PhilHealth’s use of IRM funds: incompetence or fraudulence?

In its Nov. 11 editorial titled “Digitizing PhilHealth,” the Inquirer made reference to PhilHealth insiders’ testimony that some executives pocketed as much a P15 billion through various schemes including the interim reimbursement mechanism (IRM) and that the National Bureau of Investigation had charged with graft several officers for the release of P33.8 million from the IRM to one dialysis center.

In reaction, PhilHealth Vice-President for Corporate Affairs Shirley B. Domingo wrote the Inquirer, taking exception to the Inquirer editorial’s insinuation of anomaly on the part of PhilHealth executives. The Inquirer published her letter on Nov. 18.

Her letter said that the IRM accomplished what it was intended for — that is, to provide our healthcare facilities with “needed financial support so they can better respond to the threat of COVID-19.”

Her letter further said, “The Philippine Hospital Association (PHA) has acknowledged and expressed support for its continuous implementation. Some hospitals who received the IRM managed to put in improvements in their facilities and were identified and designated by the IATF as COVID referral centers. The IRM helped as it was used to buy or manufacture the then scarce PPE … [and] to construct triage areas, emergency holding and treatment facilities, physical restructuring and purchase of equipment such as ventilators, HEPA filters, and overall improvement in their Infection Prevention and Control program.”

Ms. Domingo’s clarification on the use of the IRM funds reflects sharply her gross misconception of the nature of an insurance company and the mandate of PhilHealth. It appears her persona of doctor of medicine prevails over her role as vice-president of corporate affairs of a health insurance company.

The PhilHealth Insurance Corp. was established by Republic Act 7875 to administer the national health insurance program for all Filipinos. PhilHealth is an insurance company. It is not a financing or lending company, and definitely not a healthcare provider.

An insurance company takes on risks in exchange for premium. PhilHealth assumes the combined risks of the healthcare costs of Filipinos in exchange for their membership or enrollment fees. An insurance company gets the money up front and waits for claims or demands for compensation for loss of life or property. In the case of PhilHealth, claims are demands for reimbursement for medical expenses. Not all policy holders or insured persons file claims.

Since an insurance company does not spend cash to build a factory and make a product, it has more money to put in its investment portfolio to increase its income The company can find safe, short-term assets to invest its funds. Common instruments of this type include Treasury bonds, high-grade corporate bonds, and interest-bearing cash-equivalents.

What PhilHealth had done is transfer through the IRM its investible funds to the accounts of healthcare facilities instead of placing them in interest earning financial instruments. But PhilHealth installed the IRM as a cash advance measure to provide hospitals with emergency funds to respond to natural disasters and calamities, including the COVID-19 pandemic. It normally takes PhilHealth 45 to 60 days to pay a claim. Hospital operations would be affected adversely if the hundreds or thousands of claims resulting from a disaster take that long to be paid.

As the name of the mechanism says very clearly, it is the process by which funds are released in emergency situations. Interim means meanwhile, for the time being. Reimbursement is a sum paid to cover money that has been spent.

During the Senate hearing on Sept. 4, 2020, on the use of the IRM funds, Senator Panfilo Lacson said that weeks before the guidelines for the use of the IRM funds for the government’s COVID-19 response were approved, PhilHealth had already handed out P9.3 billion in cash advances to various hospitals, especially favored health facilities.

According to Mr. Lacson, Southern Philippines Medical Center, a public hospital in President Rodrigo Duterte’s hometown, received P326 million. Another hospital in Davao region, Davao Regional Medical Center in Tagum City, got P209 million. Senator Joel Villanueva said P45 million in cash advances were swiftly released to B. Braun Avitum Philippines, a dialysis center with pending cases in PhilHealth.

Yet claims worth P24 million filed by at least 10 district hospitals in Eastern Samar had not been paid, according to the province’s governor, Ben Evardone. Senator Franklin Drilon also complained that the requests for IRM funds of 33 hospitals in his home region of Western Visayas in April had not been granted by PhilHealth. “Up to this point, not a single peso was released to these 33 hospitals,” he lamented.

Senate President Tito Sotto said the concept of “payment mechanism” as stated in the law was different from the “financial mechanism” that the PhilHealth board cited in creating IRM. When he asked PhilHealth President Ricardo Morales if the power to finance hospitals is included in PhilHealth’s mandate, Morales said the corporation’s authority is to pay for health services.

Therefore, the use of IRM funds to provide healthcare facilities with needed financial support to improve their facilities, purchase or manufacture PPE, construct triage areas, emergency holding and treatment facilities, purchase of equipment such as ventilators, HEPA filters, as PhilHealth’s Ms. Domingo said in her letter to the Inquirer, was in contravention of PhilHealth’s mandate. Advancing millions of cash to hospitals even before healthcare is provided and medical expenses incurred is contrary to the concept of insurance and to the purpose of the Interim Reimbursement Mechanism.

Is PhilHealth’s use of the IRM funds a matter of incompetence or fraudulence or of both?

Oscar P. Lagman, Jr., is a retired corporate executive, business consultant, and management professor.