After Sun Healthcare's entry into Australia I
prepared an assessment of the corporatisation of medicine in the USA
and Australia describing the companies involved, their conduct and
what had happened in Australia. I made copies of a large number of
docuuments. In October I wrote to the chairman of hospital staff
associations, particularly those owned by Alpha/Sun and included this
as an appendix - together with the documents.
Appendix --- September 1997
Did you ever expect a corporation to have a conscience, when it has no soul to be damned, and no body to be kicked? (Edward, First Baron Thurlow 1731-1806)
But corporate executives are employed by shareholders, not patients. Ultimately the laws of the market demand allegiance to profit over health, and the laws of the land require corporate officers to maximise shareholders' returns. Should such organisational imperatives govern health care? (J S Boyd, D.U. Himmelstein, S Woolhandler, The Lancet July 8, 1995 p 64)
Introduction :- There have been several attempts by US corporate health care giants to operate in Australia. Health Corporation of America (HCA) sold its hospitals to Mayne Nickless in about 1990. National Medical Enterprises sold to Mayne Nickless in 1995. The US hospital giant Columbia/HCA attempted to enter Australia in February 1997 but withdrew when its business practices became known in Australia. The Managed care group Kaiser Healthcare has taken an interest in Australia and has a small contract in South Australia. As yet it plays no part in clinical care. General de Sante Internationale the French healthcare giant backed away in 1995 amidst disturbing publicity about its activities in the UK. Parkway Holdings, the Singapore/Malaysian real estate group shifted to health care but its bid to buy into Australia was rejected by shareholders.
Mayne Nickless is now the largest health care operator in Australia. It has had international corporate health care ambitions in Indonesia and Europe. It most closely follows the US model. AXA the French Insurance giant purchased National Mutual and is introducing managed care into Victoria, South Australia and Queensland. It is being heavily criticised by the Australian Medical Association.
Alpha Healthcare has for some years had a major investment by members of the same Malaysian groups which owned Parkway Holdings. The US rehabilitation and aged care giant Sun Healthcare has recently purchased a 38% holding in Alpha Healthcare making it the largest shareholder and the only US health care corporation providing clinical services in Australia. Alpha has expanded by purchasing Health Care Corporation Pty Ltd so making it the second largest hospital provider in NSW.
Ron Williams predictions:- The Australian social scientist and financial analyst Ron Williams studied the US system for his PhD. When he returned to Australia he analysed the financial and political forces at work. In his gloomy 1992 book "Remission Impossible" he predicted that both major political parties would see the US model as the only solution to the emerging problems in health care. Health care would be dominated by multinational megacorps. The changes he predicted were so depressing that the president of the AMA described them as dystopian. The subsequent conduct of Australian politicians and the revelations from the USA have revealed the perceptiveness of Ron Williams' predictions.
The Australian political scene:- Ron Williams gloomy predictions have not yet come to pass but this is not because of a lack of committment by our politicians. It is a consequence of corporate misconduct and the rapid availability of disturbing US corporate documents in Australia. Australian insurers and hospitals have not adopted managed care contracts with the sort of enthusiasm our politicians would have liked. The medical profession is implacably opposed to the managed care side of corporate medicine. The number of Australian corporations able and willing to implement government policy is limited. Some have a poor track record. If the government are to successfully introduce a corporate managed care system and also contract the care of medicare patients to private corporations then they have no choice but to bring international groups in to do this. As Ron Williams indicated these groups will only come in on their own terms and on condition that they can introduce their successful business practices into the "immature health care market" in Australia. It is the profits to be made from health care which will entice them.
Politicians including Richardson, Lawrence and Wooldridge have tried very hard, turning a blind eye to events in the USA. Wooldridge is ambitious and very determined. He has not abandoned his policies in the face of overwhelming evidence that they are not in the public interest. Wooldridge made his position very clear in a superficially plausible speech given to the Australian Medical Association in Canberra in May 1996. He spoke of health care as an industry, of level playing fields, of contestability, of consumers rights, of shopping for quality and cost. He claimed that corporate insurers and medical practitioners should be industry allies and work together. This is close to the spiel of the US protagonists who saw corporate market forces as the solution to health problems in the USA. US corporate moguls seized on these rationalisations to claim that the medical ethic was outdated and that health services were a commodity, like any other item to be bought and sold. Columbia/HCA, the largest corporate provider in the world openly modelled itself on Macdonald's fast food chain.
In his speech Dr Wooldridge did not talk of corporations but it is clear that corporations would thrive and dominate on his level playing field. He failed to talk of professionalism, of values, of trust, of patient vulnerability and of the power which knowledge gave over patients. He failed to confront the information which showed that in the USA such a level playing field had resulted in the exploitation and misuse of patients as well as widespread medical fraud. Consumer rights, contestability and the ability to shop around have been casualties of the US corporate system of care.
In all states except for NSW governments are contracting with corporations to run public hospitals and provide care for medicare patients. This is part of the ideological baggage of the economic rationalist policies of our governments. The present NSW minister for health has abandoned this policy following the Auditor General's criticism of the Port Macquarie experiment with Mayne Nickless.
The origin of the US corporate level playing field in health care:- The introduction of medicare and medicaid in the USA in the 1960's created opportunities for the development of "for profit" health care corporations. This insurance system provided opportunities for profits not previously possible. Groups of lawyers, businessmen and some doctors formed hospital corporations which became wealthy and expanded rapidly to harvest the golden eggs laid by the political goose. These included Humana, National Medical Enterprises or NME (lawyers Eamer, Cohen and Bedrosian) and Health Corporation of America-HCA (the political and medical Frist family). These corporations expanded rapidly and accumulated vast health. They were praised by the stock market. Profits were equated with high standards of care. Medical fraud and unethical relationships with doctors became a feature of the system. This corporate sector was balanced by a much larger number of smaller not for profit church and community groups who provided care in the interests of the communities they served, and by teaching hospitals which maintained high standards of ethical care. The main medical colleges were powerful and maintained some ethical control over members. With the steady expansion of for profit medicine commercial pressures increasingly affected the not for profit sector which was forced to adopt many corporate preactices. Doctors and their ethics were placed under increasing pressure. Abuse and fraud steadily increased.
Signs of trouble:- The FBI were aware of widespread rorting of the system towards the end of the 1970's. The complexities of the health system and the individual nature of care created difficulties for investigation and prosecution. The FBI had limited resources and these were fully expended in prosecuting the growing trade in addictive drugs. Instead the DRG system was introduced during the early 1980's. Episodes of care were codified and hospital services were closely monitored and controlled. Fraud became more difficult and profits fell. NME led the way by diversifying into ill defined areas of care which were not monitored and which were difficult to control. Others like HCA followed. These areas included psychiatric care, childhood problems, rehabilitation and aged care. At the same time companies like NME (Singapore, UK) and HCA (Australia) established international footings. In the USA a false market of vulnerable people was created by misleading advertisements. The trust of those who came to health seminars or who phoned "hot lines" for help was exploited and their insurers were milked to the limits of each patients insurance. Doctors from these less tightly controlled disciplines were bribed and coerced to comply. Corporations like NME made vast profits and stockbrokers were ecstatic.
The bubble finally burst in 1991 when NME hospitals in Texas started kidnapping patients. Government inquiries in Texas and the US House of Representatives have revealed the misuse and abuse of trusting patients in psychiatry, rehabilitation and aged care. In the USA children were much better insured by medicare and they were the prime targets. These are the groups most vulnerable to misleading advertisement, to misinformation and to exploitation. They were the most trusting groups least able to exert their rights on a market's level playing field. They naively believed that hospitals would adhere to the medical ethic of care. Tenet/NME's response to the exposure of its practices in 1991 was to intensify its attempts to expand internationally into the UK, Switzerland, Spain, Italy, Indonesia and Australia.
