Rural healthcare crosses fingers for AI investment, reimbursement

AI is hailed by many in healthcare as the future. But some worry as the tech advances, rural areas may get left behind.

A 2025 survey of 972 rural healthcare staff and leaders by independent research firm Black Book Research found just 8% of rural community and critical access hospitals use AI-driven analytics for predictive healthcare. Compare this to an analysis of 2023 American Hospital Association survey data, which found 65% of 2,547 hospitals across the US used AI or other predictive models.

Carrie Cochran-McClain, chief policy officer for the National Rural Health Association, told Healthcare Brew many rural facilities don’t have the funds or infrastructure to adopt AI and other new tech. It’s already a “battle” to help more rural facilities implement telehealth amid interoperability issues and areas without broadband internet, she added.

“About half of our rural hospitals right now in the country have negative operating margins, which means there’s not a cushion to invest in new software,” she said. “We’ve talked to clinicians who are starting to integrate pieces of [AI] and seeing a lot of benefit, but it’s very much still new to that setting.”

The benefits. Though AI comes with potential drawbacks—like weakened clinical skills, errors, potential bias, and security concerns—studies also suggest predictive analytics can identify high-risk patients for earlier intervention, potentially improving outcomes.

Groups ranging from industry organization the American Hospital Association to venture capital funder General Catalyst have pointed to AI as a way for rural hospitals to supplement chronic staffing shortages.

About 66% of primary care health professional shortage areas and 62% of mental health shortage areas were in rural regions as of March 31, according to the Health Resources and Services Administration.

“Clinicians could use AI to help inform their decision-making where they may not have a deep bench of providers in their clinical practice,” Cochran-McClain said.

The funds. Rural systems’ low adoption of AI is something Cochran-McClain and other experts hope could soon change.

Though July’s reconciliation bill had provisions that were decried as potential setbacks for rural health, it also allocated $50 billion of funds to a newly created Rural Health Transformation Program.

One of the approved uses for these funds is “providing training and technical assistance for the development and adoption of technology-enabled solutions that improve care delivery in rural hospitals,” including AI tools, according to Centers for Medicare and Medicaid Services (CMS).

Cost estimates vary, but California-based software development company Folio3 estimates adding AI can cost anywhere from $40,000 for a simple AI tool to $100,000+ for a fully customized system.

The catch. Without a pathway for long-term Medicare and Medicaid reimbursement, however, pouring money into these technologies doesn’t make sense, Cochran-McClain said.

“This funding could be a great way to infuse the startup or implementation of some of these technologies. But there needs to be a sustainable path to support them outside of the transformation fund,” she said.

CMS reimburses some AI devices through mechanisms like the new technology add-on payment program, which allows payment for recently FDA-approved technology to be bundled with payments for other healthcare services.

But devices are only eligible for that pathway when they’re “new,” usually meaning the first few years after FDA approval. When that period ends, the path to reimbursement can become uncertain, and reimbursement amounts may decrease or go away.

There’s no predictable or permanent AI reimbursement pathway, Cybil Roehrenbeck, a partner at law firm Hogan Lovells who leads the firm’s healthcare lobbying practice and serves as executive director of the AI Healthcare Coalition, told us.

Roehrenbeck wants a pathway for software-as-a-service and AI medical services within the Medicare Physician Fee Schedule. She says they should be categorized as medical services under Medicare Part B and billed, like other services in that category.

CMS noted in its proposed 2026 Physician Fee Schedule that many in the industry have sought a similar pathway, and asked for public comment through Sept. 12.

“It’s easier for providers to onboard the technology with that type of certainty,” Roehrenbeck said.