Rural Health Transformation Funds May Not Help Hospitals’ Financial Scenario: Report

The $50 billion allocated through the Rural Health Transformation Program (RHTP) represents a major boost for the rural healthcare safety net, but it may not be sufficient to undo years of financial strain that have placed countless hospitals at risk.

That assessment comes from Chartis’ latest annual analysis of the rural healthcare landscape. In its newest report, the advisory firm stated that over 41% of rural hospitals are currently operating at a loss, and 417 facilities are considered at risk of shutting down under a proprietary model that factors in elements such as declines in net patient revenue and multiple consecutive years of negative operating margins.

While still concerning, the figures show modest improvement compared to last year’s report, which found that 46% of rural hospitals were losing money and identified 432 facilities as vulnerable.

Chartis warned that the road ahead for rural hospitals remains highly uncertain, with declining reimbursement levels and shifts in payer mix creating mounting pressure. The firm estimates that policy-related payment reductions alone will reduce rural hospital revenue by nearly $700 million this year, while anticipated Medicaid cuts tied to the One Big Beautiful Bill Act (H.R. 1) could strip almost $140 billion from rural providers over several years.

One positive development highlighted in the report is the $50 billion Rural Health Transformation Program that goes for five years and is included in last summer’s federal spending package. During the latter half of 2025, states submitted proposals outlining how they intended to use the funding, and in late December, the Centers for Medicare & Medicaid Services (CMS) announced how much each state will receive for fiscal year 2026.

Allocations for the coming year range from $281 million for Texas to $147 million for New Jersey. However, Chartis cautioned that only a portion of those funds is likely to be directed toward hospitals’ most immediate operational challenges.

The firm wrote that while early public messaging around the RHT program implied the fund would deliver direct support to rural hospitals, the final language in H.R. 1 established a much broader set of eligible recipients and permitted uses for the funding. It noted that despite the apparent size of the allocations, provider payments are capped at 15% in any single budget year under CMS rules, and states are restricted from spending above 20% on capital projects and infrastructure.

Chartis added that the distribution of RHTP funds does not closely correspond with the level of vulnerability in each state’s rural hospital safety net or the size of its rural population. The firm said its review of 47 publicly available state applications identified a mix of ambitious, forward-looking initiatives likely to generate benefits, alongside provisions that could weaken the program’s overall impact and contribute to greater instability within the rural healthcare safety net.

On a more encouraging note, Chartis reported that many states described initiatives aimed at strengthening interoperability in rural healthcare environments and upgrading outdated IT systems. These are the investments that rural hospitals often delay because of constrained financial resources.

Rural Health Transformation Funds May Not Help Hospitals’ Financial Scenario: Report

A growing body of analysis suggests that Rural Health Transformation Funds — part of a federal effort to support healthcare in rural communities — may fall short of meaningfully improving the financial outlook for rural hospitals already under severe strain. The Rural Health Transformation Program was established with a commitment of roughly $50 billion over five years aimed at enhancing access to care, strengthening workforce capacity, modernizing infrastructure, and promoting innovative care models in rural areas. However, multiple experts and leaders in Rural Health policy now argue that this funding is unlikely to offset the deep financial pressures many rural hospitals face.

Limited Impact for Rural Hospitals

A key issue identified in the report and related analyses is that the Rural Health Transformation Funds are designed as broad, catalytic investments rather than direct financial support for operational losses. In many cases, states receiving federal dollars are not mandated to allocate them to struggling rural hospitals specifically, but can instead direct funds toward broader care delivery reforms, workforce development, or technology upgrades.