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Business/Economy

Alaska rural health care providers ‘in limbo’ amid budget cuts from FCC program

  • Author: Annie Zak
  • Updated: May 20
  • Published May 20

A clash between a federal agency and telecommunications companies over funding for rural health care providers has landed at least one Alaska hospital in a tough spot.

Growth in demand for money from the Federal Communications Commission's Rural Health Care program — which helps facilitate health care delivery in rural and remote parts of the U.S. — has led to funding cuts to the program in recent years.

At the Cordova Community Medical Center, the situation means there's a risk of internet and data services being shut off.

Losing such services would be calamitous for all kinds of businesses, but health care providers are unique. They rely on that connectivity for electronic health records, essential for treating patients. In Cordova, the hospital doesn't have a radiologist so staff there transmit images to a radiologist in the Lower 48. The payroll system at the medical center is cloud-based.

Downtown Cordova, Sept. 2, 2015. (Washington Post photo by Nikki Kahn.)

"The impact would be devastating," said Scot Mitchell, the medical center's CEO. "We can still provide health care services without internet or telephone — we have emergency contingency plans to do that if our service was to go out because of a disaster or something. But for a long-term outage, that would be very devastating. …  It's almost impossible to do business without the internet."

The FCC's rural health care program provides eligible health care entities with funding for telecommunications and broadband services. In funding year 2016, money to program recipients was cut by about 7 percent. That was the first time in the more than 20 years the program has been around that demand exceeded the money available. The following year, cuts were bigger.

More entities, specifically skilled nursing facilities, have also become eligible for the program in recent years, without an increase in the $400 million cap for the program.

The FCC dollars pay the majority of the Cordova hospital's bills to its provider, Alaska Communications. Since that funding was cut by the FCC, Alaska Communications has been fronting the money. Now, it can't afford to any longer.

"[D]espite not receiving payment for your telecommunications services, Alaska Communications has used its own cash to pay third parties to keep you in service — at the cost of reducing our workforce and reducing employee compensation," Alaska Communications senior vice president of finance Laurie Butcher said in a May 2 letter to Mitchell. "We cannot sustain our business this way."

The letter asks the medical center to pay its $964,370 bill in full by June 30. If not, Alaska Communications will disconnect the hospital's rural health care service on July 1.

The medical center's monthly bill from Alaska Communications is just over $80,000, Mitchell said, but with the program's funding, the medical center only pays about $1,000 of that.

"This has turned into more than just a problem," said Leonard Steinberg, senior vice president of legal, regulatory and government affairs at Alaska Communications. "It's been a very painful exercise for our company because we really believe in the mission of providing telecommunications services for rural health care services. We've bent over backwards in many cases to provide services to rural health care providers around the state."

The situation has even drawn the attention of FCC chairman Ajit Pai. A May 8 letter to Alaska Communications CEO Anand Vadapalli, Pai wrote that the company "may not deny or cut off service to any of its existing rural healthcare provider customers." Steinberg said the law Pai cited in that letter also entitles telecommunications companies to funding to pay the difference between rates for rural health care providers and rates for other customers.

The shortfall isn't just affecting Alaska Communications. In a prepared statement, a spokeswoman for Alaska telecom company GCI said the company "has been working with rural providers, the FCC, and the Alaska congressional delegation to develop a solution to maintain this critical source of support" for health care in rural Alaska.

"The steep reduction of federal Rural Health Care funding for Alaska hospitals and clinics is troubling," spokeswoman Heather Handyside said in an email. "Rural providers rely on telehealth services to keep Alaskans healthy and to save lives."

GCI has not proposed reducing or terminating service to any of our customers, Handyside said.

The problem of funding for the FCC's rural health care program isn't new — that's been going on for more than a year. But the situation at the Cordova medical center highlights the potential impact, said Becky Hultberg, president of the Alaska State Hospital and Nursing Home Association.

"I think ultimately it's in everyone's interest that we resolve the problem between the telecom companies and the FCC, because health care providers are caught in the middle," Hultberg said. Most providers are not having their service cut off, she said.

The program has been around since 1997 and was created with a set of rules and a budget that hasn't kept up with changing technology, said Steinberg.

"Who ever thought about the cloud 20 years ago?" he said. "The needs for bandwidth today are so dramatically different that it's silly to even think about updating the budget just for inflation."

Alaska's congressional delegation has been trying to find a solution. In a statement emailed by his press secretary, Rep. Don Young said he's been working with the FCC, telecom companies and health care providers in Alaska for more than a year.

"It is incredulous that Alaskans have not received our allocation of money for programs that have been enabling rural health clinics to save Alaskan lives for over 20 years," he said in the statement.

Karina Petersen, a spokeswoman for Sen. Lisa Murkowski, R-Alaska, said in an email that the senator has also been trying to resolve the issue.

"The FCC is currently evaluating how the Rural Health Care program is managed, but until that is finalized Alaskan participants are in limbo, which is a real problem because rural health clinics provide critical tele-medicine services for remote Alaskan communities," Petersen wrote.

A May 14 letter addressed to Pai and signed by Murkowski, Sen. Dan Sullivan and 29 other senators urged the FCC to increase the program's funding cap. In a hearing before a U.S. Senate committee on Thursday, in response to a question about whether he would support raising the cap, Pai said, "I can say that I do support increasing the program."

Mitchell hopes the matter is resolved by the end of June. But, he said, if that doesn't happen, the medical center has been working with Alaska Communications to find another provider for phone and internet service.

"We're trying to work with all parties involved," he said, "to make sure we can provide health care to the people of Cordova."

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