The Rural Health Transformation Program applications explained

Modern Healthcare – Tuesday, September 16, 2025
By Bridget Early

Federal regulators have officially started the clock for a key rural health fund that could help prop up providers dealing with sweeping spending cuts.

States have a short window to turn around comprehensive applications for the first tranche of $50 billion available through the Rural Health Transformation Fund. Healthcare advocates are urging industry participants to make their voices with state administrations before applications are due Nov. 5.

The dollars could serve as a critical cash infusion into an industry scrambling to collect itself after President Donald Trump in July enacted $1.1 trillion in healthcare cuts.

Here’s what to know about the fund and the application window that just opened.

What is the rural health fund?

The Rural Health Transformation Fund is a $50 billion funding pool set aside in the tax law. It is designed to help stabilize rural providers given the broader healthcare cuts also included in the measure.

The Centers for Medicare and Medicaid Services is responsible for approving or denying states’ applications for the fund. CMS will oversee the disbursal of $10 billion per year over five years beginning in October, the start of the federal fiscal year.

It is states, not providers, that apply for the funds, then distribute the dollars to providers if the applications are approved.

Out of the $50 billion, $25 billion will be evenly distributed to states with approved plans, according to CMS. The remaining $25 million will be awarded “based on individual state metrics and applications that reflect the greatest potential for and scale of impact on the health of rural communities,” according to a CMS news release.

Which providers qualify for funds?

Rural hospitals, critical access hospitals, safety-net hospitals, sole community hospitals, Medicare-dependent hospitals and low-volume hospitals are eligible to receive funding support.

Federally qualified health centers, rural health clinics and community mental health centers also qualify.

How can states use the funds?

States must use the dollars for at least three of a prescribed set of activities, such as recruiting staff, standing up new technologies, paying providers, developing value-based care initiatives and supporting access to substance use disorder treatments, among others.

Only 10% of funds can be used for state administrative expenses.

If CMS determines that a state has misused funds, it can withhold or reduce future payments, or claw back payments.

What is the timeline?

CMS began accepting applications for the funding Monday. States will have through Nov. 5 to apply. There will only be one application period for the entire five-year period, so a state cannot skip this year and expect to seek money in subsequent years. CMS will announce all funding decisions for states by Dec. 31.

What should go in state applications?

States should submit a thorough plan for how they intend to use the funds. In partnership with hospitals and other providers, states should detail how the money would be used to maintain access to care, improve workforce development, establish new care models and develop technological infrastructure, according to CMS’ funding notice.

The law grants CMS broad discretion to approve or deny applications.

What should providers being doing right now?

Alexa McKinley Abel, director of government affairs and policy for the National Rural Health Association, said healthcare providers need to be closely communicating with states as their administrations prepare applications.

Some states have issued requests for information, which offer the industry in their state a place to weigh in, Abel said. Stakeholders also should find out which government offices will be putting together the applications, Abel said. State governors are primarily responsible, but have the flexibility to delegate to other agencies, such as their state health agencies, Abel said.

CMS is offering two informational webinars about the funding, one Sept. 19 and one Sept. 25.

What are providers’ concerns about the program?

The rural-specific funding only lasts five years, and isn’t meant to make up for $960 billion in Medicaid cuts, Abel said.

Plus, some stakeholders are worried that broad definitions of “rural” and fierce competition for the funding might pull the money away from rural providers that need it the most.

“Funds can be used for suburban and urban hospitals and give multi-hospital systems an advantage over unaffiliated, independent hospitals,” said Jeff Smedsrud, CEO of Communicating for America, a rural advocacy group based in Fergus Falls, Minn.

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