Detailed Information on the
Universal Service Fund for Rural Health Care Providers Assessment

Collect performance data on a quarterly basis at the time of the contribution factor filing. Once sufficient data is collected to provide a reliable baseline, establish targets for the performance measures.

Continue review of the USF IPIA audits and determine further opportunities to improve USF oversight.

The FCC should develop a set of performance measures for the Rural Health Care program.

Is the program purpose clear?

Explanation: Section 254 of the Communications Act of 1934, as amended (the Act), specifies that the purpose of the program is for rural health care providers serving rural residents to pay rates for telecommunications services comparable to those paid by their urban counterparts within each state. Section 254 also allows the FCC to encourage, to the extent technically feasible and economically reasonable, access to advanced telecommunications and information services for all public and nonprofit health care providers. Under FCC rules, funds for the Rural Health Care program are collected as part of a carrier's overall universal service support obligation. Rather than receiving an actual disbursement, the carrier may offset the amount eligible for Rural Health Care support against its obligation for other universal service programs for the year in which the costs for providing eligible services were incurred. The Rural Health Care program supports a portion of the cost of the telecommunications link for rural health facilities. The program also supports Internet access charges, and other advanced telecommunications and information services for entirely rural areas and areas affected by Hurricane Katrina. Rural Health Care support promotes telemedicine, which is the use of telecommunications for medical diagnosis and patient care. Telecommunication technology allows for the provision of medical services to sites that are physically separated from the provider. The telemedicine communication link usually involves standard telephone service through high speed, wide bandwidth transmission of digital signals in conjunction with computer enhancement. Evolving alternative communication links for telemedicine include fiber optics, satellite connections, and other sophisticated peripheral equipment and software.

Evidence: Congress set forth the purpose of the program in 47 U.S.C. §254(b)(6) and (h)(1)(A), which states that a telecommunications carrier shall provide "telecommunications services which are necessary for the provision of health care services in a State ?? to any public or nonprofit health care provider that serves persons who reside in rural areas in that State at rates that are reasonably comparable to rates charged for similar services in urban areas in that State." The legislative history behind the Rural Health Care provisions of section 254 of the Act reveals that Congress sought to provide rural health care providers "an affordable rate for the services necessary for the purposes of telemedicine and instruction relating to such services." H.R. Conf. Rep. No. 458, 104th Cong. 2nd Sess. 133 (1996). 47 C.F.R § 54.611 (carriers may treat services provided under this program as an offset against universal service obligations). 47 C.F.R. § 54.615(a) (Rural Health Care providers seeking support must select most cost-effective alternative of bids submitted for service). 47 C.F.R. § 54.621 (25% of monthly cost of Internet access is eligible for support; rural health care providers in states that are deemed "entirely rural" are eligible for 50% of monthly cost of Internet access). 47 C.F.R. § 54.623 (if demand exceeds support, support is distributed pro-rata). See Federal-State Joint Board on Universal Service, Schools and Libraries Universal Service Support Mechanism, Rural Health Care Support Mechanism, Lifeline and Link-Up, CC Docket Nos. 96-45 and 02-6 WC Docket Nos. 02-60 and 03-109, Report and Order, FCC 05-178 (2005), at paras. 25-36 (establishing relief through the Rural Health Care program for Hurricane Katrina victims).

Does the program address a specific and existing problem, interest, or need?

Explanation: The Rural Health Care program addresses the need to improve the access to telecommunications and advanced services by health care providers serving rural residents. The Rural Health Care program accomplishes this task by providing universal service support to rural health care providers for telecommunications services and Internet monthly access charges. As a general matter, the program implements the intent of Congress to reduce rural rates, for the purposes of telemedicine and medical instruction, such that rural rates are at a level "reasonably comparable" to urban rates. Sparse population, terrain, and other characeristics of rural areas can make telecommunications and information services more expensive to serve than urban areas. In addition, rural health care programs can face difficulties in hiring health care providers, obtaining adequate medical facilities, obtaining support services, and utilizing the latest medical advances. These difficulties exist in the context of a client population that is generally older, with lower income and medical insurance coverage than the clients of many non-rural health facilities. Rural Health Care support promotes telemedicine, which is the use of telecommunications for medical diagnosis and patient care. Telecommunication technology allows for the provision of medical services to sites that are physically separated from the provider. Telemedicine can be divided into three areas: decision-making aids (e.g., searching databases), remote sensing (e.g., transmission of patient information), and collaborative arrangements for real-time management of patients at a distance (e.g., videoconferencing, allowing a remote practitioner to observe and discuss symptoms with a patient or another practitioner). Remote health care and information exchange services made available through the Rural Health Care program of the Universal Service Fund are intended to reduce the financial burden on rural health facilities for these purposes, allowing facilities to benefit from telemedicine, and permitting the dedication of resources to other health care purposes. Additionally, in response to Hurricane Katrina, the FCC temporarily adopted rules allowing health care providers including American Red Cross shelters that were providing health care assistance to disaster victims to receive support for advanced telecommunications and information services used for telemedicine.

