THIRTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
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S E N A T E  
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Introduced by Senator S. R. Osmefia 111 
EXPLANATORY NOTE 
The Constitution explicitly provides that the State shall protect and 
promote the right to health of the people and instill health consciousness among 
them. The enactment of the Local Government Code in I991 sought to give 
meaning to such mandate. Under the Code, local government units (LGUs) were 
granted more powers, authorities, responsibilities and resources. A year after its 
enactment, the Implementing Rules and Regulations” on the devolution of health 
services was created. 
Among those devolved to the LGUs were hospitals and field health 
services of the Department of Health (DOH). The full implementation of the Local 
Government Code in 1993 transferred the operation of provincial and district 
hospitals to the provincial governors and rural health units (RHUs) to the city and 
municipal mayors. This translates to 580 hospitals being operated by the 
governors and 2,000 RHUs under the mayors, and a total of 45,082 health 
personnel devolved to the local government. Meanwhile, DOH’S residual powers, 
functions and responsibilities remain. These include the oversight (general 
supervision) monitoring and evaluation functions, formulation of standards and 
guidelines, and technical and other forms of assistance to the LGUs. 
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lnspite of the lapse of time since the devolution of health services in 1993, 
the deterioration of health facilities and equipment remains deplorable, as even 
the Department of Health has to admit. As early as 1995, the DOH reported in its 
Hospital Devolution Study that LGU funds to finance operations of devolved 
health services were inadequate. 
The problems brought about by devolution led to the deterioration of 
health services particularly in far-flung areas where services are needed most. 
Only 1/3 of the total number of hospitals and about % of hospital beds are public. 
Out of the country’s 41,000 barangays, only 1/4 have a barangay health station. 
These government health facilities have acquired increasing notoriety for their 
lack of equipment, medicines and staff. 
This bill attempts to respond to an urgent need to effectively address 
these health issues in order to rationalize the health care delivery system in our 
country. 
SERGIO OSMEfiA 111 
Senator 


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THIRTEENTH CONGRESS OF THE REPUBLIC 
, .  
OF THE PHILIPPINES 
First Regular Session 
Introduced by Senator S. R. Osmetia Ill 
AN ACT 
PROVIDING FOR THE MODERNIZATION OF THE HEALTH CARE DELIVERY 
SYSTEM, APPROPRIATING FUNDS THEREFORE AND FOR OTHER 
PURPOSES 
Be it enacted by the Senate and House of Representatives of the Republic of the 
Philippines in Congress assembled: 
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Section 1. Short Title. -- This Act shall be known as the "Health Care 
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Delivery Modernization Act of 2004." 
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Sec. 2. Declaration of Policy. -- It is hereby declared a policy of the State 
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to modernize the health care delivery system to a level where it can fully and 
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effectively perform its constitutional mandate to protect and promote the right to 
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health of the people and instill health consciousness among them. Toward this 
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end, the principal thrust of this modernization program under this Act shall be as 
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follows: 
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(a) 
The development of an efficient and effective health care delivery 
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system throughout the country; 
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(b) 
The integration of 
the promotive, preventive, curative and 
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rehabilative aspects of health care delivery to be under the local chief executive 
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whenever appropriate; 
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(c) 
The transformation of government hospitals into self-governing 
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components, together with their respective rural health units; 
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(d) 
The development of cooperation among the local and national 
government agencies, members of Congress and the private sector, including 
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the civic, religious and non-government organizations; 
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(e) 
The implementation of a residency training and accreditation 
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program and accreditation of private specialist practitioners in provincial hospitals 
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and medical centers; 
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The establishment of a dependable two-way referral system 
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between the public and health worker up to the successive higher level of health 
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care stations reaching up to the specialty hospitals and vice versa; 
(9) 
The delineation of specific and specialized functions that will enable 
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the Department of Health (DOH) to concentrate its efforts in establishing and 
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maintaining adequately equipped state-of-the-art medical centers at the regional 
level, including those in Metro Manila, and specialty hospitals in the country, 
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including those with original charters; 
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(h) 
The development of partnership among local government units and 
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between local government units and the Department of Health (DOH) in the 
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establishment of health care delivery facilities; and 
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(i) 
Local government units shall adopt a system and procedure to 
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attain maximum level of transparency in the procurement of equipment and 
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medicines. 
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Sec. 3. 
Statement of Objectives. 
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The Health Care Delivery 
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Modernization Program, hereinafter referred to as the Program, shall be 
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implemented in accordance with the following objectives: 
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a. To modernize the health care delivery system. by adopting a. 
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comprehensive, consistent and systematic approach to health issues and 
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concern to complement the state-of-the-are technology; 
b. To further enhance local autonomy by granting local government units 
full powers in the formulation of policies and by mandating the Department of 
Health to perform tasks under Section 5 of this Act relative to the operation and 
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I maintenance of hospitals and public health services under its supervision and 
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control; 
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c. 
