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Aged Care Health
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This corporate web site addresses the
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This page examines the way in which the
business community has targeted the aging
population as a source of profit. The enthusiasm
for the upcoming retirement of the baby boomers is
described. The breadth of services targeted is
documented. Payment systems, values, regulatory
failure and probity are discussed.
Business View in Australia
This page takes a wider view of the business community and its wildly enthusiastic response to the opportunities presented by an aging population. It examines their approach to the baby boomer bulge.
While the range of services provided to the aging community extends across the full range of consumer competency this is not a dimension that gets much mention in market discussion or practice. Instead the marketplace differentiates on the basis of the method of payment which has financial rather than social implications and costs.
The distortion of values and trustworthiness in this business community is illustrated by their response to customer vulnerability. This is illustrated by an Australian example.
The failure of regulation, oversight and punishment, which deals with the problem after it has occurred is examined.
I argue that it is illogical to drive dysfunction with strong commercial pressures and then expect to control the results and protect vulnerable citizens with regulation. These pressures breed deception, exploitation and distrust where cooperation, trust and trustworthiness are required. The issue of probity goes to the source of the problem. It relies on the community’s personal knowledge of an individual's trustworthiness, motivation and standing in that community. It is people drawn from the community who are granted this attribute and who should play a cental role in the provision of at risk services.
Investors are beginning to see the ageing population as a market offering them the Midas touch, James Dunn reports
Feb 2004 Increased aging a seismic shift offering some the Midas touch.
THE ageing of the Australian population is not only a demographic phenomenon: it has the appearance of the economic equivalent of seismic shift.
New aged will be the true golden oldies The Australian February 18, 2004
Early political uncertainties and some cultural reluctance to profit from the misery of others (the yuk factor) probably restrained corporate investment in health and aged care in Australia. The arrival of US corporations, which had generated vast wealth in the USA, during the 1980s and 1990s changed all this. Profiting from the misfortune of others became legitimate. In spite of warnings (see Ron Williams) government welcomed US health care megacorps into Australia. They were to be the solution to our problems and the salve for the governments discomfort.
By the end of the 1990s all those areas which had been taboo for corporate exploitation because of their sensitivity were being pursued aggressively by the market. These sectors were indiscriminately lumped in with all other commercial activities. Market thinking and practices were seen as the solution to problems in the not for profit charitable sector and this was called reform.
Once government support was assured and the potential of the aged care sector recognised the looming aged care bulge became a river of gold rushing towards the business community. It simply needed to be properly managed by savvy business managers using sound business principles.
Consolidation has started to wash through the age-care sector with large players, such as Regis and DCA Group (which has a majority stake in the Amity Group) steadily chewing up more of the total pie.
Nov 2003 Our most vulnerable are now market targets
This in turn has sharpened practices within the sector and apparently caught the eye of several institutions that, according to some of the larger nursing-home operators, are showing increasing interest in taking large stakes in the proceedings. Furthermore, ambitious new players, such as Bridgewater Lake Estate Ltd, are emerging to help pry open the arena to public investment.
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"Age care offers good diversification away from standard asset classes because it's driven by completely different fundamentals," says Mark Wist, director of independent group Property Investment Research.
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Those public companies that have already taken the plunge claim to be reaping rewards.
Old Rockers Spark A Boom The Age November 1, 2003
The retirement and aged care market is probably the most overlooked sub sector in health care. With an aging population, we believe that it will be the next fad for the sector. Currently, Primelife Corporation is the only pure player, but has struggled to be considered as investment grade. Other players have begun to emerge, such as DCA Group. However, at the moment no clear jewel is present.
Nov 2003 Beating up enthusiasm - the next fad
SPECIAL SECTOR REVIEW - THE HEALTHCARE SECTOR Your Money Weekly November 20, 2003
Ramsay Health Care's managing director, Pat Grier, happily acknowledges that "aged-care services have been the ugly duckling of the health-care sector to date". Bedpans, rubber gloves and incontinence pads hardly capture the imagination of even the most cynical blue-chip investor. But, as many of the players in this industry start nudging retirement themselves, the ugly duckling is turning into a golden goose. What was once regarded as a defensive investment zone is turning growth sector.
