Virginia seeks input for competitive federal rural health transformation fund; $500M possible over five years

RICHMOND — Virginia officials described plans to apply for federal funding intended to bolster rural health systems and said the state is soliciting stakeholder proposals while the U.S. Centers for Medicare & Medicaid Services finalizes the application guidance.

Background: The 2025 federal reconciliation law (H.R.1) created a $50 billion rural health fund over five years. CMS will allocate half of annual funds to every state equally (about $100 million per year), with the remaining half awarded competitively based on criteria the agency sets. States must submit applications, and CMS must make awards by Dec. 31, 2025, for federal fiscal 2026 funding to begin Oct. 1, 2025.

Virginia’s planning process: The Secretary of Health and Human Resources is conducting a statewide listening tour and collecting up to 10‑page stakeholder proposals to shape Virginia’s application. The administration engaged the Boston Consulting Group to synthesize stakeholder input and build the state application. The state must propose at least three permitted uses identified in the federal law; those uses include workforce recruitment and retention in rural areas, telehealth and technology investments, innovative care models, behavioral health and substance use services, and technical assistance to rural providers.

Why it matters: If Virginia submits an approved plan, the state would receive an equal share of the annual allotment (about $100 million per year) and could compete for supplemental funding. Over five years, that equal allotment amounts to roughly $500 million. States may use up to 10% of awards for administrative costs and must certify that funds will not be used to finance the non‑federal share of Medicaid obligations.

Timeline and constraints: CMS guidance and the application were expected to be released in late September or early October; Virginia’s application is due in early November 2025 and CMS will announce awards by Dec. 31, 2025. Any federal funds not spent or obligated within the program’s required timelines would revert to the U.S. Treasury.

Lawmakers’ questions and next steps: Committee members asked how “rural” will be defined, whether clinics, urgent care centers and mobile health units that serve rural residents would be eligible, and how multi‑facility health systems that include rural hospitals would fit the application. State staff said CMS guidance will clarify eligibility and that stakeholder input is central to deciding proposals. The secretary’s listening tour planned multiple regional meetings across September 2025 and invited legislative feedback.

Ending: State officials asked legislators and stakeholders to submit proposals during the abbreviated engagement window so the application can reflect Virginia priorities for workforce, technology and access in rural areas.