Advocates say rural hospitals need Rural Health Transformation Program’s $50 billion

Hospitals outside the nations’ urban centers say they need a financial lifeline through the new Rural Health Transformation Program.

The U.S. Centers for Medicare & Medicaid Services (CMS) announced the application period has started for the $50 billion program. The 50 states may apply for shares to pay for projects that “reimagine care delivery and develop innovative, enduring, state-driven solutions to tackle the root causes of poor health outcomes specific to rural America,” according to the official description.

“Rural communities are the bedrock of America. They have waited too long for Washington to act,” Health and Human Services Secretary Robert F. Kennedy, Jr., said in a news release.

“Now, at last, we are acting with the largest investment ever made to improve health care for rural Americans,” he said. “This $50 billion program is about delivering dignity and dependable care to rural communities, making sure every American has access to affordable, high-quality treatment.”

Kennedy and CMS Administrator Mehmet Oz, MD, MBA, said the administration of President Donald J. Trump is driving nationwide change to envision new possibilities for rural health care and build a future where all Americans receive the care they deserve, regardless of where they live.

“This program is a historic investment that will catalyze needed change in rural health systems and improve lives for generations to come,” Oz said in the news release. “For too long, when it comes to health care access and infrastructure, we've left behind the backbone of America. That stops now with this program that will spark real change for rural health care.”

Five goals

CMS announced the program has five strategic goals:

• Make rural America healthy again: Support rural health innovations and new access points to promote preventive health and address root causes of diseases.
• Sustainable access: Help rural providers become long-term access points for care by improving efficiency and sustainability.
• Workforce development: Attract and retain a highly skilled health care workforce by strengthening recruitment and retention of health care providers in rural communities.
• Innovative care: Spark the growth of innovative care models to improve health outcomes, coordinate care, and promote flexible care arrangements.
• Tech innovation: Foster use of innovative technologies that promote efficient care delivery, data security, and access to digital health tools by rural facilities, providers, and patients.

Application period

CMS will have one application period. Nov. 5 is the application deadline for states to apply; grantees will be announced by the end of this year. The $50 billion program funding will be allocated to approved states over five years, with $10 billion available each year beginning in federal fiscal year 2026. Half of the funding will be evenly distributed to all states with an approved application. The other half will be awarded to approved states based on individual state metrics and applications that reflect the greatest potential for and scale of impact on the health of rural communities, said the program’s official description.

Who gets the money?

The American Hospital Association this summer asked Oz to prioritize programs that integrate financial stability and modernization of rural hospitals.

“Hospitals are a critical access point for health care in rural communities because they often serve as the only site where residents can receive comprehensive medical care, including emergency services, inpatient and outpatient treatment, therapy services and diagnostics,” said the letter from AHA Executive Vice President Stacey Hughes. “In many rural areas, hospitals provide a centralized location for both acute and preventive care, functioning as safety nets in regions with few or no alternative health care providers.”

They also face a tough financial situation. In 2023, 48% of rural hospitals operated at a financial loss. More than 100 have closed or converted in the last 10 years, Hughes’ letter said.

How much will it help?

While $50 billion is a lot of money, the One Big Beautiful Bill Act included cuts to Medicaid that could lead to a reduction of $137 billion in health care spending in rural areas, according to an analysis KFF published in July. Rural areas have a population of approximately 66 million people and Medicaid covered one in four adults, nearly half of all births, and one-fifth of inpatient discharges, that study said.

The National Rural Health Association (NRHA) and consultant Manatt Health published an analysis with three different spending scenarios, based on how much of the $50 billion goes to rural hospitals. At best, if the hospitals received $50 billion, it would cover 87.9% of the projected funding cuts that rural hospitals could face from now to 2034. That would cover the entire Medicaid rural hospital funding cut for 28 states, but four — Iowa, Oregon, Washington and Kentucky — would see less than half of their rural hospital funding cuts addressed, that projection said.

Rural health care, or spent elsewhere?

“Rural communities have always been at the forefront of innovation out of necessity. NRHA is deeply concerned that there is not enough discussion about how hard rural hospitals and providers will be hit by the upcoming Medicaid cuts,” NRHA CEO Alan Morgan said in a news release.

“Regardless of the intent behind health care ‘transformation,’ the reality is clear: Many rural communities may lose essential services before any improvements can be implemented,” Morgan said. “These cuts threaten access to OB/GYN care, emergency services, and primary care — services that rural residents rely on every day.”

To help, the program must remain rural in more than just the name, he said.

“NRHA recommends that rural hospitals be prioritized in the funding distribution for the Rural Health Transformation program,” Morgan said. “It is essential that funding goes to rural health care providers, not diverted to larger, urban providers or for activities that will not directly benefit rural communities.”

Making a plan

It appeared rural hospitals could be the beneficiaries through the states, according to the U.S. Chamber of Commerce, which published a guide for rural physicians, other clinicians and hospital leaders to participate in the application process.

“This strategic investment aims to address the core challenges that many rural hospitals face: low patient volumes, critical workforce shortages, deteriorating infrastructure, outdated technology, and shifting reimbursement models,” said the guide by Chamber Health Policy Vice President Lexi Branson and Health Policy Senior Director Erin Delaney. “The program is designed to ensure long-term stability and improved access to care in rural communities nationwide.”