$50B rural health fund not a cure-all for hospitals: Bloomberg

The $50 billion rural hospital transformation program that is part of the recently passed One Big Beautiful Bill Act might aim to support rural healthcare, but an Aug. 19 Bloomberg editorial said it amounts to “something of a slush fund.”

The funds, which will allocate the $50 billion over five years to rural healthcare, go toward state grants and not hospitals. 

The opinion piece, written by Bloomberg’s editorial board, said although half the funds will go to states that submit a rural healthcare “transformation” plan, the rest will be distributed at the federal government’s discretion. By not requiring funds to go directly to hospitals, the program opens the door for subsidies to instead flow to technology vendors and other health-related projects at a time when rural healthcare is particularly vulnerable.

“Although grants are required to support ‘health-related activities,’ everything from ‘technology-driven solutions for the prevention and management of chronic disease’ to ‘remote monitoring robotics’ and ‘technical assistance’ can qualify,” the editorial board said. “The law includes no provision for the Centers for Medicare and Medicaid Services to publish their rationale for distributing grants.”

Around 200 rural hospitals have closed since 2005, with smaller facilities most at risk. While urban hospitals are also at risk of closure, net rural facility closures outpace them 4-to-1. Rural hospitals also face mounting challenges such as low patient volumes, high fixed costs and lower Medicaid reimbursement rates. 

Medicaid covers about one-quarter of rural patients, outpacing the rates seen in urban areas. Looming Medicaid cuts from the One Big Beautiful Bill Act could worsen already thin margins. 

“Providing costly services to fewer patients wouldn’t be a problem if such hospitals were well compensated,” the editorial board said. “But with Medicaid paying 88 cents on the dollar, reimbursement is a challenge and the BBB cuts will make things worse.”

While the rural hospital transformation program might not be the savior many struggling facilities need, Congress did introduce the “rural emergency hospital” designation in 2020, which gives lump-sum payments to offset fixed costs. REH designation participation has been limited due to restrictions on inpatient services and eligibility for other federal programs, but it has picked up speed in certain areas across the country.

In late July, Greenville, N.C.-based ECU Health signed a nonbinding letter of intent with Martin County (N.C.) to tackle rural healthcare challenges in the area. The news came after ECU Health shared plans in late May to reopen Williamston, N.C.-based Martin General Hospital as the state’s first REH. 

“We’re advocating for investment from the state in terms of capital and changes to how the rural emergency hospital is reimbursed for Medicaid,” ECU Health CFO Andy Zukowski said during a “Becker’s CFO + Revenue Cycle Podcast” episode. “This rural emergency hospital will [also] be part of a broader system of care that includes a proposed expansion of a hospital and close proximity that would allow us to have inpatient capacity to transfer patients from the rural emergency hospital when needed.”

The Bloomberg editorial board argued that moving forward, unless the rural hospital transformation program is reserved for the most at-risk facilities and paired with structural reforms, it risks becoming a loosely defined initiative rather than a rural care access lifeline. 

“Now that Congress has appropriated the $50 billion, taxpayers’ best hope is that CMS spends it wisely,” the editorial board said. “Directing assistance to the hospitals that need it — and imposing reforms that address the reasons they’re failing — would be a good place to start.”

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