Update: All U.P. Workers Union complaint vs. U.P. PGH FMAB Project leads to scathing COA criticism vs. U.P. Administration in its 2009 Consolidated Audited Annual Report

On the basis of a complaint filed by the All U.P. Workers Union (AUPWU), the Commission on Audit (COA) has now cast doubts on the legality and validity of the 25-year lease contract entered into by and between the UP, through U.P. Manila- Philippine General Hospital (UPM-PGH), and the Mercado General Hospital, Inc. (MGHI), for the conversion and development of the PGH Dispensary historical three-storey concrete building into the Faculty Medical Arts Building (FMAB) in its recently released 2009 Consolidated Audited Annual Report (CAAR).

The FMAB is a priority project of the Administration of outgoing U.P. President Emerlinda R. Roman. However, the 2009 CAAR refers extensively to “unresolved legal issues and inadequacy of auditorial documentary requirements on the 25- year lease contract of the Faculty Medical Arts Building (FMAB).”

COA said the unresolved legal issues and inadequacy of the auditorial documentary requirements cast doubts on the legality and validity of the 25-year lease contract entered into by and between the UP, through the UPM-PGH, and the Mercado General Hospital, Inc. (MGHI), for the conversion and development of the PGH Dispensary historical three-storey concrete building into the FMAB.

Read the rest here: BREAKING NEWS: COA Releases 2009 Audit Report on the University of the Philippines System

Daniel Mercado Medical Center and Mercado General Hospital, Inc., are one and the same undercapitalized entity that signed the contract to privatize portions of the century-old Philippine General Hospital

By Chanda Shahani

A Facebook.com page, entitled, “University Physicians Medical Center” (http://tinyurl.com/2cug2w2) has provided the missing link confirming that Daniel Mercado Medical Center (DMMC) and Mercado General Hospital, Inc (MGHI) are the one and the same undercapitalized entity that has entered into a 25-year lease agreement with the University of the Philippines (U.P.) Administration to privatize portions of Philippine General Hospital (PGH) at an estimated cost of PhP 400 million.

On April 29, 2010 The Diliman Diary raised questions about the contract between U.P. and DMMC centering around the question as to how MGHI – which is the sole company on record recognized by the Securities and Exchange Commission (SEC) – could afford to put a state-of-the-art diagnostics center, pharmacy and Faculty Medical Arts Building worth some PhP 400 million out of its own money, when it only had PhP 2 million in its subscribed capital stock on record (http://tinyurl.com/2alk8ob).

The SEC request sheet embedded above shows that there is no legal entity (at least from the SEC perspective) named Daniel Mercado Medical Center or any variants thereof. What is the juridical personality on record is Mercado General Hospital, Inc., despite the fact that the website of PGH itself makes no reference to MGHI but to DMMC only in the signing of the agreement with U.P. (http://www.pgh.gov.ph/upm-pgh-faculty-medical-arts-building-fmab-project-it%E2%80%99s-go)

But it is in fact the Facebook.com page entitled “University Physicians Medical Center” (http://tinyurl.com/2cug2w2) that clarifies the matter entirely. “The project is a joint undertaking of the University of the Philippines ... the lessor, and the Mercado General Hospital, Inc. / Daniel Mercado Medical Center (DMMC), the lessee, to convert, rehabilitate, develop and operate the old Dispensary Building as the University of the Philippines Manila - Philippine General Hospital Faculty Medical Arts Building (UPM-PGH FMAB),” it says.

Moreover, the website/link of DMMC (http://www.dmmcinc.com/miles.html) reveals the following information:

1) In 1957, Dr. Daniel Mercado opened the Mercado Clinic.
2) In 1988 Mercado Clinic's name was changed to Mercado General Hospital
3)In 1997, Mercado General Hospital, Inc was incorporated (The articles and by-laws were amended in 1998 and are embedded in the Diliman Diary, April 29, 2010 ((http://tinyurl.com/2alk8ob).
4) In 2000, the name of the hospital was changed from Mercado General Hospital to Daniel Mercado Medical Center.

The following questions therefore, still remain unaswered. What other parties are funding the 25-year lease agreement with U.P. given that MGHI/DMMC does not have the cash equity to fund this project? Moreover, the Diliman Diary checked with SEC, and no financial statements of MGHI could be obtained, so it could not be verified that MGHI could fund the project from its own cash reserves. What is not clear from the website of either DMMC, U.P. PGH or the Facebook.com page, entitled, “University Physicians Medical Center,” where the money is coming from to fund this project and what sorts covenants or side agreements have been made by DMMC/MGHI with third-party entities to provide external financing to this project.

The Diliman Diary will continue to provide updates to this story as soon as they are made available.

(Chanda Shahani is the editor of the Diliman Diary)

U.P. Philippine General Hospital contract with DMMC to privatize portions of PGH may be lopsided

By Chanda Shahani

The University of the Philippines (U.P.) Philippine General Hospital (PGH) may have entered into a grossly disadvantageous relationship resembling a kind of corporate neocolonialism where the numerous assets and resources of one entity (PGH) are hijacked by a smaller but more technologically advanced entity (Daniel Mercado Medical Center) to the gross disadvantage of PGH, and consequently the Filipino people.

