AS PART of the Philippine Health Insurance Corporation (PhilHealth)'s ongoing health financing reforms under the Universal Health Care (UHC) Act, PhilHealth is transitioning from the current All Case Rates (ACR) payment mechanism to a Diagnosis-Related Groups (DRG) payment system for inpatient services.
The DRG system is a patient classification and provider payment mechanism that groups hospital cases according to diagnosis, treatment, procedures performed, and other factors such as age, sex, and length of hospital stay.
Unlike the current All Case Rates (ACR), or fixed coverage system, which allows reimbursement for a maximum of two diagnosis and/or procedure codes for an entire episode of care, the DRG system considers the full complexity of a patient's condition and the resources required for treatment.
Under the DRG system, inpatient cases with similar clinical management and resource use are grouped together. Each group is assigned a specific relative weight that directly corresponds to the cost of care.
Through this approach, PhilHealth can more accurately determine hospital payments based on case complexity and the resources used in patient care.
To support this initiative, PhilHealth Regional Office (PRO) VII is actively assisting hospitals across Central Visayas in preparing for the implementation of the DRG system.
Through orientation sessions and capacity-building activities, PRO VII aims to help healthcare facilities understand the new payment mechanism and ensure a smooth transition to a more efficient, equitable and patient-centered healthcare system.
The initiative will also help ensure that hospitals receive appropriate reimbursement based on the actual services they provide to patients.
To prepare for the transition, PhilHealth Region VII began engaging healthcare facilities in the Shadow Billing initiative in 2024.
Shadow Billing is a simulation process in which hospitals generate hypothetical DRG claims alongside their regular claims while continuing to receive payments under the existing ACR system.
This enables PhilHealth to collect the data needed to develop DRG rates, improve patient classifications and test the systems that will support future electronic claims processing.
Participation is mandatory for healthcare facilities that accept inpatient admissions and have the capability to submit claims through PhilHealth's Electronic Claims (eClaims) system.
The exercise also helps healthcare facilities become familiar with the new requirements and avoid disruptions once the DRG system is fully implemented.
Led by its Health Care Delivery Management Division (HCDMD) and DRG Team, the Regional Office has conducted training sessions for hospitals, infirmaries and primary care facilities across Cebu, Bohol, Negros Oriental and Siquijor.
As of July 29, 2026, 41 healthcare facilities have been designated as Shadow Billing Sites across the region.
Since 2025, the following government and private healthcare facilities in Central Visayas have been identified by PRO VII as Shadow Billing Sites. The sequence of facilities is based on the date PRO VII received their complete documentary requirements.
Concepcion Memorial Hospital
Lim Community Hospital
Tagbilaran Community Hospital Corporation
Adventist Hospital-Cebu, Inc.
Allied Care Experts (ACE) Medical Center-Bayawan, Inc.
Carcar Women and Children Lying-in Polyclinic and Laboratory
Dr. Lim's Clinic and Hospital
Women's and Children's Community Hospital, Inc.
Holy Child Hospital
Cardinal Rosales Memorial Hospital, Inc.
Our Lady of the Rule Maternity and General Hospital
Cebu (Velez) General Hospital, Inc.
Perpetual Succour Hospital of Cebu, Inc.
Medical Mission Group Hospital and Health Services Cooperative
Chong Hua Hospital
Chong Hua Hospital Mandaue
In 2026, the following healthcare facilities were added to the list after expressing their commitment to participate in the Shadow Billing initiative:
Cebu North General Hospital, Inc.
Siquijor Provincial Hospital
Cong. Simeon G. Toribio Memorial Hospital
Cebu Provincial Hospital (Balamban)
Governor Celestino Gallares Memorial Medical Center
Luz-Sikatuna Community Primary Hospital
Cebu Provincial Hospital – Carcar City
PNP Station Hospital
Guba Community Hospital
Amio Community Primary Hospital
Bindoy District Hospital
Catigbian District Hospital
Garcia Memorial Provincial Hospital
Vicente Sotto Memorial Medical Center
Cebu South Medical Center
Badian District Hospital
Lapu-Lapu City Hospital
Pacuan Community Primary Hospital
Sta. Rosa Community Hospital
Tuburan District Hospital
Gov. William "Billy" Villegas Memorial Hospital
Saint Anthony Mother and Child Hospital
Mabinay Medicare Community Hospital
Maribojoc Community Hospital
Dr. Jose Ma. V. Borromeo Memorial Hospital
By participating in the Shadow Billing initiative, healthcare facilities contribute to PhilHealth's ongoing healthcare reforms aimed at improving health service delivery.
The initiative also helps pave the way for a more efficient provider payment system that will enhance access to quality healthcare services and better health benefits for PhilHealth members and their families. (Press Release)