limited resources are devoted to fewer health care providers. The dissenting Commissioners do not offer any defense of existing rules and the negative impact they have on rural health care facilities—and delay would only prolong these problems. By removing the problematic provisions of the Commission's existing rules, its approach will enable rural health care providers to continue to receive the services and support they need, with fewer administrative burdens and at lower cost to the Universal Service Fund. Or in other words, it is neither necessary nor desirable to delay the benefits of implementing the new urban and rural rate rules. 55. For yet another, the Commission found that no modeling is necessary at this point to reject the suggestion of one Commissioner, without factual basis, that health care providers in the most remote locations might be forced to close as a result of the new rules. Ensuring that remote regions receive sufficient support is precisely why the Commission divided rural areas into differing tiers (with an additional subtier for the most remote regions of the country). More fundamentally, health care providers will continue to receive needed telecommunications services “at rates that are reasonably comparable to rates charged for similar services in urban areas in that State,” as provided by Congress, and carriers are obligated to provide them service at that rate. The Commission also noted that the waiver process helps ensure that any carrier outliers have an opportunity to receive sufficient support. Further, because of the prioritization rules adopted by the Commission, the most rural and remote locations actually will have more protection than they do today, because those locations will receive prioritized funding. What is more, health care providers will have a full year between the posting of the applicable urban rates and the first day they will begin to receive service at those rates, so they will have adequate time to adjust. Thus, participants in the Program will be protected from undue rate impacts under the Commission's new rules, and will receive support that is “specific, predictable and sufficient,” as required by Congress. 56. In sum, the Commission adopted a process that eliminates largely subjective urban and rural rate determinations made by the applicants and service providers and substitutes objective determinations by the Administrator in full view of the public. The Commission expects that the result will be a more equitable and efficient use of limited available funding and a more predictable application process for Program participants. 57. In its Second July 25, 2019 Ex Parte Letter, GCI contends that the Commission has engaged in unlawful delegation of functions to the Administrator. That is incorrect as both a legal and factual matter. Initially, GCI identifies no valid legal authority for its claim that the Commission is prohibited from delegating to the Administrator the administrative roles contemplated by the R&O. GCI argues, for example, that section 5(c)(1) of the Act blocks the Commission from assigning a role to the Administrator in administering the urban and rural rates for the program. But nothing in that section mentions section 254. Rather, that section provides only that the Commission cannot delegate its ratemaking hearing authority under section 204(a)(2) of the Act, which does not apply to the development of urban and rural rates under section 254. Nor does section 5(c)(1) even mention section 205, the other provision upon which GCI relies. 58. In a contorted interpretation of the Act, GCI contends that section 205 of the Act applies to the Commission's establishment of rural and urban rates under section 254(h)(1)(A). GCI then argues that because the section 204(a)(2) hearing function cannot be delegated (citing Section 5(c)(1)), the Administrator can have no role in establishing the applicable urban and rural rates for the Telecom Program. But sections 205 and 204 simply do not apply to section 254(h)(1)(A), which is structured as a universal service obligation, and which uses very different statutory terms to describe the rate determinations involved. Specifically, section 254(h)(1)(A) imposes a requirement on telecommunications carriers, as part of their universal service obligation, to provide service to eligible rural health care providers at rates “ reasonably comparable to rates charged for similar services in urban areas in that State.” It then entitles those carriers to “the difference, if any, between rates for services provided to health care providers for rural areas within a State and the rates for similar services provided to other customers in comparable rural areas in that State . . . .” Had Congress intended for the Commission to conduct a section 204(a)(2) hearing in order to give effect to the universal service obligation, it would not have used such different language in section 254(h)(1)(A), and it would have presumably cross-referenced section 204. Nor is the mere compilation of available rates and calculation of a median rate used to calculate universal service support amounts equivalent to a rate “prescription” under section 205(a) that would require a hearing, as GCI contends. Indeed, although the Act and the Commission's rules discuss a rural “rate,” the Act and rules do not contemplate requiring or even allowing any carriers participating in the program to ever charge that rate (and hence it lies outside the scope of the ratemaking contemplated in sections 204 and 205 of the Act). Instead the “rural rate” is a legal placeholder simply used to carry out the statutory requirement of calculating “the difference, if any, between the rates for services provided to health care providers for rural areas in a State and the rates for similar services provided to other customers in comparable rural areas in that State.” 59. In any event, the Commission has not delegated ratemaking authority to the Administrator. In the R&O, the Commission itself adopted rules dictating how urban and rural rates will be determined for the Telecom Program. Those rules and the R&O contain specific requirements to which the Administrator must adhere in developing these rates. For example, the Commission has delineated the geographic areas that are to be considered “comparable” rural areas under section 254(h)(1)(A); it has determined which services are “similar” within the meaning of that statutory provision (including bandwidth tiers, service quality, etc.); and it has determined how the Administrator is to assemble the available rates that will form the basis for calculating the median urban and rural rates for relevant geographic areas. The Commission has also required the Administrator to make public not only the median rates but also all the rates that the Administrator used to calculate the median. 