Mar 2005 Ugly duckling becomes golden goose
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Next year, the first of the baby-boom generation will hit 60. By 2011 they'll start turning 65, a point beyond which the Productivity Commission says health-care spending per head of population rises to nearly four times that of younger Australians.
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But it is not just that there are more people getting older. There are more people getting richer, too. ABS figures show the median weekly income for those aged over 60 rose 32 per cent in the five years to 2001.In the same time frame, the number of people aged over 60 in the highest income bracket of $1500-plus per week more than doubled to 47,025. This trend is forecast to continue.
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A startling estimate in the recent Productivity Commission draft report on ageing is that total expenditure on health as a proportion of GDP is expected to nearly double in the next 40 years to between 16 and 20 per cent that's about the current size of the whole residential housing sector.
RICH PICKINGS THE PEOPLE WHO GET RICH AS YOU GROW OLD Australian Financial Review March 19, 2005
THE ageing population and how we are going to deal with it is receiving a lot of attention of late. And so it should the Australian Bureau of Statistics predicts that the over-70s age group will double over the next 40 years to represent 18 per cent of the population.
Remarkable opportunity for savvy investors
As a savvy investor, this presents a remarkable opportunity to target the providers of goods and services for these ageing Australians, particularly in the areas of retirement living and health care.
Greater life expectancy likely to bring solid returns Sun Herald April 17, 2005
Sound management all too often means cost cutting (in health and aged care read nurses) and restructuring the way services are provided to increase "efficiency" and "productivity". This is what is often hidden behind the words "sound" and "reform" because it works so well for profitability. These management methods all too often take the "care" out of health and aged services. Good management is important for hospitals but these words so loved by analysts do not reflect the reality of marketplace management. Because good financial management involves keeping down costs (ie nurses and other carers) managers praised by the market are likely to pose the greatest threat to care, and good managers of care will not be seen as good by the market.
The comment about Mayne in the extract below is a little rich given that the changes were introduced by Australia’s most successful manager brought in by financial institutions to restore profitability. At the time most analysts were enthusiastic and the stock doubled in value.
It was the doctors who exerted economic leverage by taking their patients elsewhere. That caused Mayne Health’s profits to collapse. Companies now skate around the medical profession cautiously. The muscle they displayed then has been a deterrent to other dysfunctional market practices in hospitals. Managing their economic power (read inducements) and getting them on side is now called good management!
"But there's also the warning that you're relying on management to run a successful facility. It takes a lot more specialised management to run, and therein lies the risk because demographically, and just from pure population numbers, it's got to be a good investment."
Nov 2003 Warning about pitfalls to profitability - management
SPECIAL SECTOR REVIEW - THE HEALTHCARE SECTOR Your Money Weekly November 20, 2003
One of the key details to look for when investing in a health stock is the quality of management.
Jun 2005 Importance of management
"Good management is extremely important in the hospital side of things, for example," Lele says. "That's where good management comes to the fore, and bad management can have a bad effect on margins and throughput on hospitals. We saw that in the case of Mayne and their problems with their hospital portfolio."
Taking the pulse of health care Australian Financial Review June 8, 2005
Add to this management system a political ideology which understands the world in marketplace terms and places efficiency, productivity, and economic outcomes above our humanity. This provides the justifications and the recipes for this new sort of reform. It is one which turns the logic of motivation on its head. Instead of human actions being driven by social values and norms they are driven by greed mediated through incentives, kickbacks, bonuses, joint ventures and share options.
But the smart folks at Macquarie are not the first to notice that the developed world is ageing. Ramsay Health Care, DCA Group and Babcock & Brown vehicle, Prime Life, have all piled into the business in Australia and internationally there is plenty of competition too.
The big companies piling into the sector
Criterion: Macquarie Bank (MBL) $49.40 The Australian March 23, 2005
The article below distorts the situation. The sector has been dominated by not for profit entities and not "by owner-operators and small businesses". These were a minority.
