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Rural Health Care Pilot Program Evaluation -Staff Report
DA 12-1332
STAFF REPORT WC DOCKET NO. 02-60
Americans living in rural areas face a shortage of primary care physicians and specialists, and often must travel large distances to obtain medical care. The increasing cost of providing health care and the demands of an aging population also put pressures on rural health care providers, many of which struggle to keep their doors open.
The Federal Communications Commission (Commission or FCC) has implemented the statutory mandate for universal service by, among other things, creating the Rural Health Care (RHC) program to improve access to communications services for eligible health care providers. In recent years, broadband has become increasingly vital to the effective delivery of health care, and it can be uniquely transformative in rural areas, where distance poses a substantial challenge. In recognition of this, the Commission in 2006 launched the Rural Health Care Pilot Program (Pilot Program), which awarded 69 projects one-time funding for a defined period of time (a total of $418 million) to cover up to 85 percent of the cost of construction and deployment of broadband networks that connect participating health care providers in rural and urban areas. The Pilot Program currently supports 50 active projects in 38 states (the “Pilot projects”) and the territories of Guam, American Samoa and the Northern Mariana Islands. Many of the Pilot broadband networks have been established and are now delivering the benefits of telemedicine and other telehealth applications to their patients. In creating the Pilot Program, the Commission sought to harness the potential of broadband health care provider networks to improve the quality and reduce the cost of health care in rural areas, while drawing on that experience to inform the redesign of its permanent RHC program. A key component of any pilot program is the opportunity to evaluate what has been learned and how those experiences can inform future work – in this case, the Commission’s ongoing oversight and management of its universal service programs. This Staff Report provides an evaluation of the successes and challenges of the Pilot projects to date. The Report describes the projects, their broadband networks, and the financial and telehealth benefits generated by their broadband connectivity. The Report presents data through January 31, 2012, except where otherwise noted.
This Report also summarizes key observations from the Pilot Program, to assist the Commission as it considers potential changes to the permanent rural health care program. In the 2010 Notice of Proposed Rulemaking (NPRM), the Commission proposed a number of changes to improve access to broadband services and broadband infrastructure for health care providers, building on the recommendations of the 2010 National Broadband Plan. As is clear from this Report, the Pilot Program provides fertile ground to help the Commission determine how best to reform the existing rural health care program, which provides ongoing support for telecommunications and Internet access services. The following are key facts, benefits, and lessons of the Pilot Program to date:
Key Facts About the Pilot Program: ·
As of January 2012, 2,107 health care providers were on target to receive $217 million in universal service support through the Pilot Program (an average of about $100,000 per health care provider over the award period). ·
Projects range in size from fewer than ten to over 150 health care provider sites; about a third of the projects each have over 50 health care provider sites receiving support through the Pilot Program.
The five largest projects are statewide networks located in California, Colorado, Oregon, South Carolina, and West Virginia. So far, these networks are on target to receive funding to connect over 800 health care providers. ·
Forty-four of 50 projects that receive Pilot Program support include urban health care providers. Approximately 35 percent of all health care providers that had received funding commitments in the Pilot Program as of January 2012 were classified as urban, or 733 of the 2,107 total.
Leaders of Pilot projects often come from large medical institutions and universities, which frequently are located in urban areas. The urban health care providers often serve as hubs for the network, and as such receive support for the equipment that enables the entire network to operate.
Pilot project participants purchase higher bandwidth connections than do participants in the Commission’s existing program, which defrays the cost of telecommunications and Internet access services for health care providers in rural areas. Most Pilot Project participants purchase 10 Mbps or faster connections, which are much faster than the connections that typically are purchased in the permanent RHC Program, the vast majority of which are 3 Mbps or less.
The majority of Pilot projects choose to purchase broadband services from commercial providers rather than construct and own their own broadband networks.
Key Benefits of the Pilot Program. Support through the Pilot Program has helped health care providers obtain broadband capability to implement telemedicine and telehealth applications. Telemedicine and telehealth applications improve the quality of health care delivered to patients in rural areas, generate savings in the cost of providing health care, and reduce the time and expense associated with travel to distant locations to receive or provide care. Although many Pilot projects are still assembling their networks, the projects have already demonstrated how broadband health care networks can significantly improve the quality and reduce the cost of providing health care in rural areas. For example:
The Palmetto State Providers Network, located in South Carolina, reports that it has saved $18 million dollars in Medicaid costs over 18 months as a result of its tele-psychiatry program. Psychiatric consults are now available 24/7. Previously, patients would take up valuable health care provider time and resources by having to wait for days to receive psychiatric consults.
In Pennsylvania, Geisinger Health System notes that its network provides tele-stroke services for neurology patients within minutes as opposed to hours. Given that “time is brain” for stroke victims, instant access to specialized care can be life-saving. ·
All of Geisinger’s Pilot project health care providers are members of a Health Information Exchange that links 53 hospitals and 9,000 physicians, and they have adopted, implemented, upgraded, or successfully demonstrated the use of certified Electronic Health Record technology. ·
In South Dakota, the Heartland Unified Broadband Network (HUBNet) estimates that hospitals in its network have saved $1.2 million in transfer expenses over a 30-month period, following the implementation of electronic Intensive Care Unit (e-ICU) services. HUBNet also has dropped the average number of days patients spend in ICU, thereby reducing costs, and has reduced the number of patient transfers to other hospitals.
Pennsylvania Mountains Healthcare Alliance’s network has reduced the turnaround time on X-ray readings from 20 to 7 minutes.
Continuing medical education provides rural providers with increased learning opportunities and reduces their sense of medical isolation. For example, rural sites participating in the Iowa Rural Health Telecommunications Program report that the network and the telemedicine services provided over it have enhanced physician satisfaction and collegial support. Key Lessons Learned from the Pilot Program. This report also summarizes key observations drawn from successful Pilot Programs. These observations include: ·
Broadband health care networks improve the quality and reduce the cost of delivering health care in rural areas. Broadband makes possible the use of telemedicine to improve health care delivery in rural areas. In addition to delivering needed medical care to patients in remote locations, telemedicine lowers the cost of providing health care, reduces travel time and expense for patients, providers and doctors, and brings needed revenue to endangered rural clinics and hospitals. Broadband networks also facilitate other important telehealth applications – such as the transmission of medical images, exchange of electronic health records, remote consultations with specialists, and training of rural medical personnel.
Consortium applications are more efficient. Consortium applications save time and money for applicants and for the Universal Service Administrative Company (USAC), which administers rural health care programs under the Commission’s direction. Consortium applications allow health care providers to spread administrative, network design, and other costs over a large number of entities. They also enable smaller health care providers to take advantage of the expertise and resources of larger providers, and they foster the formation of coordinated networks of health care providers. ·
Bulk buying plus competitive bidding is a powerful combination. Consortium purchasing by a large number of geographically dispersed sites, coupled with competitive bidding, can yield higher bandwidth, lower prices, and better service quality for the Pilot projects.
Urban sites are key members of rural health care provider networks. As the Western New York Pilot project put it, without its urban partners it would be “building a road to nowhere.” Broadband networks often bring to patients in rural areas the additional medical expertise, creativity, technical know-how, and innovation available in large urban medical centers. The leadership, technical and medical expertise, and administrative resources provided by urban health care providers also have proved central to the success of many Pilot projects.
Most health care providers do not have the technical expertise to manage broadband networks and do not want to own such networks. The majority of Pilot projects have created successful broadband networks by purchasing broadband services from a third party, rather than constructing and owning their own broadband facilities. Mechanisms such as long-term leases, prepaid leases, and indefeasible rights of use of facilities for specified period of time (IRUs) help many projects obtain the bandwidth and service quality they needed.
