A recent study released by the 蝌蚪传媒 (蝌蚪传媒) recommends that the Philippine Health Insurance Corporation (PhilHealth) modernize its hospital payment system to make it more equitable and sustainable for both healthcare providers and patients.
In the study, 蝌蚪传媒 researchers proposed that PhilHealth transition from its decade-old “All Case Rates” (ACR) system to a Diagnosis-Related Groups (DRG) model—a more responsive approach that aligns hospital reimbursements with the actual complexity and cost of patient care.
Titled “Kabayarang Sapat, Serbisyong Tapat, DRG Dapat: Transitioning from PhilHealth All Case Rates to a Fairer, Responsive, and Transparent Provider Payment System (A Retrospective Policy Analysis of the All Case Rates from 2018 to 2023),” the study found that the current ACR system, while designed to simplify reimbursements, has not kept pace with the rising cost of healthcare.
Case rates stuck in time
Under the ACR system, PhilHealth pays hospitals a fixed amount per illness or procedure, regardless of case severity. Yet, of the 8,869 existing case rates, 99.9% have not been updated since 2013.
Between 2014 and 2023, hospital inpatient service costs rose by an average of 3.4% annually, causing the real value of PhilHealth’s payments to decline by about 40% over the decade.
“While PhilHealth’s nominal reimbursement has remained the same, its real peso value has declined, and hospital charges have continued to rise,” the authors noted.
For instance, the case rate for a normal childbirth remains at PHP 6,500 for years—worth only PHP 3,900 in 2023 after accounting for inflation.
The authors pointed out that this has made it more difficult for hospitals, especially public and provincial ones, to cover operating costs while keeping services affordable for patients.
Hospitals lose, patients pay
Between 2018 and 2023, average hospital charges increased by 51%—from PHP 23,852 to PHP 36,130—while PhilHealth reimbursements remained around PHP 11,000.
According to the study, about 98.8% of hospital claims now exceed the case rate, leaving hospitals to absorb the shortfall or pass some costs on to patients.
Out-of-pocket payments still comprise about 44% of total health spending, which shows that Filipinos remain financially vulnerable even with insurance coverage.
The authors explained that the ACR’s “one-rate-fits-all” structure does not account for differences in case severity or comorbidities.
Patients with more complex conditions require more diagnostic tests, medications, and care hours, but these additional costs are not fully reflected in the reimbursement system.
“When case rates do not consider clinical complexity, healthcare providers may face financial risk and incur losses while delivering the full range of services needed to treat complicated patient cases,” the authors added.
Under the current setup, PhilHealth pays for only up to two case rates per patient, with the second diagnosis or procedure reimbursed at just 50% of the case rate.
This structure, the authors warned, penalizes hospitals that care for more complex or multiple-condition patients, effectively passing the financial burden onto those already struggling with illness.
Delays add to financial pressure
Aside from insufficient payments, hospitals also experience payment delays under the current claims system.
In 2023, even the best-performing claims—those processed smoothly without requiring corrections—took a median of 87 days to process, while those returned for corrections averaged 221 days, more than seven months, from patient discharge to payment.
On average, hospitals spend about 49 days preparing and filing claims after a patient’s discharge. Once submitted, it takes PhilHealth another 31 days to process and pay the hospital.
These delays can strain hospital cash flow, especially for smaller or provincial facilities, and affect their ability to sustain operations and maintain service quality.
A way forward: Diagnosis-Related Groups (DRG)
To address these issues, the authors recommend that PhilHealth adopt a DRG payment model—an evidence-based system that classifies patients by diagnosis, severity, and resource use, ensuring that reimbursements match the actual complexity of care.
“Payments based on DRGs are more realistic, offering better financial coverage for both providers and patients,” the authors emphasized.
Under the proposed shift, hospitals would receive prospective payments based on expected service volume and performance through a Global Budget arrangement, as mandated by the Universal Health Care (UHC) Law. Instead of waiting months for reimbursements, hospitals would receive frontloaded funds—their share of the total health budget—at the start of the fiscal period.
“Rather than being paid after every individual claim is submitted, hospitals can use the prospective payment to budget for the period and smooth the purchase of inputs,” the authors explained.
If properly implemented, the DRG and Global Budget setup could better align incentives, reward efficiency, and promote transparency, especially when supported by routine cost reviews and stronger data reporting.
Toward a more equitable health financing system
“Resolving the underlying design issues of the payment system requires reform to the entire provider payment mechanism as mandated by the UHC Law,” the authors stressed.
They cautioned that one-off rate increases will not solve deeper design flaws. Even with a PHP 600 billion reserve fund in 2024 and recent announcements of a 30% across-the-board hike, PhilHealth has yet to undertake systematic updates of its payment structure.
To continue the conversation on health financing reforms, 蝌蚪传媒 will host a dissemination forum on the Philippines’ progress in achieving UHC. The event seeks to deepen public understanding of the challenges and policy directions needed to build a more equitable and resilient health system.
The public is invited to watch the livestream of the discussion on the Facebook page.
Read the full study at . ### — MJCG
