The Healthcare Connect Fund

This might sound crazy, but thanks to the Federal Communications Commission’s (FCC’s) Healthcare Connect Fund (HCF), a 65 percent discount on broadband connectivity and the equipment required to manage broadband services, could soon be available for your non-profit or public hospital.

The HCF was born out of the FCC’s reform of the congressionally created Rural Health Care Fund, which was written into the universal service section of the Telecommunications Act of 1996. That fund provided subsidies to rural public/non-profit hospitals which allowed healthcare providers to purchase telecommunications services for roughly the same cost as their urban counterparts.

Perhaps because the Rural Health Care Fund never grew to the point where it distributed its annual maximum of $400 million in subsidies, it was substantially revamped in 2012. Among other reforms, the commission created the HCF.

SEE ALSO: Medical Image Sharing and Exchange

Subsidies and Support

From the healthcare industry’s point of view, one of the most important features of the HCF is the ability of urban non-profit and public hospitals to enjoy substantial subsidies for broadband service by joining a buying consortium in which rural not for profit or public hospitals comprise a majority of the members.

For example, if four urban hospitals and five rural hospitals form a consortium, all nine institutions – including the four urban hospitals – can benefit from HCF subsidies. Moreover, the consortium is not required to be majority rural at inception – it has three years in which to gain enough rural members to achieve majority rural status. The only caveat is that large urban hospitals (those with 400 or more licensed patient beds) may not receive more than $30,000 per year in HCF support for broadband services or more than $70,000 in HCF support every 5 years for network equipment.

The HCF subsidizes any advanced telecommunications or information service that enables healthcare providers to post their own data, interact with stored data, generate new data or communicate by providing connectivity over private dedicated networks or the public Internet for the provision of health information technology.

Thus, HCF funds can be used for high-speed internet access or private networks (e.g., MPLS), provided that these transmission services are used to move healthcare data (e.g., MRIs or patient charts). In addition, the HCF provides for equipment that terminates a carrier’s transmission equipment and any router or switch that is directly connected to the terminating equipment. Eligible equipment includes computers and software that are used for network management and the costs of engineering and installing network equipment.

In addition to subsidizing the cost of high speed telecommunications or information services purchased from carriers, the HCF will subsidize the cost of building a rural non-profit or public hospital’s (or rural/urban consortium’s) own high speed network. The hospital or consortium must, however, put the services sought up for a competitive bidding process and may only seek funding for network construction if, based on the bids received, it is more cost-effective to construct its own network than to purchase services from carriers.

Minding the Red Tape

Since no federal subsidies ever come without an array of bureaucratic safeguards – a hospital or consortium cannot just buy whatever high speed services it wants and sends 65 percent of the tab to Uncle Sam – the HCF program rules are particularly strict when it comes to the manner in which eligible services must be procured.

First, the procuring hospital or consortium must post an FCC Form 461, and, under certain circumstances, a request for proposals (RFP) for 28 days before beginning bidder selection (Maximizing the number of service providers that might bid on the project).

Second, in selecting the winning bidder, hospitals or consortiums must choose the “most cost-effective” method of providing services. Note that applicants need not select the cheapest solution, because non-cost factors, such as reliability and quality, may be more important than cost in meeting their needs.

Finally, as is expected of any federal program, recipients are subject to various reporting, recordkeeping and audit requirements.

Compliance Counts

Two entities are responsible for administering the HCF: The Universal Service Administrative Corporation (USAC) and the FCC. The USAC, a quasi-governmental entity, manages the day-to-day operations of the HCF, including reviewing grant applications and procurements for compliance with the HCF program rules, distributing grant money and promulgating programmatic guidance to applicants and service providers.

The FCC is responsible for promulgating the HCF program rules and prosecuting (in conjunction with the Department of Justice) violations of those rules.

To that end, the FCC has established a USF Strike Force whose sole mission is to ferret out waste, fraud and abuse in the universal service program, including the HCF.

Applicants are advised to understand the HCF program rules, have a compliance plan in place and knowledgeable compliance personnel on staff prior to participating in the program.

While the compliance burdens are not trivial, they should be weighed against the federal government’s willingness to pay 65 percent of a consortium member’s cost of high speed data services. In this day of ever increasing pressure on CIOs to demonstrate cost savings, this is a rare savings opportunity that comes with no reduction in operational effectiveness.

Steve Rosen and Hank Levine are partners in the law firm of Levine, Blaszak, Block & Boothby, LLP, which specializes in assisting enterprise users (including healthcare providers) procure IT goods and services. Their CVs can be found at

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