Across the country, states are grappling with how to allocate their portion of funds from the Rural Health Transformation Program (RHTP) created in 2025. But whether those federal dollars will help keep rural hospitals open is still up for debate.
Money from the program was proposed as part of H.R. 1, the One Big Beautiful Bill, passed last year, along with budget cuts to Medicaid. However, implementation of the program doesn’t necessarily mean it will get to hospitals in rural communities, experts said.
“The fundamental problem with the Rural Health Transformation program is it doesn’t actually enable (hospitals) to get paid,” Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, said in an interview with the Daily Yonder. “If your hospitals in your state are losing money on all of their services, then the inability to offset that even temporarily with the Rural Health Transformation program funds is a problem.”
In 2025, Congress passed the “One Big Beautiful Bill” that set federal spending through 2030. Designed to cut costs and reduce debt, the legislation came under fire in May 2025 for its impact on rural healthcare. The legislation cut federal Medicaid spending by nearly $1 trillion, with rural areas facing between $137 billion and $155 billion in Medicaid cuts over a decade, according to analysis by the Kaiser Family Foundation.
To offset concerns over the impact on rural healthcare systems, Congress members proposed the $50 billion Rural Health Transformation program, to be implemented over five years starting in 2027.
According to the White House, the spending was an unprecedented investment in rural hospitals.
“The status quo has left rural hospitals vulnerable, and the President’s landmark legislation makes historic investments to ensure sustainability of rural access points and improve health outcomes for Americans who rely on this care,” the White House said in a white paper published just three weeks after the legislation passed.
“The Rural Health Transformation Program will provide new funding to states for a range of uses designed to make rural healthcare more effective and sustainable for the long term … To put the scale of this investment into context, consider the CMS Office of the Actuary estimates Medicaid in total spent $19 billion on rural hospitals in 2024.”
States were notified in December 2025 how much they would receive in RHTP allocations. Those first-year allocations amounted to $10 billion and ranged in dollar amounts from $147 million (New Jersey) to $281 million (Texas). On average, states received about $200 million for one year.
After notification, states had about 30 days to submit revised budgets to Centers for Medicare & Medicaid Services (CMS) reflecting what they intended to do with the money. And CMS is determining how those funds can be spent.
“That’s a sub-regulatory decision CMS made that said that no more than 15% of the funds can be used to supplement payment for services that are already being offered,” Miller said. “So, 85% of the money is essentially not available to go to the single biggest problem that rural hospitals have, which is that they’re losing money on the services that they’re already delivering, which are services that people in the communities need.”
Miller said how the program was marketed to the American people and how it’s being implemented are two different things.
“When you go back to the issue of how the program originally marketed, if you will, Congress was doing things to cut Medicaid, which was going to cause rural hospitals to lose money, so they created a $50 billion fund to help protect rural hospitals from those reductions,” he said. “But that’s not what CMS decided. CMS is allowing only a very small percentage of the money to be used for that.”
Nationally, more than 150 rural hospitals have closed since 2015. In 2025, six rural hospitals closed, according to the Cecil G. Sheps Center for Health Services Research at the University of North Carolina at Chapel Hill. According to Beckers’ Health Care News, three hospitals and emergency departments have closed this year – Unity Health in Searcy, Arkansas; Bradford Regional Medical Center in Bradford, Pennsylvania; and Adventist HealthCare in Germantown, Maryland.
The math surrounding the RHTF isn’t adding up for state policymakers who will ultimately have to shoulder the burden of funding cuts, according to Adam Searing, an associate professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families focusing on Medicaid and other health coverage programs.
“State policymakers, they’ve got to balance their budgets. They have people who need healthcare that are not disappearing into the ether. If they lose their health coverage, they still need healthcare,” Searing said in an interview with the Daily Yonder.
“(Policymakers) actually have to deal with the reality of this. You can have a political debate in Congress and say, ‘Oh, well, we’re going to put this rural health fund in and it’ll somehow magically make up for all these cuts through efficiencies and new ideas,’ but the reality on the ground is it’s not enough, and then there are these other limits that the federal government is putting on it, so it’s really not going to be enough.”
Alan Morgan, CEO of the National Rural Health Association, said it’s too soon to see what kind of effect the money will have.
“Even if 100% of the transformation funds went directly to the hospitals, that funding amount would not offset the funding reductions in HR 1, period,” he said in an interview with the Daily Yonder. “But that being said, it is a small sliver of what’s going to go to the majority of rural hospitals out there.”
The bottom line, he said, was that the funding was never meant to offset costs, but to transform rural healthcare through innovation and technology.
“The legislation was specific — members of Congress were emphatic about that, and the administration was emphatic about that,” Morgan said. “It’s not designed to keep the doors open on rural hospitals, period. And I think when we see policy leaders stating this is going to save rural hospitals, they’re not being honest with the public.”
Some Congress members have proposed legislation that would help rural hospitals in the wake of the cuts. In March, U.S. Senators Mark R. Warner (D-Virginia) and Marsha Blackburn (R-Tennessee) introduced legislation to keep rural hospitals open by addressing federal reimbursement.
The Save Struggling Hospitals Act would address the Medicare Area Wage Index that the lawmakers said disproportionately harms rural hospitals by making outdated assumptions about labor cost while failing to take into account how rural hospitals have to compete with other hospitals across the country to attract talent, coupled with the lower reimbursement rates.
“Rural hospitals are closing at an alarming rate due to significant financial strain compounded by the flawed Medicare Area Wage Index that results in rural hospitals receiving lower reimbursement,” Blackburn said in a statement. “Our Save Struggling Hospitals Act would strengthen rural health care by ensuring that hospitals in rural and low-wage areas receive fair payment for the essential services they provide.”
Last year, U.S. Representatives Shomari C. Figures (D-Alabama) and Brian Jack (R-Georgia) introduced the Rural Hospital Stabilization Act of 2025, which would have authorized a grant program to provide critical financial support to help struggling rural hospitals keep their doors open.
Both of those bills were referred to committees and have since stalled.
Morgan said the NRHA would support legislation that would help rural hospitals, but the real issue is figuring out funding solutions that work for rural communities.
“When you cluster people with high health needs, and the inability to pay in small towns, and then the financing doesn’t work, you either address the finances or you close the hospital,” he said. “I think oftentimes politicians are grasping for some magic policy lever when in fact it’s a simple case of the math is not mathing.”
“The easiest way to address this for the next five years is just to delay these Medicaid cuts that are coming down the pike, Morgan said. “I wish it was more complex than that, but it’s not.”
He said he anticipates rural hospitals will start to show the effects of funding cuts after Medicare and Medicaid cuts kick in.
“When we’ve looked at rural hospitals that closed, they stay open until the last possible moment that they can before shutting down, and I would anticipate that being the case in the future as well,” he said. “I would expect in the first quarter of next year, is when we’d really start seeing the real hospital closures.”
