Rural Hospitals and the New Federal Program

As Republicans in Congress raced to approve their tax-and-spending-program megabill before July 4th, the financial viability of the nation’s rural hospitals emerged as a potential obstacle to final passage. The GOP’s solution-a new rural health transformation (RHT) program-may prove more effective at protecting incumbent legislators than improving the financial outlook of rural hospitals.

A main objective of the megabill was to extract significant savings from Medicaid to partially offset the expected revenue loss from tax cuts. Some of the cost cutting will come from tightening program rules governing the preferred payment terms states extend to certain facilities, including rural hospitals. The megabill’s restrictions will make it harder for such practices to be as expansive as they have been in recent years.

To convince the GOP holdouts worried about the megabill’s effects on access to care in sparsely populated communities, Senate Republican leaders offered, at the last minute, to insert the five-year,$50 billion RHT program into the final version of the legislation. With little time for a thorough review of the new program’s terms, and restrictions on detailed policymaking as part of the budget reconciliation process (which governed how the megabill was assembled), the RHT funding was written with a high degree of executive branch discretion.

In September, the Centers for Medicare and Medicaid Services (CMS), which Congress charged with RHT administration, published its plans for accepting and reviewing state-initiated program applications. The guidance outlines the allowable uses of the funds and the scoring criteria for ranking state submissions.

The $50 billion pool will be split evenly between a uniform grant program paid out to all approved states and a “workload” stream dedicated to supporting the state programs ranked most favorably based on the administration’s scoring criteria.

A notable feature of the “workload” pool is the explicit favoritism of policies embraced by the Trump administration. States that agree to implement