Client Alert

House of Representatives Bill H.R. 1, Rural Health Transformation Program

H.R. 1 establishes the Rural Health Transformation Program, providing $10 billion annually to states for five years to strengthen rural health care access, infrastructure, workforce, technology, and delivery systems.

July 14, 2025

5 minutes

Key Takeaways

H.R. 1 establishes a new Rural Health Transformation Program that will provide $50 billion in federal funding to states over five years to support rural health care transformation. The program presents states with an opportunity to invest in rural providers and services while addressing the financial and operational challenges facing rural health systems.

$10 billion annually will be available to states for federal fiscal years 2026 through 2030, with no state matching funds required.
States must submit a one-time application to CMS by November 5, 2025, with approved applications providing eligibility for funding throughout the five-year program.
States receiving funding must use their allotments for at least three qualifying rural health activities, with no more than 10% of funds permitted for administrative expenses.
States should begin preparing now to identify rural providers, assess anticipated Medicaid funding changes, develop transformation plans, and determine how Rural Health Transformation Program funds can complement other funding and delivery system reform efforts.

What State Agencies Need to Know: At a Glance

The Rural Health Transformation Program represents a significant federal investment in rural health care. States that receive funding will need to develop strategies for improving access and outcomes, strengthening rural provider finances, supporting the health care workforce, adopting technology, and addressing the unique needs of rural communities. States should also evaluate the program alongside other provisions of H.R. 1 that may affect Medicaid financing and rural provider revenues.

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$50 Billion for Rural Health Transformation

H.R. 1 appropriates $10 billion annually to CMS for five years, from FFY 2026 through FFY 2030, to provide allotments to states with approved Rural Health Transformation Program applications.

Application Deadline: November 5, 2025

States must submit applications to CMS no later than November 5, 2025. CMS must approve applications by December 31, 2025. The application is a one-time process, meaning states with approved applications remain eligible for allotments throughout the five-year program.

Rural Health Transformation Program Funding

The annual $10 billion appropriation will be distributed to states through two components:

50% of annual funding will be distributed equally among states with approved applications.
The remaining 50% will be distributed according to a methodology established by CMS that must consider factors including:The percentage of the state’s population located in a rural census tract within a metropolitan statistical area.
The proportion of rural health facilities in the state relative to rural health facilities nationally.
The state’s disproportionate share hospital (DSH) circumstances.
Other factors CMS determines appropriate.
At least 25% of states with approved applications must receive funding from the second component.
States are not required to provide matching funds.
Funds generally must be spent by the end of the fiscal year following the fiscal year in which they are distributed.
CMS may withhold, reduce, or recover funds that are not appropriately expended and may redistribute unexpended or misused funds.

Eligible Rural Health Facilities and State Requirements

The program allows states to support a broad range of rural health providers and services. Eligible rural health facilities include:

Rural Medicare subsection (d) hospitals.
Critical access hospitals.
Sole community hospitals.
Medicare-dependent, small rural hospitals.
Low-volume hospitals.
Rural emergency hospitals.
Rural health clinics.
Federally qualified health centers.
Community mental health centers.
Section 330 health centers.
Opioid treatment programs located in qualifying rural census tracts.
Certified community behavioral health clinics located in qualifying rural census tracts.

States must use their funding for at least three qualifying health-related activities, which may include:

Evidence-based chronic disease prevention and management.
Payments to health care providers for health care items or services.
Consumer-facing technology solutions for chronic disease prevention and management.
Technology training and technical assistance, including solutions involving remote monitoring, robotics, and artificial intelligence.
Clinical workforce recruitment and retention, including commitments to serve for at least five years.
Information technology improvements that enhance efficiency, cybersecurity, and patient outcomes.
Right-sizing rural health care delivery systems across preventative, ambulatory, emergency, inpatient, outpatient, and post-acute care.
Opioid use disorder, substance use disorder, and mental health treatment services.
Innovative value-based and alternative payment models.
Other activities designated by CMS to promote access to rural health care services.

States also must submit a plan describing how funds will be used and provide annual reports regarding use of the allotment. No more than 10% of a state’s allotment may be used for administrative expenses.

Eligible Rural Health Facilities and State Requirements

The Rural Health Transformation Program provides a significant new source of federal funding, but states should consider the program in the broader context of H.R. 1 and its potential effects on Medicaid financing and rural providers. States should consider:

Assessing the anticipated impact of H.R. 1’s Medicaid financing changes, including provider tax and State Directed Payment reductions and DSH allotment reductions.
Estimating potential revenue shortfalls and downstream effects on provider rates and beneficiary access.
Identifying rural providers that provide essential services to Medicaid populations.
Identifying priority rural health activities and potential transformation initiatives.
Gathering the information necessary to prepare the Rural Health Transformation Program application.
Developing a rural health transformation plan that aligns federal funding with state priorities and existing delivery system reform efforts.
Evaluating how Rural Health Transformation Program funding can be leveraged with other state and federal funding sources.
Establishing processes to monitor program expenditures, reporting requirements, and compliance.

How Myers & Stauffer Can Help

Myers & Stauffer can help states evaluate the Rural Health Transformation Program opportunity and develop strategies to maximize its impact on rural health systems. Our team can support states throughout the application, planning, implementation, and monitoring process.

As federal guidance continues to develop, Myers & Stauffer will continue monitoring CMS implementation of the Rural Health Transformation Program and is available to assist states with application development, transformation planning, financial modeling, program implementation, and compliance monitoring.

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