MANILA, Philippines — Two House committees investigating corruption in Philippine Health Insurance Corp. (PhilHealth) have initially recommended administrative and criminal charges against Health Secretary Francisco Duque III, some Cabinet officials sitting on the PhilHealth board, and senior officials of the company.
A 65-page draft report of the House committees on public accounts and good government and public accountability containing the information was leaked on Facebook on Tuesday.
The draft report tackled irregularities in PhilHealth that the Senate and the Department of Justice also investigated: incorrect case rates, misuse of the interim reimbursement mechanism (IRM), overpricing an information technology project, disadvantageous settlement of cases.
Same as draft report
Sought for comment, Anakalusugan Rep. Michael Defensor, the public accounts committee chair, said the leaked copy was “seemingly same with the draft report.”
“I did not read what was posted [on] Facebook, page by page. I anticipated the leak and I forewarned (Majority Leader) Martin Romualdez about it. We have more or less 80 people in the combined membership of the two committees,” Defensor said in a message to the Inquirer.
The committees investigating corruption in PhilHealth were supposed to conduct a joint hearing on Monday, but it was canceled along with other committee hearings for the rest of the week.
Asked for a copy of the leaked report, Defensor said: “To be fair to the technical working group and the members of the committee, we have to discuss, debate, amend if necessary, and then approve the report before we can release it.”
The draft, unapproved report was posted on the account of a certain Mark Lopez on Tuesday.
According to the leaked report, the filing of administrative and criminal charges were initially recommended against Duque, Labor Secretary Silvestre Bello III, and Budget Secretary Wendel Avisado as members of the PhilHealth board, ex-PhilHealth president Ricardo Morales, executive vice president Arnel de Jesus, senior vice presidents Israel Francis Pargas, Renato Limsiaco Jr. and Rodolfo del Rosario, and several other company officials and board members.
‘Excessive’ disbursements
The recommendations involved disbursements and allocations from the IRM, which the report said was “excessive.” As of July 2020, IRM releases to health-care institutions have reached P14.97 billion in response to “fortuitous events” such as the COVID-19 pandemic.
The committees recommended that the Ombudsman file criminal charges against the officials for graft and technical malversation, and administrative charges for grave misconduct, gross neglect, and conduct prejudicial to the best interests of the service.
“While the idea behind the IRM may be commendable, the mechanism itself is flawed and encourages large scale corruption and collusion between PhilHealth officials and [health-care institutions] and while the program uses the term reimbursement, the IRM is actually a cash program, the legal basis of which PhilHealth has failed to provide this investigative body,” the draft report said.
It noted that the IRM was made available even to non-PhilHealth-accredited health-care institutions and health workers, and that preferential treatment was given to private health-care establishments.
Hospitals overpaid
“The legal basis of the IRM is unclear. Despite this, some P15 billion of funds have been distributed by PhilHealth to various [health-care institutions] all over the country. In what is arguably the most notorious instance of corruption to date that is connected to the corporation, PhilHealth officials involved in the illegal disbursement of funds through this mechanism anchor their defense on blurry interpretations of the law, none of which will hold water in court,” the report said.
Citing a Commission on Audit (COA) report, the House panels added that PhilHealth also overpaid hospitals by P102.5 billion from 2013 to 2018, and that the company’s estimated losses due to fraud amounted to P51.2 billion.
Cited were irregularities in the implementation of the all-case rate system such as the use of incorrect rates that resulted in overpayments and underpayments.
“Thus, the total estimated amount of loss from 2013 to 2018 is about P153.7 billion,” the draft report said, quoting the COA report.
The committees also found that the 22 percent overpayment and the 78 percent underpayment of PhilHealth “ultimately benefited private hospitals.”
“In summary, while PhilHealth claims it is struggling financially due to the ongoing COVID-19 pandemic and asserts that its remaining actuarial life is down to one year,” the company “has been overspending on COVID-19,” the draft report said.
It also noted that PhilHealth was operating a payment system without authorization from the Bangko Sentral ng Pilipinas as required by Republic Act No. 11127 or the National Payment Systems Act.
For breach of the law, the House panels recommended the filing of civil, criminal and administrative charges against Morales, ex-PhilHealth president Roy Ferrer, Duque, Bello, Avisado, Social Welfare Secretary Rolando Bautista, Finance Secretary Carlos Dominguez III, and other PhilHealth board members and officials.
The panels also recommended that the Monetary Board fine them, and that they be suspended or removed from office and disqualified from holding public office.
