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The
FinanciAL INSTITUTIONS
DISCLAIMER
This page gives a brief
outline of the role played by large financial
institutions (comprising banks, brokers and
analysts), accounting businesses, and lawyers in
the marketplace and so in health care. The
consequences are illustrated by quotes from the Nov
2004 book "Critical Condition" by Barlett and
Steele which examines many of these
issues. Page
5 Quotes
from "Critical Condition: How Health Care in
America Became Big Business & Bad Medicine"
by Barlett & Steele Nov 2004
(DoubleDay) What had once
been considered as "conflicts of interest", to be held at
arms length, became "synergies" to be exploited for the
benefit of the financiers. Analysts whose ethical
responsibilities were to the investors whom they advised
switched their allegiance to their financier employers and
the bankers with whom they formed close relationships. They
were richly rewarded for tailoring their market reports and
their advice to the interests of the bankers at the expense
of investors. Compliant
analysts were so valuable to their financial employers that
they became very powerful. They often overrode decisions and
set policy for brokers. The financial megacorps like
Citigroup and UBS Warburg ran market conferences where
company executives presented their successes and where close
links with corporate executives were formed. Bankers and
analysts not only advised these corporate contacts but
attended board meetings to persuade and give legitimacy to
the market practices adopted by the corporations. The
bankers arranged manipulative "structured finance" to boost
the balance sheets, set up floats to raise more capital, and
ensured that their corporate customers were allocated large
numbers of preferential shares from these floats. Analysts
then overrated the potential of these floated shares in
their advice to investors whose trust was abused. Share
prices were sent up well beyond their true value. Those favoured
executives in on the scam made large profits and ordinary
investors, whose trust was abused, were defrauded. When they
complained market advocates pointed out that the market was
a risky business and that by buying shares they accepted
those risks. Citigroup was at the heart of what happened. A
venture capitalist subsidiary is the leader in a buyout of
Australia's largest hospital group, "Mayne Health" which has
been renamed "Affinity Health". To illustrate these events
and the way the marketplace operates I have analysed
Citigroup's history and conduct. CLICK
HERE to go to the
Citigroup web pages. Financiers
and Health Care Scandals The relationship
with bankers at Salomon Smith Barney (now part of
Citigroup), and later at UBS Warburg, was close and very
similar to that at WorldCom. Bankers and analysts attended
board meetings and were supplied with office, computer and
secretarial services in HealthSouth's headquarters.
Shareholders have already commenced actions against the
bankers accusing them of complicity in the fraud. I do not have
details of the relationships between particular bankers and
the other fraud plagued health and aged care corporations.
They all worked with bankers in raising floats, had analysts
assigned to cover their activities, and participated in the
health care corporate meetings arranged by the
financiers. The close
relationship between HealthSouth and its bankers commenced
in 1986 and was maintained until the fraud was exposed. It
is clear from the duration of this and from the extent of
similar relationships across the marketplace, that much the
same relationships with bankers would have occurred in
multiple other health and aged care giants including Tenet,
HCA, and the aged care chains. Accountants
and lawyers Staff
Movements Links This comments
below are based in part on their book and I have illustrated
this page using extracts from that book. Wall
Street Prescriptions The intention
behind all this restructuring was simply to squeeze more
profits from the system. As funding was largely fixed this
meant cutting costs. The major costs were staffing - nursing
staff - the gentle people who provide much of the care. They
are the ones who stop and spend time to talk to and
empathise with patients to address their anxiety - the care
in health care.
SITE
MAPS
in Health Care
(Corporate
Healthcare Site)
The many extracts on these pages are from
copyright material. They are owned by the reference
given or its owner. They are reproduced here for
educational purposes and to stimulate public debate
about the provision of health and aged care. I
consider this to be "fair use" in the common
interest. They should not be reproduced for
commercial purposes. The material is selective and
I have not included denials and explanations which
were routine. I am not claiming that all of the
allegations are true. The intention is to show the
general thrust of corporate practices as well as
the nature and extent of any allegations
made.
Not surprisingly, in a system so complicated and
unwieldy, involving so much money, health care is riddled
with fraud and abuse.
--------------------------
The entry of for-profit, business minded companies into
health care was supposed to make it more efficient.
Instead it's given us the world's largest, costliest
health care bureaucracy, engulfed by red tape and
maddening complexity.
---------------------------
Rather than health care for everyone, the free market has
given us huge corporations with multimillion-dollar
market caps, presided over by the new corporate royalty,
whose names regularly appear among America's highest
executives.
-----------------------------
Its no secret that health care in America is in crisis.
----------------------------
Page 7
As long as Washington remains wedded to the
illusion that market-based medicine will cure health
care's woes, tens of billions of dollars a year will
continue to vanish in waste, inefficiency, fraud, and in
profits to companies that make money by denying
care.
-------------------------------
Page 34
But the driving force behind these and other
factors is one that politicians refuse to recognise.
Washington's blind obsession with market-based health
care, the notion that competition is always good and can
never have a bad result.
--------------------------------
The glaring exception to the theory is health care. The
very core principle of the market system, that companies
will compete by selling more products to everyone, is
actually the last thing the health care system needs.
The Financial Institutions
It is only recently that the central role of the
fraud ridden financial marketplace in health care has been
recognised. The part which the large financial institutions
played, not only in their own frauds and scandals, but is
assisting others became apparent when the DotCom bubble
burst. Their involvement as advisers and facilitators in the
Enron, Worldcom, and a host of other corporate scandals was
revealed.