"We are long-term investors and managers of infrastructure and essential community assets and what we like is the privileged nature of the [aged-care] asset. So this is high government regulation, stable revenue and cash flow," Mr Ward said.
Mar 2005 Market dynamics - high growth strategies
Activity in Australia's aged healthcare industry has reached a frenetic pace over the past few years as a sector once dominated by owner-operators and small businesses has been turned over by private equity players and listed companies.
Long considered the "ugly duckling" end of the market, Australia's massive tranche of cashed-up retiring baby boomers means there is money to be made in providing quality aged-care services. This is the same for other western countries.
This has driven a consolidation of the Australian scene, with ASX-listed providers like Ramsay Health Care and the Babcock & Brown-backed Prime Life and Aevum, fleshing out high-growth strategies.
MacBank adds Canadian aged-care asset Australian Financial Review March 23, 2005
The baby boomers are seen as a wealthy and self-indulgent group who will spent their wealth when they retire. The market, in rushing to capitalise on this, makes no distinction between those areas (eg buying caravans) where older citizens can act as effective customers and those where they are ineffective and vulnerable (eg nursing homes).
But for investors, there's perhaps another way of looking at it. Which are the stocks that ought to benefit from these inescapable economic trends? Whose business models are underpinned and boosted by a population that lives longer in retirement?
Apr 2004 Which stocks will benefit from aging population
Grey Power Can Line Your Pockets Australian Financial Review April 21, 2004
WHILE many view Australia's ageing population as a worrying trend, savvy investors see it as an opportunity to make money.
May 2004 A worry for some - an opportunity to make money for others
The first wave of the baby boomer generation - the post-war population bulge that, through sheer force of numbers, has changed the shape of society as it passes through - has started to retire.
And this presents great investment opportunities, says money expert Greg Smith.
The editor of Lifestyle/Money newsletter says retiring baby boomers are healthier and wealthier - thanks to the real estate boom - than their predecessors.
Not only that, they can also look forward to a longer life in retirement than people at a similar stage of life in the past.
This translates in the marketplace as rising demand for all goods and services that meet baby boomer needs, ranging from luxury cruises and artificial hearts to nursing homes and cosmetic surgery.
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Many baby boomers are cashed up and ready to spend and you can be sure the generation which invented consumerism won't be happy to settle for a Women's Weekly whirlwind tour when they travel, he says.
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"Next time you hear statistics, rather than get depressed about Australia's future, just adopt a positive perspective and be conscious of using the knowledge to your advantage.
Grey wave matters Advertiser, The (Adelaide) May 17, 2004
Investment bankers and health-care providers alike are predicting the boomers will do for aged care what they have already done for the nation's coastal real estate.
Mar 2005 Its about to rain gold
RICH PICKINGS THE PEOPLE WHO GET RICH AS YOU GROW OLD Australian Financial Review March 19, 2005
The increased wealth with age has various impacts on the competitive landscape. The older generation has increasingly more time - the kids have left the nest - and they have made a tidy sum from an increase in value of their home. Expect the demand for leisure and travel expenditure to continue to grow. We hear reports of a surge in demand for boat ownership, caravans and even Harley Davidsons as the older generation indulge.
Jun 2005 The boomers' toys
AGED CARE SECTOR : The Ageing Time Bomb, Tick, Tick, Tick........Boom! Your Money Weekly June 9, 2005
Another sector commonly thought to benefit from an ageing population is leisure. People retiring today are typically more used to international travel than their parents, and probably have a bit more money set aside to do it, while people of all ages are travelling much more than they used to.
Aug 2005 The boomers' leisure
Businesses like Harvey World Travel, Jetset, Qantas and Virgin Blue could benefit as well as Perth-based caravan manufacturer Fleetwood, which has reaped the benefits of an unlikely renaissance in caravan and mobile home sales.
"Previous generations retired to the beach with a fishing line," AMP Capital Investors chief economist Shane Oliver says.
"These days it's a Winnebago or an overseas holiday."
