Section A: Governance
What are the main national sources of health financing?
In the Philippines, government schemes and compulsory healthcare financing schemes make up 50.3% of health expenditure. Out-of-pocket payments make up 41.5%, and voluntary health insurance makes up 8.2%.
The main national sources of funding for health are as follows:
Sin Taxes: 20% of revenue is allocated to medical assistance and to the health enhancement facilities programme of the Department of Health (DOH). This is further broken down as follows:
• Tobacco products: 50% of total revenues from excise tax on tobacco products is allocated to PhilHealth (80%) and DoH (20%).
• Alcohol products: 100% of total revenues from excise tax on alcohol is allocated to PhilHealth (60%), DoH (20%) and Sustainable Development Goals (20%).
• Sweetened beverages: 50% of total revenues from excise tax on sugar-sweetened beverages is allocated to PhilHealth (80%) and DoH (20%).
PhilHealth: Premiums for the Philippine Health Insurance Corporation (PhilHealth) are financed by members and employers.
Special Health Fund: Local Government Unit (LGU)’s share of the Internal Revenue Allotment (IRA), subject to the Mandanas Law. This Law orders the national government to return a portion of revenues to the appropriate local governments. These resources are pooled into a Special Health Fund (SHF) created by local governments. The SHF covers the following:
• Population and individual health services;
• Capital investment such as but not limited to infrastructure, equipment and information technology;
• Health system operating costs;
• Renumeration of health workers;
• Incentives for all health workers in accordance with RA 7305 (Magna Carta for PHW), RA 7883 (BHW Benefits and Incentives Act), PD 1569 (Strengthening Barangay Nutrition Program), RA 11148 (Health and Nutrition of Mothers Act) and other relevant laws.
General Appropriations Act (GAA): Budgets proposed by the Department of Budget Management vary year-to-year depending on government priorities. For 2023, the Php 5.268 trillion budget distributed 39.2% to Social Services, of which 14% went to Health (corresponding to 6% of the total budget).
Allocation from Government-owned and controlled corporations (GOCS): These include the Philippine Amusement and Gaming Corp. or PagCor (50% of national government’s allocation) and the Philippine Charity Sweepstakes Office or PCSO (40% of the national government allocation). A circular signed on May 30, 2022, details operational guidelines for both agencies to remit funds to the GAA as National Government Subsidy for the improvement of benefit packages. At the time of signing, 50% of the total remitted amount went to Universal Health Care. The fund is expected to cover select medical and surgical procedures; the expansion of case rates for hemodialysis up to 156 sessions; the enhancement of benefit packages for selected orthopedic implants, post-kidney transplant, breast cancer, prostate cancer, cervical cancer, open heart surgery for children; and physical medicine and rehabilitation.
What is the main national Strategic Purchasing unit for healthcare?
The Universal Health Care Act delineates PhilHealth as the national purchaser of individual-based health services. PhilHealth is accordingly seeking to grow its strategic purchasing capabilities by accrediting service providers, selecting provider payment systems and designing benefit packages.
The Department of Health (DOH) is responsible for population-based interventions (e.g. immunisation, health promotion programmes), and local government units are responsible for local population-based interventions and health services. The DOH exercises main authority over population-level health and develops programs and interventions that are expected to be implemented at the local level. A central procurement unit in the DOH conducts procurement of goods and services for the Central Offices, or on behalf of the line agencies or hospitals under its supervision.
What agencies/institutions are involved in healthcare purchasing nationally?
Medicines and vaccines (national level)
Department of Health
Medicines and vaccines (subnational level)
Local government units
National specialty hospitals
Medical equipment and consumables (national level)
Department of Health
Medical equipment and consumables (subnational level)
Local government units
National specialty hospitals
Private healthcare institutions
Healthcare services
PhilHealth
Healthcare support services (national level)
Department of Health
Healthcare support services (subnational level)
Local government units
National specialty hospitals
Private healthcare institutions
The DOH is the main purchaser for population-based programmes and interventions. This includes immunisations and health promotion programmes, among others. The DOH’s central procurement unit centrally purchases healthcare goods and services for hospitals under its authority.
