On June 25, the Federal Communications Commission (FCC) took steps to raise the annual funding cap for the Universal Service Fund’s Rural Health Care (RHC) Program, which provides funds to rural, public and non-profit hospitals to purchase telecommunications services at the same rates as those charged to urban hospitals. In its released Report and Order, the FCC increases the cap for the RHC Program from $400 million to $571 million, with annual adjustments to reflect inflation, and a process to carry forward unused funds from prior years for use in future years. The Order had been circulated by Chairman Ajit Pai earlier this month, and was approved by the majority of the Commissioners on June 14.

The FCC's Order reflects the culmination of an effort to increase funding to keep pace with the growing demand for support that resulted, in part, from an increase in entities eligible for funding and services covered, as a result of the Healthcare Connect Fund Program (which provides support for broadband connectivity to eligible health care providers). Likely contributing to the shortfall, also, is the growing acceptance of telemedicine and wireless devices. "It's time we integrated communications technology into our health care system just as fully as we have in other parts of our lives," said Chairman Pai, quoting his earlier op-ed piece with Chairman Newton Minow published in the Boston Globe in May.

Last December, the FCC waived the RHC Program funding cap on a one-time basis for fiscal year 2017 (ending June 30, 2018) by allowing the carry forward of any unused RHC Program funds from prior funding years, and allowing service providers to voluntarily reduce their rates for qualifying funding year (FY) 2017 requests, while preserving the support amount provided by the Universal Service Fund. The FCC also solicited comments in a Notice of Proposed Rule Making and Order on the appropriate level for the RHC Program funding cap and ways to more efficiently distribute the RHC Program funds while combating waste, fraud and abuse. Under consideration were:

• Increasing the annual funding cap and creating a prioritization mechanism in the event that demand exceed the cap
• Establishing a process for evaluating outlier funding requests and reforming the rules for calculating urban and rural rates in the Telecom Program to improve fairness and transparency
• Defining the "cost effectiveness" standard across the RHC Program to encourage more efficient purchasing and fairer competitive bidding
• Targeting support for rural and tribal healthcare providers, while maintaining the participation of rural-urban provider consortia
• Simplifying the RHC Program participation process and improving oversight of the RHC Program

The figure in the approved Order is the same amount considered in the notice, and characterized by Chairman Pai as "targeted, immediate action…to mitigate the impact of the existing RHC Program cap on rural healthcare providers in funding year FY 2017." The original $400 million cap was set in 1997 and has not been increased since that time, despite the increase in demand. The $571 million figure reflects the amount that the cap would have been in fiscal year 2017 had the original amount been adjusted for inflation.

While the Order provides some increased predictability for telecommunications providers, healthcare participants and rural communities, it is viewed by some as simply a first step in a much needed process to overhaul the RHC Program. Indeed, Commissioner Mike O'Rielly made a call to action for changes to the Universal Service Administrative Company to put the RHC Program on more long-term, solid footing, an overall spending cap on the Universal Service Fund, and more interaction with other federal agencies to determine how the RHC Program fits into the larger health care system. With the RHC program now in the spotlight, we expect more changes in the future.