‘LACKING LEGAL BASIS’: State auditors have new questions about the state health insurer’s interim reimbursement mechanism, a program it uses to pay for health-care services in areas directly affected by natural disasters and other emergencies. —CONTRIBUTED PHOTO
MANILA, Philippines — The Philippine Health Insurance Corp. (PhilHealth) made payments totaling P14.97 billion under its interim reimbursement mechanism (IRM) without legal basis, releasing the money to 711 healthcare institutions (HCIs) before these have completed rendering services, according to the Commission on Audit (COA).
In its 2020 report on PhilHealth on Friday, the COA said such fund release was “contrary” to Presidential Decree No. 1445, or the Government Auditing Code, which prohibits advance payments for services, supplies, and materials not yet delivered under government contracts, “except with the prior approval of the President.”
“Absence of proof showing that IRM fund releases have legal bases or prior approval of the President of the Philippines justifying exemption from the prohibition against advance payments, the disbursements made under the IRM scheme were without legal authority and could be considered illegal expenditures,” the COA said.
In March last year, PhilHealth issued Circular No. 2020-0007 granting IRM funds as “advance payments for the provision of substantial aid to eligible/qualified HCIs directly hit” by the COVID-19 pandemic.
Like ‘blank check’
The IRM is a program that PhilHealth uses to pay healthcare services to its beneficiaries by accredited healthcare institutions in areas directly affected by a natural disaster or unexpected events, including health emergencies.
It was intended to help hospitals continuously operate and give healthcare services to affected Filipinos. It was first used in the aftermath of Supertyphoon “Yolanda” (international name: Haiyan) in 2014, then in 2017 following the siege of Marawi and for the pandemic in 2020.
But congressional hearings last year found that hospitals could use the IRM funds like a “blank check” or for purchasing supplies and paying staff salaries, instead of treating COVID-19 patients.
The COA said the funds were to be applied against the valid claims of the HCIs from PhilHealth, “which justify the IRM funds’ nature as advance payments for future services yet to be rendered by the HCIs.”
Of the P 14.97 billion, P7.680 billion, or 51.3 percent, was given to 505 private HCIs, while P7.29 billion, or 48.7 percent, was released to government HCIs.
State auditors said PhilHealth did not establish “definite guidelines and criteria or organize an evaluation team” for the HCIs applying for IRM grants.
This led to granting P783.73 million in IRM funds to 118 HCIs not directly involved in providing COVID-19 health-care, and P3.115 billion to 89 HCIs with alleged violations of PhilHealth policies.
The HCIs not involved in COVID-19 healthcare services which got IRM funds were mostly in Metro Manila, Rizal, and in the Bicol, Davao, and Caraga regions.
In Metro Manila and Rizal, P228.82 million in IRM funds were given to 47 HCIs which were classified as free-standing dialysis clinics, maternity case package providers, and mental health institutions.
The HCIs made no COVID-19 related reimbursement claims but filed P569.7 million worth of non-COVID-19 related claims in 2020.
Late to rectify
State auditors also called out the release of P7.64 billion in IRM funds to 503 HCIs without deducting the 2-percent creditable income tax required by the National Internal Revenue Code.
PhilHealth tried to rectify this by making a remittance of P156.73 million to the Bureau of Internal Revenue, but the remittance was late by 182 days.
Such a failure could lead to “possible prosecution and imposition of penalties, interest and criminal liabilities” on officials concerned, the COA said.
It also found that P10.02 billion in IRM funds were released to 515 HCIs in Metro Manila, Rizal, Ilocos, Calabarzon, Mimaropa, Bicol, Soccsksargen and Caraga despite the lack of supporting documents.
This money is apart from IRM funds amounting to P10.65 billion given to 488 HCIs, which exceeded the allowed amount, or average reimbursement per day, for each HCI, resulting in excessive releases possibly ranging from P81.507 million to P2.208 billion.
Pending claims
The audit body also found that P405.528 million in benefit claims were applied as regular reimbursements through the auto credit payment system instead of deducting it against the IRM fund balances of 119 HCIs. To justify the advanced payments, the state health insurer cited a provision for “other provider payment mechanism” under Republic Act No. 7875, as amended by Republic Act No. 10606, both laws governing PhilHealth and the National Health Insurance Program.
It said the prohibition on advance payment should not apply to the IRM under these two laws.
It added that healthcare providers have pending claims for reimbursement with PhilHealth at the time of the IRM release, “hence the IRM cannot be completely considered as advance payment.”
But the audit body was “not convinced” of this legal justification.
“Nowhere in the submitted information on PhilHealth’s legal bases could the (audit) team find express provisions that PhilHealth is allowed to make advance payments for services not yet rendered,” the COA said.
It said PhilHealth should have “at the very least” obtained the prior approval of President Duterte, who might have given permission, given the needs of the pandemic.
The COA took note of the state health insurer’s request for approval, but “post facto,” or after the lack of legal basis was cited by the state auditing agency.
Following scandals that hit PhilHealth in 2020, particularly in the use of the IRM, its president and CEO then, Ricardo Morales, resigned.