The four national specialty hospitals conduct their own procurement activities through their respective Bids & Awards Committee (BAC). In some instances, the specialty hospitals conduct procurement on behalf of the DOH.
While local government units (LGUs) have autonomy in purchasing healthcare goods and support services, these LGUs may also request assistance from the DOH to conduct purchases.
What is the market structure of healthcare purchaser(s) nationally?
34 to 44.7% of healthcare costs are purchased out-of-pocket (OOP) as of 2022. Government schemes and compulsory healthcare financing schemes make up 50.3% of health expenditure, with PhilHealth being the single purchaser of individual-based healthcare services. Voluntary health insurance schemes make up only a small percentage of the market share.
Is healthcare purchasing conducted in a decentralised manner or universally across the health system?
Purchasing for healthcare services is done separately between the public and private health sectors as well as between different health insurance schemes. There is no harmonisation in place.
In purchasing for goods and services for population health, healthcare purchasing is both centralised and decentralised. The Department of Health (DOH) is responsible for population-level health programmes which are expected to be implemented at the local level. The DOH, national specialty hospitals and local government units also play a role in purchasing.
If purchasing is conducted in a decentralised manner, are there any plans for integration?
There is no integration plan currently in place for healthcare services. The Universal Health Care Act should entail integration between sectors. However, the private sector feels that government requirements for accreditation are too stringent and service payments are too low, thus affecting the sustainability of their participation.
There was an effort to harmonise purchasing of healthcare goods (e.g. consumables, equipment, support services) among the 4 speciality hospitals. However, this was not implemented due to challenges in the national procurement law.
What are the top five agencies/institutions involved in purchasing health goods and services nationally?
• Department of Health (Php 4.355 trillion — 2021)
• PhilHealth (Php 140.16 billion — 2021)
• Specialty hospitals
• Local government units
What criteria do the main healthcare purchasers use to determine what to buy?
The Department of Health (DOH) plans what services & goods to buy based on historical use and projected increases in usage. Technical specifications of purchases (i.e. specific features & functions of the equipment being purchased) and prices of purchases are also taken into account. Broad guidelines are set by the Government Procurement Policy Board (GPPB) and the Health Technology Assessment Unit (HTA), as well as the national Drug Formulary for pharmaceuticals. However, the GPPB and HTA units are not yet fully involved in decisions for major purchases.
PhilHealth has a process of accreditation for service providers, who must satisfy its accreditation requirements. Providers are paid through a Case Rate method, though PhilHealth is currently studying how to move to a Disease Related Group (DRG) method. PhilHealth has limited some IT infrastructure that would enable the mining of data and translate into better analytics for planning and purchasing. However, this is not currently implemented.
Sub-nationally, specialty hospitals decide what to buy according to annual procurement plans, supplier qualifications and price. Local government units make decisions based on projections and historical data, technical specifications and price.
How do the main healthcare purchasers govern their use of funds?
All main purchases govern their use of funds through strict adherence to Commission on Audit (COA) guidelines. The COA is responsible for reviewing the budget utilisation of both the Department of Health (DOH) and PhilHealth.
Agencies that are purchasers of goods and services— such as the Department of Health (DOH), specialty hospitals and local government units — follow strict implementation of the Republic Act 9184 (the national Act on procurement).
PhilHealth is additionally subjected to the guidelines of the Universal Health Care Act, or Republic Act 11223, which defines its mandate as the national purchaser of individual healthcare services.
Who are the main stakeholders involved in decision-making on health financing and the health system?
Budgets for the Department of Health (DOH) and for PhilHealth are set through a multi-step process. First, the Department of Budget Management reviews proposed budget plans and may choose to cut or retain a budget. This final budget is then defended in Congress, which may approve or disapprove.
National level: For the DOH, decisions on health financing are made by the Secretary in consultation with Undersecretaries and staff. For PhilHealth, decisions are made by the CEO alongside the Board of Directors and other senior staff (e.g. internal Directors/Unit Heads).
Subnational level: For Specialty Hospitals, the hospital Director and Board of Directors make financial decisions. For local government units, the local Chief Executive and Municipal and Provincial Health Officers make decisions in consultation with the local Health Board.
Who are the main stakeholders involved in decision-making on strategic health purchasing?
