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.

6 thoughts on “Medical Investments in East Africa

  1. alextheafrican

    “…the Nairobi hospital also competes for the same customers…”

    I’d hate to be thought of as a ‘customer’ when I’m in need of medical attention 🙂

    Nice peek into the health ‘business’ though.

  2. PKW

    alextheafrican:OK, we would call you a healthcare consumer.
    Banks: am not crazy about AAR as a consumer, but would invest if I had the $ because they have very little competition in the region. A lot of insurance companies that have health products apparently complain a lot about fraud, so I think AAR overcomes that by providing both the insurance and healthcare.

    A lot of experts go to Nairobi for medical care, so I think it’s a good sector.

  3. bankelele

    alextheafrican: patients are customers, same way bodies are to a funeral home. anyway they have a robust system that is able to generate so much data – if you’ve ever been a patient there and got a very long (itemized) bill, you’d see that
    – next peek is the church

    PKW: true about fraud which has plauged the local medical scene, but there are more safeguards now – both good (fixed pricing, pre-approval of some treatment) and bad (delayed treatment, many ins. companies wont accept individual members, just groups like corporates)

  4. Anonymous

    No mention about the competition from India, which is now being seen as both a cheaper and more competent location in which to receive medical services.

  5. Anonymous

    No mention about the competition from India, which is now being seen as both a cheaper and more competent location in which to receive medical services.

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