Auditor General flags Sh678 million losses at KNH from NHIF, Linda Mama contracts
In her report for the financial year ending June 2024, Gathungu said the hospital was forced to continue bearing deficits as reimbursements under both schemes remained significantly below the cost of care.
Auditor General Nancy Gathungu has flagged losses totalling Sh678.4 million at Kenyatta National Hospital (KNH), citing underfunded contracts with the defunct National Health Insurance Fund (NHIF) and the Linda Mama programme that have left the facility absorbing huge costs.
In her report for the financial year ending June 2024, Gathungu said the hospital was forced to continue bearing deficits as reimbursements under both schemes remained significantly below the cost of care.
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The bulk of the losses, Sh459.2 million, arose from NHIF, while Sh219.2 million was linked to the Linda Mama programme.
The audit noted that NHIF-related losses had risen by 17 per cent compared to Sh379.1 million in the previous year. Gathungu noted that KNH had engaged NHIF and the Ministry of Health between 2016 and 2022 over the loss-making contracts, but a renegotiated agreement effective July 1, 2022, though expanding the number of claimable services, still left the hospital with an annual loss of Sh459.2 million.
“The NHIF loss arises where the medical cost incurred by a patient who is a contributor is greater than the rebate reimbursed by the fund, based on the existing medical services contract. In the circumstances, the hospital continues to bear the losses unless the NHIF reimbursable amounts are reviewed upwards,” reads the report.
For Linda Mama, the audit showed losses increased by Sh29 million, or 13 per cent, up from Sh190.1 million in the previous year. Gathungu observed that the government reimburses KNH Sh17,500 per delivery, even when patients require critical or neonatal care costing more than Sh100,000.
The package was revised in July 2017 to allow KNH to claim a normal rebate of Sh4,000 per day in addition to the Sh17,500 when complications arise. However, the report indicated that the review was still insufficient to cover overall costs, leaving accumulated losses of Sh21.9 million in the year under review.
“In the circumstances, the hospital continues to bear the losses arising from free maternity programmes unless the tariffs are reviewed upwards,” Gathungu warned.
Beyond service contracts, the Auditor General raised concerns over stalled or delayed capital projects, including the Paediatrics’ Emergency and Burns Management Centre and the Medical Oxygen Generating Plant.
According to Gathungu, the paediatrics centre, initially contracted at Sh2.99 billion, has seen costs balloon to Sh3.4 billion, an increase of Sh435 million, or 15 per cent, mainly due to delays in settling claims that attracted interest. The audit revealed no evidence of ongoing negotiations to resolve the cost escalation.
Funded partly through a Sh1.2 billion concessionary loan from development partners and Sh1.7 billion from the Kenyan government, the project was due for completion by August 20, 2020. However, Gathungu said the loan extension, granted up to July 31, 2024, has expired without evidence of further renewal.
“In the circumstances, value for money on amounts spent on the construction of the paediatric emergency and burns management centre could not be confirmed,” she said.
The Medical Oxygen Generating Plant, budgeted at Sh365.7 million, also raised audit concerns. Launched in May 2022 and scheduled for completion by November of that year, the project remained incomplete as of December 2024, over 24 months behind schedule.
The Auditor General further noted that there was no evidence that the contractor extended the advance payment guarantee and performance bond, which expired on October 13, 2023. This, she stressed, violated the Public Procurement and Asset Disposal Act, which requires strict monitoring of specialised procurement contracts to ensure contractors fulfil delivery obligations.
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