L.E.A.P. 1949 !: Philippine Hospitals Brought Out 6 Of Its Many Sentiments In Its Position Paper

Wage Boards of some of the Philippine’s regions have implemented varying COLA/wage increases for minimum wage earners. The Philippine Hospital Association and the Private Hospitals Association submitted its position paper to the Regional Tripartite Wage Board-NCR. Nonetheless, the PhP 22/day increase in allowance for minimum wage earners in the NCR came out. The cries of the PHA have fallen unto deaf ears and the difficulties cited by the hospitals in that position paper persist.

In a nutshell, the 6 sentiments enumerated in the position paper below, are the following:

1. THE CHEAPER MEDICINES LAW AND ITS MAXIMUM DRUG RETAIL PRICE

2. THE ILLEGAL DETENTION LAW

3. THE SENIOR CITIZENS’ DISCOUNT LAW & THE MAGNA CARTA OF DISABLED

PERSONS LAW

4. DELAYED PAYMENT OR UNPAID CLAIMS FOR REIMBURSEMENTS BY HOSPITALS

FROM THE PHILIPPINE HEALTH INSURANCE CORPORATION (PHIC) OR

PHILHEALTH

5. UNFAIRNESS OF THE EXPANDED

6. OTHER LAWS THAT IMPOSE NEW FINANCIAL BURDEN ON HOSPITALS

(CLEAN AIR ACT AND FIRE SAFETY CODE)

The government may have good reasons for some of those impositions but there is clearly a need for temperance and balance. Capacities to comply and mitigation of difficulties towards compliance must be taken into consideration by the government lest, we stand to see the demise of more hospitals.

In the hope of somehow tempering the public’s perception of the hospitals as “anti-poor”, hereunder reproduced in its entirety is the copy of the position paper it has submitted to the DOLE. The points raised herein are not only for the petition vs the minimum wage. It also brings out the not so publicized woes of hospitals in view of the burdens that have been passed on to them by concerned agencies of the government. All these concerns have been formally brought to the attention of concerned agencies who were all more than happy to lend sympathetic ears but sad to say, with nary any significant results todate.

JOINT POSITION PAPER ON

THE PROPOSED WAGE HIKE

There is no other institution in the employer’s sector that is most vulnerable to financial losses than the private hospital sector as a result of a series of laws and regulations that continue to prejudice its interests. These constrain the Philippine Hospital Association and the Private Hospitals Association of the Philippines to oppose the proposed wage hike to stop the hemorrhaging of the industry and give this a chance to recover. Specifically, the reasons are as follows:

THE CHEAPER MEDICINES LAW AND ITS

MAXIMUM DRUG RETAIL PRICE

The implementation of the Cheaper Medicines Law mandated hospitals to comply with a ceiling on the pricing of medicines as defined by the Department of Health (DOH). This DOH-mandated price is known as the “Maximum Drug Retail Price” or MDRP of essential medicines.

When this MDRP first took effect, DOH failed to consider that all private hospitals have existing pharmacy inventories on-stock already purchased from suppliers and the manufacturers at higher prices. Thus, if for example a hospital purchased a certain medicine from the manufacturer at a price of Php 1.00 and the MDRP program directs the hospital to sell it at a price of Php0.50, how will the hospital be able to recover its loss of Php 0.50?

Lamentably, the private hospitals have not been given any answer to this burning question. Since 1/3 of the hospitals’ income comes from the sales of medicines from the hospital pharmacy, they hurt and continue to hurt over these unresolved issues that negatively impact on its already measly bottom line.

THE ILLEGAL DETENTION LAW BURDENS

THE OPERATION OF HOSPITALS

Following the passage and the implementation of the R.A. 9439 or the Illegal Detention Law, the hospitals experienced and continues to experience a surge in the number of confined patients in private hospitals who insist on being discharged without paying their hospital bills and with just a promissory note, by invoking the provisions of this law. To dramatically illustrate this point, can anyone enter a restaurant, order food and drinks and leave with just a promissory note? Definitely not. Why then was this allowed in the hospital industry, where patients are given the necessary medicines, supplies, room and board and patient care and after ‘consuming’ all these goods and services these recipients of care can just walk away?

The resulting data is a testament of how detrimental this law has been to the hospitals. Out of ten (10) promissory notes issued by patients, only 1 out 10 or a mere 10% are fully paid, 3 out of 10 or only 30% are partially paid while the remaining 60% become bad debts. Many of these hospitals learn too late, that these patients are NPAs - with no permanent addresses.

This law also encouraged even a number of well-to-do patients who profess to be indigent to take advantage of the shelter provided under the Illegal Detention Law. This law significantly affected the collection of hospital accounts, raising the accounts receivables to a whopping 25%-30% of the revenues generated. This prompted hospitals to call this piece of legislation the “Killing Me Softly Law”.

As if this is not enough, lawsuits are also filed against hospitals by arrogant patients who misconstrue even a small delay in the discharge process as being held against their will for unpaid hospital bills.

The question that begs to be asked is “what has the government done to assist the hospitals on the unpaid promissory notes?”. The answer to this day – NOTHING AT ALL.

THE SENIOR CITIZENS’ DISCOUNT LAW & THE

MAGNA CARTA OF DISABLED PERSONS LAW

Hardest hit in the implementation of the Senior Citizens’ Discount Law and the Magna Carta of Disabled Persons Law by way of illustration are the hospitals; if the hospital buys supplies (e.g. medicines) at a price of P100.00, and puts a mark-up ceiling of 10%, it stands to incur a loss of 10% whenever a senior citizen and/or disabled persons avail of the mandatory 20% discount they are entitled to under the law.