Learning the population shuffle Australian Financial Review August 17, 2005
THE transition of Australia's baby boomers into retirement is not only a demographic phenomenon, it is also an economic one.
Jul 2006 Retiring boomers will be "rapacious consumers"
The cashed-up boomers will be the most affluent generation yet to retire.
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KPMG demographer Bernard Salt says the 4.1 million baby boomers approaching retirement will be "rapacious consumers".Peter Brain, director of the Melbourne-based National Institute for Economic and Industry Research, says baby boomers will be more affluent in retirement than their parents. "The baby boomers want a far more enhanced lifestyle and they'll try to seek it. They'll spend a lot more on lifestyle, services, retirement living, health and travel."
Sharing in the baby boomer bonanza The Australian July 12, 2006
The market does differentiate between the sources of funding. Government funding and support is critical in health and aged care where it provides a steady income on which to build the business. It is a secure income buffer during economic recession but there is some risk because it is subject to the changing whims of political belief. To reduce this risk close personal relationships with major political figures are cemented with political donations.
At the same time there are opportunities for growth and more profitability. These come from insurance and individual payments during good times. This is on top of a steady government income stream. There are increasing numbers of Medicare and nursing home millionaires whose wealth is built on growth and government payments.
The market in aged services offers endless opportunities for the avaricious to generate vast wealth. Better still health and aged care really are essential universal goods. Government will have no choice but to pay for it when there is no other source. Once companies attain a sufficient size government must continue to support them because of the consequences of not doing so for citizens. They can dictate their terms. The Riverside scandal was a salutary lesson.
As in the USA payment by individuals is the most profitable because they are vulnerable to marketing and have no real bargaining power or leverage. In health, in nursing homes and in retirement villages, for-profit Australian companies focus their efforts on the wealthy sections of the population. They build in affluent suburbs. Not-for-profit church groups have a broader focus and assume a much greater load of the less well off.
The big dollars (in retirement villages) are normally in strata developments, where the addition of a community centre, swimming pool and gymnasium can mean the difference between a drab, conventional housing sub-division and a retirement "resort" pitched at cashed-up baby boomers.
Feb 2004 Looking for cashed up boomers
Age of the village people looms The Australian February 5, 2004
"One of the keys to success for providers of services to retirees will be meeting expectations of the ageing baby boomers, who on average will be wealthier than previous ageing generations," says Ms Fay.
Apr 2004 meeting boomers expectations.
"A large proportion of the boomers will want to retire to warmer climates; and since Queensland will be a preferred destination, established providers can expect significant growth prospects.
Ageing population creates new companies The Gold Coast Bulletin April 13, 2004
The market’s interest extends much further than medical and nursing care. The healthy retirees are still enthusiastic for life and the baby boomers in particular have accumulated healthy nest eggs. There is a booming industry in financial advisers who help them to manage their wealth in a confusing environment. Holidays, travel, tourism and a host of other activities offer endless opportunities to relieve them of some of this wealth.
There is of course nothing wrong with someone using their savings to travel and to improve their quality of life - or for others to make their living by providing these services, even for market listed companies. These are active interacting people and market forces can work.
"Cruise ship company shares, for example, have performed poorly recently, but have long-term growth potential and the baby boomer demographic is fantastic for the industry. It used to have less than a 1 per cent share of the total holiday market, but has increased that figure to 4 per cent in the US. The rest of the world is slowly following,'' Series says.
Dec 2001 Range of products
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The chief investment officer at Platinum, Kerr Neilson, says leisure pursuits and adult education should benefit from ageing world populations.
Conservative investors seeking lower-risk investments than international equities or high-growth medical companies might want to consider local financial services companies if they want to profit from ageing baby boomers. Any financial institution with a funds management business is likely to grow in the next 20 years.
Listed Australian companies with sizable funds management arms include the four major retail banks, St George, AMP, Macquarie Bank, Perpetual Trustees and insurers such as Axa Australia Pacific.
