Low cost health start-up attracts New York PE fund

Miliki Afya Clinic at Kawangware, Nairobi. At right is the clinic’s founder and director, Dr Ernest Mureithi. PHOTO | SALATON NJAU 

By KIARIE NJOROGE

In Summary

• His vision is for Miliki Afya to become synonymous with inexpensive, quality healthcare.

It’s a tough balancing act for Dr Ernest Mureithi; providing low-cost quality healthcare to bottom-of-the-pyramid patients while turning a profit. His two-year-old startup, Miliki Afya Limited —a chain of outpatient clinics — has seen tremendous growth and Dr Mureithi believes he has the magic formula that has eluded the health sector for decades.

And investors have started noticing. New York-based private equity fund Acumen recently injected Sh52 million into the operation to help scale up the number of clinics in exchange for 17 per cent equity. With the money, Dr Mureithi has started two new clinics in Kawangware and Narok to add to the first one in Ngong. He also intends to set up three other clinics across the country.

The indefatigable doctor says that this is just the beginning and that he intends to set up 100 clinics across the country in the next decade. His vision is for Miliki Afya to become synonymous with inexpensive, quality healthcare.

“I have witnessed the population growing and the increasing deficiency of healthcare services at the bottom of the pyramid. And one day I felt it was time to come up with an institution that would deliver high quality, low-cost services,” he says.

While he concedes that having many clinics will provide economies of scale and drive down costs, he says that each clinic is set up to be self-sufficient.

The Acumen capital injection has given the brand a boost in terms of investment viability and attracted other investors willing to buy into the business.

Dr Mureithi says that most of those willing to put their money in Miliki Afya are looking at long-term financial returns but are also keen on the social good.

“Acumen invests in organisations that have a social impact; that have community good and that is what we are doing.” To set up a clinic costs between Sh5 million and Sh10 million with each manned by about 20 members of staff.

“These are comprehensive outpatient medical centres that provide doctors, nurses, have fully-fledged ultrasound machines, laboratory facilities, X-ray, ECG, an emergency room, women’s health services and even a pharmacy because we want our patients to have all services under one roof.”

The clinics charge a Sh100 consultation fee while the average cost per visit for patients is Sh1,100 including drugs. This has called for innovative thinking in terms of procurement of medicine, equipment and expense management.

“Inputs are not cheap but there are options. Even with the cost of equipment and drugs, there are choices. There are ways you can seek out different inputs from different places in Kenya and around the world which allows you to get good quality at a lower cost,” adds Dr Mureithi.

Subsidised drugs

The clinics, for example, get subsidised drugs from Mission for Essential Drugs and Supplies (Meds) a non-profit organisation that works with mission hospitals.

The Miliki Afya dream started in 1991 when Dr Mureithi was a student in Krishna Institute of Medical Sciences. It would however take him over 20 years to start replicating the healthcare model he saw in India.

In between, he worked as a physician and as an administrator, most notably with AAR and Aga Khan. He also acquired a Masters degree in health administration at the University of Minnesota, US.

But getting the clinic off the ground was the most trying part. He conducted a two-year feasibility study before he was finally convinced that the operation was viable.

He sold his house to get the seed capital to set up the Ngong clinic, which he says has been a resounding success. The clinic can serve up to 200 people daily and has seen 41,000 patients in two years of operation.

The business model employed was to have each clinic as a self-sustaining unit rather than rely on collective sustainability. This has been achieved by increasing patient numbers for those seeking primary medical service, carefully managing expenses and procurement of cheaper but quality equipment.

“What was the biggest challenge was, how do you keep such a clinic operating, month after month? That was what we had to understand so that as we spend on our inputs they had to go hand in hand with prices that the patients could afford in a balance that allows each centre to stand on its own,” says Dr Mureithi.

Having successfully proven that the model works, Dr Mureithi says that they are now looking to offer more services like physiotherapy and circumcision. However, even with the success, sustainability is a battle that is fought every day.

“Keeping the cost of doing business down is a challenge. Every single day we have to sit down and study the way the business is running so that it remains sustainable on a daily basis.”

In much the same way that Equity Bank grew into a multi-billion shilling empire by catering to the hitherto ignored low-income individuals, Miliki Afya seeks to grow by catering to the same bottom of the pyramid customers who pay out of pocket.

The country has seen a rapid expansion of clinics but for most of them, the average cost per visit that Miliki Afya charges would only be a consultation fee. The growth will however depend on mass numbers, scaling of the clinic numbers, quality service and cost management.

Dr Mureithi says that they are currently in talks with three private equity funds and other private investors which could see the expansion rate accelerate to the 10-12 clinics per year that he is targeting.

“The end game is to bring Miliki Afya into the whole country. Therefore whatever it takes, we are going to raise enough capital to get to that level. Miliki Afya is my gift to the people. I have no issues with diluting my shares so that this organisation can be all over Kenya.”

gkiarie@ke.nationmedia.com