North Carolina

Cluster 5: High-Complexity Transition States

State Context

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North Carolina is the most analytically complex state in the Rural Health Transformation Program. Every structural challenge the program was designed to address converges here: the second-largest rural population in the country (3.4 million across 85 counties), the most recent Medicaid expansion among large states (December 2023), a per-capita RHTP allocation so low it constrains the scope of achievable transformation ($63 per rural resident annually), and a 21.2:1 Medicaid Math ratio that places it firmly in the structural contradiction tier. North Carolina does not merely illustrate high-complexity transition state characteristics. It defines the category’s outer boundary.

The state entered RHTP during concurrent system-level transitions that no other large state replicates. It is simultaneously building Medicaid expansion infrastructure (680,000+ enrolled in fewer than two years), absorbing federal Medicaid cuts the Governor’s office estimates at $49.9 billion over ten years, navigating a divided government that has already defunded the nation’s most prominent social determinants of health program, managing a for-profit hospital system that has received three CMS immediate jeopardy citations since acquisition, and attempting to coordinate a transformation program across a geographic footprint stretching from the Outer Banks to the Blue Ridge Mountains. The RHTP application names this the state’s opportunity. The evidence suggests it is also the program’s most demanding implementation test.

The political environment compounds implementation complexity. Governor Josh Stein (D) took office in January 2025 after winning by 14.8 percentage points, even as the Republican presidential candidate carried the state. But Stein governs alongside a Republican supermajority in both legislative chambers that controls appropriations and has demonstrated willingness to use budget authority against executive branch health priorities. This divided government structure produced the Medicaid rate rebase standoff of 2025, in which the legislature’s mini-budget fell $319 million short of NCDHHS’s request, forcing provider rate reductions effective October 2025. It produced the defunding of Healthy Opportunities Pilots despite demonstrated cost savings. And it shapes the operating environment for every RHTP implementation decision that requires state budgetary cooperation.

North Carolina’s rural population is not merely large but geographically and demographically diverse in ways that resist uniform transformation approaches. The state’s rural communities span Appalachian mountain counties where HCA’s Mission Health dominates, eastern Coastal Plain counties with persistent poverty rates exceeding 50% among Black and American Indian populations, Piedmont agricultural communities with significant Hispanic farmworker populations, and coastal counties with tourism-dependent economies. Income levels show 37% of rural residents below 200% of the Federal Poverty Level, with rates exceeding 64% among Hispanic residents. The state ranks second nationally in rural veteran population (approximately 730,000). Fourteen non-metro counties have uninsurance rates above 18% even after Medicaid expansion. Any single transformation approach applied uniformly across this diversity will fail to address specific regional needs. The ROOTS Hub regional model is designed to accommodate this variation, but accommodation requires resources that $63 per resident constrains.

RHTP Application and Award

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North Carolina received $213.0 million for FY2026, the second-largest award nationally. NCDHHS developed the application through engagement with more than 420 stakeholders including rural hospitals, community health centers, local health departments, tribal communities, and faith-based organizations. The application was submitted in November 2025 with bipartisan support from the state’s congressional delegation.

The NC Rural Health Transformation Program (NCRHTP) organizes around six integrated initiatives, each linked to specific performance indicators:

NC ROOTS Hubs (Rural Organizations Orchestrating Transformation for Sustainability) form the structural backbone. NCDHHS will establish six regional hubs aligned to Medicaid Standard Plan regions, each governed by a Hub Lead entity coordinating a network of rural hospitals, FQHCs, private practices, and community organizations. The Hub Lead RFA was targeted for March 2026 with selection and onboarding between April and October 2026. This timeline means the foundational coordination infrastructure does not become operational until the program’s second half-year, consuming Year 1 primarily on procurement and organizational development rather than service delivery.

The remaining five initiatives layer onto this hub structure: expanded primary care and prevention (chronic disease management, maternal health, nutrition), behavioral health and substance use services (including CCBHC expansion and school-based care), workforce development (rural training centers, residencies, fellowships, certification programs), value-based payment models (supporting rural providers in advanced payment model participation), and digital health and technology (health information exchange expansion, AI adoption, broadband-dependent tools).