The early 1990's:- The US department of justice, federal and state government bodies, insurance companies, shareholders, staff wrongly dismissed for refusing to indulge in criminal and unethical practices, and patients who were misused in order to generate profits for shareholders took to the courts. Almost all of these actions were settled by paying hundreds of millions of dollars, often without admitting guilt. The business and banking communities have remained loyal to the corporate ethic and to the companies which made so much money for shareholders. They have mounted rescue packages. Tenet/NME has paid probably in excess of $1billion in settlements and was forced to sell over 75% of its hospitals. It changed its name to Tenet Healthcare claiming that this new name reflected its value systems. The banks supported a massive buying spree which re-established its influence and position as the second largest hospital owner in the USA.
The rise of Columbia/HCA:- Columbia was established when the lawyer Scott and the businessmen Rainwater bought three Texas hospitals in 1988. It commenced an unprecedented 1990's buying spree by absorbing other corporations which were now in trouble. It bought up Humana hospitals and in 1994 merged with HCA to become Columbia/HCA. It became the largest hospital owner in the world owning well over 300 hospitals. HCA's Frist assumed a senior position. The corporation was in a position to benefit from the Frist family's political patronage. Scott modelled the health care provided on Macdonald's and Walmart chains. The company spent over $100 million a year on advertising. It adopted extremely aggressive business practices which placed corporate financial interests ahead of community interests. Scott's response to government's attempts to stem the rising cost of health care and contain health care fraud was to use teams of lawyers to stretch the law to its limits.
The response of the USA to the escalating costs was to place increasing financial pressures on the provision of health care and to introduce another corporate solution called managed care. The rationale for managed care was to oppose corporate excesses with corporate constraints through contracts made with corporate managed care companies acting for the insurers or for the large business corporations which in the US pay for the health insurance of workers. These changes placed enormous pressures on smaller not for profit community based health care groups and on teaching hospitals. Smaller groups whose primary responsibilities were to the community and to patients were unable to survive. They were run by community appointees accountable to the community. Unlike their corporate competitors they could not close unprofitable services needed by the community, reject non paying patients or imperil services by cutting staff. As a consequence of these pressures there has been a massive consolidation of hospital groups in both for profit and not for profit sectors across the USA by mergers and takeovers.
PACMAN activities:- Columbia/HCA became known as the Pacman of the industry. Columbia/HCA and Tenet/NME set out to gobble up not for profit groups, often at bargain prices, a fraction of their real value. There were allegations about financial mis-dealing between Columbia/HCA and the directors of the not for profit takeover targets. Columbia/HCA also attempted to buy up managed care and insurance companies and so become both payer and provider. It attempted to buy Blue Shield in Ohio. Allegations suggest that the Blue Shield directors would have benefitted personally from their sale of the not for profit insurer to the for profit provider. Community and consumer groups became increasingly alarmed at what was happening. They banded together and took action. Attorney Generals in US states stepped in to block the purchase of Blue Shield and also of not for profit hospitals. Most states have now introduced "PACMAN" legislation to protect the community. Congressman Pete Fortney Stark accused the company of breaking the law he sponsored prohibiting payment of inducements to doctors and indicated that directors would end in jail. As the pressures built up and opportunities to expand decreased Columbia/HCA, like Tenet/NME turned its eyes overseas. In February it attempted to enter Australia. In Europe it bid to buy the French Company Generale de Sante Internationale (GSI), the largest European health corporation. Some members of the medical profession in these countries had been tracking corporate conduct in the USA and were aware of Columbia/HCA's business practices. They were in a position to obtain documents. Politicians and senior members of the profession in these countries were soon in possession of large numbers of US documents and Columbia/HCA's endeavour failed.
Columbia/HCA exposed:- On 16 July 1997 the FBI raided 35 of Columbia/HCA's hospitals across the USA and a massive fraud investigation is now in progress. Three senior staff have already been indicted. Shareholders and patients have commenced court actions which are likely to be similar to those settled by Tenet/NME. Scott, Rainwater and a number of other senior staff have been fired. Frist has become chairman. In a remarkable display Frist tacitly acknowledges exactly those business practices which were the secret of Tenet/NME's success and which were so heavily criticised in Columbia. He claims that he has always been critical of these practices and was in conflict with Scott. He is charting a new direction which will embrace the sort of practices which characterised HCA when he was its chairman. An examination of HCA's practices and its fraud settlements at this time is not reassuring!
Health Care fraud in the USA:- Mr Freeh, head of the FBI estimates that Health care fraud costs about $100 billion each year. This is so profitable, the difficulties in policing and prosecuting so great and the penalties so small in comparison that the drug syndicates are moving into health care fraud. The prime offenders have been the large corporations and there are many of them.
The difficulties in detection and prosecution of criminal offences, the pressures on the criminal courts, as well as the small criminal penalties for fraud were described to a 1992 US House of Representatives committee by Mr Parisi the fraud investigator who carried out the earliest investigations of NME's practices in New Jersey in 1990. NME was able to settle this investigation confidentially and then claim no wrongdoing. It used first offender provisions in the New Jersey law passed to streamline the prosecution of motor car fraud Parisi indicated that civil penalties are much larger and have proven to be a better deterrent. Health fraud investigators have therefore pursued large settlements through the civil courts. This approach was reaffirmed by the head of the FBI.
Health care fraud is now the major thrust of the FBI's activities. Large numbers of staff have been transferred to this endeavour. Funds have been provided and they have had some success. The court actions are usually civil ones and the offending companies are able to make large settlements on a "no wrongdoing proven" basis. Tenet/NME settled with insurers and the Texas government in this way. SmithKline Beecham recently paid $325 million to settle an action taken by the US government without admitting wrongdoing. The down side of this is that the companies cannot be prohibited them from receiving medicare benefits. Companies will not pay settlements which put them out of business. This also creates major problems for us in Australia because these companies are technically not guilty of any offence. Regulatory bodies like FIRB are unable to keep them out and state licensing authorities might face costly court cases if they rejected licence applications. This situation existed when Tenet/NME first entered Australia and may apply to Sun Healthcare if it settles the investigation by the US department of justice in this way.
The costs of the corporate model:- Managed care companies control the insurance dollar and take up to 30% of this as profit for shareholders. Corporations like Columbia/HCA which provide the services take up to 20% as profit for shareholders. Columbia/HCA spends about $100 million each year on marketing. It considers this essential for its success. I am not clear whether this is included in the 35% which one investigation suggests was spent on administration. What is clear is that there is not much of the insurance dollar left to provide the care paid for by the patient when taking out insurance. Nurses and doctors allege that cost cutting has resulted in serious problems with staffing and with standards of care. I do not know of any objective evaluations of standards of care in corporate hospitals. It would surprise me if corporations cooperated with anything like this. Corporations also do not provide care-intensive money losing services like burns units. These are left to the not for profits. Managed care has resulted in a check on the rising cost of health care but the costs in standards and suffering are not known. The horror stories from the USA suggest that it is considerable. The additional costs of state regulatory inspections, accreditation, policing, surveillance, investigation and prosecution are never factored into the costs of health care. These expensive structures are needed to contain dysfunction in a system where the financial objectives of health care providers is in conflict with the mission of care on which the services provided depend.
