3 May 2000
Mr A Hinton
Foreign Investment and Review Board (FIRB)
The Treasury Building
Parkes Place
PARKES
ACT 2600
Dear Mr Hinton,
Takeover of Mayne Nickless
I write to you again about the suspicion that a bid for Mayne Nickless may be made by a consortium which includes multinational corporations. (see The Australian 3 May) This seems very likely as it is based on an unexplained rise in share price.
The rumoured consortium includes Gribbles Pathology which has a multinational half owner, "Revesco" which I do not know, Parkway Holdings and another trucking business "Toll Holdings". I do not have information about these groups but am writing to raise a number of issues which I believe FIRB should consider.
1. The morality and acceptability in a civil society of a system which allows one group of citizens, particularly those in another country to benefit personally from the misfortunes, pain and suffering of our fellow Australians. The only interest of these citizens is the money which can be generated by exploiting this situation. The officers of the multinational companies have a primary fiduciary duty to serve the interests of their shareholders. Our government now promotes the idea of a civil society and by any standards a corporatised for profit market listed health care system is not compatible with a civil Australian society. There is abundant evidence.2. In a system capped by government or insurance payments, any profit generated for shareholders is taken from the money payed for and intended for care. Corporate officers have a responsibility to take as much as they can get away with for the benefit of shareholders. The current rhetoric about efficiencies, fat in the system and productivity creates an unrealistic paradigm which allows corporate officers to compromise care without experiencing dissonance. They can readily rationalise their actions. This rationalisation is readily accepted by the business and political establishments who currently suffer from a problem with "confirmation bias".
3. The decision in relationship to devoting money to profit rather than care is a matter of conscience and consequently dependent on the personality structure and integrity of the individuals concerned on the one hand and the commercial pressures generated by the share market on the other. The importance of the attitude and belief system of those providing care cannot be overemphasised. This is partly embraced by the term probity or being a fit and proper person. It is essential that those involved should be able to maintain a broad perspective, be receptive to different and conflicting information, and exercise judgement. I have described this as "open minded". Prior to the development of a corporate and market controlled society probity was an important consideration.
4. Probity provisions have been removed from Federal Aged Care licensing facilities. With the exception of Victoria, state governments do not have the resources to investigate, nor the legal powers to effectively deny licences to multinationals by using the probity provisions. By allowing Mayne Nickless. Alpha Healthcare and the seven facilities controlled by Sun Healthcare to hold licenses a precedent has been set which renders them ineffective. None of these companies should have qualified as being fit to hold licences and have responsibility for vulnerable citizens. Alpha Healthcare, considered to lack probity in Victoria still operates in NSW and WA. As a consequence the responsibility for determining whether a group has the sort of probity needed to provide care to Australians rests fairly and squarely with the FIRB process.
5. The Health care marketplace is a classic example of market failure and this is because it does not fulfil the requirements for a successful market. The majority of its customers are unable to act as effective customers because of the nature of illness and aging. This is particularly so in those areas which are both most costly and which can be most easily exploited for profit. The level playing field is almost perpendicular.
6. In the corporate health care market the ability to take more profit from the money provided for care is a critical determinant of financial success. Single minded one eyed or closed minded people able to ignore the unpalatable consequences of their decisions have consequently succeeded in health care. It has provided a fertile environment for the glib conmen whom Robertson et al described as "successful sociopaths". The sort of people who should be involved in health care are unable to compete. A severely dysfunctional form of social Darwinism operates. The majority of successful corporations are staffed and controlled by people like this. They are able to marshal credible and glib sounding justifications by limiting their arguments to narrow paradigms of understanding.
7. The evidence that a corporate for profit health care marketplace encourages fraud and the neglect of care is not limited to the USA. We have had the Scan scam, followed soon after by the aged care scandal involving for profit nursing homes operating under the governments new privatised and deregulated aged care system.
8. The ineffectiveness of government regulation, oversight, and prosecution in this country as well as in the USA. Accreditation processes also have done nothing to contain dysfunction in the face of the pressures in a competitive corporate health care marketplace.
9. The unfortunate consequences of the relationships which are established between corporate groups, politicians, regulators and accreditation bodies. This is well illustrated by a vast amount of information from the USA and Australia. This renders supposedly arms length processes inoperable.
10. The way in which the continuity of care, and even care itself has been disrupted by the ongoing takeovers, mergers, fickleness of the share market, and bankruptcies which are characteristic or the marketplace.
There are therefore a number of considerations relating to health care corporations which I believe FIRB should consider.
A. Corporate culture and the intention of the company. Do they have a genuine commitment to the welfare of citizens, and Australian citizens in particular or is their interest primarily financial. Some privately owned groups were started with a strong social commitment but this has rarely survived the marketplace (eg Markalinga). A good idea of corporate culture can be obtained from press reports, from company releases to the business community and from company reports. Mayne Nickless is a good example.It is usually clear that the prime focus is commercial and that the social commitments and claims to care are tacked on as a sop to public expectations, to promote credibility, and to create the illusion that financial success is a consequence of providing good care. The opposite is true. Beverly Enterprises was for example the most profitable nursing home owner in Alabama. An examination of state inspection data showed it to provide the least care. It recently paid a US $127 million settlement with government for fraud.
Citizens groups involved in aged care are now bitterly opposed to the continuation of corporate aged care chains and Beverly in particular. Despite all this it has been welcomed into Japan - an indication that corruption and the close links between business and politics persists in that country. This allows Beverly to buffer its considerable US losses by moving off shore.
B. Willingness to indulge in deceptive and even criminal arrangements and practices. A company operating successfully in countries where corruption is a way of life should be very suspiciously examined as this suggests a willingness to compromise to socially unacceptable or corrupt practices.
C. Integrity displayed in past business dealings, by the parent company as well as its subsidiary.
D. Its exposure to adverse cultural influences from staff it has acquired by takeover or appointment. Parkway for instance has had an arrangement with Tenet/NME to run some of its facilities and inherited many Tenet/NME staff in 1995. There is also the question of its relationship with Vista Healthcare in Singapore. Vista is a group which commenced operations in Singapore in 1996. It was dominated by US and American businessmen most of them from Tenet/NME's defunct international division. It main funder is a US bank. Michael Ford who was involved in the disturbing Ng revelations in Singapore and in less than frank and candid dealings with Australian authorities in 1993 left Tenet/NME and joined Vista in 1997. While there he acted as an international consultant to Tenet/NME. Several Vista directors were also directors of Parkway subsidiaries and related groups. It is not clear how close the association between Parkway and Vista is. Does Parkway use Vista's US experince in hospital management.
I do not have any information about Revesco or Toll Holdings, but clearly their integrity, culture and employment of people from companies with unsavoury backgrounds would be relevant.
Yours sincerely,