Funding challenges remain for rural health care providers. Rural health care providers operate on a thin margin, or in the red, and universal service support helps many to access the benefits of broadband. 4
BACKGROUND ............................................................................................................................. 8A. The Creation of the Rural Health Care Support Mechanism..................................................... 8B. The Creation of the Pilot Program........................................................................................... 12C. Application Process ................................................................................................................. 17D. Post-Selection Developments.................................................................................................. 19
DESCRIPTION OF THE PILOT PROJECTS .............................................................................. 23A. Size of Projects and Awards.................................................................................................... 26B. Geographic Coverage of Projects............................................................................................ 34C. Rural/Urban Composition of Projects ..................................................................................... 36D. Types of Health Care Providers Participating in Projects ....................................................... 39E. Enterprise-Grade Services ....................................................................................................... 44F. Self-Construction versus Services Purchased from Third Parties ........................................... 47G. Bandwidth of Services Purchased ........................................................................................... 52H. Reduced Cost of High Bandwidth Connections ...................................................................... 57
IMPROVEMENTS IN QUALITY AND COST OF HEALTH CARE......................................... 63A. Telehealth/Telemedicine Applications Enabled by the Pilot Program.................................... 64B. Improved Quality and Efficiency of Health Care Delivery..................................................... 67C. Cost Savings from Telemedicine/Telehealth Applications ..................................................... 72
1. Reduced Transfer and Travel Costs .................................................................................. 722. Reduced Operating Costs and Increased Revenue Opportunities..................................... 73
KEY OBSERVATIONS ................................................................................................................ 76A. Use of Consortia ...................................................................................................................... 77B. Inclusion of Urban Providers................................................................................................... 88C. Ownership of Broadband Facilities Versus Purchased Services ............................................. 91D. Funding of Network Design Studies ....................................................................................... 94E. Administrative Expenses ......................................................................................................... 95F. Requirement for Sustainability Plans ...................................................................................... 96G. Multi-Year Commitments (Waiver of Annual Filing Requirement)..................................... 100H. Flat-Rate Discount................................................................................................................. 101I.
Discount Percentage .............................................................................................................. 104
CONCLUSION............................................................................................................................ 108
Appendix A: Status of Pilot Projects by StateAppendix B: Pilot Project Descriptions and GoalsAppendix C: Pilot Project Composition by HCP TypeAppendix D: List of Winning VendorsAppendix E: List of Ex Parte Filings and Citations
1. The Wireline Competition Bureau (Bureau) staff has prepared this Staff Report (Report) to assist the Federal Communications Commission in considering reforms to the Rural Health Care (RHC) support mechanism and in developing sound evaluation plans for any new programs. The Report both describes and extracts lessons from the Commission’s Rural Health Care Pilot Program (Pilot Program), 5
which provides universal service support to extend broadband networks for health care providers (HCPs).1 As discussed more fully below, the Report provides concrete data regarding the efficacy of broadband networks in delivering health care to rural America. The Report also provides extensive information that will assist the Commission in addressing the recommendations of the U.S. Government Accountability Office (GAO) in its November 2010 report on the Rural Health Care program.2 The Report presents data through January 31, 2012, except where otherwise noted.
2. The Report draws on the experiences of the Pilot projects selected in 2007: where they are now, what has worked, what has been challenging, what their broadband networks look like, and what telehealth benefits and cost savings they have realized. In order to prepare this Report, the staff spoke with a number of Pilot projects located throughout the country, which are of various sizes and at various stages of implementation. The staff also reviewed quarterly reports submitted by the Pilot projects to the Commission and data submitted by the Pilot projects at various stages of the funding process to the Universal Service Administrative Company (USAC), the entity that performs the day-to-day administration of the program under Commission oversight. The Report also reports on USAC’s experience with the Pilot Program. USAC has provided the Commission with its own observations about the Pilot Program, as well as summaries of site visits to Pilot projects, data, and an informal assessment of the needs of rural health care providers. Because USAC is the front-line interface with the Pilot projects, USAC’s insights have been particularly valuable in the preparation of this Report.3 3. Many of the Pilot projects are still in the process of securing final funding commitments and implementing their networks, and so this Report can only provide a snapshot of the status of the various projects at a specific point in time (generally as of January 31, 2012, in this Report).4 Nevertheless, many Pilot projects have already demonstrated the enormous benefits that broadband networks can bring for patients in rural areas. They have employed sophisticated telemedicine and other health IT applications over their networks, and many have begun to realize cost savings for the health care services they provide to rural Americans.5
4. These benefits realized by the Pilot projects thus far fulfill one of the Commission’s two goals in creating the Pilot Program: “to bring the benefits of innovative telehealth and, in particular, 1 See Rural Health Care Support Mechanism, WC Docket No. 02-60, Order, 21 FCC Rcd 11111 (2006) (2006 Pilot Program Order); Rural Health Care Support Mechanism, WC Docket No. 02-60, Report and Order, 22 FCC Rcd 20360 (2007) (2007 Pilot Program Selection Order). The Commission opened participation in the Pilot Program to all eligible public and non-profit health care providers to promote the “goal of stimulating the deployment of innovative telehealth networks that will link rural health care facilities to urban health care facilities and provide telemedicine services to rural communities.” 2007 Pilot Program Selection Order, 22 FCC Rcd at 20421, para. 120. 2 U.S. Gov’t Accountability Office, FCC’s Performance Management Weaknesses Could Jeopardize Proposed Reforms of the Rural Health Care Program GAO 11-27 (Nov. 2010) (GAO Report), available athttp://www.gao.gov/products/GAO-11-27 (last visited Mar. 1, 2012). The GAO Report recommended, among other things, that the Commission assess the communications needs of rural health care providers; consult with USAC and other agencies and associations representing rural health care providers; develop effective goals, performance measures, and performance evaluation plans for current and future rural health care programs; and clearly articulate rules governing any new programs. Id. at 56-57. 3 Appendix E lists the ex parte submissions that were used in the preparation of this Report, including submissions from the Pilot projects, USAC, and other interested parties.
4 Most of the aggregate data used in this Report is provided as of January 31, 2012. The final deadline for submission of funding commitment requests by Pilot projects was June 30, 2012. USAC is still in the process of reviewing those requests, and will be in a position to update the data once that process is concluded later this year.
5 See infra Section IV.
telemedicine services to those areas of the country where the need for those benefits is most acute.”6 The other goal of the Commission was that the Pilot Program would “lay the foundation for a future rulemaking that w[ould] explore permanent rules to enhance access to advanced services for public and non-profit health care providers” and would provide “useful information as to the feasibility of revising the Commission’s current RHC rules in a manner that best achieves the objectives set forth by Congress.”7 With respect to this second goal, this Report provides analysis useful to the Commission as it considers reforms to the rural health care support mechanism to harness the potential of broadband to improve the quality and lower the cost of providing health care in rural areas across the country.8 5. In the years since the Commission outlined its goals for the Pilot Program, it has continued to recognize that broadband can play an important role in the transformation of health care in the 21stcentury, and that access to broadband is not fully realized today in all parts of the country. The Commission said in its March 16, 2010 Joint Statement on Broadband that “ubiquitous and affordable broadband can unlock vast new opportunities for Americans, in communities large and small, with respect to . . . health care delivery.”9 Additionally, the National Broadband Plan, also released on March 16, 2010, emphasized the importance of ensuring “sufficient connectivity for health care delivery locations.”10 6. During the same time period, developments in health information technology (Health IT),11
particularly in telehealth,12 telemedicine,13 and the exchange of electronic health records (EHRs),14 have 6 2006 Pilot Program Order, 21 FCC Rcd at 11111, para. 1.7 Id. at 11112, para. 4.8 Rural Health Care Support Mechanism, WC Docket No. 02-60, Notice of Proposed Rulemaking, 25 FCC Rcd 9371, 9373, para. 3 (2010) (2010 NPRM or NPRM).
9 Joint Statement on Broadband, GN Docket No. 10-66, Joint Statement on Broadband, 25 FCC Rcd 3420, para. 3 (rel. Mar. 16, 2010).
10 The National Broadband Plan recommended, among other things, that the Commission reform the RHC program by replacing the existing Internet Access Fund with a Health Care Broadband Access Fund and establishing a Health Care Broadband Infrastructure Fund to provide support for network deployment to health care delivery locations where existing networks are insufficient. Federal Communications Commission, Connecting America: The National Broadband Plan, at 200 (rel. Mar. 16, 2010) (National Broadband Plan).
