Around 40 counties in Kenya are increasingly relying on revenue from hospital fees to run their operations, a trend that exposes them to financial risks when patient inflows decline, according to the latest Controller of Budget (CoB) report.
The report covering the year ending June 30, 2025, shows that fees from hospitals—collected through out-of-pocket payments or claims reimbursement—make up more than half of local revenue in most counties.
Only a handful, including Isiolo, Nairobi, Mombasa, Uasin Gishu, Tana River, Samburu, and Narok, have diversified income sources beyond health facilities.
Counties raised Sh67.3 billion in own-source revenue (OSR) during the year, falling short of the target by Sh20.37 billion. Of this total, Sh25.29 billion, or 37 percent, came from the facility improvement fund (FIF), which channels hospital revenue back into health facilities.
In counties such as Bomet, Nyamira, and Homa Bay, the FIF accounted for over 70 percent of OSR.
“County governments should develop strategies to expand revenue and reduce reliance on the FIF,” CoB Margaret Nyakang’o warned.
Nyamira collected 81 percent of its total revenue, Sh606.6 million, from hospital fees. Garissa raised Sh384.15 million of Sh478.87 million from the same source, while Homa Bay generated Sh1.1 billion, representing 74 percent of its revenue.
Mombasa stood out as an exception, collecting Sh5.13 billion overall, with only Sh916.99 million coming from hospital fees.
The CoB cautioned that excessive dependence on hospital collections limits counties’ ability to invest in other essential sectors and leaves them vulnerable to fiscal shocks. While FIF funds support health facilities, they were not intended to finance broader county operations.
Counties such as Kitui, Kakamega, Kericho, Kirinyaga, Kisumu, Laikipia, Lamu, Kisii, West Pokot, Wajir, Nyandarua, Nyeri, Siaya, Tharaka Nithi, Taita Taveta, Turkana, Trans Nzoia, Vihiga, Marsabit, Meru, Migori, Murang’a, Kwale, Machakos, Makueni, Mandera, Nakuru, Nandi, Kilifi, Busia, Elgeyo Marakwet, Embu, Baringo, Bomet, Bungoma, Kajiado, and Kiambu showed a similar pattern, often collecting the bulk of hospital fees directly from patients rather than through health insurance reimbursements.
Conversely, counties such as Mombasa, Nairobi, Isiolo, Uasin Gishu, Narok, Tana River, and Samburu showed greater revenue diversification.
Nairobi, for example, raised Sh13.53 billion in total revenue, with only Sh1.73 billion from hospital fees.
These counties relied more on property rates, business permits, and park fees, demonstrating a more sustainable approach to financing local services.
Nyakang’o urged county administrations to strengthen other sources of revenue, including property rates, business permits, user fees, automated collection systems, and innovative financing strategies, to safeguard fiscal stability.