The Centers for Medicare & Medicaid Services (CMS) has opened up state applications for the five-year, $50 billion Rural Health Transformation Program intended to blunt, in part, upcoming cuts to hospitals’ Medicaid funding.
The hotly anticipated fund was authorized by the summer’s One Big Beautiful Bill Act, allocating $10 billion each fiscal year between fiscal year 2026 and 2030. Under the statute, half of the money will be distributed equally among all approved states with the remaining half flowing at the CMS’ discretion with the broad goal of strengthening rural providers and communities.
States may now access a Notice of Funding Opportunity to apply for the program before the Nov. 5 deadline, with the CMS announcing awardees by Dec. 31.
Details on what must be included in the applications, how the office will be grading received applications and specific restrictions on how the funds may be used are outlined in a new FAQ (PDF) and the Notice of Funding Opportunity’s full documentation.
“Rural healthcare deserves a healthcare system built for rural reality, not an afterthought of urban leftovers,” Department of Health and Human Services Secretary Robert F. Kennedy Jr. said Monday in a video announcement. “Right now, only 7% of Medicaid hospital spending reaches rural hospitals. That’s got to change. The Rural Healthcare Transformation Program is that change.”
President Donald Trump and Republicans' sweeping legislation signed into law July 4 will reduce federal Medicaid funding by nearly $1 trillion over the next decade and is estimated to lead to nearly 10 million people going without insurance by 2034.
Lawmakers debating the bill grappled with warnings from industry and constituents that the limits on healthcare funding mechanisms (such as provider taxes) could strangle financially struggling hospitals, particularly those in rural areas. In response, the $50 billion rural fund was added to push the bill over the finish line.
Hospital groups and even some of the bill’s cosigners have described the fund as insufficient compared to the bill’s coming cuts, and legislation has been proposed to bump the total up to $100 billion.
Earlier this month, the National Rural Health Association and Manatt Health released an analysis (PDF) projecting that the $50 billion fund would only address a maximum of 88% of the bill’s Medicaid cuts—assuming 100% of the funds be directed solely to rural hospitals and not other healthcare providers being hit with the reductions. Meanwhile, researchers have warned that urban hospitals and health systems have increasingly obtained rural facility Medicare designations that allow these organizations to apply to rural reimbursement programs while maintaining urban hospital benefits.
The CMS’ FAQ notes there are “no specific restrictions in the [Notice of Funding Opportunity] on which provider organizations can effectuate impact on rural communities and residents,” such as a requirement that funded providers be located in rural areas.
Application requirements, funding limitations aim for "sustainable impact"
The agency broadly outlined five strategic goals for the $50 billion program: to “make rural America healthy again” by promoting preventive care and addressing chronic disease management; to improve rural providers’ efficiency and sustainability; to attract and retain healthcare workers for rural communities (with required five-year service commitments); to develop and implement innovative payment models; and to fund greater access to digital tools, remote care and other technologies.
“The program tackles the root causes of rural healthcare failure,” RFK Jr. said. “It gives states the tools to design solutions that last—not Band-Aids that fail.”
On a more granular level, states’ applications must outline a plan to use program funds for at least three of out 11 specific permissible uses (nine as specified by statute and two others “as determined by the Administrator”).
Among these are investments into “significant IT technology advances,” including cybersecurity; training and technical assistance for rural hospitals adopting advanced technologies such as artificial intelligence; behavioral health support, including access to opioid use disorder treatment services; initiatives to foster local and strategic partnerships between providers; and promoting "consumer-facing, technology-driven solutions" for preventing and managing chronic diseases.
“Picture a patient checking symptoms on an iPhone instead of driving 35 miles to the nearest doctor,” CMS Administrator Mehmet Oz, M.D., said of the fund’s tech goals in the announcement video. “Picture an AI-powered system replacing stacks of paperwork, cutting administrative work in half so providers can focus on patients.”
The new notice also outlines specific restrictions for the funding awards. Investments in existing rural care facilities and infrastructure “including minor building alterations or renovations and equipment upgrades” are permitted, but new construction or supplanting other funding for in-process or planned projects are not allowed.
Funds can’t be used to replace or augment clinical service payments reimbursable by insurance or other health coverage, and no clinician salaries or wage support may go to facilities subjecting those clinicians to noncompete agreements.
There is also a 10% cap on funding for direct and indirect administrative purposes, as well as percentage-based limitations around certain electronic health system replacements (maximum 5% of a state’s total awarded funding) and any implementation of a state “Rural Tech Catalyst Fund Initiative” for accelerating health tech adoption (maximum 10%).
“The intent of this funding is not to be used for perpetual operating expenses, but rather for investments that can be made within the duration of the program that will have sustainable impact beyond the end of the program,” the CMS wrote of its spending limitations in the FAQ.
This year’s deadlines are the only opportunity states will have to submit their “bold, audacious proposal ideas as strong as the people they serve,” in the words of the secretary. They will also be required to report on the use of the funds and progress toward any goals annually, as well as to submit annual noncompeting continuation applications to receive subsequent years’ funding.
Though the applications may only be submitted by states, the Notice of Funding Opportunity allows states to “consult and involve numerous partners like universities, local health departments, community-based organizations, and provider associations in designing and implementing the planned activities proposed in your application and may sub-award or contract [Rural Health Transformation] Program funds to such partners for various activities.”
The CMS will be hosting two informational webinars for Rural Health Transformation Program applicants on Sept. 19 and Sept. 25.