BACKGROUND: Provider payment reforms (PPRs) can improve providers' efficiency, but they often generate mixed results. Since organizations mediate PPR effectiveness, examining hospitals' management capacity's association with PPR effectiveness can be useful. In the context of clear strategies, hospitals' management characteristics related to goal attainment would be key to PPR adaptation. This study examines hospitals' capacity to set goals at appropriate difficulty or specificity, provide feedback, or standardize processes. METHODS: We leverage a matched-pair, cluster randomized controlled PPR trial in a low-income Chinese province between 2014 and 2018. The reform aimed to reduce the per admission expenditure of the public insurance New Cooperative Medical Scheme (NCMS) though this may inadvertently trigger higher out-of-pocket (OOP) expenditure. We categorize 52 hospitals' baseline goal setting, feedback, and process standardization capacities using the World Management Survey and interact these characteristics with the difference-in-difference estimator to examine whether the four management characteristics modified the treatment effect. RESULTS: All four management characteristics were non-statistically significantly associated with lower NCMS expenditure growth, consistent with the PPR incentives. However, their effects were jointly significant. Much of the effect came from goal specificity and feedback. Regarding expenditure shifting to OOP sources, only process standardization amplified such behaviour while goal difficulty showed spillover control in OOP expenditure growth. CONCLUSION: Management capacity around goal attainment is an important moderator of PPR effectiveness, and future research can further unpack organizational characteristics of PPRs. Policymakers and hospital leaders may use industry peer networks to disseminate high quality goal development approaches and encourage huddles to facilitate feedback. Introducing monitoring and penalties for expenditure shifting-particularly for hospitals that can standardize operations in pursuit of profit-may be helpful.