Overview: Rural Health Transformation Program Act

On July 4, 2025, the One Big Beautiful Bill Act was signed into law. This Act created a $50 billion fund called the Rural Health Transformation Program, whose purpose is to offset any losses rural health providers may experience due to healthcare-related provisions in the legislation.

The $50 billion will be distributed to all states over fiscal years 2026-2030, with $10 billion released annually. Half of the $50 billion will be allocated equally among all states if their applications have been approved. My understanding is that of the $10 billion released annually, $5 billion will be distributed among the states with approved applications. If all 50 states are approved, each state could expect to receive $100 million. CMS distributes the remaining 50% ($25 billion) based on factors such as the state's rural population, the number of rural health facilities, and the situation of hospitals in the state.

CMS is still developing the application process, but as of the time of publishing this blog, this is what I was able to learn:

  • It will be a one-time application for the 5-year program.

  • CMS must approve or deny all applications by December 31, 2205

  • The application should include:

    • a plan detailing how the state will utilize the funds on at least 3 of the allowable uses listed below.

    • Provide an outline on how the state will measure the improvement and outcomes of hospitals. This includes identifying causes that put providers at risk of closure, service reduction or conversion.

    • Provide strategies to manage long-term financial solvency and operating models of rural hospitals.

    • Prioritize data and technology-driven solutions that help deliver high-quality services closer to patients’ homes.

    • Align with CMS considerations for fund distribution, which include measurable factors such as state population and the number of health facilities.

    • Demonstrate an understanding that no more than 10% of the state’s allotment can be used for administrative expenses.

    • Outline how fund allotments and overall alignment will be reported annually to CMS.

Once received, the state can use the funds received on at least 3 of the following activities:

  • Improving access to hospitals and other healthcare providers furnished to rural residents.

  • Improving healthcare outcomes for rural residents.

  • Prioritizing the use of new and emerging technologies, including artificial intelligence (AI), emphasizing prevention and chronic disease management. This can include providing training and technical assistance for the development and adoption of technology-enabled solutions, such as remote monitoring and robotics.

  • Fostering local and regional strategic partnerships between rural hospitals and other providers to promote measurable quality improvement, increase financial stability, maximize economies of scale, and share best practices.

  • Enhancing economic opportunity for and supply of clinicians via recruitment and training, especially for those who commit to serving in a rural community for at least five years.

  • Providing technical assistance, software, and/or hardware to improve cybersecurity, efficiency, or patient outcomes.

  • Identifying needed preventative, ambulatory, hospital, emergency, acute inpatient care, outpatient care, and post-acute care in rural communities.

  • Supporting access to opioid use disorder, substance use disorder, and mental health treatment.

  • Developing value-based care or alternative payment models.

  • Promoting evidence-based interventions to improve prevention and chronic disease management, including technology-based solutions.

I think it's safe to say that the CMS Administrator, Dr. Mehmet Oz, will not review all 50 applications. Application review and approval will likely become the responsibility of state Medicaid directors, as these individuals are the primary point of contact for CMS at the state level. If you are interested in finding out who the Medicaid director is in your state, visit the National Association of Medicaid Directors website.

I will share more of my thoughts in an upcoming blog. Stay tuned!

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