Rules Governing Federal Funding for Rural Telemedicine Have Been Liberalized

On November 13, 2003, the Federal Communications Commission (the "FCC" or "Commission") adopted new rules for its Rural Health Care Program ("RHCP") that expand the avail-ability of federally funded discounts for rural telemedicine applications. Specifically, the FCC extended discounts for telecommunications services to for-profit entities operating dedicated emergency departments in rural areas. Prior to this rule change, only public and non-profit institutions were eligible for any subsidized access to telecommunications services for telemedicine programs. Another important rule change permits eligible recipients to receive discounts for connections to the largest city in the state, rather than just to the nearest city of 50,000 or more. The combined impact of these rule changes could, for example, provide fund-ing for an emergency department of a rural hospital that is owned by a for-profit corporation to inter-connect with specialists at a state university’s medical school. Other rule changes, discussed below, were also adopted in an attempt to expand the use of the federal subsidies.

Section 254 of the Communications Act of 1934 states that the FCC must strive to ensure that public and non-profit rural health care providers have access to advanced telecommunications services at prices comparable to those in urban areas. As part of its duties in this area, the FCC established the Universal Service Fund ("USF") that requires all telecommunications service providers and their customers to pay for various programs designed to preserve and expand universal service, including the RHCP.

The RHCP is authorized to provide as much as $400 million annually for discounted telecommunications services for eligible institutions. However, participation in the Program has been very limited; rural health care providers have, on average, been claiming only $14 million annually. As a result, the FCC has now expanded eligibility for the RHCP so that participation can increase.

Under the FCC’s old rules, the following public or non-profit institutions can receive discounted services: post-secondary educational institutions offering health care instruction; teaching hospitals or medical schools; community health centers or health centers providing care to migrants; local health departments; community mental health centers; non-profit hospitals; rural health clinics; and consortia of otherwise eligible health care providers. Nursing homes are not eligible for assistance. Qualifying health care providers can obtain discounts for any telecommunications service that is used primarily for the pro-vision of health care, with the exception of local usage or long-distance charges (except for limit-ed reimbursements where the health care provider did not have toll-free access to the Internet). Other reimbursable services include: dedicated point-to-point circuits, packet-switched services, Centrex service, and installation charges. All services must be obtained from licensed telecommunications carriers.

In order to receive funding, a health care provider must be located in a government-defined "rural area" (basically counties outside a Metropolitan Statistical Area ("MSA") or located in any contiguous non-urban Census Tract or Block Numbered Area within an MSA identified in the most recent Goldsmith Modification published by the U.S. Department of Health and Human Services). For example, all or parts of 34 Pennsylvania counties are considered "rural areas" for the purpose of qualifying for the RHCP. However, even in counties that are located within MSAs, such as Los Angeles County, California, some rural Census Tracts may be eligible for participation in the RHCP. Essentially, the RHCP permits an eligible entity to pay the same price for a telecommunications service that it would pay if it were located in the nearest "large" city of 50,000 or more.

As noted above, the FCC just amended its RHCP rules to permit for-profit rural hospitals that also operate emergency departments to receive prorated support. The FCC reasoned that, because federal law requires emergency departments to provide emergency medical services to the public without discrimi-nation, rural for-profit emergency departments function as public institutions that should be eligible for prorated RHCP benefits. The Commission also decided to extend prorated discounts to non-profit entities that offer health care services to rural communities on a part-time basis. The existing rule requires an entity to operate on a full-time basis to receive any sup-port. Another key change in the RHCP rules is the availability of 25 percent discounts for Internet access for every rural public and non-profit health care provider, even when its community has a local Internet Service Provider ("ISP").

The FCC also decided to simplify the application process by permit-ting a rural health care provider to compare urban and rural rates for functionally equivalent services, rather than by effectively forcing them to engage in a "mini-telecom engineering project." Additionally, the FCC extended the maximum allowable distance for discountable distance-based charges from the distance from the rural location to the nearest city of 50,000 or more, to the distance from the rural location to the largest city within the state. For example, a rural health care provider in a rural section of Shasta County, California could now receive reimbursement for a portion of a high-speed data line to the UCLA Medical Center in Los Angeles, rather than only for the distance between the rural facility and Redding, California— the nearest city of 50,000 or more. Finally, the FCC moved to a more technologically neutral stance by permitting rural health care providers to receive discounts for satellite services even when comparable terrestrial services are available. However, the Commission did cap satellite dis-counts at the amount a provider would have received had it purchased functionally similar terrestrial services.

In addition to adopting the rule changes described above, the FCC is proposing several more changes to the RHCP rules and seeks public comments on its proposals. In the future we may see the provision of funding to mobile telemedicine operations (e.g., a satellite-enabled mammography van that travels to remote locations); a re-examination of the definition of "rural" to include more communities; and the establishment of an outreach program to promote increased awareness and use of the RHCP. 

This article is presented for informational purposes only and is not intended to constitute legal advice.