C. Ineligible Costs
3. Administrative Expenses
171. Background. In the Pilot Program, the Commission defined “administrative expenses” as the expenses associated with completing the application process and participating in the program, as well as other expenses that are not directly associated with network design, deployment, operations, and maintenance.464 Neither the RHC Telecommunications Program nor the Pilot Programs provide funding for administrative expenses.465
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connections may place an undue burden on the rural health care support mechanism); 2007 Pilot Program Selection Order, 22 FCC Rcd at 20398, para. 75 (“inside wiring” is an ineligible cost “except for equipment that terminates a carrier’s or other provider’s transmission facility and any router/switch that is directly connected to either the facility or the terminating equipment”); USAC RHC web site, available at http://www.universalservice.org/rhc/health-care- providers/step01/eligible-services.aspx (equipment and “wiring” not supported in Primary Program) (last visited Nov. 15, 2012).
458See 47 C.F.R. § 68.3.
45947 C.F.R. § 54.502(a)(4).
460See ATA Comments at 6.
461See Universal Service First Report and Order, 12 FCC Rcd at 9012, para. 454 (noting that the cost of providing discounts for internal connections is substantial). But compare ATA Comments at 6 n.7 (estimating that it would only take $5,000 per site to provide internal connections wirelessly).
462Universal Service First Report and Order, 12 FCC Rcd at 9015, para. 459.
463Id.at 9013, paras. 455-56.
464See 2007 Pilot Program Selection Order, 22 FCC Rcd at 20399, para. 75; see also NPRM, 25 FCC Rcd at 9386, para. 37.
465See, e.g., 47 C.F.R. §§ 54.601, 54.609; 2007 Pilot Program Selection Order, 22 FCC Rcd at 20398, para. 75.
172. The NPRMproposed to provide limited support for administrative expenses under the proposed Health Infrastructure Program, but not for the proposed Broadband Services Program.466 The Commission acknowledged that some parties had argued that planning and designing network
infrastructure deployment can place a burden on HCPs. The Commission also recognized, however, that
“the primary focus of the program should be to fund infrastructure and not project administration.”467 173. Discussion. Consistent with the objectives of streamlining oversight of the program and ensuring fiscal responsibility, we decline to fund administrative expenses associated with participation in the Healthcare Connect Fund. As discussed more fully below, we are taking significant steps today to streamline and simplify the application process, which will lessen the time and resources needed to participate in the program. Moreover, because we expect that most HCPs in the new program will choose to purchase services rather than construct and own facilities, the rationale for funding of administrative expenses is lessened.468
174. The Commission has recognized that administrative expenses of organizing networks and applying for universal service support can be substantial.469 In response, we are taking steps throughout this Order to minimize the administrative burden of participating in the Healthcare Connect Fund.470 First, we put in place a streamlined application process that facilitates consortium applications, which should enable HCPs to file many fewer applications and to share the administrative costs of all aspects of participation in the program.471 Second, we adopt a uniform flat-rate discount to simplify the calculation of support, particularly when compared with the urban/rural differential approach of the
Telecommunications Program.472 Third, we enable multi-year funding commitments, long-term arrangements (e.g., IRUs and pre-paid leases), and the use of existing MSAs.473 Fourth, we expand eligibility to include all HCPs, with rules in place to ensure a reasonable balance of rural and non-rural sites within health care networks.474 In the Pilot Program, HCPs that did not meet our long-standing definition of “rural” HCPs frequently provided administrative and technical support to the consortia, thereby reducing the burden on individual HCPs. Finally, we eliminate the competitive bidding
requirement for applicants seeking support for $10,000 or less of total undiscounted eligible expenses for a single year.475We find that the combination of these reforms, among others, should significantly reduce
466See NPRM, 25 FCC Rcd at 9386, para. 37 (“We propose that, for the health infrastructure program only, reasonable administrative expenses incurred by participants for completing the application process may be eligible for some limited support.”).
467See NPRM, 25 FCC Rcd at 9387, para. 38.
468Commenters generally recognize that the administrative burdens associated with a services program are far less than under an infrastructure program. See, e.g., Geisinger Reply Comments at 4-6 (discussing the substantial administrative burdens of the Health Infrastructure Program); HEIM Reply Comments at 10 (discussing the
“unexpectedly burdensome” infrastructure funding process). As in the Pilot Program, we expect the vast majority of HCPs to purchase services rather than deploy HCP-owned infrastructure. Pilot Evaluationat 9414-14, paras. 47-49.
469See, e.g., Pilot Evaluationat 9445-46, para. 95 (discussing the burden of ineligible administrative expenses under the Pilot Program); NPRM, 25 FCC Rcd at 9386-87, para. 37.
470See, e.g., Geisinger Reply Comments at 4 (“Minimizing the administrative burden on program participants will serve the dual purposes of increasing meaningful participation in the HIP from smaller, resource scarce providers as well as ensuring that HIP funding has its greatest impact.”).
471See suprasection VI.
472See supra section IV.D.1; see47 C.F.R. § 54.609(a).
473See suprasection VI.C.4.
474See suprasection IV.B.2.
the administrative burden on participants in terms of the complexity, volume, and frequency of filings, thereby addressing concerns raised by some commenters regarding the administrative burdens of
participating in the program. In contrast, if we were to provide direct support for administrative expenses, it would necessitate additional and more complex application requirements, guidelines, and other
administrative controls to protect such funding from waste, fraud, and abuse.476 This would significantly increase the administrative burden on USAC and on applicants as well.
