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Organizational Structure of Health System in the Philippines Philippine health system is a complex and multi-layered structure that has undergone significant transformations over years that comprises both public and private sectors, each with its own roles and responsibilities in d...

Organizational Structure of Health System in the Philippines Philippine health system is a complex and multi-layered structure that has undergone significant transformations over years that comprises both public and private sectors, each with its own roles and responsibilities in delivering healthcare services to the Filipino population. Department Proper/Key Institutions: The central office of the Department of Health (DOH), which is responsible for setting national health policies and overseeing the implementation of health programs across the country. It is led by the Secretary of Health and includes key offices: Office of the Secretary- The highest authority in DOH, ensuring national health policies are implemented. Undersecretaries and Assistant Secretaries- These officials assist the Secretary in implementing programs, overseeing various divisions, and providing leadership on specific aspects of healthcare delivery. Philippine Health Insurance Corporation (PhilHealth) - PhilHealth is the national health insurance program, providing financial protection to Filipinos against the costs of healthcare. It provides coverage for a wide range of medical services, including hospitalization, outpatient care, and preventive services. PhilHealth's organizational structure is designed to manage member enrollment, claims processing, and financial operations. Specialized Divisions- These include divisions dedicated to public health service delivery, regulatory functions, health systems, and technical support. National Health Facilities- These include major hospitals and specialty centers managed by the national government, like the Philippine Heart Center, National Kidney and Transplant Institute, and Lung Center of the Philippines. These are tertiary healthcare institutions that provide highly specialized medical treatments, often serving as referral centers. Regional Offices- Administrative bodies that implement national health policies and programs at the regional level. They ensure that policies are adapted to local conditions, coordinate with local governments, and provide services like public health education, health monitoring, and disease control. Provincial Health Offices- These offices focus on ensuring the overall health of the province’s population, manages health facilities, implement national health policies, and oversee programs to prevent and control diseases. They also monitor public health trends. Private Health Sector- The private health sector comprises private practitioners, clinics, hospitals, and laboratories. It plays a significant role in providing healthcare services, particularly for those who can afford it. District Health Offices- This operates at the district level and provide essential health services like immunizations and maternal health. Their role also includes disease surveillance, environmental health services, and emergency preparedness. Local Health Agencies- Operates at the community level and are managed by local government units (LGUs). They implement public health programs like immunization, maternal and child health services, communicable disease control, and community health education.  Challenges and Future Directions The Philippine health system faces several challenges, including: Uneven distribution of health resources: While significant progress has been made in expanding access to healthcare, disparities persist between urban and rural areas, and between different socioeconomic groups. Inadequate funding: The health budget remains a challenge, limiting the government's ability to fully implement health programs and improve infrastructure. Shortage of healthcare professionals: The Philippines faces a shortage of doctors, nurses, and other healthcare professionals, particularly in rural areas. Corruption and inefficiency: Corruption and inefficiencies in the health system can hinder the delivery of quality healthcare services. The future of the Philippine health system will depend on addressing these challenges and implementing reforms that focus on: Universal health coverage: Expanding access to quality healthcare for all Filipinos, regardless of their socioeconomic status. Strengthening primary health care: Investing in community-based health services to prevent disease and promote health. Improving healthcare infrastructure: Expanding and upgrading health facilities, particularly in under served areas. Addressing health workforce shortages: Attracting and retaining qualified healthcare professionals, especially in rural areas. Promoting transparency and accountability: Implementing measures to combat corruption and improve efficiency in the health system. Production Sectors in Health Economics In health economics, production sectors refer to the industries and organizations involved in the creation and delivery of healthcare goods and services. These sectors determine the overall efficiency, effectiveness, and cost of the healthcare system. Primary Sector This