Care of patients:- The first concerns I had about corporate medicine were about standards consequent on corporate practices. I know of no independent corporate supported comparison of standards of care. Doctors and nurses still able to complain about standards do so. Tenet/NME's leaked internal documents admit to appalling standards of care and dysfunctional practices. Staff were fired for being "too clinical". They have paid over US $115 million to compensate those patients, many of them children who suffered when exploited for profits. Columbia/HCA patients have also commenced a class action. Another glaring recent example is Kaiser. The Texas Insurance Commission produced a damning report to show how Kaiser's managed care gatekeepers had refused badly needed care to patients who were entitled to it. They were fined. Investigation of Kaiser Hospitals in California following a number of deaths revealed such poor standards that two hospitals were forced to close.
US Politicians and Health care:- With the collapse of Communism those who advocate a free and unregulated marketplace have come to dominate US politics, particularly in the republican party. This belief is now so established in the US psyche that protagonists will not examins evidence which challeges it. The failures in the health care marketplace challenge these beliefs in a fundamental way which impacts on every US citizen. In the USA and Canada the writer Jonathan Saul, the financial critic Robert Kuttner and the doctor Arnold Relman have eloquently argued these issues. In Australia Eva Cox, Stuart Rees and Ron Williams have echoed their arguments in different ways. A burgeoning health marketplace has not stopped to listen.
Vast sums have been spent by insurers and corporate providers in lobbying, advertising and destroying opponents of the unregulated corporate free market. Health care most readily exposes the limits of the unregulated marketplace model and is consequently the most heavily funded lobbying area in US history. The outcome has been that political policy has continued to support and drive the dysfunctional corporate health care practices while at the same time large numbers of ineffective band aid laws have been passed in federal and state legislatures in order to contain specific dysfunctional practices consequent on these policies.
In Australia the response has been to carefully structure contracts between government and corporations and then claim this will prevent problems. Columbia/HCA's tactic of stretching the regulations to their limits shows the manner in which corporations are likely to stretch and distort the wording of such contracts. How these contracts will be policed and enforced is not clear, not where the resources and funds to do this will come from. The manner in which breeches of contracts by wealthy corporate investors in other sectors of the economy have been ignored is illuminating. eg the mining giants in Queensland.
The Federation of American Health Systems:- This is the powerful and wealthy corporate lobbying group based in Washington. It is dominated by Columbia/HCA and Tenet/NME. It lobbies on behalf of corporate medicine. In 1994 I sent the federation copies of court documents in which a Singapore surgeon alleged that Michael Ford at the time deputy president of Tenet/NME's international division was among those who attempted to trade patient admissions with him. While this was denied by the hospital none of the NME staff involved gave evidence. Michael Focht who was president of the international division and Ford's superior was a director of the federation. Ford was a member of the quality assurance board. I suggested that the federation should examine these matters to determine whether the allegations had substance and whether these persons should hold these positions in a health care organisation. They refused to acknowledge these documents even when the American Medical Association took this up with them. Instead I was threatened in Australia and when I refused to give a number of undertakings, a defamation action was commenced against me claiming that I had made the allegations.
The Response in Australia:- Members of the Federal government, the federal opposition, state governments and state oppositions are all in possession of large amounts of material documenting and criticising corporate practices in health care and analysing the reasons why it is so dysfunctional. There can no longer be any serious doubt that the corporate model of care will be dysfunctional in Australia and will not be in the best interests of Australians. Our governments are still locked into the same economic rationalist patterns of thought which characterise the US system. Costello, Reith and Wooldridge have been prime proponents of an unregulated corporate marketplace and globalisation. Their political futures depend on their success in forcing these policies onto Australia. It is therefore not surprising that there is no sign that any of our governments are prepared to open rational discussion about health care with consumers and the profession. They are adhering rigidly to their policies. I was disturbed to hear on television that our corporate business groups have seized the opportunity presented by the prime minister's recent problems to suggest that Howard should be replaced by Costello.
The Foreign Investment and Review Board:- This board acts as an advisory board to the treasury and vets applications by foreign companies. It was criticised by the health department in NSW for not making any inquiries about Tenet/NME in 1991 when it entered Australia. Tenet/NME was at the time facing charges of fraud and the abuse of human rights in Texas. When confronted by overwhelming evidence in 1994 it finally stepped in to restrict Tenet/NME. It immediately granted approval to GSI and Parkway Holdings who were bidding for Tenet/NME's Australian holdings. It made no attempt to investigate GSI and refused to retract its approval when supplied with information. Its attitude to Columbia/HCA is unknown. It was supplied with a large number of documents and had not indicated its position when Columbia/HCA withdrew. When Sun recently bought a 38% holding in Alpha Healthcare FIRB was supplied with documents from the USA. Newspapers report that Sun was asked to explain and that FIRB accepted this explanation. Mr Hinton from FIRB has indicated to me that the decision was made by the deputy treasurer but it is not clear from this response whether this decision was made because of FIRB's advice or in spite of it. FIRB claims to have consulted widely in Australia but they do not indicate whether those they consulted with were supplied with the documents or whether they used federal government resources to investigate in the USA.
State Health Departments:- Regulations in most states specify that hospital license holders and those who influence them must be "fit and proper persons". This clause formed the basis for the recommendation by WA and NSW Health departments that license applications by Tenet/NME/AME be rejected. WA government ignored the advice. Justice Yeldham overruled NSW Health's objections and granted licenses. Victoria did not accept Yeldham's decision and commenced their own investigation. In Victoria a rejection would have gone to a public appeal process. Tenet/NME/AME abandoned their plans to enter Victoria.
Mayne Nickless pleaded guilty to running a price fixing racket and paid $7.7 million to settle this in 1994. When it purchased AME from Tenet/NME the licenses were transferred without raising any questions about its being fit and proper. When these apparent double standards were taken up with health departments a number of not very plausible explanations were offered. In most states government and also heads of health departments had changed.
My position:- I am not politically opposed to a regulated market, to corporations or to private medicine. I am very opposed to managed care, to the provision of medical services in a way which directly benefits corporate shareholders. I am opposed to managers and directors whose fiduciary duty and personal economic rewards encourage them to give profits priority over care. I am opposed to many managerial practices common in the corporate marketplace. I believe that corporations and even globalisation serve many useful functions and have major benefits. They do however have down sides and dysfunctions which are seldom confronted. Their fields of endeavour should therefore be limited and controlled so that the adverse consequences are prevented. They must somehow be induced to identify and act within the value systems which form the structures of the rest of society. The large multinational corporations have become more powerful than governments. They live in their own worlds and set their own standards of conduct.
Tenet/National Medical Enterprises (NME):- Founded by the lawyers Eamer, Cohen and Bedrosian in the 1960's NME expanded rapidly. Eamer, the driving force was from newspaper accounts rather eccentric and a manic depressive on Lithium. In public debates with Arnold Relman, Bedrosian argued that the medical model of care was obsolete and that medical services should be bought and sold like any other commodity. Relman's arguments were defeated by the enthusiasm of the stock market. In the mid-1980's NME responded to pressures in the general hospital business by opening a specialty arm comprising three corporations. These provided psychiatric care, substance abuse services and rehabilitation. They were controlled by Norm Zober who reported to Eamer and Cohen monthly. They met frequently. It is here that the fraudulent practices were first detected in 1991. In 1994 over half of NME's hospitals pleaded guilty to trading in patient referrals and paid the US government US $379 Million. They were forced to sell all of their specialty arm. They were restricted to general hospital services and signed an integrity agreement. The US Securities and Exchange Commission claimed that they would re-offend if given the opportunity and took out court injunctions to restrain them. Interestingly the founding directors and Norm Zober, who were by all accounts the driving forces in the fraud were never charged with any crimes. Several more junior hospital administrators are in prison or in international hiding.
