Following months of negotiations and sector consultation, 86% of voting practices accepted a package that will deliver an additional $120.6 million to primary care and introduce a new capitation model.

Te Whatu Ora Health NZ, Primary Health Organisations (PHOs), Contracted Providers and Te Kāhui Hauora Māori have confirmed today that the PSAAP Heads of Agreement has now been endorsed in principle by all parties following sector consultation.

The majority of PHOs and contracted providers have indicated support for the proposed agreement. Overall, 86% of practices representing 85.5% of enrolled patients voted in favour of the proposal.

This reflects significant engagement across the sector, with strong participation from PHOs and Contracted Providers. This outcome represents a pragmatic agreement that enables progress, while acknowledging that there are some areas where further work is required.

Next steps

• Development and agreement of detailed contractual clauses
• Updated payment systems to enable payment of the updated capitation rates from 1 July 2026
• Further work on key areas identified through consultation, including:
  • Refreshing the rural funding working group
  • Finalising the Performance framework and clinical indicators and finalising the performance-based capitation measures
  • Under-servicing and access issues (to be progressed through a dedicated working group)

The biggest update to capitation funding in more than two decades

The 2026/27 PSAAP negotiations were significant because they went beyond the annual funding adjustments typically negotiated between Te Whatu Ora Health NZ and primary care representatives. Alongside an additional $120.6 million investment in primary care, the agreement introduces a revised capitation funding model that aims to better reflect patient need by incorporating factors such as multimorbidity, deprivation and rurality. The changes are the first substantial update to the capitation formula in more than 20 years and are intended to direct funding more closely to the communities and practices with the greatest health needs.

Exclusion of ethnicity remains a significant concern

While most of the sector welcomed the overall package, the exclusion of ethnicity from the revised capitation model remains a significant unresolved concern for many primary care leaders and representative organisations. There is strong evidence that ethnicity is an independent driver of health need and should be considered alongside other factors included in the new formula. The advocacy for ethnicity will continue when the capitation model is reviewed in 2028 and in future review cycles.