includes the extraction of raw materials necessary for producing medications and healthcare products. The pharmaceutical industry relies on raw materials like acids, alcohols, esters, and other chemicals used in drug manufacturing. Secondary/Manufacturing Sector This sector encompasses healthcare facilities like clinics and hospitals, as well as the production of medical devices and equipment. It includes: Electricity Supplies: Essential for basic healthcare services, powering medical equipment, and supporting operations like childbirth management and immunizations. Medical Devices and Equipment: These include instruments, machines, and other items used in healthcare, designed and manufactured by companies specializing in medical technology. Tertiary Sector Focuses on providing intangible healthcare services, such as medical consultations, diagnostics, and procedures. This sector ensures the delivery of healthcare services throughout a patient’s lifetime, with a focus on improving quality of care and health outcomes. Quaternary Sector Involves healthcare education and research. This sector works on improving healthcare delivery by translating research into practice and advancing healthcare knowledge. The Healthcare Value Chain: A process or set of steps that go into the sourcing, manufacturing, advertising, distribution and delivery of a product or service. “Chain” the set of steps necessary to make a product, in this case healthcare products. “Value” the worth of the product, this can be in terms of monetary value, aesthetic value, or any type of value. It is used to analyze a product or the components to a product’s being. Components of a value chain are divided into primary and support activities. Primary Activities ◦ Inbound Logistics- Receiving Storing and Managing of inventory ◦ Operations- Includes process of converting raw materials to product ◦ Outbound Logistics- Distribution of Product ◦ Marketing and Sales- Handles advertising, promotion and pricing ◦ Service- Maintains products and Enhances customer experience Support Activities ◦ Procurement- Deals in how raw materials are acquired ◦ Technological Development- (RnD) “Research and Development” make primary activities better ◦ Human Resources Management- Manages employees and customers ◦ Infrastructure- Composed of Management systems and Teams  Consumption Sectors in Health Economics Consumption sectors refer on how healthcare services and products are utilized by patients. These represent different types of healthcare services used directly by consumers. Primary Care: The first point of contact for patients, focusing on overall health management and chronic disease prevention. General practitioners and family doctors fall under this sector. Specialty Care: Provides more advanced, specialized services. Specialists like cardiologists, dermatologists, and oncologists offer treatments for more complex health conditions. Emergency Care: Provides immediate medical attention for acute or life-threatening conditions, typically offered in emergency departments of hospitals. Hospital Care: Includes a wide range of services offered in hospitals, from inpatient care (requiring overnight stays) to outpatient procedures like surgeries and diagnostic imaging. Long-Term Care: Provides services for individuals with chronic conditions or disabilities. This sector includes nursing homes, assisted living facilities, and home health care services aimed at helping patients maintain independence. Rehabilitation Services: Focused on helping patients recover or regain functionality after illness, surgery, or injury. Pharmaceuticals: This sector involves the consumption of medications (both prescription and over-the-counter), representing a significant portion of healthcare spending. Preventive Services: Includes vaccinations, wellness checks, and screenings aimed at preventing disease and promoting overall health. Mental Health Services: Provides diagnosis and treatment for mental health disorders, including counseling and therapy. Public Health Services: Focuses on improving the health of communities through disease prevention, health education, and population health initiatives. Philippine Healthcare Consumption Data According to the Philippine Statistics Authority (PSA), healthcare consumption in the Philippines can be broadly categorized by the following sectors: Hospitals: Account for about 43.8% of health spending. This includes both public and private hospitals providing a wide range of medical services, from basic care to complex surgeries and treatments. Pharmacies: Represent around 28.2% of health expenditures. This includes spending on prescription medications and over- the-counter drugs, which are often major out-of-pocket expenses for households. Preventive Care Providers: Around 9% of health spending is directed towards preventive services, including vaccinations, screenings, and health education programs. These services focus on preventing diseases and promoting public health. Government and Compulsory Schemes: Public health funding, such as government-subsidized programs and mandatory health insurance schemes, accounts for about 44.8% of total health expenditure. These initiatives are part of the government’s efforts to provide universal health coverage and reduce the financial burden on households. Household Out-of-Pocket Payments: A significant portion (44.7%) of health expenditures comes directly from household spending, which includes paying for doctor’s visits, medications, and hospital stays. This high out-of-pocket expense poses a financial challenge for many Filipinos. Voluntary Health Care Payment Schemes: Private health insurance and health maintenance organizations (HMOs) account for around 10.5% of health expenditures, offering additional financial protection for those who can afford them. CONSUMPTION SECTORS IN PHILIPPINES 1. Household Sector Description: Individual consumers and families who purchase healthcare services, medications, and health insurance. Key aspects: Out-of-pocket expenses, health-seeking behaviors, demand for healthcare services. 