Interview with Simon Karo, CEO, Melchizedek Hospital, Kenya
In the burgeoning Kenyan healthcare sector, family-owned Melchizedek Hospital is making its mark by focusing on culture and quality. Simon Karo, CEO and second-generation family business member speaks to Tharawat Magazine about organic, healthy growth, the challenges of talent retention and where healing truly begins.
When and how did Melchizedek Hospital get started?
The business was founded by my parents. After a >career as a doctor in the military, my ther”>father decided to go into private practice and in 1981, he and my mother, who is a nurse, set up a clinic in the city.
The business grew based on my father’s good reputation as a doctor and they soon added a small pharmacy and basic laboratory with one or two machines. After a while, when the number of clients began to increase steadily, this first clinic became too small for their activities, so my parents decided to start a hospital. It takes a lot of money to start a hospital in Kenya. They started looking for a piece of land that would offer them the opportunity to set up a hospital. Such a site was available on the outskirts of the city, and at first they just set up a clinic there. However, as soon as they got a mortgage secured on the property they began the process of converting their small facility into a hospital.
It wasn’t easy to get enough patients at first and my parents soon realised that, like with the first clinic, it was a matter of building trust.
My father was still a practicing doctor at that time, so he left my mum to do the set-up of the hospital. It wasn’t easy to get enough patients at first and my parents soon realised that, like the first clinic, it was a matter of building trust. People needed to know that when they visited our hospital, they would get better. From that point on it is very much a word-of-mouth marketing approach. We tried using my father</span>’s name but a lot of people didn’t know him on that side of town.
My mum was a very entrepreneurial woman. She would go out distributing brochures, together with her friends. They gave out brochures all over town and the surrounding communities and, eventually, one day a patient walked in. They were followed by two patients a day, then three. Growing at that pace cost a lot and the first year was pretty rough, however in the second year business began to pick up. We managed to sign up a few insurance companies from here and there, convincing them to come and look over services for themselves, so that they could encourage their clients to come to us. At a certain point in our start-up journey we were dealing with around fifteen patients per day. That is when I joined the company.
What was your first role within the family business basically?
At first I just started with understanding how operations worked. I actually started working in reception and then I moved to the pharmacy and all departments before settling in the administration role.
<p>We realised that a key ingredient to our success was the staff: the doctors and nurses that we employed.
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After I joined we knew we wanted to grow further and reach more people. We realised that a key ingredient to our success was the staff: the doctors and nurses that we employed. It was also a fact that in many of the hospitals around us, the patients were not getting better. One of the turning points for us came when we started focusing entirely on investing in talented doctors.
In the end, that is what matters to the patient. They don’t come to see your HR manager or even administration staff; they come to see your doctors. So we invested heavily into getting good doctors. We changed our philosophy and used this as a point of differentiation from the competition. While they were trying to cut costs on personnel, we invested.</p>
We went to see the insurance companies> together with our doctors. I remember our first doctor was Doctor Rachel Kariuki. She, and the other doctors that followed her, were trusted by the insurance companies and were even invited to give medical talks on different topics to insurance companies and other institutions such as schools. This is how we built great trust around us and our brand and that allowed us to expand to our current size.
How have you seen the hospital expand and who is still involved from the family in managing the growth?
My father has stopped working in the day-to-day business but he is still involved as the Chairman. My mum is also still involved in the business but she’s slowly moving away from the operational side of things. Today, I am the CEO of the hospitals and I am on the board as well.
We’ve also expanded from Melchizedek Hospital and opened three other branches.
My younger brother, William Karo joined us recently and we’ve grown from 15 patients a day to almost 200 patients a day. Our main facility has long since outgrown the basic lab; today we have imaging departments with ultrasounds and x-ray machines. We are expanding and adding ICU beds, dialysis beds and chemo beds. We’re also adding more wards, and even there we are differentiating ourselves a little more. We will offer private rooms and duplexes where two people share a room, but we’ll also have triplexes, something the insurance companies are really keen on. We’ve also expanded from Melchizedek Hospital and opened three other branches. Those branches each have a laboratory, a pharmacy and doctors on-site. Basically they are similar to the initial setup that we had with our first smaller clinics.
