While the $50 billion Rural Health Transformation Program stands to be “a historic government investment,” Chartis said the initiative is likely to treat the symptoms, rather than cure the root ills, of rural hospitals.
Chartis has been tracking data on rural healthcare for more than a decade, the healthcare advisory services firm said in a Feb. 10 report. That data has consistently shown that the rural health safety net is worsening due to declining reimbursement, decreasing access to care and worsening community health.
Over the next few months, as states work to implement the programs outlined in their Rural Health Transformation applications, Chartis expects “bumps along the way and perhaps more than a few initiatives that evolve during the journey.”
Chartis said state proposals for those funds are innovative and expects many of them to positively affect healthcare in rural communities. The funds, however, may be too late to prevent additional hospital closures or service line reductions. According to Chartis, 417 rural hospitals are vulnerable to closure, and 41% are operating in the red.
How the funding is distributed could also limit its efficacy. Under the program, $10 billion will be distributed annually, with half of the funding allocated equally across states and the remainder awarded according to factors such as rural population, land mass, facility needs and proposed policy actions. States must submit annual reports to CMS, but funding is not contingent on performance, and there is no mandate that funding be directed to rural hospitals.
The legislation that created the Rural Health Transformation Program — the One Big Beautiful Bill Act — also includes long-term Medicaid cuts that are projected to reduce rural funding by $155 billion over 10 years. Chartis said the Medicaid cuts taking effect in 2027 will intensify financial pressures on rural hospitals.
“Rural hospitals need to plan for those cuts while using RHT funding at the state level to deliver the maximum benefit from those programs and initiatives to the communities they serve.”
‘Not clearly aligned with rural hospital needs’
Concerns over the Medicaid cuts were echoed in a Dec. 4 report by researchers from the Leonard Davis Institute of Health Economics at the University of Pennsylvania in Philadelphia. The researchers conducted an independent analysis of the Rural Health Transformation Program at the request of Sen. Ron Wyden, D-Ore., ranking member of the Senate Finance Committee.
Because state applications tied to the technical score remained under CMS review at the time of the analysis, the researchers estimated 75% of total program funding using available formula details, including the full baseline allocation and the rural facility and population score portion of workload funding.
The researchers said that the estimated funding is unlikely to make up for projected Medicaid cuts. The funding allocations in most states are “orders of magnitude smaller than projected total Medicaid cuts in most states,” and there is little meaningful relationship between projected total Medicaid cuts and estimated program funding to states.
Only five states — Alaska, Vermont, North Dakota, South Dakota and Wyoming — are estimated to meet or exceed their projected annualized reductions in federal Medicaid spending, according to the report.
The researchers also found that the program’s funding was “not clearly aligned with rural health needs.” After grouping states by rural mortality rates (high, medium and low), the researchers found that states with the highest rates are estimated to receive $104 per rural resident on average, compared with $233 per rural resident in states with the lowest rural mortality rates.
They also found that states that have lost the greatest share of their hospital beds between 2017 and 2023 are estimated to receive more funding ($157 million) than states that lost the smallest share ($141 million), but noted that the “funding differences are modest.”