Furthermore, this privilege is unlimited no matter how many times the senior citizen avails of this even if for confinements due to the same disease. Again, we in the hospital industry ask the government this question: “How will the hospital recover this 10% loss?”. In countries where this same law is applied, the establishments are reimbursed by the state for the equivalent of the discount/s extended. This law passed Philippine style omitted that safety net and instead passed on the burden solely to the private enterprises – and its implementation is tantamount to taxation.

These two laws apparently provide for tax incentives when implemented but the Bureau of Internal Revenue (BIR) imposes a ceiling on the tax incentive – and this is left to the discretion of the different BIR regional offices who have different ways of interpreting these two laws, i.e. some will give tax incentives and some will not.

We hasten to point out that we in the hospital industry are not opposed to the spirit and intent of these two laws; all we are asking is for the government to do something to help the hospitals recover their losses as a result of their implementation like reducing our applicable tax rate or excluding the industry in the mandatory wages to give it a breathing space. Not to provide these safety nets may deplete the hospitals’ resources which in turn will affect the ability of the hospitals to sustain their operation. Ultimately, this will affect its ability to serve the senior citizens and the disabled - the age group most commonly in need of medical care.

The laws must serve the needs of the population but in this instance, it renders the industry futile that the cure has in effect become itself the disease.

DELAYED PAYMENT OR UNPAID CLAIMS

FOR REIMBURSEMENTS BY HOSPITALS

FROM THE PHILIPPINE HEALTH INSURANCE

CORPORATION (PHIC) OR PHILHEALTH

Approximately 65-70% of patients confined in private hospitals are Philhealth/PHIC-covered patients. It can immediately be deduced that 65%-70% of the hospitals’ revenues are being “lent” to PHIC. To continue its viable operation, the hospitals should be paid/reimbursed by PHIC on-time and without delay.

Sadly, this has not been the case. Private hospitals have been complaining for quite some time now about delayed/unpaid receivables from PHIC – some even taking as long as three (3) years to be reimbursed. This situation adversely affect the ability of the

Joint Position Paper On Proposed Wage Hike

hospitals to finance its operation i.e. salaries of personnel, suppliers payment, etc., creating a domino effect where the one who will end up suffering will be the patients.

PHIC/Philhealth is also known to slash claims for reimbursement by hospitals, only paying as low as only 60% of the claims without even offering any explanation. How would the hospital have any hope of recovering from the patient the amount disallowed/unreimbursed? What has the government done to assist hospitals with this problem? Until today, nothing has been heard of from those responsible despite repeated demands by hospitals.

Adding insult to the injury, PHIC always seems to be in a hurry to file charges against hospitals for ‘supposed’ violations of the National Health Insurance Law. Under this law, the Philhealth is the investigator, the prosecutor, the judge and the executor all at the same time. In reality, most decisions of the Philhealth are perceived to be unjust and unfair to hospitals. Only when the Philhealth Law is amended can hospitals probably expect a change for the better. Until then, the hospitals are caught in a vicious cycle that is spinning out of control.

While the industry welcomes the effort of PHIC to impose quality standards as a requirement for continuing accreditation, it has not exacted the same standards from itself and rendered it a one-sided implementation. Other than the high cost of implementing the requirements, there must be a ‘reward’ for compliance – and the hospitals ask for nothing but what they should be entitled to in the interest of fairness and justice – just for timely payment of what they are owed, nothing more, nothing less.

UNFAIRNESS OF THE EXPANDED

VALUE ADDED TAX (VAT) LAW

Purchases made by hospitals are covered by the Expanded Value Added Tax (E-VAT). In other words, if a manufacturer sells a medicinal product to a distributor, a 10% VAT is imposed and this is passed on to the distributor who in turn, passes on this 10% VAT to the retailer (e.g. hospitals and drugstores). In effect, a 20% increase of the price of medicine is passed on to the hospital. These hospitals are however not allowed to pass on the VAT to the patient, and it has to absorb it.

Is there a solution being offered that will relieve the hospitals from this VAT pain? None at all, to date.

OTHER LAWS IMPOSE NEW FINANCIAL BURDEN ON HOSPITALS

The strict implementation of the new requirements of the Clean Air Act and the Fire Safety Code carries with it the added financial burden on the cash position of hospitals. The Fire Departments of the respective local government units do not give permit to the hospital if it has no water sprinkler system. This condition applies even to the already old and existing hospitals. The sprinkler system requirement will mean an additional cost burden of no less than a hundred thousand pesos to from each hospital.

The Clean Air Act likewise imposes rigid conditions for water supply and waste disposal program before clearances are issued for the operation of the hospital. Again, this will entail substantial cost to the hospital. And again, there is no relief on sight that the government can extend to.

WAGE HIKE WILL FURTHER BURDEN

HOSPITALS ALREADY REELING FROM THE

SEVERELY STRAINED FINANCIAL SITUATION

Approximately 26%-35% of the hospital budget goes to the salaries of the hospital staff, the industry being labor-intensive. A wage hike at this time when hospitals are still at the height of their agony brought about by the unrelenting effect of the previously enumerated legislations may bring this industry to the Intensive Care Unit, fighting for its survival. Already about 600 hundred hospitals have closed as a result of the present situation.

A fair concept of health must follow this equation: “Health = Healed + Healer” where the healer is the health service provider the hospital included. Both the healer and the healed must be protected equally in order to attain improvement in health condition. Both are indispensable parties for a successful health program of the government. Neglecting one and favor only the other will definitely affect the results.

Wherefore, premises considered, we in the hospital industry submit that now is NOT the time to impose a “wage hike order” upon hospitals as this will certainly hasten the deterioration of its already comatose condition. We want the industry to first become stable, move out of the intensive care and be nursed back to health, with a lot of government intervention. A wage hike at this time will only hasten the demise of the hospital industry, and the biggest loser will be the public or the patients we serve.