Rural Hospital Finance and Coordination

Rural hospitals are a vital part of Texas’ health care system. The Texas Health and Human Services Commission (HHSC) Chief Financial Officer Division’s Office of Rural Hospital Finance and Coordination (RHFC) provides financial and technical assistance to help rural hospitals deliver health care services to Texans.

Rural hospitals may request help by emailing RHFC. For information on rural hospital finance in Texas, sign up for email updates.

Rural Hospital Technical Assistance

Rural Hospital Finance and Coordination (RHFC) is the first point of contact for rural hospitals seeking technical assistance with HHSC or Medicaid-related questions.

The RHFC team analyzes how rural hospitals participate in Medicaid payment programs and provides technical assistance to rural hospitals that qualify for Medicaid-directed payment and supplemental payment programs.

RHFC helps oversee and streamline communication between HHSC and rural hospitals by coordinating meetings when necessary between HHSC divisions.

RHFC hosts technical assistance webinars and meetings and prepares informational documents for rural hospitals about HHSC programs and related questions. Resources include:

Rural Hospital Financial Assistance

Current Grant Opportunities

Rural Hospital Financial Stabilization Grant

HHSC is accepting applications for the Rural Hospital Financial Stabilization Grant. The grant funding is provided by House Bill 1, 88th Texas Legislature, Regular Session 2023, Article II, Rider 88, Rural Hospital Grant Program.

The Rural Hospital Financial Stabilization Grant provides eligible rural hospitals time-limited financial support for operational costs and long-term financial solvency and sustainability. Grants will be provided as a two-year award, with each grantee receiving a lump sum payment based on their financial need.

The three tiers of financial need are:

  • Tier 1 (Basic Need) - $100,000 in FY 2024; $50,000 in FY 2025
  • Tier 2 (Moderate Need) - $175,000 in FY 2024; $87,500 in FY 2025
  • Tier 3 (High Need) - $250,000 in FY 2024; $125,000 in FY 2025

Need is determined by financial criteria identified in the Request for Applications and supported with documentation from the hospital. Recipients of the HHSC Rural Emergency Hospital (REH) Grant are not eligible to apply.

Hospitals can apply for the Rural Hospital Financial Stabilization Grant through the Rural Hospital Program Grants Portal. Applications are due by Monday, July 8, 2024, 5:00 p.m. CT.

Submitting an application does not guarantee that a hospital will receive a funding award. HHSC will review each application and follow up as necessary with questions.

Rural Hospital Grant resources include:

Previous Grant Opportunities

Texas Rural Emergency Hospitals Financial Stabilization Grant

HHSC issued funding through the Texas Rural Emergency Hospitals Financial Stabilization Grant in October 2023. As the first grant issued by HHSC to distribute funding appropriated by the Texas Legislature for fiscal years 2024 and 2025, the grant provided time-limited financial support for hospitals transitioning into their new role as rural emergency hospitals. The grants helped support long-term financial solvency and sustainability.

Rural hospitals that obtained both the state Limited Services Rural Hospital (LSRH) license under Texas Health and Safety Code Chapter 241, Subchapter K and the federal REH designation from CMS by Aug. 31, 2023, were eligible to apply for the Texas Rural Emergency Hospitals Financial Stabilization Grant.

For each eligible hospital, HHSC provided a two-year, $750,000 grant distributed quarterly in four flat fee amounts of $187,500 for the first grant year and $375,000 distributed quarterly in four flat fee amounts of $93,750 for the second grant year.

Open enrollment for the Texas Rural Emergency Hospitals Financial Stabilization Grant application closed on Oct. 13, 2023. HHSC awarded grants to four rural emergency hospitals.

Rural Hospital COVID-19 in Healthcare Relief Grant Program

In 2021, the Texas Legislature enacted Senate Bill 8, 87th Legislature, 3rd Called Session, and appropriated funds to HHSC for grants to support Texas health care providers affected by the COVID-19 pandemic. The legislation allocated $75 million in grants through the federal American Rescue Plan Act to support rural hospitals during the COVID-19 pandemic in 2022.

