States are beginning to sketch out plans to deploy billions of dollars in new federal funding aimed at stabilizing and transforming rural healthcare, but early signals point to wide variation in approach and persistent uncertainty for rural hospitals waiting to understand when, how and whether funds will reach local providers.

CMS awarded $50 billion across all 50 states through its new Rural Health Transformation Program, a five-year initiative running from 2026 through 2030. The program will distribute $10 billion annually, with half of the funds allocated equally across states and the remainder awarded based on factors such as rural population, land mass, facility needs and proposed policy actions.

While first-year awards were finalized Dec. 29, many states have not yet received federal approval for their implementation plans. Rural hospital leaders say that lack of clarity has fragmented planning at a time when financial pressure on rural providers continues to intensify.

Few guarantees for hospitals
The Rural Health Transformation Program is designed to support access, infrastructure modernization, workforce capacity and new care delivery models in rural communities. States must submit annual updates to CMS and participate in oversight processes, but funding is not contingent on performance.

Notably, states are not legally required to pass funds directly to rural hospitals, a point that has emerged as a central concern among provider leaders.

That uncertainty is compounded by the broader legislative context. The same federal package funding the program includes long-term Medicaid cuts projected to reduce rural funding by $155 billion over the next decade, according to policy experts. For many rural hospitals, the transformation dollars represent a potential offset, but only if they flow to providers in a timely and meaningful way.

“We’re all waiting to hear more,” said David Lubarsky, MD, president and CEO of Westchester Medical Center Health Network in Valhalla, N.Y. “In the meantime, we are moving ahead with our plans to strengthen rural healthcare for our patients. We serve an area roughly the size of Connecticut in New York’s Hudson Valley, including many rural miles into the Catskill Mountains. Our patients there can’t wait.”

Dr. Lubarsky said one-third of the system’s strategic plan is Creating Care Everywhere, which will be rolled out soon and aligns with New York State’s rural health transformation plan to strengthen partnerships, advance technology-enhanced primary care, develop a sustainable workforce and build a technological infrastructure.

Early hospital engagement varies widely
States differ sharply in how much they are engaging rural providers in shaping priorities and processes. Some have involved hospitals early through surveys, workgroups and preliminary applications, while others have moved quickly with limited provider input. Raymond Hino, CEO of Bandon, Ore.-based Southern Coos Hospital & Health Center, said Oregon has taken a more collaborative approach, engaging eligible rural facilities to identify needs and gauge readiness before finalizing allocations.

“The state has been working with facilities eligible to apply for the funds with surveys for identified needs,” Mr. Hino said.

Oregon also created a nonbinding application process to help state officials understand the volume and type of funding requests it may receive. Each eligible facility was allowed to submit up to two proposed projects, a process that gave rural hospitals an early opportunity to shape how the funds might be used. Oregon has also outlined a phased distribution strategy. The first phase, covering 2026 and 2027, will focus on “catalyst” grants for shovel-ready projects in areas such as behavioral health, maternal health, aging in place and chronic disease management. A second phase will support larger, regional initiatives aimed at shared infrastructure and long-term sustainability.

Southern Coos plans to apply in the first phase for startup funding to support a new clinically integrated network, part of an effort led by independent rural hospitals with support from the Oregon Office of Rural Health. Much of the planning is already in place.

“The Oregon Office of Rural Health and a group of our independent (non-system affiliated) hospitals applied for start-up funding for an Oregon CIN,” said Mr. Hino. “Our hospital is one of the hospitals. We believe that we have an excellent chance to get the CIN start-up funded with RHTP dollars.”

Oregon intends to administer the program through its Rural Health Coordinating Council, which includes representation from rural hospitals, EMS, primary care providers and clinics. Many others will likely apply for funding to keep their obstetrics and women’s health programs afloat.

“I serve as one of the rural hospital representatives on the RHCC,” said Mr. Hino. “We are encouraged that rural stakeholders will be involved to ensure that funds are used for areas of need for our rural providers and patients.”

In other states, hospital executives feel less heard.

Many states are signaling that the dollars will be deployed through state-led initiatives, competitive grant programs, pilot projects and regional partnerships rather than direct, formula-based distributions to rural hospitals. Jeremiah Hodshire, president and CEO of Hillsdale (Mich.) Hospital, said that approach risks diluting the program’s impact on hospitals facing immediate financial distress.

He chaired a Michigan Hospital Association task force composed of rural hospital leaders from across the state that submitted recommendations to the Michigan Department of Health and Human Services.