At least that's how the the contract looks like between the UP administration and the Daniel Mercado Medical Center (DMMC), a private hospital in Batangas leasing the old Dispensary Building, to be renamed the Faculty Medical Arts Building (FMAB) a three-storey structure which used to serve as the old outpatient department (OPD) of PGH, to DMMC.

The Diliman Diary obtained copies of the Articles of Incorporation and By-laws on April 21, 2010 of the owner of DMMC from the Securities and Exchange Commission (SEC) (embedded in the scans above and below), which is Mercado General Hospital, Inc. (MGHI). What is baffling is the failure of the U.P. Administration-dominated Board of Regents to disqualify MGHI from bidding on the contract which was signed on July, 2009 when a minimum amount of PhP 400 million will be spent on a pharmacy and a medical diagnostics center where the capital stock of MGHI that is actually subscribed is a meager PhP 2 million only.

It is clear that MGHI is not a credible company in that it does not have the resources to pursue a project of such magnitude on its own, in order to bring added value to the relationship. The Diliman Diary checked with the records department of the SEC and failed to get any financial statement of MGHI, which is not in accordance with current SEC rules, as all corporations are required to submit their audited annual financial statements to SEC. In order to fund this project, there must be other “silent investors” who may have internal agreements with MGHI. But like all “hot money,” this money is subject to capital flight if the terms of reference between U.P. and MGHI are questioned or investigated by the either the next U.P. President or by Congress itself.

The default preference of the BOR should normally be with a deep-pocketed investor that is willing to advance project construction funds from its own internal funds subject to certain covenants that protect the investor in case of government non-performance or default in case a new U.P. President or the BOR itself or even Congress or the courts reverse the original contract or even scuttle it completely. In the case of MGHI, MGHI's commitment to funding this project itself is held hostage by its silent investors if groups like the All-U.P. Workers Union succeed in getting the contract cancelled or modified such that the terms of reference are no longer appealing to the outside investors.

Under the contract, MGHI has lease rights to this PGH property for 25 years. According to the Facebook page, Ibalik ang Tama - Laban UP-PGH Movement UP will be paid by DMMC only 1 million pesos a months for 25 years as payment for renting the FMAB. DMMC will earn 1 million pesos a month from doctors renting in the renovated FMAB clinics. In other words DMMC will put up an advanced pharmacy, laboratory and diagnostic center within PGH at practically no cost at all since the money generated from clinics has already covered their rental expenses.

The National Council of the All UP Workers Union also adopted a resolution authorizing the National Executive Board to initiate and file appropriate charges to responsible UP officals related to the ill-advised contract on the PGH Faculty Medical Arts Building - deemed violative of Section 23 of the new UP Charter by the Department of Justice.

Both groups are saying that the existing contract in its current form is grossly disadvantageous to PGH and thus to the Filipino people.

According to the website of U.P. PGH (http://www.pgh.gov.ph/upm-pgh-faculty-medical-arts-building-fmab-project-it%E2%80%99s-go) 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.

The BOR's September 2005 resolution mandated that the administration of FMAB be undertaken by a Management Team with UPM-PGH taking care of the clinical part (providing exclusively the physicians and other health care professionals and exercising control and supervision over credentialing, peer review and other medical affairs) and DMMC the non-clinical and fiscal operations. The Project entails lease of clinical spaces to twelve (12) departments/special services (singly or in conjunction with other groups) and four (4) concessions --- pharmacy, laboratories, radiology and business sector --- with prior improvement of common areas,including the installation of elevators, generator set, water supply, computerization system, and other utilities that conform with National Historical Institute and National University Hospital requirements.

DMMC became UPM-PGH's new partner following three (3) years and nine (9) months of bidding presided over by a Special Bids and Awards Committee (SBAC), created by Chancellor Ramon Arcadio, led by Dean Yolanda Robles and a Technical Working Group (TWG) headed by Dr. Federico Cruz. The initial Terms of Reference (TOR), approved by the BOR during its 1214th meeting of October 26, 2006, was amended/modified during subsequent BOR meetings. SBAC's recommendation to award the project to DMMC was approved by the BOR at its 1240th meeting on January 28, 2009.

Finally, the Notice of Award was issued by President Roman on February 5, 2009 and received by DMMC on February 11, 2009.

(Chanda Shahani is the editor of the Diliman Diary)

(To see the remaining scanned and uploaded Amended Articles of Incorporation of Mercado General Hospital, Inc. please click on this link: http://diliman-diary-sidebars.blogspot.com/2010/04/mercado-general-hospital-inc-amended.html and to see the scanned and uploaded Amended By-laws of Mercado General Hospital, Inc., please click on this link: http://diliman-diary-sidebars.blogspot.com/2010/04/mercado-general-hospital-inc-amended-by.html