The lead agency is NCDHHS, which operates with relatively strong internal coordination authority. NCDHHS operates as an integrated agency housing the Office of Rural Health, the Division of Health Benefits (Medicaid), the Division of Public Health, and the Division of Mental Health, Developmental Disabilities, and Substance Use Services. This consolidation provides genuine coordination authority that states with separated health and Medicaid agencies lack. However, NCDHHS’s authority is constrained by a Republican legislative supermajority that controls appropriations, has demonstrated willingness to defund NCDHHS-administered programs regardless of evidence, and maintains independent leverage over Medicaid policy through budget negotiations. The internal coordination capacity underestimates the external legislative constraint that shapes what NCDHHS can operationally achieve.

Subawardees and partners include ECU Health, Mission Health/HCA, Duke Health, Wake Forest, UNC system institutions, NC Area Health Education Centers (AHEC), NC HealthConnex (health information exchange), Unite Us (social needs platform), NC Community Health Center Association, local health departments, and NC Community Health Worker Association. The partner list is comprehensive but raises coordination complexity questions proportional to North Carolina’s scale.

The Medicaid Math

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North Carolina’s Medicaid Math tells the story of a state whose RHTP investment is overwhelmed by simultaneous coverage erosion.

RHTP five-year total: $1.07 billion. Ten-year Medicaid cut estimate: $22.5 billion (11% of baseline). The resulting 21.2:1 ratio means North Carolina loses more than twenty-one dollars in Medicaid funding for every dollar RHTP provides. NCDHHS itself has produced a higher estimate of $49.9 billion in total federal Medicaid losses when accounting for state-directed payment program restrictions and other provisions, though the YAML-standardized estimate uses the narrower calculation.

The cut mechanisms compound in ways specific to North Carolina’s recent expansion:

Work requirements will apply to the expansion population beginning December 31, 2026, requiring six-month eligibility redetermination instead of the standard twelve-month cycle. North Carolina enrolled 680,000 people through expansion in fewer than two years. Rural expansion enrollees account for more than one-third of total expansion enrollment (244,500+). The administrative burden of six-month redetermination on a population that was uninsured until December 2023, that is disproportionately rural, and that gained coverage through a process many are still learning to navigate creates coverage churn risk that directly undermines RHTP’s transformation premise. You cannot build sustainable care delivery models on a population cycling in and out of coverage every six months.

State-directed payment program restrictions threaten North Carolina’s Healthcare Access and Stabilization Program (HASP), which the NC Hospital Association estimates at $6.5 billion in total funding including nearly $5 billion in federal dollars. HASP supports Medicaid expansion operations and rural hospital financial stability simultaneously. Its restriction does not merely reduce revenue. It removes the financial architecture that makes expansion-era rural hospital operations viable.

Provider tax cap reductions limit North Carolina’s ability to generate state matching funds, further constraining the state’s capacity to offset federal cuts through its own fiscal mechanisms.

The combined effect is not additive. It is compounding. North Carolina is building RHTP transformation infrastructure on a coverage foundation that federal policy is simultaneously undermining through administrative complexity, revenue reduction, and financing mechanism restriction. NCDHHS Deputy Secretary Jay Ludlam has warned that work requirements combined with provider tax caps could effectively undo the Medicaid expansion that North Carolina lawmakers approved in 2023.

Implementation Assessment

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Transformation Approach Plausibility

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The ROOTS Hub model is architecturally sound but operationally untested at this scale. Six regional hubs coordinating across 85 counties, 400+ rural health facilities, and multiple partner organizations represents the program’s most ambitious hub deployment. The alignment to existing Medicaid Standard Plan regions leverages existing managed care geography, which provides a coordination logic that purely administrative boundaries would not.

Year 1 prioritization is realistic: NCDHHS has stated the first-year goal is to expand existing statewide efforts rather than launch new programs. This acknowledges procurement timelines and organizational development needs. The risk is that Year 1 becomes entirely consumed by hub establishment, pushing actual transformation activity into Years 2 through 5, a compressed timeline that leaves insufficient runway for iteration and course correction before the 2030 sunset.

CCBHC expansion (three to four new sites) builds on five existing certified sites. Behavioral health integration represents genuine need, given that emergency department overdose visits have declined 14% since expansion but remain concentrated in rural communities with limited treatment infrastructure.

Workforce development through AHEC partnerships, university residency programs, and community college certification pipelines addresses the state’s well-documented provider shortages. The partnership infrastructure (Duke, UNC, ECU, Wake Forest, 9 AHEC centers) is the strongest academic health workforce pipeline of any RHTP state. Whether pipeline capacity translates to rural practice retention is the question the application does not resolve.

