Rural Health Transformation Program: Implications & Opportunities

H.R. 1, commonly known as the One Big Beautiful Bill Act (OBBBA), includes many provisions that impact healthcare funding. Notable among them is the allocation of $50 billion over five years for the new Rural Health Transformation Program (RHTP), which is intended to help mitigate the impact of reductions to federal Medicaid funding and tighter beneficiary eligibility constraints on rural hospitals and other providers. The RHTP is touted as an opportunity to make rural healthcare “more effective and sustainable.”¹

Investment in rural healthcare is long overdue, given the shifts in demographics and insurance coverage that have challenged delivery systems in many rural communities. Rural providers should work closely with state elected officials, state agencies responsible for the program, provider associations, and trusted advisors to secure participation in this funding and the initiatives it supports.

However, providers should understand that RHTP funds may not fully offset the anticipated reductions in Medicaid funding and exchange revenue related to other OBBBA provisions, partly because states may choose to use the funds for purposes other than providing payment support to rural providers. With this in mind, providers should approach anticipated RHTP funding as just one part of a long-term plan for financial sustainability.

Below, we explore details of the RHTP and strategies for helping rural providers take advantage of its opportunities.

How Will RHTP Funds Be Allocated?

The RHTP provides $50 billion allocated evenly over federal fiscal years (FYs) 2026 through 2030. States are not required to provide matching funds to receive an allocation from the allotment. However, states are not permitted to use the funds received from the RHTP to finance the non-federal share of Medicaid.

While $50 billion over five years is a significant investment in rural healthcare, the Kaiser Family Foundation projects that rural areas will lose $137 billion in federal Medicaid funding over 10 years.² Therefore, the fund is not expected to fully account for the reduced Medicaid dollars for many rural providers. A future Congress could replenish the program’s funding after FY 2030, but states and management teams should be wary of anchoring a long-term rural healthcare sustainability strategy on receipt of these funds beyond these five years.

The funding is available to the 50 states via a one-time application that CMS must approve. Half of the $10 billion annual allotment will be allocated to states evenly. Assuming all 50 states apply and are accepted, each state will receive $100 million per year for five years from this portion of the distribution.

The other half will be distributed based on a statutory formula that CMS has not yet publicly announced. The OBBBA instructs the CMS administrator to consider the following factors when allocating the variable funding:

Percentage of the state’s population that lives in a rural area
Proportion of rural health facilities in the state relative to the number nationwide
“Situation” of Medicaid disproportionate share hospitals (DSHs) in the state
Other factors, as determined appropriate by the administrator

For purposes of the allocation formula, the statute defines rural health facilities as the following:

Prospective Payment System (PPS) hospitals located in a rural area, treated as being located in a rural area, or located in a rural census tract of a metropolitan statistical area (MSA)
Critical access hospitals (CAHs)
Sole community hospitals (SCHs)
Medicare-dependent, small rural hospitals
Low-volume hospitals (LVHs)
Rural emergency hospitals (REHs)
Rural health clinics (RHCs)
Federally Qualified Health Centers (FQHCs)
Community mental health centers
Opioid treatment programs (located in a rural census tract of an MSA)
Certified community behavioral health clinics (located in a rural census tract of an MSA)

The law requires that at least one quarter of states receive funding from the variable portion of funds distributed based on the formula described above. However, it’s possible that not every state that successfully applies will receive funding from this portion.

How Can States Apply for RHTP Funds?

States must submit a one-time application for the funding. CMS anticipates the application will be sent to states in “early September.”³ States will have a narrow window to apply, as the statute requires the CMS administrator to approve or deny all applications by December 31, 2025. According to the statute, states will need to outline a detailed rural health transformation plan to:

Improve access to hospitals, other healthcare providers, and healthcare items and services furnished to rural residents of the state
Improve healthcare outcomes of rural residents of the state
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 healthcare providers in order 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, healthcare clinicians through enhanced recruitment and training
Prioritize data- and technology-driven solutions that help rural hospitals and other rural healthcare providers furnish high-quality healthcare services as close to a patient’s home as is 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 standalone rural hospitals becoming at risk of closure, conversion, or service reduction

How Can RHTP Funds Be Used?

If a state’s application is approved, it will be eligible for funding for the full five years. According to the statute, states are required to use any funds received for at least three of the following activities:

Promoting evidence-based, measurable interventions to improve prevention and chronic disease management
Providing payments to healthcare providers for the provision of healthcare items or services, as specified by the CMS administrator
Promoting consumer-facing, technology-driven solutions for the prevention and management of chronic diseases
Providing training and technical assistance for the development and adoption of technology-enabled solutions that improve care delivery in rural hospitals, including remote monitoring, robotics, artificial intelligence, and other advanced technologies
Recruiting and retaining clinical workforce talent to rural areas, with commitments to serve rural communities for a minimum of five years
Providing technical assistance, software, and hardware for significant information technology advances designed to improve efficiency, enhance cybersecurity capability development, and improve patient health outcomes
Assisting rural communities to rightsize their healthcare delivery systems by identifying needed preventative, ambulatory, pre-hospital, emergency, acute inpatient care, outpatient care, and post-acute care service lines
Supporting access to opioid use disorder treatment services, other substance use disorder treatment services, and mental health services
Developing projects that support innovative models of care that include value-based care arrangements and alternative payment models
Additional uses designed to promote sustainable access to high quality rural healthcare services, as determined by the CMS administrator

States may not use more than 10% of the funding on administrative costs.

While the statute defines rural healthcare providers for the purposes of the variable allocation, it does not specify which providers are eligible for funding, nor how a state should allocate it. CMS Administrator Dr. Mehmet Oz reportedly told several members of Congress that non-rural areas could also obtain funds from the RHTP.⁴ The list of providers that receive funds may be broader than the list used to allocate them. This may be left to the states to determine or subject to future guidance from CMS.

While providing payments to rural providers is a permissible use of the funds, states may be reluctant to use a significant amount to specifically account for lost Medicaid revenue, given that the funding is time-limited. If states were to provide revenue support without requiring significant structural transformation to the rural delivery system, they would need to find additional funding sources to continue supporting providers after the RHTP is expended (assuming Congress does not later provide additional funding). Based on the parameters of the required transformation plan and the allowable uses of funds, states may instead prefer to allocate funds toward specific interventions that require initial seed funding but not ongoing support, focused on improving outcomes, efficiency of care delivery, and/or sustainability of rural healthcare delivery systems.

How Should Providers Navigate the RHTP & Other OBBBA Provisions?

There is considerable uncertainty around how much funding a given state will receive, which providers will receive the funds, and how states will allow recipients to use them. Providers should work closely with their state governments, associations, and trusted advisors to resolve this uncertainty as quickly as possible and secure RHTP funding for which they are eligible.

However, it’s important to remember that RHTP funding is only projected to offset 37% of the OBBBA’s $137 billion reduction to rural federal Medicaid funding over a ten-year period. Our Healthcare Market Point of View provides a framework that supports achieving health for providers and those they serve. This includes honing core capabilities to help providers close the gap between RHTP funding and the reduction in federal Medicaid funding. Specifically, providers should focus on:

Strategic Agility: Calibrating strategic direction as conditions demand and opportunities present. Key considerations include:

Revisit Strategic Plans: Providers should revisit their strategic plans to determine where there may be alignment between allowable uses for RHTP funding and needed investments to achieve long-term goals. Strategic agility allows plans to evolve as more information becomes available regarding RHTP funding eligibility and allocation in each state. This approach may help a provider invest funds in a manner tightly aligned with their strategic plan and develop a compelling rationale to receive funds if a state establishes a formal application process for its providers.

Aligned Growth: Pursuing strategic investments, integration activity, and partnerships across the healthcare value chain. Key considerations include:

Integration Opportunities: One required element of a state’s rural health transformation plan focuses on strengthening “local and regional strategic partnerships between rural hospitals and other healthcare providers.” There may be opportunities to use funds to support partnerships related to innovative care delivery models.
Value-Based Care: States may choose to use RHTP funds to implement or deploy value-based care models in rural areas to improve outcomes and reduce the total cost of care. If a state chooses to use funding for this purpose, providers should begin to evaluate potential partners in risk-based models and the data and infrastructure necessary to succeed.

Talent Optimization: Building exceptional teams and equipping them to succeed in executing mission-aligned business and care delivery models. Key considerations include:

Workforce Alignment: States may choose to use RHTP funding to support recruiting and retaining clinical workforce talent in rural areas. This may create increased opportunities for physician enterprises to align staffing to improve outcomes and care delivery efficiency.

Financial Discipline: Generating the margins necessary to thrive by securing and maintaining market relevance. Given that the RHTP will not fully offset the projected decrease in federal Medicaid funding as a result of the OBBBA, healthcare organizations should evaluate the following areas to support long-term financial sustainability:

Cost Structure Efficiency: Continue to seek performance improvement opportunities in labor and non-labor cost areas.
Negotiated Managed Care Rates: Utilize available price transparency data to benchmark negotiated rates relative to competitors to understand rate improvement opportunities.
Revenue Cycle Excellence: Provider organizations can no longer afford an underperforming revenue cycle. In addition to reducing denials and leakage to realize contracted rates, providers should help individuals retain Medicaid coverage when possible and connect those who lose Medicaid with other sources of coverage or financial assistance for those who qualify.

Regulatory Excellence: Understanding the rapidly evolving regulatory environment and acting strategically within it. As organizations attempt to mitigate the impact of reduced Medicaid funding, they should evaluate:

Medicare Advantage (MA): To help navigate revenue cycle challenges, providers should review their portfolio of MA contracts to determine if the relationships continue to meet their strategic objectives and yield reimbursement at acceptable rates and under fair terms.
Traditional Medicare: Given the anticipated loss of Medicaid coverage and increase in the uninsured, hospitals need to capture all Medicaid days for disproportionate share hospital (DSH) and 340B eligibility (if applicable). Hospitals with access to the 340B program may need to consider additional strategies to remain eligible and closely monitor eligibility requirements.
In addition to DSH, hospitals should explore strategies related to other Medicare reimbursement provisions, including Medicare bad debts, wage index, and IME/GME funding. The OBBBA bases state-directed payments on the “specified total published Medicare payment rate” for services for which there is one. While CMS needs to clarify what this means, efforts to improve the accuracy of allowable Medicare add-on payments could help increase Medicaid state-directed payments.

How Forvis Mazars Can Help

Our healthcare professionals at Forvis Mazars are committed to helping organizations develop the core capabilities necessary to understand and adapt to evolving federal policies and congressional legislation. If you have questions about the RHTP or strategies to navigate the impacts of the OBBBA, please reach out to your Forvis Mazars advisor.

1 “The One Big Beautiful Bill Is a Historic Investment in Rural Healthcare,” whitehouse.gov, July 25, 2025.
2“A Closer Look at the $50 Billion Rural Health Fund in the New Reconciliation Bill,” kff.org, August 4, 2025.
3“Dr. Mehmet Oz Says Applications for $50 Billion Rural Hospital Fund Will Go Out ‘in Early September,’” cbsnews.com, August 3, 2025.
4“Oz Works to Assuage GOP Members on Medicaid Relief Fund,” politico.com, July 2, 2025.

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