11 As defined in the National Broadband Plan, Health IT includes “information-driven health practices and the technologies that enable them” such as “billing and scheduling systems, e-care, EHRs, telehealth and mobile health.” Id.
12 Telehealth is defined as the “electronic exchange of information-data, images and video-to aid in the practice of medicine, advanced analytics” and non-clinical practices such as continuing medical education and nursing call centers. It encompasses technologies that enable video consultation, remote monitoring and image transmission (store-and-forward) over fixed or mobile networks. Id. 13 Although related to telehealth, telemedicine is usually more narrowly defined. The Centers for Medicare and Medicaid Services (CMS) defines “telemedicine” as “two-way, real time interactive communication between the patient, and the physician or practitioner at the distant site to improve a patient’s health.” Centers for Medicare & Medicaid Services, http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Delivery-Systems/Telemedicine.html (last visited Apr. 19, 2012). The American Telemedicine Association defines “telemedicine” as “the use of medical information exchanged from one site to another via electronic communications to improve patients' health status.” American Telemedicine Association, http://www.americantelemed.org/i4a/pages/index.cfm?pageid=3333 (last visited June 5, 2012).
14 The National Broadband Plan defines an EHR as “a digital record of patient health information generated by one or more encounters in any care delivery setting.” It includes “patient demographics, progress notes, diagnoses, (continued . . .)
increased rural health care providers’ need for robust broadband connections. Since the 2006 Pilot Program Order, rural health care providers have continued to use telemedicine to improve and reduce the cost of health care for their patients. For people living in rural areas, travel time to locations where specialists practice can be substantial, and the associated delay in obtaining treatment can have serious consequences. There are shortages of physicians in many rural areas, and Pilot projects have used their networks to meet the health care needs of their patients and accomplish other telehealth purposes.15 In addition, there have been significant advances in the move to adoption and exchange of electronic health records. Most notably, in the 2009 HITECH Act, Congress adopted an incentive payment system under Medicare and Medicaid to encourage health care providers to convert to electronic health records and to develop the capability of exchanging those records.16 Since that time, a number of health care providers have been working towards the adoption and exchange of electronic health records.
7. Many Pilot projects have made substantial advances towards completion. About half of the total Pilot funding had been committed as of January 2012, and USAC estimates that by the end of 2012, total funding requested and processed will be approximately $368 million (a figure equal to 95 percent of the 50 active projects’ cumulative total original awards). Furthermore, about a quarter of individual health care provider sites will have spent their allotment of Pilot Program funds by June 30, 2013.17 Given the extent of the Commission’s experience to date with the Pilot Program, coupled with recent developments in Health IT, the time is ripe to evaluate the Pilot Program so that the Commission may draw on that experience in considering reforms to the RHC program in the pending rulemaking proceeding.18 Accordingly, the Bureau staff has prepared this Report, which is divided into four parts: (1) the creation and design of the Pilot Program; (2) the description of the Pilot projects and their network characteristics; (3) the improved quality and reduced cost of health care realized by the projects as a result of their broadband networks; and (4) key observations regarding the Pilot Program. II.
The Creation of the Rural Health Care Support Mechanism
8. As part of the Telecommunications Act of 1996 (1996 Act), Congress directed the Commission to provide rural health care providers with “an affordable rate for the services necessary for (. . . continued from previous page) medications, vital signs, medical history, immunizations, laboratory data and radiology reports.” National Broadband Plan at 200.
15 See USAC Mar. 16 Site Visit Reports at 6, 14 (observing that Henry County Health Center, a rural health care provider participating in the Iowa Rural Health Telecommunication Program, and rural health care providers in the Avera Health network respectively use tele-radiology and tele-pharmacy to meet the health care needs of their patients). See also NARMH Apr. 12 Ex Parte Letter at 1 (explaining that telemedicine allows patients to be cared for in their communities even when a physician is not physically located at that site); ONC Jan. 17 Ex Parte Letter at 2 (the “shortage of physicians in rural areas means that there is even more need to leverage technology and use telehealth to provide care to patients in rural areas”); Pilot Project Conference Call Mar. 13 Ex Parte Letter (PMHA et al.) at 1 (noting that South Carolina faces challenges to similar to most rural states, including a paucity of specialized services).
16 See Letter from Kathleen Sebelius, Secretary of Health and Human Services, to Julius Genachowski, Chairman, FCC, WC Docket No. 02-60 (filed Sept. 7, 2010) at 1 (HHS Comments).
17 USAC Aug. 2 Data Letter at 2.18 See 2010 NPRM; see also 2006 Pilot Program Order, 21 FCC Rcd at 11112, para. 4.
the provision of telemedicine and instruction relating to such services.”19 Specifically, the 1996 Act mandated that telecommunications carriers provide telecommunications services for health care purposes to rural public or non-profit health care providers at rates that were “reasonably comparable” to rates in urban areas.20 However, not all public or non-profit health care providers are eligible to participate. Eligible health care providers, as defined in the 1996 Act, only 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; and (7) consortia of health care providers consisting of one or more entities falling into the first six categories.21 9. Consistent with Congress’s directive, the Commission established the rural health care telecommunications program in 1997 to ensure that rural health care providers pay no more than their urban counterparts for their telecommunications needs in the provision of health care services.22 The telecommunications program ensures that eligible rural health care providers can obtain a rate for each supported service that is no higher than the highest tariffed or publicly available commercial rate for a similar service in the closest city in the state with a population of 50,000 or more people, taking distance charges into account – in effect, providing a discount to the HCP in the amount of the “rural-urban differential.”23 10. In 2003, the Commission created the rural health care Internet access program pursuant to section 254(h)(2)(A) of the Act, which directs the Commission to establish competitively neutral rules to enhance, to the extent technically feasible and economically reasonable, access to “advanced telecommunications and information services” for public and non-profit health care providers.24 The Internet access program provides a 25 percent discount off the cost of monthly Internet access for eligible rural health care providers.25 Together the telecommunications and Internet access programs are commonly referred to as the “Primary Program.” 19 Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996). The 1996 Act amended the Communications Act of 1934 (Communications Act or Act); Joint Explanatory Statement of the Committee of Conference, 104th Cong., 2d Sess. at 133 (1996); see also 47 U.S.C. § 254(b)(3), (h).
20 See 47 U.S.C. § 254(h)(1)(A) (directing that telecommunications carriers should provide “telecommunications services” that are necessary for the provision of health care services to any “public or nonprofit” health care provider that serves persons who reside in rural areas, at rates that are “reasonably comparable” to rates in urban areas).
21 47 U.S.C. § 254(h)(7)(B).22 See, e.g., 47 U.S.C. § 254(h)(1)(A); Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order, 12 FCC Rcd 8776, 9093-9161, paras. 608-749 (1997) (Universal Service First Report and Order) (subsequent history omitted); 47 C.F.R. Part 54, Subpart G.
23 Universal Service First Report and Order, 12 FCC Rcd at 9093, para. 608. 24 47 U.S.C. § 254(h)(2)(A).25 47 C.F.R. § 54.621. See generally Rural Health Care Support Mechanism, WC Docket No. 02-60, Report and Order, Order on Reconsideration, and Further Notice of Proposed Rulemaking, 18 FCC Rcd 24546 (2003) (2003 Order and Further Notice). A 50 percent discount (rather than 25 percent) is available for Internet access services for health care providers in states that are “entirely rural,” that is, states in which every county meets the Commission’s definition of rural. Rural Health Care Support Mechanism, WC Docket No. 02-60, Second Report and Order, Order on Reconsideration, and Further Notice of Proposed Rulemaking, 19 FCC Rcd 24613, 24631, para. 38 (2004) (Second Report and Order and Further Notice).
