Value-based care: rebuilding South Africa’s healthcare future
Kevin Aron, Principal Officer at Medshield Medical Scheme
9 December 2025
Johannesburg - Michael Porter, one of the world's foremost Harvard thinkers on strategy and competitiveness, defined value in healthcare as the health outcomes achieved per unit of cost spent. In other words, actual value is not about how much activity the system produces, but about how well it improves people's health relative to the resources consumed. It is a deceptively simple definition. Yet South Africa's healthcare system continues to operate on a vastly different model: fee-for-service. In this system, providers are paid for the number of consultations, tests, or procedures performed, not for the health outcomes they achieve. The result is a system where incentives are misaligned, costs are spiralling, and patients, the people the system is supposed to serve, often fall through the cracks and do not gain the intended benefits from the healthcare ecosystem.
The cracks in the fee-for-service system
Every player in the system is feeling the strain. For funders, medical costs rise year after year, yet there are few levers to demand better value. Providers are stretched too, dealing with capacity shortages, misaligned costs, and isolated practices that prevent true collaboration. Patients, who should be at the centre, often find their care fragmented and reactive. Their voices are rarely heard, and interventions frequently happen too late.
This reality has created a perfect storm of rising contributions and falling affordability. The numbers tell the story starkly: 98% of members who leave medical schemes do so because they can no longer afford private healthcare. With medical inflation continuing to outpace salary growth, the sustainability of private healthcare is at risk.
Why value-based care will be different
Value-based care flips the current model on its head. Instead of rewarding volume, it rewards outcomes. Instead of fragmented, reactive interventions, it incentivises prevention, continuity, and quality. Data becomes the foundation: outcomes are measured, progress is tracked, and care is continuously improved. The patient becomes more than a passive recipient of treatment. The patient is placed at the heart of the system. While fee-for-service will not disappear entirely, value-based care can change the business model of healthcare, forcing all players (funders, providers, and policymakers) to realign their incentives around patient value.
There are already pockets of innovation in South Africa where value-based care is effectively introduced into palliative care, nephrology and other disciplines. The results are promising: lower costs, more efficient care, and better patient outcomes. But these initiatives remain scattered and limited in scale. To truly transform the system, value-based care needs to move from the margins to the mainstream.
The role of data
Porter argued that data is critical to making value-based care work. Without it, we cannot measure outcomes, refine models, or create incentives that reward quality. South Africa has made progress in collecting more clinical data, but too much of what we have remains transactional rather than clinical in nature. Worse still, the quality of data varies significantly across the value chain. It undermines the ability to build reliable models that can track outcomes or predict risks.
The failure of initiatives such as CareConnect revealed just how difficult it is to build shared data systems in a landscape full of competing vested interests. Too often, role players treat data as a tool for driving return on investment rather than as a shared resource for improving patient outcomes.
For value-based care to thrive, we need patient-centred data models that prioritise the continuum of care. It requires digital maturity, robust systems, and a willingness to collaborate. Artificial intelligence will undoubtedly play a role, helping us make sense of complex datasets and supporting earlier interventions. But the first step must be building a culture of trust and cooperation that allows data to flow where it is most needed: at the point of care.
Regulatory barriers and missed opportunities
Even with the correct data, value-based care cannot succeed without an enabling regulatory framework. Unfortunately, the current policy environment is not conducive.
The rejection of low-cost benefit options is a case in point. Without these products, medical schemes cannot attract younger, healthier members; the very people needed to balance the risk pool. The average age of medical scheme members is now 36, a clear warning that the system is running out of healthy contributors to subsidise the costs of older, sicker members.
Prescribed Minimum Benefits (PMBs) are another obstacle. While designed to ensure a safety net, they remain largely procedure-driven rather than outcomes-driven. As modern technologies enter the healthcare space, PMBs are becoming more complex, yet they still do not support the flexibility required for value-based care. Unless regulation evolves, we risk entrenching the very inefficiencies value-based care seeks to resolve.
Fragmentation and the need for collaboration
The South African healthcare system is deeply fragmented. Too many schemes operate independently, which dilutes risk pools and limits the ability to invest in systemic change.
Providers are equally fragmented, with networks that often operate in isolation. Many are not yet fully engaged in the value-based care conversation, partly because they haven't seen the benefits they too can gain. For transformation to value-based care to succeed, providers must be brought on board. They must not only buy into the rhetoric but also be included through fair and transparent systems that reward them for improving outcomes.
Managed care organisations will also play a critical role, but their current payment models do not adequately support innovation. Aligning incentives between managed care, funders, and providers is essential if we are to unlock new solutions that serve patients more effectively.
Affordability, mental health, and the human element
Affordability remains the elephant in the room. Members cannot sustain rising contributions and medical inflation indefinitely. Value-based care must ultimately deliver cost containment if it is to succeed. That means using data more intelligently, rewarding prevention, and ensuring care models are built around outcomes.
Mental health illustrates both the problem and the potential. At present, mental healthcare is still highly process driven. Patients often find themselves caught in rigid rules, like the 21-day hospitalisation model, which do little to improve long-term outcomes. Unfortunately, such facilities are not always scrutinised and regulated to the same degree as general hospitals, and medication funding is inconsistent, even when it is clear that correct treatment regimens can transform quality of life. Value-based care would allow us to put mental well-being on equal footing with physical health, focusing on outcomes that truly matter: recovery, resilience, and improved daily functioning.
Building the future
Transitioning to value-based care will fundamentally reshape business models, benefit design, and the viability of the entire healthcare ecosystem. It will require facing difficult questions: what are we willing to give up, how will we measure success, and where should we compete versus where we must collaborate? The answers will not come easily. But the alternative of clinging to a fee-for-service model that grows more expensive and less effective by the year is simply not viable.
We must build systems to stimulate innovation and experimentation. The entire healthcare value chain must share quality data, not hoard it. Providers must be empowered to embrace new models. Above all, patients must be at the centre of these care models, not as passive recipients of care, but as the accurate measure of whether our healthcare system is working.
Value-based care is not a silver bullet, but it is the most credible path we have to a more sustainable, equitable, and patient-centred system. It offers the chance to align funders, providers, and patients around a shared goal: better health outcomes at a fair and sustainable cost.
At Medshield, we believe this shift is not optional. It is essential. The longer we delay, the more fragile our healthcare system becomes. The sooner we fully embrace value-based care, the sooner we can deliver on the promise of healthcare that genuinely serves the people of South Africa.
FIN
(1317 words)
EDITORS NOTES:
International examples of value-based care in practice:
- The Netherlands – Bundled payments for diabetes care - In 2007, the Dutch health system introduced bundled payments for chronic conditions like diabetes. Instead of paying for each consultation or test, providers received a single payment to cover the full cycle of care. The result was more coordinated care, better patient outcomes, and slower cost growth.
- United States – Medicare's value-based care programmes - Through models like the Medicare Shared Savings Program and Accountable Care Organisations (ACOs), US providers are rewarded for reducing unnecessary hospital admissions and improving patient outcomes. Evaluations have shown billions in savings while maintaining or improving quality.
- Sweden – Hip and knee replacement outcomes - Sweden pioneered outcome measurement for hip and knee replacements, publicly reporting patient outcomes through registries. This transparency encouraged hospitals to improve practices and led to some of the world's lowest complication rates for these procedures, with costs kept under control.
