Category Archives: HMO

Reading the Nairobi Hospital tea leaves

What does a read of The Nairobi Hospital, which is probably the top hospital in East Africa, tell us about the state of medical investments here? The Nairobi Hospital (NH) was founded in 1954, and it, alongside Aga Khan Hospital,  is where top leaders, politicians from Kenya and the East Africa region are treated. It is also where middle-class Kenyans, tourists, and anyone with private medical insurance is treated or operated on.

Nairobi Hospital room

But treatment at Nairobi Hospital is not cheap; , a few days stay without surgery will cost about Kshs 300,000 (about $3,000) and a night in the intensive care unit (ICU ) is about Kshs 500,000!

Kenyans who have medical conditions have discovered that traveling to India for surgery, medicine, and other complex treatment procedures is a better option, even after one factors in the cost of travel for patient and relatives who oversee the patient.

Anyway, how does the Nairobi Hospital (officially registered as the Kenya Hospital Association) in 2016 compare to a few years earlier with the hospital’s 2009 report?

  • Turnover was Kshs 8.79 billion (~$88 million), up from 8.0 billion in 2015.
  • They had a surplus of Kshs 1.3 billion  ($13 million) up from Kshs 1.06 billion, but below the Kshs 1.4 billion in 2014.
  • Some income items: Pharmacy income was 2.5 billion (a 13% growth on the previous year) and the pharmacy had 60% growth in chemotherapy sales thanks to NHIF package (partnership with NHIF has opened doors to our brothers and sisters who would otherwise have not received world class health services. This has seen a rise in number of patients accessing their preferred health care in our Cancer Center, Renal Unit and Catheterization Laboratory. Laboratory income was Kshs 1.4 billion (they have also implemented o shore reporting from India for CT scan, MRI and mammography). Physiotherapy revenue was Kshs 246 million, and accident and emergency revenue was Kshs 374 million (53% of visits were done in 75 minutes and they plan to reduce the waiting time).
  • Some expense items: The Nairobi Hospital paid salaries of Kshs 2.5 billion (compared to Kshs 2.1 billion in 2015) and they added 276 staff in the year (including 128 nurses), a CEO, Company Secretary, and a Security Manager. Key management compensation dropped from Kshs 130 million to Kshs 93 million (in 2015) – and does that difference correspond to the salary of the outgoing CEO who left to become Kenya’s Cabinet Secretary for Health? They also bought medicine worth Kshs 1.7 billion, paid cleaning costs of Kshs 71M, Oxygen with 41M and paid Kshs 21 million to credit card companies
  • The Nairobi Hospital invested Kshs 2.1 billion in projects such as pharmacy, water storage, parking, nurses accommodation, roads, fencing, and kitchen improvements. They also hired a marketing agency to improve the image and awareness about services at the hospital and participated in news interviews, features, and social media.  
  • Some operational numbers for the hospital: They had 154,760 visits to accident & emergency centre, carried out 685,802 lab tests, handed out 354,296 prescriptions, and did 98,198 radiology procedures. They had 18,386 admissions, had 2,730 births (a 17% decline from the year before), and did 7,990 major operations and 1,975 minor ones. They also an occupancy level of 79%, which was down from 81% on their 299  beds, and they retained their customer satisfaction measure of 89%.  The relocation of their ICU / HDU units temporarily reduced capacity from 356 to 299 beds. 
  • On the finance side, they had cash and equivalents of Kshs 2.7 billion (down from 3.5 billion) but still a very healthy liquidity position. They also had Kshs 399 million at Imperial Bank and had Kshs 280 million of doubtful debts (up from 240 million), and Kshs 24 million in foreign exchange losses from currency fluctuations.  
  • The new Nairobi Hospital CEO wrote that his strategy would revolve around talent, technology, turnaround and territory (new location to enhance service). On the health industry, which contributes 6% to GDP, he wrote that income at the Kenya government’s National Hospital Insurance Fund (NHIF) had more than doubled to Kshs 28.5 billion in 2016 thanks to new rates levied on Kenyan workers and that there were 172,706 health personnel in Kenya in 2016.
Website of the Nairobi Hospital.  

Lipa Kama Tender


Lipa Kama Tender

This evening, Kenyan public sector nurses called off their strike after the government agreed to implement a collective bargaining agreement (CBA) deal. It’s been a painful week for patients around the country as nurses and doctors have been on strike at many public hospitals and medical facilities. Anyone who has spent time in a hospital realizes how much work the nurses do in terms of taking care of patients, alongside doctors – who themselves are still on strike, also awaiting the government to implement their CBA signed n 2013?.

The striking workers used the solidarity slogan “lipa kama tender” – Swahili for “pay (us) the way you pay (government) tenders” as a play on the widespread reports of the government paying out millions and billions of shillings of taxpayers and donor money in overpriced, corrupt, fraudulent tenders for supply of goods or services – some of which were for health-related equipment procurement, and which were flagged by an auditor who has since been removed from the sector.

