On July 4, 2025, President Donald Trump signed into law the “One Big Beautiful Bill Act”, a sweeping budget reconciliation package that includes more than $1 trillion in estimated federal health care spending cuts, primarily targeting Medicaid and the Affordable Care Act. Amid bipartisan outcry over the crisis facing rural healthcare, a $50 billion Rural Health Transformation Program was introduced in an attempt to soften the impact on rural healthcare providers.
It is estimated that the reconciliation package will decrease the federal Medicaid spending in rural areas by well over $100 billion. The majority of reductions would apply to states that have expanded Medicaid and contain large rural populations. According to KFF, the 10 states with the highest estimated negative impacts are Illinois, Kentucky, Louisiana, Michigan, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, and Virginia.
Program Funding and Overview
- Tier 1 Funds: 50% of the funds are distributed equally among all states with approved applications
- Total Funds = $5 Billion per year
- If every state is approved, each state would receive $100 million/year
- Total Funds = $5 Billion per year
- Tier 2 Funds: 50% of the funds are allocated at the discretion of CMS
- Total Funds = $5 Billion per year
- CMS must ensure that “at least 25%” of states receive Tier 2 funds, aka 13 states
- Factors the agency must consider:
- Percentage of the state located in a rural census tract
- Proportion of rural health facilities in the state relative to the number of rural health facilities nationwide
- The situation of hospitals in the state
- Any other factor that CMS determines is appropriate
Application & Oversight
Each state must submit an application to CMS. Individual providers or groups of providers cannot apply. Everything must come directly from the State.
- Deadline: December 31, 2025
- Approval: One-time application from individual state for 5-year eligibility
- Reporting: Annual fund usage reports required
- Eligible Provider Types: Rural Health Facilities include the following provider types:
- A ‘subsection d’ hospital that is:
- Located in a rural area
- Treated as being in a rural area
- Is located in a rural census tract of a metropolitan statistical area
- Specifically includes CAH, SCH, MDH, REH & Low Volume hospitals
- Rural Health Clinics (RHC)
- Federally Qualified Health Centers (FQHC)
- Community Mental Health Centers
- Opioid Treatment Programs
- Section 330 Grant Recipients
- Certified Community Behavioral Health Clinic in a rural census tract
- A ‘subsection d’ hospital that is:
Distribution of Funds
Distribution at the sole discretion of each individual state. Permitted uses of funds (must utilize at least 3 of the listed below):
- Chronic disease prevention/management
- Direct provider payments
- Consumer-facing tech solutions
- AI/robotics training
- Workforce recruitment (5-year rural commitment)
- IT & cybersecurity upgrades
- “Right-sizing” rural systems
- Opioid & mental health treatment
- Innovative care models (e.g., value-based care)
What should providers do now?
Engage Early with State Policymakers
- Identify who at the State level will be submitting the application.
- Collaborate with the State to ensure provider inclusion in the state’s program.
- Advocate for your organization’s role in rural healthcare delivery.
- Push policymakers and other public figures to maximize Tier 2 funding coming to your state.
Assess and Document Needs
- Conduct a comprehensive productivity, service lines & needs assessment.
- Evaluate the needs/measures to use data to justify funding requests, focusing on access, chronic disease management, and financial sustainability.
Develop Strategic Partnerships
- Consider alliances with rural and urban hospitals, EMS, and community health organizations.
- PPS hospitals exploring the implementation of RHCs.
- Explore collaborative care models like telehealth and mobile health units.
Prioritize Technology Readiness
- Evaluate IT infrastructure and cybersecurity.
- Identify opportunities to implement AI, remote monitoring, and robotics.
Plan for Workforce Development
- Develop recruitment and retention strategies with rural service commitments.
- Partner with academic institutions to build workforce pipelines.
Align with Program Goals
Ensure initiatives align with at least three of the eligible funding categories, such as:
- Chronic disease prevention
- Technology-driven care
- Mental health and substance use treatment
- Value-based care models
- Cybersecurity
- Workforce recruitment & retention
- Service line analysis & planning
Questions? We’re here to help.
If you’re wondering how the One Big Beautiful Bill or Rural Health Transformation Program may impact you, don’t navigate the changes alone. Reach out to your local Blue & Co. advisor to explore how these provisions could affect your organization and how we can help you prepare.
Nick Ficklin, CPA, FHFMA, CSPR, Director