11. As of June 30, 2011, approximately $414 million had been disbursed through the Primary Program.26 Annual disbursements have grown through the course of the Primary Program, from $3.375 million in 1998 (the first funding year), to $10 million in 2000, $25 million in 2003, $54 million in 2007, and $81.5 million in 2010.27 B.
The Creation of the Pilot Program
12. In September 2006, the Commission established the Rural Health Care Pilot Program to provide funding to support state or regional broadband networks designed to bring the benefits of innovative telehealth and telemedicine services to those areas of the country where the need for those benefits is most acute.28 The Pilot Program provides funding for up to 85 percent of the costs associated with: (1) the construction of state or regional broadband networks, and the advanced telecommunications and information services provided over those networks; (2) connecting to nationwide backbone providers Internet2 or National LambdaRail (NLR); and (3) connecting to the public Internet.29 Pilot projects can use RHC support to purchase services from third parties, or to receive service by constructing and owning their own network facilities.30 Additionally, the Pilot Program allows participants to use funding to purchase items that are not eligible for support under the Primary Program, such as equipment (e.g. servers, routers, firewalls, switches, and other devices or equipment necessary for the broadband connection), or to upgrade their existing equipment and increase bandwidth.31 13. In creating the Pilot Program, the Commission noted that broadband was enabling health care providers to vastly improve access to quality medical services in remote areas of the country, but that health care providers lacked access to the broadband facilities needed to support the types of advanced telehealth applications, such as telemedicine, that are so vital to bringing medical expertise and the advantages of modern health care technology to rural areas of the country.32 The Commission stated that even though it had taken a number of steps to spur deployment of the type of broadband facilities that would support advanced medical technologies, the RHC support mechanism had to date not adequately provided the type of support needed to encourage development of dedicated broadband 26 See Universal Service Monitoring Report, Dec. 2011, CC Docket No. 98-202, Table 2.21, available athttp://www.fcc.gov/wcb/stats (last visited May 7, 2012) (2011 Universal Service Monitoring Report).
27 See id.; Universal Service Administrative Company, 2011 Annual Report at 13, available athttp://www.usac.org/about/tools/publications/annual-reports/2011/index.html (last visited Apr. 17, 2012) (2011 USAC Annual Report). 28 2006 Pilot Program Order, 21 FCC Rcd at 11111, para. 1.29 2007 Pilot Program Selection Order, 22 FCC Rcd at 20361, para. 2. 30 See 2006 Pilot Program Order, 21 FCC Rcd at 11111, para. 1, 11115-16, paras. 14-15. In the 2007 Pilot Program Selection Order, the Commission clarified that, to the extent a selected participant leases transmission services in lieu of deploying its own broadband network, the costs for subscribing to such facilities and services are eligible for program support. 2007 Pilot Program Selection Order, 22 FCC Rcd at 20397-98, para. 74. Throughout this Report, we distinguish between services purchased by HCPs from third parties (which may include mechanisms such as long-term leases, prepaid leases, and indefeasible rights of use of facilities for specified period of time (IRUs)) from “self-construction” (i.e. network facilities constructed and owned by the HCPs).
31 2007 Pilot Program Selection Order, 22 FCC Rcd at 20397-98, para. 74. See also USAC Observations Letter at 6-7 (explaining that unlike Primary Program participants, Pilot Program participants could use RHC support to purchase and upgrade their equipment if necessary).
32 2006 Pilot Program Order, 21 FCC Rcd at 11113, para. 8. 10
networks among health care providers.33 The Pilot Program was intended to “provide the Commission with a more complete and practical understanding of how to ensure the best use of the available RHC support mechanism funds to support a broadband, nationwide health care network (expressly including rural areas) so that the Commission can reform the overall RHC support mechanism.”34
14. Selection of Pilot Projects. Given the nature of the Pilot Program, the Commission encouraged multiple health care providers in a state or region to join together to formulate and submit proposals.35 Pilot Program applicants were instructed to present a strategy for aggregating the specific needs of health care providers within a state or region, including providers that serve rural areas, and for leveraging existing technology to adopt the most efficient and cost-effective means of connecting those providers.36 While participation was opened to all eligible public and non-profit health care providers, applicants were required to include in their proposed networks more than a de minimis number of health care providers that serve rural areas.37 The 2006 Pilot Program Order also included 11 specific criteria that applicants were instructed to address in their applications, including the proposed network’s goals and objectives, previous experience in developing and managing telemedicine programs, and the extent to which the network would be self-sustaining once established.38
33 Id. While the Primary Program provides rural health care providers with substantial telecommunications and Internet discounts, in its 2006 Pilot Program Order, the Commission recognized that the program had yet to fully achieve the benefits intended by the statute and the Commission. Although the Primary Program was capped at $400 million, since the program’s inception in 1998 through 2006, the program generally had disbursed less than 10 percent of the cap each year. Id. 34 Id. at 11113, para. 9; see also 2007 Pilot Program Selection Order, 22 FCC Rcd at 20366-67, para. 15.35 2006 Pilot Program Order, 21 FCC Rcd at 11111, para. 3. 36 Id. at 11116, para. 16.37 Id. at 11111, 11114, paras. 3, 10. The Pilot Program was established under section 254(h)(2)(A) of the Act, which provides the Commission broad discretionary authority to provide universal service support for “advanced services” for all health care providers. See 47 U.S.C. § 254(h)(2)(A) (“the Commission shall establish competitively neutral rules to enhance, to the extent technically feasible and economically reasonable, access to advanced telecommunications and information services for all public and nonprofit … health care providers”); Texas Office of Public Utility Counsel v. FCC, 18 F.3d 393, 446 (5th Cir. 1999) (concluding that “the language in § 254(h)(2)(A) demonstrates Congress's intent to authorize expanding support to ‘advanced services,’ when possible, for non-rural health providers”).
38 2006 Pilot Program Order, 21 FCC Rcd at 11116-17, para. 17. The remaining applicant criteria included the following: (1) identify the organization that will be legally and financially responsible for the conduct of activities supported by the fund; (2) estimate the network’s total costs for each year; (3) describe how for-profit network participants will pay their fair share of the network costs; (4) identify the source of financial support and anticipated revenues that will pay for costs not covered by the fund; (5) list the health care facilities that will be included in the network; (6) provide the address, zip code, Rural Urban Commuting Area (RUCA) code, and phone number for each health care facility participating in the network; (7) provide a project management plan outlining the project’s leadership and management structure, as well as its work plan, schedule, and budget; and (8) indicate how the telemedicine program will be coordinated throughout the state or region. Id. In addition, applicants were instructed to demonstrate that they have a viable strategic plan for aggregating usage among health care providers within their state or region. Id. at 11116, para. 16. In selecting participants for the Pilot Program, the Commission also indicated that it would consider whether an applicant has had a successful track record in developing, coordinating, and implementing a successful telehealth/telemedicine program within their state or region, and the number of health care providers that are included in the proposed network, with considerable weight given to applications that propose to connect the rural health care providers in a given state or region. Id.
15. The Pilot Program generated overwhelming interest from the health care community, and the Commission received 81 applications representing approximately 6,800 health care providers.39 On November 16, 2007, the Commission selected 69 Pilot Program applications covering 42 states and three United States territories.40 The Commission awarded these 69 projects approximately $418 million in total to construct or lease state or local regional broadband networks and provide advanced communications services over their networks.41 Individual project awards, which were initially to be utilized over a three-year period, ranged from about $93,000 to almost $25 million.42
16. The 69 selected applicants demonstrated to the Commission their overall qualifications, consistent with the goals of the Pilot Program, to stimulate deployment of the broadband infrastructure necessary to support innovative telehealth and, in particular, telemedicine services to those areas of the country where the need for those benefits is most acute.43 The Commission explained that the selected participants, among other things, described strategies for aggregating the specific needs of health care providers within a state or region, including providers serving rural areas; provided strategies for leveraging existing technology to adopt the most efficient and cost-effective means of connecting those providers; described previous experience in developing and managing telemedicine programs; and had detailed project management plans.44 Rather than limiting participation to a select few among the 69 qualified applicants, the Commission found that it would be in the best interests of the Pilot Program, and appropriate as a matter of universal service policy, to accommodate as many of the qualified applicants as possible.45
Application Process 17. Selected Pilot Program participants are required to follow the normal Primary Program
procedures, as modified for the Pilot Program.46 The steps required for Pilot participants include the following: §
Organize Project and Prepare for Competitive Bidding: Each Pilot project must identify a lead entity and project coordinators, obtain letters of agency from each 39 2007 Pilot Program Selection Order, 22 FCC Rcd at 20370, para. 22; see also Wireline Competition Bureau Announces OMB Approval of the Rural Health Care Pilot Program Information Collection Requirements and the Deadline for Filing Applications, WC Docket No. 02-60, Public Notice, 22 FCC Rcd 4770 (Wireline Comp. Bur. 2007).
