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Private hospitals in financial mess

Expensive loans, unpaid medical insurance blamed

A botched medical insurance scheme and expensive bank loans have rendered a number of up market private hospitals broke.

Some of these health facilities have either scaled-down their operations, are contemplating shutting down, or shopping for investors to capitalise and resuscitate the businesses.
The first casualty is Paragon Hospital that closed its branch in Bukoto, a Kampala suburb, after only a few months in operation.
Officials of the Bugolobi-based hospital blamed non-payment of bills of insured clients. All the services are now offered at the main hospital in Bugolobi.
A source familiar with the hospital’s books of accounts told The Weekly Observer that Paragon had accumulated arrears with a leading health insurance firm, Microcare Insurance, in excess of Shs 500 million.
“Part of the reason why we expanded to Bukoto was to bring the services closer to our insured customers. But since March 2007, the insurance company has not remitted its fees. This has affected our services. We are behind schedule paying our staff, suppliers and meeting other recurrent costs,” the source said.
He added: “The majority of our customers at Bukoto were Microcare people but now that they have failed to meet the fees, we have had to relocate.”
The closure of Paragon Hospital in Bukoto comes at a time when another up market hospital, Bai Health and Medical International Centre (BHMIC), suspended in-patient services and remained open to only outpatients.
BHMIC, The Weekly Observer has been told, has also put up its equipment for sale and has contacted other private hospitals such as Kadic Hospital, Case Medical Centre, Victoria Medical Centre to purchase them.
BHMIC administrators declined to comment when this reporter approached them for three days.

Debt trap

The Weekly Observer has learnt that a number of private health centres wallow in debt, some of them resulting from heavy borrowing forced on them after insurance firms delayed to settle medical bills.
Recently, Kadic Hospital dragged Microcare to the Commercial Court for failure to pay Shs 150 million, accumulated over three years. Microcare has since paid Shs 60 million and is left with a balance of Shs 90 million.
The insurance company also owes Rubaga Hospital Shs 240 million and Mulago Hospital private wing has arrears in millions of shillings too. Abii Clinic, Victoria Medical Centre and Friecca Pharmacy in Wandegeya suspended their services with the company over unpaid bills.
Microcare however denies the accusation.
“The allegations and insinuations that Paragon’s financial difficulties are as a result of non payment by Microcare are not true,” said Lucas Festus Greyling, Director of Microcare in a statement sent to The Weekly Observer.
He in turn accused the hospital of poor service.
“We have received several sustained complaints from our insured clients that they have on occasions been required to pay cash for services rendered at Paragon Hospital in disregard of their insured status, some patients being ‘detained’ at the hospital pending payment, waiting for long hours before seeing a particular doctor, lack of nursing care, etc. We wish to advise that we can no longer recommend Paragon Hospital to our clients as we have lost confidence in the professionalism and quality of services provided by this hospital,” he said.
However, Dr. Henry Kasozi, the Medical Director of Kadic Hospital also says that Microcare does not settle bills promptly.
“You send a bill of Shs15 million, they give you only Shs10 million. Each time you send them a bill, they keep retaining a certain fee and eventually you find the bill accumulating,” he said.
“The contract with insurance companies is that they pay within 30 days of submitting an invoice, but many insurance companies take as long as 4-6 months without paying. We are now in December but some are still paying September. They should either pay in advance or promptly. Most of their customers pay them a lump sum in advance but how come that when a patient is treated, they want to pay in 4 months!” said William Lalobo, the proprietor of Paragon Hospital.
“We end up borrowing from banks at a very high interest rate of between 20-25% to meet our operational costs,” said Dr. Kasozi.
Kasozi said Kadic employs 100 people that earn a monthly salary of Shs 50 million, exclusive of NSSF contribution and PAYE. Uganda Revenue Authority (URA) recently almost closed down the hospital due to PAYE arrears of Shs76 million.
This, coupled with demand for drugs and equipment, exerts severe financial strain on private hospitals, he said.
For example, Kasozi explained, Kadic Hospital recently imported an ultra sound laboratory equipment at Shs100 million.
“You don’t have to wait for the patients to come before you say we need such equipment. Yet some equipment may not be used for the whole year,” he noted.

Embracing HMOs

Such operational costs and accumulating interest on loans are forcing investors in health facilities to pull out, industry players say.
In a bid to remain on top of competitors or at least to match them, many private hospitals have borrowed money to put up structures and import equipment, of which this money cannot be immediately recouped.
But operators point mainly to health insurance companies, some of whom are not registered for such business, that are holding onto their cash.
According to a source at the Uganda Insurers Association, only three companies are licensed to provide medical insurance. They are Microcare, Medicare (under East African Underwriters) and Liberty (under Standard Bank Group of South Africa that trades here as Stanbic).
Yet there are several other insurance companies offering health insurance.
“The problem with insurers is that they take your money and yet they don’t have hospitals –and they don’t advance money to the hospital until you fall sick,” Dr. Kasozi said.
This perhaps explains why private hospitals have started what they call Health Maintenance Organisations (HMOs) that operate in a way similar to health insurance companies –taking funds from individuals and companies to provide medical services in the long-term.
The 5 HMOs; Africa Air Rescue (AAR) for AAR Clinics, International Health Network (IHN) for Kampala Medical Chambers & Mayanja Hospital Mbarara, International Air Ambulance (IAA) for Kampala International Hospital (IHK), Kadic Health Foundation (KHF) for Kadic Hospital, and Case Medicare for Case Medical Centre are operating the service although not regulated by any law.
“What they are doing is provide long term medical services for people. When you start to collect money from people for long term services, you turn into an insurance company. So, under what law are they [HMOs] governed,” asked an insurer.
But HMOs also have outstanding bills with upcountry hospitals they subcontract to provide services to their insured clients where they have no presence.
According to Dr. Engulu W.M, the Medical Director of Soroti Medical Association and Nursing Home, “the response from HMOs is very poor.”
“The biggest culprit is IAA. Sometimes the bills accumulate up to six months,” said Engulu, who declined to reveal how much the company owed him.

IHK on sale?

Meanwhile, according to our sources, the proprietor of IHK that operates IAA, Dr. Ian Clarke, is in talks with potential investors to buy the hospital. He is said to be considering relocating to Zambia.
Although he denied plans to sell the hospital, Dr. Clarke said he was only “considering partnering with some individuals.”
“There are so many interested parties and I am considering selling off minority shares to them,” he said.
The now Namwongo-based hospital started in Old Kampala in 1996 to provide modern medical services that would see less Ugandans going abroad for treatment of complicated ailments. Last year, the hospital successfully performed its first open-heart surgery.
As government plans to table the health insurance bill, many hospitals are warming up to exploit the opportunities presented by the scheme. But defaulting coupled with limited knowledge and appreciation of the scheme may be a stumbling block in the development of the programme.
In a country with poorly funded public hospitals, private medical centres have been instrumental in taking health services closer to the people.
To confront their common problems, private hospitals are in the final stages of forming an umbrella body through which they will share information, ensure uniformity of standards and quality of care and collective advocacy.
“We will be addressing the issues affecting the private hospitals. We believe that it’s very difficult to pull apart because at the end of it all, it’s the beneficiaries that suffer,” said Dr. Ben Mbonye, the interim chairman.


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