On Dec. 21, the FCC released its long-awaited Report and Order reforming its funding mechanisms for rural health care by creating a Healthcare Connect Fund (HCF) of $400 million annually. The purpose of the HCF is to expand broadband access to health care providers and to encourage state and regional broadband networks for health care. The HCF replaces the Internet Access portion of the current Rural Health Care Program, provides continuing support for Rural Health Care Pilot Program (RHCPP) consortia as they exhaust any remaining funding already committed under that Pilot Program, and makes permanent many aspects of the RHCPP. The FCC retained the existing funding of the difference between urban and rural rates for telecommunications services (normally 25 percent, but 50 percent in states in which every county is rural).

The HCF will support the cost of (1) broadband and other advanced services; (2) upgrading existing facilities to higher bandwidth; (3) equipment necessary to create networks of health care providers (HCPs), as well as equipment necessary to receive broadband services; and (4) HCP-owned infrastructures where shown to be the most cost-effective option.

The following are significant aspects of the HCF:

• The HCF will allow eligible HCPs the option of purchasing services or designing and building networks if they can demonstrate that their choice is the most cost-effective option (the latter option is available only to consortia).
• Infrastructure funding, which is capped at $150 million each year, may be used in combination with services purchased from commercial services.
• Funding will be “2 for 1”; specifically, HCPs will be required to contribute 35 percent.
• Rural and non-rural HCPs may participate in the fund but non-rural providers must be part of a consortium and a majority of the consortium members must be rural, as defined by the FCC. Rural Health Care Pilot Program participants are grandfathered.
• Large health care providers (hospitals with 400 beds or more) are limited to $30,000 per year for recurring charges and $70,000 for non-recurring charges over a five-year period.

The FCC also simplified the application process, established goals and performance measures and created a new Pilot Program to test the technical feasibility and economic reasonableness of including skilled nursing facilities as HCF participants. The FCC committed $50 million to the new Pilot Program over a three-year period.