Hospitals hit patients with fresh rise in medical costs
A doctor attends to a patient. The cost of medical care in Kenya is set to go up after private hospitals said they would raise fees to cover higher labour costs. Photo/File
The cost of treatment in private hospitals is set to rise in coming months as the service providers struggle to match recent public sector wage increments that have eroded their ability to employ and retain top notch doctors.
The Kenya Private Health Providers Consortium (PHP), an association of private hospitals, says consumers should expect a 20 per cent increase in the cost of healthcare as the service providers move to raise the revenues they need to match doctors’ salaries in the public service.
Members of the association have been under pressure from the Medical Practitioners, Pharmacists and Dentists Union (KMPDU) to increase the salaries of health workers following their success in lobbying the government for pay similar increments early this year.
READ: Private hospital doctors demand salary raise Private hospitals say in a letter to the Association of Kenya Insurers (AKI) board that the pressure has left them with no option but to increase the cost of services by an average of 20 per cent to meet escalating labour costs.
Edwin Chokwe, who chairs PHP, said private hospitals expect labour costs to rise by 25 per cent with the award of new salaries and benefits to employees – a cost they can only bear by charging more for their services.
“In the face of myriad challenges resulting from escalating cost of services, private hospitals have no alternative but to raise prices,” says the letter.
A steep increase in the cost of medical services is in the short run expected to reverse inflation pressure that has been on a steady decline since February.
In the long term, higher medical costs that block a large number of citizens from accessing medical services runs contrary to the government’s stated goal of making healthcare affordable to all in line with the Constitution.
Health providers yesterday said the increases are inevitable because on-going demand for higher pay would take labour costs beyond the value of the hospitals’ output at current prices.
Private hospitals have been under pressure to increase their workers’ wages after the government awarded their counterparts in the public service higher pay early this year.
That pressure has seen some hospitals increase doctors’ pay by up to Sh60,000, laying the ground for an increase in the cost of services.
Top in the list of hospitals that have increased doctors’ salaries is the Nairobi West Hospital where doctors have earned Sh60,000 in the past two months.
Private health management firm AAR also increased its doctors’ gross pay by Sh45,000 in June while M P Shah has awarded its doctors a Sh50,000 pay rise.
Membership of PHP includes the Nairobi Hospital, Aga Khan University Hospital, Mater Hospital and the Kenya Association of Private Hospitals (KAPH) whose membership is made up medium-sized hospitals with a bed capacity of less than 100. PHP does not represent faith based hospitals.
Before the salary reviews, private hospital doctors earned a gross pay of between Sh105,000 and Sh150,000 a month depending on their status and experience, said KMPDU chairman Victor Ngani.
Interns who are the lowest ranking doctors and fall in group L of the public service pay scale earn Sh111,000, middle level professionals in job group M take home Sh136,000 a month while senior doctors in job group N take home Sh155,000.
All expect a Sh15,000 salary increment this month, taking them a spot ahead of their private sector counterparts.
At Getrude’s Children’s Hospital, an entry level doctor’s payslip for April 2012 seen by the Business Daily shows a basic pay of Sh105,000 a month lower than the Sh126,000 a month that interns will earn in public hospitals beginning this month.
Some private hospitals have already increased the cost of their services citing as reason the steep rise in the cost of labour.
Last month, the Aga Khan University Hospital (AKUH) said the June 1, 2012 increase in the cost of services at its Kisumu branch had been prompted by high cost of labour.
“Pressure to manage inflation continues and has been further compounded by recent increases in government staff pay and therefore the need to remain competitive,” Imran Yusuf, the director of finance and administration at AKUH said in a statement to insurers following the 7.4 per cent increase in the cost of services at the hospital’s Kisumu branch.
Healthcare costs have risen steadily this year defying the general decline in the prices of food, transport, electricity and fuel, according to the Kenya National Bureau of Statistics.
“The key driver of the month on month increase in medical costs is basically labour costs,” said Gordon Odundo, CEO of Getrude’s Children’s Hospital.
The hospital has barred its doctors from joining KMPDU on fears of coming under pressure to honour the union’s pay rise proposals.
An increase in the cost of medical services is also expected to deepen the losses of insurers who spend up to 83 per cent of premium revenues on claims.
“It will mean an increase in premiums, setting up the insurers for more losses than the Sh600 million loss that the industry returned in 2010,” said the AKI executive director Tom Gichuhi.
But he said that it is imprudent for hospitals to increase the cost of healthcare services on account of salary increases, since labour is only one item in the cost of running the business.
