A healthy business: Working to expand coverage and draw in medical tourists

In many ways, the Philippines’ health care sector is a microcosm of the broader economy. Public provision is under-resourced and over-stretched, while private provision is fragmented but also plays a vital supporting role. Workers are largely well trained and skilled, but an overabundance of nurses and physicians – combined with low salaries – has prompted many to move abroad. The sector faces a range of challenges, though investment programmes from both the public and private sectors should help to address some of these.

Historical under-investment in public health care services and a rapidly rising population spread over a vast geography have affected service provision and quality, with many rural areas severely underserved. New public insurance initiatives are looking to increase coverage, while the private sector seeks to enhance services for both Filipinos and foreign medical tourists.

FACTS & FIGURES: Like many developing countries, the Philippines has seen overall improvements in health indicators in recent years, particularly a slowing of the occurrence of communicable diseases. However, new threats have been emerging from non-communicable diseases (NCDs). According to the latest figures (2008) from the World Health Organisation (WHO), 61% of all deaths are caused by NCDs, of which cardio-vascular diseases account for 30% and cancer 10%.

Lifestyle factors are a major source of health complications. Overweight adults now number one in four, while obesity is also on the rise, prevalent among 8% of females and 4% of males. Historical trends showed positive declines in blood pressure, mean body mass index and cholesterol levels up until the early 1990s, but there has since been a reversal, particularly among women. The high rate of cancer among men – averaging nearly 100 for every 100,000 deaths in 2008 – may be in part due to the fact that 35% of men smoke, compared with just 7.7% of women.

In an effort to fight back, the Department of Health (DoH) joined with the Philippine Medical Association in 2011 to address the rising prevalence of NCDs caused by unhealthy lifestyle choices. The agencies have committed to confronting NCDs using public-private partnerships and engaging Filipinos through various forms of media, including the internet. Their primary targets will be inactivity, smoking and over-eating.

IMPROVING ACCESS: Comparisons with regional neighbours highlight a need for increased investment to improve access and quality. According to the UN Population Division, the number of deaths for children under the age of five is 21 per 1000 births in the Philippines, higher than the 11 per 1000 for Thailand, but lower than the 25 per 1000 for Indonesia. Life expectancy is 66 years for men and 73 for women, compared to 71 and 78 in Thailand and 68 and 72 in Indonesia.

While the Philippines has a few international-standard medical facilities, limited government resources and low overall per capita spending restrict provision coverage and quality. As a percentage of overall government expenditure, health care has averaged around 7% for the past few years, half the budgetary allotment allocated in percentage terms by the Thai government. Per capita spending on health care reached $129 in 2009, well behind Thailand ($328), but above Indonesia ($91). Filipinos contributed 64% of health care spending out-of-pocket, further demonstrating the under-resourcing of public services.

Some critics blame system inefficiencies on the devolved delivery structure. Since 1991 the Local Government Code transferred several health responsibilities from the DoH to local government units, which now administer district hospitals. Municipalities control rural health units and village health stations, while the DoH oversees specialised units and regional hospitals. This effectively means three tiers of provision have emerged – municipal, provincial and regional – increasing administrative costs and reducing expenditure on operational costs and investments to 30-40% of total spending.

PHILHEALTH: The main government initiative for boosting health care spending and coverage is the Philippine Health Insurance Corporation, commonly known as PhilHealth. Established through the National Health Insurance Act of 1995, PhilHealth introduced mandatory membership for all employees and overseas workers, and optional membership for self-employed and unemployed, unless the employee was already covered by a private insurance scheme.

Monthly premiums range from P50 ($1.14) for employees with salaries of P4999 ($113.48) and below, up to P375 ($8.51) for those having salaries of P30,000 ($681) and higher. The employer is expected to match contributions made by employees.

The programme has improved basic coverage and a large proportion of the population is now under the plan. In the first quarter of 2011 PhilHealth reached 21.55m direct members and 66.87m beneficiaries, including dependents. It should be noted that coverage does not necessarily mean members do not have to contribute to the cost of care. The premium only defrays a proportion of the cost of medical procedures or medicines, thought to average just 30%, according to rates set for specific claims. Patients can also have procedures carried out privately and seek reimbursement from PhilHealth. As patients can choose where to receive treatment, the government-backed system is effectively subsidising private care rather than using the scheme to directly invest in public health facilities.

