Federal health care officials are getting ready to bring the FY 2025 budget reconciliation bill’s “Rural Health Transformation Program” to life.
Added to the “One Big Beautiful Bill” to provide assistance to rural hospitals that maintained that their existence would be jeopardized by the Medicaid cuts and other health care changes in the law, the Rural Health Transformation Fund will consist of $50 billion to be distributed to rural health care organizations over a five-year period. Half of that money will go to states that successfully apply it – the Department of Health and Human Services can reject states’ applications for resources – and for those states to decide how to divide it and the other half will be distributed at the discretion of the HHS Secretary.
An interesting twist has the potential to make distribution decisions more difficult: since a Medicare policy change in 2016, hospitals located in urban geographic areas have been able to classify as both urban and rural for wage index purposes and in 2023 alone, 425 such hospitals did so. As a result, the overall share of hospitals classified as rural has risen from 27 percent to 43 percent despite the closure of many rural hospitals in recent years. With that change in the balance of hospital classifications has come a corresponding change in the balance of rural to urban hospital beds, from 13 percent just a few years ago to 45 percent in 2023.
Learn more about the Rural Health Transformation Program, how it may work, and the challenge reclassifying urban hospitals may pose from the Becker’s Hospital Review article “CMS targets September for $50B rural healthcare fund applications;” the KFF report “A Closer Look at the $50 Billion Rural Health Fund in the New Reconciliation Law;” and the Fierce Healthcare article “Hundreds of urban hospitals could be double-dipping into rural Medicare funds, study finds.”