What’s in the Rural Hospital Fund?

Added to the recently passed budget reconciliation legislation in the Senate to sweeten the deal, is a fund of $50 billion that was known as the Rural Hospital Fund. However, it is broader than just hospital care.

The Rural Health Transformation Program appropriates $10 billion per fiscal year to the Centers for Medicare and Medicaid Services (CMS) for fiscal years 2026-2030 for a total of $50 billion over five years. States must apply for the funding no later than Dec. 31, 2025.

To be eligible, a state must submit an application, in a process to be determined, with the following information:

1. A detailed rural health transformation plan detailing how the state plans to:
   1. Improve health care access to hospitals, other health care providers and health care items and services furnished to rural residents of the state.
   2. Improve outcomes of rural resident.
   3. Prioritize the use of new technologies or technologies that connect providers to patients.
   4. Initiate and strengthen local and regional strategic partnerships between rural hospitals and other health care providers in order to promote measurable quality improvement, increase financial stability maximize economies of scale and share best practices.
   5. Enhance economic opportunity and the supply of health care providers through enhanced recruitment and training.
   6. Outline strategies for the long-term financial solvency of rural hospitals in the state.
   7. Identify specific causes driving the accelerating rate of standalone rural hospitals becoming at risk of closure conversion or service reduction.
2. A certification that none of the funding under the program would be spent on expenditures attributable to an intergovernmental transfer, certified public expenditure or any other expenditure to finance the nonfederal share of expenditures required under any provision of law.

If a state is selected to receive payments under the program, it will receive payments for all five program years. The amount each state receives under the program will be determined by CMS and is based on each state’s rural population, number of rural health facilities and the situation of hospitals in the state. If a state receives funding under the program, it must use the funding for at least three of the following purposes:

1. Promotion of evidence-based chronic disease prevention and management interventions.
2. Payment to health care providers for the provision of health care items or services.
   1. Eligible items or services to be specified by CMS at a later date.
   2. Health care provider is defined as a provider enrolled under CHIP, Medicaid or Medicare.
3. Promotion of consumer-facing technology solutions to prevent and manage chronic diseases.
4. Provision of training or assistance in the adoption of technology solutions, such as remote monitoring and AI, by rural hospitals.
5. Recruiting and retaining a clinical workforce to rural areas if such workforce commits to serve in a rural community for at least five years.
6. Provision of technical assistance, software and/or hardware to improve cybersecurity, efficiency or patient outcomes.
7. Identification of needed preventative, ambulatory, hospital, emergency, acute inpatient care, outpatient care and post-acute care in rural communities.
8. Supporting access to opioid use disorder, substance use disorder and mental health treatment.
9. Developing value-based care or alternative payment models.
10.  Any other use identified by CMS as qualifying.

For an individual provider or facility to receive funding under the program, a state would have to apply for the program, be granted program funding and then operationalize three or more of the above-listed uses for the funding. The provider or facility would then likely have to meet whatever eligibility criteria such state sets and apply to the agenc(ies) in that state administering the funding use(s).

The provision defines a rural health facility as:

• Being located in a rural area or is treated as being located in a rural area or is located in a rural census tract of a metropolitan statistical area.
• A critical access hospital.
• A sole community hospital.
• A Medicare-dependent small rural hospital.
• A low volume hospital, a rural emergency hospital.
• A rural health clinic.
• A federally qualified health center.
• A community mental health center.
• A health center that is receiving a grant under Section 330 of the Public Health Service Act,
• An opioid treatment program that is located in a rural census tract of a metropolitan statistical area a certified community behavioral health clinic that is located in a rural census tract of a metropolitan statistical area.

States approved for an allotment will not be required to provide any matching funds as a condition for receiving funding. No more than 10% of the allotment to a state may be used by the state for administrative expenses.