Value-Based Payment Reform Is Only as Strong as the Data That Measures It

States are making significant investments in rural health transformation, but for many of those investments to be sustainable, states will need to change how care is delivered and paid for.

Through the Rural Health Transformation Program, CMS announced $50 billion in awards to strengthen rural health, with first-year state awards ranging from $147 million to $281 million. These funds create a real opportunity to stabilize rural providers, strengthen care delivery, and rethink how rural health care is financed. Across state proposals, nearly every state pointed to value-based payment (VBP) as critical to sustaining these investments over the long term.

It’s the right goal, but it comes with a practical challenge.

Without a clear baseline and a reliable way to measure payment transformation over time, states will struggle to answer the questions that CMS, governors, legislators, payers, providers, and communities will ask:

• How are rural providers paid today, and how is it changing?
• Which providers are participating in new payment models?
• Do the new payment models support the new access points and care delivery models being developed with RHTP funds?
• Where is financial risk actually shifting?
• Which rural regions or provider types are still being left behind?
• How should the state invest after the federal funding period ends?

States may know that a program launched and which providers participated, but without better data, they may not know whether payment actually shifted in a way that supports their rural health transformation goals.

That is why data collection on VBP needs to be treated as a core component of rural health transformation, not an afterthought.

States Are Investing in VBP and APMs as a Sustainability Strategy

Across the country, states are using rural transformation funding to move providers toward value-based payment and alternative payment models.

For example, North Carolina’s Rural Health Transformation Program includes a goal to “advance value-based payment” by helping rural primary care practices participate in advanced VBP models and laying the groundwork for rural hospitals to join VBP arrangements.

Delaware’s proposal includes a Rural Provider and FQHC Value-Based Care Readiness Initiative, focused on helping rural providers and FQHCs participate in value-based payment arrangements, make health IT investments, expand high-value services, and develop sustainable collaboration between providers and payers.

Missouri’s Year 1 RHTP fund includes dedicated funding for Alternative Payment Models design and pilots, including provider incentives tied to reductions in emergency department visits and inpatient admissions, performance pools, common measures, and provider technical assistance.

States are not only funding short-term rural health initiatives. They are trying to build more sustainable financing models for rural care. That makes measurement essential. If states are investing in payment reform, they need to track whether it’s actually happening – and how.

Claims Data Alone Will Not Tell the Full Story

All-payer claims databases help States understand health care spending, utilization, access, and price variation and are commonly used to support policy analysis, transparency, public health planning, and delivery system reform. But as states move toward value-based payment, they will need to collect information on payments that fall outside traditional claims – either through their APCDs or another state agency.

That includes payments such as:

• Shared savings payments
• Capitation payments
• Bundled payments
• Quality performance payments
• Care management payments
• Infrastructure or transformation payments
• Other payments made outside the traditional fee-for-service claim

Tracking these payments is essential to knowing whether VBP strategies are working. If states cannot see them, they cannot fully measure the progress of their rural transformation investments.

A Practical Framework Already Exists

States do not need to start from scratch. In 2024, the National Association of Health Data Organizations (NAHDO) released the Non-Claims Payment (NCP) Data Layout – a standard structure for collecting non-claims payment data from health care payers and pharmaceutical manufacturers. NAHDO designed the layout to support comparison across states and programs while reducing the data submission burden on payers.

The NCP Data Layout is based on the expanded non-claims payment framework developed by the California Department of Health Care Access and Information in partnership with Freedman HealthCare. It offers a practical, standardized way to capture payments that APCDs often miss. The framework classifies non-claims payments by their purpose and by how much financial risk is shifted to providers. The Milbank Memorial Fund has described the expanded framework as a potential national standard for categorizing and collecting non-claims payment data.

That standardization matters. As CMS evaluates rural transformation outcomes across states, the ability to compare progress using a shared framework will become increasingly valuable. States that build non-claims payment data collection into their RHTP strategy will be better positioned to benchmark progress, identify gaps, and explain the impact of their investments.

Several states are already moving in this direction. Colorado, Maryland, and California are already using the NCP Data Layout to create comprehensive, comparable views of health care payment beyond traditional claims. For states investing RHTP dollars in payment reform, this is a timely opportunity to align rural transformation work with a more durable data strategy.

Better Data Can Help States Target, Measure, and  Sustain Reform

Pairing these investments with non-claims payment data collection can help states achieve several goals.

First, it creates a baseline. States can understand where value-based dollars are flowing today across payers, providers, rural regions, and payment model types.

Second, it supports better targeting. With more complete payment data, states can identify rural counties, specialties, provider types, or delivery systems that may need additional support.

Third, it strengthens accountability. CMS, state legislators, payers, providers, and communities need a common way to assess whether rural transformation dollars are producing meaningful change.

Finally, it helps states plan beyond the grant period. RHTP funding is time-limited, but the data infrastructure states build now can support future policy decisions, Medicaid contracting, payer alignment, and CMS negotiations long after the federal dollars are gone.

The Bottom Line

RHTP gives states a rare opportunity to reshape rural health care delivery and financing. But payment reform will only be as durable as the data infrastructure that supports it.

States that pair VBP investments with non-claims payment data collection will be better equipped to show progress, identify gaps, target resources, and sustain reform after federal funding ends.

For state leaders, the question is not only how to invest in rural payment transformation. It is how to measure that transformation clearly enough to sustain it.

To discuss how your state can strengthen its rural transformation data strategy, reach out to Gary Swan at [email protected].