The Rural Health Transformation Fund: What States Are Funding in 2026

Hey, welcome back to the VBCA podcast. I'm Alex Yarijanian. This episode is going to focus on something that doesn't usually get a lot of airtime, but should. And this is the Rural Health Transformation Program, or Rural Health fund.

Heading into 2026, CMS is moving tens of billions of dollars into every state to stabilize rural health care, not through across the board rate increases, but through targeted investments in workforce technology, care coordination and alternative payment models. And what makes this moment different is that this funding isn't theoretical. So every state now has a concrete plan. You can see exactly what the money is going for, where it's going, and you could start to see some themes emerging, including a good pattern of maternal health, behavioral health, EMS reform, telehealth hubs and value based readiness, among others.

And more importantly, you can see what policymakers believe reimbursement alone hasn't been able to fix, which is good insight as you navigate the go to market landscape. So for health plans, this program is a signal. It tells you where access risk is highest, where network adequacy is most fragile, and where traditional utilization management is starting to break down. For providers, it's both an opportunity and a warning.

In a way, these dollars can stabilize care delivery, but they also come with expectations around integration, accountability, and new ways of delivering care. So today we're going to unpack what the Rural Health Transformation Program actually is, how states are using it, and why it matters not just for rural hospitals, but for payer strategy, provider contracting, and healthcare economics more broadly. In 2026 and beyond. I wanted to do a state by state review for you guys, but given that there's 50 states, of course only states are eligible for this funding, so that excludes District of Columbia and the territories.

And essentially the feedback I've received from our listeners is that they love it when an episode is 10 minutes or less. So as you can imagine, 50 states, even if I were to give you a minute, one minute briefing of each state, could easily be 50 plus minutes of an episode. So what I've done here is I've kind of truncated some of the more interesting findings or some of the more interesting use of funds according to the latest approvals from CMS for each state's application and we'll see how folks are reacting to it.

Right? And if you want more detail, if you want me to double click specifically on state by state, let me know and I'll be more than happy to do so. Ready? California is going to be using its rural health funding to reinforce Regional hub and spoke models specifically for maternal, primary and specialty care in rural areas.

So interestingly, Health plan of San Mateo in California, northern part of California has also increased their specialty rates up to 350% of Medicaid California's medical rates. So California shows how targeted rate increases in federal infrastructure dollars are starting to work together to stabilize access. Technology in Texas is thriving. So in Texas technology is a force multiplier.

That's how it's being seen. The theme there for the rural health funding is AI enabled access, clinically integrated networks. So Texas is deploying its funds towards statewide AI enabled specialty access. So telehealth coordination, clinically integrated network development.

So this matters in a state where rate pressure and payment disputes are growing, making tech enabled access a parallel lever to to reimbursement. So in Texas where reimbursement tensions are high, the bet is on technology and integration to extend access without relying solely on rate hikes. So that's how they're thinking about using their rural health funds. In Florida, what I'm seeing as the theme is essentially remote patient monitoring and community paramedicine.

So essentially Florida's rural health funding strategy emphasizes rpm, remote patient monitoring, mobile care, community based care to avoid hospitalizations or reduce avoidable admissions. So this complements a Medicare Advantage heavy market where payers are controlling utilization more than they are raising your rates. So Florida's rule strategy mirrors its Medicare Advantage reality. Fewer rate increases, more focus on managing utilization upstream.

New York actually has an interesting focus on primary care medical homes and workforce pipelines. So New York's Rural Health Transformation Fund plans on utilizing this spend on care coordination and expanding patient centered medical homes. This fits well in a highly concentrated payer market where rate growth is again is structurally constrained and you have a lot of players in a very small geographic locations. So New York is leaning into coordination and primary care capacity, not unit cost expansion.

Okay, that's how they want to improve access. And Illinois essentially very interesting, their theme is integrated care infrastructure and workforce expansion. So Illinois is using their rural health dollars to stabilize providers through integrated primary and behavioral care and EMS treat, not transport models. This is typical of a market where rate growth lags cost inflation and pushing providers towards alternative models allows a little flexibility outside of that fee for service modality.

Other key notable kind of dimensions that I was able to see in these applications revolved around shared services and hub and spoke models. I'm seeing quite a bit of hub and spoke models coming back into the forefront. For example, some applications like Oklahoma and Washington proposed hub and spoke models where smaller rural providers can access centralized EHR or centralized billing and data analytics services. And of course, powered by AI, essentially centralizing these systems, individual clinics can avoid the cost and burden of maintaining many, many separate administrative platforms.

So that is going to be something interesting to look out for. And many, many states have indicated they plan to use AI. They highlighted technology innovation as a core strategy. And my analysis notes that several applications proposed using AI for clinical decision support, operational efficiency and workflow optimization.

So that's key for me. States like Texas, Utah, Washington and Vermont, they went further by describing specific AI powered functions I'm talking about, and this is music to my ears, automated fax processing, AI enabled scribes and patient care coordination systems. But more so that automated fax processing and AI really excite me because how long have we been using this fax machine in this industry, you guys? And these specific initiatives are explicitly meant to reduce provider admin or reduce administrative admin.

These are the solutions that I'm really looking out for. What's interesting across the biggest healthcare markets is that strategy is not uniform. So California is pairing rate increases with infrastructure. Texas is leaning on technology.

Florida is managing utilization. New York is coordinating care. Illinois is stabilizing provider operations. So different tools, but same goal.

Protecting access in a system where traditional reimbursement hasn't been enough on its own. And so I'll be very curious to see how some of this pans out. Again, I left a lot of detail out of this conversation, but I have a lot of details in my notes. So if this is of interest, I'm happy to do an expanded section on the Rural Health Fund, which will be 10 billion a year for the next five years, with each state receiving funding for that duration of time for that amount of funding.

Thank you for tuning in. This is Alex Yarijanian from the VBCA podcast. Stay tuned, stay aware and rocket.