Healthcare boom draws private players to city, town estates
By Graham Kajilwa
| August 17th 2021
Private health facilities are on an expansion overdrive, cashing in on increased demand for healthcare in the country.
The expansion craze has extended to residential areas, especially in Nairobi and other major towns.
This phenomenon raises pertinent questions, key among them whether the government has abdicated its role as the primary healthcare provider and if the uptake of health insurance could be on the rise.
Penda Health is one such entity that has been expanding rapidly, going by the new number of outlets in the city.
The company opened its first clinic in November 2018 in the populous Umoja Estate in Nairobi followed by another one in Lang’ata the following October.
In September last year, the firm opened two other outlets in Transami, Embakasi, and Eastleigh Section III.
Director External Affairs at Penda Health Salome Mwaura says the expansion is in response to the rising need for quality healthcare through a patient-centred approach. “Most importantly, primary care can achieve the same outcomes at a lower cost compared to other settings of care. We often see this phenomenon at Penda Health.”
For example, if a patient comes in complaining of a headache, clinicians will examine for other serious conditions, such as meningitis, which could be behind the headache.
“In contrast, if patients go to a tertiary care centre for assessment of primary care problems, the cost (of care) will be higher,” said Ms Mwaura.
She further noted that the likelihood of using unnecessary high-cost diagnostics like Computerised Tomography (CT) scans in a tertiary facility is also high, and the patient may end up deteriorating by having to wait longer for treatment.
Equity Group has also diversified into the health sector with its Equity Afia clinic franchise, which was established in 2015 under the Equity Group Foundation’s (EGF) health pillar.
In May this year, Equity Afia opened five new medical centres in Nairobi’s South B, Ngong Road and Pangani as well as in Kitui and Juja in Kiambu County, bringing the franchise’s network to 41.
The firm said it is using the Hub and Spoke franchise model to increase access to medical services in both urban and rural areas.
“Incorporating technology in medical diagnosis will allow our clients to have additional choices in their health seeking behaviour. Equity Afia customers can now get secondary opinion from other trusted specialists in Kenya and across the globe,” said Equity Afia General Manager Health Gilbert Muriithi at the time.
Even private equity firms have invested in hospitals and pharmacies, for example, Leapfrog has invested in pharmacy chain Goodlife Pharmacy.
Capital venture funds have also sensed opportunities in the healthcare sector.
In 2013, Fanisi Capital, a fund management firm specialising in private equity investment, bought a controlling stake in drug retail chain Haltons Pharmacy for Sh262 million before offloading it to mPharma, a Ghana-based inventory management company, for a reported Sh500 million in 2019.
In 2016, LeapFrog Investments acquired a Sh2.2 billion majority stake in local pharmacy chain Goodlife Pharmacy from private equity firm Catalyst Principal Partners.
LeapFrog, which previously invested in the Kenyan healthcare sector through medical insurer Resolution, said at the time the deal was worth Sh2.2 billion.
The pharmacy retailer was at time estimated to serve 600,000 customers from 19 outlets across East Africa.
Catalyst had in 2014 alongside strategic partners Africa Chemist and Beauty acquired a controlling stake in Mimosa Pharmacy, which later rebranded to Goodlife Pharmacy.
Government figures confirm the surge in private health facilities. According to the Kenya Medical Practitioners and Dentists Council (KMPDC), the number of newly registered private facilities now stands at 8,147, almost double the number of public hospitals now at 4,707.
There are 1,263 registered faith-based facilities in the country.
“The numbers for application for registration vary from time to time,” said KMPDC Chief Executive Daniel Yumbya.
It is, however, important to note that the number of new private facilities is based on demand and supply of health services within a certain geographical area.”
According to Zamara Group Chief Executive Sundeep Raichura, the expansion of private health facilities can be linked to an increase in demand for healthcare, which has also seen an upward surge in health insurance uptake. He explained that going by the Insurance Regulatory Authority’s (IRA) fourth-quarter figures for last year, the total gross written premiums for non-life insurance was Sh130.8 billion, where health insurance contributed 34 per cent, translating into Sh44.9 billion revenue.
This is compared to 2019 when the medical class registered Sh42.4 billion worth of premiums, a growth of six per cent. “Insurance companies, and in this regard health insurers, rely on service provider networks such as hospitals, clinics and specialists to deepen insurance penetration,” said the boss of the financial services company that deals with insurance as well.
“There is definitely a direct correlation between uptake of health insurance and extensiveness of provider networks. However, the insurance penetration in the country is still very low being below three per cent,” he added.
While insurance uptake has gone up, Raichura noted that the cost of healthcare has not reduced.
“If anything, given the tough economic times the nation is going through, products and services are getting expensive including access to basic healthcare,” he said.
“There is definitely need to economically empower every Kenyan and sensitize them on the need to purchase health insurance as a risk management vehicle for health is wealth,” he says.
Despite the high cost associated with private healthcare service providers, many Kenyans seem to prefer them over public health facilities.
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