Cash Registers Increase Hospital Revenues in Kenya

During the 1980s and early 1990s, the Kenyan government struggled with economic decline, high inflation, and rapid population growth. The nation's growing health needs, including those related to HIV/AIDS, placed additional demands on limited government resources. As a result, increasing numbers of Kenyans, especially the poor, were without access to basic health care. To address these problems, the government spearheaded an initiative to improve the quality and scale of its health programs while controlling costs. The USAID-funded APHIA Financing and Sustainability (AFS) Project, managed by Management Sciences for Health, was a major player in reforming health financing throughout the Kenyan health system from 1996 to 2001.

The AFS Project quickly learned that the public, nongovernmental, and private sectors in Kenya encounter similar problems in management and service delivery, and applied similar approaches to these problems in the different sectors. One of the most successful interventions was the installation of computerized networks of cash registers in hospitals throughout Kenya. This initiative has dramatically increased hospital revenues, thus providing funds to improve hospital performance.

Increasing hospital revenues through the use of cash registers

In 1990, in an effort to strengthen the nation's health services, the Kenyan government adopted a system of cost sharing to increase revenues at hospitals and health centers. Cost sharing involved charging nominal fees to most patients—with exemptions for the very poor—and—seeking reimbursements from the National Hospital Insurance Fund.

The cost-sharing program significantly increased revenues at major hospitals throughout Kenya. The use of handwritten receipt books, however, proved ineffective in accounting for cost-sharing funds. To combat theft and accounting irregularities, the Kenyan Ministry of Health and AFS Project installed networked cash registers on a pilot basis in several hospitals to collect and account for payments. These systems significantly reduced losses and increased revenues. At one hospital alone, cash revenues increased 400%.

The cash register systems were purchased from a local company, reducing hospitals' dependence on foreign assistance for installation and technical support. Individual cash registers are typically located in five key locations: the emergency room, pharmacy, laboratory, maternity ward, and the National Hospital Insurance Fund's office. The units, linked through a computer network, issue receipts with a printed description of every service and item paid for. Each register has a cash drawer so that the money collected can be accounted for and held securely. In total, 15 government hospitals have installed networked cash registers.

The dramatic increase in revenues can be observed by looking at just one hospital, Coast Provincial General Hospital in Mombasa. During the first month after cash registers were installed, average daily cash collections almost doubled to 70,000 KSh ($900 US) per day. Eventually, monthly collections reached a peak of over 2 million KSh ($26,000 US). Overall, the use of cash registers increased average monthly revenues at Coast Provincial General Hospital from 1.4 million KSh ($24,000 US) in mid-1998 to 5.9 million KSh ($80,000 US) in late 2000. In addition, the system improved the efficiency, cost-effectiveness, and accuracy of cash accounts, reduced the administrative delay in accounting for cost-sharing revenues, and allowed patients to keep better records of their hospital expenses. The hospital has also been able to purchase equipment to upgrade the system with cost-sharing funds.

Lessons learned

An issue of particular concern to the Kenyan government and the AFS Project has been the effect of the cost-sharing program on the poor. While safeguards to protect the poor were an integral part of the program, reduced utilization of services by those unwilling or unable to pay fees was documented.1 Addressing this problem remains a high priority in Kenya, and it should be a consideration for any country planning to implement a cost sharing or user fees program.

In addition to this critical issue, the AFS Project has documented the following lessons:

  • Develop a preliminary expenditure plan in advance to consider how estimated additional funds can be spent most productively. This should include a strategic plan and budget.
  • Analyze and itemize cost sharing revenues according to whether they are payments by clients, insurance fund reimbursements, or government grants or loans in order to monitor revenues by source.
  • Anticipate and plan for an initial rise in collections followed by a decline as staff find ways to circumvent the cash register system. Management adjustments are usually necessary:
    • Rotate staff and monitor collections by cash register, department, and clerk to reduce the potential for staff interference with the new system.
    • Since it is likely that some staff will resist the implementation of the cash registers system, be aware that some staff may need to be replaced.

Based on the results of the cash register initiative at Coast Provincial General Hospital, the Ministry of Health installed networked cash registers at six other provincial hospitals and smaller stand-alone systems at eight district hospitals. The success of this initiative shows the potential for dramatically increasing revenues using a simple tool like a cash register. It must be recognized, however, that the networked cash registers are only part of the larger user-fee system, which can compromise access by the poor to health services. To ensure that the health needs of the poor are addressed, it is imperative to carefully design and monitor the program. Furthermore, safeguards such as the cash register system can help ensure that the funds from cost sharing are protected and available to meet the greatest health needs.