Health insurer NHIF has been ordered to pay Meridian Medical Centre Sh130 million that it failed to pay after terminating an outpatient service contract nine years ago.
The contract was to run for three years but it was cancelled in June 2012, after six months, after what the government described as a public outcry that Meridian clinics were not available countrywide.
“I find it hard to believe that the defendants entered into such a major contract without first establishing that the provider had the capacity to fulfil its obligations under the contract,” High Court Judge Maureen Odero said.
The amount includes Sh12.4 million that was not paid to the company for a six-month pilot project and Sh118 million that was to be paid for the second quarter after executing the contract.
Justice Odero ruled that the contracts were duly executed by the NHIF board, which manages the fund, and insurer cannot run away from it.
“As such I find that there do exist valid and enforceable contracts between the Plaintiff (Meridian) and the Defendant (NHIF) and that the said contracts created binding obligations between the two parties,” she ruled.
The company won a contract in September 2008 for a pilot project to provide outpatient medical care. The project ran for six months from January to June 2010.
Under the agreement, the company was to be paid Sh2,000 for each beneficiary. With an estimated 38,839 beneficiaries, the total amount payable was Sh77.6 million. An advance payment of Sh12.9 million was made in equal monthly installments for six months.
The company later won another contract to provide outpatient services for civil servants and the disciplined forces. The contract was to run for three years starting in January 2012 under the capitation payment method. The company was to allocate Sh14,250 to each member of the scheme with four dependents.
The contract was terminated in June 2012 but Meridian said no notice, reason or justification was given.
By the time the contract was terminated, the company had rendered services to 33,171 members and beneficiaries in the second quarter, and demanded payment of Sh118 million.
The court, however, dismissed a claim for general damages and loss of profit. It also rejected a request for the contract to be reinstated, saying it had already lapsed.