States Scramble to Create Rural Health Transformation Plans

While the recently passed H.R. 1 law includes an estimated $1 trillion in cuts to Medicaid, it also features a $50 billion Rural Health Transformation Program (RHTP) designed to ease the impact of the cuts on rural providers. But some stakeholders are raising questions about the two-tiered funding model and how quickly states are being asked to submit transformation plans. 

At the time the law was signed, the National Rural Health Association issued a statement saying it is “concerned that the Rural Health Transformation Program, dedicated to offset the Medicaid cuts on rural communities, will fall short of addressing the other provisions in this legislation.”


And as a Health Affairs article recently noted, “the relatively short implementation timeframe—with state submission of applications and CMS approval determinations happening within a few short months—compounds the underlying program limitations.” 

As a Brownstein law firm blog states, the program requires that the “application submission period” must end not later than Dec. 31, 2025. “However, it also states that CMS must approve or deny all applications by that same date. It therefore seems likely that the agency will establish an application deadline well in advance of Dec. 31 in order to have sufficient time to review the applications.”

States are hurrying to create rural health transformation plans to submit to CMS. 
For example, Pennsylvania’s Department of Human Services says it is gathering information, concepts, and additional ideas to shape the Commonwealth’s Rural Health Transformation Plan and reflect what they heard from rural providers, partners, and residents. DHS is seeking input from providers on maternal health, mental and behavioral health, aging and access, transportation and EMS, and the rural healthcare workforce.

A blog by the Community Link Consulting firm, which works with FQHCs and rural health clinics, notes that many states are already getting prepared for their application by looking for vendors to support the application process or issuing a Request for Information (RFI) that can be responded to. It provided a list of several of those:
• Alaska – issued RFI on July 21 with a response deadline of August 18 
• Mississippi – issued RFQ on July 29 looking for application support 
• Washington – e-mail requesting input sent August 8 with response deadline of August 29 
• Montana – issued RFI on August 8 with a response deadline of August 24 
• Wisconsin – issued RFI on August 11 with a response deadline of September 3 
• North Dakota – issued survey to request information on August 13 with a response deadline of September 12 
• North Carolina – issued update on August 14 sharing a website and link requesting input.

The program runs from 2026 through 2030. As the Brownstein blog notes, for each of these fiscal years, 50% of the program funds will be equally divided among the 50 states, but CMS will have substantial discretion as to the amount each state receives from the other 50%. Those funds could potentially could go to 13 states, with the other 37 states receiving nothing, the blot stated.

As Michael Baker, director of healthcare policy for the center-right American Action Forum, puts it in an Aug. 8 blog post: “While masquerading as an innovative government program, the RHTP is little more than a slush fund. There is no transparent formula for funding determinations, and instead the CMS administrator has immense discretion in determining state eligibility and allowable program expenditures, setting the stage for funding decisions based on personal taste rather than well-reasoned formulas with defined variables.”

Baker added that “even the most well-intentioned innovation can’t patch over the kind of shortfalls rural patients face.”

Here are the components each rural health transformation plan is expected to address:
• Improve access to hospitals or other healthcare providers and services for rural residents;
• Improve healthcare outcomes of rural residents;
• Prioritize the use of new and emerging technologies, emphasizing the prevention and management of chronic disease;
• Initiate and strengthen local and regional strategic partnerships between rural hospitals and other healthcare providers to promote quality improvement, financial stability and share best practices;
• Enhance economic opportunity and supply of healthcare providers through enhanced recruitment and training;
• Prioritize data and technology-driven solutions that help rural hospitals and providers deliver high-quality services, as close to a patient’s home;
• Outline strategies to manage long-term financial solvency and operating models of rural hospitals; and
• Identify causes driving the accelerating rate of stand-alone rural hospitals becoming at risk of closure, service reduction or conversion.

The Health Affairs article notes that “rather than dealing with the crisis at hand, solving the major blow to healthcare spending and resulting coverage declines that OBBBA represents, the program instead positions itself as a multi-year effort to strengthen rural healthcare systems through strategic plannings. Put another way, there appears to be a total mismatch between the actual program contours and the problem it purports to solve.”