The Supreme Court has ruled in favor of Quezon City Eye Center, protecting healthcare facilities from unwarranted claims by the Philippine Health Insurance Corporation (PhilHealth). The Court found that PhilHealth violated the clinic’s right to due process by failing to provide a copy of the resolution finding a prima facie case against it before filing formal complaints. This decision underscores the importance of procedural fairness in administrative proceedings and sets a precedent for ensuring that healthcare providers are afforded adequate protection against arbitrary accusations, safeguarding their ability to deliver essential services without undue disruption.

Cataract Surgeries and Claims: Did Quezon City Eye Center Breach Accreditation Warranties?

This case arose from allegations that Quezon City Eye Center violated its warranties of accreditation with PhilHealth. The core issue revolved around whether the eye center was complicit in, or negligent regarding, recruitment schemes for cataract surgeries allegedly conducted by visiting doctors using its facilities. PhilHealth argued that the clinic should be held liable for breaches related to these activities, while Quezon City Eye Center maintained it was merely providing facilities to independent doctors and processing claims without direct involvement in patient solicitation.

The controversy began with PhilHealth Circulars No. 17 and 19, series of 2007, which aimed to curb irregularities in cataract surgery claims, particularly those arising from medical missions or recruitment schemes. These circulars specified that claims would not be compensated if healthcare providers solicited patients through unethical means or engaged in medical missions primarily for profit. Following a complaint about “cataract sweeping,” PhilHealth investigated Quezon City Eye Center due to the high volume of cataract surgeries performed by two doctors, Dr. Allan M. Valdez and Dr. Rhoumel A. Yadao, at its facility.

Six administrative cases were filed against Quezon City Eye Center. These cases alleged multiple counts of Breach of the Warranties of Accreditation, citing violations of the 2004 Revised Implementing Rules and Regulations (IRR) of the National Health Insurance Act. The accusations stemmed from the actions of Dr. Valdez and Dr. Yadao, who allegedly recruited patients through improper means and performed surgeries at the clinic. Quezon City Eye Center countered that it had agreements with its resident and visiting doctors, including Heidelberg Ventures Corporation (HVC), an independent group of ophthalmologists. Under these agreements, the clinic provided its facilities and processed PhilHealth claims for the doctors’ patients, but it claimed no direct knowledge of how the patients were recruited or treated.

The PhilHealth Arbitration Office initially found Quezon City Eye Center guilty and imposed fines and suspensions, which were later modified by the PhilHealth Board. The Court of Appeals affirmed these decisions, holding that the clinic had been afforded due process and that substantial evidence supported the findings of liability. The appellate court noted that the clinic required HVC to conduct a minimum number of surgeries per month and failed to stop the doctors’ recruitment activities, thus concluding the clinic was not an innocent party. The Supreme Court, however, disagreed with these lower court findings, reversing the Court of Appeals’ decision.

The Supreme Court emphasized that PhilHealth violated Quezon City Eye Center’s right to due process by failing to provide a copy of the resolution finding a prima facie case against it before filing formal complaints. The Court referenced Cayago v. Lina, stating, “Due process is satisfied when a person is notified of the charge against him and given an opportunity to explain or defend himself.” Section 88 of the 2013 Revised IRR mandates that if an investigating prosecutor finds a prima facie case, they must submit a resolution to the Senior Vice-President for Legal Sector (SVP-LS) for approval. The Court interpreted the word “shall” in this provision as imposing a mandatory duty, citing Diokno v. Rehabilitation Finance Corporation: “The presumption is that the word ‘shall’ in a statute is used in an imperative, and not in a directory, sense.”

The Court also addressed the issue of whether Quezon City Eye Center properly availed of the extraordinary remedy of certiorari. The Court stated that the petitions for certiorari were not prematurely filed because the administrative cases were still pending before the PhilHealth Arbitration Office. The Court cited Republic v. Lacap, which enumerates exceptions to the principle of exhaustion of administrative remedies, including situations where “the controverted acts violate due process.” Since PhilHealth violated Quezon City Eye Center’s due process rights, the clinic was justified in seeking judicial recourse even while the administrative cases were ongoing.

