LEBANON — Rural health transformation grants can be used to invest in changes that aim to make providers more financially sustainable in the face of widespread Medicaid cuts, Upper Valley health care experts say.
New Hampshire received a $204 million grant, the largest allocation of any New England state, as part of the federal Rural Health Transformation Program for 2026, the Centers for Medicare and Medicaid Services, or CMS, announced last week. Vermont was awarded $195 million.
President Donald Trump established the allocations in his One Big Beautiful Bill Act to “help states expand access to care in rural communities, strengthen the rural health workforce, modernize rural facilities and technology, and support innovative models that bring high-quality, dependable care closer to home.”
In total, $50 billion is set to be distributed nationwide over five years.
Though lauded by many as a boon for rural health providers and health access in the Twin States, the funding comes in tandem with an estimated $1 trillion in cuts to Medicaid nationwide and changes to the Affordable Care Act that were also included in the “Big Beautiful Bill.”
A crisis in the making
As a provision of the grant, the rural health funding cannot be used “to replace payment for clinical services that could be reimbursed by insurance,” according to a notice from CMS.
Because the funding can’t be used to make up costs previously covered by Medicaid and because of the difference in value, the two funding situations don’t offset each other, said Amber Barnato, director of the Dartmouth Institute for Health Policy and Clinical Practice.
In general, Barnato said the rural health funding pot that was introduced to counteract some of the Medicaid cuts is a “political tool” and in some ways a “bribe” for legislators representing rural areas.
“I think all of these things on the face of them are good and they will essentially increase ideally capacity or improve incentives,” Barnato said. “But they’re not going to backfill. They’re not going to replace lost Medicaid revenue.”
The Medicaid changes are also expected to increase the uninsured population nationwide, so while the grant “encourages delivery innovation, which is absolutely critical for rural regions,” the population these changes will help is expected to shrink, Barnato said.
She anticipates a snowball effect of the uninsured population rising, federal and private insurance rates increasing, and small businesses no longer offering health insurance for employees. All of this could put greater stress on health care providers.
“We might be heading towards another one of these crises that might be able to precipitate major health care reform,” such as universal primary care, which could be a silver lining, Barnato said.
The state of rural health care is already somewhat bleak, Barnato said, with small rural hospitals closing across the country and large academic medical systems such as University of Vermont Health proving to be “extremely fiscally vulnerable.”
Vermont’s Green Mountain Care Board cut the UVM Medical Center’s budget for 2026 by almost $90 million, citing concerns about revenues sent out of state to support its New York locations. The regulator also slammed the network in September for high executive salaries and cost of care, a rebuke that was followed shortly by CEO Sunil “Sunny” Eapen’s resignation.
Other rural Twin State medical centers have seen instability in recent months and years.
Brattleboro Hospital is facing a $14.5 million budget shortfall for 2026; Copley Hospital in Morrisville, Vt., closed the only birthing center in Lamoille County in November, the most recent in a string of birthing center closures in recent years; and Springfield Hospital has experienced years of financial struggles, exiting Chapter 11 bankruptcy in 2020 after receiving bailout money from the state.
In the Upper Valley, smaller providers are also facing challenges. Mascoma Community Healthcare in Canaan lost its medical provider, HealthFirst Family Care Center, in November because of low volumes and high operating costs. It is still in operation, but heavily reliant on philanthropy.
Filling some gaps
Despite the bleak possibilities, “there’s a lot that’s good” in the grant proposals from states, Barnato said, and the Dartmouth Institute hopes to be involved in evaluating how states use the funding and its impact.
Changes that make the health system more efficient, such as investing in community health workers who are “lay” people with some amount of medical training who work in the community at a lower cost than doctors or nurses, may help to offset some of the losses and changes coming from Medicaid cuts, Barnato said.
Dartmouth Health hopes to use the money to expand telehealth, behavioral health, maternal health, workforce development and “other innovative use of technology in health care,” Sally Kraft, the system’s vice president of population health said in a statement last week.
