On October 20, Sunday Nation columnist Lukoye Atwoli criticised the Kenyatta National Hospital’s proposed private hospital ("KNH deal is a scam; thought you should know").
While making comparisons with the Managed Equipment Services, he delved into imaginary “exorbitant costs” vis-à-vis value and the lack of trained “experts and specialists”, wondering why we can’t use our taxes to expand and improve services at KNH.
It is true public hospitals ought to be funded by our taxes. But that would only apply if matters are taken entirely at face value.
As things stand now, more than 55 per cent of our tax revenues are spent on servicing public debt.
The other non-discretionary public expenditure such as salaries, wages, annual pension payments, among others, take upwards of 35 per cent of tax revenues.
A majority of these payments are obligatory, meaning they constitute a first-charge on the Consolidated Fund.
What this therefore means is that, in the best of times, hardly 10 per cent of our taxes end up financing development projects.
That is why a majority of capital projects are undertaken through grants and/or debts.
This situation is not unique to Kenya. For example, the debt to GDP ratio of the US is currently around 105 per cent while that of Japan stands at a whopping 250 per cent.
To suggest this is an “excuse to fleece the public with a project that appears all set to result in the loss of public resources” would perhaps underline the fact that most Kenyans are still not quite familiar with the Public Private Partnership model of project financing.
How would the public be “fleeced” when no single cent of public money is spent?
The proposed project will be fully funded by a private investor in compliance with the PPP Act (2013) and National PPP Regulations (2014).
KNH’s only contribution will be to give a small portion of its land. No public funds will be used to construct or run the facility.
The private investor will design, fund, construct, equip and thereafter operate the hospital for a pre-defined concession period.
During the concession period, the investor will share the revenue generated with KNH on a pre-determined ratio. The facility will revert to KNH at the end of the concession period.
The need for this facility has been confirmed through a comprehensive feasibility study, which has found the project to be viable.
Among them are: the changing disease profile which drive the need for specialised healthcare facilities, especially the exponential rise in non-communicable and lifestyle diseases, has increased the healthcare burden, piling pressure on the already strained budgetary allocations to facilities like KNH.
Inadequate annual tax revenues makes it impossible for Kenya to have adequate medical facilities.
Kenya currently has 3,494 beds at level six hospitals and a further 6,704 beds at level five facilities, making up 15 per cent of the required bed capacity.
From an analysis of the catchment area of the project, there is a significant deficit of 6,910 beds
Only heavy investment in healthcare can help bridge this gap. Already, KNH, the largest referral hospital in the region with a capacity of over 2,000 beds, has a private wing within the main hospital that serves market-fee paying patients.
This provides a source of additional revenue to support the other critical needs of the general hospital.
Owing to the ever increasing demand for specialised quality healthcare in Kenya and the region, upgrading and expanding KNH’s private healthcare service is a good move which will allow the space currently occupied by the private wing to be freed up to help decongest the wards and support KNH’s mandate.
The limited number of affordable specialised healthcare facilities has seen between 7,000 and 10,000 Kenyans seek specialised treatment abroad every year.
KNH’s position as the region’s apex medical institution will spur the growth of medical-tourism from neighbouring countries with the development of this new facility, hence additional revenues.
Where Atwoli gets the idea that “a public hospital wants to build a private hospital in order to make sufficient profits to run the public hospital” may stem from inability to distinguish between “revenue” and “profits”.
No public entity is ever run for profit, because that is not the business of Government.
But increased revenues alone is not the only benefit to be derived from this project.
With the same quality of care and services, if not better, KNH Prime Care Centre currently offers more competitive rates than those from similar facilities in the country, between 50 – 60 per cent lower.
As KNH, we believe ventures like these will set our country on the path to ensuring fewer of the citizenry have any need to travel abroad for specialised medical care.
Engineer Nicolas Gumbo, Board Chair, KNH
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