175. We recognize that many commenters support the provision of support for administrative expenses.477 Some commenters suggest that the funding of reasonable administrative expenses is necessary to ensure participation in the program.478 However, experience with the existing programs suggests that HCPs will participate even without the program funding administrative expenses.479 Neither the Telecommunications nor Pilot Programs fund administrative expenses, but both programs have significant participation. The number of participating HCPs in the Telecommunications Program has grown by nearly 10 percent year-over-year for the past five years.480 Similarly, the Pilot Program has experienced substantial and sustained interest with just over 3,800 HCP sites receiving funding
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475See infra section VI.B.6.a.
476Competitive grant programs, such as Broadband Technology Opportunities Program (BTOP) or Broadband Initiatives Program (BIP), typically impose detailed and cumbersome compliance requirements for the funding of administrative expenses to guard against waste, fraud, and abuse. See, e.g., AHA Comments at 6-7; Broadband Technology Opportunities Program, U.S. Department of Commerce, National Telecommunications and Information Administration, Round 2 Grant Guidance at 88,
http://www2.ntia.doc.gov/files/BTOP_NOFA2GrantGuidance_100319.pdf (Mar. 19, 2010) (requiring for
administrative expenses that the applicant “provide a breakout of position(s), time commitment(s) such as hours or level-of-effort, and salary information/rates with a detailed explanation, and additional information as needed”).
477See, e.g., HHS Comments at 5-6; NCTN Comments at 6; CTN Comments at 14; Internet2 Comments at 12;
NATOA Reply Comments at 8; WNYRAHEC PN Comments at 7 (suggesting that “the Commission should provide administrative reimbursement to the consortiums for the time invested in preparation of the RFP, the RFP
processing, bid reviews and vendor selection as a percentage of the initial award amount”).
478See RWHC Comments at 5; see alsoAHA Comments at 2 (suggesting that “heavy administrative burdens limit participation” in the current Rural Health Care programs); RNHN PN Reply Comments at 6 (stating that the
exclusion of administrative expenses is “a material failing of the program and was a significant problem for the Pilot Program”).
479See, e.g., CTN Comments at 14 (selecting an “architecture and service model that relied heavily upon existing providers, who could amortize administrative and technical support costs into their standard pricing models and legitimately receive subsidies from FCC, part of which cover such costs”); Quarterly Report of Indiana Telehealth Network, WC Docket No. 02-60 (filed Jan. 27, 2012) at 34 (covering administrative expenses by charging participating hospitals and other rural health care facilities $2,400 and $1,200 respectively per year); Pilot Conference Call Mar. 26 Ex Parte Letter (WNYRAHEC et al.) at 3 (network partners contribute money towards administrative expenses); Pilot Evaluation, 27 FCC Rcd at 9442, para. 89 (stating that “[m]any of the Pilot projects have depended on the financial and human resources of urban entities to absorb the administrative costs of
participation in the Pilot”).
480USAC Nov. 16 Data Letter at 2.
commitments.481 We expect that the participation in the RHC support mechanism will only increase with the implementation of the Healthcare Connect Fund and its more streamlined administrative process.482
176. In addition, commenters have not explained how we could readily distinguish reasonable from unreasonable administrative expenses and ensure fiscal responsibility and cost effective use of the finite support available for eligible HCPs.483 Without a clear standard, there would be increased complexity and cost in policing the reimbursement of these expenses to guard against waste, fraud, and abuse.484 By reducing the administrative burden, rather than directly funding administrative expenses, we seek to facilitate increased participation while still ensuring fiscal responsibility and the efficient use of scarce universal service funding.
177. Consistent with the approach taken by the Commission in the Pilot Program Selection Order, we conclude that administrative expenses will not be eligible for support under the Healthcare Connect Fund. Ineligible expenses include, but are not limited to, the following expenses:485
· Personnel costs (including salaries and fringe benefits), except for personnel costs in a consortium application that directly relate to designing, engineering, installing, constructing, and managing the dedicated broadband network. Ineligible costs of this category include, for example, personnel to perform program management and coordination, program administration, and marketing.
· Travel costs, except for travel costs that are reasonable and necessary for network design or deployment and that are specifically identified and justified as part of a competitive bid for a construction project.
· Legal costs.
· Training, except for basic training or instruction directly related to and required for broadband network installation and associated network operations. For example, costs for end-user training, such as training of HCP personnel in the use of telemedicine applications, are ineligible.
· Program administration or technical coordination (e.g., preparing application materials, obtaining letters of agency, preparing request for proposals, negotiating with vendors, reviewing bids, and working with USAC) that involves anything other than the design, engineering, operations, installation, or construction of the network.
· Administration and marketing costs (e.g., administrative costs; supplies and materials (except as part of network installation/construction); marketing studies, marketing activities, or outreach to potential network members; evaluation and feedback studies).
· Billing expenses (e.g., expense that service providers may charge for allocating costs to each HCP in a network).
· Helpdesk expenses (e.g., equipment and related software, or services); technical support services that provide more than basic maintenance.486
481Id.at 1.
482See, e.g., UVA Comments at 5 (suggesting that “greater utilization of the RHCS program will occur with administrative simplification”); see alsoHEIM Comments at 18 (suggesting that administrative burden has discouraged HCPs from participating in the RHC program).
483See, e.g., RNHCN Comments at 8 (suggesting that funding should be provided for any cost that that “can be shown to be reasonable and related to the project”); IHS Comments at 4 (seeking to relax the proposed limits on administrative expense funding); HIEM Comments at 23-24 (suggesting that support for administrative be expanded to include reasonable legal expenses and expenses incurred prior to applying for support).
484See supran.476.
485See 2007 Pilot Program Selection Order, 22 FCC Rcd at 20398, para. 75.
4. Cost Allocation for Ineligible Entities, Sites, Services, or Equipment