In New Hampshire, the funding application outlined goals of workforce development, implementing shared technology, resources and care coordination, filling gaps in community nursing and EMS services, focusing on prevention-based care and using technology to improve patient outcomes and efficiency.
Vermont’s application also emphasizes creating rural health networks through coordination between providers and bolstering existing programs, sharing technology and services, workforce development and increasing affordability through insurance reform and price tracking.
Vermont’s unique struggle is that health care “has been backed up” into hospitals, which is a “very expensive” way to provide health care, said Owen Foster, chair of the Green Mountain Care Board.
The state has been working for years to address this problem, but kicked the effort into high gear after a consultant’s report recommended widespread changes to Vermont’s health care system in 2024.
Foster expects that Vermont’s award will “help us execute on the goal of moving care out of hospitals” and creating “better access points especially in rural areas.”
This includes investing in more mobile clinics, telehealth and urgent care services statewide.
By moving some care out of hospitals, Foster said the larger facilities could be “redesigned” into “centers of excellence” that specialize in certain types of care that currently have major gaps in Vermont such as inpatient geriatric psychology, rehabilitation services and long-term care.
A shift like this would hopefully increase care volume and offer better, more affordable and more productive health care at specific sites, Foster said.
The changes will hopefully make Vermont health care providers “a lot less dependent on major revenue pools” and able to weather financial challenges like the impending Medicaid cuts, Foster said.
Systemic changes
At Ammonoosuc Community Health Services, or ACHS, a federally qualified health center with locations across the North Country of New Hampshire, including in Woodsville, the potential boost in grant revenue will not cover the losses from Medicaid changes, said CEO Ed Shanshala.
Cost-of-living increases, pharmaceutical costs and Medicaid changes have resulted in a $1.88 million decrease, or 16%, in ACHS’ annual operating budget revenues, Shanshala said. In response to these changes, ACHS already announced last summer that it was closing a location in Franconia, N.H.
But, the rural health funding may be able to help the organization pay for systems-level adjustments, Shanshala said. He emphasized the importance of funding “transformative and sustainable” projects that can function after the five-year grant term.
“If you see a train coming down the path, you might want to recognize earlier than later that it’s a train and what that means,” Shanshala said.
One area for investment could be in shared administrative resources or staff between health centers and community mental health providers or community action programs. This will hopefully reduce costs and leave more room to invest in patient care.
There also is an opportunity to invest in artificial intelligence technology to do transactional work such as confirming patient appointments, said Shanshala.
ACHS could also use the funding to expand “upstream” health programs such as the health network’s food as medicine program that aims to “demystify” healthy and cheap cooking.
“That’s where we’re starting to lean is upstream, in the wild out where people live their lives,” Shanshala said.
Seeking sustainability
Gifford Health Care in Randolph also is eyeing an increase in shared administrative services and technology as a potential use for some of the rural health transformation funds, CEO and President Michael Costa said Tuesday. Like Shanshala, Costa hopes to see the funding bring social service organizations and health providers together to bolster care.
“Vermont health care organizations need to be better at collaboration if we want to keep things affordable,” Costa said.
Gifford has already made some progress in this direction, like joining the New England Collaborative Health Network in 2025, a consortium of providers that buys supplies and equipment together to reduce costs, Costa said.
Costa is optimistic about how the funding may be used and said his “bias is towards many small changes” over huge shifts in operations.
“It’s an extraordinary opportunity to make the health system better.”
Gifford plans to advocate for some funding to support a family medicine residency program the health center is part of, the Maple Mountain Consortium, Costa said. The training program has regulatory approvals but needs some funding to get started.
The health network is “trying to figure out how you preserve and grow services in the face of future funding cuts,” Costa said, but it is not yet clear how the Medicaid changes will impact the health network and the state of Vermont.
“Whether there are Medicaid reductions or not, health care organizations need to change to remain sustainable,” Costa said. “We need to do this work regardless of any looming Medicaid cuts, so I’m grateful for investment from the state and federal government to try to make some of those changes.”