Evidence: Congress instructed the FCC to establish a program to provide discounts on telecommunications services provided to rural health care providers. 47 U.S.C. § 254(h)(1)(A) . For telecommunications services, the Rural Health Care program provides support for monthly mileage-based charges (minus the standard urban distance) or for the difference between the rural and urban rate for non-mileage-based charges. For Internet access, the Rural Health Care program provides support for 25% of the health care provider's Internet access charges. Support is provided for the cost of mileage beyond the standard urban distance (urban mileage allowance for each state) up to the maximum allowable distance. See Rural Health Care Program Frequently Asked Questions, available at http://www.universalservice.org/rhc/tools/fequently-asked-questions.aspx#8. See Telemedicine in Emergency Medicine, available at http://www.acep.org/NR/rdonlyres/BA992307-A653-43EA-8331-0CBD0964B7D2/0/telemedicine.pdf; Benefits of Telemedicine, available at http://www.ortcc.org/PDF/BenefitsofTelemedicine.pdf. See, e.g., Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order, 12 FCC Rcd 8776, 9107-08, 9111, paras. 631, 639-40 (1997) (Universal Service Report and Order). See also Murray, M., New Telemedicine Program Brings Top-Notch Cancer Care to More Marylanders (citing benefit for patients is that they can get access to the cutting edge clinical trial opportunities and novel therapies that historically have only existed at major academic institutions), available at http://www.umm.edu/cancer/telemed.html. The need for the Rural Health Care program was supported further by the financial problems facing rural hospitals at the time of passage of the Telecommunications Act, which are well documented. See Foley, A., The Decline in Rural Hospitals: The Effect of Investor-Owned Hospitals, Masters Thesis, West Virginia University, 2000 (statistical study of decline in the number of rural hospitals); Lehrer, J., Rural Hospitals, Transcript of News Hour, April 23, 1997 ("Now another in our continuing series of reports on the changing face of American medicine. Tonight: the problems of rural hospitals"). In the Matter of Federal-State Joint Board on Universal Service; Schools and Libraries Universal Service Support Mechanism; Rural Health Care Support Mechanism; Lifeline and Link-Up, Order, 2005 WL 2649119, paras.25-36. See H.R. Conf. Rep. No. 458, 104th Cong. 2nd Sess. 133 (1996) (legislative history of establishment of rural health care program).

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: No other Federal program provides similar support for telecommunications services for rural health care providers. Other programs provide funding for network or outreach to help build rural health networks, including those that use advanced telecommunications services for telemedicine, but these programs do not directly fund access to such services. The U.S. Department of Agriculture Rural Development Rural Utilities Program (formerly Rural Utilities Service) has a Distance Learning and Telemedicine Program that provides grants and loans for the costs associated with end-user equipment. Unlike the Rural Health Care program, the USDA program does not support telecommunications services and Internet monthly access charges. The U.S. Dept. of Health and Human Services' (HHS) Office of Rural Health Policy has a Rural Health Network Development Grant Program which covers telecommunications costs not covered by the Rural Health Care universal service program, focusing on outreach to rural communities. HHS also has an Office of the Advancement of Telehealth (OAT) that covers telecommunications costs not covered by the Rural Health Care universal service program. The OAT program pays either the discounted cost after the Rural Health Care universal service discount has been applied, or any other negotiated rates, whichever is lower. State programs generally are complementary to the Federal Rural Health Care program, providing funds in addition to the Federal Rural Health Care support. For example, to receive rural health care support from the Nebraska universal service fund (NUSF), a hospital receiving service must show the anticipated total cost for each service provided, the amount USAC will pay, the amount NUSF will pay, and the amount for which the hospital is responsible.

Evidence: See 47 U.S.C. § 254(h)(1)(A). The U.S. Dept. of Agr. Rural Development Rural Utilities Program has a Distance Learning and Telemedicine Program (DLT) that provides grants and loans for the costs associated with end-user equipment which includes computers and tele-radiology equipment, but not the "acquiring, installing or constructing [of] telecommunications transmission facilities," or, unlike the Rural Health Care (RHC) program, telecommunications services and Internet monthly access charges. Regulations governing the USDA's DLT Loan and Grant Program are available at 7 C.F.R. Part 1703. See also USDA Rural Development Telecommunications Program, available at http://www.usda.gov/rus/telecom; Rural Utilities Services, Distance Learning and Telemedicine Program Grant Application Guide Fiscal Year 2005, p. 11, available at http://www.usda.gov/rus/telecom/dlt/dlt.htm. The U.S. Dept. of Health and Human Services' Office of Rural Health Policy has a Rural Health Network Development Grant Program (RGP), which is designed to further ongoing collaborative relationships among health care organizations by funding rural health networks for costs such as contracting with technical experts, and purchasing resources to build the network. It also has an Outreach Program (OP) that seeks to address barriers to health care access within rural communities, identify successful models and strategies of service to rural communities, and facilitate exportation of these ideas to communities with similar needs. The OP also specifically encourages use of telemedicine and telehealth to address the needs of rural populations, and seeks to promote the development of such technologies and services. The RGP covers telecommunications costs not covered by the Rural Health Care universal service program. Information on the HHS RGP and OP is available at http://ruralhealth.hrsa.gov/funding. HHS also has an Office of the Advancement of Telehealth (OAT) that periodically provides grants to promote the use of advanced telecommunications and information technologies by rural health providers. The primary objective of these grants is to build and maintain rural telehealth networks. The program covers telecommunications costs not covered by the Rural Health Care universal service program. The OAT program pays either the discounted cost after the RHC universal service discount has been applied, or any other negotiated rates, whichever is lower. Telehealth Network Grant Program, available at http://telehealth.hrsa.gov/grants/teleguide.htm#5 (OAT does not have an accounting system that breaks out transmission separately from its 2005 actual expenses of $34M). In addition, state programs (e.g., Ariz., Neb.) specifically support telecommunications for telehealth, and coordinate with the federal RHC program. See Neb. Pub. Serv. Comm. Reimbursement Process, Dec. 20, 2004, p. 1 (to receive rural healthcare support from Nebraska universal service fund (NUSF), a hospital receiving service must show the anticipated total cost for each service provided, the amount USAC will pay, the amount NUSF will pay, and the amount for which the hospital is responsible). Information on NUSF is available at http://www.psc.state.ne.us/home/NPSC/usf/Telehealth/Reimbursement_Process_04_12_20.doc. See also Frequently Asked Questions Regarding Telemedicine in Arizona (financial benefits of joining the Ariz. Telemedicine Program (ATP) include that the ATP "is a volume dealer and rural healthcare organizations can benefit [from] the federal Universal Service Fund program, which reduces telecommunications costs further"). Information on the ATP is available at http://www.telemedicine.arizona.edu/program/FAQ.html. As demonstrated, the funding from these state programs is not redundant to that of the RHC program because the state funds are provided in addition to, or on top of, the federal RHC support.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: While the FCC has sought to ensure that subsidies available through the Rural Health Care program satisfy their intended purpose, the program experiences significant over-arching management challenges. The Rural Health Care program, like other mechanisms of the FCC's Universal Service Fund (USF), is managed by a private entity with no contract or memorandum of understanding with the FCC, and no performance measures. In addition, funds are maintained outside of the Treasury, and are presently exempted from the fiscal protections provided by the Anti-Deficiency Act. Furthermore, the program is funded through a percentage charge (10.9% in Q206 for the whole of the USF, of which Rural Health Care is a small element) assessed on consumer's phone bills for long distance and international calls. As technology evolves to provide alternative communications platforms and such revenue becomes more difficult to idenfity, the funding base of the program is undermined. As a result, the percentage charge on consumers' phone bills has consistently increased over time (the charge was 5.9% in 2000). While this percentage charge funds the entire Universal Service Fund, the Rural Health Care program of the USF is a very small part of program spending, at generally less than 1% of the total USF. The FCC has recognized the management challenges relating to the Rural Health Care program and the whole of the USF, and has sought comment on a comprehensive rulemaking on USF management.