60. GCI nevertheless contends that the Commission has delegated “ultimate authority over RHC Program rates” to the Administrator. But the only change the Commission made in the R&O is to have the Administrator, rather than the service provider, make the initial determination of what the rural rate should be. The Commission has no more delegated the “ultimate authority” over RHC Program rates to the Administrator than it delegated such “ultimate authority” to service providers under the prior rules. As always, the authority to establish the appropriate urban and rural rates under section 254(h)(1)(A) remains squarely with the Commission. First, the Commission ultimately decides what the rates should be and how the rules should be applied and interpreted. Should a health care provider or service provider believe that the Administrator failed to follow the Commission's rules in determining the applicable urban or rural rates, or otherwise believe the Administrator erred, it may appeal that decision to the Commission, which will conduct de novo review. Second, the Administrator is expressly prohibited from making policy or interpreting Commission rules. Section 54.702(c) of the Commission's rules, which applies to the RHC Program, prohibits the Administrator from making policy or interpreting the statute or Commission rules and requires the Administrator to seek guidance from the Commission when the Act or rules are unclear. 61. For these reasons, there is no merit to GCI's alternative contention that the Commission has impermissibly delegated an “inherently governmental function.” If GCI were correct that the determination of initial rates under section 254(h)(1)(A) is an “inherently governmental function” that cannot be delegated, then the Commission could not have lawfully permitted service providers to calculate initial rural rates, as it did under the prior rules. Determining the initial urban and rural rates under section 254(h)(1)(A) is something the service providers and the Administrator have been doing for many years, always subject to the Commission's oversight and review, and it will be no different under the program rules adopted. Because the Administrator carries out this function only pursuant to the Commission's rules and guidance, and subject to its review, and because the Administrator is prohibited from making policy or interpreting rules or statutes, there is nothing “inherently governmental” in the Administrator's role—rather, the Commission continues to exercise that function. 62. Eliminating the Limitation of Support for Satellite Services. The Commission eliminated, as no longer necessary, effective for funding year 2020, § 54.609(d) of the rules, which allows rural health care providers to receive discounts for satellite service, up to the amount providers would have received if they purchased functionally similar terrestrial-based alternatives, even where terrestrial-based services are available. The Commission determined that the limitation on support for satellite services in § 54.609(d) of the rules is unnecessary where the rural rates are constrained to an average, or in the case of the newly adopted approach a median, of available rates (including satellite service to the extent functionally similar to the service requested by the health care provider) as determined by the Administrator. The Commission previously adopted the cap on satellite service support because the prices of satellite services in rural areas were “often significantly more expensive than terrestrial-based services.” As acknowledged by USTelecom, however, and reflected in the data reported by health care providers in the FCC Form 466, rates for satellite services are in many instances comparable to, and in some instances less expensive than, the cost of terrestrial-based services. For example, in Alaska for funding year 2017, health care providers reported, on the FCC Form 466, rural rates ranging from $30,000 to $40,500 for a 10 Mbps satellite service per month. In comparison, rural rates for a terrestrial-based 10 Mbps MPLS service in Alaska, in many instances, were between $60,000 and $75,000 per month. 63. The Commission believes the changes made in the R&O in determining the rural rate place a check on the service provider's ability to inflate the rural rate by requiring the rural rate to be determined by taking a median of available rates outside the health care provider's immediate rural area (but within similarly tiered rural areas within the health care provider's state). This method of using the median takes into account rates by all competitive service providers offering services, including terrestrial and satellite services, but eliminates outlier rates that would unduly influence the rural rate determination. The median approach will thus alleviate concerns that excessively high terrestrial-based rates skew the rural rate determination to the detriment of the Universal Service Fund. Treating both services equally when functionally similar also furthers the principle of technological neutrality and recognizes the role that both satellite and terrestrial services may play in delivering telehealth services in rural areas without placing significant demand on the Fund. Additionally, by strengthening the Commission's competitive bidding process and rules, it ensures that health care providers select the most cost-effective service offering based on their telehealth needs and do not purchase services that exceed their needs. The Commission therefore found that the need to cap support for satellite service at the lower of the satellite service rate or the terrestrial service rate, where both services are available, would serve no additional purpose. Accordingly, the Commission rejected ACS's proposal to limit Telecom Program support to the lower of the rural rate for functionally similar satellite or terrestrial service, where both are available and eliminated § 54.609(d) of its rules. 64. Eliminating Distance-Based Support. The Commission eliminated distance-based support, which allows rural health care providers to obtain support for charges based on distance. With the reforms to the urban and rural rate calculations adopted in the R&O, the Commission found that distance-based support is no longer necessary. Moreover, the Administrator-created and maintained databases and median rates will provide rural health care providers with a mandatory median urban rate and a median rural rate to guide their determination of the rural rate. The Commission believes that the median rate determinations for urban and rural rates adopted in the R&O will provide a reliable proxy for reasonably comparable rates in a state. The Commission expects the dataset that the Administrator will compile will include sufficient rate information to allow the Administrator to determine meaningful median urban and rural rates for use by rural health providers. By providing a mechanism to determine urban and rural rates that is less complex and more straightforward, the Commission believes it will simplify the application process for the rural health care provider so that it can focus on its primary business of providing health care. Finally, by eliminating the distance-based support method, the Commission reduces the administrative burden on the Administrator by no longer requiring the Administrator to manage two separate rate methodologies in the Telecom Program. Although the distance-based approach was infrequently used by rural health care providers, the Administrator nonetheless was required to have in place the necessary procedures and processes to handle such requests. 