Counties are struggling to run hospitals as mounting debts from national health insurance schemes weigh them down, even though locally raised revenues from health facilities have exceeded targets.
The latest Controller of Budget report shows that hospitals collected Sh24.59 billion in Facility Improvement Financing (FIF), surpassing the annual forecast of Sh20.77 billion.
This money, drawn from charges such as outpatient fees, pharmacies, and laboratory services, has become the backbone of county health operations.
Despite this growth, counties remain exposed to huge arrears from both the former National Health Insurance Fund (NHIF) and the Social Health Authority (SHA). According to Controller of Budget Margaret Nyakango, the combined outstanding claims have climbed beyond Sh12 billion.
Nairobi is among the most affected, with Sh937 million pending from NHIF and another Sh301.6 million owed under the Social Health Insurance Fund (SHIF). Together, these unpaid claims push the county’s exposure to over Sh1.24 billion. Mombasa faces an even steeper debt load, with Sh562 million unpaid by NHIF and Sh763.9 million by SHA, totalling more than Sh1.3 billion.
Other counties grappling with heavy arrears include Nakuru, which has Sh885 million in unpaid SHIF claims, Homa Bay with Sh455.2 million, Kisumu with Sh334.2 million, Bungoma with Sh236.43 million, and Kilifi with Sh229.3 million.
While insurance arrears deepen, some devolved units have posted remarkable growth from FIF. Kisii’s hospitals collected Sh982 million, achieving 178 per cent of their target, while Kirinyaga more than doubled expectations by raising Sh431.52 million against a Sh218 million projection. Mandera and Wajir each achieved 123 per cent, while Garissa hit 120 per cent and Meru 106 per cent.
Homa Bay earned Sh1 billion from hospital services, pushing its overall revenue to Sh1.5 billion, while larger counties such as Kiambu, Kisumu and Nakuru each reported Sh1.8 billion in FIF collections. Kakamega, Bungoma, Makueni, Nyeri and Meru all generated between Sh663 million and Sh894 million.
In Nairobi, collections hit Sh1.4 billion despite FIF not being included in the county’s revenue estimates. Governor Johnson Sakaja attributed this to reforms in hospital leadership, saying new governance structures had improved service delivery in Level V facilities.
Nyakango cautioned that while FIF revenues are cushioning counties, overreliance on hospital charges is risky if insurance reimbursements continue to delay. She warned that some devolved units now depend on FIF for more than half their revenues, with Nairobi’s share reaching 66 per cent of its total target.
The report highlights a widening gap between services delivered and funds received. County hospitals provided treatment worth Sh19 billion through SHA but received only Sh12 billion in reimbursements, leaving a Sh7 billion deficit.
The Controller of Budget urged counties to ensure that FIF revenues are channelled into development priorities rather than being swallowed by recurrent spending, even as they press the national government to clear insurance arrears.
