July 26, 2022

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Healing our healthcare system


By Jose Xavier Gonzales, Chairman, The Medical City

THE WORLD never anticipated the global medical and economic freeze from COVID-19, but this is now part of a regular cadence of pandemics that we should continuously prepare for.

Is COVID-19 on its death knell?  Long COVID still has a residual impact on humanity, with 10-15% suffering chronic weakness for life.  And new virus variants are popping up that increasingly dodge immunity from prior infections. On the other hand, both RT-PCR testing and mRNA vaccines were quicker to the draw because the world was already deep into genome sequencing and gene-splicing technology. So instead of a 50 million Spanish flu mortality rate against a global population of 1.5 billion (3.33%), we have 6.3 million deaths against 7.9 billion (0.08%). In the East, because of more consistent mask wearing and social distancing, our deaths per 100,000 are one-sixth of the West’s.

All crises expose deeply etched flaws in the way things get done, so that they are either not done or undone. This weakness in earthquake-proofing for COVID-19 events showed up on three fronts: human capacity, technology foundation, and funding provision. These go, of course, deeper than COVID. Regardless, the privately run health sector can be a willing ally of government in capitalizing on these opportunities through various public-private partnership (PPP) initiatives.

On February 23, 2021, a Reuters news report highlighted local as well as global problems in the nursing profession: “The Philippines will let thousands of its healthcare workers, mostly nurses, take up jobs in Britain and Germany if the two countries agree to donate coronavirus vaccines, a senior official said.” The government had previously limited international healthcare worker (HCW) hirings to 6,000 a year.

We have interesting statistics on our global nursing resource. Of 500,000 registered nurses, 60% are overseas, half of whom are in the US. Of the 25,000 in the UK, 90% work for the National Health Service. The Middle East, and particularly Saudi Arabia, makes up a second major destination. Recently, there was a substantive relaxation in both certification and immigration requirements in foreign HCW hiring.

Of the 200,000 remaining nurses in the Philippines, a mere 90,000 work in healthcare facilities. The second-largest absorber of graduates is the BPO/call center industry.  Two hundred and thirty-three nursing schools have produced around 20,000 graduates yearly since 1999.

The Medical City (TMC) Network responded to the pandemic-induced nursing shortage by offering a 2-3 year structured development program in our hospitals for nursing professionals, after which we would place them in our Guam hospital.  Five years ago, TMC also developed a joint nursing program with Phinma’s University of Iloilo affiliate, at a very modest cost to an enrollee, without typical enrollment screening tests. In the May 2022 licensure exam, Phinma Nursing graduates achieved a 97% passing rate for first-time takers, against the 68% national average.

This suggests two PPP options to strengthen the nursing sector of our $35-billion OFW industry. The first is a strong vouchering system to encourage private sector investment in nursing (and allied medical) education. The second is R&D credited nursing internship programs at Tier2/3 hospitals that are internationally benchmarked for certification results.

Two-thirds of local hospital capacity is in private hands. What better way to harness their learning capacity than to encourage practicums to address the expected 4.6 million (WHO estimate) global nursing professional shortfall by 2030.

When COVID Patient 1 emerged from the Greenhills shopping arcade in March 2020, the Research Institute for Tropical Medicine (RITM) was the country’s only accredited laboratory for testing, with a capacity of 100 tests/day. (RITM also happens to be the regulator of other labs.) Thus, only in July-August 2020 did testing system capacity finally scale from 5,000 to 30,000 tests per day, as a slew of labs got accredited. A year later, despite the first vaccines arriving from China in February 2021, limited genomic sequencing results on variant spread were still being released two months after identification.

Clearly, it is very difficult to encourage innovation when you also regulate all laboratories nationally based on what you are able to do as a lab.  It might be best to stick to one function, say laboratory operations solely, and transfer the regulatory function to say, an independently run Food and Drug Administration (FDA), which can concentrate on regulation based on global US (FDA) and/or EU (European Medical Agency) standards.

This is a more subtle, but two-step forward-thinking form of PPP.  If we want to encourage global innovation in biotechnology, which is driving the frontiers of medicine at the molecular level, we should let the private sector flourish under an unbiased regulatory framework. Further, there is also no need to reinvent the wheel on what is globally acceptable. For example, there is a European standard that was introduced across all of the EU in May, called CE-IVD, where in-vitro diagnostic devices that meet high safety, health, and environmental safety requirements can be legally commercialized across a single European market.