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The volume of people approaching retirement means that post-retirement savings will grow by a compound 18.2 per cent to $208 billion by 2010 as retirees draw down their superannuation, says Rice Kachor.
Ageing Bubble Redraws Map For Investors Australian Financial Review DECEMBER 15, 2001
Astute investors have already been handsomely rewarded after buying stock in listed companies catering for the nation's senior citizens.
Apr 2004 Caravans booming
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The share price of Fleetwood Corp, a company that makes caravans, runs caravan parks and is a provider of portable housing, has risen from $1.47 on January 2, 2001, to close at $7.56 on Thursday.
Smart investors chase the grey dollar Sunday Telegraph April 11, 2004
And the growing willingness of people to travel in their retirement perhaps as much to do with affluence as age could have knock-on effects for the likes of Harvey World Travel , Jetset , FlightCentre , Qantas and forthcoming wholesale travel agency float Transonic - - - - .
Apr 2004 The travel business - financial services
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Then there are financial institutions that are geared towards providing retirement products. One example is Mariner Financial , listed last year, with its main focus on retirement products. It recently launched its Lifestyle Bonds , a form of annuity, and has plenty more new products to come.
Grey Power Can Line Your Pockets Australian Financial Review April 21, 2004
Little gems slip out revealing the underlying agenda of corporate interests is to influence motivation and so control the way the aged act and the way those who care for them behave - always in corporate pecuniary interests. While this can enrich lives it can intrude into sensitive areas where commercial self interest poses risks.
"There is going to be a huge migration in getting medical records onto an electronic platform," Constable (analyst) says. "HCN has a dominant position at the GP level that's the level that touches the ageing population; people go and talk to their GPs and is in a position to control and shape that process." It's returned a remarkable 182.2 per cent in a year.
Apr 2004 Computerised medical records
Grey Power Can Line Your Pockets Australian Financial Review April 21, 2004
The question is whether you can put the vulnerable aged needing care and the anxious and impaired sick into the same basket as caravans and luxury liners which is what the current market ideology does. It tries to make one size fit all and it simply does not.
Because care competes directly with the dominant profit motive and there are few balancing forces we should expect care to suffer and this is what has happened in the only well established health care marketplace, the USA.
In Australia aged care seems to be following this path with large market listed entities and the banks eating into the area. There are already major problems in care. In contrast market practices in hospitals have been at least temporarily partly contained by the failure of Wooldridge, AXA and Mayne to control doctors in the 1990s. Doctors seem to have used both the freedom this gives them and their economic power to prevent market excesses from impacting on care sufficiently to create an outcry. The same cannot be said for public services where management practices which compete with care have had disastrous consequences.
Demand for aged-care facilities remains high at the corporate end the DCA Group and Mirvac - and also for the small investor.
Jul 2000 The health and aging sectors and the impact on property industry
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Analysts say the health-care sector is considered one of the most dynamic for the property industry because accommodation and hospitals will become more important as the population lives longer. Demand for aged-care homes, nursing homes, private hospitals and retirement homes and villages is rising.
Aged Care A Healthy Place To Invest Sydney Morning Herald July 22, 2000
The focus on marketplace success has resulted in the erosion of professional values and behaviour. In medicine and nursing sections of the professions have obtained MBAs, adopted market thinking and joined corporations. Market models of health and aging soon became self evident truths.
The consequences of corporatising professionalism is particularly evident in financial services. In the USA the major frauds on Wall Street were mediated and abetted by market analysts. Their professional duty was to serve and fairly advise investors, many of them retirees. This duty was subjugated to the needs of the financial institutions who employed them and rewarded them so richly for compliance with institutional interests. Their deceptively optimistic analyses brought their bankers lucrative transactions. The retirees who took their advice lost their life savings. (see Citigroup analysts’ role in this industry wide scam as well as other frauds.)
In Australia the dominance of self-interest over professional responsibility has been blamed for recurrent problems in the service provided by financial advisers. The recent Westpoint scandal is a good example of this.
