State health officials told the Office of Cost and Accountability (OCA) board that California will prepare an application to compete for funds from the federal Rural Health Transformation Program created by the federal budget reconciliation bill known in the meeting as HR 1. The program allocates $50 billion over five years to strengthen health care access in rural areas; officials said half of the funds will be divided equally among states with approved applications and the remaining $25 billion will be awarded based on the quality of state proposals.

The OCA presentation summarized core features of the program and next steps. "The law requires CMS to consider certain factors when distributing these funds, such as a state share of population that lives in a rural part of a metropolitan area, its share of rural health facilities compared to the nation, and the situation of hospitals that serve a disproportionate number of low-income patients," a state presenter said during the meeting. Staff said the Centers for Medicare & Medicaid Services (CMS) must approve or deny applications by Dec. 31, 2025, and that the federal agency will post a notice of funding opportunity (NOFO) and guidance before states file final proposals.

Why this matters: the program is a rare, large federal investment aimed at rural health systems that have been under financial strain, and the structure of the grant (half distributed equally, half scored by application) will affect how California prioritizes investments and designs its state proposal.

What the state plans to do: the Health and Human Services Agency has asked HCAI to oversee California's application, the presenter said. HCAI houses the state's office of rural health and plans a stakeholder engagement schedule that begins with a webinar and survey on Sept. 4 and additional listening sessions through September. Staff encouraged rural providers and other stakeholders to join the mailing list and submit questions or written feedback to the state office of rural health.

Required content and eligible activities: presenters listed goals that state proposals must address, including improving access to care; improving health outcomes; promoting technology use; strengthening local partnerships; expanding the rural workforce; advancing innovation; supporting system sustainability; and identifying causes for rural hospital closures. State proposals must also include at least three of ten permitted activity types, such as evidence-based prevention and chronic disease programs, targeted payments to providers (with limits on supplementation), technology investments and training, recruitment and retention with a specified five-year service obligation, support for opioid and substance-use disorder treatment, and projects to promote value-based care.

Timeline and next steps: staff said CMS has begun hosting webinars and the federal NOFO remains pending. They emphasized the aggressive timeline: states must file applications for CMS review before the statutory deadline and the agency will score proposals based on factors spelled out in the law. State staff said they will gather and incorporate feedback from rural stakeholders as they draft California's proposal.

Public comment and stakeholder reaction: Janice Rocco, on behalf of the California Medical Association, told the board that the acting national Medicaid director advised states to collect as much data as possible to support data-driven state proposals; Rocco said CMA will share additional information about rural physician-practice declines with state staff. Victoria Valencia of the California Hospital Association said the program "will not come close to fully addressing the devastating impacts on rural patients and communities," but called it a "vital opportunity" and urged close engagement with rural hospitals. Beth Capelle of Health Access said she supported HCAI handling the application and urged attention to median income and health-care-cost trends as the state defines spending priorities.

What officials asked of stakeholders: state staff asked rural hospitals, health plans, physicians and community groups to participate in webinars and surveys and to submit written material that HCAI can incorporate into California's proposal. Staff also said they will collaborate with other state offices, including the Department of Healthcare Services, and named a point of contact for questions to the state office of rural health.

Next steps and timing for California: HCAI will host the first stakeholder webinar on Sept. 4, release a survey that day, hold additional listening sessions through September, and use stakeholder input to shape the state's application. CMS guidance and the NOFO will determine final proposal requirements and scoring. Staff told the board they are monitoring CMS webinars and will return to the board with updates as the NOFO and guidance are released.

Ending note: state staff framed the program as a transformation effort rather than a backfill of existing funding, and asked stakeholders to help craft a competitive, data-driven proposal that reflects rural priorities.