40 2007 Pilot Program Selection Order, 22 FCC Rcd at 20370, para. 22.41 See id. at 20360, 20429-30, App. B. As a result of the merger of certain projects, the withdrawal of others, and the failure of some to meet certain deadlines, there are currently 50 active projects in the Pilot Program. See infraSection III.A. 42 2007 Pilot Program Selection Order, 22 FCC Rcd at 20361, para 2. The lowest award was for $93,240 (Mountain States Health Care Alliance); the highest was $24,689,016 (New England Telehealth Consortium). See Fig. 2, below; USAC May 4 Data Letter at 2.
43 Id. at 20370, para. 22.44 Id.45 2007 Pilot Program Selection Order, 22 FCC Rcd at 20370, para. 22.46 See 2006 Pilot Program Order, 21 FCC Rcd at 11115, para. 13 & n.19; see also 2007 Pilot Program Selection Order, 22 FCC Rcd at 20403-04, para. 83.
participating health care provider, determine network configuration, identify source for 15 percent match, and prepare a Request for Proposal (RFP).47
Post Request for Services (Form 465): Each Pilot project must file Form 465 (which includes an RFP and other required documentation) and obtain USAC verification of eligibility of participating HCPs; USAC posts Form 465 on its web site, which starts the competitive bidding process.48
Select Vendor and Contract for Services: Each Pilot project must review bids, select a vendor, and negotiate and execute a contract. Projects must wait at least 28 days after posting of the RFP before committing to a particular vendor.49
Obtain USAC Funding “Commitment” (Form 466-A): Each Pilot project must file the required documentation notifying USAC of the vendor selected and the associated cost (Form 466-A).50 After reviewing, USAC “commits” the funds (i.e., will issue a “Funding Commitment Letter” (FCL) specifying the amount of support).51 §
Receive Services and Notify USAC (Form 467): The Pilot project orders the service from the vendor, receives services, and notifies USAC that services have been initiated. The vendor can then send the invoices to the project, which the project reviews and forwards to USAC. USAC will then “disburse” the funds to the vendor. Projects have six years from issuance of the initial funding commitment letter to invoice USAC. 52
18. In addition to complying with the modified Primary Program procedures detailed above, Pilot Program participants must submit to the Commission and USAC quarterly reports detailing, among other things, project management, included health care facilities, network specifications, costs, and advancement of telemedicine benefits.53 Participants must state in these quarterly reports whether their networks are or will become self-sustaining and, if so, how their networks are self-sustaining.54
Post-Selection Developments
19. Since 2007, the Pilot Program has gone through many changes. Although the Pilot Program was intended to be a three-year program with funding evenly allocated in Funding Years 2007-09, it has taken more time than originally anticipated for the projects to identify their needs, design their networks, 47 2007 Pilot Program Selection Order, 22 FCC Rcd at 20403-06, paras. 83, 85-87.48 Id. at 20412, para. 100.49 See 47 C.F.R. § 54.603(b)(3).50 2007 Pilot Program Selection Order, 22 FCC Rcd at 20403, para. 83. 51 Id. at 20409, para 93. Pursuant to the Commission’s rules, a rural health care funding year runs from July 1 through June 30 and rural health care support recipients, including Pilot Program participants, must submit their FCC Forms 466-A for a given funding year by the end of that funding year, i.e., by June 30. See 47 C.F.R. § 54.623(b)-(c); see also FCC Form 466-A Instructions, available at http://www.usac.org/rhc/tools/required-forms.aspx. 52 Rural Health Care Support Mechanism, WC Docket No. 02-60, Order, 26 FCC Rcd 6619, 6628, para. 19 (Wireline Comp. Bur. 2011) (2011 Extension Order). For instance, if a particular participant received its initial funding commitment on April 7, 2011, it is required to complete invoicing by April 7, 2017.
53 2007 Pilot Program Selection Order, 22 FCC Rcd at 20423-24, para. 126, App. D.54 Id. at 20416, para. 108, App. D.
secure funding for administrative expenses, complete the application process, prepare RFPs, conduct competitive bidding, and enter into contracts with vendors. In response, the Bureau has extended the program to accommodate the projects’ needs. First, the Bureau permitted projects to carry over unused funds from year to year during the duration of the award.55 Second, the Bureau extended the time for projects to receive funding commitments from USAC for the entirety of their awards from June 30, 2010 to June 30, 2012.56 Finally, the Bureau extended the deadline for projects to invoice USAC for disbursements from five years to six.57 As a result, Pilot projects have had more time than originally provided in the 2007 Pilot Program Selection Order to create their networks. 20. Project Mergers and Withdrawals. Of the original 69 projects, several have merged, withdrawn from the program, or failed to meet program deadlines, leaving the total number of projectscurrently in the Pilot Program at 50. Appendix A lists the status of the 69 original awardees, by lead state. ·
Mergers: From 2008 to 2009, projects merged in Mississippi, North Carolina, Ohio, Pennsylvania and Texas, leaving a total of 62 projects.58
Withdrawals: An additional four of the 62 remaining projects withdrew from the Pilot Program due to financial constraints, competitive bidding issues, or lack of health care provider (HCP) interest. The awards to these four projects accounted for about $4.7 million, or about 1 percent, of the Pilot Program.59
Failed to Meet Program Deadlines: In May 2011, the Bureau issued an order granting one-year extensions of program deadlines for Pilot Program participants, subject to the condition that the participant must have chosen a vendor and filed at least one complete request for funding before June 30, 2011.60 The Bureau stated that projects that failed to meet the June 30, 2011, deadline for filing at least one complete request for funding would be deemed “no longer capable of continuing in the Pilot Program,” and would “not be given additional time beyond that date to request Pilot Program funding.”61 Of the remaining 58 projects, eight projects did not meet the June 30, 2011 deadline.62 Two projects were able to accomplish their goals with alternate funding sources.63 One project intended to use Pilot funds for ineligible costs (personnel) and could not restructure its proposal in a way that attracted HCP interest. Five projects, for other reasons, did not proceed with their projects on a timely 55 Letter from Dana R. Shaffer, Chief, Wireline Competition Bureau, to Scott Barash, Acting Chief Executive Officer, Universal Service Administrative Company (Jan. 17, 2008), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-279603A1.pdf. 56 See Rural Health Care Support Mechanism, WC Docket No. 02-60, Order, 25 FCC Rcd 1423 (Wireline Comp. Bur. 2010) (2010 Extension Order); see also 2011 Extension Order, 26 FCC Rcd 6619.
