Last month the Federal Communications Commission (“FCC”) ordered the carry-forward of $198 million in Rural Health Care (RHC) funding for use in 2020. Seems like good news, but it depends on how you look at it. But note this action simply makes the funding available — it does not waive or increase the RHC caps for 2020. Unless the FCC takes further action, the caps remain: $604.8 million for the overall program; $152.7 million for upfront payments, and multi-year commitments under the Healthcare Connect Fund (HCF).
More potentially available funding is of course welcome news, but it raises the question: Why is so much funding available to be carried forward? The Universal Service Administrative Company’s (USAC) May 1 summary of the last five RHC funding years helps tell the story. Below is a compilation of that data with some additional calculations below the table (in millions):
Before diving in, some definitions: (1) “Authorized for disbursement” effectively means expenditures; (2) “reserve for outstanding obligations” generally includes committed funds that have not been invoiced; (3) “reserve for pending applications” means either (a) USAC has not processed the application, or (b) USAC has processed but is holding for some reason. For example, if you look at the $142.93 million in 2018 in this category, this likely includes funding being held back due to unapproved rural rates. If you look at the $513.92 million in this category for 2019, this includes the substantial backlog of unprocessed applications (as of March 31, 2020).
If you total for each year the combination for these three categories, you get a sense of what effective program expenditures were through 2018 – recognizing that pending applications and obligations will not necessarily turn into expenditures. By this measure (which generously assumes these funds will be expended) program expenditures declined by over $42 million in 2018 compared to 2017. Moreover, authorized disbursements have declined each year since 2016. So while the FCC has significantly increased the cap, from 2016 to 2018 the annual program spend has actually been going down (with millions obviously still “pending”).
That is the data. Now, some analysis and a little opinion:
Why is there is so much rollover funding? With respect to unused funding generally, it seems to represent applications for funding (1) that are denied in processing, and (2) that are abandoned after commitment because the funding is never ultimately utilized. For #1, if you look at the $513 million USAC reserved for pending 2019 applications, it appears the delays in processing are forcing USAC to treat pending applications as potential obligations – creating future rollover funding from those pending applications that are eventually denied. When applications are processed more quickly, there is no need for such a large reserve. Moreover, one might reasonably ask what a large percentage of applications being denied in processing means about how well program rules are understood by applicants, or if the rules are being uniformly applied.
For #2, abandoned funding happens when funding decisions are delayed so long that it is too late to take advantage of an actual funding commitment after it is finally issued. An example of this would be when hospitals refuse to go at-risk for services or equipment and wait for application approval – leaving little or no time before the invoicing deadline to procure once USAC issues the funding decision.
We can only hope these trends of delays, denials, held funding, and large rollovers of unused funding will reverse soon.