National Health Insurance Fund Financing and Financial Sustainability of National Referral Hospitals in Kenya

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Biruri, David
Kimutai, Caroline
Mutwiri, Nathan Mwenda
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In the backdrop of the rising global burden of diseases, global economic uncertainties, demographic transitions, pandemics and dysfunctional public healthcare system; most National Referral Hospitals in Kenya are struggling to remain afloat. They are highly characterized by diminishing sources of funding coupled with declining hospitals’ net margins and financial reserves. Their preexisting financial vulnerability was exposed during the coronavirus pandemic, which almost pushed the entire public healthcare system into a near collapse. Most of them were in dire need of government emergency bailouts to meet their short-term financial needs. This was exacerbated by delays in hospital reimbursements and diminishing NHIF annual premiums; due to sporadic monthly premiums, misalliance in NHIF capitation tariffs and incessant pull-outs of key NHIF members such as the National Police Service and Kenya Prison Service. This has starved private and public healthcare organizations destabilizing their operations, healthcare financing mix and raising concerns about its impact on financial sustainability of public healthcare organizations offering secondary and tertiary healthcare. It is on this ground that this study strived to investigate the statistical relationship between National Health Insurance Fund financing and financial sustainability of National Teaching and Referral Hospitals in Kenya. The study hinged on the theory of resource dependency and demand for healthcare. It adopted an explanatory research design and a census sampling technique to sample all National Teaching and Referral Hospitals for the period 2019-2021. A generalized least square with random effects was utilized to assess the relationship between National Health Insurance Fund financing and financial sustainability of these hospitals. The panel data was analysed quantitatively using both descriptive and inferential statistics with the aid of Eviews data analysis software. The results from the inquiry indicated that National Health Insurance Fund financing had a positive and significant relationship with financial sustainability. To alleviate healthcare financing disequilibrium and its subsequent impact on financial sustainability of National Referral Hospitals, the study proposed a review and realignment of the current healthcare financing policies, laws, and reforms. The study recommends the establishment of a robust and optimal National Health Insurance Policy and the adoption of innovative sources of financing public healthcare, such as the use of social impact bonds to finance various health programs with severe social impacts like lifestyle diseases. However, more research on social impact bonds is required.
Healthcare Financing, NHIF, National Health Insurance Reform, Innovative Sources of Healthcare Financing, Social Impact Bonds, Financial Sustainability
Biruri, D., Kimutai, C., Mutwiri, N. M. (2023). National health insurance fund financing and financial sustainability of national referral hospitals in Kenya. International Academic Journal of Economics and Finance, 3(10), 251-266.