LANSING, Mich. (WOWO) — Michigan has allocated $124.6 million of a $173 million federal rural health award to 236 organizations, with state officials saying the money is being used to improve access to care, strengthen the healthcare workforce, expand home-based services and modernize technology.
But the distribution is drawing scrutiny from some rural healthcare leaders and state lawmakers, who say the funding does not directly address the financial pressures facing rural hospitals and that the public reporting of grant commitments has not kept pace with the state’s internal accounting.
The money comes from the federal Rural Health Transformation Program, a five-year, $50 billion initiative created by Congress to support rural healthcare systems nationwide. Michigan was awarded $173,128,201 for the program’s first funding year by the Centers for Medicare & Medicaid Services.
Michigan’s program is being administered by the Michigan Department of Health and Human Services. State officials have divided the initiative into four broad areas: improving coordination to address chronic health conditions, preparing the healthcare workforce, expanding access to services delivered in patients’ homes and upgrading outdated technology.
As of Aug. 31, the state’s public-facing grant information showed roughly $102 million awarded to 126 organizations. MDHHS told Bridge Michigan that website was still being updated. At a Sept. 22 legislative hearing, however, state officials reported a substantially larger figure: $124.6 million in direct grants had been allocated and approved by CMS for 236 subrecipients.
That leaves about $48.4 million in grant-funded opportunities still to be distributed, according to the figures presented to lawmakers.
“We anticipate spending the vast amount of this award on local partners in Michigan’s rural healthcare system,” Beth Nagel, a senior deputy director at MDHHS overseeing the program’s rollout, told the House Appropriations Subcommittee on Medicaid and Behavioral Health, according to Bridge Michigan.
The state’s Department of Labor and Economic Opportunity is the largest beneficiary identified in the available records, with about $26 million directed to its Office of Rural Prosperity and high-speed internet office.
Other allocations include about $7.2 million for the Michigan Center for Rural Health, a nonprofit housed at Michigan State University, and roughly $3.6 million for the Michigan Department of Education for workforce development efforts.
The Michigan Veterans Affairs Agency is receiving about $2 million for behavioral health initiatives.
Michigan’s 12 federally recognized tribes, along with American Indian Health and Family Services of Southeastern Michigan, are receiving nearly $8.7 million. The state has set aside 5% of its total rural health award for tribal governments, with each of Michigan’s 12 federally recognized tribes receiving approximately $666,000.
Local health departments are receiving about $5.4 million combined. District Health Department No. 10, which covers a large portion of Michigan’s northern Lower Peninsula, is receiving about $1.7 million.
State universities are receiving approximately $6.3 million, while local school districts are receiving about $374,000.
More than 30 nonprofit organizations also appear among the recipients, with individual grants ranging from roughly $35,000 to several million dollars. The Michigan Health and Hospital Association is the largest nonprofit recipient identified in the available information, with an award of about $8.6 million.
Rural Area Agencies on Aging collectively are receiving about $3.4 million, while fewer than 20 federally qualified health centers are receiving a combined $1.9 million.
MDHHS says the program is intended to produce longer-term changes in how rural healthcare is delivered rather than provide routine operating money to hospitals. The Michigan Health & Hospital Association similarly describes the program as an effort to strengthen access, workforce capacity, technology and long-term sustainability rather than pay for hospitals’ day-to-day operations.
That distinction is at the center of criticism from some rural hospital executives.
Dr. Ross Ramsey, president and CEO of Scheurer Health in Pigeon, told Bridge Michigan that relatively little of the money is going directly to hospitals.
“Very few of those dollars are actually going to hospitals,” Ramsey said.
Scheurer Health is receiving $83,333 through the program to support community health workers.
Ramsey said other organizations have an important role in improving rural health, but he argued that hospitals remain central to their communities and should not be overlooked as other programs receive funding.
“It appears they have other priorities than where the cuts are happening,” Ramsey said of the state’s approach.
Michigan’s rural hospitals have faced financial and operational pressure as federal healthcare policy changes threaten revenue streams, making the purpose and timing of the transformation funding particularly important to hospital leaders.
The Michigan Health & Hospital Association has said the federal program provides an opportunity to address access-to-care problems and strengthen rural healthcare systems, while also acknowledging that Michigan’s $173 million award was less than the state requested.
Michigan also received less in first-year funding than neighboring states such as Ohio and Indiana. Ohio received about $202 million, while Indiana received about $206 million, according to figures cited by Bridge Michigan.
Federal officials used a scoring process to determine part of the state allocations, with factors including geography, participation in medical licensure compacts and other criteria.
The distribution of Michigan’s money has also become a political issue, particularly over which communities qualify for rural funding.
Some Republican lawmakers have questioned why counties containing large metropolitan areas, including Wayne and Oakland counties, are included among areas eligible for some of the program’s resources.
State officials say the bulk of the funding is nevertheless targeted toward Michigan’s most rural areas. MDHHS told lawmakers that approximately $71.5 million is being directed toward programs in the northern Lower Peninsula and about $38.5 million toward the Upper Peninsula.
The federal program also includes a major technology component. In September, the Centers for Medicare & Medicaid Services announced a separate $25 million Michigan investment focused on healthcare technology, telehealth, data exchange and high-speed internet connectivity. Federal officials said that money is intended to help rural communities overcome barriers to care and allow providers to better coordinate services.
Michigan’s broader rural health plan also calls for expanding telehealth and remote patient monitoring, improving electronic data exchange, strengthening cybersecurity and creating digital referral networks connecting healthcare providers with community and social-service organizations.
At the same time, lawmakers are questioning why publicly available spending data does not match the larger figures MDHHS has presented to legislators.
State Rep. Julie Rogers, a Democrat from Kalamazoo, noted that state databases showed only about $1.9 million as “encumbered,” a term referring to money formally committed in the state’s accounting system.
House Appropriations Subcommittee Chairman Greg VanWoerkom, a Republican from Norton Shores, called the discrepancy a transparency issue.
“They can send the public notices that they’ve committed this,” VanWoerkom told Bridge Michigan. “But in the end, we got to see it in the system.”
The timing is significant because CMS requires Michigan to obligate the first round of Rural Health Transformation funding by Oct. 30, while the state has until September 2027 to fully spend the money.
The first $173 million award covers two budget periods, according to state officials. Because Michigan’s fiscal year ends Sept. 30, VanWoerkom said MDHHS will likely have to authorize approximately $171 million for use beyond the current fiscal year.
The federal program was established as part of the legislation signed into law in July 2025 and provides $10 billion nationally each year from 2026 through 2030. Michigan’s first-year award is intended to establish infrastructure and programs that can continue beyond the initial grant period.
For rural communities, the central question now is how quickly the money translates into measurable changes in access to care, staffing, technology and health outcomes.
VanWoerkom said lawmakers need clear performance measures to determine whether the program is producing those results.
“We want to see actual results in health outcomes for these areas,” he said, according to Bridge Michigan.
MDHHS has said its overall goal is to use the federal investment to create a more connected rural healthcare system, with funding distributed through direct grants and additional competitive opportunities as the program moves forward.
