The All Case Rate (ACR) Payment Scheme Sped Up the Reimbursement Process for Health Care Institutions (HCIs) but Existing Control Mechanisms Have Been Deficient and Underperforming in the Prevention and Detection of Improper Payments
What COA Found
Under the ACR Payment Scheme, PhilHealth pays all the claims using case rates. This scheme allows HCIs to receive reimbursements greater than the actual hospitalization charges of treating patients. This happens when the actual hospitalization charges are lower than the case rates. PhilHealth has been treating these excess payments as “Efficiency Gains” or a form of incentive to HCIs for efficient treatment of patients. According to PhilHealth Management, HCIs also have a risk of losing money because of inefficiency, which is termed as “Efficiency Loss”.
Our review of the PhilHealth database revealed that PhilHealth paid ₱665.28 billion to HCIs representing reimbursement of 67.95 million claims which were processed and approved from Calendar Year (CY) 2011 to June 30, 2020. The audit team derived the Efficiency Gains and Efficiency Losses by computing the difference between the actual hospitalization charges and case rates of all the claims within the period stated. However, the audit team could not derive the entire amount due to the significant number of inaccurate entries in the database. About 42.7% or 29.04 million claims reflected actual hospitalization charges equal to zero or the case rates. These claims cover about ₱268.68 billion. Of the remaining claims, about 15.1% or 10.24 million claims amounting to ₱225.93 billion reflected that HCIs received Efficiency Gains in the amount of ₱41.91 billion – ₱28.40 billion went to government HCIs while ₱13.51 billion went to private HCIs. The remaining 42.2% or 28.67 million claims covering ₱170.67 billion payments to HCIs were exclusive of ₱61.94 billion Efficiency Losses – ₱61.74 billion were borne by government HCIs and ₱204.12 million were borne by private HCIs.
Our review of the existing policies revealed that the reason for the disparity between the Efficiency Losses of government and private HCIs was due to the limited application of the No Balance Billing (NBB) Policy. Under the NBB Policy, all government HCIs and accredited private HCIs will absorb the out-of-pocket (OOP) expenses of NBB beneficiaries (e.g. indigent patients, senior citizens) if the actual hospitalization charges is greater than the case rate. The audit team found that not all private HCIs are covered by the NBB Policy. In private HCIs which are not covered by the NBB Policy, beneficiaries will shoulder the excess of actual hospitalization charges over the case rate as OOP expenses. These HCIs receive Efficiency Gains without the risk of Efficiency Losses. Furthermore, Efficiency Losses may only be incurred if the HCIs are treating NBB beneficiaries. All other patients pay OOP expenses if the case rate is lower than the actual hospitalization charges.
To ensure that the Efficiency Gains and Efficiency Losses are maintained at a reasonable rate, PhilHealth policy prescribes the annual review of the case rates. The audit team found that PhilHealth did not review the case rates annually as required. Only six procedure rates were updated from the 8,899 original case rates established in CY 2013. Had PhilHealth conducted annual review, it could have minimized or maintained the Efficiency Gains at reasonable level converting portions of the ₱41.91 billion Efficiency Gains to savings. These savings could have augmented the Reserve Fund. Based on the CY 2019 Financial Statements, PhilHealth’s Reserve Fund has a balance of ₱109.96 billion. In the past, PhilHealth has maintained the Reserve Fund at a level equal to the amount actuarially estimated for two years’ projected program expenditures; for CY 2019, that is equivalent to ₱470.59 billion.
Ultimately, the objective of the ACR Payment Scheme is to improve the efficiency and quality of the medical services for PhilHealth members. Based on PhilHealth data, the Turn-Around-Time (TAT) for the processing of claims has improved from an average of 55 days during the Fee-for-Service Payment Scheme in CY 2010 to 19 days under ACR in CY 2019. The implementation of Electronic Claims (eClaims) System in CY 2018 contributed to a much faster TAT. While PhilHealth had established a Health Care Provider Performance Assessment System, the audit team found that PhilHealth did not collect data on the extent the program improved the health care services of HCIs indicating lack of serious efforts to assess the effectiveness of the ACR.
The audit team 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 CY 2019 to monitor four illnesses considered as priority conditions. 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. Based on the PhilHealth database, out of the total 61.25 million claims paid by PhilHealth from CY 2014 to June 30, 2020, by policy, only 16.48 million claims are required to be post-audited. Of this, only 3.20 million claims were actually post-audited. This led to the discovery of 380,413 medical review findings. PhilHealth has a backlog of 13.54 million claims. For the remaining 44.52 million which will not be subjected to MPA, there is no established guidelines to review these claims. An alternative way to detect improper payments from these claims is through citizen’s participation; however, due to lack of awareness of members this control mechanism was not maximized.
Why COA did this study
The Philippine Congress and press have indicated concerns over the Philippine Health Insurance Corporation (PhilHealth) All Case Rate (ACR) Payment Scheme, and its ability to improve care and prevent improper payments.
The Commission on Audit (COA) identified the PhilHealth’s ACR Payment Scheme as one of its priority areas for performance audits. The audit team performed the following: 1) reviewed the extent the ACR achieved its goals and objectives, and examined the existence of overpayments and whether or not the ACR facilitated such incidents; and 2) reviewed the existing control mechanisms to prevent and detect improper payments. The scope of the audit covered implementation of benefit scheme from Calendar Year (CY) 2011 to June 30, 2020.
This audit also covered the Case Type Z and Coronavirus Disease 2019 (COVID-19) Benefit Packages since the payment scheme for these benefits is similar to the ACR. The Case Type Z Benefit Packages refer to benefit packages for primary disease conditions that are economically and medically catastrophic due to its seriousness. COVID-19 coverage refers to the inclusion of the COVID-19 in the list of illnesses covered by PhilHealth.
What COA recommends
COA recommends that PhilHealth
(1) conduct the required review of case rates extensively to include the Case Type Z Benefit and COVID-19 packages to provide reasonable rates that would minimize Efficiency Gains; or revisit and revise the policies implementing the ACR and Case Type Z Benefit Packages to ensure that the scheme is beneficial to all stakeholders;
(2) address deficiencies in the control design and ensure controls are working effectively in the existing control mechanisms;
(3) formulate sampling plan for the efficient review and post-audit of other claims;
(4) develop a mechanism to empower members by increasing their level of awareness about ACR as well as their engagement and provision of feedback;
(5) pursue the implementation of planned Integrated Enterprise Solutions including the ongoing data cleanup of Membership Database; and
(6) adopt/develop relevant indicators that will measure the success of payment scheme in addition to Turn-Around-Time (TAT) in the processing of claims.
In the event PhilHealth adopts the Diagnosis-Related Group – Global Budget, it must ensure that the lessons learned from the implementation of ACR Payment Scheme are considered and incorporated to prevent and detect improper payments under the new scheme, as applicable.