Taking advantage of Rural Health Transformation Grant Program funding

What is the Rural Health Transformation Grant Program?

The Rural Health Transformation Grant Program is a new federal initiative administered by the Centers for Medicare and Medicaid Services (CMS) to strengthen rural health care systems. As a key element of the One Big Beautiful Bill Act, the program provides $50 billion over five years (2026–30) to improve health outcomes, sustain access to rural health care, expand provider capacity and modernize care delivery.

While the program offers significant opportunities to enhance the quality and reach of rural health care, states and health care entities must implement an effective plan to optimize the impact of federal funding and maintain compliance.

Funding availability and planning

With all 50 states applying for federal funding under the Rural Health Transformation Grant Program, each will receive a base amount of $500 million, with the remaining $25 billion distributed at CMS’ discretion.

State health agencies must act now to determine where funding will have the greatest impact and how to distribute it effectively to hospitals, health care providers, mental health centers and other providers. In conjunction, rural health care facilities and organizations should also begin planning to prioritize advancements to rural care and prepare for quick action when funding becomes available.

Approved uses of funds include:

• Promoting successful interventions for the prevention and management of chronic diseases
• Providing innovative solutions for the prevention and management of chronic diseases
• Making payments to providers for specific health care items or services
• Offering training and assistance for the development and adoption of advanced technology solutions
• Recruiting and retaining workforce talent in rural communities, with a minimum five-year commitment
• Providing assistance, software and hardware for technology to enhance efficiency, cybersecurity or patient outcomes
• Assisting rural communities to right-size health care delivery systems and service lines
• Enhancing access to opioid and other substance abuse treatment and mental health services
• Supporting innovative care models such as value-based arrangements and alternative payment models
• Promoting sustainable access to high-quality rural health care, as determined by CMS

Strategic considerations for states and health care organizations

Successfully obtaining funding is only one piece of the puzzle. To meet the objectives of the program effectively and improve rural health care access, quality and outcomes, state health agencies and health care organizations must focus on several core processes, including:

Project management: With grant funding spread over five years, state agencies and health care organizations need to develop a strategy that details their plan for each year, how success will be measured and how reporting will be conducted.

Change management: To follow the grant funding guidelines, some employee roles and organizational processes and strategies will likely require adaptation. For successful transformation, health care entities will require the right tools to navigate change and inspire leadership sponsorship and employee buy-in.

Grants management: Effectively managing these federal grants is crucial to success in tracking, reporting and compliance. Proactive planning is recommended to establish guidelines and develop a technology approach to automate and streamline required details and processes.

Contract management: Using various third parties can improve efficiency and productivity in health care, but the terms of any contract or subawards must be clear to CMS and consistent with the funding agreement.

Technology management: Health care organizations will need oversight to confirm funding is used for technology in adherence to grant guidelines. For example, investments in electronic health record systems are limited, but spending on cybersecurity and advanced technologies such as robotics and artificial intelligence is encouraged.

Independent verification and validation: With significant funding at stake, state agencies should leverage independent confirmation to verify grantees are following the planned processes. CMS will rely on states to confirm progress and adherence to goals and provide necessary oversight.

Technical accounting and budgeting: Program funding will require technical accounting and detailed budgeting for a five-to-eight-year period (with extensions, if necessary). Many state agencies and health care organizations may need additional support to conduct the necessary levels of accounting and budgetary reviews.

Once CMS distributes the funds, states and health care organizations need to act quickly to implement and demonstrate improvements. CMS is set to make significant cuts to facilities and programs over the next decade, and states and facilities that do not make timely improvements could be at risk.