Universal health care drives health sector growth in the Philippines

With the government committing unprecedented levels of funding to increasing the coverage of its national public health insurance programme, positive effects are being felt throughout the domestic health sector. The Philippine experiment of combining public health care spending with private sector delivery continues to evolve. As health care remains central to the public interest, there is a heavy onus on improving access and efficiency in accordance with the goal of providing universal health care coverage for all Filipinos by 2016. In addition to the realisation of hard infrastructure projects under public-private partnerships (PPPs), options for the provision of health services and business process outsourcing (BPO) more generally under such a model are gradually coming to the fore.

MULTI-LEVEL: While the progression of the domestic health care sector has failed to reach its potential in recent years due to poor infrastructure, insufficient human resources and under-investment, the current government is prioritising the fulfilment of its public health care promises.

Universal health care coverage now extends to about 82% of the population, and the government’s aim to ensure universal health care to the entire population is taking shape. Though currently in a period of adjustment as the private sector digests and adapts to the demands of its increasingly redefined role, the positives for the overall sector appear to far outweigh the negatives. However, with this evolution comes an increased responsibility of the government to regulate and maintain standards. This extends not just to quality of care and service delivery but also to the ongoing development of the PPP model, which remains prone to the inefficient bureaucracy and tardy implementation that can dampen investor appetite.

CURRENT CHALLENGES: In light of steps to increase universal health care coverage, more is now required from the state in terms of effective management of health care distribution. However, this is an area where the country has been liable to face difficulty, due to the incumbent complexities of harmonising standards across a decentralised system. The system’s three tiers include municipal, provincial and regional providers, while the Department of Health (DoH) has continued to transfer authority to local government units (LGUs). These units are responsible for the majority of primary care provision and management of provincial and district hospitals. According to World Health Organisation (WHO) data, the Philippines has 1.15 physicians per 1000 people, with the majority in urban areas, leaving LGUs short staffed. Longstanding DoH initiatives such as the Doctor to Barrios Programme that came into existence in the 1990s are in need of review, as doctors remain without sufficient incentive to work in rural areas for long periods of time. Still, rural expansion efforts have had some success. Dr Edgardo Cortez, president and CEO of St Luke’s Medical Centre, told OBG, “Hospitals in metro Manila have seen a decline in the number of patients coming from outside the city, as health care facilities in the provinces are improving and servicing more of the needs of patients.”

Another challenge associated with the increasingly broad spectrum universal system is the issue of raising awareness among the general population in order to ensure they seek treatment. At present, there is a discrepancy between the 82% of people covered by the government scheme and those who are aware of that fact and have subsequently registered. For example at Philippines General Hospital in Manila, only 30-40% of patients at the hospital were registered upon arrival. While the addition of an on-site registration service has enabled patients to register on arrival, the service is unlikely to be available outside of urban areas. Accordingly, the government must work to ensure that the general population is aware of the coverage being made available to them.

Performance monitoring and record keeping have also remained underdeveloped, making it hard for all tiers of government to keep track of incumbent health care delivery targets. Many hospitals lack basic IT infrastructure, which would allow for better management. Hospitals are often forced to rely on an offline system whereby data from their respective practice is transferred to a central database via memory stick.

HEALTH INDICATORS: The recently increased spending and the extension of the universal health care scheme will take time to have effect, so health care indicators in the Philippines still show a deficit in the quality and distribution of care across the board. According to the latest World Bank data from 2012, life expectancy at birth is 69 years old, compared to 75 in Malaysia and 71 in Indonesia. Infant mortality at birth is 25 per 1000 live births as of 2012, with 72% of births being attended by skilled medical staff. Health care spending per capita was $119 in 2012 compared to $215 in Thailand and $108 in Indonesia, however this has undoubtedly gone up since then.

PROGRESS: After a decade-long debate between government and the Catholic Church, the Reproductive Health Bill was passed in December 2012, gaining Supreme Court approval in 2014. While those in urban areas have access to contraception and health care services, those in rural areas do not. The UN Population Fund estimated of the 3.4m pregnancies annually in the Philippines, more than half are unintended and one-third are aborted. To counter this, the new law requires government health centres to hand out free condoms and birth control pills, as well as mandating that sex education be taught in schools. It also requires that public health workers receive family planning training and post-abortion medical care has been also legalised. It is believed that the law will greatly reduce the levels of child mortality, some of the highest in the region, while also reducing the strain on the universal health care system.

