Healthcare Companies Must Act Quickly After CMS Launches $50 Billion Rural Health Transformation Program

Key Takeaways:

• The Centers for Medicare & Medicaid Services (CMS) has released the application for the Rural Health Transformation Program (RHT) under the Working Families Tax Cut Act (formerly known as the One Big Beautiful Bill Act), with $10 billion per year available to states from 2026–2030.
• States have a single opportunity to apply by November 5, 2025. Awards will be announced by December 31, 2025. Healthcare companies—including providers, digital health companies and physician recruitment organizations—should engage with states now to shape proposals.
• Funding can support prevention and population health, workforce recruitment, digital health, innovative care, and improving efficiency and sustainability of rural providers. CMS encourages states to collaborate with providers, universities, community organizations, and other partners, which could include physician recruitment organizations and technology innovators, among others, in crafting applications.

Introduction

CMS has released a major funding opportunity that will shape rural health care delivery for at least the next five years. The new RHT Program, created under the One Big Beautiful Bill Act (Public Law 119-21)—which CMS now refers to as the Working Families Tax Cut Act—will provide a total of $50 billion ($10 billion a year between 2026 through 2030) in direct federal funding to the 50 states to sustainably transform rural health care. (D.C. and the territories are not eligible to apply for this funding.) The purpose of the program is to support state-led, sustainable improvements in rural health care access, quality, and outcomes through system transformation, technology adoption, strategic partnerships, and workforce development.

According to CMS, the funding will drive the following strategic goals:

1. Prevention & population health: improving disease prevention, chronic disease management, behavioral health and prenatal care.
2. Sustainable access: supporting rural collaborations across operations, technology, primary and specialty care, and emergency services.
3. Workforce development: enhancing recruitment and retention of rural providers and helping rural providers practice at the top of their licenses.
4. Innovative care models: supporting flexible care arrangement, care coordination and improved outcomes.
5. Technology innovation: advancing digital health tools, remote monitoring and secure data infrastructure.

States must designate a lead agency to develop and submit the application. The agency can be, but is not required to be, the state Medicaid agency. Although only states may apply, CMS emphasizes that states should collaborate with providers, community organizations and other partners to design transformative projects. Stakeholders who want a voice in shaping their state's proposal should engage now, before states finalize their applications.

Key Deadlines 

• Final Applications Due: November 5, 2025
• Award Decisions Announced: December 31, 2025
• Funding available: January 1, 2026

These deadlines create a short runway, especially since this is the only application opportunity. Companies that have an impact on rural communities—whether as providers, technology innovators, or otherwise—should connect with governors' offices and the lead agency in the state developing the RHT application immediately to help shape the application.

Program Overview

Under the RHT Program, CMS will distribute $50 billion over five budget periods, with $10 billion available each period. Half of the funds (baseline funding) will be divided equally among all approved states, while the other half (workload funding) will be allocated based on a points system that is recalculated annually. This system considers both rural facility and population factors—such as rural population size, facility mix, uncompensated care, and land area—and technical factors, including the quality of initiative-based proposals and specific state policy actions. States can earn conditional credit for policy commitments, but most policy actions must be finalized by December 31, 2027 (with two factors allowed additional time until December 31, 2028), or risk funding recovery. Importantly, states do not need to provide matching funds and may use up to 10% of funds for administrative expenses.

States must invest in at least three categories, which include:

• Prevention and chronic disease management
• Provider payments that are gap-filling but do not duplicate reimbursement for clinical service (with a 15% cap)
• Consumer-facing technology for chronic disease
• Training and technical assistance for technology adoption (e.g., remote monitoring, robotics, AI)
• Workforce recruitment and retention (with five-year service commitments)
• IT and cybersecurity improvements
• Behavioral health and substance use treatment services
• Innovative care models (e.g., value-based care, alternative payment models)

Additional uses, as determined by the CMS Administrator, may include capital and infrastructure investments (limited to minor renovations and equipment, capped at 20% per period) and fostering local or regional strategic partnerships.

Restrictions and Guardrails
While flexible, the statute and Notice of Funding Opportunity impose limits, including:

• No major construction; only minor renovations or equipment upgrades permitted (capital spending capped at 20%)
• Direct provider payments limited to 15% and cannot duplicate reimbursable services
• EMR replacement capped at 5% if a certified system already exists
• Rural Tech Catalyst Fund capped at 10% ($20M per budget period)
• No clinician salary support if tied to non-compete clauses
• No use for telecom/video surveillance equipment, or household broadband subsidies

Notably, there are no restrictions specifying that only rural organizations may be eligible to receive funding from the state awardees. Further, these downstream or sub-awardees are not required to be enrolled as Medicaid or Medicare providers.

What This Means for the Healthcare Ecosystem 
The RHT Program will provide an infusion of federal resources into rural health, thereby creating several new opportunities for healthcare companies that can impact rural populations. Some examples of how healthcare clients can act now are:

• Hospitals and providers should engage with state officials to secure project-level funding for chronic disease, behavioral health, and technology integration.
• Physician recruitment firms have opportunities to partner with states on workforce development, including incentive programs tied to service commitments.
• Digital health companies should highlight their solutions in remote care, robotics, AI, and cybersecurity, as CMS is explicitly encouraging technology adoption.

Our attorneys are available to advise providers, technology companies and investors on CMS programs, Medicaid and Medicare policy, and the healthcare ecosystem. We are tracking the launch of this program and can help identify opportunities for participation under the RHT Program and advise on navigating compliance and permissible use restrictions.

For more information on the healthcare provisions in Public Law 119-21, please see our previous  publication titled “Sweeping Changes in Store for Federal Healthcare Programs After the Enactment of the ‘One Big Beautiful Bill Act'" and accompanying  chart.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.