Health facilities now a top revenue source for counties

County governments have recorded a steep rise in revenue from hospitals, with earnings growing from Sh6 billion in the previous financial year to Sh18 billion in the year ending June 2024.

This is according to a report released by the Controller of Budget, which credits the increase to a new system that lets counties retain and reinvest funds collected from public health facilities.

The new arrangement began in July 2023, following the introduction of the Facilities Improvement Fund (FIF), which was made possible by the enactment of the Facilities Improvement Financing Act.

This allowed counties to keep the money collected from health centres and use it to improve the same facilities.

The report shows that county governments collected a total of Sh58.95 billion from their own sources during the period, which was 72.8% of the annual target of Sh80.94 billion.

Of this, hospital revenue accounted for Sh18 billion, representing nearly a third of the total amount collected locally.

"Out of the overall Sh58.95 billion collected as locally generated income in counties, Sh18 billion was collected from health facilities, which accounted for at least 30% of the total own source revenue," says the report.

The report notes that this was a big improvement from the Sh37.81 billion that was raised by counties in the financial year 2022/2023.

A large portion of the rise came from health facilities, indicating their growing role in local revenue collection.

Some of the highest contributors were Mombasa, which collected Sh1.12 billion from health facilities out of its Sh5.58 billion total own-source revenue, and Nairobi, which brought in Sh1.07 billion from hospitals out of its Sh12.54 billion total.

Nakuru raised Sh1.47 billion from health centres, and Kiambu collected Sh1.2 billion from the same.

Other counties also recorded strong returns: Homa Bay (Sh841.2 million), Bungoma (Sh681.4 million), Kisii (Sh683.2 million), Kisumu (Sh603.3 million), Kakamega (Sh546.6 million), and Kericho (Sh482.2 million), among others.

A report by the Parliamentary Budget Office also pointed to the FIF as the key factor in boosting revenue from hospitals, saying, "The operationalisation of the FIF has been very successful, with the counties collecting Sh18 billion in own source revenue from the health sector in the 2023/24 financial year, compared to Sh6 billion in the financial year 2022/23."

The changes are part of ongoing reforms to improve health services under President William Ruto’s Universal Health Coverage plan, and they now show how counties can make better use of their health resources.