65. Supported Services in the Telecom Program. Section 254(h)(1)(A) of the Act “explicitly limits supported services for [rural] health care providers to telecommunications services” for the Telecom Program. Over time, as technology has evolved, the line between telecommunications services and other services is not always evident to some health care providers. Therefore, the Commission took the opportunity in the R&O to remind participants that the Telecom Program only supports telecommunications services and not private carriage services, network buildout expenses, equipment, or information services. Services and expenses not covered by the Telecom Program may be supported to the extent eligible under the Healthcare Connect Fund Program. Accordingly, rural health care providers needing services not covered by the Telecom Program should seek support to the extent eligible under the Healthcare Connect Fund Program. 66. Prioritizing RHC Program Funding for Rural and Medically Underserved Areas. Under the Commission's rules, proration is required when funding requests submitted during a filing window exceed the amount of available funds. This process results in an across-the-board reduction of support by a pro-rata factor calculated by the Administrator. All eligible support requests are reduced by the same percentage amount regardless of the location and need of the health care provider applicant. Parties to the underlying contracts are responsible for any shortfall due to reduced support. Either health care providers have to shoulder a larger portion of the cost of the supported services, or service providers will offer price reductions to avoid curtailing service, or some combination thereof. 67. In the R&O, the Commission changed course and replaced the proration rules with a new process that prioritizes funding based on the rurality of the site location and whether the area is considered medically underserved. This approach furthers the goals of section 254(h) and is consistent with the universal service principles of section 254(b). First, health care providers in more rural areas have less access to telecommunications and advanced services than those in less rural areas, and those services tend to be more costly. Prioritizing limited funding for those areas fulfills the Commission's statutory mandate to preserve and advance universal service, including for “low-income consumers and those in rural, insular, and high cost areas.” Second, in areas in which medical care is less available, there is a greater need for and reliance on delivery of health care services via telehealth (which in turn requires access to telecommunications and advanced services). Prioritizing funding for those rural areas with the greatest medical need thus also serves the public interest. When demand exceeds the funds available, the Commission will first prioritize support based on rurality tiers, with extremely rural areas getting the highest priority over less rural areas. The Commission will further prioritize funding based on whether the area is a Medically Underserved Area/Population (MUA/P) as designated by the Health Resources and Services Administration (HRSA). 68. Rural Prioritization Criteria. The Commission first bases rural prioritization criteria on the existing definition of rural area. The current definition lends itself well to prioritization because it includes gradations of rurality instead of having simply two categories, e.g., rural and non-rural. Accordingly, using the current definition of “rural area” contained in § 54.600(b) of the Commission's rules, 47 CFR 54.600(b), the Commission will prioritize funding based on the following rurality tiers: Extremely rural —counties entirely outside of a Core Based Statistical Area; Rural —census tracts within a Core Based Statistical Area that does not have an urban area or urban cluster with a population equal to or greater than 25,000; Less Rural —census tracts within a Core Based Statistical Area with an urban area or urban cluster with a population equal to or greater than 25,000, but the census tract does not contain any part of an urban area or cluster with population equal to or greater than 25,000; and Non-Rural —all other non-rural areas. 69. The Commission considered and declined to use, as a proxy for rurality, the “Highly Rural” areas used by the Department of Veterans Affairs for its Highly Rural Transportation Grant program. Highly Rural areas are counties located in 25 states, primarily in the west and southwest United States, with a population density of fewer than seven people per square mile. The Commission found Highly Rural areas lack the necessary gradations of rurality and create an additional layer of complexity as to what is considered rural for purposes of prioritization. For example, using just a Highly Rural designation would prioritize only one category of rural areas for funding and would not allow the Commission to set subsequent prioritization levels among other areas that likely have varying degrees of rurality. In comparison, the current definition of rural area allows the Commission to designate multiple prioritization levels based on rurality. Moreover, creating a definition of rural just for prioritization that is separate and apart from the definition used for funding eligibility would further complicate the process for applicants and increase the burden for administering the program. With the rejection of using Highly Rural areas, the Commission likewise rejected GCI's alternative proposal to prioritize funding for such areas in exchange for increased minimum payments by health care providers over a five-year period. 70. Additionally, the Commission declined to base rurality on the number of patients in rural areas served rather than the location of the health care provider. Such an approach would not only increase the complexity of determining prioritization but would also potentially shift funding to health care facilities in urban areas. For example, the Commission would need to determine, and then update, the areas where patients served by each participating health care facility actually live to determine the facilities entitled to funding prioritization. Commenters supporting this approach fail to suggest how such a process is administratively feasible. In addition, the Commission recognized many rural Americans have limited local opportunities for health care access and must travel to more populated areas for quality care. Accordingly, urban health care facility sites, participating as part of a consortium under the Healthcare Connect Fund Program, and that serve patients living in rural areas could receive funding priority based on this approach. One of the major goals of the RHC Program is to help promote local access in rural areas for health care so patients do not have to travel as far to obtain care. Prioritizing based on how many rural patients a facility serves could act contrary to this goal by shifting the funding priority to more populated areas that likely already have greater quality health care delivery systems than more rural areas. 