The Effect of Debt Collection Strategies on the Financial Performance of Public Hospitals: a Case Study of Kenyatta National Hospital

Abstract

The fact that there is increased demand for resources by various state functions and devolved units makes referral public hospitals vulnerable to underfunding especially with the notion that the government is equipping counties with resources to improve health care and ease the burden on referral hospitals. The purpose of this study was to determine the effect of debt collection strategies on the financial performance of Kenyatta National Hospital. This research used a case study design. The target population of this research consisted of Kenyatta National Hospital in Nairobi. The research utilized both primary and secondary facts. The researcher developed a questionnaire which was used to collect data from the respondent. The respondents to the questionnaire were the head of finance department, debt collection champions and revenue accountants. The questionnaire made use of a five point likert scale on the parameters of each variable. It was self-administered via dropping and picking later approach. Secondary data was collected from the financial statements and management reports of Kenyatta National Hospital. Data was evaluated by descriptive statistical methods (mean and standard deviation), and the multiple regression analysis. The quantitative data was sorted cyphered and typed into statistical Package for Social Sciences (SPSS) analysis software. Data analyzed was presented in form of graphs, charts and tables then interpreted. In order to test the significance of the model in measuring the relationship between debt collection strategies and financial performance, this study conducted an Analysis of Variance (ANOVA). The study found that debt collection is a critical function of KNH. Debt collection function reduces revenue loss, enhances cash flow, and aids in liquidity management of KHN and conformity to laid down policies. It also ensures that there is an ethical budgetary process. The Hospital prepares debt collection reports regularly. The Hospital personnel engagement with the debtors to enhance progressive debt collection management, educating customers on need to pay debts and negotiating with clients including use collateral as guarantee were frequently preferred. However, transferring debts to government bodies like National Disaster Management Unit, Ministry of Health and employing debt collection agencies is occasionally preferred. In addition, holding patients in the wards until the debt is paid; negotiation and use of collateral to secure debt are frequently preferred strategies while denial or restricted access to services to clients with outstanding debts and use of positive reinforcement like waivers of penalties and interest to encourage payment is occasionally preferred. The study recommends the need to introduce arbitration clauses in credit agreements so that the process of litigation and costs associated with the debt collection and recovery efforts can be minimized.