HEALTHCARE EQUIPMENT FINANCING IN NIGERIA: LESSONS FROM INTERNATIONAL MARKET

DR. EMMA AJAYI; DSC (hons)CEO, Swiss Biostadt Limited

Introduction

In Nigeria, the total expenditure on health care

as % of GDP is 4.6, The percentage of Federal

Govt expenditure on health care is about 1.5%.

The average for Sub Saharan Africa is 2% while

RSA is 12%. WHO recommends 15%.

Healthcare Spending on Medical Tourism: $2Bio

per annum and still growing with wellness

having 20% share

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Healthcare Expenditure in Nigeria

The level of government expenditures in the Nigeria health sector over the years tells a story of neglect. Before the civilian government came into power in 1999, the annual government expenditures on health was $533.6 million in 1980 after which it nose-dived, reaching a trough of $58.8 million in 1987. By 1999, significant increases in health expenditure were noticed, reaching a peak in 2002 at $524.4 million (HERFON, 2006, CBN, 2006)

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Healthcare Expense in Nigeria The major sources of finance for the health sector in

Nigeria are the three tiers of government (Federal State and Local Government), public general revenue accumulated through various forms of taxation, the health insurance institutions (private and public), the private sector (firm and households), donors and mutual health organizations. Table 2.3.3 shows that private and household expenditure on health between 1998-2002 was the highest with an average of 69.1% and 64.3%, while government expenditure in the same period was a paltry 20.6%. Donor’s average expenditure in the period was 10.3%, while firms input were 4.9% respectively (Soyibo et al, 2005).

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Distribution of Healthcare Expenses

• Source 1998 1999 2000 2001 2002 5-year ave

• Govt health exp. 15.0 16.6 18.8 27.2 21.6 20.6

• Federal 9.7 9.4 10.6 17.6 12. 12.4Local1.4 3.6 1.9 1.7 1.8 2.0

• Private exp. 72.0 69.5 65.0 67.2 72.3 69.1

• Firms 2.7 3.5 4.7 5.7 6.4 4.9

• Household 69.2 66.0 60.3 61.5 65.9 64.3

• Donors 13.1 13.8 16.2 5.6 6.1 10.3

Source: Computed from Soyibo et al (2005)5

Medical Equipment Leasing

Prospects for medical equipment leasing are

looking good:

“Medical equipment leasing has been steady,” says Mark French, President of Crest Capital, a national equipment finance firm. “Most of the other vertical markets have declined since 2009, but medical equipment is one of only three areas that has held steady.”

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Medical Equipment Financing

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According to a 2011 survey by the Independent Equipment Company together with ELFA, medical equipment has been rated – for the sixth year in a row – as the type of equipment finance companies anticipate having the greatest total dollar amount of new business volume.

Recent statistics bear this out; ELFA has found that member companies finances for medical imaging and electronic devices increased from 4.4 percent in 2009 to 4.5 percent in 2010.

The Benefits of Medical Equipment Leasing

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- Helps the Medical Practice to become, or be

maintained as a state of the art facility. - money is reserved within the practice for other

common expenses

Most medical equipment may be leased on both short and long-term leases. Normally, they bargain more flexibility than a loan that is the reason why so many medical practices pick this preference.

Reasons Why Leasing is preferred

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• Banks will necessitate a 20% down-payment on a loan, whereas a Lease can be done with only one monthly payment in advance.

• Leasing permit the Practice to upgrade their equipment giving their patients access to the newest in technology.

• Leasing develops their asset management and frees up capital for extra expenditures.

• Leasing helps them plan for the future since lease payments are permanent and won’t alter with increasing interest rates.

Reasons Continued

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• With leasing equipment, helps to evade desuetude and complaints because the Practice can just upgrade to the next model at the end of your lease.

• Leasing delivers flexible payment options and oftentimes no down payment is required.

• With leasing, 100% financing is guaranteed, which means the hardware, software, training, maintenance, shipping and installation can all be encompassed in the lease agreement. Lease finance can also cover 100% EMR and EHR software.

• Leasing provides tax assistances

For The Medical Practice

• Leasing medical equipment as a replacement for outright purchase of these vital tools makes good business sense. It permits them to stay on top of technology, gives suppleness with their capital and gives them healthier assets.

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LESSONS FROM INTERNATIONAL MARKETS

SWISS HEALTHCARE SYSTEM

Healthcare in Switzerland is universal and is regulated

by the Swiss Federal Law on Health Insurance. Health

insurance is compulsory for all persons residing in

Switzerland (within three months of taking up

residence or being born in the country)

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Switzerland Continued The Swiss healthcare system is a combination of public,

subsidized private and totally private systems:

Public: e. g. the University of Geneva Hospital (HUG) with 2,350 beds, 8,300 staff and 50,000 patients per year;

Subsidized private: the home care services to which one may have recourse in case of a difficult pregnancy, after childbirth, illness, accident, handicap or old age;

Totally private: doctors in private practice and in private clinics.

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UNITED STATES HEALTHCARE SYSTEM

In the United States, health care providers (such as doctors and hospitals) are paid by the following:

• Private insurance• Government insurance programs• People themselves (personal, out-of-pocket

funds)

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US ContinuedPrivate Insurance:

Private insurance can be purchased from for-profit and not-for-profit insurance companies. Although there are many health insurance companies in the United States, a given state tends to have a limited number.

Most private insurance is purchased by corporations as a benefit for employees. Costs are typically shared by employers and employees. The amount of money employers spend on an employee's health insurance is not considered taxable income for the employee. In effect, the government is subsidizing this insurance to some degree.

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US ContinuedGovernment Insurance Programs: The largest government insurance programs include

Medicare, which funds health care for the elderly, the disabled, and people receiving long-term treatment with dialysis

Medicaid, which funds health care for certain people who are living below the poverty level and/or who have disabilities

Overall, about 30% of the population is covered by government insurance or government-provided care.

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US ContinuedOut of pocket:

When care is not covered by other sources, people pay out of their own funds. They often must use their savings to pay small bills and must borrow (including using credit cards) to pay large bills.

In the United States, about 17% of health care costs are paid for out-of-pocket. Having to pay for health care out-of-pocket contributes significantly to many bankruptcies in the United States.

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Japan Healthcare

Like the United States, Japan's healthcare system is a conglomerate of government, employer, and individual financing

Universal access to basic healthcare has been achieved in Japan through comprehensive employer/employee plans and government subsidies.

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The Way Forward

The Federal Government should explore ways towards improving access to primary health care. Extending the reach of primary health care and improving its performance requires action on several fronts’ simultaneously-including new delivery models to increase access, a greater role for non profit and private organizations in service delivery, and the introduction of performance incentives to improve it.

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Private Sector

Strong Investments in Medical Facilities

Good Access to Medical Financing

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Integrated Model of Financing

- Government- Private- Leasing

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