On Sept. 15, 2025, the Centers for Medicare and Medicaid Services (CMS) released a Notice of Funding Opportunity for the $50 billion Rural Health Transformation Program. The fund was created as part of the recently passed budget reconciliation legislation to offset concerns about the impact of the legislation on rural health care. The notice provides instructions and more detail. To receive any funds, states must submit an application that aligns with program requirements by Nov. 5, 2025. It is expected that the awards will be announced on Dec. 31.
Background: The $50 billion dollar fund is split into two equal tranches. The first tranche will go to states with approved applications and will receive funding for five years. However, applying for funding is not a guarantee to receive funds. The other $25 billion in the fund must be distributed to no less than 25% of states with eligible applications based on a variety of factors specified by law and in the notice. This includes the number of rural residents and health facilities in the state, the relative amount of uncompensated care in the state, the quality of workforce and other state initiatives supported by the rural health fund and the extent to which states adopt Make America Healthy Again policies. CMS will recalculate the allocation of the second tranche annually over the five-year period of funding primarily based on the progress of state initiatives and policy changes.
Only states – no territories, nor Washington, D.C. – are eligible for funding. States need to submit only one application to receive funding for the entirety of the program. In the notice, CMS stated that all 50 states, even if they do not have a large rural population or any rural hospitals, are eligible to apply. The statutory definitions do not limit eligibility to receive funds to rural hospitals.
Annual distributed allotments to states would remain available through the end of the following fiscal year. Beginning in 2028, CMS will determine any unexpended or unobligated funds each fiscal year and distribute any unused funding at the end of a fiscal year using a forthcoming methodology.
There is no requirement for states to match awarded allotment of funds. However, states may not use this new funding to replace or duplicate current funding activities. States must submit a program duplication assessment that includes a budget analysis that identifies current funding streams the state proposes to apply to state activities and new and distinct activities toward which the state could apply the new funding.
Strategic Goals: In the notice, CMS identified five “strategic goals” for this funding, which are aligned with the statute’s approved uses of funds. Applications must identify which strategic goal(s) is supported by each proposed initiative and use of funds that is included in the state’s plan:
- Make rural America healthy again: Support rural health innovations and new access points to promote preventative health and address root causes of diseases. Evidence-based, outcomes-driven interventions to improve disease prevention, chronic disease management, behavioral health and prenatal care may be used.
- Sustainable access: Help rural providers become long-term access points for care by improving efficiency and sustainability.
- Workforce development: Attract and retain a high-skilled health care workforce by strengthening recruitment and retention of health care providers in rural communities. Develop a broader set of providers to serve a rural community’s needs.
- Innovative care: Enhance the growth of innovative care models to improve health outcomes, coordinate care and promote flexible care arrangements. Develop and implement payment mechanisms incentivizing providers or use Accountable Care Organizations (ACOs) to reduce health care costs, improve quality of care and shift care to lower cost settings.
- Tech innovation: Foster use of innovative technologies that promote efficient care delivery, data security and access to digital health tools by rural facilities, providers and patients.
Stakeholders: The notice also provided a role for stakeholders in the application process:
- The state must certify that its application was developed in collaboration with at least the following stakeholders: state health agency/department of health, state Medicaid agency, the state office of rural health, the state’s tribal affairs office or tribal liaison, as applicable; Indian health care providers, as applicable; and any other key stakeholders identified in the planning process.
- The application must describe how the state has involved and will continue to involve rural stakeholders and must include any evidence of support from stakeholders, such as resolutions or letters of support, as attachments to the application.
- The state must provide an engagement framework that specifies how the state will have a formal process to engage stakeholders on a regular basis. This framework must also include how the state will coordinate with the required stakeholders on deploying funds, tracking milestones and assessing impact metrics.
- Universities, local health departments and provider associations must be consulted as states design and implement activities under its plan.
- States may subaward or subcontract program funds to partners for various activities. However, the state must make the process, criteria and rationale for selecting such sub awardees and subcontractors clear to CMS.
Other Requirements: A variety of other requirements were also outlined.
- Outcomes: States must identify at least four quantifiable metrics to be used to assess the impact of any initiative, including both baseline data and targets for the measurable outcomes. States must include at least four outcomes in the plan. One outcome must be at a county or community level of granularity. CMS provides a list of examples of possible types of metrics in the notice that include access metrics, quality and health outcomes, financial metrics, workforce metrics and use of technology.