By 1994 Tenet/NME's international division was under pressure because of their "lack of frankness and candour". They sold all of their international division, appointing their international staff to senior positions in the USA claiming that they were not involved in the fraud. Michael Focht a past president of the international division became COO and was responsible for the company's compliance program and its ethics structures. US banks came to the rescue with massive loans and the stock market swung in behind them pushing their share price up. They bought American Medical International and then OrNda Healthcare to become the second largest US hospital owner. They changed the name of the company to Tenet Healthcare and distanced themselves from their past so that few now know that it is the same company. They claim the new name represents the values which the company wishes to share as it enters partnerships with doctors and other providers. Tenet advertises its superior ethics structures but Tenet/NME's ethics committee has refused to acknowledge documents which raise concerns about the conduct of senior Tenet/NME staff while they operated in the international division.
Tenet/NME in Australia:- I wrote to the Singapore Medical Council in August 1991 expressing concerns about the business practices of the company in Singapore. This was before the October 1991 exposures in the USA which I did not hear about until October 1992. NME applied to FIRB to enter Australia in early 1991 The only other Australian doctor who is likely to have known of NME's practices is Dr Victor Chang who sometimes worked in their Singapore hospital and knew the staff there. Unfortunately he was gunned down shortly after NME's entry into Australia became known and before the FIRB approved NME's entry. My remonstrations were ignored. NSW naively accepted Tenet/NME's explanation of the allegations in the USA and granted licences over the objection of a human rights group. Tenet/NME became Australian Medical Enterprises (AME) in Australia. By the beginning of 1993 NSW and WA Health departments were in possession of a large amount of information and documents from the USA. NME was considered by them to be a threat to our health system. They advised that steps be taken to review their hospital licences. In WA the government ignored this advice. In NSW the decision was delegated to Justice Yeldham who ignored the advice given to him and granted licences.
The West Australian and Federal governments immediately supported NME. The banks funded its planned expansion into Victoria and Queensland. The Australian Industrial Development Corporation a federal body funnelled taxpayers money into a partnership with NME. Veteran's Affairs short listed the company to run its hospital in Brisbane. Victorian and Queensland Health departments stood firm. When advance notice of the guilty plea reached Australia and when court documents from Singapore suggested that those running Australian hospitals had indulged in the same practices in Singapore the government was forced to step in and restrict NME's expansion. Governments in the countries where NME operated were also in possession of information. Tenet/NME elected to sell its international operations in 1995.
Health Corporation of America (HCA):- This was one of the largee corporations founded by the Frist family in the 1960's. It was implicated in the corporate practices exposed in the early 1990's. It reached settlements with state authorities, shareholders and patient. HCA hospitals in Nevada were the subject of the devastating June 1993 DAY ONE television program exposing HCA's practices. HCA merged with Columbia to form Columbia/HCA in 1994. HCA owned Health Care of Australia for a number of years but sold this to Mayne Nickless in 1990.
Columbia/HCA the Pacman of health care:- Founded by a lawyer Scott and a businessman Rainwater with 4 hospitals in 1989 it has undergone miraculous growth to over 300 hospitals in 1996. Where the funds for this came from is not clear. It has modelled itself on the fast food business of Macdonald's and claimed that this was the way to reform health care. It has been the darling of the stock market and has been the role model for other corporations wishing to emulate its success. It is renowned for its aggressive profits before all else practices. These include destructive marketing, upcoding billing practices, doubtful relationships with doctors, confrontation with competitors, disregard for regional interests, inadequate staffing levels, an uncompromising drive for market share, a ruthless pursuit of potential takeover and merger partners and an aggressive and uncaring approach to gaining control of regional markets. It has occasioned extensive adverse media coverage culminating in the action of state attorney generals as well as federal and state legislatures. In June 1996 the New England Journal of Medicine published two articles by Robert Kuttner which exposed Columbia/HCA's practices and in October 1996 the "60 minutes" television program put these matters before the public. Representative Pete Fortney Stark, has been a vocal critic stating publicly that senior staff should be in jail. On 26 March 1997 the FBI raided a few hospitals in Texas and commenced an investigation. On 16 July the FBI mounted the most extensive raids on 35 hospitals throughout the USA carting away truckloads of documents. One of the largest fraud investigations in US history is under way and senior staff have already been indicted. Scott and Rainwater were fired and Frist has taken control. He has tacitly admitted the company's dysfunctional practices in the changes he has made and it seems likely that he will be looking for an early financial settlement. Columbia/HCA has vast wealth. It can afford to pay an impressive looking multibillion dollar fine.
Columbia/HCA negotiated quietly with the Ashford Community Hospital in Adelaide putting Ashford's manager in charge of its planned Australian expansion. Some Australian doctors were already familiar with Columbia's practices and had US contacts. Within days of Columbia/HCa's intentions becoming public in February documents and videos were obtained from the USA. These were soon readily available in Australia. A group of doctors from the Ashford hospital visited the USA and reported back. When the FBI raided hospitals in Texas in March Columbia/HCA abandoned its attempt to enter Australia.
At the same time Columbia/HCA bid to purchase the French giant GSI. Within days of the FBI raids in March 1997 it was removed from the short list.
Kaiser:- Kaiser is one of the larger managed care companies in the USA where it has a bad reputation. The Texas department of insurance investigated its gatekeeper practices and found that Kaiser was denying care to those who were entitled to it. It was fined $1 million and the attorney general asked for its insurance licence to be revoked. Kaiser attempted unsuccessfully to suppress publication of this document but it had been leaked and was in Australia by this time. Kaiser also runs hospitals. In California state authorities investigated hospitals following several patient deaths. They were so concerned by the standards of care in some of its hospitals that two were forced to close because they were considered to be a threat to patient's lives. Kaiser has been adversely criticised in court for dishonestly representing a company controlled arbitration system as neutral and for manipulating it in order to save $250,000 and prevent a dying man from obtaining compensation.
Kaiser executives have I believe visited Australia to look around but I understand were not encouraged. I believe that they have a small contract in South Australia but this does not involve patient care..
US Healthcare:- This is a managed care company which has had adverse publicity in the USA because of its attempts to make contracts with doctors which prevented them from acting in the patients best interests. It is the company which "terminated" Dr Himmelstein after he co-authored an article critical of managed care. Even though band aid legislation has prevented US companies from making contracts like this, they are free to cancel contracts on the slightest pretext and often do so. Most US doctors now depend on contracts to maintain their income and dare not risk this. One US contact has explained to me how he was forced to "downsize" his lifestyle when he decided that he would not compromise his integrity by signing contacts with managed care companies.
Sun Healthcare:- This is a health care giant which supplies post acute care, rehabilitation, pharmacy services and aged care facilities including nursing homes. It provides managed care services through a package called Sun Solutions. It is based in the USA but attained a large holding in the UK in 1995 during the John Major years. This was in spite of objections by trade unions and concerned labour party members who had examined its US profile.
Sun was founded by Andrew Turner, a driving force who started his career with the nursing home group Hillhaven in the 1980's at the time when it was owned by Tenet/NME and directed by Eamer and Cohen. In 1986 he and Hillhaven's chairman, Elliott moved to found Horizon. Turner left Horizon in 1989 to start Sun Healthcare with 7 facilities. Turner has adopted similar aggressive expansionist tactics to Columbia/HCA, growing by acquisitions and mergers to over 400 facilities world wide in 1997. In his public statements Turner has mirrored Scott's claim to reforming health care using marketplace solutions, claiming that there was plenty of fat in the system. His compensation package in 1994 is alleged to have been $3.239 million. In August 1995 Consumer Reports conducted a survey based on government inspection reports. Sun ranked 34th out of 43 and was among the bottom 25% of nursing home chains.
