Corruption embedded in PhilHealth – Drilon: Officials warned of plunder charges

    Senate Minority Leader Franklin Drilon (Photo from the Philippine Information Agency)


    SENATE minority leader Franklin Drilon yesterday said corruption is embedded in the Philippine Health Insurance Corp. (PhilHealth) as clearly shown in the first two hearings conducted by the Senate committee of the whole.

    “The first two hearings basically concentrated, or questions were focused on the IRM (interim reimbursement mechanism) and on the overpricing of the IT programs. My take is that indeed, there is at least prima facie case of corruption and that corruption is embedded in PhilHealth bureaucracy,” Drilon told reporters in a virtual interview.

    He told PhilHealth officials, particularly those involved in the formulation and implementation of the IRM, that they could be held liable for violation of the anti-graft law.

    The IRM is a PhilHealth program that provides cash advances to hospitals and clinics handling coronavirus disease (COVID-19) patients, and for members’ insurance claims. A suspected mafia in the state insurer is said to be using the IRM, among others, to siphon off billions in funds. The agency has lost some P15 billion in 2019 alone, according to a former official.

    At the House, PhilHealth officials suspected to be involved in the mafia were warned of plunder charges.

    “Billions were lost, that’s plunder… We’ll know which hospitals benefited. The COA’s (Commission on Audit) records are clear and it’s easy to investigate this,” said Rep. Michael Defensor (Anakalusugan party-list), chair of the public accounts committee.

    Key PhilHealth officials participated in a hearing yesterday, via Zoom, of the House committees on public accounts and on good government.

    Minutes into the meeting, three of the officials led by PhilHealth president and CEO Ricardo Morales asked to be excused from the hearing for various medical reasons.

    The officials who were left in the hearing had to face a lawmakers’ challenge for them to to waive their right to bank secrecy and allow the Anti-Money Laundering Council (AMLC) to look into their bank records. They accepted the challenge.

    Drilon told reporters that PhilHealth officials involved in the formulation and implementation of the IRM could be liable for violation of the anti-graft law because they entered into a contract on behalf of the government, which was grossly disadvantageous to government.

    “The IRM, as asserted by no less than the COA (Commission on Audit) chairman said that you have to liquidate within a reasonable period of time and the COA said it has been four months and up to now there is no liquidation,” Drilon aid.

    It can be recalled that Morales issued a memorandum dated June 16, 2020 stating that liquidation of IRM funds could be done at a date yet to be announced instead of in March.

    Another memo dated July 15 told regional offices they had options on how to liquidate the funds but was not clear what the options were.


    Aside from Morales, those who asked to be excused from the House hearing were Arnel del Jesus, executive vice president and COO; and Rodolfo del Rosario, senior vice president for legal sector.

    The three have signed off from the meeting when deputy speaker Luis Raymond Villafuerte challenged all PhilHealth officials to waive their right to bank secrecy.

    “You’re starting to get sick one by one,” Surigao del Norte Rep. Robert Ace Barbers at one point told Dr. Israel Francis Pargas, senior vice president for health finance policy sector, after Del Rosario signed out of Zoom.

    Morales, who has been undergoing treatment for cancer told the committee secretary he was not feeling. Del Jesus informed the joint panel that he had to replace the battery of his pacemaker.

    Villafuerte told the panel his request for waiver will be easy to accept if the agency’s officials are “innocent and have nothing to hide.”

    The PhilHealth officials who agreed to sign bank secrecy waivers were Pargas; Nerissa Santiago, acting senior vice president for actuarial services; Jovita Aragona, senior vice president and chief information officer; Renato Limsiaco Jr., senior vice president for fund management sector; Walter Bacareza, area vice president for the Visayas; Shirley Domingo, vice president for the corporate affairs group; Gilda Diaz, vice president for the office of the actuary; Oscar Abadu Jr.; vice president for the member management group; and, Jonathan Mangaoang, corporate secretary.

    Deputy speaker Dan Fernandez of Laguna asked the public accounts panel to also ask PhilHealth regional officers to sign bank secrecy waivers, prompting Defensor to order the secretariat to send letters to all PhilHealth board members, executive committee members, and regional officers.


    Defensor reiterated that based in COA reports from 2013 to 2018, Phi8lHealth lost at least P153 billion in overpayments to hospitals and fraud in just five years because of its “all case rates” system, which is the source of graft and corruption in the agency.

    COA reports would show that more than P150 billion were lost to overpayments and more than P50 billion to fraud in only five years.

    Under the all case rates system, PhilHealth pays hospitals based on fixed package rates even if the patient has incurred a lower hospitalization bill.

    Defensor zeroed in on questionable increases in the number of claims for various illnesses and medical procedures with PhilHealth which he believes is the scheme being used by the mafia.

    He said PhilHealth has a “benefits claim committee” in the regions and because of the all case rates system, the claims are being paid by the finance department “with no questions asked since it came from the region.”

    “It will be paid directly. When it (claims) comes there (finance), the funds will now go to the hospitals,” Defensor said. “I submit to the members of this committee, this in fact is plunder.”