To implement a program of extending technological, financial and 
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administrative assistance to local government units to support and improve the 
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provision, operation and maintenance of health facilities and equipment; 
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d. 
To enhance inter-agency multi-sectoral cooperation; 
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To enhance the capability of hospitals requiring the DOH to provide 
each local government unit, competent physicians to assist the local chief 
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executive as may be appropriate in the monitoring of health care delivery 
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functions; and 
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areas. 
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f. 
To encourage the employment and retention of doctors in rural 
Sec. 4. Definition of Terms. -- The foilowing terms shall be understood in 
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this Act to mean: 
(1) 
“Hospital” refers to a place devoted primarily to the maintenance 
and operation of facilities for the diagnosis, treatment and care of individuals 
suffering from illness, disease, injury or deformity, or in need of obstetrical or 
other medical and nursing care. 
(2) 
“Primary Hospitals” refer to those with capabilities and facilities for 
providing first contact emergency care and hospitalization in simple cases. 
(3) 
“Secondary Hospitals” refer to those which have capabilities and 
facilities for providing medical care to cases requiring hospitalization and the 
expertise of physicians with training of not less than six (6) months on certain 
specialties. 
(4) 
“Tertiary Level I Hospitals” refer to those which have capabilities for 
providing medical care to cases requiring sophisticated diagnostic and 
therapeutic equipment and t-he expertise of trained specialist and in the sub-. 
specialties. 
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(5) 
“Tertiary Level II Hospitals” refer to a departmentalized hospital with 
teaching and research capabilities and accredited Residency Training Programs 
in the fields of Surgery, Pediatrics, Medicine, OB-Gyne, EENT, Orthopedics, 
Anesthesia and other ancillary disciplines. 
Dental services is part of the 
professional services. 
(6) 
“Tertiary Level Ill Hospitals” refer to hospitals which have been 
particularly selected to provide tertiary hospital services, with teaching, training 
functions and research. 
(7) 
“Tertiary Level IV Hospitals” refer to a tertiary hospital with 
expensive and sophisticated diagnostic and therapeutic facilities for a specific 
medical problem area. 
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(8) 
“District hospital” refers to the front-line hospital with capabilities 
and facilities for providing secondary medical care to cases requiring 
hospitalization and the expertise of trained doctors. 
(9) 
“Provincial Hospital” refers to a central district hospital with its own 
catchments area which provides at least a minimum of Tertiary Level I hospital 
care. 
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“Regional Hospital” refers to departmentalized hospital which 
provides Tertiary Level II hospital care. 
(1 1) 
I l l  hospital care. 
(1 2) 
“Medical Center” refers to a hospital which provides Tertiary Level 
“Specialty Hospital” refers to a hospital which provides services for 
one particular illness or disease or health medical care need, with the highest 
medical care rendered by medical experts and using highly specialized 
equipment for a specific medical problem area. It provides Tertiary Level IV 
hospital care. 
(13) 
“Competent physician’’ refers to a doctor who possesses both 
technical and managerial knowledge or expertise in health care. 
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(14) 
“Local Government Units” refer to provinces, cities, municipalities, 
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Sec. 5. Components of the Program. - The Program shall consist of the 
barangays and other political subdivisions as may be created by law. 
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following components: 
a) 
Delineation of the role of the local government units and the 
Department of Health. 
The leagues of local government units and the 
Department of Health shall support the implementation of the Health Care 
Delivery Modernization Program by performing the mandated tasks herein 
defined, to wit: 
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The province shall be responsible for the promotive, preventive, 
curative and rehabilitative aspects of health care delivery except in places 
where municipal and city hospitals exist, in which case these municipal 
and city hospitals shall. be under the responsibility of the.local government. 
unit concerned. They shall also undertake an annual review of health 
program in their areas of jurisdiction. 
2) 
The District Health Board shall be responsible for the recruitment of 
volunteer barangay health workers, who shall be entitled to monthly 
honorarium and other benefits as provided for by law. 
3) 
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The Department of Health shall, in addition to the powers vested in 
it under existing laws, be responsible for the following: 
(3.1) Health care delivery higher than or more sophisticated than 
that provided by local government units; 
(3.2) Provide each province or qualified cities or municipalities 
competent physicians to assist the local chief executive as may be 
appropriate in the management and monitoring of devolved health 
care functions; 
(3.3) Upper tertiary hospital care where the expertise in the 
different organ specific medical-surgical specialty is needed; 
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(3.4) Operation and maintenance of medical centers, including 
those in Metro Manila, and specialty hospitals whose functions are 
to provide tertiary expertise: Provided, however, That specialty 
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hospital with original charter shall continue to be governed by its 
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own charter. 
