Hospital must compensate seniors, but P7-M fine cut to P70,000

MANILA, Philippines — The Court of Appeals (CA) has ordered Baguio City-based Notre Dame De Chartres Hospital to compensate nearly a million pesos in excess payments to its senior patients who were denied the mandatory discounts in hospital bills almost a decade ago.

The appellate court, in a decision by its Special 11th Division on June 18, affirmed the administrative liability of the private hospital for failing to correctly deduct the value-added tax (VAT) and senior citizen discounts from the total bill of eligible patients.

READ: Senate OKs establishment of specialty hospital for senior citizens

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This, it noted, was a breach of its accreditation warranties and performance commitment under Republic Act No. 7875, or the National Health Insurance Act of 1995, as Notre Dame was also an accredited Philippine Health Insurance Corp. (PhilHealth) provider.

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The case stemmed from several administrative complaints filed in 2018 against Notre Dame for failing to grant the full 20-percent senior citizen and VAT discounts to hospital and professional fees, a privilege granted to certain patients under various laws.

“This resulted in additional out-of-pocket expenses to the prejudice of the senior citizen patients,” the CA noted, citing the records of the case.

Fine steeply reduced

The appellate court directed the restitution of P908,116, which represented the unnecessary out-of-pocket expenses of affected senior patients, to “fully compensate affected patients and restore to them the amounts improperly charged.”

It also imposed a fine of only P70,000 on Notre Dame, but this was way lower than the penalty imposed by PhilHealth, as the court said the offense was deemed as only one regardless of the number of counts.

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The amount of the fine was the major modification by the CA on the earlier rulings of the PhilHealth arbitration office in 2021 and the PhilHealth board in 2022, which had imposed a P7.7-million fine to represent the number of times the hospital committed an error in the computation.

The PhilHealth arbitration office first resolved the issue in a decision in February 2022, which ruled that Notre Dame was liable for 77 counts of violating RA 7875 with a penalty of P100,000 for each count.

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The tertiary hospital, which is run by Catholic Sisters of St. Paul of Chartres, appealed this before the PhilHealth board, but the latter upheld the arbitration office’s ruling in the same year.

VAT exemption

In maintaining that it committed no mistake in the computations, Notre Dame argued to the CA that it was not required to apply the 12-percent VAT exemption because there was no output VAT added to hospital bills. Output tax is the VAT paid when buying goods or services.

The CA, however, stressed that this has no basis in either the applicable laws, namely the Expanded Senior Citizens Act and PhilHealth circulars, saying: “To adopt Notre Dame’s strained interpretation would unduly restrict a benefit that the law already grants in broad and mandatory terms.”

It pointed out that the law’s silence on the supposed output tax requirement “confirms that no such qualification was intended.”

“Notre Dame’s restrictive reading of the guidelines cannot prevail, as it defeats the clear policy of the law to lessen the financial burden of healthcare service on senior citizens,” read the 20-page CA decision penned by Associate Justice Emilio Legazpi III.

Computation

The appellate court explained how the tax exemptions should be computed in hospital bills: “Healthcare providers accredited by (PhilHealth) must first deduct the 12-percent VAT exemption from the total hospital charges, then deduct the 20-percent senior citizen discount. It is only then that the PhilHealth benefit may be applied to the total bill. Afterwards, the remaining balance, if any, serves as the co-payment of the senior citizen,” the court said.

“The same method applies to the computation of the doctor’s professional fees and for case rates and benefit packages,” it added.

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In 2022, Baguio City Mayor Benjamin Magalong criticized the health state insurer for revoking the accreditation of Notre Dame because of unspecified violations. He had called the move “very inconsiderate” and “very unreasonable” because it is one of the hospitals with state-of-the-art facilities catering to PhilHealth beneficiaries not just from the city, but also from Benguet province. /atm