Kenyatta National Hospital (KNH) has recorded losses amounting to Ksh678.4 million linked to underfunded contracts with the defunct National Health Insurance Fund (NHIF) and the Linda Mama program, Auditor General Nancy Gathungu has revealed.
In her audit for the financial year ending June 2024, Gathungu said the hospital has continued absorbing deficits because reimbursements under both schemes remain far below the actual cost of care.
The report shows that NHIF accounted for the largest share of the shortfall at Ksh459.2 million, while Ksh219.2 million arose from the Linda Mama program.
Losses tied to NHIF grew by 17 per cent compared to Ksh379.1 million in the previous year, despite a renegotiated contract signed in July 2022. Although the new deal expanded the number of claimable services, KNH still recorded an annual loss of Ksh459.2 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,” Gathungu noted.
For Linda Mama, the audit found that losses rose by 13 per cent, climbing from Ksh190.1 million in the previous year to Ksh219.2 million. The government reimburses KNH Ksh17,500 per delivery even when patients require neonatal or critical care costing over Ksh100,000.
A 2017 revision allowed KNH to claim an additional Sh4,000 per day for complicated cases, but the audit concluded the package remained insufficient, leaving the hospital with annual losses of Ksh21.9 million.
“In the circumstances, the hospital continues to bear the losses arising from free maternity programs unless the tariffs are reviewed upwards,” Gathungu cautioned.
The Auditor General also raised red flags on stalled capital projects, including the Pediatrics’ Emergency and Burns Management Centre and the Medical Oxygen Generating Plant.
The pediatrics center, initially contracted at Ksh2.99 billion, has ballooned to Ksh3.4 billion, an increase of Ksh435 million or 15 per cent. Gathungu attributed this to delays in settling claims that attracted penalties and noted no evidence of negotiations to resolve the overruns.
The project, partly funded through a Ksh1.2 billion concessionary loan and Ksh1.7 billion from the Kenyan government, was to be completed by August 2020. However, the loan extension expired in July 2024 without signs of 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,” Gathungu said.
The Medical Oxygen Generating Plant also faced scrutiny. Budgeted at Ksh365.7 million, it was launched in May 2022 and scheduled for completion in November that year. By December 2024, the project remained incomplete over two years behind schedule.
The audit further revealed that the contractor’s advance payment guarantee and performance bond, which expired in October 2023, were never renewed. Gathungu warned this contravened the Public Procurement and Asset Disposal Act, which requires continuous oversight of specialized contracts to ensure delivery of critical infrastructure.
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