71. Health Care Shortage Measure. The most commonly used Federal shortage designations are the Medically Underserved Areas and Populations (MUA/P) and the Health Professional Shortage Area (HPSA) designations. Both are administered by the Health Resources & Services Administration (HRSA) but are based in different statutory provisions for different Federal programs. The designation criteria for both rely on measures of physician supply relative to the size of the local population to assess geographically available care. MUA/Ps, however, also include weighted need-based variables for low-income, infant mortality, and population age. Designations are used to identify counties and census tracts not adequately served by available health care resources, and in the case of HPSAs, individual facilities that provide care to HPSA-designated areas or population groups. Both methods primarily rely on state governments, i.e., the state primary care office, to identify areas or populations for designation and to gather information to document satisfaction of the designation criteria. Designations are approved by HRSA. Once designated, MUA/Ps are not subject to any subsequent renewal or update requirement. The U.S. Department of Health & Human Services is required to conduct periodic reviews and revisions for HPSA designations. 72. To determine whether an area is medically underserved, the Commission will use, with limited exception, the MUA/P as designated by HRSA. MUA/P designation relies on the Index of Medical Underservice (IMU), developed by the U.S. Department of Health & Human Services, which is calculated on a 1-100 scale (with 0 representing completely underserved and 100 representing best served or least underserved). An area or population with an IMU of 62.0 or below qualifies for designation as an MUA/P. The IMU is calculated by assigning a weighted value to an area or population's performance on four demographic and health indicators: (1) Provider per 1,000 population ratio; (2) percent population at 100% of the Federal Poverty Level; (3) percent of population age 65 and over; and (4) infant mortality rate. As of June 10, 2019, MUA/P designated areas covered 41.6% of the 2010 U.S. population. The Commission recognized rural areas may experience shortages in other health care areas, e.g., mental health services and other specialty areas, but adding additional shortage designation types would significantly increase the complexity of the prioritization process. Accordingly, the Commission decided to measure shortages based on primary care at this time to facilitate predictability and to simplify the prioritization process. 73. The Commission found that MUA/Ps have two distinct advantages over HPSAs for purposes of RHC Program prioritization. First and most importantly, the MUA/P designation criteria includes variables for poverty, infant mortality, and population age in addition to provider supply as compared to population. Use of the MUA/P ensures consideration of population indicators for health need in addition to the number of primary care physicians in the area. Second, the focus on primary care with counties, census tracts, block groups, and blocks designated as shortage areas makes administering MUA/Ps in the prioritization process relatively straight-forward as compared to HPSAs. By using MUA/Ps, however, loses some degree of accuracy as compared to HPSAs because there is no requirement for renewal or subsequent review of MUA/P designations. But other benefits of using MUA/Ps outweigh this concern at this time. That said, the Commission will monitor and plan to revisit the use of MUA/Ps in the future to determine whether this proxy is sufficient for identifying medically underserved areas. 74. Application of Prioritization Factors. The Commission directed the Administrator in the R&O to fully fund all eligible requests falling in the first prioritization category before funding requests in the next lower prioritization category. The Administrator will continue to process all funding requests by prioritization category until there are no available funds. If there is insufficient funding to fully fund all requests in a particular prioritization category, then the Administrator will prorate the funding available among all eligible requests in that prioritization category only pursuant to the current proration process. The Administrator would then multiply the pro rata factor by the total dollar amount requested by each applicant in the prioritization category and then commit funds consistent with this calculation. While the Commission changed the overall prioritization process to minimize proration, the Commission found the limited use of proration prudent to equitably address instances where funding is insufficient for all applicants similarly situated within the same prioritization category. The Administrator will then deny requests falling within subsequent prioritization categories due to lack of available funds. 75. The prioritization process applies equally when demand exceeds the $150 million Healthcare Connect Fund Program cap for upfront and multi-year commitments. The Commission clarified that if requests for support exceed both the overall RHC Program cap and the $150 million Healthcare Connect Fund Program cap, the Administrator will first apply the prioritization process adopted in the R&O to requests subject to the $150 million Healthcare Connect Fund Program cap as that may eliminate the need to prioritize funding for the RHC Program cap. 76. The Commission recognized funding requests submitted by a consortium may contain multiple member sites falling in more than one prioritization categories, including member sites in non-rural areas. Nonetheless, the same prioritization process will apply, meaning those consortium sites in the highest prioritization category would receive funding commitments while other consortium sites in less rural and non-rural areas may not, i.e., based on prioritization, the consortium may only get a partial grant for some but not all of its sites. This potential outcome could dissuade future consortium participation but is necessary to better ensure support is directed to the most rural and medically underserved areas when demand exceeds the available support in a funding year. This outcome will also eliminate additional complexity in trying to prioritize consortia requests based on the percentage of member sites falling into particular prioritization categories as suggested in the 2017 Promoting Telehealth NPRM & Order. 