It was not until the HealthSouth fraud broke in March 2003
that the major role of the financial institutions in
advising and doing deals with health care companies was
revealed. HealthSouth's bankers have not yet been charged
with complicity in this fraud but they certainly turned a
very blind eye to what was happening under their
noses.
Accountants have similarly, acted in their own interests.
Accountants were required to audit company books, but they
made most of their money from other accounting services
provided to the same companies. While they had the
responsibility of detecting fraud during their auditing,
their economic well being depended on being awarded other
projects by the same companies. These projects which might
not have been awarded to accountants who probed too deeply.
It is not surprising therefore that accountants either
participated in the fraud or else turned a convenient blind
eye. Arthur Andersen was a repeat offender and was put out
of business. Ernst and Young denied any knowledge of the
HealthSouth fraud even though they had been alerted by
whistle blowers. Enron lawyers were also heavily criticised
for the way the dealt with Enron's practices. Citigroup's
layers happily advised Citigroup that its structured finance
deals were strictly legal but not that they would be illegal
if the intent was to assist in fraud. Had employees not
discussed the illegality in emails which became evidence the
Citigroup claim that they were doing nothing wrong in
setting up the fraud for Enron would have stood up in a
court of law.
As is well illustrated by HealthSouth, bankers, accountants
and lawyers frequently migrate to the companies they have
served in the past and assume senior positions. They can
maintain these links and are well placed to participate in
any fraud. Several HealthSouth staff, who have come from
accountants and bankers have pleaded guilty to participating
in the fraud. Bankers, financiers and lawyers pepper the
boards, and the ranks of senior management across the health
and aged care sector.
These issues are illustrated in web pages
describing bankers
and auditors at HealthSouth
in a page in the HealthSouth Section, and on
another
page in the Citigroup section
of this web site. The role of the financiers in setting up
this fraud is described on the Enron page, as is the role of
Arthur Andersen in another section.
Critical condition
How Health
Care in America Became Big Business & Bad
Medicine
Page 4 But what kind of system shuts out
forty-four million Americans? What kind of system
excludes people with illnesses beyond their control? What
kind of system insures a husband but denies coverage to
his wife. What kind of system forces people to choose
between risking financial ruin and risking their
lives?
---------------------
Page 115 But the main intent of the
restructuring was to cut jobs and reduce payrolls, the
single largest cost. Talk to people who work in hospitals
about a typical day, and the picture that emerges is
remarkably consistent: how staff is asked to take on more
work, how there are fewer people to perform it, how
management is constantly pressuring them to produce more,
how conditions are frequently unsafe and unsanitary.
These changes are hard on everyone, especially the
nurses, many of whom are so burned out and saddened by
what is happening to their profession that they are
leaving the field.
Critical
Condition: How Health Care in America Became Big Business
& Bad Medicine by Barlett & Steele
Barlett and Steele
In their ground breaking analysis of the US health
system "Critical Condition: How Health Care in
America Became Big Business & Bad Medicine"
(Doubleday Nov 2004), Pulitzer prize winning New York Times
journalists Barlett and Steele lay the blame for the failure
of the health system firmly at the feet of the market system
and the application of market principles. For the first time
highly credible analysts in the USA place the large
financial institutions at the heart of the problem. While
they did not analyse the processes as I have done, they
describe what has happened so confirming the accuracy of the
material on these web pages and the conclusions reached. The
book is short, goes to the heart of the problems and is
eminently readable. They have interviewed many of those who
suffered at the hands of the system and their book tells
these stories to bring home the human costs. Having
identified the root cause of the problem their solution
takes a first step in dealing with it but falls short of
what will ultimately be required.
When Wall Street saw the potential in health care they
responded to the health reform agenda by becoming instant
health care experts. They set themselves up as consultants -
experts in implementing marketplace efficiency and market
practices - restructuring hospitals and other services for
large fees. They came with a variety of impressive terms
like "Just-in-Time Inventories" and "Total Quality Care ".
Soon the views of these credible and impressive people
became the recognised way to run hospitals. Not for profit
groups followed and adopted the practices prescribed by
their bankers.
Hospitals were radically restructured in order, it was
claimed, to make them more efficient. The installation of
just in time inventory systems meant that all too often
there were no reserves. Urgently needed devices were simply
not available, occasionally patients were even left lying on
the operating table as equipment was frantically sought from
nearby hospitals.
The pressures have driven the nurses to join unions. Nursing
unions have been the main voices pressing for minimum
staffing levels and protecting the interests of patients.
But with vast numbers of disgruntled staff leaving the
profession and few enrolling problems remain acute.
Page
16
The Medical Center of Aurora in Aurora,
Colorado, charged an uninsured patient $24,100 for
cranial and peripheral disorder treatment. The average
insurer would have paid $4600 for the same care. Medicare
would have paid $4100. For the hapless Colorado patient,
the bill was a 424% percent premium over the price an
uninsured patient would have been charged and 488 percent
over Medicare.
-------------------------------
Every type of hospital - for profit, nonprofit,
community, and university - takes advantage of our most
vulnerable citizens in this way. The victims are
Americans who work at low paying jobs and fall between
the economic cracks, folks who earn a little too much
money to qualify for Medicaid or charity, but not enough
to afford the stiff premiums for health
insurance.
Critical Condition: How Health Care in America Became Big
Business & Bad Medicine by
Barlett & Steele
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