State officials are overwhelmed by the unprecedented surge of interest from tech and health-tech companies, all vying for a piece of a $50 billion government pie. 

The historic $50 billion investment, part of Trump’s tax law, signed in July, tasked CMS with fairly distributing the funding among all 50 states over the next five years, to support a rural healthcare overhaul. The funding comes at a crucial time – the Trump administration has significantly reduced federal dollars for Medicaid. The $1 trillion in cuts over a decade translates to states having less overall money to spend on providing healthcare to vulnerable patients, despite the $50 billion influx. 

States are under tremendous pressure to disburse the funds to vendors that will genuinely help transform rural health care, and whether or not they have the resources to make that decision is a looming question. Players of all sizes, ranging from smaller tech platforms that have long been in the space, to well-resourced Big Tech suddenly interested in helping to solve the problem, are in the queue – all pitching the state players for their solution to be selected.

Experts told Second Opinion they are worried the money could turn into a wasted government effort if not implemented correctly. That includes implementing solutions that don’t work well, or implementing standard enterprise solutions that are ill-fitted to the task of tackling rural health care and its very specific needs.

“States and providers (are) just getting bombarded with outreach. Even we are,” said Carrie Cochran-McLain, chief policy officer at the National Rural Health Association.

NRHA’s Cochran-McLain previously served 15 years in the U.S. Health and Human Services (HHS) department, overseeing rural health efforts, understands how high the stakes are to get the transformation done right, particularly given the hospital closures across the country. And she clearly sees the disadvantage states have against better-funded companies who can gather a team of lawyers to write the best proposal in response to state requests.

“You are dealing with rural hospitals that are under-resourced in terms of human resources. Folks wear multiple hats (in these systems). We don't have general counsels to advise on contracts. There is probably someone who does IT in the facility, but they likely don't have a lot of in-depth training in these situations,” Cochran-Mclain said. 

The types of solutions that rural health care systems need are more basic support – for emergency services, for other basic services, to cover the cost of labor, and ensure a decent staffing ratio. That has been the need, and ask for rural health over the years. The technology part, according to experts, would be to help create more workflow efficiencies, which are typical needs of larger systems, and to ensure more electronic tools are available to help stay in touch with patients, like remote monitoring and virtual visits. Mental health is also an area that needs more investment. 

Aditi Mallick, chief medical officer of rural health-focused company Hopscotch, said that while hospital systems are among those vying for the funding, there are also primary care providers, community organizations, venture capital firms, tech companies, and consulting firms. And CMS has not defined how states should disburse the funding, so it is up to each state how it decides to do so.

Mallick said this leaves room for interpretation. Some states are considering using entities like health systems, third-party community groups, or through insurers that manage the Medicaid plans in the states, in order to manage the way the funding is used – rather than take the decision-making role on themselves.

“The strategic goals of this fund, articulated in statute and by CMS, include technology innovation,” Mallick said. “I think by law, and what we are seeing in implementation, is that there is a role for tech to play. The open question is, in partnership with whom and in what way.”

Health tech failures in rural health

Rural healthcare in the U.S. has long been underfunded and overlooked, as hospital mergers and closures have decimated health access for 20% of the country.

A combination of factors impacting rural healthcare, which relies heavily on government payers, are making things harder, on top of the $1 trillion cut. In addition to the funding shortfall, which will have a domino effect of providers fleeing the area in the face of reduced revenue – and reverses course from pandemic-era gains – there are strains on expenses that determine the types of technology available, the types of specialty care available, and the distance traveled by patients, making care less accessible than in urban settings.

“The biggest challenge for states is that they have to balance their budgets in ways the federal government does not. Medicaid is one of the largest, if not the largest, line item in the budget,” Mallick said. 

Which means a lot is riding on this $50 billion – or, as Mallick put it, the “once-in-a-generation funding.”

Even with the funding spread adequately among the states, there is no guarantee that whatever tech-enabled options are implemented will succeed. And there’s no way to hold companies accountable for whatever they promise and are funded for.

Rural health providers have seen this movie before. A new tech and modernization effort falters after big promises to make health access and care more efficient and expend limited resources more efficiently. The most recent was telehealth, which went through a significant surge during the pandemic, but still left out rural areas. It had been viewed as the ultimate game-changer in rural health care for years, promising to finally get the rural population access to specialists and doctors without the burden of long drives.

But that hasn’t panned out in improving health outcomes. And electronic health records are still clunky, even in the most urban settings, meaning that coordinated care that was supposed to come as a result of tech-based records remains elusive.

Even as we prepare for Big Tech’s big plans to enter and innovate in healthcare – think of the recent ChatGPT and Anthropic announcements – there is still a lot left to fix in the current healthcare system.

But advocates remain hopeful, for now, that some level of change will help.

“At the very least, we now have a plan for rural health transformation in every state. That is a win we can take,” Cochran-Mclain said.

About Author

Anjalee Khemlani is an award-winning healthcare and business journalist based in the greater New York City area. She is the Host of the Give It To Me Straight, Doc Podcast. Anjalee was most recently the lead on-air health reporter at Yahoo Finance, where she interviewed top companies' CXOs, analyzed industry trends, and market moves. She has spent more than a decade covering pharmacy, digital health, insurance, health services, and life sciences. 

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