As CMS begins distributing first-year awards from the $50 billion Rural Health Transformation Program, three healthcare leaders gathered at the inaugural Becker’s Rural Healthcare Summit on June 12 and offered sharply divergent views on whether federal investment can fix what one panelist described as a system that is “irrevocably broken.”
Lynn Barr, founder of Caravan Health and one of 17 commissioners on the Medicare Payment Advisory Commission, was the session’s sharpest dissenter. Speaking in her personal capacity, not on behalf of MedPAC, she called the transformation fund another iteration of a pattern she has watched fail.
“Our system is irrevocably broken. I don’t think that this is going to fix it. This is just another desperate attempt to throw money at a system that isn’t working for anyone,” Ms. Barr said. “We need to just rip off the Band-Aid and start over.”
The program, launched by CMS under President Donald Trump’s Working Families Tax Cuts legislation, has approved all 50 states for first-year funding averaging about $200 million per state. Becker’s has previously reported, however, that funds flow to state governments rather than directly to rural hospitals, and states are not required to direct dollars specifically to rural providers. A Health Affairs study published in July raised concerns that money could be diverted to vendors, administrative overhead or broader state initiatives with limited impact at the hospital level.
Ms. Barr pointed to the U.S. spending three times more per capita on healthcare than other developed nations while producing worse outcomes and a declining life expectancy. She further argued that a foundational obstacle undermines every reform attempt: insufficient, inaccessible data. The federal government holds claims data covering only 10% of the U.S. population, largely because Medicare Advantage plan data is excluded, according to Ms. Barr.
“At least a third of our cost of healthcare is waste, fraud and abuse. We need the data to be able to understand what’s happening,” Ms. Barr said. She called for a national, patient-identified all-payer claims database, contending that simply standardizing claims submission formats could cut administrative costs by 10%.
“There should be one format and that alone would reduce the cost of care by 10% by reducing the administrative burden,” she said.
Her fellow panelists were more optimistic.
Nathan Kinney, senior director of strategy and planning for Phoenix-based Banner Health’s western division, said his division has already seen early results. Of the six states Banner serves, two had released application opportunities at the time of the summit. Nevada approved transformation funds for a new mammography machine at a remote clinic, a CT ambulance and van transportation for non-critical patient transfers. The western division operates 11 rural hospitals, nine of them critical access hospitals, in terrain where patients sometimes drive two to four hours for care.
“It has been a very positive thing,” Mr. Kinney said. “These are funds and capital funds that we didn’t necessarily have on the books.”
Raymond Hino, CEO of Bandon, Ore.-based Southern Coos Hospital and Health Center, a 21-bed critical access hospital with a $35 million annual budget, shared that outlook. His hospital is deliberately directing transformation dollars toward reinforcing existing programs rather than launching new ones, a strategy meant to prevent building services that cannot survive when federal support ends.
One example: A school nurse program that Southern Coos has fully subsidized, and that its community’s schools would lose without the hospital’s support, is being restructured as a revenue-generating rural health clinic.
“We’re focusing on strengthening programs that we’re already doing and not creating new programs that may not be sustainable in the future once funds dry up,” Mr. Hino said.
Maternity care loomed over the conversation as evidence of how deeply rural access has already eroded.
Roughly 55% of rural hospitals no longer provide labor and delivery services, a figure that continues to rise, according to the Center for Healthcare Quality and Payment Reform. To combat this trend, Mr. Hino said that hospital CEOs across Oregon are directing transformation funds toward standby compensation for maternal and child health staff — a cost that otherwise makes the service line financially untenable.
On a broader level, 10 independent Oregon rural hospitals, including Southern Coos, have applied together for transformation funds to create a clinically integrated network, working with a firm called Cibolo Health that has built similar models in Ohio, North Dakota, Minnesota and Montana. The goal is to capture payer contracting leverage and economies of scale typically available only to health system affiliates, while preserving local control. The state of Oregon has indicated it would fund the network for four to five years if the federal transformation program remains in place, according to Mr. Hino.
Ms. Barr argues that collaboration models are worth pursuing but depend on one prerequisite.
“Without the data, none of this works,” she said. “The money’s going to go away. It’s mostly going to consultants. It’s not going to stop the bleeding. We need to change the future if we’re going to survive.”
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