Wednesday, March 3, 2010

Department of Justice: U.P. Board of Regents cannot ignore U.P.'s own U.P. Charter of 2008 when it signed 2009 deal privatizing portions of PGH

(L to R: Faculty Regent Judy Taguiwalo, PGH Executive
Director Jose Gonzales and Student Regent Charisse Bañez)

By Chanda Shahani

 The Department of Justice (DOJ) has stated in a February 9, 2010 legal opinon released during a March 3, 2010 media briefing held at the College of Social Work at U.P. Diliman that a contract signed by University of the Philippines (U.P.) President Emerlinda R. Roman in 2009 to privatize portions of Philippine General Hospital (PGH) goes against U.P.'s own Charter of 2008 (Republic Act (RA) 9500).

 The DOJ opinion said RA 9500 requires that any such plan must protect U.P. "from undue influence and control of commercial interests" and that it should be "approved by the Board subject to a transparent and democratic process of consultation with the constituents of the national university."

By issuing such an opinon, the DOJ has practically sided with U.P. Philippine General Hospital (PGH) Executive Director, Dr. Jose Gonzales who was voted and selected by the BOR last December 18, 2009 but who has consistently opposed the privatization of portions of U.P. PGH; leading to what observers say is an attempt by disgruntled elements of the BOR to remove Gonzales last February 25, 2010 by engaging in legal acrobatics through the U.P. Legal Office in order to remove the validity of the swing vote of Student Regent Charisse Bañez.

The media briefing, was held to represent a coalition of groups including the Faculty Regent Judy Taguiwalo, Student Regent Charisse Bañez, Staff Regent Buboy Cabrera, Dr. Jose Gonzales of the PGH, concerned University of the Philippines (UP) faculty and students, and the All U.P. Workers Union.

During the media briefing, Dr. Gonzales said that the contract signed on June 18, 2009, for the UP PGH Faculty Medical Arts Building Project by President Roman and Dr. Edwin Mercado, President and Chief Executive Officer of the Daniel Mercado Medical Center (DMMC) and witnessed by UP Regents Abraham Sarmiento and Nelia Gonzalez, UP Manila Chancellor Ramon Arcadio, then U.P. PGH Director Carmelo Alfiler and other U.P. officials while beneficial in some respects, would nevertheless still hurt the essential constituents of U.P. PGH, who are the disadvantaged poor, by siphoning away much-needed income needed by PGH for its programs and benefitting DMMC instead.

The UP Board of Regents, during its 1239th meeting on December 17, 2008, confirmed the awarding of the Project to DMMC. The recommendation was submitted to the BOR by Dr. Yolanda Robles, Chair of the Special Bids and Awards Committee for the UP-PGH Faculty Medical Arts Building (FMAB) Project, after DMMC complied with all the requirements of the bidding process. The Notice of Award (NOA), was signed by President Roman last February 5.

The UP-PGH FMAB project is an activity of the University designed as a retention and incentive program for the faculty members of UP Manila (UPM), as a source of additional income for PGH’s budget, a venue for the geographic practice of profession among faculty members of UPM, an accessible and affordable ambulatory facility for private patients and to strengthen the distinction of UPM and PGH as the National Health Sciences Center and as the National University Hospital, respectively.

The contract entails the lease with conversion, rehabilitation, development and operation of the PGH Dispensary Building as the UP-PGH FMAB for a period of 25 years. DMMC is given an 18-month rent-free construction period starting from the time of contract signing. Under the Terms of Reference, DMMC shall lease the building from UP-PGH and sub-lease the clinic spaces to accredited PGH consultants. There is no need for the consultant to buy stocks to practice or buy/advance lease of clinic. DMMC is responsible for the fiscal and non-medical operations of FMAB and is allowed to manage and operate the concession areas which include the following: Laboratory, Radiology, Pharmacy among others.

 As originally envisioned, the FMAB would, among others, (1) generate additional resources to supplement PGH's budget allocation for hospital operations from the national government; (2) provide affordable, accessible high-quality, competent, comprehensive, integrated and humane health care services to ambulatory pay patient clientele of PGH; (3) provide a centralized teaching, training, and research-related facility for the faculty, trainees and relevant staff; (4) strengthen the geographic practice of profession among faculty members; (5) provide a faculty incentive package of affordable clinic spaces and income opportunities to UPM faculty in order to augment the faculty's regular compensation package from the University; (6) promote faculty retention and career development, (7) strengthen the distinction of UPM as the National Health Sciences Center, and; (8) serve as an essential component of a strong National University Hospital.

Dr. Gonzales said that while he was for the FMAB, which addressed the needs of consultant doctors at PGH who were not given any compensation, the part of the contract which allowed DMMC to manage and operate the concession areas which include the following: Laboratory, Radiology, Pharmacy among others, removed a source of funds for PGH which they needed badly to help pursue their mission to serve thousands of indigent patients every year.

Dr. Gonzales said that diagnostics alone at PGH makes up to PhP 8 million a month that would be lost to DMMC. He said that the Commission on Audit (COA) has reported that while PGH's annual budget is PhP 1.3 billion a year, it actually needs up to PhP 3 billion a year if it is to operate effectively.