(3.5) Supervise the operation of the more sophisticated organ 
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specific medical centers; 
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(3.6) Initiate and assist in the establishment of a residency training 
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program with the participation of the private practicing specialist, as 
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much as practicable, as consultants in each provincial hospital; and 
(3.7) Provide doctors in rural communities under its program of 
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doctors to doctorless areas, who shall be assigned by the local 
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chief executive as may be appropriate to qualified communities. 
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The Department of Health is hereby authorized to create positions of, and 
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provide the necessary funding, as a national aid to local government units, for 
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doctors to doctorless areas iucluding their incentives and benefits, in addition to 
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those granted under existing laws, to wit: 
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(I) Hazard allowance in an amount to be determined by the district 
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.hospital health board of the local government unit concerned; 
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(2) 
Subsistence allowance equivalent to the meals they take in the 
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course of their duty which shall be computed in accordance with the 
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prevailing circumstances as determined by the local government unit 
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concerned; and 
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(3) 
Automatic promotion to the position of Medical Specialist I or to the 
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Classification System. 
next higher rank, as the case may be, under the Revised Compensation 
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The doctors to the doctorless areas shall be entitled to incentives and 
benefits to be provided under this Act by other government agencies, to wit: 
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(1) 
Free legal representation and consultation services shall be 
immediately provided by the Public Defenders Office in cases of coercion, 
interference, and other civil, criminal and administrative cases filed by or 
against such doctors arising out of or in connection with the performance 
of their duties as such; and 
(2) 
universities to be granted to their legitimate children. 
(3) 
Strengthening the Capability of the Provincial Hospitals. - The 
Program shall develop the provincial hospitals into a responsive, efficient 
and modern hospital with the capability to handle tertiary level I to II 
hospital care, In pursuance thereto, the following necessary steps must 
be undertaken, to wit: 
I) The establishment of a residency training program and tertiary 
diagnostic facilities with, as much as practicable, the participation of the 
private sector or private specialist practitioner as consultants in each 
provincial hospital subject to the following conditions: 
Scholarship benefits in the form of tuition fees in state colleges or 
a) 
Consultants, who shall be accredited to practice in the 
hospital, may be entitled to honorarium to be determined by the 
district hospital.health board; 
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b) 
Provincial hospital residents participating in the residency 
training program shall not be permanent employees but shall be 
considered employed for the whole duration of the Residency 
training period; and 
c) 
Participants in the Residency training program shall be given 
preference in case of reemployment as residents of district 
hospitals and shall occupy the position of Medical Officer IV. 
2) 
The abolition of regional hospitals and offices. All equipment, 
records, and other assets of both the regional offices and hospitals shall 
be transferred to the Regional Medical Center. Personnel shall be 
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absorbed by the Medical Centers or assigned to the provincial government 
to assist the governors in managing the .devolved functions; Provided,. 
That the rights accorded to such personnel pursuant to the civil service 
law, rules and regulations, shall not be impaired 
3) 
The improvement of each provincial hospital. The provincial 
government shall strive to establish diagnostic centers and to provide 
modern and quality equipment to improve the capabilities of the provincial 
hospitals pursuant to its modernization objectives: Provided, That, the 
acquisition of new equipment shall be synchronized with the phasing out 
of obsolete major equipment. Provided, furlher, That, the acquisition of 
new equipment shall be subject to the laws on public bidding. 
c) Establishment of the District Hospital, Medical Center and Specialty 
Hospitals Health Boards. - This component of the Program is geared towards the 
realization of a genuine local autonomy. In furtherance, thereof, there shall be 
established a district hospital, medical center, including those in Metro Manila, 
and specialty hospital health boards 
The composition of the district, medical center and specialty hospital 
health boards shall, as they are applicable, be as follows: 
Chairman: (I) For district hospital, A Sangguniang Panlalawigan member 
representing the district where the district hospital is located; 
(2) For medical center, the Chairman of the Regional Development 
Council. In Metro Manila, the Mayor where the medical center is located. 
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(3) For specialty hospital, the Chairman of the Board of Trustees for 
specialty hospital with original charter; the Secretary of Health for specialty 
hospitals under its control and supervision. 
Vice Chairman: Chief of the District Hospitals, Medical Centers and 
Specialty Hospitals. 
Member: (1) Representative of the Congressional District for hospitals in 
his political district; 
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(2) Senator of the Republic for all medical centers and specialty hospitals; 
(3) A mayor of the catchments area of the district; 
Members common to the district hospitals, medical centers and specialty 
hospitals health boards; 
(1 ) Representative of the Philippine Hospital Association;. 