    Defensor also questioned why the payment of claims for some private hospitals only take a while, government hospitals are having a hard time.

    “Is it because under this scheme of the mafia, there’s collusion between with a region or with a regional officer and the higherups? Is that why (some hospitals) get paid quickly?” he said.


    Defensor said pneumonia, gastroenteritis, urinary tract infection (UTI) are the leading diseases used by the PhilHealth mafia in their illegal operations while dialysis is their favorite procedure, the claims for which are being paid by the billions yearly.

    He noted that in 2014, P7.6 billion was spent for pneumonia; P1.5 billion for UTI and P1.3 billion for gastroenteritis while cataract operations, which was also became a cause for scandal that year, cost P3.7 billion.

    In 2015, pneumonia claims reached P9.7 billion; gastroenteritis, P2.5 billion; UTI, P2.1 billion; at P6 billion for dialysis which reached P8 billion the following year and in 2017, pneumonia claims shot up to P10.2 billion, gastroenteritis to P1.8 billion, and UTI to P1.5 billion.

    He said dialysis claims in 2018 reached 2.2 million claims from 1.6 million in 2017 and the claims paid for gastroenteritis was P2 billion more while the payment for UTI was P2.1 billion more.


    Sen. Panfilo Lacson said there are incidents that showed PhilHealth’s favoritism in the distribution of IRM, like in the case of a hospital in the Bicol region which got P274 million with only one COVID patient, and a hospital in Eastern Visayas who also had only one patient but was given P196 million.

    He said the most controversial involved the B Braun Avitum Dialysis Center which collected P15 million for its five dialysis branches within a week upon filing of claims.

    He said B Braun Avitum, which is not registered with the Securities and Exchange Commission, will accept suspected COVID-19 patients but will eventually refer them to Gat Andres Bonifacio (GAB) General Hospital in Tondo, Manila since it cannot treat COVID patients as it is just a dialysis center.

    What is surprising, he said, is that GAB General Hospital has not been paid by PhilHealth its P20-million benefit claim.

    Lacson said initial findings showed B Braun Avitum is owned by a Jojo Villar and its managing director, an Eduardo Rodriguez. He asked how it got a PhilHealth accreditation.

    Lacson also said the first two hearings clearly showed flaws in PhilHealth management.

    “Of course, may discrimination sa pagpili ng ospital na beneficiaries ng IRM for COVID.

    Second, may excessive exercise or discretion dahil pati hindi sakop ng COVID binigyan nila
    (Of course, there is discrimination in choosing which hospital would benefit from the IRM for COVID. Second, there is excessive exercise or discretion because even those [health care institutions or HCs] not included were given IRM for COVID),” he added.


    Lacson said he has asked Commissioner Greco Belgica of the Presidential Anti-Corruption Commission to coordinate with the Ombudsman so it can compel the Anti-Money Laundering Council to conduct an investigation into the erroneous deposit of P9.705 million of PhilHealth Regional Office 2 to the Rural Bank of Balanga in Bataan.

    Lacson said he got hold of the account number of the Rural Bank of Balanga which he will give to the AMLC for deeper investigation since under the law, transactions of more than P500,000 must be immediately reported to the AMLC.

    “Milyon-milyon ang pumasok doon umabot ng P9.7 million. So may question diyan. So madaling mate trace yan kung talagang ite-trace. But that is beyond the power of the Senate. All we can do is summon the AMLC and kung ibigay sa amin ang details ng account number, mate-trace natin kung sino ang nag-open ng account na yan (Millions of peso were deposited in that bank, reaching P9.7 million). So that can be questioned. The owner of that bank account can be easily traced if it will be indeed traced. But that is beyond the power of the Senate. All we can do is summon the AMLC and if it will give us he details of the bank account, we can identify who opened that bank account),” he said.

    Thorrson Montes Keith, the PhilHealth anti-fraud legal officer who resigned due to what he said is corruption in the agency, said two officers of PhilHealth in Region 2 he identified as Editha Fonel, head of accreditation and quality assurance section; and Jerome Follante, social insurance officer 3, “intentionally” deposited P9.705 million to the Rural Bank of Balanga in an apparent move to defraud PhilHealth.

    Keith said the two officers could not have made that error since a background check he made on them showed they were long-time PhilHealth employees who have technical expertise.

    He said he learned that the P9.705 million was intended for deposit in a bank in Region 2 for the benefit claims of a hospital but “had inadvertently credited the money to the Rural Bank of Balanga located in Bataan, Region 3.”

    “I discovered that it was multiple transactions of payments of reimbursements of PhilHealth benefit claims for 12 consecutive periods for the month of May 2019 — between May 2 and to 22. This is not merely inadvertent as the multiple transaction connotes deliberate intent to defraud the government by embezzling P9.705M,” he added.

    He said after a series of negotiations, the Rural Bank of Balanga agreed to return the money on the condition that it be paid P49,123 for the inconvenience brought about by the incident.

    Lacson said he will summon the two PhilHealth officials to he next Senate hearing.