77. Under the approach adopted by the Commission, prioritization will not depend on whether the applicant seeks support under the Telecom or Healthcare Connect Fund Programs. Seeking to both ensure Telecom Program applicants have telecommunications services necessary to provide health care services and also support the deployment and adoption of advanced, next-generation broadband capabilities as promoted by the Healthcare Connect Fund Program. Accordingly, at this time, the Commission declined to prioritize funding based on program type and will treat both programs equally. The Commission disagreed with those commenters who state the language of section 254(h) requires the Commission to favor the Telecom Program over the Healthcare Connect Fund Program. The language of section 254(h) does not expressly require such prioritization; Congress did not express such an intent in the Joint Explanatory Statement accompanying the enactment of section 254(h); and the Commission has never interpreted the statute in this manner. Further, section 254(h)(1)(A) does not by its terms or otherwise require the Commission to prioritize support under that section over support to health care providers under section 254(h)(2)(A) or to other universal service programs under section 254. The Commission found that the goals of sections 254(b) and 254(h) are best served by prioritizing both RHC Programs according to degree of rurality and medical need, rather than arbitrarily prioritizing one program over another. 78. The Commission also declined to prioritize funding based on the type of service, e.g., whether the support sought is for a monthly recurring service charge versus a one-time upfront payment, such as for infrastructure. Support of infrastructure and equipment costs are only available under the Healthcare Connect Fund Program so trying to prioritize by service raises the same issues as prioritizing one program over another. The Commission intends to treat both programs equally and to provide applicants the necessary flexibility to choose the services and infrastructure that best satisfy their needs in a given funding year without concern over losing funding priority. The Commission recognized that this approach deviates from that taken under the E-Rate Program, but found that this is the right approach for the RHC Program at this time. 79. Retaining the Current Definition for Rural Area. In the R&O, the Commission found that a modification of its definition of “rural area” is unwarranted at this time and could cause uncertainty for program recipients. That said, the Commission indicated it would add to the definition as necessary to reflect the three different rurality tiers discussed in the R&O, which has relevance for not only prioritization but also for the determination of rates for comparable rural areas in a state. This change will not result in a substantive modification of the definition for rural area for eligibility purposes, however. 80. Separately, with the 2020 decennial census approaching, the Commission reminded program participants of the procedures previously outlined to address revisions to the list of eligible rural areas (Rural Areas List). In addition, the Commission took the opportunity in the R&O to make one minor change to those procedures. Specifically, to simplify and minimize disruptions in between decennial data releases and the corresponding Core Based Statistical Area designation updates, the Commission instructed the Administrator to only refresh the Rural Areas List when the decennial census data and Core Based Statistical Area designations based on the new decennial census data are released. The Administrator should not update the Rural Areas List in between the decennial updates to reflect periodic data refreshes. For example, the Administrator should not update the list to reflect the ongoing American Community Survey that occurs in between decennial updates. While this means the Rural Areas List will not be based on the most up-to-date data each year, it will simplify the process and minimize potential disruptions for program participants in between decennial releases. 81. Funding Is Not without Limit. The Telecom Program is rooted in section 254(h)(1)(A). The Commission previously read this language to mean the “amount of credit or reimbursement to carriers from the health care support mechanism is based on the difference between the price actually charged to eligible health care providers [ i.e., the discounted urban rate] and the rates for similar, if not identical, services provided to `other customers' in rural areas in that State.” Several commenters argue this statutory language requires the Commission to fully fund without limit all requests for commitments under the Telecom Program. The Commission disagrees. 82. Section 254(h)(1)(A) does not expressly provide for the creation of a funding support mechanism for telecommunications services to rural health care providers, but the Commission has relied on this provision to create the Telecom Program. Prior to creation of the Telecom Program, the Joint Board recommended the Commission rely on offsets and “disallow the option of direct reimbursement” given the statutory language to treat the discounted amount “as a service obligation as part of [the carrier's] obligation to participate in the mechanisms to preserve and advance universal service.” The Commission instead allowed for direct compensation when and if the amount of discounted services provided exceeded the provider's Universal Service Fund contribution. In 2012, the Commission changed its rules to “permit USF contributors in the Telecommunications Program and the Healthcare Connect Fund to elect whether to treat the amount eligible for support as an offset against their universal service contribution obligation, or to receive direct reimbursement from USAC.” 83. The Commission has never treated the section 254(h)(1)(A) provision as creating an unlimited right to Universal Service Fund support for telecommunication services provided to rural health care providers. As discussed in the R&O, the Commission adopted a $400 million cap in 1997 on the Telecom Program in order to “control the size of the support mechanism” and “to fulfill [its] statutory obligation to create specific, predictable, and sufficient universal service support mechanisms.” The following year, the Commission adopted a proration mechanism should demand ever exceed the cap. The Commission would not have adopted a cap or a proration mechanism if it believed that it lacked statutory authority to set limits on the Telecom Program, which was implemented by section 254(h)(1)(A). The Commission has also placed other limitations on support provided under section 254(h)(1)(A). When creating the Telecom Program in 1997, the Commission also limited services eligible for support to services with a bandwidth equal to or less than 1.544 Mbps per location, finding telecommunications services in excess of this threshold “not necessary for the provision of health care services at th[at] time.” Faced with tepid participation in the program, in 1999 the