Evidence: "Contribution factor filings" (the charge on phone bills that supports the USF) can be found at: (http://www.fcc.gov/wcb/universal_service/quarter.html) For a discussion on the challenges to universal service in a technologically dynamic industry, see: Nuechterlein and Weiser, "Universal Service in the Age of Competition", being chapter 10 of Digital Crossroads, 2005, MIT Press. See Comprehensive Review of Universal Service Fund Management, Administration, and Oversight, WC Docket No. 05-195; Federal-State Joint Board on Universal Service, CC Docket No. 96-45; Schools and Libraries Universal Service Support Mechanism, CC Docket No. 02-6; Rural Health Care Support Mechanism, WC Docket No. 02-60; Lifeline and Link-Up, WC Docket No. 03-109; Changes to the Board of Directors for the National Exchange Carrier Association, Inc., CC Docket No. 97-21, Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking, 20 FCC Rcd 11308, para. 30 (2005) (Fund Management NPRM).

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: The Rural Health Care program is targeted effectively to support rural health care providers in the U.S., thereby potentially improving their telemedicine and telehealth capabilities. To accomplish this, the program's rules require universal service support to be provided directly to Rural Health Care providers, which is then used for telecommunications services and monthly Internet access charges. Specifically, section 254(h)(1)(A) of the Communications Act requires telecommunications carriers to provide discounted services to any public or non-profit health care provider that serves rural areas in a state. Section 254(h)(7)(B) of the Act further provides several definitions for the term "health care provider" , such as post-secondary institutions, community health and mental health centers, rural health care clinics and not-for-profit hospitals, among others. Support for telecommunications services is calculated based on the carrier providing the services at a rate no higher than the urban rate, and subject to the health care provider selecting the most cost-effective method of having the services provided. (See 47 C.F.R. § 54.615.) Generally, eligible providers may receive a flat discount of 25 percent off the cost of monthly Internet access. (47 C.F.R. § 54.621.) Funds generally are available on a first-come, first-served basis, though USAC also may establish discreet filing periods where all applications are treated as files simultaneously. If demand exceeds the size of the fund, which FCC has established as $400 million annually, support is distributed on a pro-rata basis. (47 C.F.R. § 54.623.) However, program demand has not reached this level.

Evidence: See information about the Rural Health Care program, available at http://ftp.fcc.gov/cgb/consumerfacts/usp_RuralHealthcare.html; http://www.universalservice.org/rhc/about/program-overview.aspx. See 47 C.F.R. § 54.601(d) (requiring providers to allocate discounts to prevent the discounts from flowing to ineligible activities or providers of services); 47 C.F.R. §§ 54.615(c)(7), 54.621(a) (rules to ensure health care providers select the most cost-effective services). Statistics on the amount each state receives in funding through the Rural Health Care program may be found at Tenth Annual Meeting of American Telemedicine Association, Denver, CO, Apr. 20, 2005, Session T5E1, "An Update on Universal Service Support for Rural Health Care," available at (http://www.americantelemed.org/news/selected2005.htm#legal). Rural Health Care Support Mechanism, WC Docket 02-60, Report and Order, Order on Reconsideration, and Further Notice of Proposed Rulemaking, 18 FCC Rcd 24546, 24553-55, paras. 13-15 (2003) (Rural Health Care First Report and Order) (resolving eligibility issues concerning public health care providers, dedicated emergency departments in for-profit hospitals, and proration issues for non-profit entities that function as health care providers on a part-time basis). Rural health care providers and service providers must satisfy specific requirements in order to participate in the Rural Health Care program. See, e.g., 47 C.F.R. §§ 54.603 (competitive bidding requirements for selection of telecommunications providers), 54.609 (requirement to provide documentation to substantiate support request), 54.615 (requirement to select most cost-effective bid for services). The program has provided support to rural health care providers in each of the 45 states where such support has been requested, application processes have been streamlined, and outreach has been expanded to ensure that rural health care providers are aware of discount opportunities. Support under the program is subject to safeguards to ensure that only eligible activities and providers receive support, and that health care providers select the most cost-effective services. See Rural Health Care First Report and Order, 18 FCC Rcd 24546 (detailing program's safeguards and outreach efforts). The FCC adopted a flat discount of 25 percent off the cost of monthly Internet access for all eligible rural health care providers. The program establishes a 50 percent discount off the commercial rate for the purchase of advanced telecommunications and information services just for states that are found to be "entirely rural." See Rural Health Care Second Report and Order, 19 FCC Rcd at 24631-34, paras. 38, 40, 44, nn.162, 167 (the FCC considered efficiency and cost effectiveness through targeting when it established a 50 percent discount off the commercial rate for the purchase of advanced telecommunications and information services for states that are "entirely rural." This is a higher discount than the 25 percent discount available to all eligible rural health care providers). See also 47 C.F.R. § 54.621. The average support for telecommunications services under the Rural Health Care program is 66 percent of the health care provider's total service cost.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The Rural Health Care program does not currently have long-term performance measures. The FCC has sought comment on long-term performance measures in the Fund Management NPRM and is currently considering the record in that proceeding.