57 2011 Extension Order, 26 FCC Rcd at 6628, para. 19. 58 A total of 12 projects merged in these five states. See USAC May 4 Data Letter at 1-2.59 USAC May 4 Data Letter at 2. The four projects were the Alabama Pediatric Health Access Network, Rural Healthcare Association of Alabama, KanEd, and the Healthcare Education and Research Network. 60 2011 Extension Order, 26 FCC Rcd at 6625, para. 10. 61 Id. at 6625, 6628, paras. 10, 22.62 USAC May 4 Data Letter at 2.63 Id.
basis.64 These eight projects accounted for about $25.1 million, or about 6 percent of the Pilot Program.65
21. In July 2010, the Commission issued a notice of proposed rulemaking seeking comment on several proposed reforms to the RHC support mechanism.66 The reforms included a proposal to create a new health infrastructure program that would support up to 85 percent of the construction costs of new regional or statewide networks to serve public and non-profit health care providers in areas of the country where broadband is insufficient or unavailable.67 Additionally, the 2010 NPRM also included a proposal to establish a health broadband services program that would support up to 50 percent of the monthly recurring costs for access to broadband services for eligible public or non-profit health care providers.68 The 2010 NPRM is currently pending. In November 2010, the Government Accountability Office recommended, in part, that the Commission develop and execute a sound performance evaluation plan for the current programs, and develop sound evaluation plans as part of the design of any new programs proposed in the 2010 NPRM.69 22. In an order released July 6, 2012, the Commission provided temporary “bridge” funding to those Pilot projects with sites that will have exhausted their Pilot funding before the end of funding year 2013 (before June 30, 2013), in order to maintain the status quo for these projects while a process is established to transition them into a permanent rural health care support mechanism.70 In a Public Notice released July 19, 2012, the Wireline Competition Bureau sought additional comment on several issues in the 2010 NPRM, in order to develop a more robust record, particularly in light of the experience in the Pilot Program since the issuance of the NPRM.71
DESCRIPTION OF THE PILOT PROJECTS
23. In this section we describe the characteristics of the Pilot projects. Each project is by definition a consortium of individual health care providers. We first detail the varying size of the projects in terms of the number of health care providers participating in each project. We then describe the funding awards, commitments, and disbursements for the projects. 72 Of the 69 that received funding awards under the Pilot Program, 50 projects are currently active and have received funding commitments. As detailed above, the 19 projects that are no longer active either have merged with other projects or, for a variety of reasons, have withdrawn or have been disqualified from participating in the Program.73 64 Id.65 Id. 66 See 2010 NPRM, 25 FCC Rcd 9371.67 Id. at 9373, para. 3. 68 Id. 69 GAO Report at 56-57. 70 Rural Health Care Support Mechanism, Order, WC Docket No. 02-60, FCC 12-74 (rel. July 6, 2012) (Bridge Funding Order).
71 Rural Health Care Support Mechanism, WC Docket No. 02-60, Public Notice, DA 12-1166 (Wireline Comp. Bureau, rel. July 19, 2012).
72 See supra Section II.C. for an explanation of “commitments” and “disbursements."73 See supra Section II.D.
24. We then detail the geographic coverage of the active Pilot projects, which include sites in 38 states and three territories. Most projects include urban health care providers but most projects are predominantly made up of rural health care providers.74 This section also details the number and type of health care providers participating in the projects, as well as their network design and architecture. 25. Finally, we describe how the networks have been implemented and the types of broadband services utilized by the projects. Many of the projects chose to purchase broadband services from third parties rather than construct and operate a broadband network themselves. As intended, most health care providers participating in the Pilot Program obtained the high-bandwidth broadband connections sufficient to support health IT applications. The Pilot Program also has enabled many of the projects to exercise increased purchasing power and secure more advantageous pricing than would generally have been possible for an individual health care provider.
Size of Projects and Awards 26. Size of Projects. Pilot projects vary widely in size depending on their scope. For example, Palmetto State Providers Network (PSPN), a statewide backbone network that connects rural and underserved areas in South Carolina, includes 120 to 150 health care provider sites in all 46 counties of the state.75 On the other hand, Pennsylvania Mountains Healthcare Alliance (PMHA), a regional network located in central and western Pennsylvania, is comprised of only 21 hospitals.76 In their original proposals, Pilot projects identified over 6,400 health care providers that expressed interest in participating in their networks.77 As of the end of January 2012, USAC had verified the eligibility of 5,475 health care providers participating in Pilot Program networks and issued funding commitments to approximately 2,100 health care providers.78 27. Twelve projects had ten or fewer sites in their original proposals. At the other end of the spectrum, 18 projects had over 100 sites in their original proposals.79 The projects still range widely in size, as shown in Figure 1. As of January 2012, about a third of active projects included at least 50 individual health care providers that had received funding commitments. Another third had 11 to 50 such providers. Of the remaining third, some projects are lagging behind in implementation, but several are smaller projects (fewer than 10 health care providers) by design. Seven of the projects had received funding commitments for only one site as of January 2012.80 As noted above, USAC has received many funding commitment requests since January 31, 2012, and the deadline for filing all funding commitment requests was June 30, 2012. When those requests are all processed, the numbers of HCPs in many of the projects will likely be higher. 74 Due to the inherent limitations of the Commission’s definition of “rural” (or any definition of “rural”), the term “urban” can include sites located in relatively sparsely-populated areas. For example, Orangeburg County Clinic in Holly Hill, SC (pop. 1,277), a health care provider participating in Palmetto State Providers Network’s Pilot project, is characterized as “urban.” The largest cities closest to Holly Hill are Charleston, SC, and Columbia, SC, respectively 50 and 69 miles away from Holly Hill.
75 Pilot Conference Call Mar. 13 Ex Parte Letter (PMHA et al.) at 1.76 Id.77 USAC May 4 Data Letter at 1. 78 USAC 2011 Annual Report at 12.79 See Fig. 1. 80 The seven projects that have received only one funding commitment letter to date have proposed to include multiple sites as required by the 2006 Pilot Program Order, but had not yet received funding commitments for those additional sites as of January 2012. 16
Figure 1 – Project Size (By Number of HCPs)81
# of HCPs in Project
Receiving Commitments
28. Awards, Commitments, and Disbursements. Figure 2 shows the award for each of the original 69 pilot projects, from low to high. Total project awards ranged from $93,240 to $24,689,016.82 Support per site ranged from $3,400 to as much as $2.5 million, with an average of $70,000 per site.83 81 USAC Data Letter Aug. 9 at App. D. All projects proposed, and intend, to connect multiple health care providers. As of January 31, 2012, there were seven projects with only one HCP receiving a funding commitment. Four of these projects were instructed by USAC to assign the cost of the network design study to the lead entity (consortium), resulting in the data showing only one HCP receiving a commitment for those projects that had not yet implemented their networks as of January 31, 2012. The remaining three projects filed a commitment request for only one HCP in order to meet the June 30, 2011 deadline to request at least one commitment. See id. 82 2007 Pilot Program Selection Order, 22 FCC Rcd at 20429-30, App. B.83 USAC Observations Letter at 1.
Figure 2 – Pilot Projects – Original Award Amount84
Original Award Amount (Millions)
29. One way to measure the progress of projects is to review what percentage of the original award has been committed (i.e., the project can begin receiving services because it has completed competitive bidding, selected a vendor, and signed a contract) and disbursed (i.e., the project has received services and the vendor has been reimbursed by USAC). Figures 3(a) and 3(b) show the Pilot projects by the percentages of awards that have been committed and disbursed, respectively, as of January 30, 2012. The percentage of each project’s award that has been committed and disbursed varies significantly across projects.
84 2007 Pilot Program Selection Order, 22 FCC Rcd at 20429-30, App. B. 18
Figure 3(a) – Pilot Projects, Percentage of Award Committed85
% of Award Committed
Pilot Projects Ordered by % of Award Committed
Figure 3(b) – Pilot Projects, Percentage of Award Disbursed86
% of Award Disbursed
Pilot Projects Ordered by % of Award Disbursed
30. Commitments. As of the end of January 2012, USAC had committed $217 million to approximately 2,100 health care providers participating in the Pilot Program, or about $100,000 on average per health care provider.87 About two-thirds of active Pilot projects had received commitments 85 USAC Data Letter Aug. 9 at App. A.86 Id. at App. B.87 USAC Data Letter May 4 at 2. By way of comparison, from January 1, 1998 through January 31, 2012, the Primary Program had committed $232 million to 5,536 health care providers (excluding Alaska) (or about $45,000 each), with an additional $273 million committed to 283 Alaska health care providers. Id. at 2-3. Health care providers in Alaska face unique costs because the state’s vast size, harsh winter weather, and sparse population (continued . . .)
for the majority of their individual awards, while 44 percent of projects had received commitments for 81 percent or more of their awards.88 On the other hand, about a quarter of projects had yet to obtain commitments for more than 20 percent of their awards by this date.89
31. The deadline for submitting all remaining requests for funding was June 30, 2012.90 As of July 3, 2012, USAC had received requests from all 50 active projects and had 108 funding requests to be processed.91 The 108 pending funding requests represent approximately $91.60 million for 30 projects; USAC estimates that once processed, total funding commitments requested will be $368.62 million, which is 88.23 percent of the original total award amount of $417.78 million.92
32. Disbursements. As of the end of January 2012, USAC had disbursed approximately $100 million, or half of the amount for which Pilot projects had received funding commitments.93 Because each project has up to six years from issuance of its first funding commitment letter to complete its invoicing, the rate of disbursements lags behind the rate of commitments.94 While slow initially, disbursement amounts have accelerated each year of the Pilot Program, as shown in Figure 4 below. 33. Figure 3(b) above shows that projects are in widely different stages of completion and spending. Only about 28 percent of projects (14) had received disbursements of over half of their award, as of January 30, 2012.95 About a quarter of the projects had received disbursements of less than 20 percent of their awards by that date.96 On the other hand, some advanced projects have HCPs nearing the conclusion of Pilot-funded activity within the next funding year.97 USAC estimates that during the 2012 funding year (July 2012 to June 2013), approximately 484 HCPs in 14 projects, or approximately a quarter of HCPs participating in the Pilot Program, will have spent all of the Pilot money allocated within the project’s Pilot award.98 As noted above, in an order released July 6, 2012, the Commission (. . . continued from previous page) make it challenging to deploy fiber or wireless networks in many rural areas. In many parts of rural Alaska, expensive satellite services may be the only option available. 88 USAC Aug. 2 Data Letter at 2. In some cases, Pilot projects may not seek commitments for the full amount of their awards – if, for example, the competitive bidding process or other cost savings allow the project to achieve its goals for less than the amount requested in the project’s initial application. 89 Id. 90 The original deadline for requesting all remaining funding for the Pilot Program on FCC Form 466-A was June 30, 2010. 2007 Pilot Program Selection Order, 22 FCC Rcd at 20370, para. 23. The Bureau has twice extended the deadline for submitting requests for funding. June 30, 2011 was the deadline for projects to receive their first funding commitment letter or file a complete Form 466-A packet with USAC. 2011 Extension Order, 26 FCC Rcd at 6626-27, para. 14. June 30, 2012 is the deadline for projects to request all remaining funding in their award on FCC Form 466-A. Id. at 6627-8, para. 18. 91 USAC Aug. 2 Data Letter at 2.92 Id.93 USAC May 4 Data Letter at 3. 94 2007 Pilot Program Selection Order, 22 FCC Rcd at 20370, para. 94. See also supra Section II.D.95 USAC Aug. 2 Data Letter at 296 Id. 97 USAC Feb. 17 Letter at 1.98 Id.
provided temporary “bridge” funding to those projects with sites that will have exhausted their Pilot funding before the end of funding year 2012 (before June 30, 2013).99
Figure 4 - Cumulative Pilot Program Disbursements100
$95.4 $80
$59.5 $60
$24.1 $20
$11.3 $0.5 $0
(Amounts Are as of December 31 of the Applicable Year)
Geographic Coverage of Projects 34. Interactive Map of Projects. Currently, active Pilot projects include sites in 38 states and three territories, and many of the projects are state-wide or multi-state regional networks.101 An interactive map showing the broadband connectivity enabled by the Pilot Program as of January 31, 2012, can be found at http://www.fcc.gov/maps/rural-health-care-pilot-program. The map shows the health care provider locations that have received commitments for Pilot Program funding, and for each location (via mouse-over), the speed of the connection, the type of health care provider, and the urban or rural status of the health care provider. 99 See supra para. 22; see also Bridge Funding Order. 100 USAC May 4 Data Letter at 3. 101 Id., App. A; see also Appendix A to this Staff Report.
Figure 5 – Map of Pilot Projects102
(available at http://fcc.gov/maps/rural-health-care-pilot-program)
35. Active pilot projects currently include health care providers in the 38 states listed in Appendix A and in the territories of Guam, American Samoa, and in the Northern Mariana Islands. Of the 11 states without Pilot project participants, five are almost entirely urban (Maryland, Delaware, New Jersey, Rhode Island, and Connecticut).103 No projects applied from Oklahoma or Idaho.104Massachusetts was not awarded a Pilot project.105 Projects in Kansas and Florida withdrew, one due to an inability to meet competitive bidding requirements (Kansas) and the other because it obtained 102 Rural health care providers participating in Pilot Program networks are shown in green; urban health care providers are shown in red. The graphic is intended to illustrate the coverage of Pilot Program commitments as of January 31, 2012, and has two limitations that do not exist in the online map. First, the graphic does not show Alaska, Hawaii, and U.S. territories (for space reasons). Second, again due to space reasons, the graphic does not include a marker for all health care providers who had received commitments as of January 31, 2012. The interactive map allows viewers to zoom in on different areas of the country to fully see all health care providers receiving support in a particular area. 103 These states also have no federally designated rural health clinics or critical access hospitals. See Critical Access Hospitals in the Rural Health Care Program. See Letter from Craig Davis, Vice President of Rural Health Care, USAC, to Julie Veach, Chief, Wireline Competition Bureau, WC Docket No. 02-60 (filed Jul. 19, 2012) (attachment) (USAC Critical Access Hospitals Report).
104 See 2007 Pilot Program Selection Order, 21 FCC Rcd at 20426-28, App. A (listing Pilot Program applicants). We note that Oklahoma has a robust state universal service program for the communications needs of rural health care providers. See Oklahoma Corporation Commission, Public Utility Division, Universal Service Fund, available at http://www.occeweb.com/pu/OUSF/OUSF.htm (last visited April 2, 2012); see also Federal Communications Commission Response to United States House of Representatives Committee on Energy and Commerce, Universal Service Fund Data Request 2: States with a Statewide Universal Service Fund, at 6, 10 (dated June 22, 2011), available at http://republicans.energycommerce.house.gov/Media/file/PDFs/2011usf/ResponsetoQuestion2.pdf.
105 Massachusetts had one application, which was denied in part because the application sought support “focused not for a network dedicated to telehealth, but instead for a network for use by public schools, community colleges, and commercial firms.” See 2007 Pilot Program Selection Order, 22 FCC Rcd at 20390, para. 57. 22
Recovery Act funding for its project (Florida).106 Finally, projects in Mississippi and Washington State failed to meet the June 30, 2011 deadline for submitting their first funding commitment requests.107
Rural/Urban Composition of Projects 36. Rural versus Urban Sites. As discussed above, in the Commission’s Primary Rural Health Care Program, only “rural” health care providers within the meaning of the Commission’s rules may receive funding.108 By contrast, in the Pilot Program, the Commission has specifically allowed projects to include urban health care providers, as long as the urban HCPs are not-for-profit or public, and as long as there is a more than a de minimis representation of rural HCPs in the project.109 37. As of January 2012, approximately $139 million, or about 65 percent of committed funds, had been committed to health care providers in rural locations.110 Approximately $78 million, or about 35 percent, of committed funds had been committed to health care providers located in urban areas. 111 This 35 percent figure attributed to urban locations, however, is likely overstated because shared equipment and services are often attributed to urban locations, even though the shared equipment and services are used by all the network sites.112 In addition to network design studies, “shared” equipment and services (i.e., equipment and services that benefit the entire network and not just one site) would include switches, routers, and firewalls that are located at data centers or other facilities of lead entities that often are located in urban areas.113
106 USAC May 4 Data Letter at 2.107 Id.108 47 U.S.C. § 254(h)(1)(A).109 See generally 2006 Pilot Program Order, 21 FCC Rcd at 1111, para. 3; 2007 Pilot Program Selection Order, 22 FCC Rcd at 20421, para. 120. 110 USAC May 4 Data Letter at 3. Whether a health care provider is “rural” depends on where it is located in relationship to any Core Based Statistical Area (CBSA). An area located outside of any CBSA is rural. However, areas within a CBSA can be rural, depending on the characteristics of the census tract where it is located. See 2004 Second Report and Order and Further Notice, 19 FCC Rcd at 24619-20, para. 12; see also 2006 Pilot Program Order, 21 FCC Rcd at 11116, para. 16 (stating that the Commission will not accept proposals to participate in theRural Health Care Pilot Program that do not have more than a de minimis number of rural health care providers). The term “urban,” used here to mean outside “rural” areas as defined by the Commission, may also include sites located in areas that are relatively sparsely populated, but do not qualify as “rural.”
