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: 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 healthcare — 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. Every state now has a concrete plan. You can see exactly what the money is going for, where it’s going, and you can start to see themes emerging — including patterns around 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.

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. 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 are 50 states, and only states are eligible for this funding (so that excludes the District of Columbia and the territories), and the feedback I’ve received from our listeners is that you love it when an episode is 10 minutes or less…

As you can imagine, 50 states — even if I gave you a one-minute briefing for each state — could easily be 50+ minutes.

So what I’ve done here is I’ve truncated it down to some of the most interesting findings, and some of the most interesting uses of funds — according to the latest approvals from CMS for each state’s application — and we’ll see how folks are reacting to it.

And if you want more detail — if you want me to double click specifically 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.

Interestingly, Health Plan of San Mateo in Northern California has also increased their specialty rates up to 350% of Medi-Cal rates.

So California shows how targeted rate increases and federal infrastructure dollars are starting to work together to stabilize access.

Technology in Texas is thriving. In Texas, technology is a force multiplier — that’s how it’s being seen.

The theme there for rural health funding is AI-enabled access and clinically integrated networks. Texas is deploying its funds toward statewide AI-enabled specialty access — telehealth coordination — and clinically integrated network development.

This matters in a state where rate pressure and payment disputes are growing, making tech-enabled access a parallel lever 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. That’s how they’re thinking about using their rural health funds.

In Florida, what I’m seeing as the theme is remote patient monitoring and community paramedicine.

Florida’s rural health funding strategy emphasizes RPM — remote patient monitoring — mobile care, and community-based care to avoid hospitalizations or reduce avoidable admissions.

This complements a Medicare Advantage–heavy market where payers are controlling utilization more than they are raising your rates.

So Florida’s rural strategy mirrors its Medicare Advantage reality: fewer rate increases, more focus on managing utilization upstream.

New York has an interesting focus on primary care medical homes and workforce pipelines.

New York’s Rural Health Transformation Fund plans on using this spend on care coordination and expanding patient-centered medical homes.

This fits well in a highly concentrated payer market where rate growth is structurally constrained and you have a lot of players in a very small geographic location.

So New York is leaning into coordination and primary care capacity — not unit cost expansion — as the way they want to improve access.

And Illinois — very interesting — their theme is integrated care infrastructure and workforce expansion.

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 toward alternative models allows a little flexibility outside of that fee-for-service modality.

Other key dimensions I was able to see in these applications revolve 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, applications like Oklahoma and Washington proposed hub-and-spoke models where smaller rural providers can access centralized EHR, centralized billing, and data analytics services — and of course, powered by AI.

By centralizing these systems, individual clinics can avoid the cost and burden of maintaining many separate administrative platforms.

That’s going to be something interesting to look out for.

And many states have indicated they plan to use AI. They highlighted technology innovation as a core strategy.

My analysis notes that several applications proposed using AI for clinical decision support, operational efficiency, and workflow optimization.

That’s key for me.

States like Texas, Utah, Washington, and Vermont went further by describing specific AI-powered functions — and this is music to my ears: automated fax processing, AI-enabled scribes, and patient care coordination systems.

But more so — automated fax processing and AI really excite me, because how long have we been using this fax machine in this industry, you guys?

These initiatives are explicitly meant to reduce provider admin — reduce administrative burden.

These are the solutions I’m really looking out for.

What’s interesting across the biggest healthcare markets is that strategy is not uniform.

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.

Different tools — same goal: protecting access in a system where traditional reimbursement hasn’t been enough on its own.

And 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.

Thank you for tuning in. This is Alex Yarijanian from the VBCA Podcast.

Stay tuned, stay aware — and rock it.