- In addition, for each initiative and for the activities to implement the initiative, the state must provide estimated dates and milestones, legislative or regulatory actions the state has committed to enact, as well as a governance and project management structure.
- The state must describe its “strategy to ensure lasting change vs. temporary infusions of funding.”
Requirements for Fund Distribution and Evaluation Criteria
The statute requires Rural Health Transformation Program funds be distributed through a formula that allocates 50% equally among approved states in the “Baseline” funding, and 50% based on rural population metrics, facility counts and any other factors the administrator deems appropriate in the “Workload” funding. Under the statute, workload funding must be provided to at least one-fourth of the approved states, based on the following criteria:
- The percentage of the state population that is located in a rural census tract.
- The proportion of rural health facilities in the state relative to the number nationwide.
- The situation of “deemed disproportionate share” hospitals in the state.
- Any other factors the administrator deems appropriate.
In the notice, CMS described how it will evaluate state eligibility for the workload funding by calculating a weighting of factors in a points-based scoring system. Each factor (A.1. to F.3.), has a total points score of 100 across all 50 States. A state’s total points score for each budget period is the weighted sum of the points score of each factor. For each state, CMS will calculate: (1) a “Rural Facility and Population Score” (factors A.1. to A.7.); and (2) a “Technical Score” (factors B.1. to F.3.). Technical Score Factors will be recalculated each year based on the state’s required annual reporting. The Rural Facility and Population Score is calculated only once during Q4 2025, based on data available during the initial application process.
Rural Facility and Population Score Factors: The state’s Rural Facility and Population Score is based on the following factors:
- 1. Absolute size of rural population in a state.
- 2. Proportion of Rural Health Facilities in the state.
- A.3. Uncompensated care in a state.
- A.4. Percent of state population located in rural areas.
- A.5. Metrics that define a state as being frontier.
- A.6. Area of a state in total square miles.
- A.7. Percent of hospitals in a state that receive Medicaid DSH payments.
Technical Score Factors: Technical Score Factors, and corresponding Workload funding, will be recalculated each year based on the state’s annual reporting, with an emphasis on the state’s progress towards goals and commitments made by the state in its cooperative agreement. Technical Score Factors are categorized as based on one or more of the following factor types:
- Data-Driven Factors: Based on metrics compared to other states.
- Initiative-Based Factors: Based on a qualitative assessment of the programmatic initiatives outlined in the state’s application and subsequent follow through.
- State Policy Action Factors: Based on the state’s existing policy stances and any proposed policy actions the state commits to in accepting an award. As described by CMS, State Policy Action Factors do not use funding and are optional to pursue, but “will be complementary to and greatly enhance the impact of initiative-based investments and their benefits to health care in rural communities.” Factors include the following:
- B.2. Health and lifestyle: Incentivizes states to require schools to reestablish the Presidential Fitness Test.
- B.3. SNAP waivers: Incentivizes states to adopt the U.S. Department of Agriculture Supplemental Nutritional Assistance Program Food Restriction Waiver, which prohibits the purchase of non nutritious items, for example, soda, candy, energy drinks, fruit and vegetable drinks with less than 50% natural juice and prepared desserts.
- B.4. Nutrition Continuing Medical Education: Incentivizes states to adopt a requirement for nutrition to be a component of continuing medical education.
- C.3. Certificate of Need: Incentivizes states to eliminate certificate of need (CON) laws.
- D.2. Licensure compacts: Incentivizes a state’s participation in interstate licensure compacts for specified clinician types.
- D.3. Scope of practice: Incentivizes states to expand the scope of practice of nonphysician practitioners such as nurse practitioners, physician assistants, pharmacists and dental hygienists, to increase access to primary care options.
- E.3. Short-term, limited-duration insurance (STLDI): Incentivizes states to offer STLDI plans, as defined in 45 CFR 144, to help address issues associated with being uninsured.
- F.1. Remote care services: Incentivizes states to adopt broadly supportive policies to promote access to remote care and telehealth services.
Given the impact of the cuts to the health care system contained in H.R. 1 as passed, funding for rural health is important. While states began working on initiatives for what might be included in their applications, a number of policy initiatives the administration wants to achieve are embedded in the guidelines. As they go through the process, states are sure to have additional questions.