2. Government Sector Description: Public sector spending on healthcare, including public hospitals, health programs, and social health insurance (PhilHealth). Key aspects: Budget allocation, public health initiatives, health infrastructure development. 3. Private Health Insurance Sector Description: Companies offering health insurance plans to individuals and groups. Key aspects: Premium collection, risk pooling, coverage policies. 4. Non-Governmental Organizations (NGOs) Sector Description: Non-profit organizations that provide healthcare services or fund health programs. Key aspects: Targeted health interventions, community health programs, health advocacy. 5. Employers Sector Description: Companies that provide health benefits to employees as part of compensation packages. Key aspects: Employee health insurance, workplace health programs, occupational health services.  6. Healthcare Providers Sector Description: Hospitals, clinics, and individual practitioners that consume medical supplies and equipment to provide services. Key aspects: Procurement of medical supplies, investment in medical technology, operational costs. 7. Pharmaceutical Industry Sector Description: Companies that produce and distribute medications and medical supplies. Key aspects: Research and development, drug pricing, distribution networks. 8. Medical Education Sector Description: Institutions that train healthcare professionals, consuming educational resources. Key aspects: Training costs, continuing education programs, medical research. 9. Health Technology Sector Description: Companies developing and selling medical devices, diagnostic equipment, and health IT solutions. Key aspects: Innovation in medical technology, health informatics, telemedicine platforms. 10. Traditional and Alternative Medicine Sector Description: Providers and consumers of traditional Filipino healing practices and alternative therapies. Key aspects: Integration with mainstream healthcare, regulation of traditional medicine practices IMPORTANCE OF CONSUMPTION SECTORS IN HEALTH ECONOMICS - Consumption sectors are essential in health economics for analyzing the factors that impact both health determinants and healthcare utilization patterns. This article investigates the importance of consumption sectors in the field of health economics, focusing on how they affect health outcomes both directly and indirectly. DIRECT IMPACTS - Eating habits and nutrition: Having access to healthy food is a crucial factor for good health. The sectors of consumption tied to the production, distribution, and cost of food impact individuals' decisions about what to eat. Inadequate diet can result in malnutrition, obesity, and chronic illnesses, which can raise healthcare expenses. - Quality of Housing: Housing and Living conditions has a major impact on health outcomes. Overcrowding, environmental hazards, and lack of clean water and sanitation can impact the rates of infectious diseases, respiratory issues, and mental health problems. - Education and understanding of health: Education is essential for making informed health decisions and preventing diseases. People who have received more education are more inclined to engage in healthy habits, utilize preventative healthcare services, and comprehend health-related information. INDIRECT IMPACTS - Income and Socioeconomic Status: Consumption sectors are strongly correlated with income and socioeconomic status. People with higher incomes may be able to access more healthy products and services, which can result in improved health results. On the other hand, lack of resources caused by poverty can also lead to health disparities. - Employment and workplace conditions have a notable effect on health. Being in contact with dangerous materials, facing high-pressure work settings, and working extended hours can heighten the likelihood of work-related illnesses and accidents. - Social Determinants of Health: Consumption sectors intersect with wider social determinants of health, including social support networks, community safety, and the availability of healthcare services. These factors together impact both health outcomes and the use of healthcare services. EFFECTS OF CONSUMPTION SECTORS - PSA data showed that the poorest Filipinos spent a total of P190.43 billion or 17.5 percent of total health spending in the country. - Ateneo de Manila University Development Studies Program Research Associate Vincen Gregory Yu said the health financing experiences of ordinary Filipinos can be summed up in 4 “Ps” 1) Pagtitiis, which means enduring symptoms of health conditions, involves refusing to seek treatment and resorting to self- medication. 