At Big Sandy Medical Center in Montana the emergency department is one room with two beds separated only by a curtain. The 25-bed hospital in the town of about 800 has deferred maintenance, including a failing HVAC system that CEO Ron Weins says would cost at least $1 million to repair. The hospital, built by farmers and ranchers in 1965 and expanded through community effort, struggles to make payroll and relies on donations and grants to remain open.
Weins had hoped Montana’s share of the new federal Rural Health Transformation Program — a $50 billion five-year fund — would help with renovations and provide direct payments to stabilize the hospital. Montana received more than $233 million in the program’s first-year award. But the program prioritizes experimental models to improve rural access rather than straightforward operational or capital support, and some states have proposed using the money to reorganize or reduce inpatient services, a move that has alarmed hospital leaders.
The fund was tucked into last summer’s One Big Beautiful Bill Act as a last-minute measure intended to offset expected rural fallout from the legislation’s large Medicaid spending cuts, which are estimated to reach nearly $1 trillion over 10 years. Federal guidance describes projects like community gardens, paramedic home visits, school-based clinics, and mobile units as possible uses, but several state plans also include language about ‘right-sizing’ or realigning services, which critics say could be a euphemism for downsizing.
Montana’s application explicitly allows hospitals to be paid for carrying out recommendations that include right-sizing select inpatient services. That clause has left hospital administrators unsettled. Weins says terms like restructuring and reducing inpatient beds have put local hospitals on edge.
Residents worry cuts would weaken essential local care. Big Sandy rancher Shane Chauvet credits his nearby hospital with stabilizing him after a serious arm injury during a windstorm; staff treated him without power and then arranged a transfer about 80 miles to a larger facility. Chauvet worries that eliminating some services, even if not emergency care, could trigger a downward spiral for small hospitals and their communities.
Other states’ plans reveal similar tensions. Oklahoma’s application mentions ‘shutting down service lines’ as part of clinical realignment. Wyoming requires facilities that take funds to agree to ‘reduce unprofitable, duplicative or nonessential service lines.’ Wyoming health officials say right-sizing is aimed at preserving core time-sensitive services such as emergency departments, ambulance coverage, and labor and delivery, while phasing out elective or low-volume procedures better handled at higher-volume regional centers. The stated goal is to distinguish time-critical emergency care from so-called shoppable services.
Seven states — Nebraska, North Dakota, Tennessee, Kansas, Nevada, South Carolina, and Washington — said they would help hospitals convert to the federal Rural Emergency Hospital designation. That designation requires hospitals to stop inpatient services but promises higher reimbursement to support emergency and outpatient care. At least 15 additional states said they would use federal funding to right-size, evaluate, or adjust service lines, potentially adding or removing offerings or shifting care to outpatient and telehealth settings.
Rural health advocates and many hospital leaders fear the dollars will not be used in ways that actually sustain local hospitals. Brock Slabach, chief operations officer of the National Rural Health Association, says administrators have reason to be worried. Cutting services that lose money in the short term can backfire, he notes, because eliminating services like labor and delivery may drive families away, shrink the population, and reduce the hospital’s patient base and revenue.
Tony Shih, a senior adviser at the Commonwealth Fund, says which services are affected matters greatly. Removing high-margin services without replacing them can harm a hospital’s finances, while expanding outpatient care could help patients and systems in some cases. He cautions that it will take time to see which state strategies actually stabilize rural systems.
Local leaders insist decisions about services should come from hospitals and communities rather than top-down state mandates. Josh Hannes of the Colorado Hospital Association warned against state agencies unilaterally deciding which services to cut. Colorado’s plan would classify rural facilities as a hub, spoke, or telehealth node to determine what should be provided locally versus regionally or by telehealth, a framework that some members fear could force reductions.
State officials generally say they will not force facilities to end services. Colorado and Oklahoma spokespeople said no hospital will be compelled to close services, though Oklahoma added that some hospitals might opt to shift certain services to higher-volume regional providers while expanding local primary, outpatient, or community-based care.
Still, hospital CEOs in Montana fear funds could be contingent on cutting services or converting to Rural Emergency Hospital status that ends inpatient care. Darrell Messersmith, CEO of Dahl Memorial Hospital in Ekalaka, Montana, said he would hate to see hospitals become ‘pack-and-ship’ facilities and worries about losing valuable inpatient capacity that his hospital currently provides.
Not everyone views the changes as negative. Ed Buttrey, president and CEO of the Montana Hospital Association and a Republican lawmaker, argues Montana’s plan could help rural hospitals become financially sustainable and survive Medicaid reductions. Proponents say restructuring can preserve vital, time-sensitive services locally while shifting high-cost, low-volume procedures to regional centers where they can be done more efficiently and safely.
For rural residents like Chauvet the stakes are personal. After his injury he no longer considers the local hospital a luxury; he sees it as essential to the town’s survival. Whether the federal fund ultimately shored up hospitals or accelerated service losses will depend on how states implement their plans, which services they target, and whether communities retain control over decisions affecting local care.