Evidence: See generally Fund Management NPRM, 20 FCC Rcd 11308. See FY 2001 Annual Performance Report, available at http://www.fcc.gov/Reports/ar2001.pdf. See FY 2003 Annual Performance Report, http://www.fcc.gov/Reports/ar2003.pdf. See FY 2004 Annual Performance Report, pp. 30, 56 (Highlights: "expand beneficiary participation in the RHC [Rural Health Care] program"; "Adopted rules that strengthen telemedicine and telehealth networks across the Nation thereby enable health care providers to diagnose, treat and contain possible outbreaks of disease more rapidly"), available at http://www.fcc.gov/Reports/ar2004.pdf. See FY 2005 Performance and Accountability Report, p. 61 (Agency adopted rules that strengthen telemedicine and telehealth networks), available at http://www.fcc.gov/Reports/ar2005.pdf.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: The Rural Health Care program does not currently have long-term performance measures. The FCC has sought comment on long-term performance measures in the Fund Management NPRM and is currently considering the record in that proceeding.

Evidence: See generally Fund Management NPRM, 20 FCC Rcd 11308.

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: The Rural Health Care program does not currently have annual performance measures. The FCC has sought comment on long-term performance measures in the Fund Management NPRM and is currently considering the record in that proceeding.

Evidence: See generally Fund Management NPRM, 20 FCC Rcd 11308.

Does the program have baselines and ambitious targets for its annual measures?

Explanation: The Rural Health Care program does not currently have annual performance measures. The FCC has sought comment on long-term performance measures in the Fund Management NPRM and is currently considering the record in that proceeding.

Evidence: See generally Fund Management NPRM, 20 FCC Rcd 11308.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: The Rural Health Care program does not currently have specific annual or long-term goals. However, the rural health care providers that receive discounted services through the Rural Health Care program and the private-sector firms that provide connectivity are involved in supporting the administration of the program. Pursuant to the Commission's rules, the partners commit to complying with the program's eligibility and supporting data requirements, and to use the funds only for services necessary for the provision of health care. In addition, there are mandatory documentation requirements placed on all program participants. The FCC has sought comment on potential performance measures in the Fund Management NPRM and is currently considering the record in that proceeding.

Evidence: See Rural Health Care Program Process Overview, available at http://www.universalservice.org/rhc/about/process-overview.aspx. Whistleblower Hotline description, available at http://www.universalservice.org/rhc/tools/whistleblower-hotline.aspx. See FCC Form 465, available at http://www.universalservice.org/rhc/health-care-providers/step02/service-request-form465.aspx. See 47 C.F.R. § 54.603(b). See generally Fund Management NPRM, 20 FCC Rcd 11308.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Independent evaluations do not occur on a regular basis. However, the FCC informally assesses the Rural Health Care program through its ongoing management activities and takes action in rulemaking proceedings.

Evidence: See Rural Health Care First Report and Order, 18 FCC Rcd 24546; Rural Health Care Second Report and Order, 19 FCC Rcd 24613. In the Fund Management NPRM, the FCC sought comment on how well the program has worked, and whether the program is meeting its goals. The FCC is also considering establishing regular reviews. See generally Fund Management NPRM, 20 FCC Rcd 11308.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: The Rural Health Care program is not subject to the annual budget process, since it is funded through mandatory charges on interstate and international telephone revenue. The level of these charges are assessed quarterly based on estimated demand. This quarterly process provides an opportunity for the program to review progress against goals and measures and adjust the level of the program accordingly. However, since the program has no stated goals or measures aside from general statutory guidance, no such evaluation of the program is undertaken, and progress against even the statutory guidance cannot be determined.

Evidence: See, FCC Annual Budget Request, available at http://intranet.fcc.gov/omd/fo/finance/budget_process.html. The budgetary submission for the Universal Service Fund is found in the Federal Communications Commission, FY 2005 Budget Estimates to Congress, available at http://ftp.fcc.gov/Reports/fcc2005budget_complete.pdf. See generally Fund Management NPRM, 20 FCC Rcd 11308. See also 47 C.F.R. § 54.603(b); Federal Universal Service Support Mechanisms Fund Size Projections and Quarterly Contribution Base, available at http://www.universalservice.org/about/governance/fcc-filings/.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: The Rural Health Care program does not currently measure annual or long-term goals or targets, and thus has not adequately identified strategic planning deficiencies. Nevertheless, through rulemaking proceedings, the FCC works to improve the efficiency of program administration and ensure that the statutory goals are addressed. For example, in the Rural Health Care Second Report and Order, the Commission adoted rules improving the program's administrative process. The FCC sought comment on annual and long term goals in the Fund Management NPRM and is currently considering the record in that proceeding.

Evidence: See generally Fund Management NPRM, 20 FCC Rcd 11308. See also Orders and Notices of Proposed Rulemaking regarding the Rural Health Care program, available at http://www.fcc.gov/wcb/tapd/ruralhealth/welcome.html.

Are all regulations issued by the program/agency necessary to meet the stated goals of the program, and do all regulations clearly indicate how the rules contribute to achievement of the goals?