Commission eliminated the per-location limit and the limitation on service bandwidth finding such restrictions “no longer necessary to ensure that demand for support remains below the . . . per year cap.” 84. Congress intended section 254(h) “to ensure that health care providers for rural areas . . . have affordable access to modern telecommunications services that will enable them to provide medical . . . services to all parts of the nation.” The language of section 254(h) provides the Commission with ample flexibility on how to structure a support mechanism to further this goal. As with any support mechanism, the Commission must base its decisions on the principles set forth in section 254(b), including having “specific, predictable, and sufficient Federal and State mechanisms to preserve and advance universal service.” The prioritization approach adopted in the R&O serves this principle. Allowing funding without any limit runs counter to fiscal responsibility. The Commission does not believe Congress intended such a result, and instead concludes that Congress has given the Commission the necessary tools to preserve and advance universal service, including the ability to place limits on the amount of funding available. 85. Maintaining the Funding Cap on Multi-Year Commitments and Upfront Payments and Instituting an Inflation Adjustment. The Commission retained the $150 million cap on multi-year commitment and upfront payment requests in the Healthcare Connect Fund Program, but provided for the cap to be adjusted annually for inflation. The $150 million funding cap on multi-year and upfront payment requests has only been exceeded once since its creation in 2012. In funding year 2018, gross demand for multi-year commitments and upfront payments was $237 million, and demand for remaining Healthcare Connect Fund Program requests and Telecom Program requests was approximately $411 million. The overall program funding cap for funding year 2018 was approximately $581 million. If not for the $150 million cap on multi-year commitment and upfront payment requests, all funding year 2018 requests would have had to be prorated to bring the $648 million total gross demand for RHC Program funding below the $581 million funding cap, resulting in reductions of funding for all program participants. Because the $150 million cap on multi-year and upfront requests was in place, the Administrator was able to process single-year funding year 2018 requests at their full eligible amounts. Stated differently, the $150 million cap did the job the Commission intended when it was established—to prevent multi-year and upfront payment requests from usurping the funding available for single-year requests for recurring services and safeguard against large fluctuations in demand for RHC Program funds. Absent additional data demonstrating the need to increase the $150 million cap (if it is exceeded in future funding years), providing an economic basis for a particular increase amount, and establishing that an increase would not have a detrimental impact on single-year requests, the Commission concluded that increasing the base amount of the $150 million cap on multi-year commitments and upfront payments would not be a fiscally responsible measure consistent with the obligation to be good stewards of the Universal Service Fund. 86. That said, the Commission concluded that the $150 million funding cap on multi-year and upfront payment requests should be adjusted annually for inflation. In the 2018 Report and Order ( 2018 R&O ), FCC 18-82, the Commission found that health care providers purchasing services with RHC Program support should be able to maintain consistent purchasing power in the event of price inflation. To provide the flexibility necessary for that to occur, the Commission adopted a rule that annually adjusts the overall RHC Program cap for inflation, using the GDP-CPI inflation index. The Commission found that adjusting the $150 million funding cap on multi-year commitments and upfront payments within the Healthcare Connect Fund Program by the same index was a fiscally responsible means of preventing inflation from eroding the purchasing power of health care providers seeking such requests without overburdening the Universal Service Fund, unreasonably increasing contribution charges passed through to consumers, or risking an untenable depletion of funding available for single-year requests. In the R&O, the Commission directed the Bureau to compute the annual inflation adjustment pursuant to the same criteria established for adjusting the overall RHC Program funding cap in the 2018 R&O. Any increases to the $150 million funding cap will be accounted for within the overall RHC Program cap, i.e., an increase in the $150 million funding cap on multi-year commitments and upfront payments will not increase the overall RHC Program cap. The Commission also directed the Bureau to announce any inflation-adjusted increase in the $150 million funding cap on multi-years and upfront payments in the same Public Notice that announce the inflation adjustment of the overall cap, if any. 87. The Commission appreciates that health care providers want certainty of funding approvals when applying for multi-year commitments and upfront payments. The reality of the RHC Program and other universal service mechanisms is that available funds are limited, however, and there is no guarantee that funding requests submitted to the Administrator in a particular funding year will be approved. The Commission noted that the inability to obtain a multi-year commitment from the RHC Program due to a lack of available funds in a particular funding year does not prevent health care providers from obtaining the benefits of a multi-year contract. Health care providers remain free to seek advantageous pricing through multi-year service arrangements and seek evergreen treatment of those contracts so that funding requests may be submitted to the Administrator for each year of the contract without rebidding the services. Indeed, multi-year commitments are not permitted in the E-Rate Program, but that does not prevent schools and libraries from benefitting from the cost-benefits of negotiating multi-year contracts for services, including substantial broadband projects. Applicants that are concerned that a multi-year commitment may be denied in a particular funding year due to lack of funding should consider seeking annual funding for services provided under multi-year contracts. 