2) Pangungutang or borrowing money often becomes their first resort in addressing their medical needs. Unfortunately, Yu said, this “often leads to more catastrophes.” 3) Pagmamakaawa refers to the process of soliciting help from state and private institutions and individuals. This often happens as a last resort when no friend or family can lend them money, or one has exhausted donations from them. 4) PhilHealth, referring to the state health insurer, is the last “P” in health financing. It is accessed only when Filipinos are already hospitalized. Healthcare Expenditure: A Closer Look 2021-2022: Total Health Expenditure (THE): - In 2022, the Philippines’ Total Health Expenditure (THE) amounted to P1.20 trillion, representing 5.5% of the country’s GDP at current prices. This marked a 1.4% decline compared to the P1.22 trillion spent in 2021, reflecting a slight decrease in overall health spending Current Health Expenditure (CHE): - The Current Health Expenditure (CHE), which covers the consumption of health services and goods by households, the government, and institutions, reached P1.12 trillion in 2022. This was a 1.5% reduction from P1.14 trillion in 2021, indicating a dip in health-related spending compared to the previous year. Health Capital Formation Expenditure (HK): - In 2022, Health Capital Formation Expenditure (HK), which includes investments in health infrastructure and equipment, totaled P79.0 billion, representing a modest 0.2% increase from the P78.8 billion recorded in 2021. This figure highlights the ongoing investments in long-term health assets Health Financing Schemes: - Government schemes and compulsory health care financing programs accounted for the largest portion of CHE, contributing 44.8% or P502.9 billion in 2022. Household out-of-pocket payments (OOP) were almost equivalent at 44.7% or P501.8 billion, while voluntary healthcare schemes, including private insurance, made up 10.5% or P117.6 billion. Health Spending by Income Group: - The richest income group, or the fifth quintile, contributed P361.3 billion to health spending in 2022, representing 32.2% of the total CHE. In contrast, the second quintile had the lowest health expenditure at P161.5 billion or 14.4% of the total. The poorest quintile, however, still managed to spend P204.3 billion on health. Health Spending by Age Group: - In 2022, working-age Filipinos (those aged 15-64) were responsible for 68.5% of the total CHE, amounting to P770.4 billion. Meanwhile, the elderly (65 years and older) accounted for 20.2% of CHE, spending P227.2 billion on health Health Spending by Disease Group: - The largest portion of health spending in 2022 went toward noncommunicable diseases (NCDs), with P449.2 billion or 40.0% of CHE dedicated to conditions like cancer, heart disease, and diabetes. Infectious diseases represented 18.3% of spending, while reproductive health, including maternal conditions, accounted for 11.8%. Nutritional deficiencies also received P122.6 billion or 10.9% of total health spending. Per Capita Health Spending: - Per capita health spending in the Philippines declined by 2.7% in 2022 to P10,059.5, following a significant increase of 21.4% in 2021. This slight reduction suggests a normalization of healthcare consumption after the pandemic surge in 2021 Financing the hospital services/ Health financing main functions: 1. Revenue generation - Premiums are collected by PhilHealth similarly to a designated tax, from populations with the means to do so. The cost of individuals without the means to pay is covered by the government of the country. 2. Pooling (consolidating resources) - The goal of PhilHealth is to enroll every Filipino, so that both the Health costs are shared by the rich and the poor, the ill and the well and needs. 3. Strategic purchasing (World Health Organization, 2019) - PhilHealth purchases medical services on behalf of its members using the combined money pool. Specifically, financial resources are used to: a. Ensure that members may access desired services; b. Hire providers through contracting or accreditation c. Pay providers in a systematic way to ensure timely, high-quality, and financial-risk free delivery of the specified services. 4. Governance - increased fiscal and budgetary space by making effective use of the current government budget in addition to increased accountability and transparency in the funding of healthcare (DOH, 2023). TWO DIFFERENT CLASSIFICATION METHODS OF FINANCING HEALTH SERVICES: I. Indirect Financing ✓ Government: central and local ✓ Compulsory insurance and any government subsidies are being counted under I, above. ✓ Voluntary insurance, any government subsidies being counted under I, above. ✓ Employment insurance, contributions are counted in 2 and 3, above. ✓ The charity raised inside the country, any government subsidies being counted in I, above. ✓ Foreign aid. II. Direct Financing A. Payments by recipients for services The method of health financing is key to ensuring access for the poor and rural populations. While free services funded by taxes may seem ideal, they often remain concentrated in urban areas, limiting rural access. To promote equity, expanding