By Sarah Jane Tribble
April 27, 2026 / 5:00 AM EDT / KFF Health News
Tory Starr, CEO of Open Door Community Health Centers on California’s North Coast, worries that remote clinics serving restaurant workers, teacher’s aides and others could lose services if they don’t get a share of the $50 billion Rural Health Transformation Program Congress included in last year’s legislation. About half of Open Door’s 60,000 patients are on Medicaid, the joint state-federal program that, with CHIP, covers roughly 76 million people with low incomes or disabilities. The same law also cut nearly $1 trillion from Medicaid over the next decade.
States won first-year awards this spring ranging from $147 million for New Jersey to $281 million for Texas. But state plans show a heavy focus on digital health investments — electronic health records, cybersecurity, telehealth and other technology platforms — and a significant portion of money is being steered to large contractors and coalitions that can deliver those services quickly.
Federal rules capped provider payments, which could help clinics pay for patient care, at 15% of a state’s award and limited replacing compliant electronic medical record systems to 5% of a state’s funding, signaling regulators’ emphasis on upgrades and interoperability rather than wholesale replacements. CMS also set tight reporting and spending timelines: states must file progress reports by the end of August and obligate all first-year funds by Oct. 30, or risk reduced or terminated awards.
That urgency has pushed states to tap consultants and established vendors to meet deadlines. Several large coalitions are already pitching bundled services. Science Applications International Corp. (SAIC) launched the Alliance for Advancing Rural Healthcare, combining SAIC’s cybersecurity and engineering work with partners including Walgreens and Mission Mobile Medical, plus telemedicine, data analytics and workforce-placement firms. SAIC says the alliance creates an “ecosystem” to coordinate state commitments.
Gainwell Technologies, which operates systems for many state Medicaid programs, is leading another collaborative effort. States’ detailed budgets are shifting in real time as plans evolve; Maine’s initial application listed multiple Gainwell contracts totaling more than $16 million over five years, and its approved first-year budget includes a $250,000 contract to modify Medicaid claims systems.
Policy experts say digital infrastructure gaps — incompatible electronic health records, weak broadband and limited tech staff — have long hindered rural care teams’ ability to use telehealth, remote monitoring and AI tools. The Bipartisan Policy Center’s Maya Sandalow, co-author of a report on states’ technology plans, said the program wasn’t designed to replace lost Medicaid dollars and that the federal emphasis on digital investments is clear.
States’ priorities vary. Maine and Utah plan cybersecurity investments; Indiana, Missouri and New Mexico aim to modernize EHRs; Oklahoma will buy hardware, subsidize subscriptions and provide technical support to rural providers; Arizona and South Carolina plan telehealth hubs and remote monitoring. Arizona’s first-year $167 million budget earmarks up to about $30 million for diagnostic equipment and tech upgrades for rural facilities and sets aside grants for county public health departments and community health workers, with Pima County public health director Theresa Cullen stressing the need for in-person presence in rural areas.
Some state officials say they will try to ensure community providers aren’t left out. Massachusetts officials say they’ll offer training, financial incentives and direct investments so clinics, home care agencies and nursing homes have “a seat at the table.” But advocates worry that big vendors and health systems — with existing Medicaid contracts, telehealth platforms, analytics tools and staffing solutions — will capture a disproportionate share of transformation dollars, leaving frontline providers marginally involved.
Practical concerns also persist. Several states reported partial or pending CMS approvals of budgets as of early April, including Wyoming, Colorado and Vermont. Alaska’s budget was approved but state officials say awarding grants may take longer than initially planned because vendor and applicant responses exceeded expectations.
CMS rural health transformation director Alina Czekai has said her team plans to visit all 50 states and wants “the money to go to rural communities, rural providers, rural patients.” Still, how upgrades to digital systems and cybersecurity will translate into sustained access to local care and coverage continuity — for instance, by maintaining the documentation needed to keep patients enrolled in Medicaid — remains uncertain for clinics like Open Door.
Local leaders say technology upgrades could help keep people covered by enabling seamless EHR functions that document eligibility and coordinate care. But they also warn that rapid procurement and large-scale vendor involvement may prioritize systems and platforms over direct support for the clinics and community-based services that deliver everyday care in rural places.
KFF Health News senior correspondent Phil Galewitz and rural health care correspondent Arielle Zionts contributed to this report.
KFF Health News is a national newsroom producing in-depth journalism about health issues and is one of the core operating programs at KFF — the independent source for health policy research, polling, and journalism.