Personal Finance

How private investors can resuscitate healthcare sector

Private investments could help ease the pressure in public hospitals and increase number of doctors.
Private investments could help ease the pressure in public hospitals and increase number of doctors. 

Five years ago I met a Stanford-trained financier who introduced me to the concept of “social entrepreneurship”. According to him a “social entrepreneur” is a person who invests his capital ‘time or money” e.t.c. in a venture whose aim is to transform or address an issue challenging a society. In Kenya, we need social entrepreneurs to invest in rural public healthcare sector.

Though blurry at the time, I find the concept much needed now especially with the ailing public health sector.

Currently, our healthcare system is overstretched mainly because the meagre resources allocated to it (less than the 15 per cent pledged at the Abuja Convention) cannot cater for our ballooning population.

Of this little amount, we are forced to channel a great percentage to address primary health issues such as influenza, leaving little to life-threatening ailments like cancer, renal diseases which are on the rise and killing thousands of Kenyans.

Despite the rising number of sick people needing specialised treatment, Kenya only has two referral hospitals, two radiotherapy units for a population of 39 million people. There are a handful of renal units, few MRI/CT scans centres and so on. Because of this shortage, patients are forced to travel long distances, incur extra costs in terms of accommodation and many other inconveniences and pay high prices to receive specialised treatment.

In Kenyatta National Hospital, for example, cancer patients awaiting radiotherapy often have to wait six months and if the machines break down, one is forced to seek alternatives in private hospital which is costly or if they have no money the long wait complicates issues leading to early death.

We need at least six more machines to address this issue. The same services in the private sector costs about 20 times more. An almost similar scenario exists for dialysis patients.

Private investments could help ease the pressure in public hospitals. If we can raise Sh21 billion in 14 days (money raised in a previous bond issue), how much harder would it be to raise Sh150 million, money for a radiotherapy unit, if both investments had similar returns?

From a business perspective, if demand for a service exists and clients can afford it while the supply is still inadequate; then there must be constraining reasons. However, the government regulations may partly be the reason to blame. Given the right incentives and investment environment, the private sector or individuals can play a bigger role in public healthcare financing while at the same time earning good returns from their investments. In the above example what would prevent investors from setting up such a facility and charge say half of what the private sector charges?

Best option

So what modes of engagement (donations, public private partnerships (PPPs) or build operate transfer (BOT) models)?

Donations as often happens are characterised by “chronic-donor fatigue syndrome” which is increasing in both individuals and corporates due to perennial donations requests. Once the donor exits, the facilities are unable to sustain themselves.

The PPP model is good because as semi-autonomous units, they are subjected to different operational standards thus guaranteeing longevity. In the PPP model, contributors to the project or members of their family can access the services at subsidised rates while others pay slightly higher rates. In addition any extra revenue is paid out as dividends amongst the financiers. Medical insurance companies may find this model very attractive. It also saves hospitals money that could have been spent on these expensive projects.

But PPPs are not new in government institutions so why should hospitals not do the same? The BOT model is fraught with the risk of losing the original aim in the quest of recouping the invested amounts. The social entrepreneur will set up the facility, operate it and once they have recouped their set-up cost, transfer it to the hospital.

Omete is a medical doctor.
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