Intermediary Landscape

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North Carolina’s intermediary ecosystem is extensive but carries specific vulnerabilities.

NCCARE360, the statewide coordinated care network operated by the Foundation for Health Leadership and Innovation, provides the most comprehensive social needs referral platform in any RHTP state. It is also the platform that served the now-defunded Healthy Opportunities Pilots. NCCARE360’s infrastructure remains technically operational, but the loss of HOP service delivery funding has severed the link between referral capacity and service provision. A referral platform without funded services to refer to is a directory, not a care coordination tool.

NC AHEC operates nine regional centers providing workforce development, continuing education, and practice support across the state. This network predates RHTP and provides embedded regional presence that hub development can leverage rather than build from scratch.

NC Community Health Center Association coordinates 43 FQHCs with more than 200 service sites. The FQHC network’s geographic distribution across rural counties provides primary care infrastructure essential to hub operations.

The intermediary landscape’s primary vulnerability is the demonstrated willingness of the General Assembly to defund evidence-based programs administered through these intermediaries. Healthy Opportunities Pilots showed $85 per member per month in Medicaid savings and $1,020 in annual healthcare cost savings per enrollee. The legislature defunded it anyway. This creates a credibility problem for RHTP sustainability planning: if proven cost-saving programs cannot survive state budget politics, what confidence exists that RHTP-funded programs will transition to state support after 2030?

Provider Readiness

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North Carolina’s provider landscape splits into three distinct zones with different readiness profiles.

Eastern North Carolina is anchored by ECU Health, which has proposed reopening Martin General Hospital in Martin County as a Rural Emergency Hospital after Quorum Healthcare’s 2023 bankruptcy closure left the county without hospital services. If successful, it would be the first hospital in the country to reopen as a REH after complete closure, a test case with national implications for the REH designation model. ECU Health Sciences provides the academic workforce pipeline for the region. This zone contains the state’s highest concentrations of persistent poverty counties, agricultural worker populations, and Medicaid-dependent providers. Provider readiness here depends on whether RHTP funding can stabilize facilities already operating on negative margins while simultaneously building new service delivery models in communities that have lost institutional healthcare presence entirely.

Western North Carolina faces a provider landscape dominated and complicated by HCA Healthcare’s Mission Health system. HCA acquired the formerly nonprofit Mission Health in 2019, converting a six-hospital system serving an 18-county region to for-profit operations. Since acquisition, Mission Hospital in Asheville has received three CMS immediate jeopardy citations (the most recent in October 2025 following a patient death), settled an antitrust lawsuit with four local governments, and seen two of its rural hospitals (Angel Medical Center and Blue Ridge Regional Hospital) identified by the Sheps Center as at risk of closure with three consecutive years of negative margins. A Wake Forest academic study concluded HCA’s purchase produced no lasting improvements. Meanwhile, AdventHealth’s proposed new hospital in Weaverville has been blocked for three years by certificate-of-need litigation initiated by HCA.

The western NC provider landscape is not a readiness question. It is a structural accountability question. RHTP funds flowing through or alongside Mission Health/HCA require NCDHHS to navigate the tension between the region’s dominant provider system and that system’s documented quality and financial performance failures. Madison County, with roughly 22,000 residents and no hospital, relies on three ambulances making two-hour round trips to Mission Hospital in Asheville. The state determined in 2022 that the region needs 67 additional acute care beds. AdventHealth’s proposed facility to address this need has been blocked by HCA-initiated certificate-of-need litigation since 2022. RHTP transformation planning for western NC must account for a provider landscape where the dominant system has both the infrastructure and the documented accountability deficiencies to shape every implementation decision.

The Piedmont corridor contains North Carolina’s academic medical centers and largest health systems but relatively less rural territory. Its role in RHTP is primarily as a workforce pipeline and specialty referral destination rather than a direct transformation site.

Sustainability Design

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North Carolina’s RHTP application identifies value-based payment transition as the primary sustainability mechanism. The application describes moving rural providers toward advanced payment models where revenue depends on outcomes rather than volume, creating financial structures that persist beyond RHTP’s grant period.

This sustainability design is theoretically coherent but practically unproven for rural providers at this scale. North Carolina lacks the AHEAD model participation that gives Vermont an independent payment reform pathway. It lacks the Medicaid global budget mechanisms that other states use to stabilize rural hospital finances independent of volume. The value-based payment transition the application envisions requires rural providers to simultaneously build transformation infrastructure, shift payment models, maintain financial viability during transition, and absorb Medicaid revenue reductions. Each of these tasks individually challenges most rural providers. Combining them represents an implementation ask that no state has successfully executed.

