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Soon, $50 billion is coming to rural healthcare. Whether any of it reaches your organization depends on decisions being made right now at the state level, often without much notice or fanfare. Learn about RHTP, what compliance applies, and how to prepare now.
For hospitals and health systems operating with constrained resources, the Rural Health Transformation Program (RHTP) may create meaningful opportunities to support access, strengthen infrastructure, and address long-standing community needs. To make informed decisions, provider organizations should be monitoring program requirements, state-level implementation, and potential funding pathways now. This article outlines key features of the program and considerations for providers as states move from planning to implementation.
What is RHTP?
The Rural Health Transformation Program (RHTP) is a $50 billion federal cost-reimbursable grant program administered by the Centers for Medicare & Medicaid Services (CMS) to improve access, quality, and sustainability in rural healthcare. States receive funding over five years beginning in fiscal year 2026 and must develop CMS-approved transformation plans before funds are distributed. CMS gives states substantial flexibility in designing their programs. As a result, program structure and eligible activities vary significantly across states.
What Should Providers Know about RHTP Grant Compliance Requirements?
Because it’s federal financial assistance, RHTP funding is subject to Uniform Guidance requirements under 2 CFR Part 200, including Single Audit requirements. While these requirements are not new, some rural providers may be managing federal grant compliance at this scale for the first time. Understanding these obligations before accepting or spending funds will be an important part of audit readiness and effective program participation.
Are RHTP Recipients Required to Undergo a Single Audit?
Yes. Under Uniform Guidance requirements, non-federal entities expending $1 million or more in federal awards annually are required to undergo a Single Audit, which includes compliance testing of internal controls, allowable costs, and reporting accuracy.
How Do the RHTP Distribution Models Work, and What Should Providers Do?
The path from federal funding to provider organizations will depend on the distribution model selected by each state. Most states appear to be using one of two approaches or a combination of both, and in both, funds are used to reimburse qualified expenditures:
- Aggregator Model: Under this approach, the state designates one or more hub or aggregator organizations, such as a hospital association or rural health network, to receive funding and distribute it to eligible providers within a defined region. This model may support coordination across communities but will require providers to work through an intermediary organization to access funds. Providers should identify potential aggregator organizations in their state and understand how subrecipient decisions may be made.
- Direct Model: Under this approach, the state distributes funds directly to eligible providers through a state-administered application or selection process. While this model may involve fewer intermediary steps, it also places administrative and compliance responsibilities directly on the provider organization.
Now, provider organizations should determine which model their state is using and how their organization may fit within that framework. The distribution model will influence application steps, contracting relationships, compliance expectations, and ongoing reporting responsibilities. Additionally, this process will help organizations track their state’s readiness levels and stages of implementation.
What Five Areas of RHTP State Discretion Should Providers Understand?
Because each state’s transformation plan will guide local implementation, providers should avoid assuming that RHTP will operate the same way in every jurisdiction. Key areas of state discretion may include
- Eligible provider types. Federally Qualified Health Centers (FQHC), critical access hospitals, and rural hospitals are likely to be included in many state plans. Other organizations, such as behavioral health providers, long-term care facilities, or emergency medical services providers, may or may not be eligible depending on the state’s approved approach.
- Allowable uses of funds. Each approved state plan should describe how funds may be used. Common areas may include workforce, infrastructure, telehealth, and care coordination, but allowable activities will depend on the state’s approved plan and related guidance. Providers also should note that capital improvements may be limited or not allowable unless expressly authorized by the applicable state plan, award terms, or program guidance.
- Application and selection criteria. Many states are already awarding funds. Some may use competitive application processes, while others may rely on eligibility-based criteria or targeted funding decisions. Deadlines, scoring factors, and required documentation will be established at the state level. For example, Pennsylvania has launched its Rapid Response Stabilization Program, which will release funds to hospitals, providers, or rural health facilities that meet certain eligibility criteria rather than through a competitive application process, meaning providers may not need to compete for those funds if they meet the applicable requirements.[1]
- Reporting and program requirements. All recipients must comply with applicable federal grant requirements, including the Single Audit requirements at 2 CFR Part 200, Subpart F. States also may establish additional reporting obligations, performance measures, or program conditions. Providers should evaluate these requirements before accepting funds.
- Definition of “rural.” States may apply different definitions of rural for purposes of RHTP eligibility. Providers should confirm eligibility based on their state’s plan rather than relying on assumptions from other federal or state programs.
What RHTP Information Sources Should Provider Organizations Be Monitoring?
Given the pace of implementation and the variability among state approaches, provider organizations should take a proactive approach to monitoring RHTP and their state’s readiness levels. Three sources of information may be particularly important:
- State RHTP websites and agency communications. State Medicaid agencies and rural health offices are likely to be the primary sources for program details, including readiness, eligibility criteria, deadlines, approved plans, funding opportunities, and implementation stages. Providers should monitor these sources regularly.
- Listening sessions and stakeholder meetings. Many states are using these forums during planning and early implementation. Participation can help providers understand how state agencies are interpreting program requirements and where additional guidance may be forthcoming.
- Funding applications, even when they may not appear to be an immediate fit. Applications issued by states or aggregator organizations often provide important insight into eligibility, covered activities, compliance expectations, and budget parameters. Even when a specific opportunity is not the right fit, reviewing the application can help organizations prepare for future funding and identify potential options.
How Should Providers Prepare for RHTP Implementation Realities and Audit Exposure?
Providers should be prepared for these realities:
- Document decisions in real time
- Account for state readiness variability
- Plan for Single Audit timing
- Build audit-ready records from the start
RHTP shares some practical similarities with pandemic-era funding programs. The program is moving quickly, and in some cases, providers may need to make decisions while detailed guidance is still developing. For those reasons, organizations should document not only how funds are used but also the guidance, assumptions, and decision-making process used at the time.
State readiness also will vary. Some states may have detailed plans, established processes, and clear compliance expectations and already begun awarding funds. Others may continue refining program requirements during early implementation and even in subsequent years. The level of guidance available to providers may depend in part on the maturity of the state’s implementation process.
Audit exposure should be part of the planning process. Large federal grant programs often receive close scrutiny, and Single Audits may occur two to three years after funds are received and spent. Records created during implementation may later become the basis for demonstrating compliance.
Experience with prior federal funding programs, including the COVID-19 pandemic-era Provider Relief Fund, shows that compliance challenges often stem from incomplete documentation or misunderstood requirements rather than intentional misuse. Accordingly, providers receiving RHTP funds should build audit readiness into their processes from the beginning. Clear records of spending decisions, approvals, program rationale, and guidance relied upon can help demonstrate why costs were considered allowable and how each decision supported the proposed program objectives.
What is the Bottom Line for Providers, and How Can PYA Help?
RHTP is a significant funding opportunity that is still taking shape at the state level. Provider organizations that monitor state activity, participate in stakeholder discussions, and review funding materials as they are released will be better positioned to understand eligibility, requirements, and potential next steps.
In this environment, staying informed is a key part of strategic readiness. PYA can help with RHTP preparation, strategic decision-making, and implementation. Our professionals work with rural health systems and other provider organizations on funding strategy, compliance readiness, documentation processes, and related advisory needs. If your organization is evaluating RHTP eligibility, preparing for an application, or building processes to support compliant use of funds, contact our consultants for assistance.
[1] https://www.pa.gov/content/dam/copapwp-pagov/en/dhs/documents/rural-health/rhtp-funding/faq-rapid-response-stabilization-rhtp-payments.pdf
