Revenue collection from local health facilities in Kenya surged to Sh18 billion in the financial year ending June 2024, tripling from Sh6 billion in the previous year. This significant increase, revealed in a Parliamentary Budget Office (PBO) report, is attributed to policy changes that have allowed county governments to collect and reinvest funds directly into healthcare services.
The introduction of the Facilities Improvement Fund (FIF) under the Facilities Improvement Financing Act, 2023, has played a pivotal role in enhancing county revenue collection. The FIF allows counties to collect funds from primary healthcare centres and reinvest them to improve service delivery. This initiative aligns with President William Ruto’s broader healthcare reforms aimed at achieving Universal Health Coverage (UHC).
According to the PBO report, the operationalisation of FIF has been highly successful, demonstrating the financial potential of devolved health services when supported by the right policies and incentives. The collected Sh18 billion now accounts for 30 per cent of counties’ total own-source revenue (OSR), marking a substantial financial shift.
The boost in healthcare revenue has contributed significantly to the overall OSR collected by counties, which reached a record Sh58.95 billion in the same period. This marks a 55 per cent increase from Sh37.81 billion in the previous financial year. However, despite this growth, the revenue collection still falls 27 per cent short of the annual target of Sh80.94 billion.
This shortfall highlights the ongoing financial challenges that counties face in meeting revenue targets, despite improvements in health sector collections. Nonetheless, the increased funding from health facilities signals progress in local revenue mobilisation and the potential for greater financial independence for county governments.
The FIF framework not only enhances healthcare financing but also ensures that funds collected remain within health facilities, preventing county treasuries from reclaiming unspent funds. This measure is designed to strengthen local healthcare infrastructure, ensuring that funds are reinvested in improving service delivery, purchasing medical equipment, and hiring healthcare workers.
Additionally, primary healthcare facilities, especially in rural areas, stand to benefit the most from these reforms. The continued reinvestment of funds will help bridge the healthcare gap between urban and rural communities, a key challenge in achieving UHC in Kenya.
Despite the success of FIF, the PBO report recommends additional financial support to enhance its impact. One key suggestion is that at least 40 per cent of the funds from the Sports, Arts, and Social Development Fund (SASDF) should be redirected to FIF to support its expansion.
Furthermore, the Social Health Authority (SHA) has been urged to ensure that claims, particularly for primary healthcare facilities, are settled within 90 days. Timely payments are essential for sustaining efficient operations and avoiding service disruptions in healthcare facilities.
The surge in healthcare revenue collection marks a positive step in strengthening Kenya’s devolved healthcare system. However, to sustain and enhance these gains, the government must address remaining financial gaps, improve fund management, and ensure continued reinvestment in local health facilities.
With the right policies and financial support, the Facilities Improvement Fund can drive long-term improvements in health service delivery, bringing Kenya closer to achieving Universal Health Coverage.
