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Content This page complements the other Healthscope pages by giving more information about corporate thinking, management, and relationships with doctors, nurses, politicians and others.

Australian section    Healthscope  People and Culture

CONTENTS

• Corporate Culture
  • The Early Years
  • The Crisis Years
  • Recovery and Marketplace Success
  • Incentivisation
  • Embedding a culture
  • Healthscope's perspective on the market
  • A part of the wider marketplace
  • Change in Investors
• Relationship with Politicians
• The Medical Profession
• The Nursing Profession
• Healthscope and the Press
  • Advertorials
• The man behind Healthscope's success

This web page looks at the people and the culture at Healthscope - the way it sees and understands health care and its place in the system. This is seldom explicitly stated but some insights can be gained from the past history of the corporate leaders, from their statements and from what is said about them. The Healthscope story, told on another page, provides many extracts and insights. This page supplements that.

Healthscope is a peculiar fusion of the most credible of business executives, investors and medical administrators. There is no doubt about its market vision and its confidence in the market model. It has gone looking for the top people in both areas. There is consequently an insoluble conflict between its committment to medical care and social responsibility on the one hand and its hard nosed pursuit of profit and growth on the other. When it comes to choice its survival depends on the latter and this is the path it follows.

Like other health care corporations its investors were and are primarily investment groups whose prime focus is profit. More recently the big banks and larger financial institutions have been investors. All these groups typically force changes until a profit is generated. Philanthropy and social responsibility are the luxuries of success.

Healthscope's story shows that behind all of the credibility, the reputable directors, the best practices, the motivation and the intention to provide the best lay the unforgiving market. The market imposed its own practices and solutions. Managers either found some way of accommodating to the primary requirements of the marketplace or they went elsewhere.

During its ideological origins and disastrous early years Healthscope placed its faith in the medical administrators who seemed to be in control. After reshuffling its senior management repeatedly it finally got the market message about profit. It realised that if it were to succeed then ruthless market management was more important than medical management, care or community service. In 1997 Spotless Cleaners acquired a large holding and Bruce Dixon, a spotless protégé and profit first manager took over management of the company.

While Dixon realised the importance of the sort of patient care that did not generate adverse criticisms and of relationships with the communities and with professional staff, these seem to have been outranked by the profit priorities of the company. There was criticism of care in the money losing Modbury hospital, and alienation of the community and doctors at Mosman and again at the Mersey hospital in Tasmania. In these situations commercial priorities seem to have outranked the medical/community mission. Its bruising confrontation with BUPA was a classic example of the way commercial considerations and commercial advantage was placed ahead of the needs of the community and the responsibility for care. It rejected, sold, restructured or closed anything which was not profitable regardless of the need. There was nothing malign in this. It is simply the way the competitive market thinks and operates. The profit first marketplace is what our political masters have decided we will have in health care.

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The Early Years

Healthscope was founded with the best of intentions by a self-made businessman and by hospital administrators frustrated with the public system. It recruited well motivated and highly qualified businessmen and medical administrators. These were the rosy eyed years when the market was seen as the means by which motivated physicians could give of their best and that this would be profitable for their commercial backers.

Oct 1986 Founder Wilson

Wilson, 44, is one of a band of hardheaded, profit-oriented businessmen to spot an investment niche in the private health care industry.
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When Wilson started out as an apprentice electrical fitter with the Melbourne City Council, he managed to top his year. Then, in a classic example of pulling oneself up by the bootstraps, he put himself through night school where he eventually achieved an engineering diploma. From then on, there was no stopping his scalarship; he went on to do his bachelor of commerce and ultimately master of business administration.

Wilson stayed with the council while he studied at night, but became involved in the health industry in a voluntary capacity in 1970 when he become active in his local community of North Melbourne. He headed a committee which wrote the first submission that obtained funding for community health centres in Australia.
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Wilson says: "Through this process I learnt to work my way around the political system and understand the politics of health."

