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Last month, the Centers for Medicare & Medicaid Services (“CMS”) issued a Notice of Funding Opportunity (“Notice”) for the $50 billion Rural Health Transformation (“RHT”) Program. The RHT Program was created by the One Big Beautiful Bill Act to partially offset the impact of the estimated $137 billion reduction in federal Medicaid spending in rural areas alone, also resulting from the One Big Beautiful Bill Act. The five-year Program seeks to support rural communities by improving healthcare access, quality, and health outcomes.

CMS’s Notice sets forth the criteria that it will use to determine how RHT funds will be allocated to states. All 50 states are eligible to apply for funding, regardless of the size of their rural population or the needs of their rural hospitals. [1] To receive funds, states must submit their applications by Wednesday, November 5, 2025. A merit review panel will review all applications, and CMS will issue award decisions by December 31, 2025.

Half of the fund ($25 billion) will be distributed equally across states with approved applications, and the remaining $25 billion will be distributed among approved states based on 23 factors. These factors include data-driven measures of a state’s rural health population, rural health facilities, and other state characteristics, such as state-proposed initiatives and state efforts to implement Make America Healthy Again policies. The Notice details the point scoring methodology for each factor and provides examples of initiatives that align with the Program’s goals. As part of the application, states must describe how they will use RHT funds to support their own initiatives. States can consider collaborating with stakeholders to bolster their applications.

States may use RHT funds in a variety of ways. For example, these funds may be used to promote evidence-based, measurable interventions to improve prevention and chronic disease management, recruit and retain clinical workforce talent to rural areas, and support access to opioid use disorder treatment services. The Notice provides a list of impermissible uses of funds, such as to fund new construction or initiatives that fund gender-affirming care.

Participating states must abide by the terms and conditions of their awards, such as satisfying annual reporting requirements. CMS reserves the right to decrease funding or terminate a state’s award if it fails to meet its requirements. States will be assessed on an annual basis throughout the duration of the Program, primarily as it pertains to progress made with their proposed initiatives and policy changes.

While there are uncertainties as to who will benefit the most from RHT funds, CMS has explained “the intent of this funding is not to be used for perpetual operating expenses, but rather for investments that can be made within the duration of the program that will have sustainable impact beyond the end of the program.”

To learn more about the RHT Program and how state applications will be reviewed, please contact Healthcare Member Daphne Kackloudis at dlkackloudis@bmdllc.com or Attorney Kate Crawford at khcrawford@bmdllc.com.

[1] By law, the District of Columbia and U.S. territories are ineligible for funding.