Facing questions over past policies and share valuation, the board of directors of the debt-heavy Catanduanes Doctors Hospital Inc. (CDHI) has created a committee to study and fix the legal issues hounding the private hospital and its shareholders.
Chaired by former Charter Change consultative committee member Atty. Susan Ubalde-Ordinario, herself a minority shareholder, the committee will reportedly clarify first details of the problems raised during the recent 2022 general assembly meeting before considering its resolution.
It has not been given a fixed timetable for the task, which would likely lead to further delay in the election of a new board, which would have replaced the existing six-person board.
Fifteen directors were supposed to be elected during the June 25, 2022 annual meeting held face-to-face and online, with the nominees to be chosen from a list of 48 stockholders who hold a minimum of 10 shares each.
The major stockholders included the ARDCI Microfinance Corporation, Catanduanes Multi-Purpose Cooperative, Congregation of St. John the Baptist, Immaculate Concepcion Seminary Academy, 17 doctors, a member of the Roman Catholic clergy, several retirees, businessmen as well as founder Raymond Taopa.
Atty. Ordinario, however, questioned the approval of the increase in the number of directors, pointing out that any amendment of the CDHI by-laws should have been approved by the stockholders and not merely by the board and that the holding of the election should have the approval of the Securities and Exchange Commission (SEC).
The current chairperson, Iluminada Teves, admitted that the amendment to the board composition was made through a board resolution, with the SEC yet to communicate its assent.
Ordinario also questioned the board’s move to limit the candidates to those with 10 shares and above for lack of approval by the general assembly.
Corporate secretary Herminia Apil disclosed that the amendments to the by-law passed by virtue of the board’s six members holding at least 70 percent of the outstanding shares, as advised by a SEC official invited by the board during its deliberation.
The ARDCI representative also raised the issue of varying valuation of the shares and the conversion into shares of stocks of Taopa’s P69 million receivables from the construction of the hospital, making him the majority stockholder.
The impasse over the issues cast a huge shadow over a guarded but optimistic report of CDHI President Dr. Luis Ramon Rodriguez, who cited increased revenues and a reestablished relationship with hospital suppliers who had shied away due to pending claims.
With its restructured loan from the Development Bank of the Philippines awaiting approval, he said that the management is continuously luring Manila-based specialists to provide services to CDHI and local doctors to bring their patients to the hospital which now provides empowered services.
Among the strategies he proposed for implementation include improved hospital services, strengthened home care program, corporate linkages with big medical centers, strict implementation of policies, a strong alliance between management, doctors and the rank-and-file, and consideration of future services.
Founded in 2014 with eight incorporators, CDHI was registered with the SEC with P60 million authorized capital, of which P15 million was subscribed and P11 million fully paid.
With Taopa elected as board chair, president and chief executive officer, the corporation purchased the Valencia lot for P11 million, with Taopa and ICSA jointly paying P4 million for pre-construction expenses.
That same year, CDHI applied for a P168-million loan with DBP, for the construction of the building (P82 million), purchase of medical equipment (P71 million) and initial operating capital (P15 million).
But a requirement for board members to sign a surety agreement that would make them liable to the bank in case the CDHI failed to pay delayed its approval.
It was Taopa who signed the agreement, placing all his properties as well as shares of stocks in his newly constructed hospital in Agusan del Sur as guarantee.
The loan was approved by December 2015 and construction began in April 2016, with Taopa’s company undertaking the work after a public bidding reportedly failed to attract contractors.
By October 2016, almost 79% of the loan was already exhausted, with only the ground floor substantially completed.
Alongside an application for an additional P40 million loan, the board decided to sell 3,000 shares of stocks to cover the cost of ongoing construction.
The P73 million raised was added to the P17.4 million in unreleased loan portion, with the hospital completed in July 2017 and opened for outpatients only by September.
The hospital had a grand opening on April 6, 2018, with its operation sustained by investments and sometimes by the officers’ own fund infusions.
The proceeds of its additional loan was released only in December 2018.
However, during the next two years, delays in PhilHealth reimbursements and the COVID-19 pandemic affected its financial stability, resulting in doctors and suppliers not getting paid on time and the management having difficulty paying its loan amortizations.
In March 2021, a new, 15-man board took over, with Dr. Rodriguez as president.
A stockholders’ meeting in April 2021 broke up when stockholders who were attending online at the conference room left the venue and demanded a face-to-face meeting with CEO Taopa, then holed up at the CDHI board room with the directors.
The stockholders cited as violations Taopa’s undertaking construction of the hospital while he was at the same time one of its officers and the board’s conversion of Taopa’s P69 million into shares of stocks, thereby making him CDHI’s controlling stockholder.
By this time, CDHI was on the verge of foreclosure by DBP due to its unpaid amortizations averted only by financial assistance from other directors and stockholders.
In November 2021, the management received a notice of foreclosure, prompting it to request for a restructuring of the loan over a period of 15 years.
Pending approval of the restructuring, DBP’s remedial office required CDHI to pay P1.5 million monthly over a period of six months or until the restructuring is approved.
Over the past seven months, a report said, the amount was paid religiously from the hospital’s PhilHealth claims save for one month when Teves advanced the P1,5 million.
The board chair, who is the wife of TGP Rep. Jose Teves Jr., also advanced over P4 million from her own pockets to sustain the hospital’s operation.
Records show CDHI still owes 27 doctors a total of P2.8 million in professional fees and its suppliers another P6.2 million in unpaid pharmaceutical and medical supplies.
Despite these difficulties, the management expressed confidence that it would eventually overcome the challenges, citing improved finances.
Compared to its 2020 performance where it sustained a net loss of nearly P28 million, CDHI was able to pare the deficit to just P7 million by yearend of 2021.
Unconfirmed reports claim that a case has been filed in court against Taopa and the board over the alleged irregularities in the management of the hospital.