The main stakeholders involved in decisions on strategic purchasing are as follows:
The Government Procurement and Policy Board lays out guidelines for government and public procurement, including the selection of suppliers.
The Health Technology Assessment unit gives guidance on the cost-effectiveness of health technologies, interventions and devices.
The National Drug Formulary, or the essential medicines list, lists which drugs medicines should be purchased by all public healthcare agencies.
The Food and Drug Administration (FDA) limits the allowed drugs to be purchased by the government through its drug formulary. The FDA also provides the License to Operate, Cerificate of Product Registration, Certification of Product Notification, Batch Notification for Drug Products and other releases for drugs and vaccines to be used.
PhilHealth makes decisions on provider payment systems, benefit packages and reimbursement rates for individual health services.
Section B: Legal and Policy Landscape
What laws/regulations define the mandates and roles of healthcare purchasers and providers?
The Universal Health Care Act 2019 defines the mandates and roles of health care providers as well as healthcare purchasers. The Act defines who qualifies as a health care provider. On the purchaser side, the Act places the Department of Health (DOH) in charge of contracting province-wide or city-wide health systems to implement population-based health interventions. This includes primary care networks (both public and private). PhilHealth is mandated to contract for individual-based healthcare using a mix of public, private or mixed health care provider networks through service-level arrangements, provided that a set of quality and payment conditions are met.
The General Procurement Reform Act mandates that each Department (including the DOH) should conduct its own procurement planning. If the planning is approved by the Department Secretary, heads and any consultants (if required), the relevant procurement unit shall prepare the materials needed to call for bidding.
What policies/regulations are in place surrounding healthcare purchasing?
The government’s purchasing for health is governed by the general Procurement Law.
The Universal Health Care Act lays out further regulations specific to healthcare purchasing. It states that the Department of Health (DOH) shall institutionalise a Health Technology Assessment (HTA) process to define priorities to be recommended to DOH and Philhealth. The function of the HTA covers drugs, medicines, pharmaceutical products and other devices, procedures and services.
The HTA Council should be composed of health experts within the DOH and be supported by a Secretariat and Technical Unit for policy, planning, and evaluation. The HTA Council is to review submissions based on the following criteria:
• Responsiveness to magnitude, severity, and equity
• Safety and effectiveness
• Household financial impact
• Cost-effectiveness
• Affordability and viability
What laws/regulations govern public finances and public spending?
Public finances and public spending go through a budget cycle wherein branches of government submit their work plan and corresponding budgets. This is reviewed by the Department of Budget and Management and then defended in Congress by the requesting agency. Any approved budget will be part of the annual General Appropriations Act (i.e. annual government budget) and will have to be utilised in accordance with the Procurement Law.
What government procurement & tendering processes are in place?
The Philippines uses the Philippine Government Electronic Procurement Services platform, where all suppliers must be accredited in order to participate in bids.
Prior to conducting public procurement activities, the relevant agency should prepare an Annual Procurement Plan to be submitted to Congress for approval.
A Bids and Awards Committee (BAC) must be created to handle the bidding process, in keeping with the Procurement Law / Republic Act 9184. No purchase will be allowed if it is not related to the Annual Procurement Plan.
What healthcare-specific procurement & tendering processes are in place?
The Government Procurement and Policy Board (as defined in the Procurement Law) details the process for the identification of items to be purchased by all government agencies. This Board includes the Secretary of the Department of Health as a member. In keeping with general government procurement guidelines, the Department of Health or local government units shall utilise the Philippine Government Electronic Procurement Services platform (PHILGEPS) for procurement. The relevant Bidding and Awards Committee (BAC) is responsible for posting bid specifications and evaluating bids from suppliers based on their technical and financial track record.
Specific to the health sector, a Health Technology Assessment unit was created under the Universal Health Care Act in 2019 as the body to recommend the approval or acceptance of new health technologies, drugs and other new healthcare developments.
The National Drug Formulary (i.e. essential medicines list) details the drugs approved by the government and lists drugs that all government health agencies shall purchase. Drugs that are not included in the list are not purchased by the government in their healthcare facilities.
Who is responsible for enforcing contracts with healthcare providers and suppliers, and how is this done?
