Broker jolts hospitals with new pricing index

Source: Business daily
Posted Thursday, November 24 2011
A new medical inflation index that will influence patients and insurers’ choices has been released, sparking off debate on the cost of health care services in Kenya’s top private hospitals.The annual ranking developed by AON, an insurance and pensions consulting firm, seeks to classify top private hospitals based on how expensive they are in terms of average length of stay and billings.

“Length of stay is a measure of the outcome of a medical process. The less the patient stays in a hospital means one is receiving higher value for money,” said Dr Peter Kamunyo, the head of Healthcare Division at AON.

In the first survey of its kind covering one year to September 2011, doctors at Nairobi Women’s Hospital recommended discharge of patients after the shortest span of 3.2 days followed by The Karen Hospital at 3.65 days, Mater Hospital at 3.72 days, Aga Khan Hospital at 4.02 and the Nairobi Hospital for 4.1 days.

Average total inpatient bill— meaning total cost incurred by patients divided by the number of patients —for the one year was lowest at the Nairobi Women’s Hospital at Sh72,843 followed by Mater Hospital (Sh82,174), Aga Khan Hospital (Sh102,976), Nairobi Hospital (Sh108,054) and The Karen Hospital at Sh146,789.

The measure has come under sharp criticism from some players who say it ignores the nature of ailments
handled and the level of specialisation needed.

“AON mostly gives us Members of Parliament and ministers who occupy most executive wings. The index is based on their costs and may therefore give an impression that we are expensive when our general charges are very competitive,” said Dr Dan Gikonyo, the founder of the Karen Hospital.

Dr Gikonyo said the hospital charges consultation fee of Sh1,000 at its Nairobi centre and Sh200 in its regional branches. A general ward bed rate index indicates Karen Hospital is the third cheapest at Sh5,580 per day, compared to Nairobi Hospital at Sh6,820 and the Aga Khan Hospital at Sh6,960.

Mater and Nairobi Women’s Hospital were Sh5,200 and Sh2,700 respectively. The charges include the Sh1,900 per night paid for patients by the National Hospital Insurance Fund and discounts given to health insurance brokers.

AON Kenya said it had developed the index, which includes comparable data on outpatient services for three years ending September 2011, for its internal use—such as negotiating with the hospitals —and to help the sector improve its pricing index. “This is the first attempt being made to measure the cost of medical care.

The country needs more medical care data to develop an improved pricing index,” said Dr Kamunyo.

The index also ranked hospitals on the average bed rate—the total cost of boarding divided by total days of hospital stay —days they stayed at the hospital. On this measure, Karen had an average rate of Sh15,298 followed by Nairobi (Sh8,672), Aga Khan (Sh6,960), Mater Sh5,709 and Nairobi Women’s Sh3,500.

“If one was to do an average then it would have to be according to the type of accommodation that the patient was entitled to,” a medical practitioner who is not authorised to speak on behalf of one hospital said.

While admitting the claims received from some hospitals may have been for patients using more expensive rooms, AON said the data was factual because it included the average number of days patients spent in hospitals. “The challenge is to continue data collection so that the index will be more representative of the reality on the ground,” said Dr Kamunyi. Dr Sam Thenya, the Group CEO of the Nairobi Women’s Hospital, said the main drivers of medical costs include high rates for technical staff, imported medical supplies and energy.

“The solution lies in making imports predictable and affordable and ultimately manufacturing locally. We also need to pursue cheaper energy like wind, solar and geothermal more aggressively,” he said. The new data is expected to be used by patients and insurance companies to select preferred hospitals as both have been hit by the high cost of medical services.

For example last year, hospital inflation increased by 13 per cent, the cost of physician services increased by an average of 10 per cent.

Spending on prescription drugs spending rose by a 37 per cent, hitting directly most Kenyans, who pay out of pocket for hospitalisation because of the low penetration of medical insurance.

Insurers have been raising their costs by up to 20 per cent every year to cover for the increase in medical bills charged by healthcare providers, according to the Association of Kenya Insurers (AKI). Medical insurance companies made a loss of Sh529 million in 2010, from a loss of Sh235 million in 2009, according to AKI.

Some companies with employee schemes have as a result required that their employees co-pay for the scheme because of the rising premiums, further affecting the take home package for workers.

The inflation and pricing index comes at a time when most hospitals have established marketing departments to create and maintain business relationships with the public and insurance companies, partly because of increasing competition for patients.

In the recent past, hospitals like the Aga Khan and the Karen Hospital have been buying space in the media to educate clients on new services and investments. Aga Khan, for example, recently opened a Heart and Cancer Centre and rolled out a media campaign to inform thepublic.
The Karen Hospital also hosts a heart centre.

rotini@ke.nationmedia.com and smbogo@ke.nationmedia.com

A cancer patient receives treatment in hospital under the watchful eye of a doctor. A new medical inflation index that will influence patients and insurers’ choices has been released, sparking off debate on the cost of health care services in Kenya’s top private hospitals. Photo/FILE

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One Response to "Broker jolts hospitals with new pricing index"

  1. Administrator says:

    Where is MP Shah Hospital in the survey?

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