The healthcare sector in Nigeria is facing a harsh reality as about 20 percent of small and medium-sized private hospitals grapple with crippling operating costs, leading to closures and significant challenges for those still operational. According to Adeyeye Arigbabuwo, the national chairman of the Health Care Providers Association of Nigeria (HCPAN) Committee on NHIA Matters, many hospitals are struggling to cover basic expenses like rent, utilities such as electricity, staff payroll, and essential medical supplies. Some hospitals have even resorted to selling off their assets, seeking mergers or leases, or diversifying into other industries like hospitality to stay afloat.
With high operational costs pushing hospitals to the brink, the situation is dire. As of mid-2021, Nigeria had over 40,000 hospitals and clinics, with private facilities accounting for a significant portion of healthcare services. However, the unpredictable costs of medical supplies, exacerbated by fluctuating foreign exchange rates, have made it challenging for hospitals to maintain stable pricing for patients. The rising costs of electricity, fuelled by recent tariff hikes of about 300 percent by the Nigerian Electricity Regulatory Commission (NERC), have added to the financial strain on hospitals.
Impact of operational costs on private hospitals.
This increase, coupled with expensive backup power solutions, has significantly inflated operational expenses. Kehinde Oyesiku, the chief business officer of Evercare Hospital in Lekki, highlighted the substantial cost of powering backup generators, which runs into millions monthly. This cost burden affects the hospital’s ability to provide affordable care and impacts profit margins. Also, the shortage of clinical staff, including nurses and doctors, further compounds the challenges faced by private hospitals. The competitive nature of the healthcare sector, coupled with high inflation rates affecting the cost of drugs and medical consumables, puts additional pressure on hospitals to manage expenses while maintaining quality care.
One of the most immediate impacts is on access to healthcare services. As operational costs increase, private hospitals may raise prices for medical services and treatments, making healthcare less affordable and accessible for many Nigerians. This particularly affects individuals with lower incomes who rely on private healthcare providers for essential medical care. As well, the quality of care provided by private hospitals can be compromised due to financial constraints. Limited resources may lead to challenges in investing in modern equipment, maintaining facilities, and hiring skilled healthcare professionals. These factors can potentially result in compromises in patient care standards and outcomes, impacting the overall quality of healthcare delivery.
Potential solutions to address these challenges.
Patient outcomes are also influenced by the financial challenges faced by private hospitals. Resource limitations can hinder hospitals’ ability to deliver optimal patient outcomes, affecting treatment effectiveness and patient satisfaction levels. This underscores the importance of addressing operational challenges to ensure that patients receive the best possible care. The financial strain on private hospitals also reflects broader issues within Nigeria’s healthcare infrastructure. Inadequate power supply, high inflation rates affecting the cost of medical supplies, and shortages of clinical staff are systemic challenges that impact the efficiency and effectiveness of healthcare delivery across the country. These challenges highlight the need for comprehensive solutions to strengthen the healthcare system as a whole.
These hospitals are exploring various solutions to mitigate these challenges. Some are considering renewable energy sources like solar power to reduce electricity costs. However, the potential of such solutions is limited, especially for tertiary hospitals with intensive care units and specialized equipment that require uninterrupted power supply. The need for consolidation in the healthcare sector has been highlighted as a viable solution. Oluwafemi Olaleye, head of Health Banking at FSDH Merchant Bank, emphasized the benefits of mergers and acquisitions, which can provide struggling hospitals with stronger negotiating power and improved service quality.
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Despite the economic headwinds and operational hurdles, private hospitals remain committed to providing high-quality care. However, sustained support from stakeholders, including government policies to address infrastructure challenges and stabilize economic conditions, is crucial for the long-term viability of Nigeria’s healthcare sector. As consumer spending faces pressure due to rising prices and lower disposable incomes, the healthcare industry must adapt and innovate to ensure continued access to essential medical services while addressing the financial sustainability of private hospitals.
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