In a further attempt to widen coverage, in 2011 President Benigno Aquino III – in conjunction with the DoH – initiated the Universal Health Care Programme. The scheme aims to cover the treatment costs of at least 90% of common diseases for all Filipinos within three years. While “universal health care” in this instance clearly does not imply comprehensive health insurance, the starting point is low and the initiative will provide millions of families with medication and treatment for easily curable diseases. The programme aims to increase the current enrolment of low-income Filipinos deemed to be vulnerable from 4.6m to 7.4m.

Further initiatives to widen coverage under PhilHealth include the deferring of the nine-month period between the beginning of contributions and the receipt of benefits. The deferment should encourage a greater uptake, but there are concerns that patients will only pay contributions when they need to access the benefits. The government also announced relief to those in typhoon-hit regions on the island of Luzon, who were granted a one-month extension to keep up with their PhilHealth payments.

PRIVATE CARE: Due to limited public provision, private health care has been expanding in recent years, providing both essential and non-essential medical services to Filipinos and health tourists. With 65% of the population urbanised, facilities are concentrated in cities, including a few international-standard hospitals as well as medical clinics and diagnostic centres.

According to WHO statistics, private spending accounted for 64.7% of total health expenditure in 2009. This compares with just 24.2% in neighbouring Thailand. Though private health facilities often have links with insurance providers, and sometimes even house them, private insurance coverage is still low. Patients making use of private health care are thought to number around 23m, and yet only 3m of these are members of private health insurance plans. Private insurance providers are also seeing increased competition from the state provider, PhilHealth. This accords with the WHO figures for 2009, which show private prepaid plans as a percentage of private health expenditure reached just 12.3%.

Hospitals in the Philippines are typically small, most with fewer than 100 beds. This means investment often goes to equipment that can offer higher-return treatments such as eye care, cosmetic surgery and orthopaedics, leading to an oversupply in certain services and an undersupply in others, particularly those requiring greater investment like cancer treatment.

SPECIALISATION: A self-payment model means maximum patient choice, and business-savvy doctors have been quick to open specialised clinics requiring low capital expenditure. Clinics are flourishing in urban centres, optimising convenience by locating in shopping malls and staying open later in the evening. Jose Puno, the president and CEO of Maxicare, a local health maintenance organisation, supports the increasing trend towards service specialisation, noting its benefits. “The health care industry would benefit from a continued shift towards a clinic-based model for primary care, which would also necessitate an improved referral system within the sector,” he told OBG. “It is expected that this would decrease overall costs, thus improving affordability and hopefully opening health care access to a wider portion of the population.”

ACQUISITIONS: Another recent trend has been the acquisition of several private hospitals by major local businesses, some with limited previous experience in health care. The Metro-Pacific Investment Corporation has acquired six hospitals: Makati Medical Centre in Manila, Our Lady of Lourdes Hospital in Manila, Asian Hospital in Alabang, Davao Doctors’ Hospital in Mindanao, Cardinal Santos Medical Centre in Greenhills and Riverside Medical Centre in Iloilo, with plans to invest a further P3.5bn ($79.45m) over the next five years. The aim is to build a network of 15 hospitals with 3000 beds. This model is likely be replicated by other groups seeking to provide the capital and management expertise needed to consolidate and produce synergies, raise investment and widen the client base.

Some commentators believe these acquisitions are being made not precisely as profit-making ventures, but by business people looking to create a legacy for themselves. However, others detect a healthy professionalism and profit motive that will drive efficiencies and improve standards. In any case, consolidation of hospitals will no doubt help provide the economies of scale and injections of capital required for new upgrades.

HR: Filipino health professionals can be found around the world working as nurses, physicians and technicians. Qualification standards are quite high and most locals speak English, which results in a great deal of potential for them to work in a variety of developed economies.

