FCC Adopts Final Rural Health Care Program Rules and Initiates Further Rulemaking

February 07, 2023

During its January 26 open meeting, the Federal Communications Commission (FCC) adopted an order and further notice of proposed rulemaking (FNPRM) (FCC 23-6) to amend its Rural Health Care (RHC) Program rules. The final rule changes and FNPRM differ in several respects from the draft circulated prior to the Commissioners’ vote.

As anticipated, the FCC has reinstated the Telecommunications (Telecom) Program’s pre-2021 urban and rural rate rules. 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. In addition, the FNPRM seeks comment on proposals to extend Healthcare Connect Fund (HCF) Program funding to new categories of equipment, as well as proposed procedural modifications that may increase the administrative burden on program participants or offer increased flexibility. We recommend that service providers participate in the rulemaking to raise any concerns, suggest revisions, and offer alternative solutions.

An asterisk (*) indicates new content that was not included in the draft release circulated prior to the open meeting.

Final Rules

  • Rural and Urban Rates. Effective funding year (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.
  • Limited Waiver for Cost-Based Rural Rates.* Although the use of previously approved urban rates and rural rates determined under Methods 1-2 are no longer permitted, the final order includes a limited waiver permitting the use of previously approved cost-based rates for any FY 2024–2025 rural rates that would otherwise require approval under Method 3. When the waiver applies, a service provider may use a cost-based rural rate approved in the most recent funding commitment from FY 2021, 2022, or 2023 for the same or similar service at the facility for which funding is requested. If there are no such rates, the carrier may use an approved rate in the most recent funding commitment for the same or similar service at a facility with the same or similar geographic characteristics. If no such comparable rates exist, the rural rate must be established using a cost study in accordance with Method 3 under the FCC’s rules.
  • Rural Rates in Multiyear Contracts.* The FCC clarifies that the approval of rural rates is required only in the first year of an evergreen or other multiyear contract, and also seeks comment in the FNPRM on a proposal to continue requiring rural rate justifications only in the first year of such contracts.
  • Telecom Program Invoices. Beginning in FY 2024, a new form functionally similar to 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 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

  • 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 FCC 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 FNPRM seeks comment on alternative rural rate calculation methods generally, as well as comments on specific FCC proposals, including adoption of an automated process for determining rural rates, changes to the rural rate submission timeline and process, changes to the market-based calculation methodologies under Methods 1 and 2, and adoption of heightened evidentiary requirements and procedural changes for the development of cost-based rural rates under Method 3.
  • Urban Rates. The 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 FCC 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.
  • HCF Program Eligible Equipment.* The FNPRM seeks comment on whether the FCC’s rules should be amended to make equipment supporting Telecom Program services eligible for support in the HCF Program.
  • Administrative Deadlines.* The FNPRM proposes extending the deadline for requesting Service Provider Identification Number (SPIN) changes to align with the program-wide invoicing deadline.
  • Evergreen Contract Date Changes.* The FNPRM seeks comment on whether there should be a process to allow applicants to change evergreen contract dates following a funding commitment.

How We Can Help

Please contact us if you are interested in participating in the rulemaking process. We also are well positioned to advise service providers concerning compliance with rural 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: