CMS opens applications for Rural Health Transformation Fund

Dive Brief:

• The CMS launched applications for the new federal Rural Health Transformation Fund on Monday, giving states until Nov. 5 to apply for a piece of a $50 billion pie. 
• Under the program, the agency will dole out $10 billion each fiscal year to approved states for five years, beginning in 2026. The funds can flow to tackle a variety of challenges facing rural healthcare, from enhancing provider recruitment and retention to fostering the use of innovative technology. 
• Should states miss the narrow application window, they will lose access to the five year program entirely, CMS said in an FAQ released Monday. Funding decisions will be made by Dec. 31.

Dive Insight:

The healthcare industry has been eagerly anticipating details about the Rural Health Transformation Fund since July, when Republicans crafted the $50 billion program as a last-minute negotiation tactic to secure key votes for their reconciliation bill. Half of the money will be divided equally among all approved states, and half will be allocated at CMS’ discretion.

Questions swirled this summer about how the CMS might review and prioritize applications. Experts disagreed about whether the CMS should prioritize applications that sought to offset the impact of federal healthcare cuts — an approach that could more heavily fund projects at small, rural hospitals — or seek to fund programs that took a more expansive view on rural health, such as boosting ambulatory or home healthcare initiatives. 

The CMS provided more details about how it would weigh applications this week in its FAQ and the Notice of Funding Opportunity, or NOFO.

The program has five broad goals — promoting preventive care and addressing chronic disease management, improving rural providers’ financial sustainability and efficiency, retaining and recruiting rural healthcare workers for at least five years, developing and implementing innovative payment models, and improving access to innovative technologies, including remote care and digital health tools.

States’ plans must address at least 3 out of 11 permissible uses tied to one of those goals, according to the CMS. For example, states could focus their plans on boosting access to opioid use disorder treatment services, developing training and technical assistance for rural hospitals using AI or promoting “consumer-facing” solutions for managing chronic diseases.

Some of these initiatives would not necessarily occur in a rural hospital setting. Indeed, the CMS clarified in its FAQ that money does not have to flow to hospitals to be an acceptable use case.

“There are no specific restrictions in the NOFO on which provider organizations can effectuate impact on rural communities and residents,” according to the FAQ.

However, the CMS wants states to be innovative in their applications. The agency placed restrictions on how much money states can allocate toward administrative purposes, for example, or to fund projects already in existence.

“The intent of this funding is not to be used for perpetual operating expenses, but rather for investments that can be made within the duration of the program that will have sustainable impact beyond the end of the program,” the CMS said in the FAQ.

The program is also not meant to be an offset fund for Medicaid cuts, the CMS said.

“Funding cannot be used to replace payment for clinical services that could be reimbursed by insurance or another form of health coverage,” according to CMS.

The CMS will be hosting two informational webinars about the application process on Sept. 19 and Sept. 25.