FCC to Consider Amending Rural Health Care Program Rules and Initiating Further Rulemaking

January 11, 2023

At its January 26 open meeting, the Federal Communications Commission (FCC) will consider an order and further notice of proposed rulemaking (FNPRM) to amend the rules of the Rural Health Care Program, which includes the Healthcare Connect Fund (HCF) Program and the Telecommunications (Telecom) Program. The most significant change in the final rules under consideration would reinstate the Telecom Program’s pre-2021 urban and rural rate rules, which have caused confusion and compliance failures for applicants and service providers in the past.

The FNPRM’s proposed information requirements for funding requests could be burdensome for both Telecom and HCF program participants. We recommend that service providers participate in the rulemaking to explain such burdens and suggest revisions. The FNPRM also provides an opportunity to propose and comment on modifications to the Telecom Program’s urban and rural rate rules to simplify compliance obligations.

Final Rules to Be Considered for Adoption

  • Rural and Urban Rates. Effective FY 2024, the Telecom Program will revert to the pre-2021 rules for determining urban and rural rates, rather than requiring use of the Universal Service Administrative Company’s (USAC’s) Rates Database. Previously approved urban and rural rates allowable under the FCC’s waivers for FYs 2021–2023 will no longer be accepted.
  • Telecom Program Invoices. Beginning in FY 2024, a new form functionally similar to the Form 463 used in the HCF Program will be used for invoicing in the Telecom Program. Unlike prior funding years in which the service provider was solely responsible for invoicing, the draft order suggests that the new form will include fields that must be completed by the applicant. In addition, USAC will no longer issue a Health Care Provider Support Schedule (HSS) notifying the service provider that it may begin invoicing for approved funding. Instead, service providers will begin invoicing USAC immediately after services have started, provided that they invoice USAC only for services already rendered. This differs from prior funding years in which service providers invoiced USAC in accordance with a predetermined payment schedule set forth in the HSS. Funding will no longer be automatically disbursed in accordance with the HSS upon receipt of each invoice. Instead, each invoicing form will be subject to individual review by USAC prior to disbursement.
  • Prioritization of HCF Funding. Effective FY 2023, funding for upfront payments and multiyear requests in the HCF Program will be capped only if total demand exceeds available funding. If demand exceeds remaining funding during a given filing window, support for upfront payments and the first year of multiyear commitments will be prioritized over support for subsequent years of multiyear commitments. As a result, some applicants with multiyear commitments may be required to file applications in future funding years for services that otherwise would fall under the second and third year of a multiyear commitment. However, to the extent multiyear funding requests are not fully funded, the underlying contracts may be designated as evergreen, which will allow impacted applicants to reapply for funding without additional competitive bidding.

Further Notice of Proposed Rulemaking to Be Considered for Release

  • Funding Requests. The FNPRM proposes revising the funding request forms in the Telecom and HCF Programs to require more detailed information about the requested services, including technical specifications and service level agreement (SLA) terms. The draft further proposes requiring the service provider, rather than the applicant, to provide the technical service details for funding requests in the Telecom Program, but it does not explicitly propose the same for the HCF Program.
  • Rural Rates. The FCC seeks comment on possible changes to the rules for determining rural rates in the Telecom Program, including development of an automated process for determining rural rates when applicants file their requests for services; changes to the process by which rural rates are calculated under Methods 1 and 2, as well as the order in which the two methods are applied; and heightened evidentiary requirements for use of cost-based rural rates under Method 3.
  • Urban Rates. In addition, the draft FNPRM seeks comment on possible alternatives for determining urban rates in the Telecom Program, including reinstatement of the required use of USAC’s Rates Database, reinstatement of the option to use safe harbor urban rates posted on USAC’s website, or other alternatives that would not rely on USAC to determine and post rates.
  • Funding Cap for Satellite Services. The Commission proposes reinstatement of the cap on support for satellite services in the Telecom Program at the amount of support the applicant would have received for similar terrestrial-based services.

How We Can Help

Please contact us right away if you are a service provider interested in lobbying the FCC to retain the waiver permitting use of preapproved rural and urban rates, pending the adoption of final rules. We can provide guidance on participation in the rulemaking after the FCC’s January 26, 2023, meeting. Assuming the rules will be reinstated, we are also well positioned to advise service providers concerning compliance with rate Methods 1, 2 and 3.


If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following: