Individuals residing in rural areas face numerous challenges when it comes to accessing healthcare. These challenges are compounded by disparities in health status and outcomes between individuals residing in urban and rural areas.

Healthcare Challenges Facing Rural Communities

• Rural residents may travel almost twice as far to access a hospital as urban residents.
• Despite being an important source of care for rural communities, nearly 200 rural hospitals have closed since 2005.
• Individuals in rural areas face a higher prevalence of preventable disease, including chronic conditions like obesity and diabetes.

The combination of diminishing access to care and disparities in health status makes rural communities a key issue for policymakers and stakeholders in the healthcare sector.

The Rural Health Transformation Program: What You Need to Know

On July 4, 2025, President Donald Trump signed into law the One Big Beautiful Bill Act (OBBBA). According to Congressional Budget Office (CBO) estimates, the Act will reduce Medicaid spending by nearly $1T over ten years, largely as a result of new caps on state Medicaid finance mechanisms and reductions in enrollments resulting from the implementation of community engagement requirements and changes to eligibility and enrollment processes.

During House and Senate debates over the bill, lawmakers and stakeholders raised concerns over the potential disproportionate impact Medicaid funding reductions could have on rural communities, including accelerating the trend of rural hospital closures.

To address these concerns, lawmakers added the Rural Health Transformation Program (RHTP) late in the OBBBA negotiations.

Breaking Down the RHTP Application: Requirements for States

OBBBA appropriates a total of $50B to the RHTF over five years, and states must submit an application to CMS to receive an allotment. OBBBA directs CMS to disburse half of the $50B evenly to all states with approved applications and award the other half at CMS’ discretion to at least ¼ of those states awarded the first half based on need and rurality as defined below. Each state’s application must include a Rural Health Transformation Plan.

A state’s Rural Health Transformation Plan must include details on how the state will:

• 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 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;
• strategies to manage long-term financial solvency and operating models of rural hospitals in the State; and
• Identify specific causes driving the accelerating rate of stand-alone rural hospitals becoming at risk of closure, conversion, or service reduction.

In awarding states the second allotment, CMS must consider

• The percentage of the State population that is located in a rural census tract of a metropolitan statistical area;
• The proportion of rural health facilities in the State relative to the number of rural health facilities nationwide;
• The situation of hospitals in the State; and
• Any other factors that the CMS Administrator determines appropriate.

Timing

While CMS has not yet released official guidance, application materials, or a timeline, CMS Administrator Dr. Mehmet Oz indicated in an August 3 interview that the agency would begin accepting applications in early September. OBBBA requires that CMS review and approve state applications no later than December 31, 2025.

Use of Funds

Once disbursed, states may use funds under the RHTP for:

• Promoting evidence-based, measurable interventions to improve prevention and chronic disease management.
• Providing payments to health care providers for the provision of health care items or services, as specified by the 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 5 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 right size their health care 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, 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, as appropriate.
• Additional uses designed to promote sustainable access to high quality rural health care services, as determined by the Administrator.

Once awarded, states must submit a plan to CMS for using its allotment to address at least three of these activities, an annual report on the use of its allotment, and must ensure no more than 10% of its allotment is used for administration. Funds awarded under the RHTP may not be used as state match.

While the Act requires states to describe their strategies for addressing several key issues impacting rural health, and requires CMS to consider the proportion of rural providers in each state in awarding allotments, funds are ultimately disbursed to states, not directly to rural providers.

States are permitted under the Act to make direct payments to rural providers, and the Act also encourages states to consider investments in technology and workforce development. Because the funds are time-limited, it may be difficult for states to implement strategies to support the long-term fiscal health of rural providers.

Lessons Learned from ARPA

The implementation of home and community-based services (HCBS) spending plans authorized under the American Rescue Plan Act (ARPA) of 2021 offers potential lessons learned for states and policymakers as they develop plans under the RHTP.

ARPA allowed states to submit plans to receive additional federal funding for HCBS initiatives. While potentially transformative, implementation of these initiatives was confounded by short timelines for application and disbursing funds, as well as competing state priorities with the unwinding of public health emergency eligibility flexibilities.

In its analysis of state experiences with the HCBS spending plans, the association ADvancing States identified key lessons learned, including that “states need ample time to develop a spending plan with meaningful stakeholder input, including legislative bodies,” and that states should consider the complexities and timelines of processes such as procurement and rate setting in developing achievable plans.

States now face a similar challenge. As with the ARPA HCBS spending plans, states have minimal time to develop plans to spend allotments under the RHTP. It will be incumbent upon states to make best efforts to meaningfully engage with rural providers, beneficiaries residing in rural areas, and other key stakeholders. Due to the abbreviated timeline, states should consider using surveys or convening stakeholder forums to quickly solicit ideas and feedback.

States should also be realistic about what can be achieved within the timeframe for spending the time-limited funds. Projects that require procurement, for instance, may not be feasible. State leaders should also consider how they can collaborate to share lessons learned from previous state initiatives to support rural providers, as well as work to align strategies in rural areas that cross state lines.

What’s Next? Ongoing Coverage and Analysis of RHTP Application Process

With CMS approval due December 31, 2025, states’ applications for the RHTP could be due as early as this fall. Sellers Dorsey will continue to track and summarize the latest developments, enabling stakeholders to act quickly and effectively. Learn more about our OBBBA and RHTP support services  and be sure to follow us on LinkedIn for additional updates.