Rural Health Transformation Starts Now: Funding, Oversight, and the Road Ahead

On December 29, 2025, the Centers for Medicare & Medicaid Services (CMS) announced 50 state awards for the Rural Health Transformation Program (RHTP) – a $50 billion federal investment designed to support states in transforming rural health care delivery. RHTP funding will enable states to pursue wide-ranging, evidence-based initiatives to improve health care access, quality, and outcomes in rural communities.

State RHTP Applications

All 50 states applied for RHTP funding. Each state was required to develop a comprehensive Rural Health Transformation Plan, consult a defined set of stakeholders (including state Medicaid agencies, state offices of rural health, and tribal partners, as applicable) and propose initiatives addressing at least three statutorily approved uses of funds. Texas ($281.3 million), Alaska ($272.2 million), California ($233.6 million), Montana ($233.5 million) and Oklahoma ($223.5 million) received the largest first-year funding awards. 

CMS published Program State Project Abstracts as well as 50 State Spotlights. The newly established Office of Rural Health Transformation within CMS is responsible for overseeing the RHTP, including administering and coordinating the distribution of grant funds to states in partnership with the Office of Acquisition and Grants Management.  

Funding Allocations and Formulas

For fiscal year (FY) 2026, CMS is distributing $10 billion to approved states, covering a 10-month period. Half of this funding will be distributed equally across approved states. The remaining half is being distributed based on:

• State need, as determined by measures of rurality such as state size and size of a state’s rural population; and

• The technical score of each state’s application.

States receiving funding in FY 2026 remain eligible for all four remaining budget periods ($10 billion per year), contingent on satisfactory performance and compliance.

Beginning in FY 2027, and through FY 2030, CMS will determine funding amounts annually by October 31. As is the case for FY 2026, half of the annual pool of funds will be allocated equally, with the other half distributed based on state need and technical scores. While state need is a static number that will be determined once, the technical score is dynamic, and will be recalculated each year based on implementation progress. Because the calculation directly affects each state’s funding levels, rigorous data collection and reporting will be a vital part of each state’s program.

What Happens Next

States will enter a cooperative agreement structure with CMS, and CMS will remain closely involved in project oversight, check-ins, and data review. The cooperative agreement requires states to:

• Submit quarterly and annual progress reports;

• Convene annually at the CMS Rural Health Summit;

• Report on work plan progress, timelines, and milestone completion;

• Provide updated quantitative performance and outcome metrics for each initiative;

• Submit financial reports; and

• Maintain active compliance with CMS evaluation and monitoring.

Aurrera Health looks forward to partnering with states and other stakeholders to identify and implement strategies that support the RHTP goals of improving care for rural communities. If you would like to discuss how we can help, please reach out to Lauren Block.

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Authors

Alisa Chester [Director]

Kristal Vardaman [Managing Principal]