As for improving primary care, the Health Facility Enhancement Programme has continued to make gains. The Philippines has over 3000 rural health care units, servicing between two and four barangays ( villages) each. Each unit has a doctor, a nurse, a midwife and potentially other additional health care staff. These units represent the backbone of primary health care in the Philippines, managed by LGUs and put under considerable strain by the large populations located in rural areas. The installation of birthing facilities at these clinics is now being prioritised in accordance with aforementioned MDGs. Though 57.79% had such facilities in 2010, it is estimated that this level has now reached over 70%.

The reallocation and boosting of the government health care budget has been key to the constantly developing coverage of Philippine Health Insurance Corporation (PhilHealth). The implementation of initiatives such as the 2012 Sin Tax Law has been a success, helping to increase the Department of Health budget by 57.9%, from P50bn ($1.1bn) in 2013 to P83.7bn ($1.9bn) in 2014 under the 2014 General Appropriations Act. From January to November 2013, the Bureau of Internal Revenue collected P91.6bn ($2.1bn) from excise taxes on tobacco and alcohol products, resulting in P41.1bn ($924.8m) worth of incremental revenues and a lower smoking rate. Changes have also been made to the management of the Priority Development Assistance Fund (PDAF), widely referred to as the “pork barrel”, a controversial scheme that has long faced public opposition.

The total PDAF fund stood at P25.2bn ($567m) at the beginning of 2014 after the House of Representatives agreed to break it up between six departments and agencies. The DoH was allocated 15% of the total, equal to P3.78bn ($85m).

For 2015, the DoH budget was raised to P102.18bn ($2.3bn), making it the sixth-largest ministerial budget recipient. The UN Millennium Development Goals (MDGs) are viewed by many as an essential driver for improving health fundamentals within the Philippines. Health care related goals for the 2015 deadline include eradicating extreme hunger and poverty, reducing child mortality, improving maternal health and combating HIV/AIDS malaria and other diseases.

PUBLIC INSURANCE: Established under the National Health Insurance Act (NHIA) of 1995, PhilHealth was originally given the mandate of providing the entire Philippine population with health insurance by 2010. However, by that year, only about 54% of the population (i.e., the formal sector) had been enrolled in the programme, a discrepancy the current administration has been working hard to remedy ever since.

Though mandatory for all formal sector employees, including contractors, sub-contractors and Filipinos working abroad, coverage is currently being extended to cover the entire population including informal sector works. Amendments to the original NHIA include the 2010 Expanded Senior Citizens Act, which now covers all Filipinos over 60, with PhilHealth covering all costs unless the person is gainfully employed. However, the headline amendment took place in 2013 under the comprehensive amending of the NHIA to provide mandatory health care for all Filipinos. In 2014, the government focused on extending coverage to the 14.7m poorest families in the Philippines, according to a list prepared by the Department of Social Welfare and Development, entitling them to PhilHealth benefits even if they have not paid premiums. This extended coverage to 82% of the population.

CLAIMS PROCESSING: While record keeping tracking the proportion of the population which has actually registered remains hazy in light of inadequate IT infrastructure, access for patients has been assured in urban areas through the use of on-site registration facilities. The facilities allow patients to register with PhilHealth via their hospital on the day of treatment, after which hospitals are reimbursed. The maximum claim time target was 30 days, a figure PhilHealth was keeping up with as of December 2014.

As for the premium rates, these have remained largely unchanged since January 2013. For employees with a monthly salary of P7000 ($157.50) or less, the premium of P210 ($4.73) is divided between employer and employee. For employees with a salary range between P7000 ($157.50) and P50,000 ($1125), both the employer and employee contribute 1.5% each. The premium will be P1500 ($33.75) with an equal contribution of P750 ($16.88) from both employers and employees for all those earning more than P50,000 ($1125). Therefore, the annual premium for the employee in the lowest income bracket is P2520 ($56.70), up from P1200 ($27) earlier.

