Governor Patrick Morrisey announces on Thursday, September 18, 2025 that he is seeking input from West Virginia residents on the state’s application for the federal Rural Health Transformation Program. (Photo courtesy of West Virginia Governor’s Office Patrick Morrisey)
West Virginia may receive at least $100 million a year from a five-year federal program aimed at “transforming the health care ecosystem,” but that money will not make up for the Medicaid funding that state hospitals will lose if the One Big Beautiful Bill Act is fully implemented.
If the Republican megabill is fully enacted, West Virginia hospitals will lose more than $1 billion a year, Jim Kaufman, president and CEO of the West Virginia Hospital Association, told West Virginia Watch.
“This is going to have an impact and hospitals are going to have to figure out what they’re doing to ensure access with fewer resources,” Kaufman said. “And that could radically change what they can offer in certain communities.”
The Rural Health Transformation Program is a provision of the One Big Beautiful Bill Act, or HR 1. Congress included the $50 billion Rural Health Fund in the bill in response to the threat of rural hospital closures due to historic Medicaid cuts in the bill.
The law cuts states’ targeted payment programs for Medicaid. West Virginia currently imposes a 6% provider tax – the maximum allowable – on hospitals that serve Medicaid recipients. The money collected goes to Medicaid and the state draws a 3-1 state game for that money. The money will be distributed to state hospitals based on the number of Medicaid beneficiaries it serves, Kaufman said.
Starting in 2028, the law requires states to reduce their provider taxes to a maximum of 3.5%. The legislation also lowers Medicaid payment rates to those of Medicare, which do not cover the full cost of services, he said.
The bill also imposes work requirements and more constant redeterminations for Medicaid, which is also expected to reduce the number of recipients.
And while hospitals will feel the brunt of the Medicaid cuts, Rich Sutphin, executive director of the West Virginia Rural Health Association, said very little of the Rural Health Transformation Program money will go directly to hospitals.
“You can’t make investments that go beyond minor changes to a facility,” Sutphin said. “You can’t use it to replace provider revenue that’s already been paid. So you can’t add enhanced reimbursement for certain services.”
The money also cannot be used to replace Medicaid funding, Sutphin said.
“[The Centers for Medicare and Medicaid Services’] The guidance has made clear that the Rural Health Transformation Program is not intended to offset deep Medicaid cuts or otherwise support the rural hospitals and providers that will be most impacted,” said Kelly Allen, director of the West Virginia Center on Budget and Policy. “In their funding announcement, they specify that no more than Allow 15% of funds to go toward provider payments that would help close the gaps in our nation’s deepest Medicaid cuts.” Story.”
If hospitals had to cut services, it would affect entire communities, not just Medicaid recipients, Kaufman said.
“Someone actually told me, ‘Well, I don’t take Medicaid, I don’t care about these cuts,'” Kaufman said. “Hospitals don’t recruit a provider or operate a service just for Medicaid. They provide that service to a community. So when you talk about these cuts, that means resources are being taken away from a community.”
The program aims to “transform” healthcare.
According to the federal Centers for Medicare and Medicaid Services (CMS), the Rural Health Transformation Program aims to “strengthen rural communities across America by improving health care access, quality, and outcomes by transforming the health care ecosystem.”
The $50 billion fund will be distributed to eligible states over the next five years, with $10 billion distributed each year beginning in fiscal year 2026.
Half of the money will be distributed evenly to states with approved applications. The other half will be distributed based on states’ individual metrics and applications that “reflect the greatest potential and magnitude of impact on the health of rural communities.”
According to CMS, the program has five strategic goals: restoring rural America to health, sustainable access, workforce development, inventive care and technological innovation.
Sutphin and Kaufman said the program provides opportunities for the state.
“This is really about how we can start to transform and modify rural health care,” Kaufman said.
“We are confident that Governor Morrisey’s team will submit a proposal that will benefit West Virginians and be eligible for funding from CMS,” Sutphin said.
The public submits ideas in exchange for money
The federal government opened the application period for funding on September 15th and gave states a deadline of November 5th to submit their applications.
During a fresh conference on Sept. 18, Gov. Patrick Morrisey sought public input on what the state should include in its proposal. The governor requested that ideas be submitted by Sept. 29 so his administration can meet the tight deadline.
“We have a chance to help our citizens live longer, healthier lives… We have a chance to reverse some of the terrible health trends that have long plagued our state,” Morrisey said at the time. “I think the key to our application is to really focus on things that we can meaningfully improve.”
Curtis Capehart, Morrisey’s policy director, said in a call with state lawmakers earlier this month that the office had received about 2,000 pages of responses from more than 221 citizens and organizations. The state hired McKinsey and Company to facilitate with the application process, he said.
The Rural Health Association submitted ideas focused on three areas: a rural health pipeline to provide opportunities for health professions students to move into rural communities, a mechanism to train and recruit health care providers by offering improved services, and encouraging the automation of certain parts of the health care system.
The hospital association submitted ideas for a wellness initiative that would expand access to technology, including telemedicine, and expand residency programs to attract and retain physicians in rural areas, and another that would operate artificial intelligence to support physicians, Kaufman said.
Capehart said the governor’s office met with major health networks, academic institutions, associations and researchers on the proposal.
He said the government’s three strategic priorities for program implementation include identifying barriers to health workforce participation, establishing the state as a hub for rural health innovation and partnerships, and improving access to health care and sustainability of the health system.
Kaufman said the program can improve health outcomes and access if the money is used properly. The state also needs to understand that these are one-off payments, he said.
“The most important thing is, how do you support sustainability in the sixth year when the dollars dry up?” Kaufman said.
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