Managing compliance risk for the Rural Health Transformation Program

The Rural Health Transformation Program (RHTP) represents a significant opportunity for states to invest in critical infrastructure, expand access to care and modernize rural health systems. However, the compressed timeline for initial funding introduces a set of operational and compliance risks that warrant careful consideration.

States are required to obligate and deploy a substantial portion of first-year funding by Oct. 30, 2026. At the same time, the Centers for Medicare & Medicaid Services (CMS) is expected to evaluate program effectiveness as early as August 2026. This overlap creates a strong incentive for states to quickly award funds to demonstrate early progress.

While this urgency is understandable, it also increases the likelihood that states may overlook foundational compliance requirements during the program rollout.

Procurement risk under 2 CFR 200

Procurement standards under the Code of Federal Regulations (CFR) Title 2, Part 200, or the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, are an immediate risk for states. In a rapid-deployment environment, states might prioritize project outcomes over process rigor, particularly when projects appear straightforward or have the potential for significant impact.

Consider the example of a rural hospital seeking funding to upgrade surgical capabilities through remote or telesurgical equipment. Only one provider might manufacture the technology, leading stakeholders to conclude that a noncompetitive procurement under 2 CFR 200.320(c)(2) is appropriate.

However, this conclusion may not fully account for the procurement landscape. While there may be only one manufacturer, there could be multiple authorized resellers or distributors capable of supplying the same equipment. In such cases, the justification for sole-source procurement becomes significantly weaker, and failure to conduct appropriate market research or competitive solicitation could result in noncompliance.

States often miss these sorts of nuances when they deploy programs under compressed timelines without sufficient technical assistance or procurement guidance.

The cost of delayed compliance

The consequences of early-stage compliance gaps often do not materialize until much later in the grant lifecycle, typically during the reimbursement or audit phases. By that point, corrective action is significantly more difficult and, in many cases, financially consequential.

A failure to adhere to procurement requirements may result in partial or full disallowance of costs, even when the underlying project is otherwise eligible and delivers meaningful public benefit. From a program-integrity standpoint, this creates avoidable friction between recipients and administrators and undermines the effectiveness of the funding.

It is far more efficient to establish compliance expectations at the outset than to attempt remediation after funds have been spent.

Embedding compliance from the beginning

To mitigate these risks, states and program administrators should integrate compliance and monitoring functions into the earliest stages of program design and implementation. This includes:

• Providing clear, up-front guidance on federal procurement standards, including practical examples and common pitfalls
• Offering technical assistance to subrecipients prior to issuing awards and during project scoping
• Requiring documentation of procurement decision making, including market research and vendor analysis
• Establishing monitoring protocols that begin at the award stage, rather than post-expenditure

Embedding these practices early not only reduces the likelihood of disallowed costs but also builds capacity among rural providers that may have limited experience with federal grant compliance.

Balancing speed with sustainability

The urgency to demonstrate early success under RHTP is real, particularly given the anticipated CMS review timeline. However, speed of deployment should not come at the expense of program integrity.

States that take a measured approach, prioritizing both timely awards and robust compliance frameworks, will be better positioned to sustain their programs over the long term. More importantly, they will reduce the risk of funding disruptions that could affect the communities the program is designed to support.

In the context of rural health transformation, the goal is not simply to spend funds quickly, but to invest them effectively, compliantly and with lasting impact.