Fresh controversy rocks President Kenyatta's Sh38bn hospital equipment deal

A major controversy is brewing over the national government’s Sh38 billion project to lease medical equipment for 94 hospitals in the counties three months after the deal was launched at State House.

The contentious project has put the national government at odds with governors, all of whom boycotted the much-hyped announcement by President Uhuru Kenyatta in February.

The deal includes provision of X-ray, ultrasound and dialysis machines, among others.

Experts are now raising tough questions about why the government chose a leasing arrangement that is renewable every seven years instead of outright purchase of the medical equipment.

This past week, governors went to court challenging the legality of the scheme even after some of their colleagues softened their stance and signed up for the deal.

A medical expert who has analysed the whole project has told the Sunday Nation that Kenyans could be getting a raw deal in the arrangement where every county will spend at least Sh95 million to pay for the equipment every year.

According to the expert, who cannot be named because of the sensitivity of the issue, it would have cost less than Sh200 million for each county government to purchase the same equipment that is now being leased.

President Kenyatta announced the programme at State House in February amid opposition from governors, and on Wednesday he visited Machakos Level 5 Hospital with Deputy President William Ruto and Governor Alfred Mutua where some of the leased equipment has been installed. 

“Today I met a patient who, for two years, moved to Kibera (in Nairobi) to access dialysis twice a week at Kenyatta National Hospital, but now he is getting the service back home. That is what devolution means,” the President said.

Health Secretary James Macharia said: “Today is a dream-come-true. This is what we have been looking for, to transform health care and save lives.”

Governor Mutua said the county was preparing to hire more medical staff as a result of the upgrade.

On Saturday, the Director of Medical Services, Nicholas Muraguri, rejected claims that the project was expensive and tainted.

“There is no scandal here at all,” he said.

At the launch of the programme on Wednesday, Machakos Level 5 Hospital received new theatre facilities, kidney dialysis kits, intensive care unit equipment and X-ray machines from the deal.

LEGAL QUESTION

The Commission on the Implementation of the Constitution has also questioned the legality of the programme by the national government.

CIC chairman Charles Nyachae wrote to the Health CS seeking documents that would help answer the legal question whether the right legal procedure had been followed in leasing the equipment.

“We are aware that the county health facilities have been transferred to the Transitional Authority,” Mr Nyachae said. “This means that the provision of health services excluding the national referral health facilities is fully a county function.”

Mr Nyachae then requested documents relating to the transaction to help CIC reach an informed opinion. By close of business on Friday, Mr Macharia had not responded to the CIC request.

The leasing deal will see two hospitals in each county receive equipment worth a combined cost of at least Sh38 billion financed by the national government.

Earlier in the week, the Council of Governors (CoG) joined the International Legal Consultancy Group (a lobby) in a suit seeking to stop the leasing deal, arguing that county governments were not consulted.

“Despite clear indications from the governors of the various counties that the Ministry of Health was overstepping its mandate, the respondents have pushed forward with pressuring counties to sign the MoU,” ICLG advocacy manager Miller Ateka said.

Former CoG chairman Isaac Ruto said in court papers that procuring health equipment is the preserve of counties and allowing the central government to continue with the deal will rob the devolved units of their mandate.

“Counties will lose a key part of their fully devolved mandate over the health sector if this court does not stop implementation of the MoU. The ministry has not disclosed to the county governments the contracts executed with medical equipment providers,” Mr Ruto and Kakamega Governor Wycliffe Oparanya said.

Justice Mumbi Ngugi on Wednesday ordered the government to respond to the suit and appear before her on July 1 for a hearing.

The five international companies that won the leasing tender are General Electric (GE) from the USA, Philips from the Netherlands, Bellco SRL from Italy, Esteem from India and Mindray Biomedical of China. They will earn leasing fees of more than Sh5 billion annually over the seven years.

But the lack of trained technicians to operate the equipment has also rocked the scheme.

PLAGUED BY SHORTAGES

While the Health ministry has argued that the leasing will save the government huge upfront costs in purchase and maintenance fees, governors fear the deal could see a cut in their budgets.
Kenya has a rickety public health infrastructure plagued by a shortage of doctors and a lack of medicines and medical equipment.

The medical expert who analysed publicly available information on the deal said: “Most of the equipment is not lifesaving. A lot of it is not even diagnostic. It is basic hospital equipment. There are hospital beds, stretchers, trolleys, surgical equipment, drip stands, among others and they make up the bulk of the purchases.”

He maintains that it would have been far cheaper for taxpayers to buy the equipment and replace it when it becomes obsolete with newer technology rather than lease.

In the leasing arrangement, the suppliers maintain the equipment during the lease period.

There is also suspicion that the suppliers may have used local middlemen who may be earning tens of millions of shillings in commissions adding an unnecessary load to the taxpayer.

Ordinarily, industry players have said, middlemen earn up to 40 per cent in commissions from suppliers of medical equipment, which money the government would save by going directly to suppliers.

Governors have also raised questions about details of the contracts with suppliers and the mode of financing, which they have told the courts they do not have even though it is the county budgets that will be used to pay for the deal.

A county official familiar with the details of the deal, but who spoke in confidence, told the Sunday Nation; “The national government has borrowed the money to pay for the equipment. Since the borrowing is on behalf of county governments, the national government must disclose to them the details because it affects equitable revenue sharing every year.”

The official argued that in a conditional grant, the system used in this case, money is given to a county but with restrictions on its use.

“Conditional grants do not allow the national government to carry out the functions for counties,” said the official. “The counties have become mere rubber stamps for a programme that the Constitution has devolved to them fully.”

The official added that each county should have been asked what equipment they needed according to their plans.

“The government is making these decisions for county governments that have been elected by the people to make the decisions,” he said.

The expert who analysed the deal said “most medicare in Kenya is not about equipment. It is about treatment. Medi-leasing is about investigative and diagnostic equipment. There are no treatments and curative interventions, which are the priority.”

He said instead of spending Sh95 on equipment annually, the counties would actually save more lives by spending more on increasing the number of nurses, clinical officers, doctors and buying medicine to treat pneumonia, malaria, cholera, and educating the public about preventive health care.

“We are concentrating on diagnostics yet once we know the problem we have no facilities to treat the diseases,” he said. “For instance, there are only a handful of oncologists in Kenya. Yet we want to put up diagnostic equipment everywhere. We should also be thinking of spending money on treatment.”

'A COLOSSAL AMOUNT'

New Council of Governors chairman Peter Munya did not immediately respond to inquiries by the Sunday Nation. However, soon after the programme was announced, he read a statement on behalf of his colleagues.

“The cost of leasing the equipment for 10 years is enough to buy our own equipment over a period of three years. Spending Sh38 billion to lease equipment is a colossal amount,” he said.

Some 40 governors attended the meeting.

“We thought the government was to utilise its share of allocation for the equipment. It is a shock that they want to eat into our small allocation with the lease,” Mr Munya added at the time.

On Wednesday, Mr Macharia told the National Assembly that 35 counties have signed an MoU with the national government for the supply of the equipment.

“Our deadline is May 6, 2015. If any county will not have signed an agreement with us, then we will not supply them with the equipment. We are going to proceed with the leasing contracts without them,” Mr Macharia told the National Assembly’s Committee on Health.

Ms Rachael Nyamai, the chair of the health committee, directed the ministry to publish counties that have agreed to the health plan to pile pressure on governors opposed to the deal.

“We want Kenyans to benefit from the leased medical equipment across the country. We want you to publish a list of all those who have already signed up and those that have not for us to push them into signing the agreements,” said Ms Nyamai.