January 2018 BusinessDaily; The National Hospital Insurance Fund (NHIF) is facing a Sh1.5 billion compensation claim over the termination of a controversial medical services contract it signed with a private clinic five years ago.
Meridian Medical Centre, a chain of private clinics, has accused NHIF of refusing the pay the money despite the Attorney- General’s advice that part of the payment be made.
“The plaintiff suffered loss of profit due to the malicious and negligent breach of contract by NHIF through the abrupt and unjustified termination of contract,” Meridian says its petition.
Meridian has produced in court a legal advisory the AG had sent to the NHIF CEO, asking him to clear part of the total amount claimed.
Meridian is seeking outstanding arrears it says were not paid for services offered, payment in lieu of notice and loss of business and profit all totalling to Sh1.5 billion, with interest at the court rate.
NHIF has denied the claim, arguing that it is not in breach of contract, and has in turn accused Meridian of failing to submit requisite returns as provided for in the contract it signed with the NHIF Board.
Meridian says the termination and events that followed were so acrimonious, leading to criminal charges being proffered against former NHIF boss Richard Kerich.
Mr Kerich, alongside Meridian Medical Centre directors Peter Wambugu and Ndiba Wairioko, was charged with conspiracy to defraud the NHIF of Sh116.9 million.
The health insurers’ bosses were accused of entering into a contract with Meridian Medical Centre Limited to provide medical care while knowing that the facility had no capacity to do so.
Mr Kerich and other directors denied the allegation.
In its defence against the claim for compensation, NHIF has not made any direct allegation on any kind of fraud.
The parties will return to court in June for NHIF to submit its defence.
The dispute dates back to June 2012 when NHIF terminated the contract it had awarded Meridian to provide medical services to public servants.
Meridian had entered into a three-year contract with NHIF in January 2012, where the insurer was to pay Sh14,250 for a beneficiary and four dependants per annum.
Meridian claims it received Sh116 million from NHIF in March, being payment for the first quarter.
But their honeymoon was shortlived when the acting CEO informed them in June that the board had terminated the contract.
It immediately moved to court seeking Sh118 million payment for services it claims to have rendered in the second quarter, Sh531 million for loss of profit and Sh34 million spent expanding its network in anticipation of more traffic.
It is further seeking Sh671 million for loss of business, reputation and credibility.
NHIF has refuted the claims, insisting no returns have ever been produced to show Meridian is entitled to the payments. NHIF further denies ever paying Meridian Sh116 million.
Meridian has now adopted AG Githu Muigai’s legal opinion advising NHIF to honour and settle Sh118 million, being payment for services rendered in the second quarter.
Meridian had argued last November that NHIF had failed even to honour a legal advice from Prof Muigai and its own board.
The AG had in his advisory noted that the letter terminating the contract failed to specify any form of misrepresentation or fraud, noting that even if any misrepresentation had existed the firm is entitled to payment for the second quarter that the services were offered.
“The service providers are at very least entitled to be paid for the second quarter of the contract in which they continued to provide services,” he said. He further noted that the manner of termination has left the fund legally exposed.
Upon deliberation the NHIF Board in January, 2013 resolved to settle the claim for services already offered as adviced by AG but the court was told during the hearing in November that no payment has been made.
But NHIF holds that it has not breached any contract and has asked the firm to produce any proof.
It further says that the contract is clear that the fund is not responsible for any loss of profit caused by false misrepresentation by the Meridian.
It further denies allegations by Meridian that the fallout was marred by irregularities and termination was done in a manner that its reputation was damaged by advanced negative coverage in the media.