A system designed for the wrong disease
For three decades, South Africa's health debate has been organised around infectious disease and access. That framing is now out of date. The country is living through an epidemiological transition in which the chronic, slow-burning diseases of affluence and ageing (diabetes, hypertension, heart disease, stroke, cancer) have overtaken the acute, communicable threats that defined twentieth-century medicine.
The numbers are unambiguous. Statistics South Africa attributes about 43% of all deaths to non-communicable diseases, ahead of the 34% from HIV/AIDS and tuberculosis, with communicable, maternal and perinatal causes at 14% and injuries at 10%1. Six of the ten leading natural causes of death are now NCDs, with diabetes the single largest5. The continental trajectory points the same way: IQVIA projects that NCDs will be the primary cause of both mortality and morbidity across Africa by 2030, even as the population grows to a quarter of the world's total by mid-century2. Globally, the population aged 60 and over will double to 2.1 billion by 20506, and an older population is a chronically ill one.
This matters because chronic disease breaks the economics of fee-for-service medicine. An infection is an episode: diagnose, treat, resolve, bill. A chronic condition is a trajectory measured in decades, defined by comorbidity and by the quality of coordination between many hands, the GP, the specialist, the pharmacist, the physiotherapist, the dietician, the family. Fee-for-service pays each of those hands for doing more, never for the patient doing better. When the dominant disease is chronic, a payment system that rewards volume does not merely fail to control cost; it actively manufactures it.
Cost is outrunning the country's capacity to pay
The second force is financial. South African medical-scheme contributions have, for years, risen well above general inflation. For 2025 the largest schemes announced weighted increases of roughly 9.3% (Discovery Health), 9.4% (Momentum), 10.2% (Bonitas), 10.8% (Medihelp) and 12.75% (Bestmed), against a headline consumer inflation rate closer to 3–4% and a healthcare-specific CPI of about 4.7%3. The Council for Medical Schemes can recommend restraint, its 2026 guidance was CPI plus "reasonable utilisation", but it cannot manufacture the underlying efficiency that would make restraint painless3.
Compounding contributions of 9–13% a year are not a temporary post-pandemic correction. They are the financial signature of a delivery model that adds activity faster than it adds value. Left unchecked, the arithmetic is brutal: cover becomes a luxury good, the risk pool shrinks and ages, and the schemes enter the "doom loop" of soaring costs, thinner benefits and sicker members that global analysts now warn about6.
Fragmentation is not a flaw in the market; it is the market
If the disease and the cost case for value-based care are so clear, why has South Africa's private sector not already moved? Because the system is structurally fragmented, and fragmentation is the enemy of value. Value-based care depends on a single actor being accountable for the whole of a patient's journey and able to share in the savings from doing it well. The South African private market is built to prevent exactly that.
The Health Market Inquiry put it on the record. The private sector, it found, is "characterised by high and rising costs of healthcare and medical scheme cover, and significant overutilisation without … associated improvements in health outcomes"4. Crucially, the Inquiry traced overutilisation not to bad actors but to structure: fee-for-service reimbursement that rewards volume, supply-induced demand, and an absence of outcome measurement. It described an industry "deeply fragmented," in which "different interests are pushing the funders and practitioners to advance their own interests"4.
Three structural features lock the fragmentation in place. First, solo, independent practice is the norm, and each provider (GP, specialist, pathologist, hospital, pharmacy) bills separately, with no node responsible for the total cost or outcome. Second, the regulatory regime actively obstructs integration: the HMI found that HPCSA rules on fee-sharing, multidisciplinary group practice and the employment of doctors "significantly inhibited the evolution of innovative and integrated models of care"4. Third, professional associations have operated as "quasi-collusive forums" coordinating tariffs and network participation, dampening the very competition on value that VBC needs4. The result is the "large public and private innovation divide" and "lack of coordination" that IQVIA identifies as Africa's defining health-system weakness2.
This is why VBC in South Africa is not primarily a clinical problem or a technology problem. It is a problem of permission and architecture: who is allowed to coordinate care, who is allowed to be paid for the result, and who carries the risk. The answer the country has inherited is "no one", and that is the thing that must change.
What the law must permit before value can scale
Value-based care in South Africa is constrained less by a shortage of willing clinicians than by a body of law written for a fee-for-service world. Four instruments matter most, and they must move together. Read in isolation, each looks like a technical reform; read together, they are the difference between VBC remaining a collection of pilots and becoming the operating system of the private sector.
The Medical Schemes Act (No. 131 of 1998) is the foundation. Its prescribed minimum benefits (PMBs) (26 chronic conditions and 270-odd diagnosis-treatment pairs that every scheme must fund, frequently at cost) were designed to protect members, but in practice they entrench fee-for-service by guaranteeing payment for defined episodes rather than for managed outcomes7. The Act's designated-service-provider (DSP) provisions already create a legal toehold for contracting; what is missing is explicit, unambiguous accommodation for risk-bearing capitation and outcomes-based reimbursement within the PMB framework, so that an integrator can be paid a single budget to keep a diabetic well rather than a fee each time they fall ill.
