NAIROBI, Kenya — The Controller of Budget (CoB) Margaret Nyakang’o has cautioned county governments against their growing reliance on hospital charges to fund local operations, warning that the practice exposes devolved units to serious financial risks.
In her report for the financial year ending June 30, 2025, Nyakang’o revealed that some counties derive more than 80 per cent of their own-source revenue (OSR) from health facilities, mostly from patients paying out of pocket.
“Overreliance on the facility improvement fund, which accounted for over half of OSR in many counties, poses a risk to financial sustainability.
County governments should develop realistic strategies to expand their revenue and reduce reliance on hospital fees,” Nyakang’o said.
According to the report, counties raised Sh67.3 billion in local revenue during the year, missing their target by Sh20.37 billion.
The shortfall was cushioned by Sh25.29 billion generated through the Facility Improvement Fund (FIF), which channels hospital collections back into health facilities. Overall, hospital fees accounted for 37 per cent of all county OSR.
Heavy reliance in smaller counties
Counties such as Nyamira, Garissa, and Homa Bay were singled out for depending on hospital revenues for more than 70 per cent of their income.
Nyamira collected Sh606.6 million from hospital fees, compared to just Sh134.5 million from all other sources combined.
Garissa generated Sh478.9 million in total revenue, of which Sh384.2 million came from hospital fees — the majority being direct payments by patients rather than reimbursements from the national health insurance scheme.
Similarly, Homa Bay collected Sh1.1 billion from hospitals out of a total Sh1.49 billion.
Other devolved units, including Kitui, Kakamega, Kericho, Kisumu, Laikipia, and Turkana, were also flagged for similar trends, with only a fraction of hospital costs reimbursed through insurance claims.
Fiscal risks
The report stressed that FIF resources are meant to enhance service delivery in hospitals, not to plug gaps in broader county budgets.
Dependence on them, Nyakang’o warned, could destabilize county finances if patient numbers fall or reimbursements delay.
Diversified models offer lessons
By contrast, counties like Nairobi, Mombasa, Isiolo, Uasin Gishu, Narok, Tana River, and Samburu demonstrated more diversified income streams.
For instance, Nairobi collected Sh13.5 billion in OSR, of which hospital fees made up Sh1.7 billion. Mombasa raised Sh5.13 billion, with less than a fifth coming from health facilities.
In these counties, business permits, land rates, park fees, and other charges formed the backbone of local revenue, offering what Nyakang’o described as “more sustainable financing models.”
The CoB urged counties to broaden their revenue bases by enforcing property rates, scaling up business permit collections, automating systems, and exploring innovative financing options.
“Strengthening alternative income streams will reduce dependence on hospital collections, ensure predictable funding, and safeguard the financial health of devolved units,” Nyakang’o said.
