States, hospitals scramble to hit deadline for rural funds

Amid a looming deadline for $50 billion in rural health funding, states and hospitals are scrambling to present the relevant information to CMS in the best possible light.

Nov. 5 is the deadline for states to apply for a share of the $10 billion that will be made available each year from 2026 through 2030.

The applications are for Rural Health Transformation Program (RHTP) funds of $100 million per year for each states’ rural healthcare providers. Another $5 billion per year will be disbursed at CMS’s discretion based on demographics and prospective programs described by states in their applications.

Of the factors that will determine the $5 billion in annual discretionary funding, half are based on a state’s rural characteristics (e.g., how many people and hospitals are in designated rural areas). Among the remaining criteria, which feed into a complicated scoring system that will be used to determine grant totals, some factors are based on how state policies align with the Trump administration’s regulatory and healthcare priorities.

Hospitals and state hospital associations have been working closely with states on the applications, where the biggest point of emphasis may be efforts to shore up the clinical workforce in rural areas.

Establishing an enhanced infrastructure for remote patient monitoring also appears to be a common theme in RHTP applications.

Source:  Health Resources and Services Administration. Health Professional Shortage Areas Dashboard. Updated September 2023.

State-directed payments halted during shutdown

No new Medicaid state-directed payments (SDPs) were expected for the duration of the federal government shutdown, health system leaders and policy watchers said.

The last SDP approval was issued by CMS on Sept. 12, two weeks before the Oct. 1 start of the federal government shutdown.

SDPs that are still under CMS consideration and that include hospital funding, according to health system executives, include those from:

• Florida
• Nevada
• Georgia
• Virginia

For-profit health systems said SDP revenue has provided a large lift to their 2025 financial results.

California hospitals sue over cost control push

California’s cost control board is a sharp departure from such boards in other states and needs to be stopped, according to a lawsuit from California’s hospitals.

The California Hospital Association (CHA) filed a lawsuit against the California Office of Health Care Affordability (OHCA) on Oct. 15 to stop spending tracking that would produce “potentially substantial monetary penalties” by 2028.

The OHCA, which was created by the state’s legislature, set limits on increases in hospital spending to 3.5% beginning in 2025 and a cap of 1.8% for 2026 for seven hospitals designated as “high-cost.”

The cost control targets would cut nearly $5 billion from patient care by 2029, cost more than 10,000 healthcare jobs and result in 83% of the state’s hospitals operating in the red, according to the lawsuit.

The lawsuit noted that California is one of a number of states that have implemented cost control initiatives, but it differs from others in significant ways, including efforts to account for an inflation spike that is still working its way through the healthcare system.

Source: Center for Healthcare Quality and Payment Reform, “Rural Hospitals at Risk of Closing,” October, 2025.

Increase in median drug expenses for hospitals nationally

year-over-year (YOY) in September, contributing to a 9.3% YOY increase in non-labor expenses. Read more.

Crucial Date

REGULATORY

Nov. 5: Deadline for states to submit a plan to CMS for funds from the Rural Health Transformation Program