CMS is scheduled to award grants to states under the Rural Health Transformation Program on or before December 31, 2025. Although the award of half of the funds was specified by Congress, Congress provided CMS with significant discretion over the remainder – discretion that CMS is using to reward states whose current or future policies align with Administration policies.
The Rural Health Transformation Program was created as part of the Administration’s omnibus tax and spending cut bill (“the bill”) in an effort to attenuate some (but certainly not all) of the negative impacts of the bill’s significant cuts to Medicaid on rural hospitals. The bill appropriated $50 billion to the Program, $10 billion each year for fiscal years 2026 – 2030. Only the 50 states are eligible to apply. Fifty percent of the annual funds, “the baseline funds,” are to be distributed by CMS equally among all states with approved applications, without regard to a state’s rural population or rural healthcare needs. Every state applied, meaning that if all the applications are approved, each state will receive $100 million in each of the five years of the program.
The bill granted broad discretion to CMS to allocate the remaining 50% of the available funds, “the workload funds.” The bill further specified that CMS’s decisions are not subject to administrative or judicial review. In announcing its criteria for these grants, CMS’s Notice of Funding Opportunity stated that the applications would be scored based on 23 factors. Some of those factors are data-driven, such as a state’s rural population, the percentage of a state’s health facilities that are in rural areas and uncompensated care in a state. Approximately 53% of the workload funding will be based on data-driven factors.
Other factors are based on current and prospective state policies aligning with the Administration’s priorities. Approximately 15% of the workload funding will be based on state policies. These factors are not limited to rural areas. In the scoring, states receive full credit for laws or policies that have already been implemented and partial credit for proposed laws or policies. CMS will monitor progress on implementing proposed laws and policies and may claw back funds if the policies are not actually implemented. These factors include examining whether states allow for expansive scope of practice for nurse practitioners, whether they have eliminated Certificate of Need laws, and whether they do not restrict short-term, limited duration insurance beyond federal guidance. Other factors examine whether states restrict the use of SNAP food benefits to buy junk food, whether states require schools to reestablish the Presidential Fitness Test, and whether states require that nutrition be included in continual medical education for physicians.
CMS’s Notice of Funding Opportunity is linked here. The attorneys at Whatley Kallas, LLP will continue to monitor the award and implementation of grants under the Rural Health Transformation Program.