The Health Professions Act and the HPCSA's ethical rules are the most immediate blockers. As the HMI found, current rules on fee-sharing, multidisciplinary group practice and the employment of doctors have inhibited integrated models4. A GP, a dietician and a nurse cannot easily pool income and share in the value they jointly create; a doctor cannot be straightforwardly salaried inside an accountable care organisation. Until these rules are modernised, the multidisciplinary team, the basic clinical unit of VBC, operates in a grey zone.
The National Health Act (No. 61 of 2003) governs the certificate-of-need and facility framework and the architecture of health information. VBC runs on shared, interoperable data; a coordinator cannot manage a population it cannot see. McKinsey estimates that accurate, interoperable records could deliver up to a 15% efficiency gain in health systems by 20308, yet only a small minority of countries have mature data architecture in place8. South Africa has shown it can move, integrating Human Resources for Health using DHIS2 and FHIR standards in 20232, but the legal mandate for private-sector data sharing remains thin.
The Competition Act is the surprising keystone. The same collaboration that VBC requires (providers jointly agreeing care pathways, sharing outcome data, contracting collectively with funders) can look like coordination the competition authorities are bound to scrutinise. The HMI's own remedies (a supply-side regulator, risk-adjustment, outcome measurement and standardised coding) were designed to make pro-competitive collaboration possible. Implementing them would give integrators the legal certainty to cooperate without fear.
Over all of this sits the National Health Insurance Act (2024), signed into law in May 2024. Its Section 33 envisions that, once NHI is "fully implemented," medical schemes may offer only complementary cover for services not reimbursed by the Fund, a horizon that is legally significant but practically undefined, since the Act does not specify what "fully implemented" means9. The uncertainty is itself an argument for VBC: the private sector that builds coordinated, capitated, outcome-measured delivery now is building precisely the kind of accountable care architecture that any credible NHI will need to purchase from, and is hedging its own future in the process.
| Instrument | Current barrier to VBC | Required change | Primary impact |
|---|---|---|---|
| Medical Schemes Act, 1998 | PMBs guarantee payment for episodes; no explicit basis for risk-bearing capitation. | Permit outcomes-based and capitated reimbursement within PMBs; modernise solvency rules for risk-sharing entities. | Payers, new contracting freedom and risk tools. |
| Health Professions Act & HPCSA rules | Restrictions on fee-sharing, multidisciplinary practice and salaried employment of doctors. | Authorise multidisciplinary group practice, shared value-based fees and employed-clinician models. | Professionals, can form and be paid as teams. |
| National Health Act, 2003 | Weak mandate for private-sector data interoperability and information-sharing. | Mandate FHIR-based interoperability and a shared longitudinal patient record across funders and providers. | Providers, can coordinate around one record. |
| Competition Act | Pro-VBC collaboration risks appearing as anticompetitive coordination. | Implement HMI remedies: supply-side regulator, risk-adjustment, outcome measurement, standardised coding. | All three, safe harbour for cooperation. |
| NHI Act, 2024 | Section 33 limits schemes to complementary cover, on an undefined timeline. | Define transition; position VBC delivery networks as future purchasable capacity for the NHI Fund. | All three, strategic certainty. |
Localising the Kaiser logic for a multi-payer market
If fragmentation is the disease, integration is the cure, and the world's clearest demonstration of integration is Kaiser Permanente. Kaiser is not a hospital with an insurance arm; it is a single, self-reinforcing system of three interdependent entities: the Kaiser Foundation Health Plan, a capitated insurer; Kaiser Foundation Hospitals; and the Permanente Medical Groups, networks of physicians who are salaried, not paid fee-for-service10. Because the plan pays the medical groups a fixed sum per member per month, and because doctors earn a salary rather than a fee, the entire system is financially aligned around one objective: keeping people well at the lowest necessary cost. Hospitals become cost centres to be used sparingly, not revenue engines to be filled. The organisation's energy concentrates where the spending concentrates, on proactively managing the sickest 5% of members10.
South Africa cannot, and should not, copy Kaiser wholesale. Kaiser is a closed system in a single-payer-per-member context; South Africa is an open, multi-scheme market with strong consumer choice and a constitutional commitment to access. The task is to localise the logic, not clone the form. Four design principles translate directly.
One, a coordinating entity that holds the budget. In place of Kaiser's monolith, South Africa needs lighter, contractable integrators, management services organisations or value care teams, that sit between funders and providers, hold a risk-adjusted capitation budget for a defined population, and are accountable for its total cost and outcomes. Two, the multidisciplinary team as the clinical unit: a GP and nurse care-coordinator at the centre, with allied professionals and specialists contracted around a shared care plan and a single record. Three, payment that blends capitation with value fees, a predictable per-member budget, plus additional payment for measured improvements in outcomes, replacing the volume incentive with a value incentive. Four, measurement as the operating system, every team scored on outcomes relative to peers, so that value is visible, comparable and rewardable.