When Wilson missed out on a promotion at the council on the basis of seniority, he became disillusioned and applied for three new jobs. The first offer that came up was for the position of general manager of Epworth Private Hospital, in Richmond which, Wilson says, was at the time "a run-down, fifth-rate facility." He says: "I went there on July 1, 1975 and they had just mounted an appeal for $100,000 to do up one ward. I developed some feasibility studies and it ended up as a $30 million project. Epworth became the pacesetter for hospitals in the country - without any question."
Getting Set For A Healthcare Boom Business Review Weekly October 3, 1986

1987 Medical administration

Dreher is typical of the top professional, frustrated by restrictions from the top and reactions from underneath, who has chosen a new direction. The professionals who have taken the same path as he has include medical people and management people from the top areas of government health services.
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Dreher, 49, was in the government service for 24 years, but took little time deciding to move when Healthscope approached him. "I just couldn't achieve my objectives any more - management in the public arena is being strangled and autonomy eroded," he says. He says that decisions are being made by the health department, and hospital administrators are becoming little more than glorified clerks".
New Strength For Private Hospitals Business Review Weekly May 15, 1987

Mar 1994 Going public - the management

After the raising and issue of new shares to South Australia's SGIC as part payment for several hospitals the 35-odd original investors will account for about 24 per cent. Among them are managing director Dr Geoffrey Dreher who has 494,726 shares, Colin Boltman, a former partner of law firm Abbott Stillman &Wilson and Healthscope director since 1985, who has 1.94 million shares and another longstanding director valuer Clyde Eastaugh with 987,000.

One of Healthscope's new directors, chartered accountant Geoffrey Leonard, whose honorary doctorship gives him an appropriate monicker for a private hospital operator, is, however, set to become the biggest holder on the board. Leonard is spending $2 million to take up 1.14 million shares in the float and has agreed to sub-underwrite a further 1.34 million.

Besides the investment Healthscope has given Leonard, the former chief of Hospitals of Australia, a further incentive to stick around by issuing him 1 million options.

Healthscope chairman, Mr Kevin McCann, is a senior partner with law firm Allen Allen & Hemsley. Managing director, Dr Geoffrey Dreher, was the executive director of the Royal Melbourne Hospital between 1984 and 1986.
$10M PROFIT AIM FOR HEALTHSCOPE Australian Financial Review March 23, 1994

Apr 1994 Total Quality Mannagement

THREE years ago Dr Lee Gruner returned from a study trip to the United States fired by what she had seen in a number of hospitals there. A novelty to herself and other health administration executives making the tour, the American ideas she encountered opened her eyes to the questions of quality management.

It seemed to her that TQM ought to be put into practice at her place of work at the time, the vast all-embracing Repatriation Hospital at Heidelberg.
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Dr Gruner's position with the Repat. at the time of the quality revolution she led there was director of medical services and she also was a medical surveyor with the Australian Council of Healthcare Standards, a role that placed her perfectly to effect the many changes she made when she returned from the US.
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In addition to her medical and science degrees, Dr Gruner completed examinations for fellowship of the Royal Australian College of Medical Administrators and also obtained a further degree, entirely by correspondence -a bachelor of health administration awarded by the University of New South Wales.

Dr Gruner has been chairwoman of the Victorian Board of Studies for the RACMA for some years and is a censor in the subject of principles of organisation and administration for RACMA.
TQM Disciple Is Manager At Melbourne Clinic The Age April 16, 1994

Aug 1994 Highly qualified people

Tim McDonald's qualifications include: Master of Education; Graduate Diploma in Computing; Diploma of Education and Bachelor of Science.

He is: a Fellow of the Australian Institute of Management; member of the Australian Hospitals Association and international Hospitals Federation; Board and Executive member of the Australian Private Hospitals' Association; Board member of the Australian Council on Healthcare Standards, the State Training Board of Western Australia, and the Western Australian Branch of the Australian Quality Council.

Tim McDonald will commence his new position (Regional Director for Victoria) at Healthscope on 19 August.
Healthscope Media Release August 2, 1994

Aug 1994 Highly qualified people

THE man who steered the Austin Hospital through 10 years of major expansion has joined the private hospital sector. During his time as general manager, from 1985 until earlier this year, Mr Graeme Houghton presided over enormous changes at the Austin.
Austin Hospital chief joins Healthscope The Age May 26, 1995

Aug 1994 Accreditation

As outlined in the Prospectus for the recent Public Float of Healthscope, all Healthscope hospitals are pursuing accreditation by the Australian Council on Healthcare Standards (ACHS).
HEALTHSCOPE LIMITED: APPT. OF REGIONAL DIRECTOR - VICTORIA (Part A) Australian Stock Exchange Company Announcements August 2, 1994

Nov 1994 A topnotch team

The Directors believe the Company now has both the management skills and depth in place to ensure we can manage our existing hospitals, our new hospital at Wangaratta, Victoria, the Modbury Public Hospital in Adelaide and to undertake planning for the construction of a private hospital at the Modbury site as well as a feasibility study for a private hospital on the Queen Victoria site in Adelaide.
HEALTHSCOPE LIMITED: CHAIRMAN'S ADDRESS (Part A) Australian Stock Exchange Company Announcements November 22, 1994

