Rural Health Transformation Program: A Complete Guide for Healthcare Leaders

The Centers for Medicare & Medicaid Services (CMS) has opened the application process for the Rural Health Transformation Program, a $50 billion, five-year cooperative agreement that funds state-led initiatives to improve rural access, strengthen the workforce, and modernize infrastructure and technology. 

Applications to the Notice of Funding Opportunity are due in early November 2025. Awards will then be announced by December 31, 2025, and annual funding begins in FY2026.

Rural providers face persistent financial headwinds, staffing shortages, and infrastructure gaps that widen access and equity divides. The Rural Health Transformation Program is designed to address these challenges at the state level through durable investments with measurable outcomes. 

This guide explains how the Rural Health Transformation Program works, who applies, how funding flows, what is in scope, what is restricted, and how providers can align early to become strong sub-award partners under their state’s application.

High-Level Overview of the Rural Health Transformation Program

Eligible applicants and authority: U.S. states only. Each governor designates a lead agency to manage their Rural Health Transformation Program responsibilities.

Total funding: The Rural Health Transformation Program allocates $50B over five years; $10B per year in FY2026–FY2030.

Annual distribution approach overview: Rural Health Transformation Program will distribute 50% of the funding evenly between each state and the other 50% based on scoring.

Implications for healthcare professionals: Expect state-led projects touching important areas, including infrastructure, data security, and staffing.

Immediate provider action steps: Healthcare organizations do not apply for the Rural Health Transformation Program. Stay up-to-date on any announcements from your state’s lead agency. 

What Is the Rural Health Transformation Program?

The Rural Health Transformation Program is a five-year, $50 billion CMS cooperative agreement. With this, CMS will distribute $10 billion per year from FY2026 through FY2030 to states with approved applications. 

Each year’s funding has two parts. 50% is evenly distributed between each state, and the other 50% is awarded based on scoring and program metrics

CMS centers the Rural Health Transformation Program on four aims:

• Improving access
• Strengthening the rural workforce
• Modernizing infrastructure and technology
• Piloting care and payment models that produce sustained impact

Explore the full Notice of Funding Opportunity (NOFO) for the Rural Health Transformation Program.

Background and Policy Context

Rural America has endured decades of hospital closures and service reductions. Thin margins, staffing shortages, and aging infrastructure have pushed many facilities toward instability. Additionally, recent shifts in reimbursement may intensify these pressures and widen access gaps.

Policymakers created the Rural Health Transformation Program to match the scale of the problem with sustained funding and clear accountability for results. The program pairs historic investment with measurable goals tied to access, workforce, and technology.

Trade and policy coverage also notes the broader budget environment and its potential to influence timelines, sustainability, and expectations. Teams should plan with that context in mind as they shape portfolios, define milestones, and set long-term targets.

Rural Health Transformation Program Eligibility

Applicants: Only representatives from each state may apply for Rural Health Transformation Program funding. Healthcare organizations don’t need to apply to the NOFO for funding.

State leadership: Each Governor designates a lead state agency to develop and submit the application and includes a Governor’s endorsement letter.

Sub-awards: Approved states may sub-award or contract with hospitals, clinics, universities, local health departments, community-based organizations, and other partners to carry out initiatives funded by the Rural Health Transformation Program.

Rural-benefit: CMS does not require every sub-recipient of Rural Health Transformation Program funding to be physically located in a rural area, provided the funded work delivers a measurable benefit for rural residents.

Scope of communities: Projects must demonstrate clear benefit for rural populations. Sub-recipients do not need to be physically located in rural areas when the work benefits rural communities..

What Rural Health Transformation Program Funds Can and Cannot Support

The Rural Health Transformation Program prioritizes investments that leave durable capacity in place after the funding period. States should structure portfolios that modernize infrastructure and technology, expand access in healthcare deserts, and strengthen the rural workforce, with clear outcomes and sustainment plans.

Permissible investments include:

• Technology and cybersecurity modernization, secure data exchange, analytics, and consumer-facing tools that expand rural access.
  
• Telehealth and broadband-enabled access to reduce travel burdens and extend specialty services.
  
• Workforce recruitment and retention with service commitments, plus training and technical assistance to help rural providers adopt modern technology and care models.
  
• Care model and payment innovation that improves outcomes and strengthens sustainability beyond the program period.

CMS sets guardrails to focus funding on durable impact. Funds cannot replace payment for clinical services that would otherwise be reimbursable. Administrative costs are capped at 10 percent across direct and indirect administration. New construction is out of scope, though minor renovations and equipment upgrades are allowed. CMS also places limits on certain EHR replacements and on any state “tech catalyst” set-asides as a percentage of the award.

In practice, proposals should emphasize investments that change capabilities, improve measurable outcomes, and remain viable after 2030.

Timeline and Key Dates

CMS has set a single, time-bound application cycle for the Rural Health Transformation Program with awards issued before year-end to allow planning for FY2026 start-up. Use the dates below to anchor internal workplans and partner coordination.

• NOFO on Grants.gov: by mid-September 2025
  
• Application window closes: early November 2025
  
• Awards announced: by December 31, 2025
  
• Funding years: FY2026–FY2030

There is one application window for the Rural Health Transformation Program. States that miss the deadline will not have another opportunity in this cycle. CMS recommends submitting a non-binding letter of intent to open a channel for questions, though it is not required.