In line with improved enforcement of the health care scheme, PhilHealth instituted a No Balance Billing policy in 2011 under which enrolled members are exempted from paying anything. This scheme applies even when a member’s medical bills at a PhilHealth-accredited hospital are higher than the specified PhilHealth case rates for the medical condition. In 2014, this scheme was extended to cover kasambahays ( household helpers), based on provisions made within the 2013 NHIA. Employees in the private and public sectors were also awarded improved benefits under the Employees’ Compensation Programme (ECP) following the signing into law of Executive Order No. 167. Under the order, funeral benefits for private and public sector employees were doubled from P10,000 ($225) to P20,000 ($450) in addition to a 10% increase for Employees’ Compensation (EC) covering those with permanent partial, permanent total disability and/or survivorship pension.

PRIVATE HEALTH CARE: During the years of lacklustre investment under previous administrations, private health care provision in the Philippines grew in order to supply the demands of a growing population. According to the latest WHO data from 2012, the country has approximately 1800 hospitals, of which 60% are private, and which cover a range of services in the areas of medicine, paediatrics, primary and tertiary clinical laboratory, and radiology. The number of primary health care centres around the country is 2252 and there are 721 public hospitals under the management of LGUs. There are 70 DoH hospitals, which treat patients suffering specific illnesses requiring a range of services. As for actual hospital usage, in 2013 the percentage of persons treated in a public hospital or clinic was 55%, compared with 44% handled in a private facility, according to the National Demographic and Health Survey. About 2% of Filipinos are covered by private insurance or membership in health maintenance organisations (HMOs).

The effect of the increased coverage under PhilHealth and consequent demands for increased private sector health care delivery is forecast to have a positive effect on the sector. The government paid out P47.2bn ($1.1bn) for claims in 2012 and over P62bn ($1.4bn) in 2013. The primary revenue sources for private hospitals are user fees and health-cost reimbursement from PhilHealth, and the scales are expected to tip in favour of the latter as the country approaches universal coverage.

Private hospitals in the Philippines are generally smaller than public hospitals and have sought to invest in specialist treatment segments – such as eye care, cosmetic surgery, orthopaedics and cancer treatment – to ensure profit making. However, the increased coverage of PhilHealth will likely result in the construction of larger private hospitals that provide general and primary care. As for the pharma industry, following the imposition of the Maximum Drug Retail Price (MDRP) in May 2008, which called for a 50% price reduction on 21 molecules, generic drugs have become more widely available and better implemented into the treatment plans of both private and public hospitals. Retail battles between pharmacies such as Watsons and Rose have begun as they have started to open dedicated generic drug retail stores as the variants have become more publicly accepted, despite the enduring strength of the big brands.

REGULATIONS: The headline regulatory change for 2014, other than the signing into law of the 2010 Expanded Senior Citizens Act, was the launch of the new Case Type Z benefit package that increases coverage and treatment for catastrophic diseases. Accordingly, PhilHealth will pay for the whole treatment course for patients who are affected by the following diseases: early stage breast and prostate cancer with low to intermediate risk (both have a package rate of P100,000, $2250); childhood acute leukaemia of standard risk, with a P210,000 ($4725) package; and low-risk end-stage renal transplants, with a P600,000 ($13,500) benefit package. A tracking system is under development to monitor and ensure provision of all medical services to PhilHealth members.

MEDICAL TOURISM CHALLENGES: According to the National Economic and Development Authority, medical tourism in the Philippines is set to lift revenue to $3bn annually by 2015. It is also estimated that arrivals of medical tourists will approach 200,000 in 2015, up from 100,000 in 2008. The growth of the sector is largely thanks to the high quality of health care services offered by Philippine hospitals, which are keeping up with competitive neighbours like Thailand and Malaysia while also out-pricing them. Several facilities have achieved accreditation from Joint Commission International (St. Luke’s Medical Centre, Medical City and Chong Hua Hospital), and others have from Accreditation Canada International (the Philippine Heart center, Manila Doctors Hospital, and Asian Eye Hospital). Speciality care in the Philippines includes cosmetic surgery, wellness treatments and dentistry. The sector has been held back by the national infrastructure deficit, which leaves it unable to fully compete with its neighbours. Connectivity has long been an obstacle, with many airlines not flying directly to the Philippines due to safety concerns and the high price of refuelling costs at national airports. While the 2014 inclusion of Philippines Airlines into category one in the US and Europe should help, the quality of the airports is behind that of the nation’s competitors.