Professional financial advisers received large kickbacks (not called that) when they advised clients to put their money into Westpoint. This was a high risk investment which has been called a Ponzi scheme. The elderly were advised to put all of their savings into Westpoint, even to mortgage their houses. As in other scandals of this sort auditors, KPMG, went along with what was happening and did not speak out.
When Westpoint collapsed many trusting investors were left destitute. It is the steady introduction of this sort of morality into the vulnerable health and aged care professional sectors which is so worrying. The press reports tell the story.
We should not forget that the large financial institutions are the people who now dominate and control the care of the more vulnerable aged in our nursing homes.
Leyland's first rule concerns "inverse relationships between incentive commissions paid to product sellers and the quality of product being sold". In other words, it's harder to sell a duff product than a good one, so people get a higher incentive to sell a bad one.
Feb 2006 The treacherous incentive commission - a nice word for legal kickbacks!
"A poor quality product for which there is little demand will require a big payment to intermediaries in order for the intermediary to promote the products to its clients," says Leyland. It says a normal range of commissions for a product is from 0.5 to 2.5 per cent. "Investors should be wary if the commission to their adviser from the issuer is too far above this." You can find the commission in the back pages of a product disclosure statement.
Rules of thumb to save your bacon Australian Financial Review February 4, 2006
So why did financial planners encourage their clients to make what were obviously bad investments? Because the promoters kicked back an average up-front commission to planners of 10 per cent out of the money that they raised. Thus, every $10 invested became $9 from the beginning. I have attempted to find disclosure of this in the documentation promoting the funds but have failed. Perhaps it's there somewhere.
Feb 2006 A 10% kickback to financial advisers
The Westpoint collapse highlights the core problem with the investment industry, and in particular financial planning - the conflicts of interest inherent in sales commissions. Ninety per cent or more of financial planners are paid via commissions from the promoters of investment products and therefore recommend only commissioned products.
- - - - - - the industry is fundamentally conflicted and this collapse will bring enormous pressure to bear, starting with action by the Australian Securities and Investments Commission.
Westpoint wreck shows how deep commissions can cut The Age February 4, 2006
The Westpoint property group's collapse is a national shame. National because so many family investors across this land trusted the advice from their financial planners.
Feb 2006 Betrayed by professional advisers
It appears that juicy commissions tempted them to place clients' money into situations where clients were in effect banks, lending their hard-earned super money without taking meaningful security.
Westpoint a national shame Australian Financial Review February 9, 2006
In the end, Ann Street and Westpoint were a house of cards and were described by ASIC chairman Jeffrey Lucy as a scheme where money from new investors was used to pay existing ones, a classic Ponzi scheme.
Feb 2006 They advised a ponzi scheme
Pie in sky costs investors $72m The Courier-Mail February 9, 2006
Financial planners are preparing to sue KPMG, the auditor of the troubled property group Westpoint, and the group's directors, in a class action they expect will start this year. The chief executive of the Association of Independently Owned Financial Planners (AIOFP), Peter Johnston, says errors have been found in KPMG's audit reports of several of Westpoint's accounts, by a committee of planners established to prepare a class action to recover clients' funds.
Feb 2006 Rogues fall out. Financiers blame auditors
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Johnston says: "KPMG put out positive audit reports on [Westpoint] and clearly it was wrong."
Snapshots : KPMG law suit BRW February 9, 2006
This sorry saga also illustrates the ineffectiveness of government and industry regulation in the face of powerful corporate interests. This has been a feature of the US health and aging systems and is also apparent in nursing home regulation in Australia.
Ms Brailey, who now works with litigation funder IMF on a potential class action by Westpoint investors against financial planners, said yesterday that investors who complained about the schemes had received one of three form letters from ASIC (government regulator).
Feb 2006 Trying to duck the problem.
The letters said either ASIC had insufficient resources, had no jurisdiction or was not investigating the matter.
"Consumer complaints were inadequately dealt with," Ms Brailey said.
Westpoint grilling for ASIC chiefs The West Australian February 8, 2006
Another question worth asking is, why was Westpoint able to operate for three years, raising funds and developing new markets in the east coast, when ASIC clearly had concerns about its operations?