The information in my possession suggests that the Department of Health and Human Services as well as the FBI commenced an investigation in late 1994 and eventually raided Sun's facilities in Seatle and Oregon. State level regulatory authorities in Connecticut, New Mexico and Oregon had also started investigations. Two of Sun's wholly owned subsidiaries were involved. Sun delayed 6 months before informing shareholders and the US Securities and Exchange Commission. Sun's other directors were critical of Turners style and the way in which he handled the matter. Two resigned claiming that they were unable to act properly as Turner had not kept the board informed of these events. A series of shareholder actions followed alleging insider trading among other matters. Much of this information is derived from these court documents. They quote from an FBI affidavit which alleges that a director of the rehabilitation unit indicated that the fraudulent practices alleged were company policy carried out on the personal instructions of Turner. Turner had not been responsive when he was approached about this. These court actions were eventually settled I believe for a sum of money. I do not have this settlement and I have no means of verifying the matters referred to in these documents. In July/August 1997 Sun announced that the FBI had discontinued their criminal investigation but that a civil investigation was ongoing.
Sun Healthcare purchased a 38% stake in Alpha Healthcare in June 1997 lodging an application with FIRB. FIRB were supplied with the relevant court documents and asked to investigate the accuracy of the allegations contained in them. Sun was issued with a "please explain". Newspaper reports indicate that FIRB accepted Sun's explanation. The nature of Sun's explanation is not known nor do we know whether FIRB took any steps to verify this. I have been informed that the decision was made by the deputy treasurer but it is not clear to me whether this was made on the advice of FIRB or independently by the deputy treasurer for strategic reasons. FIRB's regulations protecting documents from Freedom of Information inquiries are extensive and it is doubtful whether these documents will be released. Doctors working in Alpha hospitals may be in a better position to force explanations from Sun. Sun has indicated its desire to be more than a sleeping partner. Doctors treating patients in Alpha's facilities are entitled to be satisfied that these hospitals are run by directors who embrace the medical ethic and have displayed the sort of integrity expected of those who provide health care.
Generale de Sante Internationale:- This is the health care arm of a French multinational and the largest hospital owner in Europe. It bid to buy Australian Medical Enterprises in 1995. Despite concerns about its practices FIRB rapidly approved its entry into Australia. There were newspaper reports suggesting that directors of GSI's parent had attempted to bribe officials in Reunion. Inquiries revealed a series of deaths of healthy young people in its UK hospitals which suggested problems in staffing and overmedication. These were being investigated. A copy of the damning Woodley report was obtained. The company was criticised for adopting a dysfunctional money saving factory approach to care, much inferior to the care provided in National Health Hospitals. Nurses who carried out an audit of the hospitals were prevented from speaking out by threats of libel actions. When the Australian Medical Association took up these matters publicly the company stopped bidding. In 1997 GSI was sold to other European companies. Columbia/HCA and Mayne Nickless were unsuccessful in acquiring GSI.
Parkway Holdings:- Parkway Holdings started as a Malaysian property company and is controlled by the Tan family and the Berjaya group. Both also have a significant holding in Alpha Healthcare. Berjaya have a 50% holding in Gribbles Pathology. In the 1980's Parkway purchased Gleneagles Hospital in Singapore from a group of doctors and refurbished it. There have never been any concerns about the way this hospital was run or that Parkway has indulged in any dysfunctional US business practices. In 1995 Parkway purchased NME's Singapore and Indonesian hospitals. They also purchased NME's holding in AME, but this offer was rejected by Australian shareholders. Parkway did not have the administrative skills to run all these hospitals and entered into some sort of management agreement with NME. I believe that this was for 2 years. Parkway and the Tan family have therefore been exposed to the successful money making US corporate health care practices. Vista Healthcare a new company comprised almost entirely of past Tenet/NME staff and funded by US banks has recently formed in Singapore. I do not know whether this group has taken over the running of Parkway's hospitals or whether it will have any input into Alpha Healthcare.
Vista Healthcare:- This company was founded in Singapore in October 1996. The same Tenet/NME team (including Michael Ford) which was so financially successful in Singapore between 1985 and 1995 have reformed as Vista Healthcare. It is backed by a section of the US Chase Manhattan bank with which Ford is now associated. Five of the seven directors are past NME Singapore staff and 5 are US citizens. Some have also been Parkway employees. I do not know whether Vista is to take over the management of Parkway hospitals or whether they will have any input into Alpha Healthcare.
Alpha Healthcare:- This company has been run by a combination of Australian and Malaysian businessmen in the form of the Tan family and the Berjaya group. Berjaya owns 23% of Parkway Holdings in Singapore. Alpha initially resticted its activities largely to hospital services and was less successful. It is currently, like Mayne Nickless following the US lead into integrwated medicine by purchasing primary care practices as well as radiology and pathology services. These are well established US business practices based on the concepts of vertical and horizontal integration. Alpha's Mr Hopper has indicated Alpha's intention to be an "integrated health care provider". In the USA integrated services have made it easier for corporations to influence the services provided by the medical profession. This has been one of the secrets of Columbia/HCA and Tenet/NME's financial success. Sun Healthcare has now purchased a 38% interest in Alpha Healthcare. Sun's founder Andrew Turner has become a director of Alpha and it is clear that Sun intends to involve itself in management. Alpha has used Sun's investment to purchase Health Corporation Pty Limited. This makes it the second largest hospital owner in NSW.
Mayne Nickless:- Mayne Nickless, originally a trucking business is Australia's largest hospital owner. It has switched the main thrust of its activities from trucking to its Health care arm Health Care of Australia (HCoA). It sees health care as the major focus of its activities and considers itself a strong candidate to provide services to public hospital patients under contracts. It purchased HCoA from the US company HCA in 1990 and expanded further when it bought AME from Tenet/NME in 1995. It has since expanded into Indonesia and was interested in buying the French giant GSI.
In 1994 Mayne Nickless pleaded guilty to running a price fixing racket which defrauded customers. It paid a $7.7 million fine. In 1996 it was once again convicted of misleading patients in its trucking business. State Health departments have not considered these matters of integrity sufficient to revoke licences under the "fit and proper" provision. Mayne Nickless has received considerable adverse television coverage criticising the way in which its primary care facilities operated. They closely followed the Edelstein model. Prominent members of the medical profession participated in these programs. There has also been a damning report by the NSW auditor general in regard to the contract and running of the public hospital in Part Macquarie by Mayne Nickless. The minister of health in NSW has promised that his government will stop contracting public patients to corporate providers.
News reports suggest that Mayne's financial fortunes are at a low ebb. It is under pressure to increase its revenue for shareholders. It sees HCoA's health care activities as the means of accomplishing this. Mayne Nickless has followed the US integrated model of care purchasing primary care practices, radiology and pathology. It calls this one stop medicine and likens it to a travel agent. It has also followed the US practice of offering senior staff incentives linked to corporate financial success. The top two executives in the health care chain of command will make $2 million and $800,000 if the company reaches profit objectives. This practice has been one of the major forces used by US corporations to drive the misuse of patients for profit. Columbia/HCA claims to have abandoned it.
