Pain of treatment deepens with rise in medical fees

Kenya’s top hospitals have increased their charges by up to 40 per cent in the past four months, placing medical costs among the key drivers of the country’s runaway inflation, which touched the 15.53 per cent mark last month.

Kenyatta National Hospital (KNH), Gertrude’s Children Hospital, Mater Hospital and Karen Hospital are some of the health providers that have increased their bed and consultation charges in the past four months, citing the rising cost of operations.

The increments add medical services to the high cost of food, fuel and a weak shilling that have been the main drivers of the steep rise in the cost of living since January when inflation stood at 5.42 per cent. Besides the possibility of locking out low income earners from accessing qualify medical care, the increase in medical charges is expected to take a huge chunk of expenditure from the top and middle class families, cutting back their power in the consumer goods market.

The steep rise in the cost of medical services is also piling pressure on insurance premiums with demands that consumers pay more to access services they have been enjoying at lower prices.

“We are being hit by costs of diagnostic procedures and medicines that have increased by 40 per cent and 30 per cent respectively,” said Mr Peter Nduati, the chief executive of Resolution Health East Africa, a medical insurer.

“Medical insurance premiums are bound to go up on renewal and we in the mean time expect very high loss ratios for insurers.

Insurers say the cost of health premiums could rise by up to 22 per cent in step with the pace at which the cost of medical services is rising.
Hospitals blame the rising medical bills on runaway inflation, expensive labour and a weak shilling that has lost nearly 20 per cent of its value against the dollar.

Reduced dollar inflows amid rising demand for foreign currencies to purchase goods such as oil, metal and machinery has seen the shilling sink to new lows against major currencies, including the yen and euro.

The shilling is currently trading at Sh94 to the dollar compared to Sh78 at the start of the year, and currency dealers reckon that it would continue to remain weak.

A weak shilling automatically increases the cost of imported medicine and medical equipment that is ultimately passed on to consumers. Kenya imports 60 per cent of its medicines and 90 per cent of medical equipment.

Staff costs, including doctors’ fees, have also increased in recent months as specialised human talent becomes the most sought-after resource and an arsenal for marketshare growth.

“We had not reviewed our costs since 1999. This review is because of the rising cost of inputs like manpower costs, rising electricity costs among others that are affecting all providers,” said Mr Michael Kihuga, the finance manager at Kenyatta National Hospital.

“It is, however, unlikely to come down in the future.”

Hospitals are looking at the outpatient consultation fees and bed charges to recover the additional expenses – explaining the rise in outpatient fees by the highest margins. For instance, consultation fees at Kenyatta National Hospital (private wing) rose to Sh1,000 from Sh450 in May, while Aga Khan now charges Sh1,300 from Sh1,200.

Early this month, Mater Hospital reviewed its consultation charges fixing it at Sh1, 100 from Sh1, 000 while Karen Hospital is now Sh1,000 from Sh800. At Gertrude’s Hospital, bed charges are up by Sh500 to Sh5,250 per day while Kenyatta National Hospital now charges to Sh3,000 per day from Sh1, 950 on the private wing.

Bed charges at KNH’s public wing have also increased from Sh450 per day to Sh800 as Aga Khan University Hospital raised its inpatient charges by between eight and 12 per cent.

It has recently been argued that the steep rise in the cost of hospitalisation is mainly linked to the aggressive expansion plans the institutions are pursuing as they spread their footprint across the country. All major hospitals have expanded to major towns and within the city suburbs as they seek to shore up revenues.

Drug makers have also reviewed their rates to reflect the weakening shilling, says the Managing Director of Bayer East Africa, Mr Frans Labuschargne, a German supplier of drugs to local hospitals.

“We reviewed upwards the prices of drugs by seven per cent last month to cover for the weak Kenyan currency,” said Mr Labuschargne.
Healthcare costs monitoring done by Aon Kenya indicate that costs have gone up by 40 per cent this year, eating deeper into household budgets and threatening profit margins of employers with self-funded group medical insurance schemes.

Outpatient and inpatient costs have increased by between 10 per cent and 40 per cent respectively since January this year with costs expected to go higher because of the weakening shilling.

In the past couple of years, the rising cost of medical services has been piling pressure on insurance premiums, forcing consumers to pay more for access to services they have been enjoying at lower prices.

Insurers say the cost of health premiums could rise by up to 22 per cent in step with the pace at which the cost of medical services is rising.
A steep rise in the cost of medical insurance is becoming painful for corporate Kenya, which must find money to pay for the new premiums at a time when they are under pressure to cut costs.

Employees of small businesses whose healthcare allowances are capped at a very low level will bear the harshest brunt. “Our health insurance allowance is only Sh15,000. Employees will have to pay for this extra cost,” said Mr Shamji Patel, managing director at Kenwesfal, a cables manufacturer.

This means more Kenyans are being left out of the medical insurance bracket as the policies cost higher at a time when insurers are pitching for more clients to increase revenue from one of the worst performing classes of insurance business.
Of the 16 medical insurance providers in Kenya, only five made an underwriting profit in 2009 with overall underwriting loss of Sh235.8 million, said Association of Kenya Insurers.

“Insurance companies are being forced to revise their premiums upwards at the end of every policy period to absorb the new price increase,” said Mr Faizer Devji, product development manager at Aon Minet Insurance Brokers.

Insurance companies said that hospitals have affected large increases, which have forced them to bear the immediate costs and wait to review their costs until the contract with their clients expires at the end of the policy period.

“We have to bear the high costs initially but we adjust the premiums at the end of every policy period,” said Mr Ashok Shah, managing director at APA Insurance.