Gertrude’s invests Sh500m in new unit

Gertrude’s Hospital CEO Gordon Odundo. File

What you need to know:

  • Children’s hospital to start offering heart surgeries at Muthaiga branch.

Gertrude’s Children’s Hospital has become the latest healthcare institution to expand its capacity as service providers seek to tap into the growing middle class, with a Sh500 million investment.

The hospital has set up a new building at its Muthaiga branch that will expand its bed capacity from 83 to 103 and offer new services like heart surgeries and specialised burns treatment.

Its expansion follows Nairobi Hospital’s multi-million-shilling investment in a new cancer treatment unit last year and Aga Khan Hospital’s investment in a similar facility in 2011.

“The private sector is stepping in to meet the high demand for healthcare in the country,” said Gordon Odundo, the CEO of Gertrude’s.

“This investment enables us to offer new services, increase capacity, and acquire better equipment,” he said.

Dr Manu Chandaria, one of Kenya’s leading philanthropists, has donated Sh25 million to Gertrude’s to fund the project and has committed to disburse a total of Sh100 million to the hospital in the short-term.

The facility, named The Chandaria Medical Centre, is expected to be complete in March and offer services to the hospital’s target base of young patients in Kenya and the region.

Aggressive expansion of private hospitals has been linked to a rising spend on healthcare by the country’s middle class as government hospitals suffer from congestion and frequent strikes.

This has seen charitable trusts and private equity firms increase their investments in the healthcare market with a view to promote social welfare and earn returns.

Research firm Business Monitor International (BMI) says growth in Kenya’s healthcare sector is being driven by population growth and increased awareness of preventative healthcare.

The country is also recording rising incidents of illnesses such as malaria and diseases of the respiratory systems.

“In comparison to many other African markets ...  Kenya offers more commercial promise and a more stable overall business environment,” BMI said in a research note.

The research firm estimates that the local healthcare sector grew 14.1 per cent to Sh167.4 billion in 2011 compared to Sh146.7 billion the year before.

While several private hospitals are focused on breaking even rather than making profits, the rising demand from middle class households has seen them post surpluses.

Gertrude’s, for instance, recorded net surpluses of Sh56.8 million in the year ended July 2011 compared to Sh76.5 million the year before.

This came as its sales increased 21 per cent to Sh1.5 billion from Sh1.2 billion in the same period.

Private equity firms have taken note of the profitability in the sector, prompting them to buy into the institutions, a move that has raised fears of prioritising profit over social welfare.

Aureos Capital, for instance, invested Sh228 million in Revital Healthcare—a medical equipment manufacturer—last year and Sh226 million in Nairobi Women’s Hospital in 2010.

Rising incomes amid a higher disease burden have sparked the aggressive investments in private healthcare, with the country witnessing growth in specialised treatment.

Hospitals like Aga Khan and Nairobi have invested heavily in treatment of cancer whose incidence has risen in the past five years.

The increased investment in private healthcare is expected to raise competition and help slow down the annual double-digit increase in hospital bills and medical insurance premiums.

This year, more than six major private hospitals including Nairobi, Avenue Healthcare, and Guru Nanak have raised their charges by an average of 10 per cent, citing higher staff costs and electricity bills.

Medical insurers have said premiums will go up by up to 10 per cent following the increase in hospital charges, hitting companies and households with higher medical costs.

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