COVID-19’s Impact on Strategic Health Purchasing: Lessons from the Philippines
Collectivity Series: 1 of 5
[Editor’s Note: This is the first post in a blog series by a group focused on strategic purchasing, working through Collectivity — a collaborative learning platform for global, regional and country experts. This series features insights from six country teams that explored how governments have adjusted their health purchasing arrangements to support the COVID-19 health response, as part of a project co-facilitated by R4D, the Strategic Purchasing Africa Resource Center and the World Health Organization. Jointly, these country teams are seeking to draw lessons for the future, and share reflections on whether these adjustments contribute to making purchasing more strategic. In this post, the Collectivity’s Philippines team shares key takeaways from the government’s efforts to develop a COVID-19 benefits package and maintain essential health services amid the pandemic.]
The COVID-19 crisis called for rapid adaptation of purchasing arrangements in the Philippines. It was only a little over three years ago when the Universal Health Care (UHC) Act mandated the Philippine Health Insurance Corporation (PhilHealth) to become the national purchaser of all individual-based health services.
The Bayanihan to Heal as One Act (Bayanihan 1) enacted in March 2020 further mandated the Philippines Health Insurance Corporation (PhilHealth) to cover testing and treatment of COVID-19 patients and medical expenses incurred by public and private health workers during the state of national emergency. Consequently, PhilHealth developed benefit packages for inpatient, isolation, and testing services for COVID-19 and adjusted its provider accreditation and payment mechanisms.
As part of a Collectivity group on Strategic Purchasing and COVID-19, we explored the impact of these adjustments in the purchasing arrangements of PhilHealth in 2020 to deepen our understanding and draw lessons for the future. In this post, we share four key takeaways from this exercise.
1. Provider engagement should be streamlined
To ensure that there were enough accredited providers to deliver both essential and COVID-19 services, in April 2020, PhilHealth set up a streamlined “provisional accreditation” process.” Previously, accreditation required both Department of Health (DoH) licensing, and a separate PhilHealth survey. The streamlined process removed the need for the PhilHealth survey, meaning all licensed facilities could be accredited once they apply. This worked well for hospitals, but there were delays accrediting testing facilities and COVID-19 isolation units (CIUs). This is because it took time for the DOH to release and operationalize licensing guidelines for these new types of providers and PhilHealth also had to ensure efforts to engage these facilities. At the end of the year, PhilHealth accredited 1,915 public and private hospitals, 114 SARS-COV2 testing facilities and 711 CIUs.
2. Benefit design process should be responsive
The development of the benefit package for COVID-19 testing proved to be challenging. First, it was difficult for PhilHealth to standardize the cost of testing given that other national and local government agencies were also providing resources to scale up testing including capital outlay and procurement of test kits. PhilHealth developed three packages for testing each with a different rate. The rates were applied depending on whether the testing centre received donated test kits or if other inputs were subsidized by public funds. Second, the cost of testing was volatile due to changes in market prices as well as development of new methods and technology. Over time, newer and cheaper testing inputs and methods became available in the market and PhilHealth heeded to adjust its rates accordingly. In 2020, PhilHealth received approximately 1.5 million claims for COVID-19 testing compared to the 6.8 million individual tests done in the country. Most claims were reimbursed to government facilities in the greater Manila area where the surge and capital outlay efforts were concentrated in.
3. Expedite payments to health providers — but beware shortcuts
PhilHealth faced numerous challenges in paying its accredited facilities during the pandemic. PhilHealth usually reimburses providers’ claims, but it also has an Interim Reimbursement Mechanism (IRM) policy which allows PhilHealth to front-load three months’ worth of claims payment to health care providers. The IRM can be used during emergencies and was applied during the COVID-19 response. However, allegations of corruption, and other payment anomalies, came to light in July 2020, which resulted the suspension of the IRM in August 2020, whilst senate and congressional inquiries were set up to investigate allegations. These enquiries found some technical and operational policy gaps, but nevertheless, as of August 2021, 669 out of the 711 health care facilities which received IRM funds have fully liquidated them, 31 facilities have liquidated at least 50% of their IRM funds while only 11 facilities have liquidated below 50% of their funds. Delays in utilization of these funds may have been caused by a lack of clarity in the regulations, compounded by the media furore around corruption.