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What are the particular challenges and advantages for a business’s growth in Kenya?
ght”>We invest a lot in training and developing our staff but that brings the disadvantage that they become attractive to bigger hospitals who then hire them away from us.
One of the challenging factors is obviously the infrastructure. Things like getting a license and getting connections for electricity and water is easy in other parts of the world, but it can be a bit frustrating for us. It tends to take a long time, here. I would say another great challenge that we definitely face is finding the right talent. It is a constant struggle for us to find the right doctors and nurses. We invest a lot in training and developing our staff but that brings the disadvantage that they become attractive to bigger hospitals who then hire them away from us.
We have to be very creative in the ways that we try to retain our staff, to keep them motivated and to make Melchizedek their home. We even get coaching for them as well as encourage continuous individual development. There’s a shortage of nurses everywhere and we can’t match the offers that they get from outside. Other institutions are always looking for highly trained, highly qualified nurses and we have become a sort of bridge to some of the local institutions locally as well as internationally – they head-hunt our staff making keeping them a big challenge.
What kind of support do you find in the business community? Is there much exchange on growth strategies?
Actually, there’s a lot of support. Kenya is a leader in most industries in East Africa. In particular, the healthcare industry is really growing right now. Initially one of the greatest challenges we faced was, of course, the number of insured patients or lives. We still have a very small percentage of patients who are insured. When we began we were looking at only about 2% of the population who had health insurance, and that’s out of a population of 44 million people. The majority of the patients used to pay cash which was also difficult.
I believe we’re almost up to 10% of the total population being insured. That is a huge increase and with the NHIF it is on the rise.
Over the years the government has implemented the National Health Insurance Fund where the majority of Kenyans can be insured. A lot of insurance companies have also picked up and developed policies that are affordable. I believe we’re almost up to 10% of the total population being insured. That is a huge increase and with the NHIF it is on the rise. We’re going to be the ones who are ready to meet the new demand, as we already have a great reputation for managing patients, very well and with limited resources.
How do you manage the competition?
Unfortunately, competition in healthcare often boils down to who has the latest and more advanced medical equipment and technology. This is used as a marketing tool and patients tend to trust what is newer when it comes to equipment. This makes it very testing for us. As a family business, we’ve grown organically. We’ve not taken any funding from outside investors to grow, so we are growing through our own financing; either from our profits or from our institutional money. Sometimes we don’t have deep enough pockets to be able to buy the newest or latest machines immediately. It’s a growing industry at this very minute there are a lot of outside companies arriving intending to establish and invest in establishing hospitals, imaging facilities and diagnostic labs all over the place.
I think the most critical thing that makes us a success, in spite of the competition, is the culture that we have developed in the hospital. When a patient comes to our hospital, they get the feeling that although we might not be the flashiest we believe healing begins once you walk through our door. Healing is not just taking medicine but it’s also the way you’re treated as a human being. I think that the way we treat people is what matters.
They know that it is our hospital and I think that because of the reputation we’ve built, people know that if they come to us they will get that extra personal care. I believe this culture started with mum.
Actually, people know that we’re a family business. They know that it is our hospital and I think that because of the reputation we’ve built, people know that if they come to us they will get that extra personal care. I believe this culture started with mum. She always walked around speaking to patients, to the staff and everyone else who was involved.
What is the next growth phase you are interested in?
The next growth target for us is to continue to increase the capacity. We want to continue growing the hospital, so we can reach more people and treat more people. Our future aim is to become specialised. We want to be able to do kidney transplants, as well as develop our oncology department. We will also be increasing the number of clinics and branches that we have across Kenya.
Are family businesses the future of the Kenyan economy?
I think the Kenyan economy relies heavily on family businesses. I believe 80% of all businesses are family-owned. Many of us face the typical challenges of succession and governance but I also think that what should be on the agenda, primarily, is making our environment aware of how it can become friendlier to the growth of family businesses.
Tharawat Magazine, Issue 31, 2016
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