Medical Investments in East Africa Redux

It’s been 5 years since reviewing the annual results of Nairobi hospital, and since then it’s almost doubled in size.
  • The hospital has revenue of Kshs Kshs 7.5 billion (~$75 million)  up from Kshs 6.9 billion in 2013.
  • It had a surplus of Kshs 1.58 billion (~15.8 million) up from 1 billion in 2013.
  • Assets were  Kshs 9 billion up from 7.5 billion in 2013
  • The hospital invested Kshs 1.2 billion in the last year, including 621 million on building, and 547 million on equipment.
  • Their doctor efficiency target is 4 patients per hour per doctor, an improvement from the current 17 minutes (it’s also 21 minutes per patient with ambulance cases)
  • Other revenue sources were the pharmacy with sales of Kshs 2.15b from 327,000 prescriptions and the laboratory which did 630,000 lab tests generating 1.2 billion. It also made 1.1 billion from bed fees.  They had 277 beds available (up from 269 the year before) and admitted 17,558 patients
  • They spent 1.5 billion on medicine, and 1.2 billion on staff towards a total of 4.4 billion in direct expenses. 

Medical Investments in East Africa – Part II

Rising Prices: In November last year, AAR Health sent a casual letter announcing some new medical insurance services they would be offering such as extending the membership age to 80 years, free basic health checks on appointment, out of country cover extended to 90 days, psychiatric benefit increase, a 24 hour help line, and ATM (forced) robbery compensation.

Ambulance in Lamu (picture courtesy of @azthedance)

Their CEO also noted that in the last three years there has been a consistent increase in costs of drugs, medical equipment, hospital charges, and doctor’s fees that after an actuarial review they would marginally adjust the premiums
on an age-band basis is.

However the sticker shock came, this month with a renewal notice letter that was 67% more than last year – shocking given that there were no claims. It has not been clear what caused this and various from AAR include, doctors fees have gone up, the enhanced payments will go towards the new services, the company was hit by several claims last year, they have to pay for their own clinics & ambulances unlike other insurers etc.

But a rival CEO on twitter wrote that increases should not be more than 25% a year, and this is borne out by Government and other insurers statistics that indicate changes & inflation in the sector are about 20% per year.

Money going in to healthcare: A previous post touched on the finances and the Nairobi Hospital surplus and how their financial picture is much healthier some of than its patients.

The medical sector has also attracted a some recent investments including:

– A few days prior to the AAR November letter, a Dutch company – Investment Fund for Health in Africa (IFHA) took up a 20% stake in AAR at a cost of Kshs. 750 million (then about $10 million). From media reports on the deal, IFHA will over the next two years increase its stake to 60% and exit by way of an IPO at the Nairobi Stock Exchange in about 5 years

– TBL Mirror Fund has an investment in Meridian Medical Centres

– In January this year, Resolution Health which had 2010 revenue of Kshs 1.12 billion and income of Kshs. 208 million sold a 25% stake in the company to a German private equity fund Africa Development Corporation (ADC), for KES184m. Resolution, which has 42,000 members, is also eying a stock exchange listing.

– In this week’s East African is a story of a new Aureos Health Fund that is being set up.

Medical Investments in East Africa

Reading the Nairobi Hospital tea leaves

Had a mini-debate (with @matrixster) about the potential returns of investing with AAR or another medical sector firm in Kenya (if it is well run). Kenya and the region’s population has been steadily growing (good or bad thing?) and with more people accessing formal medical care would that not be a growth opportunity? While it is tough to get a true picture of the many private firms that operate in the sector, there has been quite a bit of banking and VC interest, with some local venture capital firms specifically seeking out medical investees.

Kenya’s premier hospital, Nairobi Hospital, which is owned by an association of members, also has its results out for 2009. It is considered a hospital for the middle and upper class in Kenya and the region. But, you can also get admitted to Nairobi Hospital if you observe the Underwear Rule (hilariously illustrated here by Kuweni Serious)

Anyway, while I was in Nairobi Hospital, which is not a bad place to stay and recupearate, I had these illustrative numbers to ponder from their annual report.

– Turnover of Kshs 3.98 billion ($50 million) up from 3.3 billion in 2008
– A surplus of 832 million ($10.5 million) up from 564 million the year before
– Some income items: Medicine sales of 1.194 billion, inpatient bed income of 809m, radiology 400m, lab income of 628m, theatre/HDU/ICU income of 300 million, student fee income of 33m, and finance income of 47m.
– Some expense items: staff costs of over 1 billion, bought medicine costing 894m, cleaning costs of 70m, oxygen 16m, and financial costs of 22m (with 11m paid to credit card companies)
– Some operational numbers for the hospital: They had 106,242 visits to the accident & emergency centre, carried out 427,725 lab tests, handed out 269,302 prescriptions, and did 93,755 radiology procedures. They also have an occupancy level of 80%, up from 77% on their 272 beds, and had a slightly improved customer satisfaction measure of 79.1%

They promote their service locally and abroad; Since, in Nairobi, there are firms who advertise for medical procedures to be performed in India, the Nairobi hospital also competes for the same customers; last year they continued a medical tourism program that targeted 8 African counties and their teams made visits to DRC and Uganda, which may have contributed to their 50% increase in the number of foreign patients. Domestically, they participated in 16 expos and 36 corporate sessions, had open days (kidney, cardiology) and sponsored programs on Radio Waumini, and K24 TV.