The Healthy Opportunities Pilots experience provides a cautionary data point. North Carolina built the nation’s most ambitious Medicaid-funded social needs program, demonstrated cost savings, and lost its funding through legislative action unrelated to program performance. The sustainability question for RHTP is not whether transformation approaches work. It is whether North Carolina’s political environment permits successful programs to survive.

One structural advantage deserves mention: the UNC Cecil G. Sheps Center for Health Services Research is the national authority on rural hospital closures and the analytical institution that produced the data Congress used to evaluate OBBBA’s rural hospital impact. North Carolina has the country’s most respected rural health research infrastructure embedded in its own university system. Whether NCDHHS leverages this asset for real-time implementation evaluation and evidence-based course correction, rather than treating it as an external evaluator producing reports after the fact, will differentiate genuine learning from performative measurement.

Architecture Trajectory

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North Carolina’s architecture trajectory analysis must account for what the state already possesses and what its regulatory environment prevents. The state has stronger community health infrastructure than most high-complexity transition state peers but faces regulatory constraints that limit how that infrastructure can evolve.

North Carolina’s Office of Rural Health is one of the oldest in the nation, and its CHW investment dates to the early 2000s. The NC Community Health Worker Association is a named RHTP subawardee. This is not a state building CHW capacity from scratch. The question is whether RHTP embeds CHW roles as permanent local workforce infrastructure with career ladders from entry through specialization, or treats them as supplemental program staff whose positions depend on continued grant funding. The distinction determines whether North Carolina builds a workforce that functions regardless of facility survival or a workforce that disappears when the funding cycle ends. The application’s workforce initiative channels development through AHEC partnerships and university systems, producing licensed professionals through traditional pipelines. The CHW infrastructure that already exists receives coordination support but not the career ladder architecture that would convert community health work from grant-funded positions to permanent rural careers.

North Carolina maintains restricted NP practice authority, requiring collaborative agreements with physicians. This regulatory constraint blocks alternative delivery models that states with full practice authority can pursue. Service centers staffed by independently practicing NPs are structurally impossible under current North Carolina law. The ROOTS Hub model routes care through provider networks that depend on physician availability, which is precisely the constraint that rural North Carolina cannot resolve through recruitment. The 21.2:1 Medicaid Math means the state cannot afford to build and staff conventional facilities across 85 counties. It also cannot, under current scope of practice rules, build the lower-cost alternatives. The regulatory environment and the fiscal environment compound each other: the state needs cheaper delivery models and prohibits the workforce flexibility those models require.

The Eastern Band of Cherokee Indians creates a tribal demonstration opportunity that no other high-complexity transition state possesses. The Qualla Boundary in western North Carolina is sovereign territory where state scope of practice restrictions, facility licensing requirements, and technology authorization rules do not apply. The Eastern Band can authorize dental health aide therapists, deploy AI companions, operate service centers with expanded CHW scope, and test delivery models that North Carolina’s regulatory framework prohibits for non-tribal communities. If the ROOTS Hub serving western NC coordinates with the Eastern Band as a sovereign demonstration partner rather than a subawardee implementing state-designed programs, tribal innovation could generate evidence that shifts the regulatory debate in Raleigh. Dental therapist authorization, CHW scope expansion, and service center licensing reform all face legislative resistance that empirical evidence from an in-state sovereign demonstration could erode. The application references tribal community engagement. It does not reference tribal sovereignty as a regulatory laboratory.

The trajectory for North Carolina is constrained by forces RHTP cannot change: the 21.2:1 ratio limits investment per resident, restricted practice authority blocks alternative delivery models, and a legislative supermajority has demonstrated willingness to defund evidence-based programs. Within those constraints, the ROOTS Hub model provides coordination architecture that could evolve toward alternative governance if structured for community authority rather than provider coordination. CHW infrastructure could anchor local workforce career ladders if the state commits to certification and Medicaid billing pathways beyond the 2027 target. And the Eastern Band of Cherokee represents an architecture demonstration opportunity that the plan acknowledges culturally but does not leverage structurally.