Explanation: The Rural Health Care program was established by FCC regulations in response to Section 254 of the Act. Changes to eligible services, application processes, funding levels, and other program components are made through administrative or regulatory changes. In making regulatory changes, the rulemaking process addresses why the changes are needed to meet the statutory goal of providing discounted services to rural health care providers. The most recent rule changes to the Rural Health Care program were adopted by the FCC in December 2004. The FCC modified the definition of "rural" for purposes of the program, expanded funding for mobile rural health services, and improved the program's administrative process. In addition, Section 11 of the Communications Act requires the FCC to evaluate its regulations and eliminate any unnecessary regulations every two years. However, upon implementation of the program following the 1996 Act, the FCC did not conduct a comprehensive assessment of which Federal requirements, policies, and practices apply to it. As such, the implementation of the Rural Health Care program, and the USF generally, has been unusual for a Federal program. In particular, this approach has created uncertainty in the appropriate application of fiscal controls and other normal program standards. In response to a recommendation on the part of the Government Accountability Office (GAO) that the FCC conduct a comprehensive assessment of the legal requirements related to the USF, the FCC expressed its belief that the case-by-case approach it uses is appropriate. However, as GAO noted, "A definitive determination on the entire framework of laws that apply or do not apply to the USF would enable the FCC to make proactive operational decisions on what stepts it should take and what inernal controls it should have in place."

Evidence: See Rural Health Care Second Report and Order, 19 FCC Rcd at 24614, para. 1. See also Orders and Notices of Proposed Rulemaking regarding the Rural Health Care program, available at http://www.fcc.gov/wcb/tapd/ruralhealth/welcome.html. 47 U.S.C. §§ 161 (requiring FCC to review its regulations every two years to determine whether any regulations are no longer in the public interest), 254 (USF). See generally Fund Management NPRM, 20 FCC Rcd 11308. See GAO-05-151, "Greater Involvement Needed by the FCC in the Management and Oversight of the E-Rate Program", February 2005, at: (www.gao.gov)

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: Though the program's administrator collects program information for the purposes of administration, it has not established measures for the Rural Health Care program through which it might use such data to gauge the results of the program. It therefore cannot take steps to improve program performance based on quantitative analysis, or set targets that would demonstrate the satisfaction of the program's statutory guidance. The program's administrator routinely publishes information about the support it provides to rural health care providers by state, and audits select samples of fund beneficiaries to ensure that funding is spent in compliance with program requirements. Also, there is a toll-free Whistleblower Hotline for public concerns about the program.

Evidence: See Understanding Audits, available at http://www.universalservice.org/rhc/about/understanding-audits.aspx. See, e.g., Federal Universal Service Support Mechanisms Fund Size Projections for the Second Quarter 2006, Universal Service Administrative Company, Jan. 31, 2006, available at http://www.universalservice.org/about/governance/fcc-filings/2006/Q2/FCC%202Q2006%20Quarterly%20Demand%20Filing.pdf. Whistleblower Hotline description, available at http://www.universalservice.org/rhc/tools/whistleblower-hotline.aspx. Rural Health Care program search tools: http://www.universalservice.org/rhc/tools/rhcdb/Rural/2005/search.asp. http://www.rhc.universalservice.org/funding/asc/. http://www.universalservice.org/rhc/tools/rhcdb/UrbanRates/2005/Search.asp. http://www.universalservice.org/rhc/service-providers/step02/. See generally Fund Management NPRM, 20 FCC Rcd 11308.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: The Rural Health Care program, along with other programs of the Universal Service Fund, is administered by a private entity established by the FCC, entitled the Universal Service Administrative Company (USAC). USAC operates with no contract or memorandum of understanding with the FCC, and with no measures against which to judge its performance. USAC, in turn, contracts out to third parties the execution of some functions. USAC does not collect performance information from carriers, though carriers are required to certify their compliance with the FCC's rules and Section 254 of the Communications Act. Data collected by USAC is used to administer the program, rather than to judge performance or results.

Evidence: General information about the USAC Board of Directors and its by-laws is available at http://www.universalservice.org/about/governance/board-directors/ and http://www.universalservice.org/about/governance/corporate-by-laws/. Information on the USAC Management Team is available at http://www.universalservice.org/about/leadership/. The FCC rules relating to USAC can be found at 47 C.F.R. §§ 54.701-54.705.

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: While the FCC has established program rules that specify the intended purpose of funds, it cannot demonstrate that funds are regularly used in accordance with program rules. Federal funds are provided to carriers only in the amount of discounts passed directly to the eligible consumer. The FCC's rules require participants, including state public utility commissioners and carriers, to file annual certifications demonstrating compliance with Section 254 of the Communications Act and FCC universal service rules, which are designed to accomplish the program's purpose. While the program's administrator and the FCC have undertaken an audit program to determine the level of compliance with FCC rules, this oversight is at present insufficient to properly control the use of funds by program beneficiaries. During the last fiscal year, the FCC's efforts led to recommended recovery for the Rural Health Care program of approximately $49,000 in funds that were used in a manner inconsistent with program rules. In addition, the FCC's Office of Inspector General (OIG) has noted that the Universal Service Fund, of which the Rural Health Care program is a part, has in insufficent audit program in place to accurately determine the level of waste, fraud, and abuse in the program. The FCC's Inspector General has indicated it plans to implement more rigorous oversight of Low Income program beneficiaries, and the FCC has requested authority to use funds for this purpose in its fiscal year 2007 budget request to Congress.

