Louisiana’s chief innovation officer, Josh Fleig, responded with a single word when he learned his state had won $20 million annually for five years to support rural health startups: “Wow.” The award represented a rare financial boost for a region where healthcare access has long been inadequate, with hospitals shutting down for decades. For Fleig, the funds brought both relief and a new challenge—one that reflects a broader push among states to compete for shares of the $50 billion federal Rural Health Transformation Program.
The program was designed to counterbalance $900 billion in projected Medicaid reductions under the 2025 tax and spending law. Unlike conventional grants, these funds operate like venture capital, demanding strict deadlines and performance metrics. States must demonstrate innovation or risk forfeiting the money.
Louisiana is not the only state pursuing this approach. At least eight others, including Texas, Georgia, and Nebraska, have allocated portions of their federal awards to “tech catalyst” funds, a term inspired by Silicon Valley’s startup ecosystem. The objective is not merely to distribute capital but to encourage rapid experimentation, as healthcare consultant Aaron Bujnowski of Alvarez & Marsal described it: “move fast, fail quickly, innovate rapidly, and achieve sustainability.” The critical difference here is that the consequences involve human lives, not just financial returns.
Federal requirements are strict. States can allocate no more than 10% of their awards to these catalyst programs, and they must compete annually for funding. While first-year progress reports were due in late August, the Centers for Medicare & Medicaid Services (CMS) has not yet released them publicly. Instead, the agency plans to publish an annual review, though states must show they have committed their funds by October 30. Missing this deadline could result in CMS reclaiming the money.
States race to deploy funds before October deadline
Daniel X. O’Neil, a technology consultant monitoring the program, described the October deadline as “a critical moment.” His state-by-state analysis shows many applications referencing catalyst funds, but the true test will be whether states actually deploy the money for innovation rather than storing it in administrative accounts.
CMS’s guidelines outline seven steps for states to follow, including provisions for intellectual property and federal rights. However, the document does not specify patient protections in detail, though a spokesperson confirmed compliance with privacy, security, and interoperability standards is mandatory. Maya Sandalow, director of the Bipartisan Policy Center’s health program, emphasized that “public funds” require transparency. Without it, she warned, the risks of harm from untested technology could outweigh any potential benefits.
The program imposes strict eligibility rules on startups. Companies must be under 10 years old and have raised less than $50 million. Winners must meet specific milestones before receiving payments, with federal officials conducting “targeted reviews” as needed. Louisiana’s fund, announced in rural Natchitoches—a town known as the setting of Steel Magnolias—attracted 200 applicants seeking grants ranging from $250,000 to $3 million.
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One applicant was Greens Health, a two-year-old startup analyzing Medicare claims to identify patients with chronic illnesses. The company, which serves 100 patients across Texas, Alabama, and Florida, had been seeking entry into Louisiana. A $250,000 grant could accelerate its growth there, according to co-founder Kehlin Swain. “We’ve been looking for a way to launch in Louisiana,” Swain said.
Louisiana’s health crisis fuels tech-driven solutions
Louisiana’s health challenges are severe. The state ranks as the “least healthy” in the nation. State rates of diabetes, obesity, and cardiovascular disease are among the highest in the nation. Fleig believes Louisiana is an ideal place to test technology solutions. So, while Silicon Valley has “not needed much of what Louisiana has had to offer” for much of its existence, it does now, he said.
Caret Health is one of those companies. Co-founders Riya Pulicharam, who is a physician-researcher, and Kevin Zhao, an engineer, met in Silicon Valley. Together, they created a technology platform that identifies patients who need help getting to their appointments, having scans done, or picking up prescriptions. That technology flags a human, who then contacts the patient with a call or text. Zhao said Caret had successful pilots at large health systems, but those places also had other vendors and “it was a pretty big uphill battle” to get in and scale.
By 2024, Caret Health began paying attention to rural areas.
Federal oversight demands speed and accountability
The urgency to act quickly extends beyond Louisiana. CMS’s guidelines require states to submit finalist lists at least 15 business days before announcing winners, ensuring transparency. This rule prevents favoritism or last-minute changes that could undermine the program’s integrity. Federal officials will review awarded projects to verify milestones, such as patient enrollment or technology deployment, are met before releasing additional funding. For startups like Greens Health, this means rigorous oversight from the start, with no tolerance for delays.
The stakes for states like Louisiana are high. The federal program’s five-year timeline leaves little room for mistakes. If a state fails to meet the October 30 obligation deadline or misses performance benchmarks, CMS can adjust future awards, potentially reducing or eliminating them entirely. This enforcement mechanism ensures the $50 billion program remains focused on real results rather than empty promises. Louisiana’s $208.4 million first-year allocation demonstrates its commitment, but the coming months will determine whether the state’s catalyst fund delivers, or becomes another underperforming initiative. The outcome may depend on whether rural startups can operate at the speed demanded by federal rules.
