RHTP Compliance Requirements: What Grant-Funded Hospitals Need to Know

Most hospitals have well-developed compliance programs for CMS billing, accreditation, and HIPAA. But federal grant compliance requires a different strategy. From different frameworks, tracking requirements, and documentation standards, it demands regimented processes. Hospitals that fall short could face repayment, disallowance, and restrictions on future funding.

Key Takeaways

• Hospitals that receive RHTP funds as subrecipients are subject to 2 CFR Part 200 Uniform Guidance, the federal rulebook governing how grant funds are tracked, spent, and managed.
• Nonprofit and governmental hospitals that expend $1 million or more in federal awards in a fiscal year must have a Single Audit. Many RHTP-funded hospitals will reach that threshold quickly, though Medicare and Medicare payments for patient care services generally do not count toward it (200.502).
• Financial systems should track grant expenditures at the award level, not just the cost-center level.
• Demonstrating grant outcomes requires a baseline measurement taken before implementation begins, a step many hospitals skip. CMS will fund results, not activity.

The Regulatory Foundation: 2 CFR Part 200

Every hospital that receives RHTP funds as a subrecipient is subject to the Uniform Guidance, the federal rulebook for managing, spending, and reporting grant funds. Below are four common areas that catch hospitals off guard:

1. Cost allowability: Not every expense can be charged to a grant, even if it seems related. To be allowable, a cost must be necessary, reasonable, allocable, and adequately documented (§200.403). Entertainment, certain administrative costs, lobbying, and costs outside the grant period are common disallowance triggers.
2. Financial management: Systems must track expenditures at the award level, not just the cost-center level. The general ledger (GL), procurement, and payroll systems must separately identify and track grant-funded costs (§200.302).. Many hospitals discover after the award that their systems can't do this without modification.
3. Procurement: Grant-funded purchases must comply with federal competition requirements with full documentation. Hospitals that routinely sole-source based on relationships need a different process, because noncompetitive procurement is allowed only in limited circumstances (§200.320).
4. Property management: Equipment purchased with RHTP funds is subject to inventory tracking, use restrictions, and disposition rules. Under the current Uniform Guidance, equipment costing at least the lesser of $10,000 per unit or the hospital's own capitalization threshold triggers the full tracking and disposition requirements under §200.313 — inventory records, physical inventories at least every two years, and disposition instructions from the awarding agency before disposal, with limits on using the equipment for other activities. A telehealth cart bought with RHTP dollars can't be freely repurposed without following the prescribed process.

Performance Reporting: Proving the Money Worked

RHTP doesn't just require hospitals to report spending. Hospitals must demonstrate results tied to the milestones in their state's CMS-approved plan. At a workforce-funded hospital, providers need to demonstrate they are delivering care and meeting retention thresholds. A technology-funded hospital must demonstrate the platform being used and the outcomes it produces.

Three capabilities most hospitals lack out of the box:

1. Data collection and validation at the granularity CMS requires, particularly for new programs that didn’t exist before the grant.
2. Baseline measurement. Demonstrating improvement requires a credible starting point. This is a frequent gap we see: the hospital can describe what it did but cannot quantify the change because it never measured the baseline. Baselines carry extra weight now: CMS must approve any change to a milestone, metric, baseline, or target, so a weak starting measurement is hard to correct later. Hospitals must route any change request through their state.
3. Structured reporting that connects spending, activities, outputs, and outcomes, not just narrative summaries. State agencies will layer their own templates and timelines on top of federal requirements.

These three gaps are no longer theoretical. CMS is conducting its first annual "rescoring" of state RHTP allocations with results due by October 31, to recalculate each state's future funding share based on documented progress against milestones — and a state's share can shift ' its documented progress compares with other states', not just its own performance in isolation. A hospital that cannot produce baseline-anchored, structured outcome data puts its state’s position at risk, along with the subawards that depend on it.

Audit Readiness: It's Not If, It's When

Any nonprofit or governmental hospital that expends $1M or more in federal awards in a fiscal year is subject to a Single Audit. For-profit hospitals are not subject to the Single Audit requirement, but the state, as the pass-through entity, sets audit and monitoring requirements for them through the subaward, so they should still keep audit-ready records and expect to be reviewed. Below are the steps needed to stay audit-ready.

Contemporaneous documentation. Every significant grant transaction is documented when it occurs, not reconstructed for the auditor months later.

Subrecipient monitoring. If a hospital passes RHTP funds to community organizations that carry out part of the program, those organizations are typically subrecipients, and the hospital becomes responsible for monitoring their compliance, including risk assessments, financial reviews, and corrective actions. Vendors that provide goods or services are generally contractors, which puts them under procurement rules instead, so each relationship needs a documented classification. Many hospitals have never done this under federal rules.

Corrective action. Repeat findings in successive audits trigger enhanced oversight or funding restrictions. Having a corrective action process before the first audit is essential.

Anti-Fraud Controls: Operational, Not Theoretical

Grant expenditure approval workflows, time-and-effort documentation, conflict-of-interest disclosures, and whistleblower protections must be implemented and tested — not just written into a manual. Hospitals must also promptly disclose credible evidence of federal criminal fraud, conflict of interest, bribery, or gratuity violations, or civil False Claims Act violations, connected to the award (§200.113). GAO issued an early review of CMS’s implementation and monitoring plans for the program and has more work planned, and CMS created a dedicated Office of Rural Health Transformation to monitor state progress.

Where Do Hospitals Typically Have Compliance Gaps?

• Financial systems that can't track at the grant level
• No baseline metrics before implementation
• Procurement that doesn't meet federal standards
• Informal subrecipient management
• Documentation adequate for billing audits, but not grant audits
• Anti-fraud controls on paper only
• No designated grant compliance function — oversight competing with billing compliance

Build Before the First Deadline

The first RHTP cycle is well underway. States submitted first annual reports in August, budget period one closes October 30, and CMS is due to announce second-year allocations by October 31. States owe CMS their next quarterly report by November 29, so expect data requests from your state well before then. Year-one funds can be spent through September 30, 2027, though your subaward may set an earlier deadline.

The hospitals that retain funding and position for continuation build compliance infrastructure during award standup — not when the first report is due. If your award is already active, close the gaps above now, starting with award-level tracking and baselines. If you are still negotiating a subaward, build these controls in before you sign: configure systems, establish baselines, set up monitoring, and create documentation processes. That discipline builds a culture of diligence and transparency that supports compliance.

Our Government Sector grants team builds this infrastructure to help hospitals navigate federal compliance for the first time. For hospitals that have it but need validation, we identify gaps before the auditors do. To reap the benefits of RHTP, compliance obligations must be at the forefront of all decisions. When treated seriously, the funding becomes a lasting transformation. Do you have the processes in place to remain compliant? Get started by contacting our team today.