In the meantime, PhilHealth is facing increasing backlog of provider reimbursements. As of September 2021, PhilHealth has only paid 23% of isolation and inpatient related benefits, while the rest has been denied (18%), continue to be processed (21%) or returned to hospital for additional information (38%). Similarly, only 40% of the COVID-19 testing benefits have been paid while the rest continue to be processed (28%) or returned of hospital (23%). Delays in payment are caused by technical (e.g., payment for new medicines such as remdesivir or tocilizumab which are not the national formulary) and operational (e.g., need for electronic signature, confirmatory test) challenges, as well as human resource and IT system gaps. Inevitably, these delays in reimbursement have resulted into significant operational issues for providers. To fast-track payments to facilities, PhilHealth established a new payment mechanism in May 2021 called the Debit-Credit Payment Method (DCPM). Through the DPCM, PhilHealth shall immediately pay 60% of the total amount of applicable receivables, while the remaining 40% will be paid following compliance to existing claims processing requirements and procedures.
4. Balance cost-containment with health outcomes
PhilHealth’s policies for COVID-19 inpatient and isolation services shifted from “full coverage” of medical expenses toward cost-containment. As early as February 2020, PhilHealth announced case rates for hospital isolation of COVID-19 patients and for those with more severe COVID-19 symptoms. Following the surge in COVID-19 cases, a backlash about low initial rates, and enactment of the Bayanihan 1 act, PhilHealth issued a retroactive policy to cover all medical expenses of patients admitted to the hospital due to COVID-19 through fee-for-service. This policy was in place until April 14, 2020, after which PhilHealth restricted full coverage of medical expenses to health care workers only. For all other beneficiaries, PhilHealth developed new case rates for moderate, severe, and critical COVID-19 cases admitted to hospitals. For mild cases, PhilHealth developed a case rate for elderly patients admitted to hospitals and a case rate for all other beneficiaries to be treated in CIUs. Of claims paid in 2020, the average cost to PhilHealth per COVID-19 admission decreased from PhP 454,697 in March 2020, when fee-for service and hospital isolation policies were in place, to less than PhP 160,000 between July and December 2020, when case rates and CIU isolation was enacted.
PhilHealth’s cost-containment measures did not have the intended effect in terms of provider behaviour. Although the case rates are costed based on clinical guidelines, many providers do not adhere to this and continue to provide irrational care. In the meantime, the no balance billing policy is poorly enforced. A lack of transparency about hospital tariffs also contributes to perceived higher out-of-pocket expenditure especially once the case rate policy was implemented in April 2020. This in turn may cause a higher number of claims by more financially capable beneficiaries, but at the time of writing we did not have enough information to fully determine the impact of these benefits on equity in healthcare access.
Shifts in PhilHealth payment policy, as well as challenges in reimbursement, may be symptoms of insufficient government investment in PhilHealth. Even with the mandates of the Bayanihan 1 and the UHC Act, PhilHealth did not receive additional revenues to cover the cost of COVID-19 benefits. National premium subsidies have remained at PhP 71.4 billion in 2020 and 2021. The current approved 2022 subsidy is at PhP 80 billion, an increase but still less than originally proposed (PhP 110B billion). Plans to upgrade PhilHealth information systems have been derailed by a lack of funding. This funding squeeze forces PhilHealth to focus on cost-containment rather than prioritizing adequate access to health services.
The COVID-19 pandemic revealed PhilHealth’s strengths and weakness as the country’s dominant strategic purchaser
The COVID-19 pandemic acted as a catalyst for PhilHealth to make progress toward achieving UHC. PhilHealth expanded its benefit package for COVID-19 hospitalisation, isolation, and testing. It also expanded its coverage of public and private providers and streamlined the accreditation mechanism to make it less cumbersome for itself and providers. Payment methods are also being adjusted amid new constraints.
However, the COVID-19 crisis also revealed a series of issues to be addressed for the scheme to become truly universal. PhilHealth still needs to cover all COVID-19-related health services. The design of its benefits, including their tariff rates, continue to be problematic which may lead to undesirable providers’ behaviour. Contracting modalities are challenging, making it difficult to engage new providers. Organizational and system problems delay reimbursements to providers. These issues are not insurmountable, however. Continuing to capacitate PhilHealth to be the strategic purchaser envisioned in the UHC Act is imperative for both the country’s continuing COVID-19 response and health system strengthening efforts.
The insights provided in this series are part of a larger research effort — led by Collectivity country teams — on the strategic purchasing reforms countries developed during the COVID-19 pandemic. Their collective research will culminate in a series of published journal articles. In upcoming posts, we’ll hear from Collectivity teams in Armenia, Romania, Cameroon, Ghana and Ukraine. Click here to learn more about the Collectivity Group on Strategic Purchasing, which aims to contribute to the global knowledge base on strategic purchasing and strengthen the ecosystems that support countries to advance health financing and health system reforms.
Catch up on the Collectivity Blog Series
- Lessons from the Philippines
- Lessons from Armenia and Romania
- Lessons from Cameroon
- Lessons from Ghana
- Lessons from Ukraine