hospital governance reforms in the philippines: four case

Hospital Governance Reforms in the Philippines: Four Case Studies

Oscar F. Picazo

COHRED Global Forum on Research and Innovation

Philippine International Convention Center

August 25, 2015

Health sector context 1

•~100 million population, 12th largest in the world; high population growth (1.8% p.a.); high TFR (3.3); 49% urban

•Demographic and health transitions are underway

•Health MDGs likely to be met for child health; shaky for infectious diseases (TB, malaria, dengue, HIV); unmet for maternal mortality

•Multiplicity of funders (National Government, local governments, PhilHealth social health insurance, HMOs, micro-insurance, employer-based, OOP); OOP has historically been very high

O. F. Picazo, Hospital Governance in the Philippines

Health sector context 2

•Multiplicity of providers (government, for-profit, nonprofit)•Dual health care system, access dictated largely by

ability to pay•Health spending 3% of GDP; rising government

health spending since 2010•Major reforms underway to achieve UHC (width,

breadth, depth); “width” reforms in Q1 and Q2 running way ahead of “breadth” (benefits improvement) and “depth” (full reimbursement and No Balance Billing).


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Hospitals Hospital Beds/10,000

Growth of hospital system, 1970s to present

Source: Philippine Statistical Yearbooks


Hospital by ownership, 1976-2010

Year Government Private

Hosp-itals

Beds Ave. Beds

Hosp-itals

Beds Ave. Beds

1976 366 44,525 122 670 31,075 46

1985 624 48,395 76 1,190 41,113 35

1995 584 43,229 73 1,111 37,571 34

2005 662 43,739 66 1,057 43,397 41

2010 730 49,372 67 1,082 48,783 45


Government hospitals by type, 2011

Type Hospitals Beds Ave. No. of BedsNo. % No. %

DOH retained

75 11.0 21,819 43.4 295

LGU managed

572 83.6 22,188 44.2 39

University 5 0.7 453 0.9 91

Military 28 4.0 3,761 7.5 139

Other gov’t 4 0.7 2,011 4.0 40

All 684 100.0 50,232 100.0 60


Government hospitals by level, 2009

Level Hospitals Beds Ave. No. of Beds

No. % No. %

1 362 50.2 7,213 15.0 20

2 271 37.6 14,890 30.9 55

3 38 5.3 5,212 10.8 137

4 50 6.9 20,834 43.3 425

Total 721 100.0 48,149 100.0 68


DOH-retained hospitals: occupancy rate and patient load by level, 2011

Level Ave. Implem. Bed

Cap.

Bed Occ. Rate (%)

Ave. Annual Patient Load

Level 1 21 70.0 11,403

Level 2 66 103.0 21,837

Level 3 314 114.0 74,632

Level 4 389 108.0 128,294

All 265 105.0 85,213


Four Hospital Case Studies


Overview of case studies

Items LUMC (1) Leyte (9+3) NKTI (1) SPMC (1)

Location Ilocos Region, Northern Luzon

Eastern Visayas

Metro Manila Davao Region, Mindanao

DOH or LGU hospital?

LGU LGU DOH DOH

Autonomy Became autonomous as part of reforms

Not autonomous

Autonomous before and after reforms

Not autonomous


Major reforms undertaken

Reforms LUMC Leyte NKTI SPMC

Autonomization Yes No No No

Fee retention Yes (new) Yes (but at LGU level)

Yes (not new)

Yes (not new)

Active claiming of PhilHealth reimburse-ments

Yes Yes Yes Yes

Strengthening PhilHealtheligibility verification system

No Yes (LINKS call center)

No No

PPP on equipment acquisition

Yes, but minor

No Yes, major

Yes, major

PPP drug consignment No No No Yes


LA UNION MEDICAL CENTER


La Union Medical Center (LUMC) –Background

• La Union, a medium-sized province in Northern Luzon (pop. 720,000)

• LUMC (formerly DGMPH) served as district secondary hospital for 10 municipalities; one of 6 such hospitals owned by the province

• Province faced financial difficulties in supporting these hospitals as soon as they were devolved; about 33 percent of IRA spent on their maintenance

• Hospital’s annual budget of PhP35 million deemed highly inadequate; some PhP80 million to PhP100 million more needed

• Poor quality of services (unfilled staff posts, drug shortage, poor patient amenities, inadequate diagnostic capacity)


LUMC – Reforms undertaken

• Construction of new facilities (EU funded) leading to 100 beds

• Granting of economic enterprise status through presidential Executive Order; granting of autonomy through Congressional Republic Act; conversion into a non-stock, nonprofit government owned and controlled corporation (operating under GOCC Law) of La Union Province

• Change in status from secondary to tertiary hospital

• Reform of fee structure; retention of fees at facility; classification of patients; creation of paying wards

