The emergency room at Big Sandy Medical Center in north-central Montana is a single room with a curtain between two beds. The 25-bed hospital, built by local farmers and ranchers in 1965, still relies on donations and grants to stay open. CEO Ron Weins says the facility needs at least $1 million for deferred maintenance, including a failing HVAC system, but often struggles to make payroll.
Weins hoped Montana’s share of the $50 billion federal Rural Health Transformation Program would help renovate the hospital and provide direct payments to secure its future. Montana received more than $233 million in its first-year award. But the federal program — created as a last-minute addition to the One Big Beautiful Bill Act signed last summer — emphasizes new models to improve rural access rather than direct funding for repairs and ongoing services. The larger law is expected to reduce Medicaid spending by nearly $1 trillion over 10 years, and the rural fund was intended to offset disproportionate impacts.
States’ plans for using the money have raised alarm among rural hospital leaders. Montana’s application lists projects such as community gardens, paramedic home visits, school-based clinics, and mobile clinics. It also says hospitals can receive payments for implementing recommendations, “including right-sizing select inpatient services,” and notes that right-sizing may include “downsizing.” Weins and other hospital leaders say language about restructuring and reducing inpatient beds leaves them “on pins and needles.”
Rancher Shane Chauvet, who lives near Big Sandy and credits the hospital with stabilizing him after a severe arm injury, worries that cuts to services beyond emergency care would trigger a downward spiral for his town. Though the state says emergency departments would not be eliminated, Chauvet fears that losing other services could hollow out the community.
Across the country, at least 10 states’ applications or laws mention right-sizing, restructuring, or removing unprofitable or duplicative services. Oklahoma’s application explicitly allows realigning clinical services that could mean “shutting down service lines.” Wyoming’s rural health law requires facilities that receive funding to agree to “reduce unprofitable, duplicative or nonessential service lines.” Wyoming officials say right-sizing means focusing on essential services — emergency departments, ambulance services, labor and delivery — and possibly limiting elective procedures that are more cost-effective at higher-volume regional centers.
Seven states — Nebraska, North Dakota, Tennessee, Kansas, Nevada, South Carolina, and Washington — said they will help hospitals convert to the new Rural Emergency Hospital (REH) designation. REHs must stop offering inpatient care but receive enhanced payments to maintain emergency and outpatient services. At least 15 more states said they would use the federal funding to right-size, evaluate, or adjust services, which could mean adding services, cutting others, or moving care to telehealth or outpatient settings.
Rural hospital advocates warn that focusing funding on redesign and cutting money-losing services could backfire. Brock Slabach, COO of the National Rural Health Association, says hospital administrators are rightly concerned the funding won’t reach the places it was intended. Tony Shih, a senior adviser at the Commonwealth Fund, cautions that if states remove high-margin services without replacing lost revenue, hospitals could be financially harmed. He noted that converting services to outpatient or telehealth could benefit patients, but outcomes will vary and take time to evaluate.
Local hospital leaders emphasize that service changes should not be imposed from the top down. Josh Hannes of the Colorado Hospital Association says hospitals are willing to find efficiencies and collaborate, but state agencies should not unilaterally decide which services to cut. Colorado’s plan to classify rural facilities as a “hub, spoke, or telehealth node” — intended to define locally sustainable services versus those better provided regionally — has prompted concern that it could force service reductions. Colorado and Oklahoma health departments say no facility will be forced to end services, though some hospitals might choose to shift services to regional providers as part of broader stability efforts.
Montana hospital leaders are divided. Some, like Ed Buttrey, president and CEO of the Montana Hospital Association and a state lawmaker, believe the plan could help rural hospitals become financially sustainable and weather Medicaid cuts. Others, including Weins and Darrell Messersmith of Dahl Memorial Hospital in Ekalaka, worry that hospitals will need to cut services or convert to REHs to access federal funds. Messersmith says his hospital currently “functions quite well as an inpatient facility” and doesn’t want to become a “pack-and-ship” center.
Rural residents and clinicians fear that losing inpatient or other local services could accelerate population loss from small towns, reduce patient volumes further, and undermine long-term viability. Supporters of the program argue that investments in outpatient care, community health initiatives, and telehealth could improve access, prevent hospital reliance on costly inpatient services, and stabilize rural health systems if implemented thoughtfully.
Which states and approaches will ultimately help stabilize rural hospitals remains to be seen. The federal program’s emphasis on innovation and restructuring, coupled with state plans that explicitly allow downsizing or service realignment, has created uncertainty and anxiety in small towns dependent on local hospitals.
This story was produced by NPR’s health reporting partnership with Montana Public Radio and KFF Health News.