Highlights
- H.R. 1, the One Big Beautiful Bill Act signed by President Donald Trump on July 4, 2025, provides a $50 billion fund for states with approved rural health transformation plans.
- Rural and other hospitals, healthcare providers and technology platforms can be recognized in federal guidance on state transformation plans, as well as in individual state transformation plans themselves.
- This Holland & Knight alert reviews requirements that states must meet to receive funds.
President Donald Trump signed H.R. 1, known as the One Big Beautiful Bill Act (OBBB), into law on July 4, 2025. (For a detailed analysis of the bill, see Holland & Knight's previous alert, "Trump Signs the One Big Beautiful Bill Act," July 3, 2025.) The U.S. Senate passed the legislation by a 51-50 vote, with Vice President JD Vance casting the tiebreaking vote on July 1, 2025, and the U.S. House of Representatives approved the legislation in a 218-214 vote on July 3, 2025.
OBBB provides a $50 billion fund – $10 billion annually to be administered by the Centers for Medicare and Medicaid Services (CMS) from 2026 to 2030 – for the Rural Health Transformation Program (RHTP). States must submit their RHTP applications by Dec. 31, 2025. This is a ripe opportunity for rural and other hospitals, such as urban medical centers, healthcare providers and technology platforms, to be recognized in federal guidance on state transformation plans and in the individual state transformation plans themselves.
Rural Health Transformation Plan Requirements
In order to access this federal funding, each state must develop and submit plans and secure approval of a Rural Health Transformation Plan by the CMS administrator. The plan must specify how it will:
- improve access to hospitals and other healthcare providers furnished to rural residents
- improve healthcare outcomes for rural residents
- prioritize the use of new and emerging technologies, including artificial intelligence (AI), emphasizing prevention and chronic disease management
- foster local and regional strategic partnerships between rural hospitals and other providers to promote "measurable" quality improvement, increase financial stability, maximize economies of scale and share best practices
- enhance economic opportunity for and supply of clinicians via recruitment and training
- prioritize data- and technology-driven solutions that help rural hospitals and other rural providers furnish high-quality healthcare as close to home as possible
- outline strategies to manage long-term solvency of rural hospitals
- identify specific causes of stand-alone rural hospital closures or conversions
The CMS administrator must approve or deny all applications no later than Dec. 31, 2025. Every state needs to submit only one application for all five funded years.
State Funding Allotments and Qualification Conditions
The RHTP funding will be distributed through a formula that allocates 50 percent ($25 billion) equally among approved states and 50 percent ($25 billion) based on rural population metrics, facility counts and any other factors the administrator deems appropriate. Therefore, for the first $25 billion, $5 billion per year will be divided between approved states, from 2026 through 2030. For the remaining $25 billion, the CMS administrator is allotted $5 billion per year that must be provided to at least one-fourth of the states based on the following criteria that the administrator must consider:
- the percentage of the state population that is located in a rural census tract
- the proportion of rural health facilities in the state relative to the number nationwide
- the situation of "deemed disproportionate share" hospitals in the state
- any other factors the administrator deems appropriate
The CMS administrator is also tasked with determining the terms and conditions of state allotments. States may not use more than 10 percent of their allotment for administrative expenses and must provide annual reports to the administrator. The law proscribes a number of "use of funds" of which at least three such uses for activities must be selected by the state as part of its plan. The administrator may add additional uses to the following statutorily identified activities:
- promoting evidence-based, measurable interventions to improve prevention and chronic disease management
- providing payments to healthcare providers for the provision of healthcare items and services, as specified by the administrator
- promoting consumer-facing, technology-driven solutions for prevention and managing chronic disease
- providing training and technical assistance for the development and adoption of technology-enabled solutions that improve care delivery in rural hospitals, including remote monitoring, robotics, AI and other advanced technologies
- recruiting and retaining clinical workforce to rural areas, with commitments to serve rural communities for at least five years
- providing technical assistance, software and hardware for information technology (IT) advances designed to improve efficiency, enhance cybersecurity capability or improve outcomes
- assisting rural communities to right-size their delivery systems by identifying needed preventative, ambulatory, "pre-hospital," emergency, acute inpatient care, outpatient care and post-acute service lines
- supporting access to opioid, substance abuse and mental health treatment
- developing projects that support innovative models of care that include value-based care arrangements and alternative payment models
- additional uses to promote sustainable access to high-quality rural health services, as determined by the administrator
Implications for Hospitals and Other Healthcare Providers
The Rural Health Transformation Fund is designed to achieve two critical objectives: stabilizing rural hospitals at risk of closure and improving health outcomes and access to care for rural residents. However, it is critical to note that the eligibility for funding of providers is not limited to rural hospitals. Other healthcare providers (and suppliers) may be eligible for funding in the state's transformation plan.
A key emphasis of the fund is investment in technology platforms that enhance care delivery, particularly those that are consumer-facing, such as remote monitoring tools, telehealth and AI-enabled systems. States are encouraged to prioritize technologies that help prevent and manage chronic diseases, support value-based care models and improve care coordination. Funding may also be used for cybersecurity infrastructure, data platforms and staff training to ensure effective and secure implementation of these technologies.
The CMS administrator, Dr. Mehmet Oz, has enormous discretion in establishing guidance for the Rural Health Transformation Program. On various occasions, the statutory language points to "measurable" quality and outcomes and includes a potential use for new value-based delivery models. Further, data and technology development is championed. Improving delivery systems in rural areas includes access to pre-hospital care and delivery.
Rural hospitals should be working closely with their states to ensure that the state's transformation plan addresses their key financial challenges and provides opportunities for financial stability, attracting and retaining clinicians, and improving rural health. Urban teaching hospitals also have an essential role to play in providing specialty tertiary, trauma and critical care to rural residents (whether by transport, telemedicine or otherwise) and are eligible for funding and inclusion in the state plan. Further, emergency medical service providers and suppliers that are critical to the delivery of lifesaving services to rural communities and transporting patients to definitive care are eligible for funding and inclusion in the state plan.
There are ample opportunities for new and creative models of care and collaboration between various types of providers, including mobile hospital services (ground or air) for critical and stroke care, mobile integrated care and community paramedicine, hospital at home, regional partnerships to bring urban and specialty capabilities to rural areas, and much more.
Though centered on rural health, the program has the unique opportunity to build the foundation for improved access, quality and outcomes throughout states and the nation.
[View source.]
