Northern Cape pilots new health care payment model

A MAJOR health care reform is being piloted right here in the Northern Cape — and it could change how primary health care is funded across South Africa.

The Phokwane Local Municipality, which includes Hartswater and surrounding areas, is one of nine national sites testing a new capitation-based health-care funding model. This pilot is part of a broader strategy to prepare for the implementation of National Health Insurance (NHI), which was signed into law by President Cyril Ramaphosa in May 2025.

The capitation model represents a major shift from the traditional way health-care providers are paid. Instead of being reimbursed for every service they deliver, providers receive a fixed monthly payment per patient — regardless of how many times that person visits. This approach aims to support better preventive care, improve efficiency, and strengthen primary health care.

From “fee-for-service” to “capitation”: a shift in incentives

Under the traditional “fee-for-service” model, health-care providers are paid for each consultation, test, or procedure they deliver — for example, R200 per patient visit. While this system ensures providers are compensated for their work, it has also been criticised for encouraging unnecessary treatments, driving up costs without necessarily improving outcomes.

The capitation model works differently. Think of it like a gym membership: health-care providers receive a fixed amount per patient per month — regardless of how many times that person visits. For example, a doctor might receive R50 per month for each registered patient, whether they come in once, five times, or not at all.

The goal is to remove the incentive for “overservicing” and instead reward providers for keeping patients healthy. 

Phokwane: a national test site

Phokwane is one of nine Contracting Units for Primary Healthcare (CUPs) being piloted across the country. Each province is testing one CUP, and Phokwane is the Northern Cape’s selected site.

A CUP is a structured, local-level unit responsible for organising and delivering primary health-care services within a sub-district. It typically includes:

• A district hospital
• Primary health-care clinics
• Ward-based outreach teams
• Accredited private providers

These services are co-ordinated within the CUP to ensure patients receive appropriate, accessible, and continuous care. The CUP also manages the flow of funding and monitors health care delivery in its area.

What is being tested?

The Phokwane CUP pilot involves detailed baseline research to better understand both the community's health needs and the current capacity of providers. The outcomes of this research will guide the rollout of capitation-based funding.

Specific aspects under review include:

• Payment structures: determining appropriate monthly rates per patient
• Service delivery models: evaluating how care is best delivered under capitation
• Performance measures: identifying how to reward quality and outcomes
• Population management: tailoring services to meet local health needs

How the payment model works

The capitation model being piloted in Phokwane consists of three key components:

1. Base Capitation Fee: This is a fixed monthly amount paid per registered person. The amount is calculated using current public and private sector health-care costs and adjusted based on the health risks of the population being served.
2. Risk Adjustments: Providers who serve communities with greater health needs receive higher payments. Adjustments are made based on factors like age, gender, location, and disease burden — including conditions such as HIV, diabetes, and pregnancy.
3. Performance Bonuses: Providers can earn bonuses for delivering high-quality care, reducing hospital admissions, improving health outcomes, and expanding service coverage.

What this means for patients

For people living in the Northern Cape, the capitation model could bring several benefits:

• Improved access: There are no additional charges for multiple visits
• Preventive care: Doctors are encouraged to keep patients healthy rather than just treat illness
• Better co-ordination: Providers are supported to manage long-term care and chronic conditions
• Focus on outcomes: The system rewards providers for patient health, not just activity

What this means for health-care providers

Healthcare professionals in the pilot project receive:

• Predictable monthly income: More financial stability compared to fee-per-service models
• Incentives for teamwork: Encouragement to work with nurses, outreach teams, and specialists
• Support for quality care: Bonus structures based on performance and patient outcomes
• Opportunities for development: Recognition for qualifications and continuous improvement

Benefits for the broader health system

The capitation model aims to:

• Control costs by discouraging unnecessary tests and procedures
• Align funding with need so that resources follow patient health needs
• Boost efficiency through a focus on prevention and outcomes
• Improve service delivery using data and performance monitoring

Timeline for NHI implementation

The capitation pilot in Phokwane is part of Phase 1 of the NHI roll-out (2023–2026), which focuses on:

• Strengthening health-care systems
• Building the infrastructure for the NHI Fund
• Testing CUPs in all nine provinces
• Developing digital systems for tracking care and performance

Phase 2, expected to begin in 2026/2027, will see the NHI Fund start purchasing health-care services — starting with primary care under the capitation model and gradually expanding to hospital services.

International experience

Capitation has been used successfully in other countries, including the United Kingdom, the Netherlands, and Singapore. The Northern Cape pilot aims to learn from these examples while adapting the model to local realities.

Current progress and next steps

Health-care facilities in Phokwane are now receiving fixed monthly payments per enrolled patient to cover essential primary health-care services. Payments are adjusted for demographic and health risk factors, and providers are responsible for managing the overall health of their patient populations.

The Northern Cape Department of Health has been conducting monitoring visits to support participating facilities. Recent oversight efforts have also extended to facilities in the broader Sol Plaatje area. These visits aim to identify challenges early and ensure smooth implementation.

After the Phokwane pilot is fully assessed, more CUPs will be rolled out in other districts and provinces. The lessons learned from the Northern Cape will help shape the national expansion of the NHI system.

Looking ahead

This initiative marks a significant departure from the traditional health care model South Africans have known for decades. 

The Department of Health has indicated that this is just the beginning of a longer-term transition toward a system that prioritises prevention, equity, and access — with the potential to benefit both patients and health-care providers across the country.

By testing this alternative funding model, the Northern Cape is playing a leading role in preparing the country for universal health coverage.

A model under observation — and part of a bigger debate

While the Phokwane pilot is part of a carefully phased approach to health care reform, the capitation model and the broader National Health Insurance system have sparked national debate.

Critics of the capitation model caution that, if not properly regulated, it could lead to underservicing — where providers limit care to stay within fixed budgets. Others emphasise the need for robust oversight to ensure that quality of care is not compromised, especially in communities with complex or chronic health needs.

There are also broader concerns about the readiness of the health-care system for full NHI implementation. Civil society organisations, medical associations, and opposition parties have raised questions about governance, funding mechanisms, and the state’s ability to efficiently manage a system of this scale.

Some argue that while the goals of universal health coverage are laudable, the NHI roll-out must be matched with strong financial accountability, infrastructure investment, and human resources planning — especially in rural provinces like the Northern Cape.

As the Phokwane pilot continues, it will not only test the mechanics of capitation-based funding, but also provide valuable insight into how these reforms might work in practice. The findings will inform both provincial health strategy and the national conversation about the future of public healthcare in South Africa.