AXA/National Mutual:- AXA is a French Insurance giant. It purchased a controlling interest in National Mutual. National Mutual ran Health Benefits Association (HBA) in Victoria and Mutual Community in South Australia. As not for profit's they were primarily responsible to those insured. They have now been changed to for profit organisations responsible to National Mutual and AXA shareholders. These two insurers have been in the vanguard of the governments introduction of managed care contracts with hospitals in Victoria and South Australia. They have attempted to form contracts with doctors. The AMA have been highly critical of their conduct and have publicly opposed their practices.
Australian Hospital Care:- This company owns 13 private hospitals, 11 in Melbourne. As far as I am aware it does not operate general practice clinics. pathology services or radiology practices. It has a major Malaysian shareholder, Peremba which put $45 million into the company in 1996. It plans to enter the potentially lucrative health care market in Malaysia and other Asian countries.
Healthscope:- This company ran into trouble with a contract to run a public hospital in South Australia where it consistently lost money. It has concentrated on running hospitals and not adopted the integrated approach. It is struggling financially.
Sonic Healthcare:- Acording to the magazine Shares, Sonic had a diverse career until it expanded into the lucrative pathology market. It bought or merged with rivals and is now the largest provider of pathology services in Australia.
Ramsay Healthcare:- Ramsays is one of the larger health care companies in Australia, It has been proivately owned and so not beholden to shareholders. It runs 14 hospitals in Australia. It has been successful in acquiring hospitals from Veterans Affairs and providing services to diggers. As far as I am aware they have been running these facilities ver y well. Ramsays have been active in the US marketplace where they are reported to have made money. I am not aware of any adverse publicity to suggest that there is any concern about their operations in the USA and Australia. Ramsays has recently announced a float to raise capital and will now be listed publicly. It will be accountable to shareholders.
SmithKline Beecham:- This international pharmaceutical group has its head office in Europe. It has recently indicated its interest in being more directly involved in patient care in Australia. It recently settled a fraud action taken against it by the US depoartment of justice for US $325 million without admitting guilt.
This is a small selection from a large volume of documents
1. "Remission Impossible" Ron Williams 1992 - quotes from this depressing book.
The US health system was the subject of Ron Williams PhD thesis. When he returned to Australia he examined the financial and political forces concluding that within a few years our health system would be dominated by ruthless international health megacorps and that citizens would be unable to prevent our politicians from bringing them into Australia. His comments about the consequences sounded alarmist. The president of the AMA described them as dystocian. The conduct of corporate health care in the USA has more than confirmed William's assessment. Had Tenet/NME and Columbia/HCA's practices not been detected and prosecuted in the USA and had a few Australians not sought out material from the USA then our health system would by now be dominated by Tenet/NME, Columbia/HCA and probably many others including Kaiser, US Healthcare and GSI; corporations whose recent conduct has caused them to back off. We would be in the same mess as the USA.
2. The Impact of Financial Pressures on Clinical Care: Lessons from Corporate Medicine
Published article (May 96) reviewing the development of corporate medicine in the USA and examining the consequences of applying business principles to health care. The way in which a culture encouraging health care fraud has developed within the corporate community is tracked and the underlying forces are analysed. National medical Enterprises (now renamed Tenet Healthcare) is used as an example. Its conduct in the USA and in Australia is described. Its US documents are quoted to illustrate the corporate world view. Many other corporations have adopted similar practices. Had they failed to do so they would not have survived.
3. Best to look the other way Austr. Fin. Rev 29 August 1997
These clippings document the way in which Justice Yeldham's sexual exhibitionism with young males and the extent to which he was at risk of improper influence was ignored by the NSW establishment. It also indicates that politicians were aware of this. It is difficult to believe that the Fahey government were not aware that one of their supreme court judges was being investigated by the ICAC.
4. ICAC moves on Yeldham The Sun Herald 19/1/97
Yeldham was appointed by the same government with the same cabinet members to determine Tenet/NME's licence application when it became clear that NSW Health were not disposed to grant a licence for the new St. George private hospital. Dr Amos, director general of health had publicly indicated his displeasure and his belief that he had been duped in 1992. NSW health unexpectedly found that they had a conflict of interest. The government was at this time supportive of Tenet/NME/AME and the new hospital was important politically. Yeldham repeatedly rejected NSW Health's advice and overruled the advice of WA and NSW health departments to grant the licence. He disregarded the increasingly disturbing information coming from the USA during this period. The licence conditions he imposed were inadequate and incapable of accomplishing what Yeldham claimed they would. NSW Health had indicated that they were unenforceable. The Victorian Health Department did not accept Yeldham's decision. Tenet/NME had a track record of using bribery and coercion to attain its ends and several indicated that they had been threatened. One administrator has since been imprisoned in the USA of threatening to kill someone if he spoke out. NSW government should have aware of these allegations about Tenet/NME's conduct as the health department would have briefed the minister on documents in their possession..This clipping indicates that the ICAC have been asked to investigate this matter. They have been asked to determine whether any of those involved in approving Yeldham's appointment knew of his vulnerability to improper influence and whether any of those involved exerted any improper influence on Yeldham.
5. Letter from the ICAC. dated 25 September 1997
The ICAC referred the matter to the Operations Review Committee (ORC) who have decided not to investigate it. The ORC consists of the chairman of ICAC, the Commissioner of police, a representative of the attorney general, a management consultant, two lawyers and a clergyman.
5. US Companies support my assessment of corporate practices
This was a submission to politicians outlining the practices reported in US newspapers by Columbia/HCA and Kaiser. It challenged the belief that this could not happen in Australia by supplying press cuttings which revealed the same sort of conduct in Australian companies and even on the Reserve Bank's board. It was supported by a selection of newspaper reports from the USA and Australia. Copies of these reports are in the possession of state branches of the AMA.
6. Mad-cow thinking - how far has it spread.
A nice little satire from Prof Stephen Leeder
7. Appendix:- Corporate Medicine - Hospital licences - Revising the regulations
The West Australian Health Department investigated Tenet/NME in February and March 1993. They concluded that it posed a threat to both the public and the private hospital systems and recommended steps to revoke the licences. They also indicated that Tenet/NME's practices were not isolated and advised that state licensing regulations should be revised in consultation with other states and the federal government in order to meet the emerging threat. The minister ignored this document until it was released in 1995 when FOI legislation became effective. I have since that time lobbied state ministers to implement WA Health's recommendations. Queensland is currently reviewing its regulations. When newspapers described the changes which Columbia/HCA was making in the face of criminal investigations I quoted from these reports in order to drive the need for effective legislation ahead. I lobbied politicians and the AMA.
8. Columbia/HCA Profit Pressure Blamed -- New York Times 7/9/97
A typical example from a large number of reports describing and analysing Columbia/HCA's practice. It is important to remember that other corporations did the same things. If they did not do so then they ceased to be competitive and ended by being taken over by Columbia/HCA or Tenet/NME. They were between a wall and a hard place.
9. Comparison of Florida Community not-for profit hospitals and Columbia Facilities Dec 1996
These are the summaries of one of the few reliable comparisons of leading for profit hospitals as represented by Columbia/HCA with community not for profit hospitals. The for profit hospitals compare very poorly. They are made by an independent group of lawyers experienced in this and are based on information gathered by the government.
10. Quotes and Extracts - the new corporate world of medicine
It is impossible for me to supply copies of the many documents in my possession. I have taken out representative phrases from articles about corporate medicine, newspaper reports, corporate documents and witnesses' statements over the years. They do not follow any specific order. Most relate to Tenet/NME of Columbia/HCA. They are the corporate healthcare leaders and are representative of many other corporations who follow in their successful footsteps. My intention is to give a flavour of the corporate environment and of the debate which surrounds it.
