‘Philhealth lacked mechanisms to prevent improper payments’

THE Commission on Audit (COA) said state-run Philippine Health Insurance Corp. (Philhealth) lacked control mechanisms to detect and prevent improper payments.

In a statement on Wednesday, the COA said they found out Philhealth’s existing control mechanisms were “deficient and underperforming due to the deficiencies in the design and performance of controls, insufficiency of human resources and inadequacy of strategy to mitigate the effects of the first two problems.”

Government auditors cited, for instance, the Philhealth only reviewed 252,408 claims out of a total 878,876 claims from March 1, 2019, to June 30, 2020 that should have undergone a “Medical Prepayment Review” or MPR.

The commission said Philhealth established the MPR system in 2019 to monitor four illnesses that were considered vulnerable to fraud.

“Of the remaining 626,648 claims, 443,162 claims were paid by Philhealth despite not undergoing MPR,” the COA said.

On top of this, the COA also found out that only 3.2 million claims were actually post-audited by Philhealth out of the 16.48 million claims required to be post-audited by the state health insurer from 2014 to June 30, 2020, under its “Medical Post-audit,” or MPA, mechanism. This mechanism was established to detect improper payments after the health care institution received its reimbursements, according to COA.

“The audit of these 3.20 million claims led to the discovery of 380,413 medical review findings. Around 13.54 million claims still remain for post-audit,” it said. “If only to highlight the importance of the control mechanisms, from 2011 to 2020, Philhealth paid P665.28 billion to HCIS representing reimbursement of 67.95 million claims.”

In the same statement, the COA also said they found out that Philhealth “was remiss in conducting an annual or even periodic review” to determine whether the case rate for a particular treatment under its “All Case Rate,” or ACR, payment scheme is “responsive to the actual costs.”

If the review was done and adjustments in the case rate were made accordingly by Philhealth, the COA pointed out that any savings could have been added to its reserve fund.

“If the actual costs for a treatment are significantly less than the case rate, then a corresponding adjustment in the case rate should be made. Similarly, if the actual cost is significantly higher than the case rate, then an adjustment should also be made to the case rate. This was not done, and any savings from such adjustments could have been used to augment the reserve fund,” the COA said.

The COA issued the statement after conducting the performance audit of Philhealth’s ACR payment scheme since its implementation in 2011 until June 30, 2020.

Despite this, the COA said Philhealth’s ACR payment scheme improved the efficiency on the turnaround-time in the processing of reimbursement of claims of HCIS.

“Based on Philhealth data, the TAT for the processing of claims improved from an average of 55 days during the fee-for-service payment scheme in 2010 to 19 days under ACR in 2019. The implementation of the electronic claims system in 2018 also contributed to a much faster TAT,” it said.

Under the ACR payment scheme, Philhealth pays all claims using a case rate, which is a predetermined fixed rate for each covered case or disease.

Instead of computing the reimbursements based on actual costs, HCIS will be reimbursed a fixed amount, which may be more or less than the actual cost, COA said.

“The idea behind the ACR, which is utilized in other jurisdictions as well, is to incentivize HCIS to be more efficient. If the case rate for a specific treatment is lower than the actual cost, the HCI will try to be more efficient in the costing of the treatment. On the other hand, if the case rate is higher than the actual cost, the HCI gets to keep the difference as a form of ‘efficiency gains’,” the Commission added.

Along with the release of these findings, COA said it also recommended that Philhealth conduct an “extensive review of case rates to include Case Type-z Benefit and Covid-19 packages to provide reasonable rates that would minimize efficiency gains and address deficiencies in the control design and ensure controls are working effectively.”

Should Philhealth proceed with its shift from ACR to Diagnosis Related Group-global Budget system, the COA said Philhealth should consider the same observations and recommendations.

To better detect improper payments from claims, the Commission emphasized the need for citizen participation, adding that Philhealth can develop a mechanism to empower members by increasing their level of awareness about ACR as well as their engagement and provision of feedback.