CMS Opens State Applications for $50B Rural Health Transformation Program

The program, authorized under the One Big Beautiful Bill Act, will allocate $10 billion annually between 2026 and 2030.

The Centers for Medicare & Medicaid Services (CMS) has opened state applications for the $50 billion Rural Health Transformation Program, a five-year initiative aimed at addressing Medicaid funding cuts for hospitals.

The program, authorized under the One Big Beautiful Bill Act, will allocate $10 billion annually between 2026 and 2030.

Half of the funds will be distributed equally among approved states, while the remaining half will be awarded at CMS’ discretion to strengthen rural providers and communities. Applications are due by Nov. 5, with awardees to be announced by Dec. 31.

“Rural healthcare deserves a healthcare system built for rural reality, not an afterthought of urban leftovers,” Health and Human Services Secretary Robert F. Kennedy Jr. said in a video announcement. “Right now, only 7% of Medicaid hospital spending reaches rural hospitals. That’s got to change. The Rural Healthcare Transformation Program is that change.”

Program goals and funding priorities

CMS outlined five broad goals: preventive care and chronic disease management, rural workforce recruitment with service commitments, innovative payment models, improved provider efficiency, and expanded use of digital tools and remote care.

“The program tackles the root causes of rural healthcare failure,” Kennedy said. “It gives states the tools to design solutions that last—not Band-Aids that fail.”

CMS Administrator Mehmet Oz highlighted the program’s technology focus: “Picture a patient checking symptoms on an iPhone instead of driving 35 miles to the nearest doctor. Picture an AI-powered system replacing stacks of paperwork, cutting administrative work in half so providers can focus on patients.”

States must outline at least three of the 11 permissible uses in their applications. These include IT upgrades such as cybersecurity, AI adoption, opioid use disorder treatment, partnerships between providers, and consumer-facing technology for chronic disease management.

Restrictions and reporting requirements

Funding may support equipment upgrades and minor renovations, but cannot be used for new construction or projects already underway. Clinical service payments reimbursable by insurance and clinician salaries tied to noncompete agreements are excluded.

A 10% cap applies to administrative costs, with additional limits on electronic health system replacements (5%) and Rural Tech Catalyst Fund Initiatives (10%). CMS emphasized that funds are intended for “investments … that will have a sustainable impact beyond the end of the program.”

States will need to report annually on fund usage and progress, with continuation applications required to receive subsequent years’ funding. While only states may apply, they are allowed to partner with universities, community organizations, and provider associations for implementation.

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