Dr. Gonzales and the All U.P. Workers Union supports the geographical/private practice/clinic of PGH Medical Consultants/UP Manila Faculty at the Faculty Medical Arts Building (FMAB). They also support the expanded and efficient operation of PGH laboratory pharmacy, radiologic, endoscopic, laparoscopic, arthroscopic and other diagnostic services to serve the needs of the FMAB, the PGH and of the Filipino people.

However, in the Memorandum of Agreement (MOA) signed between Daniel Mercado Medical Center (DMMC) and the University of the Philippines last June 18, 2009, the University would allow the operation by the DMMC of privately run laboratory, pharmacy, radiologic, endoscopic, laparoscopic, arthroscopic and other diagnostic services at the FMAB. This is objectionable to Dr. Gonzales, because it imperils not only the long term viability of PGH services but the operation of the whole hospital itself. These services that are intended to be privatized at the FMAB are the heart and soul of hospital operations, and to alow allow the operation of private entities right inside its the PGH compound that will directly compete on its own laboratory, pharmacy and other services.

In a statement released to the media during the press briefing, the U.P. Democratization Movement said that President Roman “is turning the BOR into a highly politicized body by initiating the attack to remove the Student Regent, by conspiring to reverse a BOR selection of the PGH Director that she did not want, by acting as the President only of some segments of the university instead of the whole university. She is demonstrating all the weaknesses of her appointing authority which is to divide and confuse instead of leading and governing. The crisis of the University is really a gross failure of executive leadership of President Roman.”

Observers are saying that some segments of the BOR strategized to remove Executive Director Gonzales by first eliminating the validity of the swing vote of Student Regent Banez because of Gonzales' lack of all-out support for the privatization of PGH. The U.P. Democratization Movement is calling for the BOR, whom it voted to select Dr. Gonzales as U.P. PGH Executive to recognize Dr. Gonzales' term of office from January 1, 2010 to December 31, 2012.

The DOJ legal opinion, Opinion No. 8, S. 2010, dated February 9, 2010 was signed by DOJ Secretary Agnes VST Devanadera and was issued due to three (3) separate requests for opinion relating to the contract of lease by and between U.P. as lessor and the Mercado General Hospital, Inc. (DMMC) as the lessee. The opinion was issued at the request of Emmanuel Y. Angeles, Chairman of the Commission on Higher Education and Development (CHED). U.P.'s Vice President for Legal Affairs, Theodore Te, and the Manila Chapter of the All U.P. Workers Union.

The opinion sought to address the question of whether the new requirements provided in the U.P. Charter of 2008 or R.a. 9500, which took effect only in May of 2008, or three years after the approval of the FMAB project applied retroactively to the FMAB Contract which was signed in 2009.

The DOJ opinion said that the request originated from the claims of the All U.P. Workers Union that the BOR was ill-advised when they rushed for the confirmation of the Contract of Lease without conasidering the provisions of the new U.P. Charter of 2008.

The DOJ opinion said that U.P. is the owner of a historical three-story concrete building known as the PGH Dispensary Building, situated at the PGH Complex, Taft Avenue, Manila and that part of the area is being utilized as the PGH Main Pharmacy; that U.P. entered into a contract with DMMC for the lease, conversion and development of the remaining area as the UPM-PGH Faculty Medical Arts Building (FMAB) which was approved by the BOR on September 29, 2005, with the Terms of Reference for the lease with conversion, development and operation of the PGH Dispensary Building approved by the BOR on October 26, 2006.

Furthermore, bidding ensued with DMMC as the only pre-qualified bidder, but the bid was below the internal government estimate of a desired rental of PhP 1 million per month; therefore a second round of bidding was undertaken and was even extended to allow more bidders to participate but that a failure of bidding was declared on September 5, 2007. This failure paved the way for U.P. to enter into a negotiated contract for the UPM-PGH FMAB and recommend DMMC as the only remaining and potential bidder.

The DOJ said that RA 9500 became effective on May 2008 and that Section 23 prescribed the procedure for the lease of assets for more than 5 years which included:
  •  The transactions must be based on a mukti year comprehensive development plan undertaken by qualified urban planning professionals;
  • In the case of two failed biddings and negotiated transactions, the BOR must secure a fairness opinion from respected third party bodies;
  • If the contract amount exceeds more than PhP 50 million, then 3/4 of the BOR and not a simple majority must approve the contract and breaking up the contract into smaller parts will not be allowed.
The All U.P. Workers Union said none of the above conditions existed as part of the due diligence required prior to the signing of the contract by President Roman, as required by R.A. 9500 and that the contract is grossly disadvantageous to ther U.P. community.

U.P. insists that Section 23 does not apply to the FMAB contract and that to apply it would be to give retroactive effect to a provision that was not yet existent when the parties negotiated the terms of the contract of lease in 2007 and 2008, thus violating the non-impairment of contracts clause of the 1987 Constitution.

However, the DOJ opinion said that U.P.'s arguments did not appear to be sustainable.

It said that the parties were still at the negotiation stage at the time the U.P. Charter was passed. "No contract was entered into, no agreement was yet in effect. It (U.P.) approved the renegotiated terms fo the contract months after the effectivity of the U.P. Charter of 2008. It was only at that time that the contract was prefected between the parties. Hence the non-impairment clause, as claimed by U.P., would not apply."

The DOJ opinion said that all parties should be guided accordingly by its legal opinion.

(Chanda Shahani is the Editor of the Diliman Diary).

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