One year into federal funding, rural healthcare transformation is taking shape

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The $50 billion Rural Health Transformation Program (RHTP) is moving from planning to implementation, with recent federal reports and state announcements providing an early look at how states are putting their first-year funding to use.

On October 9, the Centers for Medicare & Medicaid Services (CMS) released its first report on state RHTP funding obligations, covering activity through July 31, 2026. States collectively reported obligating less than half of their first-year funding, with significant variation in implementation. Georgia, Hawaii, Kentucky, and New Hampshire reported obligating their full allocations, while New York and West Virginia reported no funding obligated during the reporting period.

States face an October 30 deadline to obligate their first-year funding, with funds required to be spent by September 30, 2027. An October 6 Government Accountability Office (GAO) report also outlined CMS’s plans to monitor implementation through state reporting, audits, and site visits, with future funding tied to states’ progress.

While states are working within the same five strategic goals, their approaches to rural healthcare transformation vary. For example:

In technology, Wisconsin is pursuing a shared statewide electronic health record system through a centralized procurement process, while Maine is distributing roughly $30 million directly to providers to modernize the systems they already have.
In maternal care, Alabama is connecting rural facilities to regional maternal-fetal medicine hubs through telehealth and telerobotic ultrasound and equipping rural hospitals without labor and delivery units for obstetric emergencies. Kentucky is building community-based perinatal teams of community health workers, doulas, and peer support specialists coordinated by a telehealth nurse.

Federal investment is also expanding beyond RHTP. Since September, the Department of Health and Human Services (HHS) and Health Resources and Services Administration (HRSA) have announced:

$11.2 million for 15 new rural residency programs
Nearly $25 million to support 132 small rural hospitals
$89.3 million for rural addiction treatment and recovery
Nearly $19 million for telehealth and technology-enabled care to support rural and other underserved communities

These investments come as major Medicaid policy changes included in the One Big Beautiful Bill Act (OBBBA) are set to take effect in 2027. A RAND Corporation analysis projects approximately $679 billion in reductions to combined federal and state Medicaid funding between 2025 and 2034. While RHTP provides $50 billion over 5 years to support rural healthcare transformation, the investment will not fully offset the broader Medicaid funding reductions.

Why It Matters

The challenges facing rural healthcare are not new, and financial, workforce, and access pressures continue to intensify:

A recent University of Minnesota Rural Health Research Center report found that 718 US hospitals lost obstetric services between 2010 and 2024, and by 2024, 58% of rural hospitals no longer offered them.
A new American Hospital Association (AHA) report found that more than 40% of rural hospitals operate at a financial loss.
Rural hospitals provided more than $5 billion in uncompensated care in 2024, while Medicare underpayments exceeded $7 billion.

These pressures make it increasingly difficult for rural providers to maintain services and invest in new care delivery capabilities.

RHTP has drawn significant attention from both established rural healthcare stakeholders and new entrants seeking opportunities to address systemic challenges. The funding creates an opportunity to rethink how care is delivered, strengthen existing services, and explore new approaches to connecting rural communities with the care they need.

There are encouraging signs in how states are approaching transformation, particularly through greater collaboration and new care delivery models. Regional partnerships, hub-and-spoke models, clinically integrated networks, and shared clinical capabilities are central to RHTP and may offer some of the greatest opportunities to improve rural access.

These approaches can help connect patients with specialty expertise through telehealth, shared resources, and partnerships with larger health systems, while allowing rural providers to maintain essential services closer to home.

With states pursuing the same five strategic goals through different delivery models, RHTP creates an opportunity to identify which approaches are most effective. CMS plans to convene states annually at a Rural Health Summit to share lessons learned and highlight promising practices, and future funding will be tied to demonstrated progress.

However, questions remain about whether these investments can support meaningful, sustainable transformation.

The program’s rapid implementation timeline presents challenges. States and participating organizations have had to move quickly to develop proposals, establish partnerships, and obligate funding. These requirements may lead organizations to secure funding before they have fully developed the infrastructure, operational capacity, or implementation plans needed to carry out their initiatives.

While the first RHTP spending report provides an early look at state progress, it is too soon to determine whether these investments will produce lasting improvements in rural healthcare delivery.

While RHTP offers a meaningful opportunity to strengthen rural healthcare, it comes as the financial outlook for many rural providers is becoming more challenging. Medicaid policy changes under the OBBBA beginning in 2027 will add pressures that even successful transformation efforts cannot fully offset.

As states move into implementation, health systems with rural footprints and independent rural hospitals will face difficult choices about how to put these investments to work while sustaining essential services. The priority now is to translate this funding into lasting improvements in rural care, while recognizing that long-term sustainability will require solutions beyond RHTP.