Background

As part of Public Law 119‑21, US Congress established the $50 billion RHT Program to help rural communities reimagine their healthcare delivery systems and improve health outcomes.

The RHT Program seeks to advance five strategic goals outlined in Public Law 119‑21:

Although the goal of the RHT Program is to effectuate impact on rural communities, per CMS FAQs, the NOFO does not include specific restrictions on which provider organizations may be eligible to receive funding. Some stakeholders have expressed concerns that the funds may go to providers that are not located in rural areas or that only nominally serve rural communicates.

Funding

Funding allocation

The RHT Program provides $50 billion in funding to be allocated to approved states:

• CMS will distribute 50% of the funding ($25 billion) equally among all approved states. This suggests approved states will receive the same amount from this pool regardless of the size of their rural population, the number of rural health facilities in the state, or other factors. CMS refers to this funding in the NOFO as “baseline funding.”
• CMS will allocate 50% of the funding ($25 billion) based on a variety of factors, including the content and quality of the state’s application and rural factors. In the NOFO, CMS refers to this funding as “workload funding.” CMS developed a point scoring methodology for workload funding in the NOFO that includes data driven metrics (based on rural facility and population factors), initiative-driven metrics (based on programmatic initiatives outlined in the state’s application and subsequent follow-through), and state policy metrics. CMS will recalculate each approved state’s technical score and corresponding workload funding amount for each subsequent budget period based on the information and data the approved state provides in the required annual reporting each year. A state’s rural facility and population score will only be calculated once as part of the application process.

The funding will be allocated over five fiscal years, with $10 billion of funding available each fiscal year, beginning in fiscal year 2026 and ending in fiscal year 2030.

Funding eligibility

Only the 50 US states are eligible to receive an RHT Program award. The District of Columbia and US Territories are not eligible. Local governments, hospitals, universities, nonprofits, federally recognized Tribes, and individuals may not apply.

Use of funds

States must use RHT Program funds for three or more of the approved uses:

• Prevention and chronic disease: Promoting evidence-based, measurable interventions to improve prevention and chronic disease management.
• Provider payments: Providing payments to healthcare providers for the provision of healthcare items or services, subject to the restrictions described in the NOFO.
• Consumer technology solutions: Promoting consumer-facing, technology-driven solutions for the prevention and management of chronic diseases.
• Training and technological assistance: Providing training and technical assistance for the development and adoption of technology-enabled solutions that improve care delivery in rural hospitals, including remote monitoring, robotics, artificial intelligence, and other advanced technologies.
• Workforce: Recruiting and retaining clinical workforce talent to rural areas, with commitments to serve rural communities for a minimum of five years.
• IT advances: Providing technical assistance, software, and hardware for significant information technology advances designed to improve efficiency, enhance cybersecurity capability development, and improve patient health outcomes.
• Appropriate care availability: Assisting rural communities to right size their healthcare delivery systems by identifying needed preventative, ambulatory, pre-hospital, emergency, acute inpatient care, outpatient care, and post-acute care service lines.
• Behavioral health: Supporting access to opioid use disorder treatment services (as defined in Social Security Act § 1861(jjj)(1)), other substance use disorder treatment services, and mental health services.
• Innovative care: Developing projects that support innovative models of care that include value-based care arrangements and alternative payment models, as appropriate.
• Additional uses: Uses designed to promote sustainable access to high-quality rural healthcare services, as determined by the CMS administrator, including:
  • Capital expenditures and infrastructure: Investing in existing rural healthcare facility buildings and infrastructure, including minor building alterations or renovations and equipment upgrades to ensure long-term overhead and upkeep costs are commensurate with patient volume, subject to restrictions in the NOFO.
  • Fostering collaboration: Initiating, fostering, and strengthening local and regional strategic partnerships between rural facilities and other healthcare providers to promote quality improvement, improve financial stability of rural facilities, and expand access to care.

Prohibited uses of funding

The NOFO outlines unallowable costs, including the following:

• Funding cannot be used for new construction. This prohibition includes supplanting funding for in-process or planned construction projects or directing funding toward new construction builds. Renovations or alterations are allowed if they are clearly linked to program goals in, and in accordance with, the requirements and limitations set forth in the NOFO. Capital expenditures and infrastructure funding cannot exceed 20% of the total funding that CMS awards to a state in a given budget period.
• Funding cannot be used to replace payment for clinical services that could be reimbursed by insurance or another form of health coverage. CMS will not approve proposed initiatives that would pay for clinical services where payment for the services is available from another source of coverage, including where the initiative would increase the payment amount available from the other source of coverage. If a state plans to fund direct healthcare services, it must justify in its application why such services are not already reimbursable, how the payment will fill a gap in care coverage (such as uncompensated care or services not covered by insurance), and/or how such funding will transform the current care delivery model. Funding for provider payments cannot exceed 15% of the total funding that CMS awards to a state in a given budget period
• Funding cannot be used for clinician salaries or wage supports for facilities that subject clinicians to noncompete contractual limitations.
• No more than 5% of the total funding that CMS awards to a state in a given budget period can support the replacement of an electronic medical record (EMR) system if a previous HITECH-certified EMR system is already in place as of September 1, 2025.
• To the extent a state seeks to implement a “rural tech catalyst fund initiative” or similar initiative for accelerating technology adoption, as described in the NOFO, funding for such initiative cannot exceed the lesser of 10% of total funding awarded to a state in a given budget period or $20 million. Funding for such an initiative is subject to all restrictions and requirements described in the NOFO.

State application process

CMS released the NOFO, including application instructions, for the RHT Program on September 15, 2025. Application submissions are due by November 5, 2025. There is only one opportunity to apply for funding and one application period for the RHT Program. Awards will be decided by December 31, 2025.

To assist states with the application process, CMS has made available an FAQs document. The agency also will hold introductory webinars on September 19 and 25, 2025, and will continue to engage with states during the open application period to answer any questions. More details regarding webinars are available on CMS’s website.

Each state must separately apply for its own funding. However, proposed initiatives could include multistate collaborations, such as regional networks or complementary workforce initiatives. States also may consult and involve partners, such as universities, local health departments, community-based organizations, and provider associations, in designing and implementing the planned activities proposed in the application, and may sub-award or contract RHT Program funds to such partners for various activities. Stakeholders interested in participating in their state’s application process should contact the state agency (or agencies) responsible for the application. The specific state agency may vary from state to state and may require some effort to identify. For example, some states have tasked the governor’s office with the application and others have tasked the state health services agency.

Next steps for stakeholders

As states prepare their RHT Program applications, many states are soliciting input from stakeholders and seeking feedback on how the state, if awarded, should use the federal funding to transform rural healthcare. Interested stakeholders should provide input to their applicable state agency.

We will continue to monitor updates to the RHT Program. Please contact the authors of this article or your regular McDermott Will & Schulte lawyer with any questions.