Colorado officials have begun to strategize as the state is set to receive hundreds of millions of dollars from a federal program meant to boost rural health.

Cristen Bates, deputy Medicaid director at the Department of Health Care Policy and Financing, told members of the legislature’s new Commission on Medicaid that Colorado is poised to get $200 million each year for the next five years to support rural healthcare initiatives.

The money will come from the Rural Health Transformation Program, which was created under H.R. 1, the congressional budget.

The U.S. Centers for Medicare & Medicaid Services requires states to apply for the program by November, with awards expected by year’s end.

Of the $200 million, Bates said $160 million will go directly to providers in rural areas, with the rest allocated to training and technical assistance for the 19 new staff who will assist in operating the program within the Colorado Department of Health and Environment.

Bates said the program’s requirements are “really, really, really strict” — the money must go toward new operations and innovations, not day-to-day operations, and only providers located in rural areas are eligible.

Recipients must use the dollars for at least three of the 10 uses of funds approved by the federal government, including prevention and management of chronic diseases, payments for healthcare providers, workforce training and recruitment and increasing access to substance addiction and mental health treatment services.

“This is very clearly the purpose of the funding and why it was developed and what we will be doing with it,” Bates told lawmakers. “Really, our goal has been to push these monies out specifically to our rural providers.”

Of the $160 million going to providers, the majority has been designated for telehealth services, alternative models of care and workforce training and retention. If states do not use the funds appropriately, they risk having them scaled back or taken away entirely.

Bates noted that while all of Colorado’s healthcare providers are struggling amid inflation and workforce shortages, rural providers have been hit the hardest.

“As much as every provider is struggling in the state, rural and frontier providers are struggling in a different way,” she said. “Now, they have different resilience and different ways that they get things done, but it’s a different challenge.”

The new commission, created in the last legislative session to guide implementation of Medicaid changes under new federal rules, met Wednesday to begin shaping its recommendations.

Several commission members questioned why providers in smaller metropolitan areas, which mostly serve rural patients, were not eligible for funding.

Rep. Rick Taggart, R-Grand Junction, said many of the providers in his district told him they are ineligible to receive the funds because they’re located in an urban area, though they serve a majority rural population.

“In some cases, hospitals can’t afford to even survive unless they’re in a reasonably sized town or city,” he said. “So, if I seem frustrated, I am.”

“I’m getting frustration from the people that (the program) is supposed to benefit, and I don’t even understand the regulation in terms of rural having to be just in a rural place,” he said. “That, to me, is way too simplistic, especially when a hospital is serving a huge rural area.”

Bates agreed that many places in Colorado feel rural but technically aren’t, but “we can’t make decisions based on what feels rural and how many people you’re serving are rural,” she said. “It really has to be based on access in the locations of rural and frontier. That is the direction that we have received from the feds.”

Sen. Kyle Mullica, D-Thornton, said he doesn’t want the state to repeat what he sees as past missteps in handling large federal infusions of cash.

After the American Rescue Plan Act passed, Colorado received more than $9.5 billion in federal funding. The legislature controlled the largest share — $3.62 billion — and distributed it through more than three dozen bills spanning economic development, healthcare, housing and workforce programs.

Mullica told the commission he wants a clearer strategy this time.

“I’m trying to hear a plan of making sure that we maybe don’t make some of the mistakes that I view that we made with the ARPA dollars, because I do think that there are some things that we did with the ARPA dollars that we have nothing to show for today,” he said. “You don’t get a billion dollars from the federal government every single day. How do you make sure that these dollars last?”

The Commission on Medicaid’s next meeting is Aug. 5.