Va. health secretary outlines plan for $189.5 million rural transformation fund, warns of Medicaid financing trade-offs

Secretary Marvin Figueroa told the House Appropriations Subcommittee on Health and Human Resources that Virginia will receive $189.5 million from the federal rural transformation fund and described how the administration plans to implement the award.

“This fund sits at the intersection of a number of federal Medicaid changes and Virginia's responsibility to protect access to care,” Figueroa said, framing the award as a response to broad changes in Medicaid rules and financing.

Figueroa said the national fund totals roughly $50 billion and that states applied roughly on the basis of need and alignment with federal priorities; Virginia had planned around a $200 million award but was notified it received $189.5 million. He emphasized the fund’s intended scope: “This program is designed to fund one-time investments in new capabilities, things like workforce development, technology, data systems, and care models that can demonstrate value,” and said the awards are capital and time-limited to five years.

He cautioned that the grant cannot replace or supplement clinical Medicaid services formerly financed through indirect payments: “It cannot pay for clinical services that were previously funded through Medicaid, and it cannot supplement those payments as well.” He added that, when compared to the limits on indirect payments and provider assessment mechanisms in the federal changes, “the Commonwealth will lose from the provisions included in the bill more than a gain in terms of financial resources from the rural transformation fund.”

On implementation, Figueroa said the administration will hire a program director and two deputy directors to manage subgrants and community outreach, with a goal of naming a director within weeks. DMAS (the Department of Medical Assistance Services) will receive a substantial share to administer subgrants, he said. He also noted an immediate administrative step: the state must submit a revised budget by January 30 to reflect the actual award amount.

During committee questions, members pressed on how prescriptive the approved application will be and what flexibility Virginia has to shift funding among subgrantees and programs. Figueroa said the approved application limits major changes but allows some pragmatic adjustments as implementation realities arise, and that CMS will judge future year funding against a rubric and metrics the state must meet.

Committee members also raised concerns about hospitals and other providers that had relied on indirect payments that federal rules now constrain. Figueroa acknowledged the risk, saying the reduction of certain financing tools “will have a significant destabilizing impact on our system” if not managed, and urged collaboration across agencies to prioritize sustainability once the five-year funding horizon ends.

Next steps mentioned in the presentation included finalizing hiring, settling subgrantee allocations, establishing a community engagement schedule to solicit feedback, and submitting the revised budget to reflect the $189.5 million award. The committee requested follow-up briefings and further detail from DMAS on subgrant allocations and operational metrics.

The presentation concluded with the committee taking questions and the secretary thanking members for the opportunity to brief them.