McKinsey's own research on scaling VBC underlines what this requires to work: standardised care pathways, data-driven coordination, and, critically, sufficient scale. The firm estimates the minimum effective scale for risk-bearing in any one line is generally above half a million lives11. That is the single most important strategic implication for South Africa: isolated pilots, however elegant, will not bend the curve. The integrators must aggregate populations across schemes to reach the scale at which risk-bearing is viable, which is precisely why a new model of cooperation, not a new model of competition, is the unlock.
What changes for each stakeholder
An honest case for VBC must be honest about disruption. The model redistributes risk, revenue and control. Each constituency gains something essential and gives up something familiar.
Providers
Gain: a predictable capitated income, freedom from the fee-treadmill, and a share of the savings they create. Give up: fee-for-service upside and clinical autonomy in isolation. Need: the legal right to form multidisciplinary teams and a shared record to coordinate around.
Payers
Gain: a credible lever on the cost curve and on outcomes, not just on tariffs. Give up: the simplicity of paying claims; they must become buyers of value and managers of risk. Need: regulatory room for capitated, outcomes-based contracts under the Medical Schemes Act.
Professionals
Gain: to practise as teams, focus on outcomes, and reduce the administrative burden that drives burnout. Give up: the solo-practice, bill-per-item identity. Need: HPCSA rules that permit fee-sharing, salaried roles and group practice.
South Africa's proof points: PPO Serve and Alignd
The strongest argument against the "it can't be done here" objection is that it is already being done here, at small scale, inside the existing law, by South African pioneers who have engineered around the constraints rather than waiting for them to lift.
PPO Serve's Value Care Team (VCT) is the clearest template. Launched in September 2019 and funded by the Government Employees Medical Scheme (GEMS), the VCT model assembles multidisciplinary teams (GP practices, nurse care-coordinators and allied health professionals such as physiotherapists, occupational therapists and social workers) that meet regularly to manage complex patients against a shared plan12. Critically, it replaces fee-for-service with capitation: unlimited team-based primary care benefits substitute for restricted out-of-hospital benefits, and GPs earn additional value-based fees for positive health outcomes. Each team's performance is scored against the average of GEMS-contracted providers and against local peers, measurement built into the model12. The explicit logic is to strengthen primary care so that costly hospitalisations fall, and to let schemes capture the savings13. It is, in miniature, the operating model of Exhibit 5, proof that the architecture is legal and executable in South Africa today.
Alignd attacks the problem from a different entry point: the highest-cost, highest-stakes patients. Founded in 2019 by a palliative physician, a health economist and an actuary, Alignd designs the contracts between funders and providers that make coordinated care possible "in a fragmented system," starting with palliative and end-of-life care for metastatic cancer patients14. Its premise is that the way to move "from volume to value" is to re-engineer the financial contract first, paying for the right care, in the right place, aligned to patients' own documented preferences. Alignd validates a second crucial point: VBC is not only for chronic primary care; it can transform the small population of complex patients who drive a disproportionate share of cost: the South African expression of Kaiser's "manage the top 5%" insight10.
Together these organisations dissolve the false choice between waiting for perfect legislation and doing nothing. They show that with creative contracting, a multidisciplinary team and a measurement discipline, value-based care produces results inside today's rules. What they cannot do alone is reach scale. PPO Serve's pilot covers a few thousand lives; Kaiser-style risk-bearing needs hundreds of thousands11. Bridging that gap from prototype to system is the work, and it is cooperative work.
The cooperation imperative
South Africa's private health sector faces a choice it can no longer defer. The disease burden has shifted decisively to chronic, lifelong conditions; the cost of cover is rising at three to four times the rate of inflation; and the fee-for-service architecture that produced both is incapable of fixing either. Value-based care is the only model that aligns the money with the medicine: paying to keep populations well rather than to process their illness.
The obstacle is not evidence and not willingness. Kaiser Permanente proves the integrated logic at system scale; PPO Serve and Alignd prove it is executable on South African soil and within South African law. The obstacle is fragmentation (structural, regulatory and cultural) and fragmentation cannot be overcome by competition. It can only be overcome by a new model of cooperation: schemes pooling lives to reach risk-bearing scale, providers forming multidisciplinary teams, professionals sharing accountability and reward, and the state clearing a coordinated legislative path across the Medical Schemes Act, the HPCSA rules, the National Health Act and the Competition Act.
This is not a call to wait for the National Health Insurance to resolve the question. It is the opposite. The private sector that builds coordinated, capitated, measured care now will not only protect its members and bend its own cost curve; it will build the one thing a future NHI cannot do without: a delivery system that actually knows how to buy and produce value. The schemes that lead this transition will define the next era of South African healthcare. The ones that wait will simply pay more, for less, until they cannot.