11. Quotes from "America's Health Care Revolution" -- Joseph A. Califano, Jr - 1986.
Califano was Secretary of Health, Education, and Welfare 1977-79 and an architect of Medicare and Medicaid in the USA. He subsequently became chairman of Chrysler Corporation's committee on healthcare at a time when the medical expenses of present and past employees and their relatives was pushing Chrysler towards collapse. He is a strong advocate for the use of market forces to reform medicine and contain costs. His book was published in 1986. If we are to understand the way our economic rationalist political leaders think, then Califano is an excellent guide. Califano at times has a poor grasp of medicine and the relationship of trust on which it depends. Some of his analysis will therefore not persuade members of the medical profession. Califano's analysis of the commercial forces which have caused the USA to develop a health system which is many times more expensive than any other country is sound. This complex system with its many subsidiary industries fails to provide care to large sections of the community. The USA has a lower standard of citizen's health than most other developed nations. Califano goes on to paint a frightening picture as he describes the likely consequences of increasingly expensive technology and a rapidly aging population whose medical expenses must be met by a dwindling work force. He indicates that life saving treatment will have to be rationed. While Australia is different many of Califano's criticisms, arguments and predictions can be applied to our system. Our politicians have good reason for concern and so do the medical profession.Califano correctly and very clearly identifies marketplace forces, the drive for profits and their impact on the medical profession as a major cause of the problems in the US health sector. While Califano is strongly motivated by humanitarian considerations, he thinks and operates within the US marketplace. By a remarkable feat of logic he proposes to deal with the problems created by market forces by creating another set of competing market forces to introduce more competition and pressure into the health system. He fails to grasp the nature of health care. What has eventuated in the 10 years since Califano published his book is an ever increasing number of corporations involved in health care, each with a set of shareholders whose profit expectations must be met. Doctors and the care they provide for patients are being squeezed to provide these profits. Patients can receive only a shadow of the care which their insurance has paid for as there is little left over. Techniques for evaluating health services are imperfect and too frequently measure only its form and not its substance. Corporations don't encourage this. Patients do not have the knowledge needed to evaluate services and make market forces work. Doctors struggling to provide high standard services by maintaining their grasp of an expanding medical database are also influenced by corporate advertising. They often do not have the knowledge to advise patients about the standards of care they will receive from a particular hospital or a particular specialist themselves.
10. Wooldridge needs a miracle cure -- Courier Mail 25/9/97
11. Rift deepened between Wooldridge and AMA -- Courier Mail 13/9/97
These articles document the health ministers failure to resolve the problems of health care in Australia and his frustration with the AMA who have rallied to oppose his plans and keep criminals out. He needs really wealthy corporations to implement his policies and they are in short supply. To overcome professional resistance they must have wealth and power. Mayne Nickless has tarnished its image. Ramsay's Healthcare have had to return to the stock market for more capital and the others are too small and depend on support from the profession. Alpha has the financial backing from its Malaysian backers but does not have the managerial expertise to drive Wooldridge's changes. In Malaysia its directors use Tenet/NME staff to provide the corporate profit making expertise. Tenet/NME staff would not be allowed back into Australia. Alpha have therefore turned to Sun Healthcare and the government have allowed them into the country. Sun has extensive experience through its Sun Solutions managed care offering. It has the American Corporate aggression and ruthlessness.
12. AMA warns doctors on hospital contracts -- Courier Mail 15/9/97
13. Hospital contracts warning -- Australian Medicine 15/9/97
Hospitals are now trying to make contracts with doctors. The AMA is well aware of the way in which corporate hospitals have used contracts to control doctors and secure their referrals. For example in 1993 a Singapore doctor described in evidence how Tenet/NME administrators running hospitals in Australia insisted that he sign a contract guaranteeing a minimum number of admissions if he was to qualify for a reduced price for his rooms. The hospital denied this in court but none of those involved took the stand to refute them with evidence. Nine months later over half of Tenet/NME's hospitals were listed in a guilty plea to similar practices. The AMA have these court documents.
14. Fund will not cover all private hospitals -- The Australian 22/8/97
This describes the manner in which National Mutual Benefit is contracting with hospitals. National Mutual is controlled by AXA. Since AXA gained control of National Mutual two not for profit health insurance groups whose responsibility was to members have been turned into for profit organisations whose prime responsibility is consequently to shareholders. They have been the vehicle used to introduce managed care into Victoria and South Australia. They attempted to contract with doctors in Geelong in Victoria. The AMA opposed this vigorously. I do not know whether members were informed of the dynamics involved in a change to for profit operation.
15. Health fraud costs billions in US BMJ 1 April 1995
This describes the US Senate's 1995 investigation into the fraudulent misuse and abuse of the aged chaired by Senator Cohen at which Louis Freeh, director of the FBI gave evidence. I do not know whether Senator Cohen's report supplied information about Sun Healthcare's aged care facilities and nursing homes. I suspect that this investigation commenced in 1994 and may have been the impetus for the investigation the FBI commenced in December 1994. FIRB had a copy of this article and were asked to use federal resources to obtain a copy. I do not know if they did so.
16. Extract from report Modern Healthcare 25/8/97
This documents SmithKline Beecham's $325 million settlement with the US department of justice and indicates that 37 health insurance companies have sued them for overbilling them for laboratory services. In Australia SmithKline Beecham is attempting to involve itself directly in patient care.
17. Texas Department report on Kaiser - March 1997 -- two pages only
The report recommended a $3 million fine but I understand Kaiser paid only $1 million. Kaiser tried to suppress publication of this damning report on a technicality but the court rejected this.
18. HCFA Report Criticizes Kaiser Hospitals - I think this is reprinted from Modern Healthcare
This describes the investigation which followed patient deaths and the standards which caused the closure of two hospitals in California. The investigation has now been extended to other hospitals in California. These things have all occurred in spite of hospital accreditation procedures. A US investigation has found that many of the accrediting bodies are owned or funded by corporate medicine. Even the JCAHO, the world role model was found to be in the corporate pocket. The main role of accreditation was found to be for corporate marketing and not for patients. Sadly this is the reality of health care controlled by corporate might. Representative Stark is pushing legislation through the US congress to terminate the control of accreditation bodies by corporate providers.
19. With a $20m injection, Alpha aims to be a health-care major -- Austr. Fin. Rev. 6/6/97
20 . Alpha deal on ice after approval snag -- Austr. Fin. Rev.1/8/97
21. Sun Healthcare Group Announces Partial Completion of Government Investigation 16/7/97
22. Sun gets nod for 38pc stake in Alpha Austr. Fin. Rev. August 1997
23. Alpha appoints Sun's Turner as director Reuters 25/8/97
These reports document Sun's entry into Australia, FIRB's request for information, the move of the FBI from a criminal investigation to a civil one, FIRB's approval and the appointment of Sun's chairman Andrew Turner to Alpha's board. In the USA criminal proceedings are costly and the penalties so small as to make it not worth while. In most instances the matters are dealt with through a civil action in which the corporation is forced to make a large financial settlement, sometimes with a no wrongdoing tag. This is a greater deterrent. The corporate health marketplace in the USA is very forgiving of crime and a guilty plea carries little odium and is easily left behind. While the FBI may have abandoned the criminal action because of lack of evidence, I think it is more likely that this is part of the process of negotiating an out of court settlement of the sort made by SmithKline Beecham.. Because there will be a "no wrongdoing proven" clause it will be difficult for Australian state health departments to reject licences and the deputy treasurer can comfortably allow them into Australia.