Evidence: See, e.g., 47 C.F.R. § 54.615(b)(4). See Fund Management NPRM, 20 FCC Rcd at 11337-38, para. 70. See FCC's fiscal year 2007 budget request at: (http://www.fcc.gov/Reports/fcc2007budget_main.pdf)

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: Though the FCC's rules limit the support available to qualifying beneficiaries, the program does not measure administrative efficiency in a rigorous manner, and has not adopted any metrics by which to judge efficiency. The FCC sought comment on long-term performance measures in the Fund Management NPRM and is currently considering the record in that proceeding. Some aspects of the program's design promote efficiency. For example, rural health care providers must use competitive bidding processes to award contracts. The program requires recipient rural health care providers to fund a portion of the contract, which creates an incentive for beneficiaries to only choose the most cost-effective service provider and to only request services that are necessary and can be put to effective use.

Evidence: See 47 C.F.R. § 54.603. See generally Fund Management NPRM, 20 FCC Rcd 11308. See 47 C.F.R. § 54.603(a) (competitive bidding rule). See 47 C.F.R. § 54.609 (calculating support). See Rural Health Care First Report and Order, 18 FCC Rcd 24546; Rural Health Care Second Report and Order, 19 FCC Rcd 24613. See 47 C.F.R. §§ 54.609, 54.623 (Rural Health Care program cap). 47 C.F.R § 54.615(c). The program is targeted only to eligible rural areas and requires cost allocation and prorating of discounts if any urban areas are also served. The FCC requires "prudent economic decisions" for the program. Specifically, section 54.603 of the FCC's rules sets out competitive bidding requirements for the Rural Health Care program. It requires consideration of cost tradeoffs between satellite, terrestrial wireless and landline transmission. The FCC also requires an annual certification stating that the most cost-effective method of providing service has been chosen taking into account reliability and quality. Finally, the program is subject to an annual $400 million cap, with pro-rata distribution of funds if requests exceed the cap, though program demand has not approached that level.

Does the program collaborate and coordinate effectively with related programs?

Explanation: The Rural Health Care program is structured in a manner that is complementary to related programs that provide support to telemedicine activities. For example, the Department of Health and Human Services' Office of the Advancement of Telehealth (OAT) covers telecommunications costs not covered by the Rural Health Care universal service program. The OAT program pays either the discounted cost after the Rural Health Care universal service discount has been applied, or any other negotiated rates, whichever is lower. State programs generally are complementary to the Federal Rural Health Care program, providing funds in addition to the Federal Rural Health Care support. For example, to receive rural health care support from the Nebraska universal service fund (NUSF), a hospital receiving service must show the anticipated total cost for each service provided, the amount USAC will pay, the amount NUSF will pay, and the amount for which the hospital is responsible.

Evidence: See 47 C.F.R. §§ 54.609-625 (providing rules regarding Rural Health Care program support, including for advanced telecommunications and information services); see also Telehealth Network Grant Program, available at http://telehealth.hrsa.gov/grants/teleguide.htm#5 (describing OAT grants). See HHS Telehealth Network Grant Program, available at http://telehealth.hrsa.gov/grants/teleguide.htm#5 See Neb. Pub. Serv. Comm. Reimbursement Process, Dec. 20, 2004, at (http://www.psc.state.ne.us/home/NPSC/usf/Telehealth/Reimbursement_Process_04_12_20.doc)

Does the program use strong financial management practices?

Explanation: An independent auditor has identified material internal control weaknesses associated with the FCC's financial management processes, and was unable to express an opinion on the 2005 financial statements of the agency. In particular, the auditor noted that appropriate controls were not in place that would enable monthly reconciliation of accounts and investment transactions, and the USF administrator did not record financial transactions in a timely manner. The independent auditor has made several recommendations to the agency, including: 1) clarifying the FCC office responsible for the agency's financial activities; 2) make explicit a delegation of authority from the Office of the Chairman, when such delegation has occurred; 3) ensure timely financial reporting; 4) ensure that the Office of the Inspector General exercises independence. The FCC has indicated that it is addressing these findings and taking the appropriate steps to correct deficiencies. Since October 1, 2004, and pursuant to FCC direction, USAC has implemented generally acceptable accounting principals for federal agencies (Federal GAAP) and maintains universal service funds in accordance with the United States Government Standard General Ledger (USGSGL).

Evidence: See FCC Fiscal Year 2005 Performance and Accountability Report at: (http://www.fcc.gov/omd/strategicplan/) See Application of Generally Accepted Accounting Principles for Federal Agencies and Generally Accepted Government Auditing Standards to the Universal Service Fund, CC Docket No. 96-45, Order, 18 FCC Rcd 19911 (2003) (GAAP Order). See generally Fund Management NPRM, 20 FCC Rcd 11308. The FCC's rules requiring reporting and audits from USAC are 47 C.F.R. § 54.702(g-h) (USAC quarterly and annual reports) and 47 C.F.R. § 54.717 (Audits of USAC). See FCC Filings, available at http://www.universalservice.org/about/governance/fcc-filings/.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: The Rural Health Care program continues to be administered by a non-Federal entity without any contract or memorandum of understanding, and no performance measures have been adopted by which to judge the performance of the program. In additon, the program is presently exempt from fiscal protections afforded by the Anti-Deficiency Act. Also, the funding base of the program continues to decline as interstate and international telephone revenue becomes more difficult to identify. The FCC periodically reviews the administrative procedures in the Rural Health Care program and modifies these procedures where appropriate. The FCC sought to improve the financial reporting on the part of the administrator by requiring that financial statements be be prepared consistent with Federal accounting standards. The Fund Management NPRM proceeding is also considering ways to improve the administration of the Rural Health Care program, and the Universal Service fund in general.

Evidence: See Rural Health Care First Report and Order, 18 FCC Rcd 24546; Rural Health Care Second Report and Order, 19 FCC Rcd 24613; Fund Management NPRM, 20 FCC Rcd 11308. See Amendment of Parts 0 and 1 of the Commission's Rules, Implementation of the Debt Collection Improvement Act of 1996 and Adoption of Rules Governing Applications or Requests for Benefits by Delinquent Debtors, MD Docket No. 02-339, Report and Order, 19 FCC Rcd 6540 (2004). For information on USAC's internal audits, see Universal Service Administrative Company, 2003 and 2004 Annual Reports, available at http://www.universalservice.org/_res/documents/about/pdf/2003-annual-report.pdf, http://www.universalservice.org/_res/documents/about/pdf/2004-annual-report.pdf.