Risk Assessment

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Primary risk: Compounded transition overload. North Carolina faces the high-complexity transition failure mode in its most extreme form. The state is simultaneously managing Medicaid expansion implementation, RHTP program development, Medicaid rate reductions, work requirement preparation, and for-profit hospital accountability challenges. Each transition individually requires sustained lead agency attention. Their simultaneous occurrence creates competition for organizational capacity, procurement resources, and political capital.

Legislative constraint risk. The divided government dynamic (Democratic governor, Republican legislative supermajority) has already produced tangible damage to health programs through the Healthy Opportunities Pilots defunding and Medicaid budget standoffs. RHTP is federal funding and does not require state appropriation, but sustainability planning, Medicaid policy alignment, and workforce program integration all require legislative cooperation that recent history suggests is unreliable.

Scale penalty. At $63 per rural resident annually across 3.4 million people and 85 counties, North Carolina cannot fund transformation at the intensity smaller states achieve. The ROOTS Hub model distributes limited resources across six regions, diluting per-region investment to levels that may support coordination but cannot fund infrastructure at scale. For comparison, Vermont invests $424 per rural resident through a single integrated system covering 460,000 people. North Carolina must achieve comparable transformation outcomes with one-seventh the per-capita resources across a population seven times larger.

Political continuity note. The YAML data flags a 2026 gubernatorial election for North Carolina. This is incorrect. North Carolina elects governors in presidential years; Governor Stein took office in January 2025 and is eligible for re-election in 2028. The midpoint political continuity risk is therefore not gubernatorial but legislative. The General Assembly’s Republican supermajority controls budget and policy levers that shape RHTP’s operating environment regardless of who occupies the Governor’s mansion.

Honest Assessment

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What North Carolina does well. The NCRHTP application reflects genuine stakeholder engagement (420+ participants), realistic first-year expectations (expanding existing programs rather than launching new ones), and structural alignment with existing Medicaid managed care geography. NCDHHS’s integrated agency structure provides better internal coordination authority than most large-state agencies. The academic health center infrastructure (Duke, UNC, ECU, Wake Forest, AHEC) is unmatched for workforce pipeline capacity. The state’s two-year Medicaid expansion experience demonstrates implementation capability under compressed timelines.

Where the plan faces reality. North Carolina’s RHTP investment of $1.07 billion over five years is building on a Medicaid foundation losing an estimated $22.5 billion to $49.9 billion over ten years. The mathematics do not support transformation at scale. They support triage. The ROOTS Hub procurement timeline consumes most of Year 1 on organizational development. The Healthy Opportunities Pilots defunding demonstrates that evidence of program effectiveness does not protect against legislative budget politics. The western NC provider landscape is dominated by a for-profit system under repeated federal quality sanctions. The value-based payment sustainability strategy requires rural providers to execute payment model transitions that well-resourced urban systems find challenging. Restricted NP practice authority blocks the lower-cost delivery alternatives that the 21.2:1 ratio demands, and the Eastern Band of Cherokee’s sovereign demonstration potential remains unleveraged.

What would change this assessment. Three developments would materially alter North Carolina’s implementation trajectory. First, legislative restoration of Healthy Opportunities Pilots funding would demonstrate that the political environment can support evidence-based health programs and would restore the social needs infrastructure that NCRHTP’s ROOTS Hubs are designed to coordinate. Second, meaningful resolution of the Mission Health/HCA accountability crisis in western NC, whether through operational improvement, regulatory intervention, or ownership transition, would address the region’s provider readiness gap. Third, federal flexibility on work requirement implementation that reduces administrative burden and coverage churn would preserve the expansion foundation on which rural transformation depends. A fourth would open architectural possibility: scope of practice reform granting full NP practice authority, enabling delivery models that the state’s fiscal constraints demand but its regulatory framework currently prohibits. Absent legislative action, the Eastern Band of Cherokee could demonstrate those models within sovereign jurisdiction if the ROOTS Hub structure treats tribal health systems as demonstration partners rather than program subawardees.

None of these developments is currently on a trajectory to occur. The profile that emerges is of a state with genuine implementation capacity, authentic stakeholder commitment, and the country’s strongest academic health infrastructure attempting transformation under political and fiscal constraints that make success at the intended scale improbable. North Carolina’s RHTP will produce meaningful improvements in specific counties and for specific populations. Whether it transforms rural health delivery across 85 counties serving 3.4 million people at $63 per person per year is a different question, and honest assessment requires acknowledging the distance between aspiration and arithmetic.