111 USAC May 4 Data Letter at 3.112 USAC May 30 Data Letter at 2.113 Id.
Figure 6 – Urban/Rural Composition of Each Pilot Project114
# of HCPs 60
Projects Ordered By Total # of HCPs With Commitments
Rural HCP
Urban HCP
38. Figure 6 above shows the number of rural and urban health care providers participating in each Pilot project, ranging from the smallest projects to the largest projects. As shown in the figure, most projects are made up predominantly of rural health care providers and as of January 31, 2012, only six projects do not have an urban provider in their network.115 A few projects are large-scale, statewide networks, consistent with the 2006 Pilot Program Order (which encouraged such networks).116 The largest five projects (at the far right) are statewide networks in West Virginia, Colorado, Oregon, South Carolina, and California, as shown in the health care provider map located at http://fcc.gov/maps/rural-health-care-pilot-program. Due to their statewide footprints, which include densely populated regions in their networks, these networks have larger percentages of health care providers located in urban areas than do smaller, regional networks that focus their coverage on specific rural areas within a state. Approximately 35 percent, or 733, of the 2,107 health care providers that had received funding commitments in the Pilot Program as of January 31, 2012, are classified as urban.117 D.
Types of Health Care Providers Participating in Projects
39. Types of Health Care Providers in Projects. Section 254(h)(7)(B) of Act identifies the types of health care providers eligible to participate in the Commission’s rural health care program: not-for-profit hospitals;118 rural health clinics; community mental health centers; community health centers of 114 USAC Aug. 9 Data Letter at App. E.115 USAC Aug. 2 Data Letter at 2.116 2006 Pilot Program Order, 21 FCC Rcd 11111, para. 16; 2007 Pilot Program Selection Order, 22 FCC Rcd at 20370, para. 24. 117 USAC June 27 Data Letter at 1. The mix of rural and urban providers has remained largely consistent since January 2012. See USAC Aug. 2 Data Letter at 3 (noting that as of July 19, 2012, urban providers make up 33.02% of Pilot sites).
118 In 2003, the Commission determined that dedicated emergency rooms of rural for-profit hospitals qualified as “public” health care providers under section 254(h)(1)(A) of the Act, which makes “non-profit” or “public” health care providers eligible for rural health care support. The Commission held that dedicated emergency departments in (continued . . .)
health centers providing health care to migrants; local health departments or agencies; post-secondary educational institutions offering health care instructions, teaching hospitals or medical schools; and consortia of the above. As depicted in Figure 7, of these categories, 773 (37 percent) of Pilot participants who have received commitments as of January 2012 are hospitals, 547 (26 percent) are rural health clinics (or the urban equivalent), 309 are community/migrant health centers (15 percent), and 318 are community mental health centers (15 percent).119 Figure 7 – Number of HCPs Receiving Funding Commitments120
Rural Health Clinic or Urban Equivalent
Community / Migrant Health Center
Teaching Hospital, Medical School, Post-
Not-For-Profit Hospital / 28
40. As noted above, as of January 2012, USAC had verified the eligibility of approximately 5,475 health care providers participating in Pilot Program networks, and issued Pilot Program funding (. . . continued from previous page) for-profit hospitals are “public” health care providers because they are required, under the Emergency Medical Treatment and Labor Act to provide medical screening examinations to all patients who present themselves and to stabilize or arrange for appropriate transfer of those patients with emergency conditions. 2003 Order and Further Notice, 18 FCC Rcd at 24553-54, para. 13. In addition, the Commission also held that dedicated emergency departments in for-profit rural hospitals constitute “rural health clinics” because they typically provide the types of medical services often provided in traditional health clinics and, in many instances, are the only health care providers in rural areas serving the medical needs of the community. Id. As a practical matter, however, broadband purchasing decisions for a hospital’s emergency room are likely to take place in the broader context of broadband purchasing decisions for the hospital as a whole. Therefore, solely for purposes of analyzing the results of the Pilot Program in this Report, the staff has included data on the dedicated emergency rooms of for-profit hospitals within the “not-for-profit hospital” category. 119 USAC Aug. 9 Data Letter at App. F. 120 Id.
commitments to more than 2,100 health care providers.121 Most projects included a wide range of HCP types.122 The Pilot Program provides funding for a number of “safety net provider” health care sites, including many Critical Access Hospitals, Rural Health Clinics, and Federally Qualified Health Centers.123 Several Pilot projects include health care provider sites that are located on Tribal lands or that serve Indian populations.124
41. The Commission also permits Pilot projects to include health care provider sites that are not eligible to receive funding under the rural health care program (e.g., for-profit providers), so long as they pay for their own connections.125 Nineteen projects have reported a total of approximately 138 such ineligible health care providers that participate in their networks by paying the undiscounted cost of the connection.126
121 USAC 2011 Annual Report at 12. At the initial application stage (Form 465), Pilot projects submitted a list of all HCPs that provided a Letter of Authority, and USAC then verified the eligibility of the HCPs. See Section II.C above. Only those HCPs for which eligibility has been verified may receive a funding commitment (Form 466-A). See id. In comparison, the Primary Program funds approximately 2,000 to 3,000 eligible health care providers annually. See 2010 Universal Service Monitoring Report at Table 5.2, 2011 Universal Service Monitoring Report at Table 2.22 (2,695 health care providers received Primary Program commitments in FY 2007; 2,871 in FY 2008; 3,164 in FY 2009; and 1,941 in FY 2010).
122 See Appendix C (detailing the number of each HCP type that received a funding commitment as of January 31, 2012). 123 See John Gale Mar. 29 Ex Parte Letter (attachments) (Centers for Medicare and Medicaid Services Fact Sheets on Critical Access Hospitals, Rural Health Clinics, and Federally Qualified Health Centers). According to the Centers for Medicare and Medicaid Services (CMS), critical access hospitals are Medicare-participating hospitals that, among other characteristics, furnish 24-hour emergency care seven days a week, are located more than 35 miles from the nearest hospital, and have an average annual length to stay of 96 hours or less per patient for acute care. Federally qualified health centers are “safety net” providers such as community health centers, public housing centers, outpatient health programs funded by the Indian Health Service, and programs serving migrants. Rural health clinics provide the services of physicians, nurse practitioners, physicians’ assistants, midwives, clinical psychologists, and clinical social workers, along with services incident to those furnished by these providers. See id.; see also USAC Critical Access Hospitals Report at 1.
124 These include: (1) the Southwest Telehealth Access Grid, which is a multi-state regional network in the southwestern United States; (2) the California Telehealth Network, which includes several HCP sites that serve Tribal populations; (3) the Alaska eHealth Network, which to date has received funding commitments only for network design studies; and (4) the Health Information Exchange of Montana, which serves four HCP sites on Tribal lands. See Letter from Jeffrey Mitchell, Counsel for Health Information Exchange of Montana, to Marlene Dortch, Secretary, FCC, WC Docket No. 02-60 (filed June 21, 2012). In addition, under the Commission’s Primary program, substantial funds ($35,625,539 in 2010) go to the Indian Health Service and directly to Tribal entities to fund health care facilities located on Tribal lands or serving rural Tribal populations. USAC Aug. 2 Data Lette