Does the program have oversight practices that provide sufficient knowledge of grantee activities?

Explanation: Though the program's administrator has issued 63 audit reports of the program beneficiaries to date, oversight of the program could be improved. As the FCC's Inspector General of the FCC has stated, "fraud is an inherent risk in the Universal Service Fund (USF) core business processes: collection, certification, and disbursement of funds", and greater oversight is required. Specifically, the Inspector General has stated that, "controls over management oversight and accountability for receipt of USF funds by beneficiaries have been materially weak because of inadequate management controls, lack of a sufficient independent audit program to deter future fraudulent activity, and weaknesses in the structure of the program." The Inspector General has been unable to implement an effective independent oversight program of the USF, including the Rural Health Care program, because of a lack of sufficient resources. The FCC has requested funds from Congress for this purpose, and is presently evaluating the participation of outside auditors. The FCC has also initiated a proceeding in which it sought comment on fund management issues and is currently considering the record in that proceeding. To date, the program's administrator and the independent auditor have issued a total of 63 audit reports of the Rural Health Care program beneficiaries. Some measures and reporting functions have been implemented that provide information about grantees and their expenditures of funds. Approximately $ 2.1 million in funds provided to beneficiaries have been subjected to an audit. To date, the program has recovered a total of approximately $49,000 for FCC rule violations. The program uses a toll-free Whistleblower Hotline for those with concerns about how parties are using the program.

Evidence: See the FCC's 2005 Performance and Accountability Report at: (http://www.fcc.gov/omd/strategicplan/) Whistleblower Hotline description, available at http://www.universalservice.org/rhc/tools/whistleblower-hotline.aspx. See Fund Management NPRM, 20 FCC Rcd at 11340-41, paras. 76-79.

Does the program collect grantee performance data on an annual basis and make it available to the public in a transparent and meaningful manner?

Explanation: The program does not collect performance data from Rural Health Care program beneficiaries. The FCC sought comment on long term performance measures in the Fund Management NPRM and is currently considering the record in that proceeding. The program's administrator conducts beneficiary audits to help ensure program compliance.

Evidence: See generally Fund Management NPRM, 20 FCC Rcd 11308. See Understanding Audits, available at http://www.universalservice.org/rhc/about/understanding-audits.aspx.

Did the program seek and take into account the views of all affected parties (e.g., consumers; large and small businesses; State, local and tribal governments; beneficiaries; and the general public) when developing significant regulations?

Explanation: The rules governing the Rural Health Care program were adopted after notice and comment have been sought, consistent with the Administrative Procedure Act. A wide range of parties commented, such as the Federal-State Joint Board on Universal Service, rural health care providers, telecommunications carriers, and health care advocacy groups and associations. Those comments are taken into consideration before implementing changes to the program rules.

Evidence: See Orders and Notices of Proposed Rulemaking regarding the Rural Health Care program, available at http://www.fcc.gov/wcb/tapd/ruralhealth/welcome.html.

Did the program prepare adequate regulatory impact analyses if required by Executive Order 12866, regulatory flexibility analyses if required by the Regulatory Flexibility Act and SBREFA, and cost-benefit analyses if required under the Unfunded Mandates Reform Act; and did those analyses comply with OMB guidelines?

Explanation: FCC regulations are not subject to E.O. 12866 or the Unfunded Mandates Reform Act, though they are subject to the Regulatory Flexibility Act and SBREFA. The order initiating the program rules, and subsequent implementing decisions, complied with the Regulatory Flexibility Act. OMB reviews FCC rules under the Paperwork Reduction Act. The FCC does consider the costs of implementing regulations for small businesses in the course of rulemaking proceedings in accordance with the Regulatory Flexibility Act.

Evidence: See Orders and Notices of Proposed Rulemaking regarding the Rural Health Care program, available at http://www.fcc.gov/wcb/tapd/ruralhealth/welcome.html.

Are the regulations designed to achieve program goals, to the extent practicable, by maximizing the net benefits of its regulatory activity?

Explanation: The FCC was directed by Section 254 of the Communications Act to ensure that rural health care providers have access to telecommunications services at rates reasonably comparable for similar services in urban areas. While the FCC has provided a regulatory framework for this purpose and adjusted eligibility criteria over time, it has not developed any measures by which to assess performance. The lack of measures or targets in the program inhibit the ability to adjust for changing circumstances and long-term effects of the program.

Evidence: See Rural Health Care First Report and Order, 18 FCC Rcd 24546 (expanding the scope of entities eligible to receive discounts; providing support for Internet access; modifying the way in which the FCC calculates discounts, to offer rural health care providers more flexibility; and describing streamlining of application processes and expansion of outreach efforts). See 47 C.F.R. §§ 54.605, 54.607, 54.609 (how rates of support are determined). See 47 C.F.R. § 54.603(a) (competitive bidding requirements). See 47 C.F.R. § 54.621 (support for Internet access (25%) and advanced telecommunications and information services (50%) for eligible providers in entirely rural areas).

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: The FCC is currently in the process of developing the long-term outcome goals for the Rural Health Care program. The FCC has sought comment on performance measures for the Rural Health Care program.

Evidence: See generally Fund Management NPRM, 20 FCC Rcd 11308. Quantitative performance measures for the Rural Health Care program never have been set.

Does the program (including program partners) achieve its annual performance goals?