A decade ago the Philippines suffered from a shortage of nurses due to the attraction of higher wages overseas, but now, with growth in the number of these overseas workers slowing and more nursing colleges being established domestically, graduate numbers are in oversupply. There are currently some 200,000 nurses looking for employment in the Philippines. This is not surprising when WHO figures reveal the country has 60 nurses and midwives per 10,000 of the population, compared to a regional average of just 20.

One growth area for Filipino nurses offering attractive salaries within the country is outsourced care management services. One company, Accenture Philippines, has been hiring English-speaking nurses to work as call centre operatives to handle vital pre-screening needs for US-based insurance companies. The operatives conduct initial screenings of a patient’s medical records, talk them through dietary or lifestyle habits, and provide information, advice and guidance. The nurses receive salaries above those of regular call centre agents because their service requires more in-depth training and medical experience. Accenture’s current operations are spread over 10 facilities in Metropolitan Manila, with two further facilities located in Cebu.

UNDERSUPPLY: Despite an oversupply of certain health care professionals, limited government expenditure has resulted in a particularly acute undersupply of physicians and nurses in remote rural areas. The main problem concerns salaries. Physicians working in the public sector may receive as little as P30,000 ($681) per month. With much higher salaries in the private sector, largely in urban centres, most either work only in the private sector, or will only work in the public sector in cities, where they can supplement their income by doing shifts in private hospitals and clinics. The same is true for nurses, who are also underrepresented in rural communities. The highest-qualified medical professional in a town or village is often a health worker with only basic qualifications.

MEDICAL TOURISM: Efforts continue to enhance the Philippines as a leading destination for medical tourists. The National Economic Development Authority expects the industry to be worth $3bn annually by 2015, with an influx of 200,000 foreign patients per year.

The city of Cebu, in the centre of the Visayan Islands, has been working particularly hard to promote itself. It has several key advantages, including an international airport, good climate, a well-designed city and established tourist facilities and beaches nearby for those seeking extra recuperation time. Its central location is also beneficial in attracting Filipinos from both the north and south islands of the country.

To enhance its medical reputation, Cebu Doctors’ University Hospital (CDUH) obtained international accreditation from QHA Trent, a health care company owned and managed by a group of practitioners and experts in the UK. The accreditation will serve to assure patients that the hospital has all safeguards, policies and procedures in place. CDUH is working with two other private hospitals, Chong Hua Hospital and Perpetual Succour Hospital, in an effort to drive further medical tourism into the city.

St Luke’s Medical Centre at Fort Bonifacio Global City is an international-standard, non-profit medical facility that now boasts Japanese- and Mandarin-speaking nurses and technicians, and also includes onsite hotel accommodation for inpatients and their families. St Luke’s has already promoted itself heavily in Guam and believes strong interest will also come from Japan.

One key issue to address is reassuring target clients in Japan, China and other neighbouring states that the country is safe. The Philippines has a reputation for being a dangerous destination, fuelled by the conflict in Mindanao and several murders at tourist resorts. Some in the industry believe the government needs to work harder to promote an image of safety that will allow for the medical tourism strategy to fully pay off.

PHARMACEUTICALS: Despite the government’s attempts to bring down the cost of drugs, many Filipinos are still unable to afford vital medicines. The Cheaper Medicines Act of 2008 intended to lower costs, which at the time were estimated to be far higher than other Asian countries for certain medicines, with discrepancies attributed to weak regulation and the dominant market position of major pharmaceuticals firms. The act allowed for the importation of parallel branded products, but was compromised by the mandatory procurement of drugs by the Philippine International Trading Corporation (see analysis). Retail prices were reduced as a result, but not significantly, leaving many to question the effectiveness of the act. One particular point of contention was that pharmaceuticals companies successfully lobbied to remove an earlier provision that required doctors to prescribe only generic drugs in lieu of branded pharmaceuticals.

OUTLOOK: Health care provision in the Philippines will remain a dynamic and potentially lucrative sector for investors with an eye on the long term. While the introduction of public health insurance through PhilHealth may only provide limited coverage, it has done much to promote the concept of health insurance among a large portion of the population. Future generations of Filipinos will expect i mproved coverage and facilities as health becomes more of a priority. The move towards consolidating larger private hospitals and the opening of smaller clinic-based facilities should provide better patient services as the sector continues to develop.