• PhilHealth enrolment of members initially by the province, then by the National Government

• Internal restructuring of the hospital through creation of 17 hospital committees (teams); systems improvement in procurement, financial system, HR system, and IT

• Selected capital acquisition of diagnostic and imaging equipment


LUMC – Governance structure

• Evolution from a hierarchical unit of the provincial government to an autonomous unit with independent board of trustees (17 members); the only LGU hospital that has been made autonomous in the country

• Governor sits as chairman of the board; ensures provincial commitment to continue its share of the subsidy

• Selection and appointment of members of the board representing a range of skills

• Formulation of provincial resolutions and ordinances to institutionalize reforms

• Formation of internal management team


LUMC – Results of reforms

• Containment of the provincial fiscal subsidy to a manageable level (~PhP35 million a year)

• Increase in total patient discharge from an annual average of 8,056 before the reforms to 11,481 after

• Decline in percentage of charity patients from 84.7 percent before the reforms to 53.4 percent after; Corresponding increase in PhilHealth patients from 10.2 percent before the reforms to 38.8 percent after

• Increase in PhilHealth collections from PhP1.1 million in 2002 to PhP19.1 in 2008

• Greater stability in employment among hospital staff, better employee incentives and morale

• Better patient amenities (rooms, waiting areas)


LEYTE PROVINCIAL HOSPITALS


Leyte provincial hospitals – Background

• Island province in Eastern Visayas, one of the poorest regions in the Philippines (direct path of typhoons)

• Involved 12 provincial hospitals (9 secondary + 3 primary)

• Province faced financial difficulty in supporting hospital services since these were turned over in 1992; 30-35 percent of IRA devoted to these hospitals

• Provincial budget for hospitals in 2003 of PhP233.8 million deemed highly inadequate; very weak internal revenue mobilization (PhP7.3 million a year)

• Annual provincial subsidy of PhP223.4 million deemed as “hemorrhaging” provincial finances

• Poor condition of hospitals has led to declining patient census from 5,867 in 2003 to 5,531 in 2004


Leyte – Reforms undertaken: Hospital Enhancement for Leyte’s Progress (HELP)

• Province-wide governance of 9 secondary and 3 primary hospitals, under Office of the Governor

• Start of Special Service Fee (SSF) voluntary scheme with standard fees for hospitals

• Enrolment of PhilHealth members through provincial premium subsidy; More active claiming of PhilHealth reimbursements

• Establishment of PhilHealth LINKS as a regional call center to assist in eligibility verification of members

• Establishment of paying and PhilHealth wards in all provincial hospitals

• Collection of all fee revenues at the provincial level (hospital fees, professional fees), and their allocation as staff incentives, capital outlay, and maintenance and other operating expenditures (MOOE) for all provincial hospitals using set rules


Leyte – Governance structure

• Creation of an Ad Hoc Committee on Health in 2004 to implement HELP program

• Visionary and transformational leadership of Gov. Jericho Petilla; active governance by the Governor’s office of the HELP program, which managed provincial hospitals like a holding corporation

• Advocacy and capacity-building (including study tours domestically and abroad) of hospital directors and managers

• Formulation of provincial resolutions and ordinances to institutionalize reforms


Leyte – Results of reforms

• Hospitals are in better upkeep; Patient census doubled from 5,867 in 2003 to 9,973 in 2012

• Total funding for 12 provincial hospitals increased from PhP227.3 million in 2003 to PhP272.2 million in 2012

• Income from fees and PhilHealth reimbursements increased from PhP7.3 million in 2003 to PhP118.4 million in 2012

• Provincial subsidy declined from PhP220.0 million in 2003 to PhP153.8 million in 2012, and further down to PhP100.0 million in 2013

• Doctors now much better remunerated (each earning in the range from PhP41,000 to PhP162,000 a month); medical vacancies no longer exist, and there is a queue of applicants


NKTI-FRESENIUS HEMODIALYSIS CENTER PPP


National Kidney and Transplant Institute (NKTI) –Background

• Established in 1983 as an autonomous hospital, one of 4 premiere government hospitals; major renal hospital and transplant center in Asia

• Asian financial crisis of late 1990s/early 200os turned capital outlay to zero and reduced recurrent budget

• Increasing burden of renal patients > high demand for hemodialysis > high breakdown rate of equipment > overstressed HD nursing staff


NKTI – Reforms undertaken: PPP scheme with private investor, Fresenius

• PhP54 million Build-Operate-Transfer (BOT) scheme, initial contract from 2003-2008, renewed 2009-2013

• Equity participation: NKTI, 20 percent + Fresenius, 80 percent

• Fresenius’ role: supply of all HD machines, state-of-the-art water treatment and dialysis reprocessing machines, service maintenance