88. Clarifying the Carry-Forward Process for the RHC Program. In the 2018 R&O, the Commission adopted rules to address increasing demand in the RHC Program. Specifically, the Commission: (1) Increased the annual RHC Program funding cap to $571 million and applied it to funding year 2017; (2) provided for the annual RHC Program funding cap to be adjusted for inflation, beginning with funding year 2018; and (3) established a process to carry-forward unused funds from past funding years for use in future funding years. As part of that process, the Commission committed to announcing in the second quarter of each calendar year “a specific amount of unused funds from prior funding years to be carried forward to increase available funding for future funding years.” The Commission indicated unused funds “may be used to commit to eligible services in excess of the annual funding cap in the event demand in a given year exceeds the cap, or it may be used to reduce collection for the RHC Program in a year when demand is less than the cap.” The Commission directed the Bureau to “announce the availability and amount of carryover funds during the second quarter of the calendar year.” 89. To provide additional clarity for the carry-forward process, the Commission, in the R&O, directed the Bureau, in consultation with the Office of the Managing Director, to determine the proportion of unused funding for use in the RHC Program in accordance with the public interest to either satisfy demand notwithstanding the annual cap, reduce collections for the RHC Program, or to hold in reserve to address contingencies for subsequent funding years. The Bureau has authority to direct the Administrator to carry out the necessary actions for the use of available funds consistent with the direction specified in the document. The Commission previously provided similar authority to the Bureau in the context of allocating unused funding between demand for Category 1 and 2 services for the E-Rate Program. 90. Targeting Support to Tribal Health Care Providers. The Commission sought comments on targeting more support to health care providers located on Tribal lands and asked how the prioritization proposals would impact Tribal populations. The Commission received several comments on this issue, including comments from the Alaska Native Tribal Consortium and the Council of Athabascan Tribal Governments. Commenters generally emphasized the need for Tribal consultation and supported funding for health care providers on Tribal lands, specifically supporting prioritization based on the most rural areas. The Commission believes the prioritization approach adopted in the R&O, which prioritizes funding in those most rural areas with the greatest medical shortages, will help those living and seeking health care on Tribal lands as they are likely often the most remote and medically underserved areas of the country. 91. Increasing Rural Participation in Healthcare Connect Fund Program Consortia. The Healthcare Connect Fund Program provides support for eligible non-rural health care providers in majority-rural consortia (“more than 50% rural health care providers).” Consortia have three years from the filing date of their first funding request under the Healthcare Connect Fund Program to meet the majority-rural requirement. To ensure that eligible rural health care providers are benefiting from limited RHC Program dollars, the Commission eliminated the three-year grace period for consortia to come into compliance with the majority-rural rule. The Commission concluded that the prior rationale for a three-year grace period is no longer applicable to the RHC Program as it exists today. It was established at the time when there was significantly less demand for RHC Program funding and the Commission sought to encourage the formation of consortia within the Healthcare Connect Fund Program. Now, approximately seven years later, circumstances have changed. The Commission's focus now is to ensure that the limited RHC Program funding reaches the rural beneficiaries the RHC Program was created to support, and the Commission determined that requiring all Healthcare Connect Fund Program consortia to comply with the majority-rural requirement is an appropriate step toward achieving those ends. 92. Eliminating the grace period (rather than shortening it) will also eliminate administrative burdens for the Commission and the Administrator in overseeing it—and eliminate an opportunity for regulatory arbitrage. No longer, for example, would the Administrator need to track how long a consortium had failed to meet the majority-rural requirement. And no longer would the Commission potentially face thorny compliance questions, such as whether a “new” consortium consisting of non-rural health care providers that switched from other non-compliant consortia would receive a new grace period. 93. The Commission now requires all consortia to comply with the majority-rural requirement by funding year 2020. Although the Commission recognized that some existing consortia may need a slight ramp-up period to negotiate and enter into contractual relationships amongst their participants and form a technology plan, almost two out of every three consortia have already demonstrated that achieving more than 50% rural participation is feasible—and 37% of consortia have reached at least 75% rural participation. For those that have not yet met the 50% threshold, the Commission found that allowing them until funding year 2020 to reach it strikes the appropriate balance between ensuring that RHC Program support reaches eligible non-rural health care providers during the transition to majority-rural status and the Commission's duty to ensure that RHC Program support is focused on the delivery of services to eligible health care providers in rural areas. For new consortia seeking to participate in the Healthcare Connect Fund Program, the majority-rural threshold must be met at the time that they apply for RHC Program funding. And while Kellogg & Sovereign, LLC asserts that, in some circumstances, it can take up to three years “to establish the contracts” to initiate the consortium and to add the eligible rural health care providers to “ensure a proper balance”—the Commission does not see that as a reason to steer scarce RHC Program funds to non-compliant consortia when so many rural health care providers as well as compliant consortia are in need. 94. Given the Commission's elimination of the grace period, the Commission declined to increase the majority-rural threshold at this time. Rather, the Commission determined that increases to the majority-rural threshold should be consistent with overall RHC Program demand and the need to prioritize funding to health care providers in rural areas. Accordingly, the Commission will increase the majority-rural consortia percentage requirement only when RHC Program demand exceeds the funding cap. Specifically, if the Commission must prioritize funding in one year because demand exceeds the cap, the majority-rural threshold will automatically increase by 5% for the following funding year (up to a maximum of 75%). Consistent with the statutory mandate, this will ensure, as demand increases, that more Healthcare Connect Fund Program funding is focused on eligible health care providers serving rural areas. The Commission found that the more incremental approach—making such increases only when further evidence of demand outstripping supply comes in—better accomplishes the goals of such commenters without preemptively limiting participation by currently compliant consortia. 