THE governing board of the Philippine Health Insurance Corporation (PhilHealth) violated Section 88 (1) of Presidential Decree No. 1445 when it passed Board Resolution No. 2496 s. 2020 which led to the release of P14.97 billion to private and government hospitals under the Interim Reimbursement Mechanism (IRM) last year.
In its 2020 report on the state health insurer, the Commission on Audit said the amount released constituted “advanced payments,” which is explicitly prohibited under PD 1445.
PhilHealth said the money was distributed to healthcare institutions (HCIs) in various regions to assist private and state-run hospitals and clinics in providing healthcare services during the pandemic.
Auditors, however, said PhilHealth failed to do the one thing that would have cleared the cash releases from being questioned — secure prior approval from the Office of the President.
“Considering the enormous sum of P14.971 billion of funds released by PhilHealth to the HCIs through the IRM scheme, it could have at least exercised the required diligence. At the very least, PhilHealth could have secured the prior approval of the President of the Philippines, which the latter might approve given the circumstances faced by the country brought about by the COVID-19 pandemic,” the audit team said.
“Thus, absence of proof showing that IRM fund releases have legal bases or prior approval of the President of the Philippines justifying exemption from the prohibition against advance payments, the disbursements made under the IRM scheme were without legal authority and could be considered illegal expenditures,” it added.
In reaction, PhilHealth said the IRM has been suspended and that around 95 percent of the funds released have been liquidated by the recipient HCIs. It added, although belatedly, it has requested the Office of the President for post-facto approval of the said advance payments.
About P7.68 billion or 51 percent of the total IRM released went to private HCIs but these were not subjected to 2 percent creditable income tax amounting to P152.83 million, which would have been withheld before the funds were transferred.
PhilHealth management admitted its oversight during exit conference with the audit team.
It said it has taken steps to recoup the unpaid taxes by requiring its regional offices to collect the amount from the hospitals. As of June 11, 2021, the PhilHealth said it has recouped P137.502 million of the sum required.
COA said PhilHealth, by failing to withhold the proper taxes and to remit them on time, violated provisions of the National Internal Revenue Code. These offenses are punishable by fines or imprisonment of six months to two years per count, or both.
“Failure to withhold the appropriate income taxes and/or to make timely remittance thereof would expose the officers of PhilHealth charged with the duty to deduct, withhold and remit the required taxes to possible prosecution and imposition of penalties, interest and criminal liabilities,” COA said.
Review of the IRM releases revealed 488 HCIs ended up with the lion’s share of the PhilHealth funds totaling P10.651 billion equivalent to 71.15 percent.
“The amounts released/granted to these HCIs were more than what was allowed under PhilHealth Circular No. 2020-0007 and its corresponding PhilHealth Standard Operating Procedure (SOP) Nos. 2020-02-02-007 and 2020-02-02-008,” the auditors said.
With some hospitals getting more than their fair share of the money, COA said other hospitals were forced to make do with less.
“IRM fund releases to HCIs resulted in overpayments ranging from a total of P81.507 million to P2.208 billion; thus depriving other HCIs of the availment of IRM fund critical in the immediate provision of health care services to PhilHealth members and their dependents and denoting that the resources of the agency were not managed properly and efficiently,” COA said.