• NKTI’s role: (a) pay fee-per-treatment to Fresenius in accordance with agreed lease payment schedule; (b) provision of staff, space, and water utility supply


NKTI – Governance structure

• BOT Law (R.A. 6957) governs PPP contract

• NKTI board of trustees approves all key policy decisions, including choice of investment partner and renewal of contract

• NKTI management team implements decisions and carries out HD program

• Unclear whether to attribute success to governance (the board) or to the management team, but senior hospital staff indicated that autonomous hospital status makes governance and management more flexible


NKTI – Results of reforms

• Quick award of contract > quick acquisition of latest HD technology at competitive cost

• From 2007 to 2010, total number of patients reached 27,522 or 6,880 per year (roughly 20 a day)

• Access among patients with limited ability to pay was expanded as fees remained lower (PhP2,000 per week) than commercial rates at private hospitals and dialysis centers (PhP4,000 per week)

• Training and rotation of nurses improved, lessening staff stress, and lowering staff turnover

• Hospital’s budget from National Government has remained fairly constant since 1998, and HD fee revenues have increased and outpaced the annual payment to the private partners


SOUTHERN PHILIPPINES MEDICAL CENTER


Southern Philippines Medical Center (SPMC) –Background

• Located in Davao City, the metropolitan area in Mindanao, second largest island

• One of 72 DOH retained hospitals; regional catchment area; tertiary facility

• Inpatients (1,107 per day) far exceeds authorized bed capacity (600); 1,096 OPD patients per day

• No capital outlay for the past 3 years (2010-2012); recurrent budget barely increased from PhP250 million in 2011 to PhP261 million in 2012

• Frequent drug shortage; inadequate diagnostic capability; frequent equipment breakdown


SPMC – Reforms undertaken

• Based on 2008-09 stocktaking exercise

• Hospital financing reforms focusing on maximizing PhilHealthreimbursements• Staff recruitment, 7 to 40 for claims preparation; assignment of 3 doctors as

claims adjudicators• Staff training on PhilHealth rules and ICD-10/11• Quality assurance on claims preparation

• Adoption of drug consignment system with private pharma providers (“pay for what you consume”)

• Use of PPP to access diagnostic equipment from private sector (“cost-per-test” payment)• Chemistry and immune-assay analyzers, dialysis machines, Computed radiography

and digital radiography• CT scans• Mechanical ventilators


SPMC – Governance structure

• Hospital remained non-autonomous before, during, and after reforms

• Visionary and transformational leadership of hospital director (who came from the private sector)

• Strong agreement among senior hospital managers on the direction and scope of reforms

• Relative latitude provided by central DOH on the execution of the reforms


SPMC – Results of reforms

• PhilHealth patients increased from 32 percent in 2008 to 44 percent in 2012

• PhilHealth reimbursements increased from PhP170.4 million in 2008 to PhP436.9 million in 2012

• Most of large-scale capital investment program has been completed (buildings, equipment)

• Drug consignment system has largely solved drug shortage problem; DOH Administrative Order based on SPMC experience has been approved, encouraging the practice in DOH retained and LGU hospitals


Summing Up


Internal environment affecting governance

• Active and visionary leadership is critical, but rare

• Financial difficulties frequently trigger hospital reforms. While the solution is available (PhilHealth), hospital leaders usually do not know what to do, used as they were to passively receiving budget subsidy.

• No rifts were identified between reform leaders and hospital managers/staff in the 4 reform sites, but vociferous critics do abound

• Successful reforms in devolved hospitals hinge on the good relationship between LGU executives and hospital managers; short tenure of office of LGU executives can be a hindrance


Strengths and good practices

• Use of provincial resolutions and ordinances to institutionalize reforms in LGUs and sustain them across administrations and local elections; use of Administrative Orders to do the same for DOH hospitals

• Use of competitive PPP (lease, BOT) as a means of acquiring expensive medical equipment under conditions of limited gov’t fiscal capacity

• Centrality of PhilHealth financing as the anchor of reforms; user fees, which tend to be regressive, used only as transitional mechanism

• Maintenance of budget subsidy during the transition period until the reforming hospitals are able to sustain themselves with PhilHealthpayments

• Conduct of corresponding systems improvement, especially IT, to udergird hospital reforms


Challenges and recommendations

• Lack of an overall analysis and strategy of government hospital sector

• The few reforms are sporadic and highly “individualized” (idiosyncratic) based on leaders

• Poor state of government hospital data (collected but not encoded, analyzed, aggregated)

• Negativity of skeptics within hospitals and public commentators

• Challenge of financing both communicable and noncommunicablediseases


hospital governance reforms in the philippines: four case

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