§ 54.639   Ineligible expenses.

   (a) Equipment or services not directly associated with eligible
   services. Expenses associated with equipment or services that are not
   necessary to make an eligible service functional, or to manage,
   control, or maintain an eligible service or a dedicated health care
   broadband network are ineligible for support.

   Note to paragraph (a): The following are examples of ineligible
   expenses:

   1. Costs associated with general computing, software, applications, and
   Internet content development are not supported, including the
   following:

   i. Computers, including servers, and related hardware (e.g., printers,
   scanners, laptops), unless used exclusively for network management,
   maintenance, or other network operations;

   ii. End user wireless devices, such as smartphones and tablets;

   iii. Software, unless used for network management, maintenance, or
   other network operations;

   iv. Software development (excluding development of software that
   supports network management, maintenance, and other network
   operations);

   v. Helpdesk equipment and related software, or services, unless used
   exclusively in support of eligible services or equipment;

   vi. Web server hosting;

   vii. Web site portal development;

   viii. Video/audio/web conferencing equipment or services; and

   ix. Continuous power source.

   2. Costs associated with medical equipment (hardware and software), and
   other general health care provider expenses are not supported,
   including the following:

   i. Clinical or medical equipment;

   ii. Telemedicine equipment, applications, and software;

   iii. Training for use of telemedicine equipment;

   iv. Electronic medical records systems; and

   v. Electronic records management and expenses.

   (b) Inside wiring/internal connections. Expenses associated with inside
   wiring or internal connections are ineligible for support under the
   Healthcare Connect Fund.

   (c) Administrative expenses. Administrative expenses are not eligible
   for support under the Healthcare Connect Fund.

   Note to paragraph (c): Ineligible administrative expenses include, but
   not limited to, the following expenses:

   1. Personnel costs (including salaries and fringe benefits), except for
   personnel expenses in a consortium application that directly relate to
   designing, engineering, installing, constructing, and managing a
   dedicated broadband network. Ineligible costs of this category include,
   for example, personnel to perform program management and coordination,
   program administration, and marketing;

   2. Travel costs, except for travel costs that are reasonable and
   necessary for network design or deployment and that are specifically
   identified and justified as part of a competitive bid for a
   construction project;

   3. Legal costs;

   4. Training, except for basic training or instruction directly related
   to and required for broadband network installation and associated
   network operations;

   5. Program administration or technical coordination (e.g., preparing
   application materials, obtaining letters of agency, preparing request
   for proposals, negotiating with vendors, reviewing bids, and working
   with the Administrator) that involves anything other than the design,
   engineering, operations, installation, or construction of the network;

   6. Administration and marketing costs (e.g., administrative costs;
   supplies and materials, except as part of network
   installation/construction; marketing studies, marketing activities, or
   outreach to potential network members; evaluation and feedback
   studies);

   7. Billing expenses (e.g., expense that vendors may charge for
   allocating costs to each health care provider in a network);

   8. Helpdesk expenses (e.g., equipment and related software, or
   services); and

   9. Technical support services that provide more than basic maintenance.

   (d) Cost allocation for ineligible sites, services, or equipment—(1)
   Ineligible sites. Eligible health care provider sites may share
   expenses with ineligible sites, as long as the ineligible sites pay
   their fair share of the expenses. An applicant may seek support for
   only the portion of a shared eligible expense attributable to eligible
   health care provider sites. To receive support, the applicant must
   ensure that ineligible sites pay their fair share of the expense. The
   fair share is determined as follows:

   (i) If the vendor charges a separate and independent price for each
   site, an ineligible site must pay the full undiscounted price.

   (ii) If there is no separate and independent price for each site, the
   applicant must prorate the undiscounted price for the “shared” service,
   equipment, or facility between eligible and ineligible sites on a
   proportional fully-distributed basis. Applicants must make this cost
   allocation using a method that is based on objective criteria and
   reasonably reflects the eligible usage of the shared service,
   equipment, or facility. The applicant bears the burden of demonstrating
   the reasonableness of the allocation method chosen.

   (2) Ineligible components of a single service or piece of equipment.
   Applicants seeking support for a service or piece of equipment that
   includes an ineligible component must explicitly request in their
   requests for proposals that vendors include pricing for a comparable
   service or piece of equipment that is comprised of only eligible
   components. If the selected provider also submits a price for the
   eligible component on a stand-alone basis, the support amount is
   calculated based on the stand-alone price of the eligible component on
   a stand-alone basis. If the vendor does not offer the eligible
   component on a stand-alone basis, the full price of the entire service
   or piece of equipment must be taken into account, without regard to the
   value of the ineligible components, when determining the most
   cost-effective bid.

   (3) Written description. Applicants must submit a written description
   of their allocation method(s) to the Administrator with their funding
   requests.

   (4) Written agreement. If ineligible entities participate in a network,
   the allocation method must be memorialized in writing, such as a formal
   agreement among network members, a master services contract, or for
   smaller consortia, a letter signed and dated by all (or each)
   ineligible entity and the Consortium Leader.

   [ 78 FR 13987 , Mar. 1, 2013]

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