“The committee was representative of rural hospital leaders from across the state who spent months working on priorities that our hospitals viewed as immediate needs given the Medicaid cuts under OBBBA,” Mr. Hodshire said. But, he noted, the MDHHS didn’t accept any of the recommendations.

“I don’t expect to see much for our hospital,” he said.

Michigan ranked 43rd among state awards and was among the seven lowest-funded applications nationally. Mr. Hodshire said he was “disappointed” by the decision.

“This will have little impact on rural community hospitals, for which it was designed, and will create statewide programs and grant applications while dozens of hospitals in the state are at risk of closure,” he said.

MDHHS submitted an application for funds to strengthen rural hospital partnerships with community organizations, healthcare professional recruitment and retention, chronic disease prevention, integrated behavioral care access, technology implementation, interoperability and the establishment of a digital referral network.

“Michigan continues to support a resilient and innovative rural health system where every resident has access to high-quality care close to home,” said Elizabeth Hertel, Michigan Department of Health and Human Services director in a news release. “Our approved proposal for these federal funds focuses on enhancing the long-term sustainability of rural providers while supporting their growth and continued service to their communities.”

Other hospital executives echoed concerns that funds could be absorbed into state initiatives with long timelines and indirect benefits, rather than stabilizing fragile providers. The federal government approved South Carolina’s plans to have the funding administered through the health department’s Healthy Connections Medicaid program, but the state hasn’t decided yet who will receive funds or what programs would have priority.

“We don’t have as much control as we thought we’d have,” said Brian Sponseller, CEO of Carolina Pines Regional Medical Center in Hartsville, S.C. “We are in active conversations and calls with Eunis Medina, director of the South Carolina Department of Health and Human Services. They are listening to rural hospitals and they are waiting for feedback from the federal government.”

States want ‘system building,’ not short-term relief
In many states, leaders signaled a preference for long-term transformation over near-term financial relief, a shift that aligns with federal intent but may clash with the realities facing rural hospitals. Tom Vasko, CEO of Shattuck, Okla.-based Newman Memorial Hospital, said Oklahoma’s early messaging has emphasized sustainability, accountability and structural change rather than one-time infusions of cash.

“While certain operational details continue to be refined, the strategic intent of Oklahoma’s Rural Health Transformation Fund is coming into sharp focus,” said Mr. Vasko. “The state has deliberately organized this unprecedented investment around six foundational initiatives: innovating the care model, moving upstream, facilitating regional collaboration, shifting to value, growing next generation rural talent and building health data utility. Each is designed to address the structural realities facing rural healthcare across Oklahoma through disciplined, long-term transformation rather than episodic funding.”

States are increasingly framing the funds as support for care model redesign, workforce pipelines, data infrastructure and regional collaboration rather than backfilling operating losses. Rural providers with a proven record of success and with the capacity to execute transformational programs and track results are most likely considered responsible stewards of public funds.

“Across all six initiatives, Oklahoma is unmistakably positioning itself to invest in operational leaders and early implementers, rural hospitals and providers prepared not only to innovate but to scale thoughtfully, report transparently and translate transformation dollars into lasting access, quality and financial stability,” said Mr. Vasko.

That philosophy is shaping rural hospital strategic planning. At Newman Memorial, leaders anticipate pursuing targeted, initiative-aligned funding over multiple years rather than a single lump-sum award.

Potential investments include expanding specialty access and telehealth, launching preventive and chronic disease management programs, facilitating regional collaboration to reduce service duplication, strengthening workforce recruitment and retention, investing in data and analytics, and continuing the transition toward value-based care.

“At Newman Memorial, we view the Rural Health Transformation Fund as a catalytic opportunity to accelerate work that is already underway, such as strengthening access, sustainability and quality of care for the communities we serve across Northwest Oklahoma,” said Mr. Vasko. “While final allocations have not yet been determined, we anticipate pursuing targeted, initiative aligned funding rather than a single lump-sum award, with potential support spanning several million dollars over multiple years, as programs are phased and scaled.”

Rather than committing to single, large projects, many are developing modular proposals that can be scaled depending on funding structure, timing and approval. Kelly Macken-Marble, CEO of Osceola (Wis.) Medical Center, said hospitals are closely watching how grant processes evolve, particularly around workforce, technology and partnership-based initiatives.

“We are encouraged about the opportunity, specifically in the area of technology and innovation,” she said. “Grants for workforce and rural partnerships look to be focused on bringing together multisector partners. I am hopeful that we will have the opportunity to be included in those partnerships as the grant process develops.”

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