TAX CORNER & CORPORATE PLATFORM: The Anti Hospital Deposit Law & its Tax Implication

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By Atty. Josephrally L. Chavez, Jr.

Did you know that on 3 August 2017, a law was enacted increasing the penalties against hospitals and clinics for their refusal, denial, or rejection to administer or accept patients for appropriate medical treatment on an emergency or serious cases unless a corresponding deposit is made?

RA No. 10932 otherwise known as the Anti-Hospital Deposit Law, amending Batas Pambansa 702, as amended by RA No. 8344, prohibits the demand of deposits or advance payments for the confinement or treatment of patients in hospitals and medical clinics in certain cases.

Coverage

In an emergency or serious cases, it is now unlawful for any proprietor, president, director, manager or any other officer and/or medical practitioner or employee of a hospital or medical clinic to request, solicit, demand or accept any deposit or any other form of advance payment as a prerequisite for administering basic emergency care to any patient, confinement or medical treatment of a patient in such hospital or medical clinic or to refuse to administer medical treatment and support as dictated by the good practice of medicine to prevent death, or permanent disability, or in the case of a pregnant woman, permanent injury or loss of her unborn child, or noninstitutional delivery. [Sec. 1]

The only excuse for this matter is by reason of inadequacy of the medical capabilities of the hospital or medical clinic. However, the law still requires that the attending physician may transfer the patient to a facility where the appropriate care can be given, after the patient or his next of kin consents to said transfer and after the receiving hospital or medical clinic agrees to the transfer.

And when the patient is unconscious, incapable of giving consent and/or unaccompanied, the physician can transfer the patient even without his consent. But, such transfer shall be done only after necessary emergency treatment and support have been administered to stabilize the patient and after it has been established that such transfer entails less risks than the patient’s continued confinement. In this case, no hospital or clinic, after being informed of the medical indications for such transfer, shall refuse to receive the patient nor demand from the patient or his next of kin any deposit or advance payment.

Only upon strict compliance of the foregoing transfer procedure makes the refusal not punishable under the law.

Emergency situation, in this case, connotes an objective finding of a medical officer on duty for the day that there is immediate danger and where delay in initial support and treatment may cause loss of life or cause permanent disability to the patient, or in the case of a pregnant woman, permanent injury or loss of her unborn child, or would result in a noninstitutional delivery. On the other hand, a serious case refers to a condition of a patient characterized by gravity or danger wherein based on the objective findings of a prudent medical officer on duty for the day when left unattended to, may cause loss of life or cause permanent disability to the patient, or in the case of a pregnant woman, permanent injury or loss of her unborn child. [A classic example is: a COVID-19 patient]

Penalty

If this law is violated by any official, medical practitioner or employee of the hospital or medical clinic, upon conviction by final judgment, they will be punished by imprisonment 6 months and 1 day but not more than 2 years and 4 months, or a fine of not less than 100,000.00, but not more than 300,000.00 or both, at the discretion of the court.

If such violation was committed pursuant to an established policy of the hospital or clinic or upon the instruction of its management, the director or officer of such hospital or clinic responsible for the formulation and implementation of such policy shall, upon conviction by final judgment, suffer imprisonment of 4 to 6 years, or a fine of not less than 500,000.00, but not more than 1,000,000.00 or both, at the discretion of the court, without prejudice to damages that may be awarded to the patient-complainant.

And upon 3 repeated violations committed pursuant to an established policy of the hospital or clinic or upon the instruction of its management, the health facility’s license to operate shall be revoked by the DOH. The president, chairman, the board of directors, or trustees, and other officers of the health facility shall be solidarily liable for damages that may be awarded by the court to the patient-complainant. [Sec. 4]

Presumption of Liability

In the event of death, permanent disability, serious impairment of the health condition of the patient-complainant, or in the case of a pregnant woman, permanent injury or loss of her unborn child, proceeding from the denial of his or her admission to a health facility pursuant to a policy or practice of demanding deposits or advance payments for confinement or treatment, a presumption of liability shall arise against the hospital, medical clinic, and the official, medical practitioner, or employee involved. [Sec. 5]

PhilHealth Reimbursement of Basic Emergency Care

PhilHealth is mandated to reimburse the cost of basic emergency care and transportation services incurred by the hospital or medical clinic for the emergency medical services given to poor and indigent patients. Furthermore, the Philippine Charity Sweepstakes Office (PCSO) is bound to provide medical assistance for the basic emergency care needs of the poor and marginalized groups. [Sec. 7]

Tax Implication

Other expenses incurred by the hospital or medical clinic in providing basic emergency care to poor and indigent patients not reimbursed by PhilHealth is tax deductible. [Sec. 8]

Under DOH AO 2018-0012 dated 5 April 2018, basic emergency care to poor and indigent patients provided by the hospital or medical clinic not reimbursed by PhilHealth and PCSO shall be deductible from gross sales/receipts. [BIR RMC 39-2019]

SIMPLY PUT, the tax incentives granted to hospitals or medical clinics by way of deductible expense from the gross income or, the tax deduction is allowed only when the patients are poor and indigents, and that the hospital or medical clinic expenses covering the basic emergency care were not reimbursed by Philhealth or PCSO. Notably, however, the law in imposing prohibition on advance-deposits applies to all as it did not distinguish the patient as long as it is a serious case or an emergency and one’s life is in peril. But as to tax implication, consistent with the time-honored principle of stricssimi juris, the patient has to be poor and indigent in order for the expenses to be considered deductible.  [This Article is penned to salute my good friend – Atty. VBTF]

Feel free to email me for any question at atty.jlc@gmail.com

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