ASIC could have stopped this but did not - why?
Is it that ASIC is under-resourced and simply couldn’t more effectively fight a well-funded property developer that had a lot gain in the midst of a massive property boom?
Or is that ASIC simply doesn’t have the teeth to do anything more than go to the courts?
Playing on the finance fringes WA Business News February 9, 2006
At issue here is the whole problem of the independence and the funding of government regulators. Government funding of regulators is often inadequate and renders them ineffective. Truly independent investigators can bite the hand that feeds them and government does not want this.
The costs of effectively prosecuting a large corporation can be prohibitive. They employ the best lawyers and not all cases are won so that unhappy low tax governments have to bail them out. Regulators jobs go on the line. This has been a key problem in the USA where wealthy corporations and their lawyers have fought a war of attrition which has turned some regulators into little more than corporate rubber stamps.
In Australia the first fraud action against the disturbing practices of trucking company "Mayne Nickless" left regulators with large debts and red faces. It was much later that Mayne was successfully prosecuted. They then dumped trucking for health care. More recently ASIC backed away from a confrontation with Telstra because it would have involved a costly court action. This is a script that has played itself out down the regulatory ladder in the USA. Telstra’s new tough boss comes from the USA.
AUSTRALIA'S biggest businesses are snubbing the corporate regulator set up to keep them under control.
Feb 2006 big companies face down regulator
The Australian Securities and Investment Commission admitted yesterday its power to pursue the top end of town was sometimes limited.
It said it could have fined Telstra $100,000 last year for technically breaching the law when it discussed its dividend policy.
But ASIC deputy chairman Jeremy Cooper said action was not taken because Telstra claimed it would not pay any fine.
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He (Cooper) said that had a $100,000 fine been issued, he believed that under no circumstances would Telstra have paid it."So we are straight back to square one of having to either just let that stand which we don't think that would been a terribly good indicator to the business community about where we were coming from, or we would have to institute legal proceedings."
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"We have a very large corporation, it's insisting it has not broken the law, we determined it's not appropriate to take full blown legal proceedings on the matter," he said.
Business thumbs nose at ASIC rules The Courier-Mail February 17, 2006
Governments have moved away from the fundamental requirement that health and aged care providers should be people who could be trusted and preferably known by and acceptable to the community they served. This is represented by the word probity or in old world terms "fit and proper" people.
Probity is an attribute bestowed on individuals by a community of which they are an active part and to whom they are well known. It places the interests and concerns of the community above the rights of the individual. It is a measure of our responsibility to others rather than ourselves.
The attribute of probity is a privilege which entitles the holder to provide services which require trustworthiness. If the trust placed in them is abused they lose that attribute together with the privileges, status and livelihood which it brings.
The idea of probity challenges the legitimacy of the universal free market and the primacy of individual rights over our responsibility for others. This primacy of individuals rights gives the free market its legitimacy. Probity therefore confronts economic ideology at a fundamental level.
Democracy imposes responsibilities for the rights and welfare of others and the community, as well as the right of individuals to claim fair treatment. Probity represents the responsible side of democracy, a side that current marketplace democracy distorts. The balance in our society is currently skewed.
By its very nature the individual has no personal rights in regard to probity and has no appeal. The individual must demonstrate his or her probity to the satisfaction of the community which is the final arbiter. It cannot be challenged from outside because it is a community given attribute.
This means that any organization providing services based on trust should ideally be represented and run locally by people in that community. These are people who are considered to have probity by the community because they will give the interests of the community and its members priority over their own self-interest and the interests of those outside the community.
When an individual moves from one community to another the first community can and will if asked vouch for the person's probity - but that probity remains under scrutiny until the new community is satisfied and accepts this.
The fact that probity is legally and administratively messy in a marketplace society - or that it challenges ideology - does not reduce its importance in protecting the vulnerable sectors of the community. These very difficulties illustrate its critical importance and are no justification for ignoring it. The borderland between probity (Community centred trustworthiness) and the rights of the individual needs to be explored and mediated so that conflicts can be resolved by reference to the particular context within which a service is provided. The following example illustrates how this problem has been dealt with.
