OBJECTIVES: The New Cooperative Medical Scheme (NCMS) which aims to reduce the risk of catastrophic health spending for rural residents has substantially improved health care access and utilization in China. However, cost containment and provider incentive remains a huge challenge, which has been particularly acute in poorer rural areas, such as the North-west. Over the past years, several counties in Gansu province have introduced a variety of provider payment reforms, shifting from the traditional Fee-for-Service to case-based, global budget and/or per-diem methods. This study provides the first impact evaluation of these reforms. METHODS: Using a quasi-experimental design, we collected NCMS claims data from 2008 to 2013 in three counties. A difference-in-difference analysis is performed to take advantage of the variation in provider payment methods implemented at different years across the counties. We also control for patients’ age, gender and diagnosis as well as demographic factor of each county in estimating the effects of payment reform on cost (measured by inpatient healthcare expenditure) and quality (measured by readmission rate). In addition to the quantitative analysis, we conduct key informant interviews with policymakers, hospital administrators, and medical professionals to better understand the design and implementation issues involved in the reform process. RESULTS: Preliminary data analysis indicates that in one county, the provider payment reform is associated with 9.8% drop in total health care expenditure per admission. Length of stay fell by 4.9% as a result too.  However, other factors such as changes in the demand-side reimbursement rate may also influence the outcomes. Differences in local infrastructure and technical capacity have led to the same payment method implemented differently at the county level. CONCLUSIONS: Provider payment reform in rural China can be an effective way to control health expenditure. However, more technical guidance on designing the right payment is needed for future reforms.