Rural Health Transformation: What It Is, What It Isn’t, and How Federally Qualified Health Centers (FQHCs) Should Prepare

Written By Community Link Consulting

The Rural Health Transformation Program (RHTP) is a groundbreaking initiative designed to revolutionize healthcare in rural communities across the United States. With a substantial $50 billion fund spread over five years, the program aims to enhance digital presence, improve customer engagement, and ensure sustainable healthcare for rural residents. This blog post will provide an overview of the RHTP, its funding structure, eligibility criteria, and the steps FQHCs should take to prepare for this transformative opportunity. 

What Is the Rural Health Transformation Program? 

Congress created a new Rural Health Transformation Program (RHTP)—a $50 billion, five-year state-driven fund—to bolster rural care starting in FY2026. It sits inside the recently enacted “One Big Beautiful Bill” (H.R. 1). States must submit RHTP applications/plans in 2025, and CMS/HHS will approve and release funding beginning in 2026. FQHCs should mobilize now: organize data, shape state plans, line up projects, and monitor how your state is responding.  

Funding Structure & Timeline 

  • Total Funding: $50 billion, spread over five fiscal years (2026–2030), with $10 billion allocated each year.  

  • Fund Distribution: 

  • 50% ($5 billion annually): Equally divided among all states with approved applications—roughly $100 million per state per year if all states participate.  

  • Remaining 50%: Allocated based on need, considering factors like rural population share, number of rural health facilities, hospital situation, and other CMS-determined criteria.  

Eligibility & Application Process 

  • Who Can Apply: Only U.S. states (the District of Columbia and U.S. territories are not eligible).  

  • Application Deadline: CMS must approve or deny applications by December 31, 2025.  

  • One Application Covers Entire Term: Approved applicants receive funding for all five years—no need to reapply annually.  

Required State Transformation Plans 

Each application must include a detailed rural health transformation plan, which must address all the following: 

  1. Improve access to hospitals, healthcare providers, and services for rural residents. 

  2. Enhance health outcomes for rural residents. 

  3. Prioritize use of new/emerging technologies – especially prevention and chronic disease management. 

  4. Initiate, foster, and strengthen regional partnerships between rural hospitals and providers for quality improvement, financial stability, economies of scale, and best practices. 

  5. Enhance economic opportunities by recruiting and training healthcare clinicians. 

  6. Deploy data- and technology-driven solutions so rural providers can deliver high-quality care close to home. 

  7. Outline strategies to ensure long-term financial solvency and operating models for rural hospitals. 

  8. Identify specific causes threatening standalone rural hospitals (e.g., closures, conversions, service reductions). 

Additionally, the state must certify that none of the funds will be used for intergovernmental transfers, certified public expenditures, or as the non-federal share of Medicaid.  

Approved Uses of Funds 

States must commit to using the funding for at least three of the following purposes: 

  1. Promote evidence-based, measurable interventions for prevention and chronic disease management. 

  2. Provide payments to providers for healthcare items/services (as specified by CMS). 

  3. Promote consumer-facing, technology-driven solutions for prevention and chronic disease management. 

  4. Provide training/technical assistance for advanced tech in rural hospitals (e.g., remote monitoring, robotics, AI). 

  5. Recruit and retain clinical workforce—requiring a minimum 5-year service commitment in rural areas. 

  6. Provide technical assistance, software, hardware for significant IT advances (efficiency, cybersecurity, outcomes). 

  7. Assist rural communities in "right-sizing" healthcare delivery systems (covering preventive, ambulatory, emergency, inpatient, outpatient, post acute care). 

  8. Support access to opioid use disorder (OUD), substance use disorder (SUD), and mental health services. 

  9. Develop innovative care models (value-based care and alternative payment arrangements). 

  10. Additional CMS approved activities that promote sustainable access to high-quality rural health care services. 

Reporting & Fund Usage Conditions 

  • Annual Reports: States must submit annual reports to CMS detailing their use of program funds. The specific reporting requirements will be defined by CMS. 

  • Spending Timeline: 

  • Funds allocated in a fiscal year must be expended by the end of the following fiscal year (e.g., FY 2026 funds must be used by end of FY 2027). 

  • CMS may redistribute unspent funds for states, with all unused funds returned to the Treasury after October 1, 2032. 

  • Consequences: If a state misuses funds, CMS may withhold or reduce future payments. 

What the Rural Health Transformation Program (RHTP) isn’t 

  • A bailout fund – the plan must have a forward-looking strategy not simply request funds to sustain current operations 

  • A Medicaid backdoor – the funds can not be used to match or be a budget filler for changes in Medicaid funding 

  • A One Size Fits All Model – each state must have a specific plan tailored to their needs and challenges 

  • Unlimited Funding – there is a five-year time frame with funds spend no later than September 30, 2032. 

  • A Technology-Only Program – while there is a piece focused on technology, there are broader goals to address 

  • A fund ONLY for hospitals – other rural health services are included in eligible activities 

  • Funds without accountability – there are reporting requirements and if funds are misused there is a risk to lose funding 

What FQHCs should do now for the Rural Health Transformation Program (RHTP) 

  1. Understand Your State's Plan: Identify the lead agency in your state (usually the Medicaid agency or health department) and find out how they are coordinating the RHTP plan. Stay updated on any announcements and releases.  

  2. Develop Template Language: Prepare need statements, equity impact assessments, rural access narratives, and sustainability plans.  

  3. Coordinate with Your PCA: Ensure that the priorities of Federally Qualified Health Centers (FQHCs) are included in the state plan.  

  4. Mark Key Dates: Keep track of important milestones such as comment windows, requests for information (RFIs), requests for proposals (RFPs), and legislative approvals. 

  5. Prepare Your Grants and Policy Departments: Focus on workforce metrics, financial resilience, and quality outcomes. 

  6. Be Ready with Data and Projects: Create a concise packet with community needs, impact and budget projections, and implementation plans. 

  7. Prioritize Favorable Projects: Position proposals that strengthen rural access, stabilize the safety net, accelerate team-based care, invest in workforce, and enhance digital readiness. 

  8. Quantify the Stakes: Use clean data to highlight access metrics and advocate for FQHC workstreams. 

  9. Form Coalitions: Collaborate with rural hospitals, public health entities, and other stakeholders to submit joint proposals aligned with state priorities. 

  10. Advocate for Your State Plan: Submit formal comments to ensure dedicated FQHC set-asides, equitable distribution formulas, competitive grantmaking, and multi-year commitments. 

States Already on the Move 

Some States are already getting prepared for their application by looking for vendors to support the application process or issuing a Request for Information (RFI) that can be responded to.  Here is a quick list of those we are aware of at this point: 

  • Alaska – issued RFI on July 21 with a response deadline of August 18 

  • Mississippi – issued RFQ on July 29 looking for application support 

  • Washington – e-mail requesting input sent August 8 with response deadline of August 29 

  • Montana – issued RFI on August 8 with a response deadline of August 24 

  • Wisconsin – issued RFI on August 11 with a response deadline of September 3 

  • North Dakota – issued survey to request information on August 13 with a response deadline of September 12 

  • North Carolina – issued update on August 14 sharing a website and link requesting input 

The Bottom Line 

The Rural Health Transformation Program (RHTP) is a rare window of opportunity and unique one for Federally Qualified Health Centers (FQHCs) to enhance their services and ensure sustainable healthcare for rural communities. By mobilizing now and preparing comprehensive state plans, FQHCs can leverage this significant funding to address critical healthcare challenges, improve access, and foster innovation.  

Key takeaways from the RHTP include: 

  • Significant Funding: With $50 billion allocated over five years, the RHTP provides substantial resources to support rural healthcare initiatives. 

  • State-Driven Plans: States must submit detailed transformation plans that address access, financial stability, and the use of technology to improve healthcare delivery. 

  • Collaboration and Preparation: FQHCs should work closely with state agencies, develop innovative care models, and prepare data-driven proposals to maximize their chances of receiving funding. 

Remember, the success of this initiative hinges on proactive planning, collaboration, and a commitment to leveraging data and technology to deliver high-quality care. If you wait for the state to come to you, you risk being left out of the conversation. 

Stay tuned for more updates and insights as we navigate the RHTP program. 

About the Author 

Amy Brisson, Chief Strategy Officer 
Community Link Consulting 
Phone: 509-226-1393 
Email: info@communitylinkconsulting.com 

Amy combines over 15 years of progressive financial leadership experience with 11 years of specialized FQHC industry expertise to drive strategic initiatives and deliver solutions for community health centers. Her deep understanding of rural healthcare challenges and federal funding programs positions her as a trusted advisor for FQHCs navigating complex transformation initiatives like the Rural Health Transformation Program. 

 

Sources & further reading 

Community Link Consulting https://www.communitylinkconsulting.com
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