Acts Online
GT Shield

National Health Act, 2003 (Act No. 61 of 2003)


National Health Insurance Policy towards Universal Health Coverage

Chapter 8 : Purchasing of Health Services

8.4 Provider Payment Mechanisms

8.4.1 Provider Payment at Primary Health Care Level


290. At the PHC level, the main mechanism that will be used to pay contracted providers will be a risk-adjusted capitation system with an element of performance-based payment. Capitation-based provider reimbursement systems are best suited for PHC services, and will take into account the re-engineered PHC. A key issue will be to determine the capitation rate (i.e. the average cost of providing the clinic and community-based services per person and similarly for CHC services, and later on appropriately adjusted according to age-sex categories).


291. There will be a gradual phasing in of the provider payment mechanisms over the implementation period of NHI. Once routine and reliable data becomes more readily available on the diagnoses of patients and services provided, additional steps will include refining the risk-adjusted capitation formula that is used to determine the global budget for each clinic and contracted multidisciplinary group practices. This would particularly relate to taking account of the epidemiological profile of the catchment population.


292. The annual capitation amount will be linked to the registered population, target utilisation and cost levels. Contracted public and private providers will be paid in a manner appropriate to their contract which may include price and volume contracts.


293. Consideration will be directed towards the introduction of complementary payment methods to enhance incentives for providers. The types of payments will be carefully designed and monitored to mitigate some reported adverse consequences of ‘pay-for-performance’ initiatives.


294. To deal with any potential adverse effects of capitation fundingo, there will be routine monitoring of provider practices, particularly in relation to the use of treatment protocols and clinical guidelines for key diagnoses and referral patterns.


295. Fee-for-Service (FFS) will not be used in general as a mechanism for provider payment at PHC level because by its nature, payment is limited to one provider for one interaction.



o It should be noted that a recent systematic review of evidence on the impact of alternative provider payment mechanisms (Lagarde et al., 2010) found no evidence supporting the 'conventional wisdom’ that capitation leads to decreased service provision. The review found some evidence contradicting this hypothesis about the impact of capitation payments.