rural services is essential, but cutting urban services, such as reducing hospital beds or staff, would be politically sensitive and wasteful. Gradually increasing charges in urban hospitals could lower demand and make bed reductions more acceptable, while deterring self-referred patients. Compulsory health insurance, which mainly benefits wealthier populations, may further raise rural healthcare costs, as rural residents indirectly subsidize more expensive urban services. B. Voluntary Insurance Offers A way of developing local services under the control and with the participation of the community provided premiums are low enough for the majority of the population to pay and the services are geared to the income collected from the premiums. Rural people have long been accustomed to paying for. A brief overview of the various options for financing health care is presented below: 1. User Charges User charges are suited for services considered private goods, like curative care and personal health services, where benefits directly affect the user. These charges work best when consumers can afford to pay on a fee-for-service basis. In competitive markets, user charges can efficiently maintain service quality and volume. However, public goods, like sanitation or disease control, are less suited for user charges. 2. Public Subsidy Public subsidies are appropriate for services benefiting the entire population, such as public health programs (e.g., pollution control, food safety, drug regulation). Subsidies may also cover private goods, like curative care for low-income individuals who cannot afford user fees, driven by equity rather than efficiency. 3. Community Financing Community financing mobilizes resources and fosters health awareness, especially in underserved areas. Voluntary labor and fundraising support efforts like sanitation projects, clean water supplies, health funds, and paramedical workers. It thrives in economically challenged communities, where collective action is essential, while wealthier households tend to be more self-reliant. 4. Health Insurance Health insurance is a structured form of financing based on risk-sharing. It pools resources through regular premiums, providing protection from catastrophic health costs. The advantage lies in spreading large, unpredictable expenses over time, offering substantial financial coverage during illness or injury. 5. Private Sector Involvement The private sector participates in healthcare when there is market demand and willingness to pay, often through user charges. This can be encouraged by the government. Additionally, private involvement includes employer-sponsored health benefits, philanthropic support for the needy, public donations for emergency care, and lotteries to fund medical facilities. Republic Act 11223 or the Universal Health Care (UHC) Act Law established ensuring clear defining financing roles of key players in the sector, with PhilHealth identified to be the national purchaser of individual health service UHC Law: 1. PhilHealth serves as the national purchaser, meaning dominance in the health system's financing of healthcare. 2. PhilHealth as an institution can theoretically help steer service delivery towards a primary health care (PHC) orientation by shifting a greater share of its payments and incentives to cover these services. 3. The leveraging capacity of an institution like PhilHealth can also help facilitate equitable delivery of health services by virtue of cross-subsidization of the healthy and rich to the sickly and poor. Different Methods of Health Financing 1. Out-Of-Pocket Out-of-pocket (OOP) spending involves paying directly for the health goods and services you use. For instance, when you visit a doctor's clinic, you typically pay out of your own pocket for the consultation, medications from the pharmacy, and any diagnostic tests from the laboratory. This is the most common form of private health financing in our country. The advantage of this system is that you only spend money when you need medical care. However, the major drawback is the financial burden it can create, especially in cases of serious illness. For example, a government employee without insurance may struggle to secure the necessary funds if they become seriously ill. 2. Private Insurance Individuals or their families can purchase insurance plans, which may also be provided by employers as part of employee benefits. An individual pays an annual premium to an insurance company, and in return, the company guarantees coverage for hospital expenses up to a certain limit for one year. Essentially, the company says, "Pay us now, and we’ll cover your hospitalization costs if you need it within the next year." The advantage of this system is that the individual pays a relatively small amount in exchange for potentially substantial hospital coverage during the year. The downside is that if the individual doesn’t require hospitalization within that period, they are unable to make use of the services they've paid for. 3. Health Maintenance Organizations Health Maintenance Organization (HMO) plans are becoming a prominent form of private health financing in the country, evolving from traditional health insurance models. HMOs were originally developed in the United States to address the issue