Counties lean on hospital fees to sustain operations as unpaid claims soar

Counties are increasingly depending on hospital fees to sustain operations, as delayed payments from the national health insurer threaten the financial stability of health facilities.

The latest report from Controller of Budget Margaret Nyakang’o highlights that the Facility Improvement Fund (FIF) has emerged as a key revenue source, surpassing targets and cushioning the devolved health sector.

“The collections received from FIF, totalling Sh24.59 billion, outperformed the annual target of Sh20.77 billion, achieving 118 per cent,” Nyakang’o states in the 2025 report.

FIF funds, gathered directly from payments for laboratory tests, pharmacy sales, and other services, are fully retained at the facility level and used to cover day-to-day expenses, capital projects, and management costs.

Nairobi earned Sh1.4 billion from hospital collections, despite not including the income in its budget plans. Governor Johnson Sakaja credited improvements in hospital management for the strong performance.

“We restructured the board membership and created the position of CEO above the medical superintendent,” he said.

“There has been exceptional transformation in Level V hospitals, with service delivery improving significantly.”

Several counties exceeded their annual revenue targets, with Kisii collecting Sh982 million (178 per cent), Mandera and Wajir at 123 per cent, and Kirinyaga nearly doubling its target by raising Sh431.52 million, achieving 122 per cent.

Other counties performing above expectations included Garissa at 120 per cent, Homa Bay at 101 per cent, and Meru at 106 per cent. Homa Bay alone collected Sh1 billion from health services, bringing its total own-source revenue to Sh1.5 billion.

Kiambu raised Sh1.8 billion, Kisumu Sh1.6 billion, and Nakuru Sh1.8 billion. Kakamega earned Sh894 million, Bungoma Sh663 million, Makueni Sh773 million, Nyeri Sh769 million, and Meru Sh758 million.

Despite the impressive collections, the report points to disparities in how counties manage this vital revenue stream, with many relying heavily on FIF to meet financial obligations.

The Controller of Budget warns that in numerous counties, hospital fees make up more than half of all local revenue, underscoring the sector’s growing role in financing county operations.

Nairobi’s health collections alone accounted for 66 per cent of its total revenue target, reflecting the extent to which counties depend on hospital charges to keep services running.

Other Topics To Read

• Health
• NHIF
• SHIF
• SHA
• Controller of Budget Margaret Nyakang'o
• Facility Improvement Fund
• Counties lean on hospital fees to sustain operations as unpaid claims soar
• Headlines