The emergency department at Big Sandy Medical Center in Montana is a single room with two beds separated only by a curtain. The 25-bed hospital in Big Sandy, a town of about 800 in north-central Montana, faces deferred maintenance — including a failing HVAC system — that the CEO, Ron Weins, estimates would cost at least $1 million to fix. The hospital struggles to make payroll and depends on donations and grants to stay open; it was built by farmers and ranchers in 1965 and expanded over time through community effort.
Weins hoped Montana’s share of the new federal Rural Health Transformation Program — a $50 billion five-year fund — could help renovate the facility and provide direct payments to stabilize the hospital. Montana received more than $233 million in the program’s first-year award. But the program emphasizes new approaches to improve rural access rather than direct operational or capital support, and some state plans for the funds could push rural hospitals to cut services or restructure.
Congress created the fund as part of last summer’s One Big Beautiful Bill Act as a last-minute addition intended to offset anticipated rural impacts from the legislation’s large Medicaid spending cuts, projected to total nearly $1 trillion over 10 years. The federal program is supposed to support creative rural health improvements — such as community gardens, paramedic home visits, school-based clinics, or mobile clinics — but several states’ applications also include language about “right-sizing” inpatient services, which in some cases could mean “downsizing.”
Montana’s application explicitly says rural hospitals can receive payments for implementing recommendations that include right-sizing select inpatient services. That prospect has hospital leaders worried. “That’s what has all the hospitals on pins and needles, words like restructuring, reducing inpatient beds,” Weins said.
Residents fear cuts could undermine essential local care. Big Sandy rancher Shane Chauvet credits his local hospital with stabilizing him after a severe arm injury during a windstorm; staff worked without power and he was later transported 80 miles to a larger hospital. Chauvet worries that eliminating some services, even if not emergency care, could trigger a downward spiral for small hospitals and their towns.
Other states’ plans show similar concerns. Oklahoma’s application mentions “shutting down service lines” as part of realigning clinical services. Wyoming requires facilities receiving funds to agree to “reduce unprofitable, duplicative or nonessential service lines.” Wyoming’s health department says right-sizing is intended to preserve essential services — emergency departments, ambulance service, labor and delivery — while phasing out some elective procedures that are better provided in higher-volume facilities. The idea is to distinguish time-sensitive emergency care from “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 new designation requires hospitals to halt inpatient services but offers higher payments to sustain emergency and outpatient care. At least 15 more states said they would use the federal funding to right-size, evaluate, or adjust services, which could mean adding, removing, or shifting services to telehealth or outpatient settings.
Rural health advocates and hospital leaders worry the money won’t be used as intended. Brock Slabach, chief operations officer of the National Rural Health Association, said administrators are right to be concerned. Cutting services that are money-losing in the short term could backfire: for example, stopping labor and delivery might drive families away, reducing the town’s population and the hospital’s patient base and revenue.
Tony Shih, a senior adviser at the Commonwealth Fund, said the types of services affected matter. “If the end result is that high-margin services are taken away from local hospitals with nothing given back in return, it can be financially harmful,” he said. He also noted that expanding outpatient care could benefit patients, but time will tell which state strategies stabilize rural systems.
Local hospital leaders say decisions should come from facilities and communities, not from top-down state directives. Josh Hannes of the Colorado Hospital Association warned that state agencies shouldn’t unilaterally decide which services to cut. Colorado’s plan would classify rural facilities as a “hub, spoke, or telehealth node” to determine sustainable local services versus those better provided regionally or via telehealth — a framework some members fear will compel reductions.
State officials generally insist they won’t force facilities to end services. Colorado and Oklahoma spokespeople said no facility will be forced to close services, though Oklahoma added some hospitals might choose to shift services to higher-volume regional providers while expanding local primary, outpatient, or community-based care.
Hospital CEOs in Montana fear hospitals may receive federal funds only if they cut services or convert to Rural Emergency Hospitals that no longer offer inpatient care. “I would hate to see things shift toward a pack-and-ship facility,” said Darrell Messersmith, CEO of Dahl Memorial Hospital in Ekalaka, Montana. He added that his hospital currently functions well as an inpatient facility and worries about losing that capacity.
Not all state or hospital leaders see the changes as negative. Ed Buttrey, president and CEO of the Montana Hospital Association and a Republican lawmaker, believes Montana’s plan could help rural hospitals become financially sustainable and survive Medicaid cuts. Proponents argue that restructuring could preserve essential, time-sensitive services while shifting less critical or high-cost, low-volume procedures to regional centers where they can be performed more efficiently and safely.
For rural residents like Chauvet, the stakes feel personal. After his accident, he no longer sees the local hospital as a luxury; he calls it essential to the community’s survival. Whether the federal fund will shore up such hospitals or accelerate service losses will depend on how states implement their plans, which services are targeted for change, and whether communities retain control over decisions that affect their local care.