Rural Health Transformation Program – What’s Next? Considerations as States Begin Implementation

On December 29, CMS that all 50 states would receive awards from the Rural Health Transformation (RHT) Program, a five-year initiative authorized by H.R. 1 () to strengthen and modernize rural health systems nationwide.  In early 2026, states will receive first-year awards ranging from $147 million (New Jersey) to $281 million (Texas).  CMS released for all 50 states, highlighting planned investments in initiatives to expand access to care, grow the rural health workforce, support health information technology (IT) modernization and pilot new delivery and payment models tailored to local needs. 

The announcement kicked into high gear state implementation efforts.  Broadly, states have already been hard at work in six primary areas:

Early implementation challenges emerging for states

With early implementation already underway, several points of tension are emerging for states:

1. Balancing speed of spending with making thoughtful investments.  States have ten months to obligate year one funds (and one additional year to spend them) or risk having money clawed back and re-distributed by CMS to other states in future program years.  The pressure of “spending fast” is pushing up against state desires to make thoughtful investments that are linked to clear, measurable community needs and that can be sustained beyond the lifecourse of the five-year grant.  Ultimately, states’ initiative design and funding structure will play a central role in balancing timely obligation of funds with the goal of producing lasting, community-level impact.  Many states are drawing on lessons learned from the rapid deployment of COVID-19 relief funds and emergency programs, applying those experiences to design processes that can move quickly while maintaining accountability and strategic focus.
2. Balancing support for community-driven projects with the need for a cohesive, statewide model to bolster the rural health ecosystem.  States, correctly, want to be responsive to interests and capacity of providers in their communities, which is why many are establishing opportunities for providers to propose projects for grant funding.  While that ensures local community engagement and willing partners on the ground who are ready to implement based on the needs they see and solutions they design, it also increases the risk that states will fund many discrete, isolated projects that fail to link together for a more meaningful and transformational combined impact.
3. Ensuring strategic, productive engagement between technology vendors/commercial partners and providers.  When it comes to partnerships with technology and other commercial vendors, on-the-ground partners and organizations will need a lot of support.  States are invested in ensuring these partnerships lead to successful adoption of sustainable, interoperable technology—not only because that is what their providers need but because that is what will help the state achieve its transformation goals.  Unfortunately, rural providers typically lack the experience and bandwidth to assess tools and contract effectively, and many vendors offer niche solutions (e.g., for pediatrics, cancer support, etc.).  This leaves providers asking “What problem(s) should I try to address? What solution should I invest in? Which vendor(s) offer that solution and are best for me?”.  As a result, states are deliberating on how best to manage the expansive vendor landscape and foster a more interconnected set of technology vendors that can support interoperability across providers.

Considerations for RHT stakeholders and partners

The success of each state’s program will be contingent on a network of partnerships and underlying contracts for services and supports in line with the state’s planned goals and initiatives.  As different types of organizations prepare to engage the state as a potential partner, several considerations should be taken into account:

1. Position for state contracting and procurement strategies. States are finalizing their approaches to funding each of their planned initiatives and the mechanisms by which they will “push money out the door” to meet federal requirements.  Broadly, it appears states are deploying a mix of strategies including:

• Competitive grant pools making funds available to eligible applicants. 
• Formation of third-party grant management intermediaries that distribute funds through competitive grant processes, which may also hold the funds on behalf of the state.
• Direct contracts with third-party entities to manage pools of state money for defined purposes, expecting these third parties to further contract with partners to implement specific initiatives in designated geographies or for designated purposes.
• Direct state procurements for services, utilizing “normal” state procurement channels via public RFPs, evaluations and contract decisions. 

2. Understand eligibility requirements and explore strategies to comply. States will likely develop specific eligibility requirements for different initiatives.  For technology vendors and other for-profit partners, it is clear many states will not distribute project funds directly to these vendors if state-based entities are not committed to investing in these products and services.  These vendors will have to find on-the-ground partners that will be the lead applicant for state funds (e.g., providers, non-profits, associations).

3. Prepare for successful funding applications now. Most states are engaged in further design work around the planning initiatives included in their applications.  Interested partners can begin to organize themselves for partnership and funding opportunities, utilizing state applications as a guide for what the states will be funding.  Interested applicants should take into account:

• Ensure explicit alignment with state RHTP goals and specific, measurable outcomes that can be expected to align to the metrics and outcomes states have committed to in their applications.
• Ensure all proposed uses of funding are allowable and consider using multiple sources of funding, if needed, to strengthen the overall potential for investment and impact into a specific project. 
• Determine application strategy as states are likely to favor applications that show partnerships—not just between technology vendors and state-based entities, as described above, but also between health care providers and supportive service organizations that serve the same region.  Partnerships among on-the-ground providers that serve the same communities that offer a cohesive plan to serve their communities better, together, help the state to thread the needle between their community-driven approach and the need for coordinated efforts that impact outcomes and support transformation goals.  
• Start preparing for the nuts and bolts that will be required of your application, such as timeline and budget which are critical to understand as states ensure compliance with spending rules and reporting requirements to CMS.

Bottom line: Interested applicants can begin the work necessary for applications now despite limited clarity on the specific funding mechanisms from states.

4. Identify ways to support state teams in successful implementation. The administrative burden being placed on states by this program is substantial, including complicated rules regarding funding and budget reporting, program performance measurement and reporting and other requirements.  Through both formal channels—such as external advisory committees that are being formed—and informal channels, states will value advice and partnership from experts on the ground that will help them to succeed.  There are also likely opportunities to support the state to meet their program requirements, including the provision of program evaluation services, metrics/reporting services, auditor services and data collection and visualization supports.

5. Elevate issues of sustainability. Beyond the immediate, states’ partners will be well served by keeping long-term sustainability at the forefront of their planning process.  Rural health transformation success will not be fully realized during the five-year grant cycle, and indeed CMS has prioritized sustainability as a major component in both application scoring and regular reporting requirements.  States and their partners must begin sustainability planning this year and continue to evaluate each initiative and program through this lens to ensure their continuation beyond the lifecycle of the grant and the vision for true transformation.

During the application process, states were required to build annual program budgets using a fixed $200 million figure.  CMS acknowledged that the stat’s final awarded amount may be higher or lower based on the application evaluation criteria and that a final budget would be negotiated with CMS post-award.