Explanation: The FCC is in the process of developing the annual outcome goals for the Rural Health Care program. The FCC has sought comment on performance measures for the Rural Health Care program. Currently, the Rural Health Care program does not have performance measures. The FCC is considering adopting performance measures.

Evidence: See generally Fund Management NPRM, 20 FCC Rcd 11308. Quantitative performance measures for the Rural Health Care program never have been set.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: The annual financial statements of USAC provide some indication of the program's efficiency, but no measures are tracked over time that can demonstrate improved efficiency.

Evidence: See Universal Service Administrative Company, 2003 and 2004 Annual Reports, available at http://www.universalservice.org/_res/documents/about/pdf/2003-annual-report.pdf, http://www.universalservice.org/_res/documents/about/pdf/2004-annual-report.pdf. Quantitative performance measures for the Rural Health Care program never have been set.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: Several Federal programs complement the Rural Health Care program's efforts at supporting telemedicine activities, though since no performance measures have been set for this program and no independent assessments of the program have been performed, there is no basis by which to compare related programs.

Evidence:

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: Since there have been no independent evaluations of this program, and the program has not established measures by which to judge its results, it cannot demonstrate that it is effective. Some independent studies also show that rural telemedicine can be cost effective, particularly when utilization is high and patient travel is also considered. However, no studies have focused on the impact of the Rural Health Care program's impact on telemedicine services. The FCC sought comment on long-term performance measures in the Fund Management NPRM and is currently considering the record in that proceeding.

Evidence: Fiscal Year 2004 Performance and Accountability Report (Oct. 1, 2003 - Sept. 30, 2004) at 167, available at http://www.fcc.gov/Reports/ar2004.pdf. See 47 C.F.R. § 54.717 (USAC must be audited annually). See Understanding Audits, available at http://www.universalservice.org/rhc/about/understanding-audits.aspx. See, e.g., Doolittle G., Williams A., Spaulding A., Spaulding R., Cook D., A Cost Analysis of a Tele-oncology Practice in the United States, J Telemed Telecare. 2004 (analysis of the costs associated with providing tele-oncology clinics to a rural Kansas town for two fiscal years, 1995 and 2000. The aim was to compare recent tele-oncology costs with those of the first year of tele-oncology practice. A study conducted in 1995 showed that the average cost was $812 per telemedicine consultation. Data from fiscal year 2000 showed that the average cost was $410 per telemedicine consultation, a decrease of almost 50%. As the tele-oncology practice in Kansas continues to grow, it can be expected that the costs associated with providing tele-oncology services will continue to decline). Berman M, Fenaughty A., Technology and Managed Care: Patient Benefits of Telemedicine in a Rural Health Care Network, Institute of Social and Economic Research, University of Alaska Anchorage (the results suggest that telemedicine increased estimated patient benefits by about $40 per visit, and reduced patients' loss from rationing of access to physicians by about 20%). Young TL, Ireson C., Effectiveness of School-Based Telehealth Care in Urban and Rural Elementary Schools, Pediatrics, 2003 Nov;112(5):1088-94 (including travel, savings for families ranged from $101 to $224 per encounter. Telehealth technology was effective in delivering pediatric acute care to children in these schools. The POTS-based technology helps to make this telehealth service a cost-effective alternative for improving access to primary and psychiatric health care for underserved children). Brown-Connolly, N., Patient Satisfaction with Telemedical Access to Specialty Services in Rural California, J Telemed Telecare, 2002; No. 8 Suppl 2:7-10 (741 patients submitted travel information. There was an average decrease in travel distance of 170 km and time savings of 130 minutes using telemedicine. The average cost of travel to a specialty appointment was $83 (sample size = 310). The present study suggests that telemedicine is acceptable to patients as a method of improving access to specialty expertise, and compares favorably with face-to-face care). Loane M., Oakley A., Rademaker M, Bradford N, Fleischl P, Kerr P, Wootton R., A Cost-Minimization Analysis of the Societal Costs of Realtime Teledermatology Compared with Conventional Care: Results from a Randomized Controlled Trial in New Zealand, J Telemed Telecare, 2001;7(4):233-8 (from a societal viewpoint, and assuming an equal outcome, teledermatology was a more cost-efficient use of resources than conventional hospital care). Loane M., Bloomer S., Corbett R., Eedy D., Evans C., Hicks N., Jacklin P., Lotery H., Mathews C., Paisley J., Reid P., Steele K., Wootton R., A Randomized Controlled Trial Assessing the Health Economics of Real-Time Teledermatology Compared with Conventional Care: an Urban Versus Rural Perspective, J Telemed Telecare, 2001;7(2):108-18 (sensitivity analysis using a real-world scenario showed that in urban areas the average costs of the telemedicine and conventional consultations were about equal, while in rural areas the average cost of the telemedicine consultation was less than that of the conventional consultation). See generally Fund Management NPRM, 20 FCC Rcd 11308.

Were programmatic goals (and benefits) achieved at the least incremental societal cost and did the program maximize net benefits?

Explanation: While the FCC generally assesses the cost of regulatory actions in accordance with the Regulatory Flexibility Act, no regular assessment of the impact of the program's rules is performed by which societal cost and net benefits can be determined. The lack of performance measures in the program contributes to the difficulty in determining relevant costs and benefits.

Evidence: See 47 C.F.R. § 54.603 (competitive bidding requirements). See Orders and Notices of Proposed Rulemaking regarding the Rural Health Care program, available at http://www.fcc.gov/wcb/tapd/ruralhealth/welcome.html; see also USAC's website at http://www.universalservice.org/rhc/about/. Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order, 12 FCC Rcd 8776, 9097, para. 615 (1997) (discussing comment sought by the FCC's Common Carrier Bureau about the exact scope of services that should be included in the definition of services "necessary for the provision of health care," and the most cost-effective way to provide such services). See Rural Health Care Second Report and Order, 19 FCC Rcd at 24614, para. 1.