95. The Commission was not persuaded by commenters who oppose increasing the majority-rural health care provider requirement for Healthcare Connect Fund Program consortia. These commenters argue that: (1) The rural/non-rural composition of consortia is artificial; (2) increasing the majority-rural requirement may prevent small consortia from participating; (3) non-rural health care providers that deliver institutional knowledge, specialization, and expertise to rural communities may be disincentivized from participating; and (4) non-rural participants help to offset the expense of middle- and last-mile costs. Based on RHC Program data, the majority of consortia currently participating in the Healthcare Connect Fund Program exceed the current majority-rural participation requirement without any apparent degradation of benefits to the eligible rural health care participants. The Commission determined, based on the current make-up of participating consortia, and with no data to support the arguments of the commenters opposing an increase, that increasing the majority-rural requirement by an incremental percentage as demand exceeds the cap, focuses the limited RHC Program dollars on support for eligible rural health care providers while still encouraging the participation of eligible non-rural health care providers. Thus, the Commission requires all existing and new consortia to reach any increased threshold, as necessary, and in so doing ensure the focus of RHC Program support remains primarily on supporting eligible rural health care providers. 96. Applicability to Grandfathered Pilot Program Consortia. The rule changes the Commission adopted in the R&O will apply equally to those consortia that participated in the prior Pilot Program and were grandfathered from complying with the majority-rural requirement in 2012. These grandfathered consortia were allowed to participate in the Healthcare Connect Fund Program with limitations on adding eligible non-rural member sites. The Commission grandfathered these consortia in recognition of their ability to encourage eligible rural health care provider participation in the Healthcare Connect Fund Program, and to minimize potential disruption in rural health care as the Commission transitioned from a pilot to a permanent program. Currently, 32 grandfathered Pilot Program consortia are participating in the Healthcare Connect Fund Program. All but three of these consortia now have more eligible rural than non-rural sites, i.e., a rural majority. Fourteen of the 32 grandfathered Pilot Program consortia consist of 75% or more eligible rural sites. Given the limited number of such consortia and the current percentage of eligible rural health care provider sites within each consortia, the Commission sees no detrimental impact from requiring the remaining three consortia to meet the majority-rural requirement in one year. As the Commission indicated, circumstances have changed significantly since the Commission decided to grandfather Pilot Program consortia in 2012. The Commission therefore found all these requirements should apply equally to those grandfathered Pilot Program consortia. 97. Requiring Applicants to Seek Bids for Particular Services, Not Tasks Performed by a Service. Under the Commission's rules governing the Telecom Program and Healthcare Connect Fund Program, health care providers during the competitive bidding process are required to select the most “cost-effective” service offering. As the Commission explained in the 2017 Promoting Telehealth NPRM & Order, the definition of “cost-effective” applicable to both RHC Programs places virtually no limitation on how health care providers make their service selection. In addition, because the definition of “cost-effective” does not require health care providers to identify their specific service requirements when posting their requests for service, they can select carriers whose service offerings meet the current “cost-effective” definition, but which exceed the needs of the health care providers irrespective of cost. The result is a procedure that can lead to wasteful inefficiency in the competitive bidding process. 98. To increase the effectiveness of the competitive bidding process, the Commission implemented a new safeguard intended to reduce the risk of the type of inefficiency described in the R&O. Specifically, the Commission requires RHC Program applicants to list the requested services for which they seek bids ( e.g., internet access, bandwidth) rather than merely listing what those services are intended to do ( e.g., transmit x-rays), and requires applicants to provide sufficient information to enable bidders to reasonably determine the needs of the applicant and provide responsive bids. The Commission believes requiring applicants to describe with greater specificity the precise services that they need, rather than just more specific uses, will reduce the likelihood of funding being used for excessively expensive services that are not necessary. This in turn will ensure a more equitable distribution of limited RHC Program funding. This change will become effective for funding year 2020. 99. Harmonizing Certification and Documentation Requirements Between the RHC Programs. To further promote the effectiveness of the competitive bidding process, the Commission harmonized the competitive bidding rules requiring Telecom Program applicants and Healthcare Connect Fund Program applicants to submit the same certifications and documentation (with limited exceptions) as part of their requests for service. The Commission first harmonized the certifications that RHC Program applicants must make when requesting service. Effective with funding year 2020, both Telecom Program and Healthcare Connect Fund Program applicants will be required to provide, contemporaneously with their requests for services, the following identical certifications that: (1) The health care provider seeking supported services is a public or nonprofit entity that falls within one of the seven categories set forth in the definition of health care provider listed in § 54.600 of the Commission's rules; (2) the health care provider seeking supported services is physically located in a rural area as defined in § 54.600 of the Commission's rules, or is a member of a Healthcare Connect Fund Program consortium which satisfies the rural health care provider composition requirements set forth in § 54.607 of the Commission's rules; (3) the person signing the application is authorized to submit the application on behalf of the applicant, has examined the form and attachments, and to the best of his or her knowledge, information, and belief, all statements contained therein are true; (4) the applicant has complied with any applicable state, Tribal, or local procurement rules; (5) RHC Program support will be used solely for purposes reasonably related to the provision of health care service or instruction that the health care provider is legall [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%3A2019-20173. Public record. Not legal advice.