Key Rural Health Transformation Program Components

The Rural Health Transformation Program allows states to design coordinated sets of initiatives that reflect local needs. The components below translate statutory uses and CMS guidance into operator-friendly building blocks that can be combined and sequenced over the five funding years.

Digital Infrastructure and Cybersecurity

Modern, secure data exchange is foundational for rural access and program reporting. States should target durable capabilities that protect patient information and enable interoperability.

• Secure interfaces and data-sharing standards across EHRs and HIEs
  
• Cybersecurity hardening, incident response, and business continuity
  
• Shared analytics capacity for small hospitals and clinics
  
• Consumer-facing tools that streamline access and referrals

Tele-enabled Specialty Access

Telehealth extends specialty care without long travel and helps close gaps in high-need regions. Prioritize access pathways that are measurable and sustainable.

• Broadband expansion and connectivity upgrades in underserved areas
  
• Contracted specialty consults and e-consults tied to quality metrics
  
• Remote monitoring programs for chronic and post-acute care
  
• Integrated virtual behavioral health in primary care settings

Workforce Recruitment, Retention, and Training

A stable rural workforce is essential to sustain improvements. States can strengthen pipelines and upskill teams to support new models and technologies.

• Recruitment and retention incentives with service commitments
  
• Rural residency and training tracks for clinicians and nurses
  
• Cross-training for care coordination, virtual care, and data use
  
• Ongoing technical assistance for adoption of modern systems

Care Model and Payment Innovation

Care models should improve outcomes and financial stability while aligning with program goals. Focus on designs that scale and persist after the funding period.

• Pathways for chronic disease, maternal health, and behavioral health integration
  
• Team-based primary care with coordinated referrals and follow-up
  
• Outcome-oriented payment approaches that support rural viability
  
• Embedded evaluation plans with defined targets and timelines

Community Partnerships

Durable transformation relies on cross-sector collaboration that reflects local priorities and barriers to care.

• Formal collaboratives with public health, EMS, schools, and social services
  
• Transportation, language access, and care navigation supports
  
• Community health needs assessments that guide investment choices
  
• Shared governance and data-sharing agreements to track results

Impact of the Rural Health Transformation Program on Rural Communities

The Rural Health Transformation Program is landing at a moment when many rural systems are under acute financial pressure. Independent analyses project deep federal Medicaid reductions over the next decade, with rural areas expected to absorb disproportionate losses, while physician Medicare payments have faced repeated year-over-year cuts. 

In that context, the program functions as a counterweight that targets access, workforce, and modernization where vulnerabilities are greatest.

How the program supports providers

• Stabilizes essential access points. A baseline share of funding gives every approved state resources to shore up core services and plan multi-year interventions, with additional performance awards tied to strength of strategy and execution.
  
• Accelerates tech and security upgrades. Investments in interoperability, telehealth, analytics, and cybersecurity help small facilities meet reporting obligations, protect patient data, and expand specialty access without long travel.
  
• Builds workforce pipelines. States can fund recruitment, retention, and training tied to rural service, addressing chronic vacancies that threaten service continuity.

Why this matters now

• Budget headwinds are real. KFF estimates federal Medicaid spending in rural areas could fall by about $137 billion over ten years, exceeding the total appropriation for the rural fund. AHA’s analysis similarly anticipates large rural impacts from the enacted package. These pressures heighten the stakes for state strategies that convert time-limited dollars into durable capacity.
  
• Closures and consolidations are rising. Recent reporting shows new rural clinic closures and service pullbacks as organizations brace for tighter Medicaid financing and ongoing staffing challenges.
  
• Industry critiques to weigh. Rural advocates warn that without disciplined execution, communities could lose services faster than states can deploy improvements, and that Medicaid reductions could overwhelm gains unless projects deliver measurable, lasting impact. Use of funds that create enduring capabilities is a recurring theme in both CMS materials and stakeholder commentary.

What communities can expect when states execute well

• Shorter travel and faster consults via tele-enabled specialty access and remote monitoring.
  
• More integrated behavioral health embedded in primary care, with referral and follow-up pathways that reduce gaps in care.
  
• Better protection of health information through upgraded cybersecurity and standardized data exchange.

Put plainly, the Rural Health Transformation Program can help rural systems navigate a tough fiscal decade if states use it to build capabilities that outlast the grant period. The surrounding budget environment underscores the importance of choices that produce measurable access gains, resilient workforce pipelines, and secure, connected infrastructure.

Rural Health Transformation Program: Long-Term Outlook

The Rural Health Transformation Program is structured to leave durable capacity in place after FY2030. Its cooperative agreement model, annual continuation process, and outcome targets push states to embed capabilities that outlast the award period. For providers, the priority is to align with state strategies, define measurable projects, and build reliable reporting from day one.

What strong long-term plans include

• A sustainability glide path that names post-2030 owners, budgets, and revenue sources
  
• Institutionalization of successful pilots through policy, contracting, or reimbursement updates
  
• Braid-and-blend financing that ties program investments to existing payment streams
  
• A lightweight evaluation loop that informs course corrections without stalling delivery

Done well, the program can stabilize essential access points, strengthen the rural workforce, and modernize digital infrastructure in ways that continue to deliver value after the funding sunsets.

Supporting Rural Healthcare Organizations

The Rural Health Transformation Program is a rare, high-leverage opportunity to stabilize essential access points, expand specialty services through technology, rebuild workforce pipelines, and modernize the backbone of rural care. States lead the application, and providers shape the results through sub-awards that are ready to execute, simple to evaluate, and designed to endure.

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