Rural health’s $50 billion tech transformation: Too fast to last

The Centers for Medicare & Medicaid Services (CMS) just placed a $50 billion bet on rural healthcare, but the odds are not in its favor. CMS, now led by Mehmet Oz, MD, created the Rural Health Transformation Program to help the 60 million Americans in rural areas have better access to care, modernize facilities and technologies, and support innovation that brings “high-quality, dependable care closer to home.”

But CMS only gave states a few months to create and submit their transformation plans to secure a piece of the pie. Early rollouts are underway, and many states are in over their heads. There is a real danger that technologies are about to be deployed that ignore the stark realities of rural communities, and money will likely be wasted. Quick actions without a thorough understanding could put communities in unintended situations when funds run out. Will the urgency meant to accelerate transformation be its doom?

The transformation fund was a late-stage deal in 2025’s “One Big Beautiful Bill” to blunt criticism over immense Medicaid cuts that are straining rural healthcare; yet the fund only amounts to 37% of an offset in those areas, making it one big beautiful stopgap.

RURAL HEALTHCARE ALWAYS AT RISK

A larger proportion of people in rural areas are on Medicaid, compared to urban areas. These cuts are costing rural healthcare communities hundreds of millions of dollars when they were already operating on a financial razor’s edge. At least 182 rural hospitals have closed or stopped providing in-patient care in the last 15 years. Currently, at least 417 rural hospitals are vulnerable and over 40% operate at a loss.

Patients often exist in “care deserts,” and adequate resources like primary care, mental health, and specialists in obstetrics and oncology are scarce. There are also extensive gaps in high-speed broadband, which translates to limited access to telehealth, remote patient monitoring, and electronic health records (EHR). Paper-based health records are still common for many practitioners.

WARP SPEED DECISIONS AND THE YEAR-SIX PROBLEM

Policy, funding, and government expectations underwent a seismic shift across healthcare last year. Now all eyes are on how states deploy technologies and experiment with rural care delivery and financing reforms. Green flag investments include workforce recruitment and training, expanded public health and behavioral health services, and most critically, broadband expansion so telehealth, remote patient monitoring, and health information exchanges (HIEs) can actually function. But red flags are flying too. Some focus on data, interoperability, and IT modernization without the broadband or local expertise to support it. Others are chasing flashier solutions, like drone prescription deliveries or mobile telehealth units, tele-ICUs, and virtual nursing programs, that depend on reliable WiFi that barely exists in target communities.

The fund’s timeline for states to design and submit comprehensive rural overhaul plans was months rather than years. Government employees raced to make consequential decisions outside their core expertise in record time.

The infrastructure mismatch of urban versus rural compounds the issue, as much of health technology was designed in and for city environments. What looks transformative on paper could become turbulent in practice when weak infrastructure realities hit.

States are planning to spend one-time dollars on technologies that will require ongoing funding past 2030. “What happens in year six?” should be the paramount question in every decision. If the financial margin isn’t there now (which it isn’t), it likely won’t materialize later to support expensive technologies. Interestingly, Wyoming is focusing on “forever” and targeting the money for a perpetuity fund.

CMS has also made clear that future-year funding will depend on states’ performance against transformation goals, meaning these first bets on technology carry long-term financial consequences, with the math and operations still unwritten.

Before we digitize or embed AI avatars as clinicians, rural America needs to stabilize, focus on the basics, and ensure it can pay the bills in year six.

THE MOST CONNECTED RURAL-URBAN PATIENT CARE IS IN ALABAMA

Uncoordinated care remains healthcare’s most significant driver of preventable costs and avoidable harm. Between antiquated fax and phone, structured and unstructured data from EHRs, HIEs, and paper-based sources—all stuck in complicated data silos—it’s hard to access actionable patient insights. Information spread makes care coordination nearly impossible.

But one state with a large rural population is connecting care across a patient’s entire health journey. Since 2020, urban and rural communities in Alabama have been operating on Watershed Health, making it one of the few states where major insurance providers, hospital systems, post-acute providers, and community-based organizations coordinate patient care on a single platform. The network follows a patient from hospital discharge to recovery at home to community support and beyond.

The network has contributed to a more than 25% reduction in Medicare 30-day hospital readmissions and shorter patient stays, while significantly reducing referral times. One provider system recorded $5 million in savings in its first year. Healthcare workers also benefit, spending less time chasing information by fax and phone and more time on patient care, a direct counter to rampant industry worker burnout.

With a large share of avoidable adverse patient outcomes in the U.S. attributed to provider behavior, coordinating care across rural and urban health communities should be mandated to help avoid test duplication, medication errors, delayed or missed diagnoses, patient confusion, and poor outcomes.

THE BASICS ARE THE TRANSFORMATION

Cross-continuum care coordination is a critical priority that many are already doing. States should resist technology-first solutions that lack the infrastructure to support them or the community capacity to sustain them once the $50 billion runs dry.

No one wants an already fragile rural healthcare system left holding a bag it could never carry in the first place. By focusing on the fundamentals that improve patient care rather than chasing high-risk technology bets, states could help rural healthcare find more independent footing by 2031.

Effie Carlson is CEO of Watershed Health.