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In December of last year, the Administration announced the establishment of a $50 billion initiative called the Rural Health Transformation Program (RHTP). The purpose of this program is to allocate money to the 50 U.S. states to fix what it calls "systemic problems that leave rural Americans without access to good health care."

As CBS reports, the Administration has an aggressive timeline: "Within eight months, states must submit revised budgets, begin spending, and show the money is going to good use." Funding will be announced in October of this year.

The program website notes that $50 billion will be "allocated to approved States over five fiscal years, with $10 billion of funding available each fiscal year, beginning in fiscal year 2026 and ending in fiscal year 2030."

Again quoting from the program website, the money will be assigned in the following ways:

In other words, all 50 states (excluding the District of Columbia and U.S. Territories) will receive an equal share of the first portion of funding, whereas CMS will steer "payouts from the second portion based on each state's rural score, as well as results from a 'technical' scoring system for project proposals."

Congress included the fund in last summer's One Big Beautiful Bill Act in an effort to counterbalance significant cuts to Medicaid. The race is now on to demonstrate the need for the additional $25 billion that will be allocated at the discretion of the Administration after the first 50% of funds are disbursed.

While the funds will flow to a range of rural health facilities, I want to focus on one particular category whose constituent agencies could benefit from this effort: community health centers (CHC).

In the U.S., CHCs play a major role in providing care in rural areas. Two major entities fall under the CHC umbrella, namely rural health clinics (RHCs) and federally qualified health centers (FQHCs).

With respect to RHCs, according to the National Rural Health Association (NRHA), "Over 60% of rural Americans are served by the over 5,450 RHCs across 47 states." The NRHA website states that "Rural providers with RHC status receive enhanced reimbursement rates for providing services under Medicare and Medicaid."

The Penn Leonard Davis School of Health Economics provides a nice breakdown of RHCs:

"About 65% of RHCs are provider-based, meaning they are part of a hospital, nursing home, or home health agency, while 35% are operated independently. Nearly three-quarters of independent RHCs are for-profit, compared to just 11% of provider-based RHCs. The National Association of Rural Health Clinics estimates that in 2022, RHCs served more than 37 million patients, representing about 11% of the entire population and about 62% of the 60.8 million people living in rural America."

These clinics are distinct from FQHCs, which the NRHA defines as "outpatient clinics that qualify for specific reimbursement systems under Medicare and Medicaid."

Apart from the functions they serve, RHCs and FQHCs also have somewhat distinct funding sources – or, at least, different requirements for disclosing their funding sources. Again from Penn:

"FQHCs receive substantial funding from the federal government to help cover the cost of providing free and reduced-cost care to their patients. FQHCs receive about 12% of their revenues from Section 330 grants, which amounted to an average of $3.7 million for each FQHC in 2022…More than one-quarter of their revenues come from federal, state, and local grants and contracts, which complicates FQHC participation in alternative payment models."

There is also a variety of CHC called FQHC "look-alikes." These are community-based providers that meet the requirements of the Health Center Program but don't receive funding from that source. As the HRSA website says, "They provide primary care services in underserved areas, provide care on a sliding fee scale based on ability to pay, and operate under a governing board that includes patients."

Advantages to becoming a look-alike entity are that these programs are paid for services rendered to Medicare and Medicaid patients through the FQHC Prospective Payment System (PPS), drug discounts via the 340B Drug Pricing Program, free vaccines for children without insurance or who are under-insured as part of the Vaccines for Children Program, they receive help finding and keeping primary care providers via the National Health Service Corps, and they receive technical assistance.

Again quoting from the Penn website, "Because they do not receive Section 330 grant funding, FQHC look-alikes have a slightly different mix of revenues, with nearly 20% coming from private insurance. However, they also derive a significant portion of their revenues from nonpatient care sources, including 18% from grants and contracts (primarily state, local, and foundation grants).

Now that we have a baseline understanding of what RHCs and FQHCs are, and the differences between them, let's look at how they've developed over the years. Let's start by reviewing the number of RHCs that currently exist in each state. The Centers for Medicare and Medicaid Services (CMS) only lists data for 45 states, which I've arranged in descending order from most to least number of RHCs per state:

Data courtesy of CMS

As you can see, Kentucky leads the way with 409 RHCs, followed by Texas with 349 sites and Tennessee with 320 sites. It's also interesting to look at the pace of RHC expansion among states. The area charts below track the states with the most inflows of RHCs between 1950 and 2026:

Data courtesy of CMS

Tennessee is a big outlier among the states, particularly in the 1990s. Although it's outside the scope of this blog post, it would be instructive to delve into what legislative environment existed in the state in that time period to facilitate such extensive growth.

Turning now to FQHCs, let's review how many centers there are per state (data courtesy of CMS):

Data courtesy of CMS

The list above includes U.S. Territories like the U.S. Virgin Islands, Guam, and the Northern Mariana Islands. There are far more FQHCs in California than in any other state. Interestingly, while Texas comes in second on both lists (of both RHCs and FQHCs), the top fifteen or so states on both lists have very little overlap.

Like our "top 10" (well, technically "top 11") RHCs incorporations per state charts above, I've graphed the same trends for FQHCs between 1965 and 2026 in the charts below:

Data courtesy of CMS

North Carolina is the real outlier here, with a spike in FQHC incorporations after the year 2000s, which happened in no other state in the top 10.

Keeping our focus on FQHCs for a moment, if we examine the years when the most number of FQHCs were established, we'll see that they reached their pinnacle of growth from the 1970s through the 1990s; indeed, there are only a few years since 2000 that a significant number of FQHCs were incorporated. These years are highlighted in the chart below:

Data courtesy of CMS

To consider FQHCs another way, let's look at a graph of annual FQHCs incorporated between the years 1950 and 2026. As mentioned before, the 1970s and 1980s were a boom time for these federally-funded centers, and their growth tapered off in the early 2000s. Ever since, growth has remained at a low level. Here is the current rate of incorporation of the centers:

Data courtesy of CMS