Modified penalty
As to the reported disadvantageous settlement of cases, the panels found that the PhilHealth board modified the penalty for a case involving the Perpetual Succor Hospital of Cebu Inc., which was found guilty and liable for “extending period of confinement.”
The initial penalty imposed by the PhilHealth arbitration office was a three-month suspension of accreditation and P10,000 fine, which was affirmed by the Court of Appeals.
The PhilHealth board, however, considered the hospital’s letter of reconsideration and partially granted it.
The suspension order was recalled and the hospital was fined P100,000, “with restitution of all benefits, and sternly warned.” Duque, Ferrer, Bautista, Bello, Interior Secretary Eduardo Año, and several other board members signed the resolution modifying the hospital’s penalty.
PhilHealth’s action on the case prompted lawyer Harry Roque to file a complaint with the Ombudsman, charging that the reversal of the suspension cost the government P90 million in insurance funds, or P30 million for every month that the accreditation should have been suspended.
The joint panel noted the 2018 opinion of the PhilHealth’s legal sector, which said penalties in a final and executory decision may be modified only for correction of clerical errors, nunc pro tunc (retroactive) entries that caused no prejudice to any party, void judgments, and circumstances transpiring after finality of decision.
“The imposition of penalty of suspension of PhilHealth accreditation is not a mere procedural/technicality or clerical error which would warrant modification of a final and executory decision, but such penalty is clearly provided by law,” the draft report said, adding that the modification should have been done by a court and not a PhilHealth board resolution.
The House panels recommended that the Ombudsman bring civil, criminal and administrative charges against Duque and all ex-officio members of the PhilHealth board involved in the cited resolutions, and Celestina Ma. Jude de la Serna, then the interim chief executive officer and vice chair of the PhilHealth board.
Missing premium payments
They also recommended that the Department of Justice and the National Bureau of Investigation “reopen and expedite the investigation” into the P114.62-million missing premium contributions of private company Accenture Inc., which was first discovered in 2011.
The premium payments were diverted, with the messenger of Accenture, in connivance with some PhilHealth employees, depositing the 10 managers’ checks for PhilHealth in two Metrobank branches in Batangas, where the money was later withdrawn.
In July 2012, the PhilHealth board agreed on a financial settlement of the unremitted premiums, settling for 95 percent of the amount due or P108.35 million.
The panels said the two agencies should “focus on the validity and legality of the amicable settlement and establish the culpability of PhilHealth officials and employees directly or indirectly involved.”
Recommended for investigation were Duque, former health secretary Enrique Ona, and other PhilHealth board members involved in the 2012 board resolution, Morales, and past and present PhilHealth presidents, executive vice presidents, senior vice presidents for legal sector and other officers and employees related to the transaction.
“The amount involved is so scandalous yet PhilHealth officials at that time and even now prefer to keep the issue under wraps and beyond the knowledge of the public,” the draft report said.
The House panels also recommended that the Bureau of Internal Revenue “assess PhilHealth for violation of Sections 57, 251 and 272 of the National Internal Revenue Code for failure to withhold taxes on its payment to Accenture, including penalties and surcharge.”
‘Crime pays well’
“The failure to file criminal cases has emboldened the other personnel who witnessed the success of the Accenture criminals in evading justice and enjoying the fruits of their crime to replicate their exploits in the future. Alas, seven years after, the scam was repeated in the Balanga Rural Bank Inc. case. In this Accenture case, both PhilHealth and the NBI proved that crime pays, and pays well,” the draft report said.
The House panels also urged the Ombudsman and DOJ to probe Duque and other PhilHealth officials after “no administrative charges were yet filed against” Dr. Editha Conel and Jerome Follante after the benefit payment for B. Braun Avitum Philippines worth P9,705,332 was “erroneously credited” to the company in May 2019.
It was learned that to “facilitate the correction of the error, P49,123 in service charges were paid by PhilHealth’s errant employees, Conel and Follante,” and that no administrative charges were yet filed against them.
The House committees recommended that the Ombudsman and the DOJ “investigate and prosecute acts and/or omission” of the PhilHealth directors, officers and employees involved.
Lastly, the House panels called on PhilHealth to consider outsourcing some of its functions, as some of its personnel are “ill-equipped” and “clearly inefficient” for their tasks.
“To sum up, PhilHealth does not only have to contend with rampant corruption; half of the pressing problems that beleaguered the corporation are caused by its inept officials who lay down bad policies and decisions,” the draft report said.