of overutilization of medical services by insurance companies. By having more control over how healthcare benefits are used, HMOs aim to make the provision of health services more cost-effective. In an HMO plan, a consumer pays a premium in exchange for access to a comprehensive healthcare program that offers a "package of benefits." These benefits typically cover a wide range of medical services, including doctor consultations, diagnostic tests, hospitalization, and preventive care. Unlike traditional insurance, where payments are made only when services are needed, HMOs operate on a prepaid model, which encourages the efficient use of healthcare resources and often requires the consumer to seek care within a specific network of healthcare providers. This system helps manage costs while still providing comprehensive care. Package of Benefits: - Annual Physical Examination, including basic laboratory procedures - Out-patient benefits, mainly consultation but not medication - Preventive care, well baby visits (costs of vaccines not included) - In-patient coverage, hospitalization including professional fees, laboratory, medications, surgery if needed, etc. - Emergency coverage - Dental, tooth extraction, prophylaxis and cleaning - Maternal Benefits, seen only in group plans  - Optical benefits - Executive Checkup - Insurance benefits 4. Employer-Based Plans Employer-based plans are health packages that companies administer for the medical benefits of their employees. For example, Meralco has put up its own hospital for its employees, Philippine Airlines has both an upscale medical facility and hospital referral system; PLDT follows a hospital referral system, and so does a lot of other corporations. Trends in Philippine’s HMO’s 1. Preferred Provider Organization (PPO) ▪ A PPO is a managed care service that uses provider networks to deliver healthcare. Members can access any provider within the network without needing a primary care physician's referral for specialists or other services. Providers in the network are paid discounted fees, and charges to consumers are capped by the PPO. 2. Exclusive Provider Organization (EPO) ▪ An EPO requires members to use only providers within its network. Participants usually choose a primary care physician and a hospital to use exclusively. Referrals to other network physicians are allowed when necessary, but only emergency care is covered outside the network. Co-payments are typically low or nonexistent when using in-network services. 3. Capitation ▪ In a capitation plan, insurers or employers pay a provider a set fee for all necessary medical care for each enrolled member. Providers, often hospitals, must manage care costs below this fixed fee to avoid financial losses. Physicians and hospitals must cooperate to minimize hospitalization and control costs. Primary care physicians act as gatekeepers, and physicians may share in the financial incentives to reduce costs. 5. Point-of-Service (POS) ▪ A POS plan combines features of PPO and HMO plans. Like PPOs, it allows members to use both in-network and out- of-network providers. However, members must designate a primary care physician, who can refer them to specialists, including those outside the network. If the referral is made, the insurer covers most of the out-of-network costs. POS plans also emphasize preventive care and health improvement programs, similar to HMOs. The country’s health financing system is an intersection of five main sources: 1. National government 2. Local governments units (LGU) 3. Social health insurance through PhilHealth 4. Household out-of-pocket (OOP) spending 5. Other private spending which may include private health insurance, donor funding, among others Problems in Financing Hospital Services 1. Limited Fiscal Space for Health The inadequate annual budget allocated to the health sector hampers the full implementation of the Universal Health Care (UHC) Act. While the national government remains the primary financier for devolved health programs, audits reveal a significant gap between allocated budgets and actual expenditures. This discrepancy limits the reach and quality of health services, preventing UHC's full realization. 2. Fragmented Pool of Funds The fragmentation of health financing sources exacerbates inequalities, as wealthier areas tend to have better-funded healthcare systems than poorer regions. The decentralized nature of healthcare funding contributes to disparities in service availability, leading to unequal access to healthcare services across different regions.  3. High Out-of-Pocket (OOP) Health Spending Despite increased government expenditure, OOP spending remains high for many Filipinos. PhilHealth, the national insurance program, does not fully cover all medical expenses, especially for drugs not listed in the Philippine National Formulary (PNF) or those unavailable in healthcare facilities. This forces patients to pay out-of-pocket for the remaining balance, placing a financial burden on households. 4. Chronic Underinvestment in Primary Care Despite overall increases in health spending, investment in primary care remains insufficient. While hospital care commands a larger share due to higher costs, expanding primary care investment could prove more cost-effective by addressing health issues earlier, reducing the need for more expensive hospital treatments. 