DataConnex Gets Hit with $18.7M Fine for Violation of the Rural Health Care Program

Photo by Hush Naidoo on Unsplash

As it has for many months now, the FCC at its January Open Meeting continued its review of the Rural Health Care Program (RHCP). This time, it issued a proposed $18.7M fine against health care telecommunications service provider DataConnex. A reseller of telecommunications services, DataConnex is alleged to have taken in millions of dollars from the RHCP that it was not entitled to. Primarily, the FCC alleges that DataConnex "willfully and repeatedly" provided inaccurate, forged, misleading, or unsubstantiated documents to support that it had made payments to the Universal Service Fund. Furthermore, the FCC says that DataConnex violated the RHC's competitive bidding rules.

What is most significant about this forfeiture is the amount of the proposed fine. DataConnex's fine is three times the amount it wrongfully received from the RHCP and the FCC has warned it may revoke the company's authorization to sell telecommunications services altogether. Plus, the FCC said it is considering a measure to waive the competitive bidding rules on account that DataConnex played the system to its advantage, thus undermining the bidding process for other telecommunications services in the RHCP.

The RHCP was established by the 1996 Telecommunications Act to "facilitate health care delivery in rural and remote parts of America." Health care providers in rural America use RHCP in order to, according to the FCC, "provide telemedicine, transmit health records, and conduct other telehealth activities, thereby improving patient care and reducing health care costs." The program provides eligible health care providers with a 65 percent discount on broadband services in rural America. The FCC alleges that DataConnex took advantage of this program.

The FCC's DataConnex fine was issued based on six instances of wrongful conduct that, according to the FCC's Forfeiture and Order, include:

• engaging in an undisclosed multiyear financial relationship with a RHC Program consultant through which DataConnex gained an unfair advantage in the competitive bidding process;
• steering healthcare providers to this RHCP consultant and paying more than $200,000 to a company owned by the consultant over a two-year period during which time DataConnex received dozens of contracts from healthcare providers represented by this same consultant;
• making monthly payments ranging from $250 to $2,000 to a company owned by the RHC Program consultant which were directly tied to six contracts DataConnex was awarded by healthcare providers represented by the same consultant;
• reaching agreements in principle with the RHCP consultant that healthcare providers would award the contract to DataConnex before the required competitive-bidding period ended;
• using documents containing forged, false, misleading, and unsubstantiated information, including material misrepresentations, to increase its receipt of payments from the Telecom Program; and
• submitting payment requests based upon service contracts tainted by violations of the Commission's competitive bidding and urban rates rules and in so doing falsely implying compliance with Commission rules.

What DataConnex is being fined for most is its violation of the competitive bidding process which is where health care providers apply to the Universal Service Fund (USF) in order to support eligible RHCP services. The bidding process, like most, is intended to protect the RHCP from waste, fraud, and abuse so that health care providers can choose, according to the FCC, "the most cost-effective bid so that USF funds are used wisely and efficiently."

This all comes as the RHCP has undergone increased scrutiny since, back in December, the Commission issued a Notice of Proposed Rule Making and Order to review and update the program. As we reported then, the NPRM asked for comment on: the spending cap for the program, evaluating the program for fairness and accuracy, re-defining what "cost-effectiveness" means, ensuring funding for rural and tribal health care providers, simplifying program participation, and enhancing proper oversight of the program. This Forfeiture and Order seems is aimed at addressing the latter concern.

During its January meeting, Chairman Ajit Pai supported the forfeiture, stating, "I'm pleased that we're taking aggressive action against a company that we believe sought to scam the system." The forfeiture was approved by all five Commissioners with Brendan Carr stating, "This means that DataConnex's apparently fraudulent scheme might have resulted in providers that are playing by the rules-and the potentially millions of consumers they serve-losing out on the valuable healthcare services made possible by the Program. Needless to say, we are not taking this conduct lightly."

It is predicted that the FCC will continue to reform the RHCP in ways that will impact health care service providers, telecommunications services, and the health care industry as a whole. Our attorneys have experience with FCC regulations and compliance that has been relied on by telecommunications and health care providers nationwide. If you have any questions about your own compliance, please contact us.