Rural healthcare in the United States has reached a breaking point. Hospital closures, provider shortages, and long travel distances for care have left many communities without reliable access to basic services. These challenges have compounded over time, creating systemic gaps that disproportionately affect rural populations, including veterans. Rural areas face higher rates of hospital closures and persistent shortages of healthcare providers compared to urban regions.
Joanne Frederick, CEO of Government Market Strategies, a consulting firm that supports businesses in the government contracting sector, says the federal government is now attempting a more structural fix.
In an interview with Military.com, Frederick described the Rural Health Transformation Program (RHTP) as “a $50 billion federal initiative to transform how healthcare is delivered in rural America,” emphasizing the program is intended to redesign systems rather than temporarily stabilize them.
From Stabilization to System Redesign
For years, federal efforts to support rural healthcare focused on keeping hospitals open through targeted funding. The RHTP marks a departure from that approach. Instead of prioritizing institutional survival, the program requires states to rethink how care is delivered across entire systems.
States submitted proposals to the Centers for Medicare & Medicaid Services outlining how they will use funding to improve access, efficiency, and outcomes. Funding is distributed over five years and tied to performance benchmarks, creating a system where continued support depends on measurable progress. Frederick explained that “funding is phased and tied to milestones and performance,” reinforcing the program’s focus on accountability.
This shift reflects a broader recognition that traditional hospital-centered models may not be sustainable in many rural areas. CMS has increasingly emphasized integrated care networks, outpatient services, and alternative delivery models as part of its rural strategy.
State Flexibility with Accountability
A defining feature of the program is the flexibility given to states. While federal officials set broad objectives, states determine how to allocate funds and design their healthcare systems based on local needs. This approach acknowledges that rural healthcare challenges vary significantly across regions.
Frederick noted that states had “a significant amount of flexibility” when crafting their proposals, but are now “beholden to what they said they were going to do to get those grant dollars.” That structure allows for innovation while ensuring that states remain accountable for delivering results.
The success of this model will depend on how well states balance experimentation with execution. Poorly designed programs risk failing to meet benchmarks and losing future funding.
Targeted Investments and Persistent Barriers
The RHTP directs funding toward several key areas, including outpatient and community-based services, telehealth and digital infrastructure, behavioral health, workforce development, and new care delivery models. These priorities aim to address longstanding weaknesses in rural healthcare systems.
Telehealth has emerged as a particularly important tool for expanding access. Its use increased dramatically during the COVID-19 pandemic and remains a key component of rural care delivery. However, the effectiveness of telehealth depends on reliable internet access, which remains inconsistent in many rural areas. The Federal Communications Commission reports that millions of rural Americans still lack high-speed broadband access.
Workforce shortages present another major obstacle. Many rural communities lack sufficient doctors, nurses, and specialists, which often forces patients to travel long distances for care. The Health Resources and Services Administration continues to designate large portions of rural America as Health Professional Shortage Areas.
Frederick pointed to alternative strategies some states are using, such as expanding the use of paramedics and community health workers, as ways to extend care into underserved areas. These approaches reflect a broader shift toward more flexible, community-based care models.
Implications For Veterans
The program could also have meaningful implications for veterans, many of whom live in rural communities and rely on a combination of Department of Veterans Affairs facilities and local providers. The VA has attempted to address access issues through community-based outpatient clinics, which extend care beyond major medical centers.
Even so, gaps remain. When services are unavailable within the VA system, veterans are referred to local providers, increasing demand on already-strained rural healthcare systems. As Frederick explained, “that makes the supply side of the equation more problematic,” because communities must absorb additional patients without additional resources.
Although the RHTP does not directly fund VA healthcare, it may improve access for veterans by strengthening the broader rural healthcare infrastructure on which they depend.
Not a Bailout for Rural Hospitals
Despite its size, the program is not designed to rescue struggling hospitals. Frederick emphasized that “this is really not designed to provide...shoring up of funds to rural hospitals,” underscoring its focus on transformation rather than preservation.
In some cases, that may mean shifting away from hospital-based care entirely. States may instead invest in outpatient networks, mobile care units, or home-based services. These changes could be difficult for communities that rely on hospitals as both healthcare providers and economic anchors.
Execution Will Determine Outcomes
The program’s success will ultimately depend on implementation. While $50 billion is substantial, resources are spread across states and over multiple years, requiring careful planning and prioritization. Frederick noted that funding “can go very quickly” once divided across competing needs.
CMS requires ongoing reporting on metrics such as access, travel times, and patient outcomes, with future funding contingent on demonstrated progress. This structure creates strong incentives for states to deliver results but also introduces risk if programs fail to meet expectations.
A National Experiment in Rural Care
At its core, the Rural Health Transformation Program represents a large-scale experiment in healthcare reform. States are pursuing different strategies, creating an opportunity to compare outcomes and identify best practices.
Frederick described the initiative as having “the opportunity to really create huge lasting structural changes,” while acknowledging that results will vary depending on how states implement their plans.
The program reflects a broader shift in federal policy from preserving existing systems to rethinking how care is delivered. Whether it succeeds will depend not only on funding, but on the ability of states to translate that funding into sustainable, effective healthcare systems for rural communities.
