§ 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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