COA: PhilHealth’s All Case Rate Payment Scheme sped up reimbursement process but lacked control mechanisms to detect and prevent improper payments

Published: 8 March 2021

The Commission on Audit (COA) conducted a performance audit of the Philippine Health Insurance Corporation (PhilHealth) All Case Rate (ACR) Payment Scheme covering the period since its implementation in 2011 until June 30, 2020.

Previously, PhilHealth utilized the Fee-for-Service payment scheme, health care institutions (HCIs) such as hospitals and clinics were reimbursed an amount based on the actual charges for the patient’s treatment. This led to delays in the reimbursement due to differences in rates and fees charged by each HCIs and the difficulty in validating such charges. In some instances, this also resulted in bloated charges.

Under the ACR Payment Scheme, PhilHealth pays all claims using a case rate which is a predetermined fixed rate for each covered case or disease. For example, natural childbirth has a case rate of ₱5,000, which will be paid uniformly among all HCIs. The result is that instead of undergoing the process of computing the reimbursements based on actual costs, the HCI will be reimbursed a fix amount, which may be more or less than the actual cost. The idea behind the ACR, which is utilized in other jurisdictions as well, is to incentivize HCIs to be more efficient.  If the case rate for a specific treatment is lower than the actual cost, the HCI will try to be more efficient in the costing of the treatment. On the other hand, if the case rate is higher than the actual cost, the HCI gets to keep the difference as a form of “efficiency gains.”

The audit team found that the ACR Payment Scheme improved the efficiency on the Turn-Around-Time (TAT) in the processing of reimbursement of claims of HCIs. Based on PhilHealth data, the TAT for the processing of claims improved from an average of 55 days during the Fee-for-Service Payment Scheme in 2010 to 19 days under ACR in 2019. The implementation of Electronic Claims System in 2018 also contributed to a much faster TAT.

However, COA found that PhilHealth was remiss in conducting the annual or even periodic review of the case as required, in order to determine whether the case rate for a particular treatment is responsive to the actual costs.  If the actual costs for a treatment are significantly less than the case rate, then a corresponding adjustment in the case rate should be made. Similarly, if the actual costs are significantly higher than the case rate, then an adjustment should also be made to the case rate. This was not done, and any savings from such adjustments could have been used to augment the Reserve Fund.

COA also examined PhilHealth’s existing control mechanisms to prevent and detect improper payments and found that these were deficient and underperforming due to the deficiencies in the design and performance of controls, insufficiency of human resources, and inadequacy of strategy to mitigate the effects of the first two problems.

For instance, PhilHealth established the Medical Prepayment Review (MPR) in 2019 to monitor four illnesses considered vulnerable to fraud. From March 1, 2019 to June 30, 2020, a total of 878,876 claims should have undergone MPR but only 252,408 claims were reviewed. Of the remaining 626,648 claims, 443,162 claims were paid by PhilHealth despite not undergoing MPR.

Another example is the Medical Post-Audit (MPA) mechanism which was established to detect improper payments after the HCI received its reimbursements. Out of the 16.48 million claims required to be post-audited by PhilHealth from 2014 to June 30, 2020, only 3.20 million claims were actually post-audited. The audit of these 3.20 million claims led to the discovery of 380,413 medical review findings. Around 13.54 million claims still remain for post-audit.

If only to highlight the importance of the control mechanisms, from 2011-2020, PhilHealth paid ₱665.28 billion to HCIs representing reimbursement of 67.95 million claims.

COA’s recommendations include the conduct of extensive review of case rates to include the Case Type Z Benefit and COVID-19 packages to provide reasonable rates that would minimize efficiency gains and address deficiencies in the control design and ensure controls are working effectively. In the event PhilHealth proceeds with the shift from the ACR to the Diagnosis Related Group – Global Budget system, then the same observations and recommendations should be considered in the system and the implementation thereof.   COA added that improper payments from claims may be detected through citizen participation and recommended PhilHealth to develop a mechanism to empower members by increasing their level of awareness about ACR as well as their engagement and provision of feedback. #

For more details, please click the link for the copy of the Performance Audit Report on ACR Payment Scheme of PhilHealth (PAO-2020-01).