States race for a stake of rural health transformation funding
The race is on for states to secure a piece of a new $50 billion federal program aimed at revitalizing rural health care. The Rural Health Transformation (RHT) program, administered by the Centers for Medicare and Medicaid Services (CMS), is poised to deliver a significant jolt of funding to rural health providers over the next five years. With states vying for funds, the distribution methodology is proving to be a key determinant of which states will emerge as big winners.
A new model for funding
The RHT program, established under the One Big Beautiful Bill Act, will distribute $10 billion annually from 2026 to 2030. The funds are divided into two distinct streams:
- Direct awards: Half of the total funding, $25 billion over five years, will be distributed equally among all states with an approved application. This ensures a baseline of funding for every state that successfully applies, with each of the 50 states receiving a potential $500 million over the program’s duration.
- Formula-based awards: The other half of the funds, another $25 billion, will be allocated based on a formula determined by the CMS administrator. This portion is where states with greater rural health care needs could gain a larger share. The formula will consider key factors such as a state’s percentage of rural residents, the proportion of rural health facilities and the financial situation of its hospitals, including uncompensated care and reliance on Medicaid Disproportionate Share Hospital (DSH) payments.
The path for transformation
States must submit a comprehensive rural health transformation plan to CMS to be eligible for funding. This plan must outline how they will use the funds to address specific rural health care challenges. The program aims to promote innovation across a number of areas:
- Care delivery: Supporting preventative and chronic disease treatments and improving access to a wide range of care points from emergency services to post-acute care.
- Technology and infrastructure: Funding for consumer-facing technology, IT improvements like cybersecurity and efficiency software, and providing training for staff to adopt new tech-enabled solutions.
- Workforce and behavioral health: Initiatives to improve workforce recruitment and retention in rural areas, as well as solutions for substance use disorder and mental health services.
- Payment models: Advancing innovative care models, including value-based care and alternative
States that have a chance to receive additional funds
States that score higher on the risk factors, such as having a larger rural population and a higher proportion of distressed rural health facilities, are positioned to receive more of the formula-based funds. While the specific distribution is still being determined by CMS, early analysis from groups like the UNC Cecil Sheps Center for Health Services suggests states with extensive rural landscapes and higher rates of uncompensated care, like North Carolina, Missouri and Georgia, are likely to receive a larger share of the discretionary funds than smaller, more urban states such as Rhode Island, Massachusetts and Delaware. As shown in the chart below for the lower 48 states, the more radiant the color, the more significant chance a state could have to receive funds from the formula-based awards pool.
The takeaway
The program application deadline is November 5, with awardees expected to be announced by the end of the year. This gives states a tight window to craft data-driven applications that demonstrate their specific needs and a clear plan to transform their rural health care operations. States that can provide the most accurate and compelling data stand to gain a competitive advantage in this high-stakes race for funding.
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