Colorado has secured approximately $1 billion in federal funding aimed at transforming rural health care over the next five years. Despite this substantial financial support, many hospital executives in the state have expressed reservations about the state’s proposed allocation and strategy for utilizing these funds.
The funding originates from last year’s H.R. 1, informally known as the “big beautiful bill,” which allocated $50 billion for the federal Rural Health Transformation Program. This program is designed to overhaul rural health care but also entails cuts estimated at $137 billion in other rural health spending over the coming decade. The Centers for Medicare and Medicaid Services (CMS) has outlined strict guidelines for how the funds can be utilized, emphasizing a focus on restructuring rural health care rather than merely maintaining existing infrastructure.
Concerns have been raised by leaders of rural hospitals regarding the potential implications of the state’s plans. Many fear that initiatives might lead to a centralization of services, causing local hospitals to reduce the range of care they offer. Rural hospital executives argue that before embarking on any transformation efforts, they require immediate financial support to stabilize their operations.
Colorado is set to receive about $200 million annually from this fund, positioning it in the middle tier among states by award amount. While hospital leaders welcome any investment in rural health care, they maintain that the available funds will not adequately address the financial challenges they face. Kevin Stansbury, CEO of Lincoln Health in Hugo, remarked, “I think across the country, people are grateful for that. It’s just not enough.”
Rural areas typically experience declining populations that are aging more rapidly than urban regions and often have higher poverty rates and chronic health conditions. These factors contribute to the increased cost of delivering health care services in rural settings, raising skepticism about whether a significant one-time investment can successfully address systemic issues.
The state’s funding application includes ten initiatives aimed at improving various aspects of rural health care. These initiatives encompass broad goals, such as preventing chronic diseases, modernizing emergency services, and stabilizing hospitals. Each initiative invites health care providers and nonprofits to submit proposals tailored to achieving these objectives.
Jennifer Riley, CEO of Memorial Regional Health in Craig, voiced her concerns regarding a proposed regional hub-and-spoke model. This model would require patients to travel for certain services, potentially jeopardizing the financial viability of local hospitals. “Orthopedic surgery is a profitable service line,” she explained, adding that such a shift could adversely impact hospitals that rely on profitable services to support less lucrative areas like emergency care.
While the Colorado Department of Health Care Policy and Financing, responsible for managing the new federal funding, states that no hospitals will be forced to close services or relinquish local decision-making, the implementation of changes will depend on consultations with an advisory committee. If the state intends to enhance services—such as ensuring at least one hospital in a region can deliver obstetric care—there must be adequate compensation for hospitals taking on unprofitable services.
Joe Theine, CEO of Southwest Health System in Cortez, echoes the apprehension regarding regionalization and the state’s extension of the Colorado Hospital Transformation Program. He highlighted that the program, which mandates facilities to demonstrate progress on quality measures, has yet to prove its effectiveness in improving patient safety or reducing costs.
The state has endeavored to incorporate diverse voices into its funding application process, but Stansbury expressed that this approach may have diluted the specific needs of rural hospitals. He emphasized the necessity for local resources and decision-making authority within broad state guidelines. “It feels to me like the state is trying to say, ‘We know better,’” he stated.
The CMS has established five key objectives for the funding, which include:
1. Reducing rates of chronic disease
2. Developing financially sustainable models for rural health care
3. Recruiting and retaining health workers
4. Innovating payment models
5. Leveraging technology to improve care
However, the federal guidelines impose restrictions that may limit the flexibility states hoped for. The funds cannot be used to replace existing funding or for certain expenditures such as construction and research, which could hinder comprehensive local solutions.
Although the available funds will assist struggling hospitals, the cap on direct payments for uncompensated care—limited to 15% of total funding—may fall short for many facilities with urgent financial needs. Stansbury noted that the maximum of $30 million per year for uncompensated care might not suffice to stabilize all affected facilities.
Despite the challenges, there are some positive aspects in the state’s plan. Opportunities for workforce development and telehealth expansion have been highlighted by Josh Hannes, vice president of rural policy and strategy at the Colorado Hospital Association. Yet, he pointed out that these initiatives may not align with the immediate needs of rural hospitals, which primarily seek financial stability, more staffing, and infrastructure improvements.
The demographic challenges faced by rural areas—comprising older populations with lower income levels—are unlikely to change soon, according to Katherine Hempstead, senior policy officer at the Robert Wood Johnson Foundation. The costs associated with delivering health care to small populations can be high per capita, and some services may not be feasible due to insufficient patient volumes.
As the state rolls out its plans, the true impact of the funding will become clearer. Key stakeholders, such as Riley, emphasize that the success of any initiatives will depend on long-term support mechanisms beyond the initial five-year funding period. “The devil is always in the details of how this is going to roll out,” she cautioned.
The outcomes of this funding initiative could offer insights and potential solutions for rural health care challenges in Colorado and beyond.
