States jostle for $50 billion rural health fund as Trump’s Medicaid cuts lead to a scramble

WASHINGTON — Nationally, states are racing To win their share in a new $50 billion rural health fund. But helping rural hospitals, As originally envisionedquickly became a strange idea.

Instead, states should submit requests that “reconstruct and reshape” how health care is delivered in rural communities, Abby Sutton, a Centers for Medicare and Medicaid Services administrator, said late last month during a daylong meeting at the Watergate Hotel in Washington, D.C. Simply changing the way the government pays hospitals has been tried and failed, Sutton told an audience of more than 40 governor’s office staff and leaders of state health agencies, some from as far away as Hawaii.

“This is not backfilling operating budgets,” said Sutton, CMS’s director of innovation. “We’ve been really clear about that.”

Rural hospitals and clinics across the country face looming financial disaster, as President Donald Trump’s massive tax and spending bill is expected to cut federal Medicaid spending on rural health care by $137 billion over 10 years. Congressional Republicans added a one-time, five-year Rural Health Transformation Program as a last-minute solution to win the support of conservatives concerned about the bill’s financial ramifications for rural hospitals.

However, the words CMS Administrator Mehmet Oz and his agency leaders are using to describe the new pot of cash are generating tension between legacy hospital and clinic providers and new, technology-focused companies that are stepping in to offer new ways of delivering health care.

This is “what I would call incumbents versus rural insurgents,” said Cody Kinsley, senior policy adviser at the Institute for Policy Solutions at Johns Hopkins University School of Nursing.

Applications are due November 5. The money will be awarded to states by the end of the year and will be distributed over five years.

Half of the fifty billion dollars will be divided equally among all the countries whose request was approved. The other half will go to the states that win by points. to The second half$12.5 billion will be allocated based on a formula that calculates each state’s rurality. The remaining $12.5 billion will go to countries that It scores well On initiatives and policies that reflect the Trump administration “Make America Healthy Again” Goals.

the Defines the application Specific policy goals such as implementing presidential fitness testing and restrictions on food aid, as well as broader investment strategies around telecare services, data infrastructure, and consumer-facing technology tools, which CMS has defined as “AI-powered symptom screening and chatbots.”

In September, after CMS officials issued the request, Republican members of Congress from states with Democratic governors applied He called for justiceconcerned that their states might funnel money to urban areas. In a letter to Oz and Health and Human Services Secretary Robert Kennedy Jr., they said the money “will serve as a lifeline to rural and at-risk hospitals in our communities that are already struggling to keep their doors open.”

Small hospitals fear they will get “a very small slice” of each state’s share, said Emily Felder, who leads the health care practice at Brownstein Hyatt Farber Schreck, a law firm whose clients include rural hospital systems.

“There’s a lot of frustration,” Felder said.

But Kinsley, who was previously North Carolina’s secretary of Health and Human Services, said using that money just to shore up the balance sheet “is really just throwing good money after bad money.” In contrast, he said, insurgents, such as technology-driven startups, can offer new strategies.

One of those companies competing for funding is… Home healtha Silicon Valley-based company that contracts with Medicare managed care insurers. Using AI analytics, Homeward helps patients access care in their homes and with local providers.

Jennifer Schneider, co-founder and CEO of Homeward, said the company manages the health of 100,000 patients in rural Michigan who are enrolled in insurance. The company was a sponsor of the Watergate summit. She also has ongoing meetings with Oz and his team, Schneider said.

“They’re doing their job, talking to a lot of people in the ecosystem and they’re really keen to learn from those of us who have been in the system,” Schneider said. “We are one of many in this situation.”

KFF Health News requested an interview with Alina Czekai, Director Newly created Office of Rural Health Transformation. CMS spokesman Alexx Pons said the agency is “unable to facilitate any interviews.”

Instead, CMS provided an emailed statement from Oz saying the program “will help states and communities reimagine what is possible for rural health care.”

The money would be better used to help pay for a transformation that isn’t “dramatic” or “revolutionary,” said Brooke Slabach, chief operating officer of the National Rural Health Association, the largest organization representing rural hospitals and clinics.

“If what we end up getting to is having a wearable device for every rural patient, I don’t think that’s a game changer,” Slabach said, referring to digital health monitoring devices like fitness trackers.

Slabach, who was once a small hospital CEO and an informal consultant to hundreds of rural facilities across the country, named a few ideas for the money — including paying for capital improvements like electronic health records or equipment, loan repayment programs to help grow the workforce, and creating “SWAT” teams that would bail out rural hospitals that were on the brink of closing.

More than 150 rural hospitals I’m closed nationwide since 2010 — a statistic cited by CMS’s Sutton and well known among industry observers. The SHIPS Center at the University of North Carolina, which collects lockdown data, also released the report guide To help countries calculate how rural they are in relation to their applications.

Kate Sapra, acting deputy director of the Office of Rural Health Transformation, who spoke at Watergate, said state applications will be reviewed by a committee, which includes some reviewers from within the government but others from outside it.

“We will train them on the registration criteria,” Sapra said, adding that committee members will not come from “your state” and will need to fill out conflict of interest forms. A portion of the funds each state receives will be reevaluated annually based on the progress it makes toward its goals and priorities. According to CMS.

States are creating stakeholder groups, requesting public comment, and working with their health agencies. Some like Mississippi and New MexicoConsultants are being hired.

In Montana, a group of health providers and associations has proposed a list of ideas for money, including creating a loan repayment fund for rural doctors to try to ease the worker shortage.

“It’s one-time money, a little bit of money,” said David Mark, a physician and CEO of One Health, which has clinics spread across eastern Montana and Wyoming. The state could receive at least $100 million annually for five years if applications from all 50 states are approved.

“How can you achieve the goals of transforming the health care system with an infusion of money like this?” Mark said.

Neither Montana nor Wyoming — vastly rural states — sent leaders to the Watergate summit, according to a copy of the attendance list. In the afternoon, attendees could rotate between planning tables and meet corporate sponsors such as electronic health records giant Epic and emergency services company Global Medical Response.

Wyoming Department of Health Deputy Director Franz Fox confirmed that his state did not send representatives to the event, because they were “burdened with other obligations.” Montana, Wyoming, and other states submitted Optional letter of intent Suggesting that they will apply for the funds. CMS did not respond to questions about how many states sent the letters and which states sent them.

During the Watergate event, hints of intense competition between the states began to surface.

“I think Arkansas’ request will be better than yours,” veteran political consultant Jack Sisson said with a smile during a morning panel discussion.

The audience laughed. Sisson, who recently left his job as health adviser to Arkansas Gov. Sarah Sanders, had interrupted Michael Hendricks, a political adviser to another Republican governor, Bill Lee of Tennessee.

“Look, this is the kind of friendly competition that CMS hopes to achieve,” Hendricks said. He smiled broadly, thanked Sison and added: “I’m looking forward to our victory together.”

KFF Health News Montana reporter Katherine Houghton contributed to this report.