Example:- In 1998 I lodged an objection to nursing home licences for the US giant Sun Healthcare based on the probity requirement as outlined to me in a fax in 1994. At that time in 1994 I had taken up the issue of the fraud prone Tenet Healthcare’s possible entry into aged care with the department.
I sent large amounts of supporting material on multiple occasions asking for acknowledgement. When none of my correspondence was acknowledged I asked Dr David Brand, the president of the Australian Medical Association for help. He kindly took the matter up with the ministers on my behalf.
I subsequently corresponded with the ministers department and was unable to get any satisfactory answers to my questions about probity. This correspondence indicated what had happened to the probity requirement in 1997 when the sector was turned into a competitive marketplace and "reformed" to make it corporate friendly.
I wrote to Dr Brand to thank him and summarised what happened in the following extracts.
The absence of probity requirements in federal licensing regulations:- My objections to licences and the documents I sent have been acknowledged. In addition to that I have had a letter from the chief of staff of the minister for aged care indicating that "The criteria assessed by the Commonwealth include the applicant's ability and experience in providing aged care and their record of financial management." In 1994 I was informed that approval for a licence "involves checks of propriety, honesty, financial capacity and previous experience in the industry".
Apr 1999 Probity in the providers of aged care
I therefore wrote back on the 9 March 1999 asking for an assurance that "probity issues, including honesty are still major and important components in the assessment of the suitability of an approved provider of residential aged care services".
I received another letter from the Chief of staff dated 14 April 1999. This simply restated "The criteria assessed by the Commonwealth include the applicant's ability and experience in providing aged care and their record of financial management." I conclude that probity and honesty are no longer prerequisites for providing aged care in Australia. This is particularly relevant, in the light of the failure of Sun Healthcare to satisfy a probity check in Victoria in December 1998.
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In promptly acknowledging these documents (additional incriminating documents and a rewritten objection) the Assistant Secretary of the Residential Care Program Management assured me that "the Commonwealth is very concerned that only suitable persons are approved under the Aged Care Act 1997".I do not believe that "concern" is any substitute for clearly specified probity requirements in the regulations. Without legally binding probity requirements corporations applying for licences or whose licenses are removed can and will successfully challenge the regulations in court.
Extracts from letter to Dr David Brand President of Australian Medical Association April 27, 1999
There is a web page on this site which looks more closely at the issue of probity
Two fundamental issues in the market impact on probity.
The first is the issue of profitability as the primary driving force in the market model. The participants compete to be profitable. Market listed corporations have a fiduciary duty enshrined in law to put the financial interests of their shareholders first. If probity requires that the person or corporate body can be trusted to put the interests of the community and its members first then the strict market model is not acceptable in those sectors where probity is specified. Because of their fiduciary responsibilities market listed companies could not meet probity requirements.The second involves a conflict of interest payment system that can and often does reward professional providers of services for providing services, which are not in the best interests of the community and its members but increase profitability. One must question the probity of people or companies that accept remuneration in this way. The practice is common in the accounting and financial sectors as is illustrated in the Westpoint scandal. The linking of financial performance to personal rewards is an integral part of microeconomic reform and is the mode of operation of modern management. It directly challenges probity to the extent that they are really incompatible bedfellows.
The argument is that there are large sectors of welfare and professional services where probity is critically important and which should therefore be shielded from the market as the two are incompatible. We require an alternative pattern of ideas within which the people and organisations that provide those services can operate. There are well-established traditional paradigms but their utility has been eroded by the dominance of market thinking.
For Updates:- A good way to check for recent developments in aged care is to go to the aged care crisis group's search page and enter the name of the company, nursing home or key words relating to any other matter in the search box. Most significant press reports are flagged there. The aged care crisis web site has recently been restructured and some of the older links used from this site may not work.
Web Page
History
This page created Sept 2006 by
Michael
Wynne
Minor changes Aug 2008
