What does the Rural Health Transformation Program pay for?

Where the money comes from

Congress created the program in section 71401 of Public Law 119-21, which added it to the Social Security Act as subsection (h) of section 2105. The law appropriates $10 billion for each of fiscal years 2026 through 2030 for the 50 states only, and a state may spend no more than 10% of a year's allotment on administration (CMS).

Half of each year's money is divided equally among states with approved applications; CMS allots the other half using factors in the law, such as each state's share of the nation's rural health facilities, and others it chooses (CMS). CMS's funding notice scores that half: rural factors such as rural population, uncompensated care and land area carry half the weight and were calculated once, and a technical score for the state's initiatives, data and policies carries the rest and is recalculated for each budget period (CMS). First-year awards, announced Dec. 29, 2025, ranged from $147,250,806 for New Jersey to $281,319,361 for Texas (CMS).

Who gets the money

Only states receive awards. Hospitals, local governments, universities, nonprofits, tribes and individuals may not apply, but they and other providers, such as clinics, "may still be able to participate through subawards or partnerships if their State chooses to include them," according to CMS (CMS). Each governor could designate a lead agency or office to develop and submit the state's application (CMS).

States run their own award processes. "CMS does not review State RFP/award opportunities," and states need no CMS approval before signing a subaward, but they must report each agreement and track how subrecipients use the money (CMS). Federal award terms "generally flow down to subawards," including cost limits (CMS).

What the money may pay for

The law requires each state to spend its allotment on "3 or more" of 10 activities (CMS):

1. Evidence-based prevention and chronic disease management
2. Payments to health care providers, as CMS specifies
3. Consumer-facing, technology-driven solutions for chronic disease
4. Training and technical assistance to adopt technology in rural hospitals, "including remote monitoring, robotics, artificial intelligence, and other advanced technologies"
5. Recruiting and retaining clinicians who commit to serve rural communities for at least five years
6. Technical assistance, software and hardware for information technology, including cybersecurity
7. Helping communities "right size" their health care systems by service line
8. Treatment for opioid and other substance use disorders, and mental health services
9. Value-based care and alternative payment models
10. Other uses that CMS determines promote sustainable access to rural care

Beyond the law's 10% cap on administration, CMS set its own limits. Provider payments may not exceed 15% of a state's award in a budget period (CMS) and are meant for "items and services not currently paid by insurance or other health coverage programs," not higher rates for billable care (CMS). Capital spending on existing facilities is capped at 20%, new construction is not allowed, no more than 5% may replace an electronic health record where a certified system was in place on Sept. 1, 2025, and the money may not supplant existing funding, such as staff salaries (CMS).

Where technology and AI fit

Artificial intelligence appears once in the program's statute, in the use for training and technical assistance; software and hardware fall under the separate information technology use (CMS). CMS's funding notice gives "AI diagnostic tools in rural clinics" as an example of emerging technology, with telehealth expansion and remote monitoring for chronic disease (CMS). Announcing the awards, CMS said the investments would "strengthen cybersecurity and interoperability; and expand telehealth, remote patient monitoring, and digital tools that enable timely access to care," and that states were "exploring the use of technology such as AI scribes and clinical workflow improvement tools to reduce burdens on clinicians" (CMS).

Some state plans name AI. In CMS's compilation of state abstracts, Maryland's includes "artificial intelligence modeling for patient risk predictive alerts" and North Carolina's "AI-based technology to support documentation" (CMS). Mississippi's 167 awards, announced Sept. 14, included $537,094 for Hattiesburg Clinic "to deploy ambient AI documentation to approximately 500 providers across its multispecialty network" (Mississippi governor's office). Colorado says AI-enabled tools "are allowable when they directly support approved project activities," and, in a separate answer on telehealth, that "grant funds cannot pay for billable telehealth services" (Colorado HCPF).

Deadlines and recoveries

The first budget period runs from Dec. 29, 2025, through Oct. 30, 2026, and the second from Oct. 31, 2026, through Oct. 30, 2027 (GAO). A state must obligate each year's money within its budget period, with no extensions (CMS), and spend it by the end of the following fiscal year (CMS). CMS's funding notice sets Oct. 31, 2026, as the date by which it determines fiscal 2027 award amounts (CMS). CMS plans to allot up to $40 billion more over the next four years based on states' "satisfactory progress toward approved initiatives and policy actions," the Government Accountability Office (GAO) reported Oct. 6 (GAO).

The law lets CMS withhold, reduce or recover payments when a state does not use them as its approved application described, and bars administrative or judicial review of those decisions (CMS). States that committed to change laws or regulations must finalize them by the end of 2027, or 2028 for two score factors, or CMS "will recover payments made to the State based on the technical score credit associated with these commitments" (CMS). When a provider does not complete a five-year service commitment and there are no extenuating circumstances, "CMS may seek to recoup 100% of the funds awarded to the provider" (CMS). CMS plans audits of states' use of the money beginning in 2027, according to GAO (GAO).

Where to look

Physician in the Loop's state-by-state tracker lists each state's lead agency, first-year award, funding rounds and what its plan says about AI. CMS tells organizations to "follow the guidance of their Governor's office" to take part (CMS), and it posts a state-by-state report of obligated funds, to be updated after states' Nov. 30, 2026, quarterly reports (CMS).