Furthermore, the Supreme Court determined that there was no substantial evidence to hold Quezon City Eye Center guilty of Breach of the Warranties of Accreditation. The Court acknowledged that factual findings of administrative agencies are generally accorded respect and finality, provided they are supported by substantial evidence. However, in this case, the Court found that the evidence presented by PhilHealth was insufficient to establish the clinic’s liability. The Court found the “doctrine of apparent authority” invoked by PhilHealth as misplaced, explaining it did not apply. As the Court said:

the “doctrine of apparent authority” does not apply where the cause of action as in this case is breach of petitioner’s warranties of accreditation under PhilHealth rules and regulations and not medical malpractice arising from negligence or recklessness. And rightly so, since medical malpractice is a form of negligence or recklessness which consists in the failure of a physician or surgeon to apply to his practice that degree of care and skill that the profession generally and ordinarily employs under similar conditions and circumstances.

The Supreme Court underscored the importance of PhilHealth’s mission to provide health services to all Filipinos. It held that penalizing healthcare providers without substantial evidence would undermine this mission and deprive people of their right to health and patient care services. The Court therefore reversed the Court of Appeals’ decision, dismissed all charges against Quezon City Eye Center, lifted the suspension of its accreditation, and ordered PhilHealth to pay all pending claims related to the cataract operations conducted by Dr. Valdez and Dr. Yadao.

FAQs

What was the key issue in this case?	The key issue was whether Quezon City Eye Center violated its warranties of accreditation with PhilHealth in connection with cataract surgeries performed by visiting doctors at its facility. Specifically, the Court examined whether PhilHealth had proven that the eye center was complicit in recruitment schemes and afforded the clinic due process.
What did the Supreme Court decide?	The Supreme Court reversed the Court of Appeals’ decision and ruled in favor of Quezon City Eye Center. The Court held that PhilHealth had violated the clinic’s right to due process and that there was no substantial evidence to support the finding of Breach of the Warranties of Accreditation.
Why did the Supreme Court find a violation of due process?	The Court found that PhilHealth violated due process by failing to provide Quezon City Eye Center with a copy of the resolution finding a prima facie case against it before filing formal complaints. This violated the clinic’s right to know the case it had to meet and defend itself against.
What is the “doctrine of apparent authority” and why was it not applicable?	The doctrine of apparent authority is used to determine a hospital’s liability in medical malpractice cases involving independent contractor physicians. The Court found it inapplicable here because the case involved a breach of warranties of accreditation, not medical malpractice due to negligence or recklessness.
What evidence did PhilHealth present against Quezon City Eye Center?	PhilHealth presented evidence suggesting that the clinic’s facilities were used for cataract surgeries resulting from improper recruitment schemes. The clinic had an agreement requiring a minimum number of surgeries per month and argued that it did not police how doctors recruited patients.
How did the Court assess the contract between Quezon City Eye Center and HVC?	The Court found that the agreement requiring HVC to perform a minimum number of surgeries per month, with a penalty for non-compliance, did not imply complicity in any fraudulent scheme. The Court noted that such agreements are common and do not necessarily indicate an intent to defraud PhilHealth.
What is the significance of Circular Nos. 17 and 19, series of 2007?	These circulars were issued by PhilHealth to address irregularities in cataract surgery claims. They specified that claims would be denied if healthcare providers solicited patients through unethical means or engaged in medical missions primarily for profit.
What is the practical implication of this decision for healthcare providers?	This decision reinforces the importance of due process in administrative proceedings involving PhilHealth claims. It protects healthcare providers from arbitrary accusations and ensures that they are afforded adequate protection against unsubstantiated allegations.

In conclusion, this ruling underscores the necessity for PhilHealth to adhere strictly to due process requirements when investigating and prosecuting healthcare providers. By protecting healthcare facilities from unsubstantiated claims, the Supreme Court safeguards the provision of essential medical services to the public.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Quezon City Eye Center vs. Philippine Health Insurance Corporation, G.R. Nos. 246710-15, February 06, 2023