Kenya is set to benefit from a new private sector-led initiative to increase the quality of healthcare in public hospitals and keep the cost of private medicare affordable to millions of low-income households. The project, hinged on a policy the Cabinet passed last year, will see Kenya benefit from the Sh22.8 billion that three private equity funds – the International Finance Corporation Fund, Investment Fund for Health in Africa and Africa Healthcare Fund – plan to invest in Africa’s health institutions.

The choice of Kenya as a participant in the pilot phase of the project comes barely a year after a government health financing taskforce crafted a public-private partnership financing model that the country has been selling to its development partners as the preferred long-term solution to the deplorable state of healthcare facilities.

The policy is hinged on the injection of private sector discipline in the management of public hospitals and the provision of subsidies to institutions that train health professionals and in the procurement of equipment and drugs.

“Financing the subsidy gap is good investment that will unlock the demand side obstacles to healthcare services in Africa,” said Prof Eyitayo Lambo, the International Management and Health Consultants CEO who once served as Nigeria’s Health minister.

Prof Lambo reckons that increased financing of health services must extend to provider networks, quality monitoring and education to encourage new enrolment.
Under the new scheme, the private equity funds will pump billions of shillings into start-ups or help to expand established institutions in return for stakes that gives them management control over the health facilities.

All the participating private equity funds are under instruction to set low return expectations for their investments. The plan should, for instance, see the International Finance Corporation Fund buy a controlling stake in Kenyatta National Hospital and use that leverage to take charge of its management to improve the quality of services offered.

It is expected that through management control, the private equity partners will exert positive influence in policy formulation, corporate governance and stop financial haemorrhage that has been the bane of health institutions in Africa.

Participation of private equity funds also offers the health institutions an avenue for raising additional low-cost capital for future developments.

Dr Heather Sherwin, one of the architects of the model and a fund manager with South African private equity fund, Bioventures, says the rationale is to pass on all the savings made in the process to patients in terms of low healthcare costs.

Successful implementation of the plan is expected to culminate in efficiently run public health institutions that can compete effectively against private healthcare providers and bring down costs.

In Kenya, this means that a number of private clinics, hospitals, diagnostic centres and laboratories that have been the preserve of those in the middle and high income groups could significantly lower their charges and become accessible to ordinary folk.