My Profile e-Learning Center my.ASTHO Contact Us

Understanding and Applying for the Rural Health Transformation Program

August 27, 2025 | Susan Kansagra, Alexandra Kearly, Madison Hluchan, Orobosa Idehen

The One Big Beautiful Bill Act, signed into law on July 4, will have a sweeping impact across Medicaid, insurance programs created by the Affordable Care Act, food nutrition programs, and other services. According to the Congressional Budget Office, the bill will cause over 10 million people to become at risk of losing their health insurance coverage by 2034, most notably due to changes in Medicaid policy.

During debate of the legislation, members of Congress raised concerns about the impact of Medicaid policy changes on rural communities and hospitals. In response, Congress added $50 billion in federal funding to establish a new Rural Health Transformation Program. This program is an opportunity for states to invest in prevention, innovative care delivery, and workforce initiatives to ultimately improve the health of rural residents.

Funding Criteria and Formula

As enacted, the Rural Health Transformation Program appropriates $10 billion per fiscal year to the Centers for Medicare & Medicaid Services (CMS) for 2026-2030, equating to $50 billion over five years for eligible states. Only the 50 states – no territories, freely associated states, or Washington, D.C. – are eligible for this funding. Applications are expected in mid-September, with a submission deadline in November. CMS expects to take six weeks for application review. States must apply with a detailed rural health transformation plan and a certification that includes specifics on how funding will support state needs. States are only required to submit one application to receive funding for the entirety of the program. CMS must approve or deny the state applications by December 31, 2025.

Distribution of Funds

Following the application review, CMS will distribute $25 billion equally among all states with approved applications based on alignment with five CMS strategic goals:

Make Rural America Healthy Again.
Sustainable Access.
Workforce Development.
Innovative Care.
Technology Innovation.

CMS will distribute the second $25 billion to no less than 25% of states with eligible applications based on three main areas:

Ruralness (including statutory criteria and others determined by the CMS administrator).
State policies and policy commitments (policies they will adopt).
Quality of application and how the state intends to spend funds.

Should all 50 states apply and be approved for funding, each state will receive at least $100 million per year for five years. Annual distributed allotments to states would remain available through the end of the following fiscal year. Beginning in 2028, CMS will determine any unexpended or unobligated funds each fiscal year and distribute any unused funding at the end of a fiscal year using a forthcoming methodology by the CMS administrator. There is no requirement for states to match awarded allotment of funds.

Beyond this, the CMS administrator has broad discretion for how to distribute funds. Congress outlined certain factors that the administrator must consider when developing a formula to identify which states will receive the second $25 billion. Additional guidance is expected when CMS shares the application instructions with states.

Expected State Application Process

The Rural Health Transformation Program Notice of Funding Opportunity will likely be shared through Governors’ offices. While Governors may be required to submit a Letter of Intent, they may delegate another state agency to submit the application. A recent example of CMS funding Governors’ offices directly is the State Innovation Models grants, which sunset in 2016 and funded states to test multi-payer health care payment and delivery system reform models. Governors’ offices may work directly with rural providers, health systems, and communities in their states to determine usage of funds.

Required Specifications

As written, the law provides broad discretion to states over how to allocate funds; however, state applications must specify how they will use program funds to:

Improve access to hospitals, other health care providers, and health care items and services furnished to rural state residents.
Improve health care outcomes of rural state residents.
Prioritize the use of new and emerging technologies that emphasize prevention and chronic disease management.
Initiate, foster, and strengthen local and regional strategic partnerships between rural hospitals and other health care providers to promote measurable quality improvement, increase financial stability, maximize economies of scale, and share best practices in care delivery.
Enhance economic opportunity for and the supply of health care clinicians through enhanced recruitment and training.
Prioritize data and technology driven solutions that help rural hospitals and other rural health care providers furnish high-quality health care services as close to a patient’s home as possible.
Outline strategies to manage long-term financial solvency and operating models of rural hospitals in the state.
Identify specific causes driving the accelerating rate of stand-alone rural hospitals at risk of closure, conversion, or service reduction.

Mandatory Commitments

Within the specified parameters, states can use funds for a wide range of purposes and services. They must also commit to using funds for at least three of the following health-related activities:

Prevent and manage chronic disease through evidence-based strategies.
Make direct payments to rural providers for health care items or services.
Promote consumer-facing, technology-driven solutions to prevent and manage chronic disease.
Provide training and technical assistance for technology-enabled solutions that improve care delivery in rural hospitals (e.g., remote monitoring, artificial intelligence, and other advanced technologies).
Recruit and retain rural clinicians with a minimum five-year service commitment.
Upgrade cybersecurity and health IT systems to improve patient health outcomes.
Assist rural communities to rightsize their health care delivery systems and identify needed preventative, outpatient, emergency, hospital, and post-acute care.
Expand mental health, opioid, and substance use disorder treatment.
Support alternative payment or value-based care models.
Implement other rural health transformation strategies determined by CMS.

It is unclear what specific criteria CMS will ultimately use to approve or deny state applications and distribute funds across states. Forthcoming guidance may provide additional insight into these and other questions that arise for state leaders as they prepare their applications.

Collaboration Opportunities, Aligned with CMS Strategic Goals

The following are examples of collaborative opportunities funds may be used for that align with initial legislation details and CMS strategic goals, and where public health agencies may have a role. Applicability of these examples may change, pending additional HHS guidance and application information.

Make Rural America Healthy Again

Prevention/Chronic Disease

Behavioral Health

Maternal and Child Health

Workforce Development

Training and certification programs and reimbursement models for community health workers, peer support, and doulas.
Expanding reach of specialty workforce via telehealth.
Supporting or expanding loan repayment programs for health professionals in primary care, dental, and mental health, who practice in rural communities.
Expanding investments in the state primary care offices that manage health professional shortage designation tracking and health care workforce pipeline programs.
Alternative workforce training programs for community health workers or health coaches.

Innovative Care

Telehealth interventions to prevent and manage chronic disease.
Payment and service delivery models tracked by CMS Innovation Center.
Payment models that address nonmedical drivers of health.
Integration of public health metrics into value-based primary care reimbursement models.

Tech Innovation

Remote patient monitoring.
Advancing interoperability with health care systems: Electronic case reporting, syndromic surveillance, or immunization registry upgrades.

Tactical Recommendations for State Applications

In addition to exploring the aforementioned collaborative opportunities, state health officials may consider the following tactics to support the application process:

Connect early with your Governor’s office to understand their priorities and application process.
Identify all additional relevant partners to speak with about your state’s application, including your State Office of Rural Health, Medicaid director, local health departments, state primary care association, state rural health association, and state health care and hospital associations.
Start conversations with partners early to align shared goals, opportunities, and expectations for funding.
Consider areas that may have been recently defunded or are at risk of funding deficits to ensure continuity of public health service provision.
Explore opportunities to braid or layer resources from the fund with other funding sources.
Consider how the health agency can support the tracking of data and outcome measures of interest for rural state residents.
Look at state and local health needs assessments and state health improvement plans to identify areas of need.
Explore how the health agency can engage rural community leaders and rural residents in developing transformation plans and implementing projects.
Consider ideas that have potential to succeed in an unstable operating environment.
Document and articulate the challenges, successes, or opportunities with this grant program. Since this is a new funding mechanism, there will likely be robust Congressional oversight, and states will be required to submit annual reports to CMS.
Discuss sustainability early and often when considering opportunities, as these program funds are short term.
Share and learn about what other states are doing.