Hospitals need new revenue streams as wages rise

A Meridian Medical Centre, Nairobi, nurse tests a patient for high blood pressure in March. Given an opportunity, many Kenyans would invest in medical training. FILE 

By EDWARD OMETE

The ongoing changes in the health sector pose a serious challenge to facilities, mostly private owned ones. That said, even public facilities will be affected by the same issues.

The recent directive banning levying of fees on certain services, especially in relation to outpatients, makes matters worse. The most affected public facilities are dispensaries and health centres. These two have previously financed their operations by a mix of money from the National Hospital Insurance Fund (NSSF) and small user fees.

Having been intimately involved in primary healthcare level facilities for the last two years, my view is that while the intention is good the repercussions will be detrimental.

I have come across stellar examples in the generation and use of fees generated by these facilities. The truth is that money allocated by the government will never be enough to sustain operations of small facilities, especially those that were built by through the Community Development Fund or money donated by faith-based organisations and NGOs.

It remains to be seen what the results of the new directive will be. While the expected allotment by the Health ministry is expected to rise on the back of the directive, the general rule in public healthcare financing is that a shilling raised on the ground would do better than every Sh2 given by Treasury.

This is because self-generated funds have a target use and exhibit more fiscal discipline in their use. They are also prone to less interruptions or delays in disbursement as is the case with most Treasury funds.

For the private sector, the ever ballooning wage bill will rise even further. Two factors point to this: fewer top cadre workers are available — many having opted to remain or return to public service. Many more are now venturing into entrepreneurship (one in every five express the wish to have a private business).

The demand-supply curve is shifting towards smaller private facilities as they have “friendlier terms”. The usual raising of user fees will not work any more as even insurance premiums will reach a ceiling beyond which further raises will lead to loss of clients.

What models then? Most of the facilities have training institutions that also act as a pool of workers from which they can hire. This is usually nursing and other junior cadre courses, but currently only one or two major hospitals have started their own medical schools. For private facilities, this avenue is one of the few salvation routes. Demand for the courses is high while supply is short.

As a premium course the value of returns is also high. The only challenge may be capital for setting up ventures, but even this should not be challenging.

Given an opportunity, many Kenyans would invest in medical training facilities, especially schools. Such health facilities can also directly invest in existing privately owned institutions to increase brand visibility or make them more professional.

This should not be the only route to be pursued. They should also think of setting up medical research units, collaborating with other stakeholders in auxiliary medical services provision to increase their revenues. This will relieve the strain on their wage bills.

It is noteworthy that some are “selling” extra capacity of the services they offer like medical waste disposal. Emergency vehicle lease to external players is another example of revenue generation. Adoption of new survival techniques is a must.