Tory Starr worries about the people who receive medical care at Open Door Community Health Center on California’s north coast.
“These are people who work in restaurants. They’re teacher’s aides,” said Starr, a registered nurse who became Open Door’s chief executive officer more than six years ago. These patients are “the very heart and soul of rural America,” he says.
He said patients could quickly lose services if remote medical centers don’t get a share of the billions of dollars Congress has allocated to reform health care in rural America. About 50% of Opendoor’s 60,000 patients are on Medicaid. Medicaid is a state and federal co-insurance program that, along with the associated Children’s Health Insurance Program, covers approximately 76 million people with low incomes and disabilities.
Last summer, when Congress approved the One Big Beautiful Bill Act, it cut nearly $1 trillion from Medicaid over the next 10 years. Now, Starr hopes the $50 billion Rural Health Transformation Program, part of the same bill, will help maintain coverage for patients.
But small community health care providers such as Open Door may find themselves sharing billions of dollars with an army of corporate giants before care reaches patients.
Months after federal leaders announced that all 50 states had won first-year awards ranging from $147 million for New Jersey to $281 million for Texas, the state plan would direct significant prescribed spending to companies that can increase the use of electronic health records, strengthen cybersecurity and improve technology platforms for states and health systems.
And at least four large consortiums are now marketing multifaceted services to each state. Many of the companies already work with local health systems and states through Medicaid contracts and mobile and telehealth operations.
How these services help improve health care for rural Americans in places like Open Door remains an open question.
Each state strictly adheres to reporting deadlines.
Maya Sandalow, associate director at the Bipartisan Policy Center, a Washington, D.C.-based think tank, said federal regulators were “very interested in investing in digital health” when they developed the five-year local health program rules last year. She co-authored a recent report on how the 50 states plan to invest in technology, including modernizing health care infrastructure and expanding virtual care options such as telemedicine and remote patient monitoring.
“The Rural Health Fund was not really designed to directly replace or offset lost Medicaid funding,” Sandalow said, noting that federal officials in charge of the program cap provider payments (funds that help local hospitals and clinics pay for patient care) at 15% of the total funding given to states.
Federal regulators also have strict reporting deadlines, and states are required to act quickly.
States must submit progress reports by the end of August and pay in full for the first year by October 30, according to the Centers for Medicare and Medicaid Services, the federal agency that oversees the program. According to the CMS Funding Opportunity Notice, states may have their benefits reduced or terminated at any time if they fail to comply with federal requirements.
As of early April, CMS had not approved or only partially approved budgets for some states, including Wyoming, Colorado and Vermont, state officials said. CMS spokeswoman Katherine Howden declined to say which states require approval of revised budgets, but said CMS does not provide “state-by-state updates.”
Alaska’s budget has been approved, but the state has not announced the full grant proposal and when it will release the grants, said Tricia Franklin, Alaska Rural Health Reform Program Coordinator.
“Early summer was the goal,” Franklin said. However, the response from vendors and applicants has been “much better than expected, so it may take a little longer.”
Morgan MacDonald, national director of population health at the Milbank Memorial Foundation, a nonprofit focused on state health policy work, said working with consulting firms is a well-established way for states to meet federal deadlines “quickly and effectively” and deploy grant funds.
Technology upgrades, rural healthcare modernization
Science Applications International Corp., a Fortune 500 government contractor, has formed an alliance to advance rural health care. SAIC performs a variety of technology operations, including cybersecurity and engineering support. The partnership also includes Walgreens and Mission Mobile Medical, which turns RVs into primary care clinics. Data analytics companies, telemedicine and software companies, and companies that help place medical school graduates in health systems are also part of the coalition.
SAIC’s partnership provides an “ecosystem” of companies that can coordinate the work the state has committed to, said Suresh Soundararajan, SAIC’s rural health transformation program director and former chief information officer for the Virginia Department of Health. Each company has a representative focused on rural programs, he said.
Sandalow, of the Bipartisan Policy Center, said the lack of digital infrastructure, such as electronic health records in different clinics and hospitals that can communicate with each other, is a consistent barrier for local health teams.
“The funding hasn’t always been there for provinces to build the infrastructure needed to fully deploy remote patient monitoring, telemedicine and artificial intelligence in a way that actually supports it,” Sandalow said. “It will require things like infrastructure updates and workflow changes.”
Sandalow’s recent report found that Maine and Utah are investing in cybersecurity. Indiana, Missouri, and New Mexico plan to modernize their electronic health records. Oklahoma will purchase the hardware and software, subsidize subscriptions and provide technical support to local providers. States such as Arizona and South Carolina will use the funds to create telehealth hubs and purchase remote patient monitoring equipment.
In developing spending rules for local programs, federal regulators also said that states can only use up to 5% of the total funding they receive to replace electronic health records systems that already meet federal standards. Sandalow said this means states will focus on strengthening and upgrading their current systems.
Gainwell Technologies operates systems for dozens of states’ Medicaid programs and is spearheading another coalition. Lucille Desai, a senior vice president at Gainwell, said detailed spending plans for each state are “changing in real time.”
Maine’s Medicaid plan contracts with Gainwell, and the state’s initial filing listed four contracts with the company worth more than $16 million over five years. The state confirmed it received federal approval for only the first year’s spending, which includes a $250,000 contract to implement changes to the state’s Medicaid billing system.
James Lomastro, an advocate for elderly care in rural Massachusetts with the nonprofit Dignity Alliance, said he worries that big vendors and health systems will get the state’s transformation funding.
“The clinics, home care agencies, and nursing homes that actually provide day-to-day support in the community are largely on the margins of the state’s discussions about how to spend the money,” he said. Olivia James, a spokeswoman for the Massachusetts Department of Health and Human Services, said state officials will “make sure everyone is at the same table” on training, financial incentives and direct investment.
Arizona’s local fund budget is $167 million in the first year, with up to about $30 million earmarked specifically for technology upgrades such as medical diagnostic equipment and electronic health records for rural health facilities.
But Pima County Public Health Director Teresa Cullen said grants to county public health departments are also a priority. The approved budget includes up to $4 million in grants to support local health care workers.
“In these rural communities, you need to be present,” Karen said.
Alina Chekai, director of the CMS Office of Rural Health Transformation, said her team plans to visit all 50 states. She spoke at the National Rural Health Association’s policy conference in Washington, D.C., in February, telling the audience that her team wants “money that goes to rural areas, rural health care providers, and rural patients.” The association’s membership includes rural hospitals and clinics that are expected to lose billions from Medicaid cuts.
In California, Open Door Star provided input on the state’s initial application and said it received $234 million in first-year funding, but it’s not clear what the next steps will be to get funding from the program.
For patients, Starr said technology upgrades require funding. After all, he said, modern electronic health systems can work seamlessly and store the documents needed to keep patients enrolled in Medicaid.
Starr said cutting-edge technology could be exactly what Opendoor and other local clinics need “to protect people’s health.”
KFF Health News senior correspondent Phil Galewitz and local health correspondent Arielle Zionts contributed to this report.
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