5. Inadequate Capacity for Budget Execution The allocation of sin tax revenues has provided additional funding for health, particularly for enrolling indigents and senior citizens in PhilHealth. In 2022, sin tax revenues allocated for health reached PhP 270 billion, which supported various public health programs. However, despite these efforts, a significant portion of these funds remains underutilized due to inefficiencies in budget execution, leading to missed opportunities for improving healthcare access and services. To achieve universal health coverage, health financing systems must be designed to: 1. Provide all people with access to needed health services, including prevention, promotion, treatment, and rehabilitation, that are of sufficient quality to be effective. 2. Ensure that the use of these services does not expose the user to financial hardship The Health Care Financing(HCF) Strategy contributes to the attainment of the intermediate outcomes of Universal Health Care (UHC) on: 1. Service coverage - Ensuring that all Filipinos have access to needed health services, including prevention, promotion, treatment, and rehabilitation, that are of sufficient quality to be effective. 2. Equity and efficiency in service use - Promoting fair and effective utilization of health services with preferential regard for the unserved or underserved. 3. Efficiency in service production (quality) - Enhancing the quality and efficiency of health service delivery. 4. Transparency and accountability - Establishing mechanisms for monitoring and evaluating the performance of the health financing system (DOH, 2023 Evaluation of the efficiency and effectiveness of the various financial schemes for hospitals Achieving proper balance in policy and implementation across these three functions is necessary to: (a) ensure sufficient funds to pay for population health needs and (b) align health provider behavior to health system goals through financial incentives. For health care providers, such as hospitals, country health financing arrangements form the financial landscape that influences their financial health. Moreover, health financing systems must help keep providers of health care financially sustainable. In order to evaluate the financial schemes of hospitals, the following must be done: 1. Collection and Analysis of Hospital Financial Statements - hospitals annual financial statements are collected and encoded into a standard data structure for analysis. 2. Ratio analysis of hospital financial statements to gauge the financial health and performance of hospitals. Four types of 10 financial ratios analyzed: A. Size and Capital Structure 1. Total Assets - Measure of hospital size and includes everything that the hospital owns (e.g. cash, receivables, equipment). - Formula: Cash + Cash Equivalents + Inventories + Property and equipment + Investments + Receivables 2. Financial Leverage - Hospital’s use of debt to finance its operations and capital investments. - Formula: Total Liabilities / Total Assets B. Profitability 3. Total Margin - Measure of how much out of every peso of revenue the hospital keeps as earnings or profit. - Desired Trend: Upward over time - Formula: Net Income / Total Revenues 4. Operating Margin - Measure of financial performance in providing patient care (hospital’s core business) and control of operating expenses. - Desired Trend: Upward over time - Formula: Income from operations / Total Revenues C. Assets Liquidity 5. Current Ratio - Measures the hospital’s ability to pay for short-term obligations due in one-year using its available assets.  - Desired Trend: Upward over time - Formula: Current Assets / Current Liabilities 6. Days Cash on Hand - Number of days the hospital can operate and pay for its operating expenses if they earned no additional cash. - Desired Trend: Upward over time - Formula: (Cash + Cash equivalents) * 365 / Operating expenses D. Operating Efficiency 7. Average Age of Plant - Average age in years of the hospital’s fixed or long-term assets used to provide health care services (e.g.., buildings, equipment, vehicles). - Desired Trend: Downward over time - Formula: Accumulated depreciation / annual depreciation expense 8. Assets Turnover - Measure of efficiency in how a hospital generates revenues per peso of assets. - Desired Trend: Upward over time - Formula: Revenue / Total Assets 9. Days Patients Accounts - Measure of how efficient a hospital is in collecting debts for its health care services: Number of days it the hospital to collect outstanding payments to itself. - Desired Trend: Downward over time - Formula: Receivables[(Accounts receivables - allowances for uncollectible) * 365] / Total Revenue 10. Salary to Revenue - Measure of staffing efficiency: proportion of revenues consumed by salary expenses. - Desired Trend: Downward over time - Formula: Salary Expense / Total Revenues Drug and Pharmaceuticals Performance of the Pharmaceutical Industry in the Philippines One of the fastest-growing markets in the Philippines is the pharmaceutical industry which is valued at 176 Philippine billion pesos and has an average growth rate of 8.3 percent based on the data of the science company IQVIA which provides analysis and clinical research to the life