What Physicians Need to Know About The $50 Billion Rural Health Fund in the New Reconciliation Law

After months of inter-party negotiations, in early July the Republican Congress passed and President Trump signed into law The One Big Beautiful Bill Act. The 870-page law was passed under the Senate’s budget reconciliation rules and includes a mix of policy initiatives supported by President Trump, including a permanent extension of most of the individual income tax provisions included in Trump’s 2017 tax law, foreign policy, border security, and energy policies. Although not focused on healthcare, the bill does include 115-pages of healthcare provisions, most of which are focused on reducing future Medicaid spending as a mechanism to reduce the overall budgetary impact of the bill. 

In total, the law contains 24 new Medicaid policy changes that according to the Congressional Budget Office (CBO) are projected to contribute to a nearly $1 trillion overall reduction in federal Medicaid spending (compared to the previous baseline) over the next 10 years. While the law was being debated, Republicans in both the House and Senate raised concerns about how these Medicaid changes might impact rural hospitals and other safety net providers. In response, a $50 billion “Rural Health Transformation Program” was added to the law to alleviate some of these concerns. 

Program Basics

The law creates this new “Rural Health Transformation Program” and provides it with $10 billion in annual funding from 2026–2030. The funds will be distributed from the Centers for Medicare and Medicaid Services (CMS) directly to the states with half of the $10 billion in annual funds to be distributed “equally among all States with an approved application” and half to be distributed at the discretion of CMS based on application responses. The application process will require each state to create and submit a “Rural Health Transformation Plan” to CMS by December 31, 2025. The plan must detail specific funding requests and how states will improve access to care, patient outcomes, and the long-term financial viability of rural hospitals and other providers. CMS must approve or deny state applications by December 31, 2025, with an intention for the funds to start flowing to states (and subsequently providers) in early 2026. Notably, the law also includes a “One-Time Application” provision regarding the application and approval process which is intended to ensure that if a state’s application is approved for 2026, it wouldn’t have to be revised and/or refiled in future years. 

Use of Program Funds

Despite some members of Congress and the media labeling the program as a “Rural Hospital Fund”, these funds are not restricted to hospitals, or even necessarily to rural areas. The law specifically includes community health centers and Certified Community Behavioral Health Clinics (CCBHCs) as providers eligible for program funds. Additionally, the law offers CMS broad discretion to approve state applications that would use the funds for a variety of purposes, including:

• Promoting evidence-based, measurable interventions to improve prevention and chronic disease management.
• Providing payments to health care providers for the provision of health care items or services, as specified by the CMS Administrator.
• Promoting consumer-facing, technology-driven solutions for the prevention and management of chronic diseases.
• Providing technical assistance, software, and hardware for significant information technology advances designed to improve efficiency, enhance cybersecurity capability development, and improve patient health outcomes.
• Supporting access to opioid use disorder treatment services, other substance use disorder treatment services, and mental health services.
• Developing projects that support innovative models of care that include value-based care arrangements and alternative payment models, as appropriate.

Next Steps for Interested Physician Groups

Federally Qualified Health Centers (FQHCs), Certified Community Behavioral Health Clinics (CCBHCs), and other physician groups concerned about the potential impact of the Medicaid provisions in the new law should consider how this grant program could benefit them. Interested providers should contact their state’s medical societies, Medicaid programs, and government health agencies to inquire about the state-led application process. It is also likely that states will need to collaborate with providers to create their “rural health transformation plans. And with the deadline for both application submissions and CMS approval set for December 31, 2025, there is little time to waste.

Whether you’re a community health center or a behavioral health organization, NextGen Healthcare is on a mission to improve healthcare efficiency and patient outcomes. Contact the NextGen Healthcare team at results@nextgen.com to schedule time.