PhilHealth conducts regular audits of its accredited providers based on pre-existing Service Level Agreements (SLAs).
Section C: Performance Monitoring
What regulations or accountability frameworks are in place for healthcare purchasers and providers?
For individual healthcare services, accountability is dependent on PhilHealth which audits and reviews performance commitments by its accredited providers.
For local government units, there are Local Government Scorecards in which health outcomes are considered.
Are there performance-based incentives in place for healthcare providers and suppliers?
The Department of Health has no set of incentives for good performance of its suppliers, but only punitive provisions. These may include blacklisting and filing of cases in court.
For the private healthcare sector, there are no prevailing government incentives.
For the public sector, PhilHealth utilises some performance incentive bonuses and income retention. PhilHealth has generally moved from fee-for-service to case-based financing, resulting in greater efficiency and the setting of incentives to improve service provider performance. If yearly projected expenses are not met or if targets are exceeded, PhilHealth also gives incentives to its officers and staff in the form of pay bonuses.
What systems are in place to assess the performance of healthcare providers and suppliers?
PhilHealth conducts audits of its providers. An accreditation process is first conducted for hospitals or health facilities to be included in PhilHealth’s list as legitimate sources for claims. These accredited facilities are later visited to ensure continued compliance when it comes to facility requirements. Likewise, reports are audited in a periodic fashion.
The Government Procurement Reform Act provides clauses for penalties to suppliers who submitted false information regarding bids, who refuse to carry out the contract after award, who terminate a contract and any such violations.
Government agencies are assessed in their performance based on their delivery of a contracted service, the quality of products/services delivered against the promise specified in the bid, and after-delivery performance.
What mechanisms are in place to provide feedback to healthcare providers and suppliers?
The Department of Health (DOH) and PhilHealth conduct consultation meetings with suppliers and providers. However, these are initiated by the government and not the suppliers/providers and there is no guarantee of regularity. It is during these meetings that grievances are aired. Any possible concerns from suppliers are raised in writing to the agency concerned, which may or may not lead to action.
What processes are in place to assess health system performance (utilisation, financial protection, quality, efficiency)?
The Department of Health (DOH), PhilHealth, Specialty Hospitals and local government units conduct annual reviews and are subject to Commission on Audit checks in terms of government efficiency and proper use of funds. However, reporting among these agencies remains fragmented.
PhilHealth’s annual report focuses on the following indicators: a) Number of accredited facilities; b) Premium contributions broken per sector; c) Claims payment per facility (private vs public).
The DOH Annual report covers the following indicators:
• Budget utilization
• Trainings and policy consultations conducted
• Efforts to implement Universal Health Care
• Health policy, standardization and modernization efforts
• Hiring of medical professionals
• Facilities improved or constructed
• Other programs of the Department
• Monitoring on: maternal health care, child nutrition, immunization, family planning, oral health, top non-communical diseases, HIV, tuberculosis, dengue, schistosomiasis, helminth control, leprosy.
What data and information management systems are used to monitor health system performance?
PhilHealth has separate IT systems for enrolment & membership and for utilisation. These two systems are not integrated with each other. Therefore, the system that contains data on enrolment cannot be accessed by the system that contains data for claims and vice-versa. Claims have to be manually re-inputted into the system; as such, there are cases wherein patients enrolled in PhilHealth who have passed away or are no longer giving their regular contribution are still able to claim from the agency.
PhilHealth does have limited data and IT infrastructure that would enable data mining and better analytics. However, currently this data is not necessarily used to make strategic purchasing decisions.
How are findings on health system performance used to inform purchasing decisions?
Purchasing decisions are largely based on historical data, such as the rate of use of medicines and supplies.
What health & operational indicators are used to monitor and evaluate health purchasing decisions?
Rate of utilisation of supplies: reviewing the historic allotment and use of individual supplies (e.g., cotton balls).
Rate of utilisation of medicines: reviewing the historic use of medicines and consumables to determine future budgets.
Number of procedures performed: annual tabulation of services (based on procedure or disease) attended by the institution (e.g., TB cases, heart surgery, etc.).
Case rate (PhilHealth): Used by PhilHeath to determine the amount to be reimbursed to an accredited provider.