science industry. As shown in the following charts, Figure 1. Composition of Pharmaceutical Market: 72 percent of ethical drugs is growing at 6.2 percent per year, while the other percentage is growing at a double-digit rate of 12.9 percent In Figure 2. Distribution of Pharmaceutical Supplies shows the total market sale of 173.076 Philippine billion pesos in 2016, 87.2 percent of the supply was distributed to retail outlets, such as drugstores, and the remaining went to hospitals In terms of sales, the National Capital Region (NCR) has captured around 74 Philippine billion pesos, or 44.8 percent; the Luzon region has captured 49 Philippine billion pesos, or 28.2 percent; the Visayas region has captured 23 Philippine billion pesos, or 13 percent; and the Mindanao region has captured 24 Philippine billion pesos, or 14 percent. Distribution of Drugs and Pharmaceuticals The distribution process for local companies is through regional divisions, or subsidiaries. In addition to terminologies in distribution, the FDA uses the DOH Administrative Order No. 2014-0034 as a reference for the following: 1. Drug distributor-exporter: any establishment that exports raw materials, active ingredients, and finished products for distribution to other drug establishments outside the country. 2. Drug distributor-importer: any establishment that imports raw materials, active ingredients, and/or finished products for wholesale distribution to other local FDA-licensed drug establishments 3. Drug distributor-wholesaler: any establishment that procures raw materials, active ingredients, and/or finished products from a local FDA-licensed drug establishment for local distribution on a wholesale basis. A. Distribution through Hospitals - Hospitals distribute 13 percent of the pharmaceutical products, while drugstores distribute the bulk. Every private hospital and their informants vary in terms of deciding on the list of medicines that go into their formulary. This formulary is created by the hospital's body, the Pharmaceutical Therapeutic Committee (PTC), which is composed of the hospital's chairman, medical director, supply chain manager/purchaser, doctors, and pharmacist. However, the marketing strategies of the medical representative of the manufacturer could still have an effect on the decision of the hospital body.  B. Distribution through Drugstores - The manufacturer or importer first promotes and markets the product to the retailer, providing information about the drug and the costs before this could reach drug stores, including the decision of the retailer to sell the drug or not. Drug establishment refers to those drugstores, pharmacies, botica, and pharmacies in hospitals, where chemical products, registered drugs, and dental, household, and medicinal remedies are distributed to the public on a retail basis. In addition to those Botica, they are required to secure LTO as a drugstore. - A retailer could accept multiple brands, whether the medicine is generic or not. However, a retailer does not produce or manufacture a product of their own as they do not have the license to do so. The partner of the retailer, either a local or multinational manufacturer, produces the product they sell and/or delivers with a complete label and final packaging done by the manufacturer. Therefore, a retailer only distributes products to their branches all over the country Effects of Drug Distribution and Production 1. Out of Pocket Expenditure and Health Financing 2. Impact of Drug Pricing on Public Health Financing 3. Price Mark-up and Inefficiencies in Drug Financing 4. VAT and Discount’s Impact on Drug Financing 5. Limited Access to Affordable Generics LITERATURE CITED: Hartigan-Go K. (2018). 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Financing for Universal Health Coverage: Dos and Don’ts. https://p4h.world/en/news/financing-universal-health-coverage-dos-and-dont Researched by: ALAGAD, Aiger Mae A, BELARDO, Jason Gabriel G., CADLEY, Xyrah Shillah Miah M., DIANO, Precious Anne F., GADOS, Stephanie P., KIMMAYONG, Kristine Angel B., MENDOZA, Ashleigh Elyzha D., OLMAN, Jhydeloth B., QUINONES, Macrina A., SANTIAGO, Nicola Gail A., WILLIAM, Diane Rose D., AGCOPRA, Samantha E., BALAGOT, Ashley Vienne D., BARGAS, Rhiza Mae R., CANOR, Sandra B., CE-ING, Shankeen V., ESTERA, Renalyn B., HIDALGO, Jemima A., LARDIZABAL, Mariah Mae Shane R., MAAMO, Rosalyn G., PAKIPAK, Venus D., SAGAMLA, Jolina B., TALIGAN, Samantha Clyde A., WALLANG, Nash Allan, ASTUDILLO, Kenzo Mauri Gyan Andre M., LEE, Ariadne Gwynne R., BALDEVINO, Eloralayne A., MAITANG, Dhesiree Mae L., BRITANNIA, Michelin M., PALADINO, Mark P., CARDINES, Margaret Grace A., SANTOS, Aaliyah Gwen A., DELA VEGA, Mary Joy B., VALDEZ, Mary Grace Shamil B., FAUSTINO, Kurt Nathaniel M., WANGALEN, April Jay B., ISIC, Mark Anthony M., ALISWAG, Arthea Jade C., BERNABE, Jonathan Jean A. CANUTE, Jonafe N. ES-ESA, Daiseree R. GARCIA, Jade Zhythelle A. LOGANG-A, Cheslie S. MAWAGAY, Florianne M. PEREZ, Japhet Sekizu S. SALBINO, Angela Mae I. TABORA, Ykaterina Noemi A. WANGIWANG, Jericho Lee D. Compiled by: BALIWAWA, Salinia U., BANOS, Leny Ann A., CARDINES, Margaret Grace A., CATANES, Manuela Joy P., MAAMO, Rosalyn G., PALADINO, Mark P., QUITANIA, Maritoni Grace R., WANGALEN, April Jay B. Edited and finalized by: Shane May M. Lozano, RND