24. Example of one of many court actions by shareholders against Turner and Sun Healthcare.
Extracts only supplied. FIRB were supplied with these. They give some indication of the concerns and allegations made about Sun and its chairman. Whether the FIRB made any attempt to verify the allegations apparently made about Turner by Brockman, the director of Sundance Rehabilitation is not clear. In the past the US department of justice have been most unforthcoming in these matters. They gave little information to Australian authorities in the case of Tenet/NME. I knew of the US wide extent of these investigations and their intention because I had met or spoken to those investigating the fraud in June 1993, a year before the guilty plea. Australian authorities could not confirm this. The investigations were I was told being limited to two of Tenet/NME's subsidiaries because of the complexity of the investigation and because the FBI at that time lacked resources to do more.
25. Foreign Investment Review Board -- Functions
FIRB setting out its functions including encouraging foreign investment.
26. Policy Perspective's on Foreign Investments by Tony Hinton
The extract from this paper included here describes the confidentiality provisions which protect FIRB and corporations from FOI requests. It is therefore unlikely that FOI requests will get us any closer to finding out Sun's response and the basis for the deputy treasurers decision. Doctors in the hospitals have leverage and may be more successful in forcing information and documentary evidence rather than words and denials from Sun and Alpha.
27. Copy of letter from Tony Hinton dated 22/9/97
Mr Hinton indicates that the decision to allow Sun into Australia was made by the deputy treasurer. Mr Hinton indicates that FIRB consulted widely in Australia. I find it interesting that he made no reference to investigation or inquiry in the USA. One of the problems encountered by NSW Health Department in 1993 was that state departments are not permitted to deal with US authorities. This is a federal function. NSW were critical of FIRB for not doing so. If they did not do so it would have made it easier fro the deputy treasurer as the shareholder cases were settled out of court and such settlements usually contain suitably worded clauses to protect the company.
28. Mayne sells logistics in Europe for $202m Syd. Morn. Herald 21/8/97
29. Optus stake jams Mayne Profit. - Austr. Fin. Rev. 3/9/97
30. The Mayne link between incentive and outcome - Australian 17/2/96
31. Mayne Nickless fined $7.7m -- P Williams - Austr. Fin. Rev. 7/12/94
32. The Arrangement - Sally Jackson - The Australian 7/12/94
33. Mayne stands by its man. Austr. Fin. Rev. 7/12/94
These articles reveal that Mayne is not doing well in its non-medical businesses and is dependent on profits from its health care subsidiary HCoA to keep its shareholders comfortable. It is shifting the main thrust of its activities to health care. This division is consequently under considerable pressure to perform well. The last two articles describe the massive incentive bonuses linked to profits being offered to the two senior executives in the health care chain of command, and also the comments made by professor Fels and witnesses the company's $7.7 million 1994 guilty plea in which court injunctions were imposed.
34. Brain drain of top executives gathers pace
This article urges Australkian corporations to get with it and offer their managers financial incentives to increase profits. They are advocating the use of greed to drive corporate activities. The failure of our companies to do so is leading to a brain drain. This practice has been one of the major strategies used by corporations to induce hospital managers to misuse patients and their care in order to generate profits.
33. Health care growing pool for big fish, says giant - Courier Mail 8/9/97
In this little gem HCoA is predicting what our politicians have so far failed to accomplish, reorganisation of health care around a corporate model and "an influx of foreign investment". Its spokesman describes the not for profit groups as "little suburban lumps and bumps stuff" and claims that our health system is dependent on the private sector so conveniently equating HCoA with not for profit community hospitals. The spokesman, Dr Catchlove says that the larger players will continue to increase in size and that the little players are a thing of the past. "Even doctors will have to put themselves in bigger groups so they can negotiate". This article needs to be examined beside Dr Wooldridge's policy statement to the AMA in May 1996. It exposes the assurances which Wooldridge gave for what they were. Is this the level playing field he promised us?What Dr Catchlove is describing is the US system which our Dr Wooldridge has promised he will not allow in Australia. He makes the claim that private operators are likely to cut health care costs, exactly the claim made in the USA. It was managed care which checked costs in the USA, not corporate hospital operators like Mayne Nickless. The actual costs of managed care to the community have been conveniently ignored. Corporate providers were responsible for much of the blow out which precipitated managed care. The reality is that Mayne Nickless has positioned itself for a US style health care marketplace in Australia and its future depends on Wooldridge's success in accomplishing this. Wooldridge is looking sickly and he needs Mayne Nickless too, something difficult for him because of Mayne's track record. Mayne has already adopted US health care's "marketspeak", is advocating the same integrated systems, the same contracts with groups of doctors, and is using the same incentive programs. Mayne is well aware that it cannot accomplish Wooldridge's dream alone and that foreign corporations are required. Like Wooldridge Mayne must persuade the medical profession and the public that this is the future of health care in Australia and that this is desirable. To do so they must misrepresent the situation and downplay the revelations about Columbia/HCA, Tenet/NME, SmithKline Beecham, OrNda Healthcare, GSI, Charter Hospitals, HCA, Sun Healthcare and numerous others in my files. We should look at Mayne Nickless' track record carefully before we believe them.
34. Why fight "Microsoft takes all"? -- Cross Roads by Steward Fist, The Australian 7/10/97
This little review is about competition in the modern corporate world of computers. It examines the problem of governments giving the interests of corporations and their shareholders priority over the interests and well being of citizens. In the last line Fist refers to globalisation and indicates that the problem extends to many modern industries. Health care if it is to be classed as an industry is certainly one of these.
34. Governments who welcomed Columbia/HCA into Australia were well informed.
Some comments and articles which reveal that politicians who were well informed in regard to the problems with corporate medicine in the USA negotiated with Columbia/HCA and welcomed them without asking any questions.
35. Snippets from the US Health Scene
These are sets of some documents I have handy. There is information about some of the US contracts. Dr Peeno who worked as a gatekeeper for a managed care company resigned when she was rewarded for refusing care to a patient who died as a result. The USA is alive with horror managed care stories. An NME hospital executive is convicted of threatening to kill someone to stop him speaking out. David Dahm is an Australian accountant who has looked at the implication of US style managed care in Australia. His article is included.
36. Doctor pursues answers as Tenet Healthcare vacates Australia. Healthcover Feb 1996
The text of a statement in the senate which describes how I became interested in corporate misdemeanours and my reasons for acting.
Action is required:- My desk and my email are constantly flooded with material about corporate medicine and managed care in the USA. A number of individuals have told me of their experiences. There is far too much material for me to disseminate, but state branches of the AMA have been supplied with a representative selection. It is important that the medical profession and the public be properly informed about the down side of all this. Our newspapers are promoting the business model which is hardly surprising as they are owned by businessmen. Doctors are not well informed and are too busy running their practices to come to grips with the problems and act.
We need to understand that our future and the future care of our patients is currently on a political knife edge balancing political ambition and ideology against the public interest. We must ensure it falls the right way. Like many doctors I have some differences with the AMA but in this they deserve all our support. There are many changes,which can be made to improve health care and make it less costly. These need to be debated and carefully tested as they are introduced. The high handed untested and unmonitored introduction of changes which have failed disastrously elsewhere in order to serve an ideology to which a few politicians have nailed their flags and their futures is simply not on. If health care serves to reveal deficiencies in government ideology and policies then that is something which must be addressed. There will be lessons for other areas where humanitarian services are provided. Politicians must learn them. We should lead rather than follow the USA.
