The provincial hospitals of Leyte before typhoon Yolanda struck the area in November 2013 had started drawing attention for their scheme to hike the pay of their physicians and staff despite the impediments. The pay of an obstetrician-gynecologist, for example, stood to rise for August 2013 by P166,000 at the lowest, or by more than P215,000 at the highest — representing her combined share from pooled monies generated through a local incentive scheme.
On the average, the Leyte physicians took home for August of 2013 an additional pay ranging from P106,000 to more than P161,000. That’s on top of their average statutory pay for the same month, including bonuses and allowances, of about P40,000.

The result was improved health care for the province. The number of full-time physicians attending to patients at the Leyte Provincial Hospital had doubled to 19 by 2012, with more doctors applying for a job. Service has tended to improve as doctors vie for patients and work to keep them pleased — the miracle of tying pay to performance.

How did the capitol consistently raise that much money? A team organized by the Action for Economic Reforms flew to Tacloban to look into the practice — to know what Leyte did, how it did it, and more. Highlights and how-to hints follow.

Provinces (and cities) may raise incentive funds from at least two potential sources: able patients and PhilHealth. Able patients are those who can afford to pay for hospital services. They are your non-indigents. PhilHealth is shorthand for Philippine Health Insurance Corporation, which carries the mandate of providing health insurance coverage to all Filipinos. With a budget of over P35 billion last year, it’s a rich source of wealth for health if you know how to tap it.

To lay the scheme using these fund sources, the will and the way must be in place. Mustering the will is your department. This how-to hopes to help in finding the way. It draws heavily from the experience of Leyte in implementing its hospital incentive scheme.

So, you would need to:

• Charge (or, if warranted, adjust rates of) a fee for service.

• Pool cash donations.

• Pool PhilHealth payments for professional fees.

For each of these, you have to put in place an agreed distribution formula that bears in mind the virtues of participation and makes everybody happy.

This is a beaten path among provinces as a way of recovering cost, whose success varies across jurisdictions. As local holder of the power of the purse, the Sanggunian enacts an ordinance imposing fees (or adjusting current charges) for certain hospital services rendered, prescribing how much and to whom the fees apply, and providing how much of the proceeds goes to what and to whom.

You would like to ring-fence the hospital account for your incentives. Otherwise, the income goes straight by default to the general fund and gets spent following the usual budgetary process. You would need therefore to lay the collections together, “fence” them off, and keep any other from spending them on anything else.

How? By creating through the same ordinance, as the law allows, a special account in the general fund.

But bear in mind the hurdles. By law, you are not allowed to hike the pay of any of your official or employee higher than the maximum salary rate fixed for her position. Another law puts a limit to what local governments can spend for personal services in the form of salaries, premiums, bonuses, benefits, and the like.

Fortunately, the legal impediments do not cover cash donations. By definition, private donations to local governments can only be used for the purpose for which these were made. The Leyte experience has impressively demonstrated that cash donations from non-indigent patients form a viable source of hospital income to fund the incentive scheme. In 2013, these amounted to a total of P3.7 million.

Again, you would need the Sanggunian to enact an ordinance authorizing the collection of cash donations from non-indigent patients, providing for the creation of a special account (as Leyte did) or a trust fund (as the Commission on Audit requires) for these donations, and prescribing the manner of distribution of the proceeds, among other things.

PhilHealth is another source of funds to tap for the hospital incentive scheme. What you would like to look into is its reimbursement facility. The PhilHealth law says: “All payments for professional services rendered by salaried public providers shall be allowed to be retained by the health facility in which services are rendered and be pooled and distributed among health personnel.”

This is ring-fencing the payments courtesy of the law. To use them for the hospital incentive scheme, the province would only need to attend to some key tasks, such as the following:

• Ensure that the hospital and its physicians are PhilHealth-accredited. It takes some steps to get accredited. Knowing these in detail would require you to pay your PhilHealth local health insurance office a visit.

• Create through an executive order an ad hoc hospital committee mandated to propose guidelines for the pooling and distribution of PhilHealth professional fees.

• Enact an ordinance prescribing the approved guidelines and creating a trust fund for this purpose. This task seeks to apply sustainability to the pooling and distribution scheme.

Leyte’s is a story of success that’s worth the telling. Your own is surely worth the wait.

Mario M. Galang is a senior fellow of Action for Economic Reforms and a development and governance specialist.