The funding was distributed in two tiers under the Rural Hospital COVID-19 in Healthcare Relief Grant program (RH-CHRG). Tier 1 funds totaled $38 million and were released as direct grant awards. Tier 2 funds totaled $37 million and were released through competitive grants. The grants require that HHSC receive documentation on which hospital costs were paid by the funds.

Community Health Access and Rural Transformation Model Program

On March 17, 2023, the Center for Medicare and Medicaid Innovation (CMMI) within the Centers for Medicare and Medicaid Services (CMS) announced the federal Community Health Access and Rural Transformation (CHART) Model would end earlier than expected due to a lack of participation nationwide. Since no hospitals chose to participate in the CHART Model, CMS gave lead organizations, such as HHSC, the option to expend CHART Model funds by Sept. 30, 2023, to advance the strategic priorities previously approved by CMS. HHSC spent CHART Model funds to advance rural hospital knowledge of the provision of health care services through telehealth and advance knowledge of rural Alternative Payment Models (APM).

HHSC supported 41 staff from 11 rural hospitals in registering and receiving reimbursement for the Frontiers in Telemedicine training program, securing two rural APM subject matter experts to present at the fall 2023 Texas Organization of Rural and Community Hospitals (TORCH) Conference and scholarship funding for two rural physicians to attend the conference.

For more information, email HHSC CHART Model or read through the following resources:

Rural Hospital Services Strategic Plan

HHSC created the Rural Hospital Services Strategic Plan to improve health care access and outcomes in rural communities. The 86th Texas Legislature added Texas Government Code Section 531.201, which requires HHSC to create the strategic plan to ensure rural Texans have access to hospital services.

HHSC must submit a progress report regarding the development and implementation of the strategic plan by Nov. 1 of each even-numbered year. HHSC published its first Rural Hospital Services Strategic Plan Progress Report in November 2020.

In the most recent Rural Hospital Services Strategic Plan Progress Report (PDF) published in November 2022, HHSC provided an update on activities that support the three strategies identified in the previous report published in November 2020. These strategies, outlined below, were identified to further the goal of ensuring access to hospital services and reducing rural hospital closures:

  1. Ensure Medicaid reimbursements are adequate and appropriate.
  2. Increase access to established revenue opportunities to maximize reimbursements for hospitals.
  3. Identify challenges hospitals experience in providing services to people covered by Medicare and other payers.

The Rural Hospital Services Strategic Plan will be updated and published in November 2024.

Information for Rural Hospitals

New Rural Emergency Hospital Designation

A Rural Emergency Hospital (REH) is a Medicare provider type designed to maintain access to critical emergency and outpatient hospital services in communities that may be unable to support or sustain a Critical Access Hospital (CAH) or small inpatient rural hospital. The U.S. Congress established the REH designation in December 2020 through Section 125 of the Consolidated Appropriations Act, 2021, which became effective Jan. 1, 2023. Conversion to an REH allows for the provision of emergency services, observation care and additional medical and health outpatient services, if elected by the REH, that do not exceed an annual per patient average of 24 hours.

According to CMS, the REH designation provides an opportunity for CAHs and certain rural hospitals to prevent a potential closure and continue to provide essential services for the communities they serve. Facilities eligible to apply for the REH designation include CAHs and rural acute care hospitals with 50 or fewer beds that were open as of Dec. 27, 2020.

Learn more about the REH designation:

HHSC Licensure Information

For hospitals to apply to the Centers for Medicare and Medicaid Services (CMS) to obtain an REH designation, states must first establish licensing requirements for this new provider type. On Oct. 5, 2023, HHSC adopted standard rules (Texas Administrative Code (TAC) Title 26 Chapter 511) for Limited Services Rural Hospitals. These rules permit a qualified rural hospital to be designated as an REH under the Code of Federal Regulations Sections 485.502 and 485.506, and to apply to HHSC for a limited services rural hospital (LSRH) license under Texas Health and Safety Code (HSC) Chapter 241, Subchapter K.

To apply for an LSRH license, applicants must complete Form 3240, LSRH License Application (PDF), follow the application’s instructions, and submit all required information to HHSC. An LSRH license is necessary for a provider to apply to become an REH Medicare provider.

Email Health Care Regulation Policies and Rules or visit the following resources for more information: