Auditor General exposes Sh678m losses at KNH over NHIF, Linda Mama contracts
The audit showed that Sh459.2 million in losses arose from NHIF while Sh219.2 million was linked to Linda Mama.
Auditor General Nancy Gathungu has exposed losses amounting to Sh678.4 million at Kenyatta National Hospital (KNH), pointing to underfunded service contracts with the defunct National Health Insurance Fund (NHIF) and the Linda Mama programme that continue to leave the referral hospital carrying huge financial deficits.
In her report for the financial year ending June 2024, Gathungu said KNH had been forced to absorb costs as reimbursements under the two schemes remained far below the actual expenses incurred in patient care.
The audit showed that Sh459.2 million in losses arose from NHIF while Sh219.2 million was linked to Linda Mama.
The NHIF-related losses rose by 17 per cent from Sh379.1 million in the previous year.
Gathungu noted that although KNH had engaged NHIF and the Ministry of Health between 2016 and 2022 to review the contracts, a renegotiated deal effective July 2022, while expanding the range of claimable services, still left the hospital with an annual shortfall of Sh459.2 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,” reads the report.
For the Linda Mama programme, the audit indicated that losses rose by Sh29 million, or 13 per cent, up from Sh190.1 million in the previous year. Gathungu explained that the government reimburses KNH Sh17,500 per delivery, even when mothers and newborns require critical or neonatal care costing more than Sh100,000.
Although the package was revised in July 2017 to allow KNH to claim Sh4,000 per day in addition to the Sh17,500 when complications occur, the audit showed that the review remained inadequate, leaving accumulated losses of Sh21.9 million in the year under review.
“In the circumstances, the hospital continues to bear the losses arising from free maternity programmes unless the tariffs are reviewed upwards,” Gathungu warned.
The report also highlighted concerns with delayed or incomplete capital projects. Among them is the Paediatrics’ Emergency and Burns Management Centre, initially contracted at Sh2.99 billion, whose cost has risen to Sh3.4 billion—an increase of Sh435 million or 15 per cent—largely due to interest on delayed claims.
The project was partly financed by a Sh1.2 billion concessional loan from development partners and Sh1.7 billion from the Kenyan government, with completion expected in August 2020.
However, the loan extension lapsed on July 31, 2024, with no proof of further 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 stated.
Another stalled project flagged by the audit is the Medical Oxygen Generating Plant, budgeted at Sh365.7 million. Launched in May 2022 and set for completion by November the same year, it remained unfinished by December 2024, more than two years late.
The Auditor General also pointed out that there was no evidence of extension of the advance payment guarantee and performance bond for the oxygen project, which expired on October 13, 2023.
She noted this contravened the Public Procurement and Asset Disposal Act, which demands strict supervision of specialised contracts to ensure contractors deliver as agreed.
