Rural health transformation: when funding depends on results

Why execution discipline now determines whether states keep their rural health funding

In brief

• Rural health funding is now performance based, with annual dollars tied to measurable progress — not just compliance.
• States must manage rural health initiatives like a delivery portfolio, not a traditional grant program.
• Strong governance, reporting and execution discipline now determine whether rural health funding continues.

For decades, state health agencies have managed large federal grants where the core challenge was compliance: follow the rules, submit reports, spend the money appropriately. The Rural Health Transformation Program (RHTP) changes that equation.

The RHTP is not a traditional block grant. It is a performance-linked funding model where continued federal investment depends on whether states can demonstrate measurable progress against their approved rural health transformation initiatives. In practice, that makes the RHTP feel far less like a grant — and far more like a multiyear performance contract.

States that approach the RHTP as a compliance exercise risk discovering too late that meeting federal requirements alone is not enough to secure future funding.

Reporting is not paperwork — it is the renewal mechanism for rural health funding

To remain eligible for continued RHTP funding, states must submit annual progress reports and noncompeting continuation applications. These documents are not retrospective summaries. They are the formal mechanism the CMS uses to determine whether a state has earned its next tranche of funding.

Effective reporting requires states to show:

• Progress toward approved initiatives
• Achievement of defined milestones
• Alignment between spending, activities and outcomes
• Evidence that corrective actions are taken when initiatives fall behind

States that wait until reporting deadlines to assemble documentation often find gaps that are difficult — or impossible — to close after the fact.

In the RHTP, reporting is not the end of the work. It is the proof that the work happened.

Audit readiness is operational readiness

States must maintain complete and accurate financial, programmatic and performance records, and the CMS may request documentation at any time.

While audits are a familiar feature of federal funding, the RHTP raises the stakes by tying audits to performance outcomes — not just the allowability of costs.

This means states must be able to answer, at any point:

• What initiatives are underway?
• How is progress being tracked?
• Which partners are responsible for delivery?
• How do expenditures support measurable outcomes?

Audit readiness is no longer a finance function alone. It is a reflection of whether the program is being actively managed.

What this means for state leaders

The RHTP rewards states that treat execution infrastructure as core program design, not administrative overhead.

States that succeed tend to:

• Establish clear governance and decision-making authority
• Track milestones and outcomes continuously, not annually
• Maintain a single source of truth for performance and documentation
• Align program, finance and policy teams around shared accountability

States that struggle often underestimate the operational lift required to manage dozens of initiatives, partners and reporting requirements simultaneously.

Three practical next steps for RHTP management

State agencies don’t need to overengineer RHTP management — but they do need to be intentional.

Three practical steps:

1. Translate initiatives into milestone-driven delivery plans, not just budget line items.
2. Design reporting and documentation processes at the program’s launch, not after year one.
3. Treat performance tracking as a leadership responsibility, not a back-office task.

The RHTP offers a rare opportunity to reshape rural health systems. But the funding model is unforgiving. States that treat the RHTP like a performance contract — and manage it accordingly — are far more likely to see that opportunity through.

The views reflected in this article are the views of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.