Let’s not downplay the government’s role in facilitating market agility in the biotech space. South Korea provided strong regulatory assistance in uniting academe and business efforts to launch its RT-PCR test solution in March 2020. Beyond Bill Gates, the US government committed to massive dosage purchases in support of Moderna and Pfizer vaccines. On TMC’s part, we have created a Clinical Transitional Research Institute to provide the bench-to-bed basis for advanced precision medicine in Oncology, in an open PPP research partnership.

In the Philippines, the opportunity for government to spur biotech investment locally was lost due to corruption charges surrounding personal protective equipment (PPE) purchases in 2020. One wonders why foreign purchases were shown preference over repurposed local manufacturing capacity. Locally developed test kits, for example, which would provide opportunities for job creation and expertise development, were shunned in favor of more expensive test kits from China.

After a meandering decades-long migration on health devolution, there appears a strong shaft of light at the end of this tunnel.

The issue on financing for health has historically been rooted in the mismatch between the internal revenue allotments (IRAs) and the cost of devolved functions. In the initial devolution in 1992, LGUs picked up 66% of personnel, 93% of hospital facilities, and 100% of regional and barangay health units, but only 40% of the yearly budget.

This imbalance in funding was only significantly remedied 22 years later in 2014, when a casting of sin tax allocations resulted in a jump in the Department of Health (DoH)/PhilHealth annual spend from P40 billion to P100 billion in five years.  Subsequently, the Universal Health Care (UHC) Act in 2020 stepped up premium contributions by 0.5% annually until a maximum 5% in 2025.  And a recasting of the Sin Tax Law in 2021 raised incremental allocations from more sin taxes, so that this year, DoH budget appropriations are at P205 billion.

Not to be outdone, a Supreme Court ruling on June 1, 2021 affirmed the Mandanas petition to allot to LGUs not just 40% of income but all other tax revenue, including customs and excise (including sin) taxes. This separate reallocation raised the LGU 2022 budget appropriation from P850 billion to P1 trillion.

By 2020, healthcare spend had reached 5.6% of GDP, a percentage point lower than Vietnam, but two percentage points higher than Indonesia. This compares with 10-12% for most developed markets, and 19% for the US.

The uplift continues. The DoH 2022 budget alone provides for P80 billion to be allocated for UHC implementation.  Are the stars aligned now between healthcare devolution and resource and organizational implementation?

The original devolution effort was diluted by an inability to sustainably find a substitute for the original District Health System that nationally coordinated healthcare delivery.  Now, with startup funding available, multi-sectoral models with Local Health Boards and Inter-Local Health System Zones need to carry the brunt of moving the healthcare registry from 87% to 100% of the population, educating the public on primary care choices, and ensuring appropriate access for all along the wellness-to-illness spectrum.  Private sector hospital participation in this process can depoliticize healthcare across political lines.

Our experience working with the local government unit of Pasig could be useful as a model for small-scale PPP:

1. We adopted five major Pasig barangay health centers where we send residents and consultants of various specialties twice a week.  Patients needing specialty care are either referred to Pasig General Hospital or if needed, to TMC Main.

2. We established an open system of referral/transfer of patients within the Pasig City hospital ecosystem especially during the peak of the pandemic.

3. Our hospital premises and manpower resources are openly being used for the Pasig community vaccination program.

Partnering in the hospital sector, which is two-thirds private sector-owned, can range from case referrals to management assistance, clinical professional development to facilities complementation and outsourcing.  What needs to be recognized is that the value proposition for a PPP rests on efficiency and profitability, not on equity and subsidies. Nurses, for example, are paid more in the public sector, but nurse-patient ratios are higher, and there is thus less opportunity for professional development.

The current state of our healthcare ecosystem reeks of opportunity to do better by doing good. Nursing apprenticeships favor “industrial synergy” between schools and hospitals. Medical biotech has its roots in the establishment of the National Institute of Molecular Biology and Biotechnology as far back as 1979. The past decade has seen the quintupling of monetary resources available to the healthcare ecosystem. The pandemic has hit our country hard, but as Paul Coelho writes, “Life always waits for some crisis to occur before revealing itself at its most brilliant.”


Jose Xavier “Eckie” Gonzales is the chairman of The Medical City, a network of hospitals and clinics in the Philippines, as well as the operator of Guam Regional Medical City, the only private hospital in Guam. He is also the president and CEO of USSC, one of the country’s largest remittance companies. He holds an MBA from the Harvard Business School, and is a magna cum laude graduate of Business Economics from the University of the Philippines.