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(2) Representative of the Philippine Medical Association; 
(3) Representative from the non-government organizations involved in 
health services; 
(4) Representative of the religious sector; 
(5) Representative of the private sector. 
The Chairman, Vice Chairman and the members of the District Hospital 
Health Board, except the Representative of the Congressional District, shall be 
appointed by the provincial governor. 
The Chairman and Vice-chairman of the Medical Center, including those 
in Metro Manila, and specialty hospital health boards shall serve by the operation 
of this Act without the need of any appointment. 
The representative from the non-government organizations, religious and 
the private sector in the medical center and specialty hospital health boards shall 
be appointed by the Chairman of the respective health boards. 
The powers and functions of the district hospital, medical center and 
specialty hospital health boards shall, as they are applicable, be as follows: 
(I) To assist the provincial governor, the Secretary of Health, 
Administrator or Chairman of the Boards of Trustees, as the case may be, 
in the operation and management of devolved functions, medical centers 
and specialty hospitals; 
(2) 
health services, medical centers and specialty hospitals; 
(3) To devise a mechanism for internal control; 
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To review and endorse the budgetary requirements of the district 
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(4) 
To enhance the participation of local government units and 
community involvement in hospital service and public health activities; 
(5) 
To screen and recommend to the Selection Board the appointment 
of qualified applicants to fill vacant positions in the rural health units and 
district hospitals, medical centers and specialty hospitals, as the case may 
be; 
(6) 
To deposit, in trust, all the earnings of the district hospitals and rural 
health units derived from whatever source with the Provincial Treasurer’s 
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Office or with any authorized depository banks; for medical centers and 
specialty hospitals, with any authorized depository bank as part of their 
General Fund; 
(7) 
To determine the utilization of funds of the hospitals and medical 
centers for the betterment of hospital health services; and 
(8) 
To perform such other functions as may be deemed necessary for 
the effective management of the rural health units, hospitals, medical 
centers and specialty hospitals: Provided, however, That the Board of 
Trustees of specialty hospitals with original charter, shall exercise the 
powers and functions of the hospital health board under this section, in 
addition to the powers vested in it under existing laws. 
The Board shall meet at least once a month or as often as may be 
necessary. 
A majority of the members of the Board shall constitute a quorum but the 
chairman and the vice-chairman must be present during meetings where 
budgetary proposals are prepared or considered. Members thereof who are not 
government officials or employees shall be entitled to necessary traveling 
expenses and allowance chargeable against the funds of the health boards of the 
district hospital, medical center and specialty hospitals subject- to the accounting 
and auditing rules and regulations. 
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SEC. 6. Period of Implementation. - The Program shall be implemented 
over a period of three (3) years from the approval of this Act. 
SEC. 7. Appropriations. - a) Initial Appropriations. - For the first year of 
the 
implementation of 
this 
Act, 
the 
amount 
of 
One 
billion 
pesos 
(PI ,OOO,OOO,OOO.OO), 
is hereby appropriated out of any funds of the National 
Treasury not otherwise appropriated. 
b) Continuing Appropriations. - The Department of Budget and 
Management (DBM) is hereby mandated to include in the annual General 
Appropriations Act the amount necessary for the implementation of this Act. 
Other sources of funds shall from the following: 
(1) 
The total cost 'of devolved functions to be deducted from the' 
Internal Revenue collections subject to the following principles: 
(2) 
Internal revenue allotment shares be based on the total amount 
collectible for internal revenue, including value-added tax collected by the 
Bureau of Customs, proceeds from the sin taxes and the like; 
(3) 
The cost of devolved functions shall be taken from the sixty percent 
(60%) share of the national government; 
(4) 
and Gaming Corporation (PAGCOR); 
(5) 
Twenty percent (20%) net earnings froin the Philippine Amusement 
Twenty percent (20%) net earnings of the Public Estate Authority; 
and 
(6) 
Loans, grants, bequest, or donations, whether from local or foreign 
sources. 
SEC. 8. Implementing Rules and Regulations. - The Department of Health 
(DOH) and the Department of the Interior and Local Government (DILG) shall, in 
coordination with the League of Provinces, promulgate the rules and regulations 
for the implementation of this Act within sixty (60) days from its effectivity. 
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SEC. 9. Repealing Clause. - All laws, orders, decrees, rules and 
regulations inconsistent with the provisions of this Act are hereby repealed or 
modified accordingly. 
SEC. 10 . Separability Clause. - If any part or provision of this Act shall be 
declared to be unconstitutional or invalid, other parts or provision hereof which 
are not affected thereby shall continue to be in full force and effect. 
SEC. 11. Effectivity. - This Act shall take effect fifteen (1 5) days following 
its publication in at least two (2) newspapers of general circulation. 
Approved, 
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