The Philippines is currently opting out of joining the ASEAN Open Skies programme, as the government does not feel the country is ready to participate just yet, and although improvements at Ninoy Aquino International Airport terminals are making progress, alongside the development of alternative airports further away from Manila – like Clarks International Airport – it will take time for these project to be complete and better integration between health care and travel is needed across the country.

ACQUISITIONS: With the government honouring its commitments to PhilHealth, which is increasingly becoming a dominant sector driver, investment in health is prompting a rise in acquisitions as large business groups acquire hospitals. The Metro Pacific Investments Corporation (MPIC) is currently the largest health care group in the country, with eight hospitals and a total capacity of 2137 beds. The firm is targeting a bed capacity of 3000 by purchasing new facilities at a pace of one or two hospitals per year. The group acquired 51% of the 200-bed Central Luzon Doctors’ Hospital Educational Institution with an investment of P187m ($4.2m) in 2013, and allotted P4bn ($90m) to its health care arm for capital spending in 2014. The group hopes to launch five to 10 mallbased clinics in the next three to five years and is also targeting the tele-health segment for expansion.

Just behind MPIC is the country’s biggest real estate developer, Ayala Land (AL), has also begun to build a portfolio in health care. In 2013 it signed a deal to acquire Whiteknight Holdings, which owns 33% of Mercado General Hospital (MGH). At the start of 2014, AL and MGH started a joint venture named QualiMed, which aims to implement 1000 new hospital beds across 10 new hospitals and 10 satellite clinics over a 10-year period. It is forecast that capital spending for the project could reach P5bn ($112.5m), as a 100-to 150-bed hospital will require approximately P500m ($11.3m) of investment, while satellite clinics require P20m-30m ($450,000-675,000).

TALENT: Despite a growing economy and increasing urbanisation, the Philippines continues to lose many health workers to international opportunities, as doctors, nurses and specialists look abroad for higher earning potential and better jobs. For example, in the UK the Philippines is the source of the third-highest number of National Health Service staff, at 12,744. The brain-drain has subsequently compromised domestic ability to fulfil human resource demands in the sector. In an attempt to discourage students from going abroad, the University of the Philippines (UP) implemented a return service agreement (RSA) in 2010. The RSA requires UP medical students to perform three years of medical work in the Philippines in the areas of research, further study or practice. If the student does not comply, he or she is held liable to pay back P1.8m ($40,500), which is the approximate cost of five years’ tuition at the UP medical campus. With new medical students graduating in 2015, it will be the first year of testing for the RSA programme. The RSA is an experiment that other educational institutions may well adopt in the future.

As for the ASEAN Economic Community and the mobility of Filipino health professionals, countries such as Singapore and Malaysia are anticipating the possible influx of inexpensive labour as the region becomes more integrated in 2015. However, on a positive note, the Philippines may also see foreign talent coming to the country, which would be serve to bolster the human resource deficit.

Dr Joven Cruz, chief of plastic surgery at Asian Hospital and Medical Centre, told OBG, “We have started seeing medical students from neighbouring countries, such as Indonesia, coming to complete residencies in the Philippines, where they can also obtain a higher level of English and improve their skills.”

OUTLOOK: In 2014 observers were assessing the commitment of the current administration to PhilHealth, but extended coverage and accessible funding for public and private care providers are grounds for optimism. The government continues its efforts to further integrate the private sector while it extends universal health care coverage before 2016 and health care providers are poised to receive investment from domestic and international entities. Thus, 2015 is expected to be a year of consolidation, as inefficiencies in PhilHealth and past shortcomings in the investment environment are addressed with new funding. The battle to improve the quality of primary care in rural areas remains pressing and efforts to keep health care staff close to home will start having an effect.

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The Report: The Philippines 2015

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