May 1994 Shareholders

TOP 20 SHAREHOLDERS AS AT 29/04/94

STATE GOVERNMENT INSURANCE COMMISSION
WESTPAC CUSTODIAN NOMINEES LIMITED
NATIONAL NOMINEES LIMITED
CHASE MANHATTAN NOMINEES LIMITED
STATE AUTHORITIES SUPERANNUATION BOARD
COLIN BOLTMAN
THE COLONIAL MUTUAL LIFE ASSURANCE SOCIETY LTD
PERMANENT TRUSTEE CO LTD
VYNOTAS PTY LTD
PERPETUAL TRUSTEES NOMINEES LTD
DENE NOMINEES PTY LTD
FBAE THIRD NOMINEES PTY LTD
ANZ NOMINEES LIMITED
A & M SLADE NONINEES PTY LTD
QBE SECURITIES PTY LTD
MALLA PTY LTD
FALEURA NOMINEES PTY LTD
EASTPHIL PTY LTD
JOHN GRAEME SLOMAN
BANOON INVESTMENTS PTY LTD

TAKEN FROM: HEALTHSCOPE LIMITED: - TOP 20 SHAREHOLDERS (Part A) Australian Stock Exchange Company Announcements May 4, 1994

Aug 1995 The board

The board comprises the managing director of the past seven years, Mr Geoff Dreher, two lawyers, a registered valuer and town planner, a merchant banker and Dr Geoff Leonard, the former managing director of HCOA before it was acquired by Mayne Nickless in 1991
Mayne Aims For Health Sector Sydney Morning Herald August 23, 1995

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The Crisis Years

Healthscope's disastrous early years led to uncertainty and a scramble to restructure as the illusions crumbled. It went through a series of managing directors with a medical focus before it got the message.

Jan 1996 One of a train of managers

HEALTHSCOPE's long search for a replacement managing director has ended with the hiring of William Kricker, chief executive of the Alfred hospital group.
Holders hoping for a healthier Healthscope. The Age Jan 31, 1996

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Recovery and Marketplace Success

When Spotless leaders Ron Evans and Bryan Blythe became dominant shareholders and members of the board the focus of the company and its culture became far more commercial and ruthless.

Bruce Dixon was appointed manager and Dr Michael Coglin, a doctor, was made business and development manager. It requires rather different personality traits for a doctor to successfully operate within the profit first paradigm while at the same time maintaining the medical ethic of primary service to the community and patients. Coglin seems to manage this remarkably well but his ultimate allegiance to the market sees him making contradictory statements and losing credibility in those areas where the company places commercial considerations ahead of the needs of the community.

Dixon's style and commercial philosophy proved the tonic needed by Healthscope to pull it out of near bankruptcy and make it very successful in the marketplace.

At the same time the rest of the company's board began to look like a Who's Who of corporate directors in Australia. Richard England was the man who unravelled Alan Bond's fraud in Western Australia. The remaining directors were on so many boards that their ability to give adequate time to Healthscope must be questioned. They gave it the stamp of credibility it needed to gain status among institutional investors.

Nov 1997 Dixon joins Healthscope

Hospital group Healthscope Ltd has snapped up a new chief executive officer from one of the divisions of Spotless Services Ltd. Mr Bruce Dixon, 41, will join Healthscope in mid-January. He is now the general manager of SSL Healthcare Services, one of the major operating arms of Spotless.
HEALTHSCOPE SPOTS NEW CEO Australian Financial Review November 21, 1997

Mar 2001 Spotless increases holding

Hospital case HEALTHSCOPE (HSP) shares catapulted to a six-year high yesterday on news that interests associated with Spotless Group dynamic duo Brian Blythe and Ron Evans now have 22 per cent of the private hospitals' company.
Day trader. The Australian March 7, 2001

May 2002 Dr Michael Coglin

Australian career hospital manager, Dr Michael Coglin, has helped transform publicly-listed Healthscope in three years. Appointed business and development manager in 1997-1998, Coglin inherited a sprawling hospital group striving to recover from dire financial straits. In 2002, Healthscope is the best performing listed hospital company in Australia with 18 hospitals, most of them considered centres of excellence in the treatment of psychiatric conditions. Coglin sees one of his greatest challenges as being the satisfaction of patients. This applies particularly to those two million Australians who joined public health insurance funds from 2000 under an Australian Government incentive program. Coglin says these people must get quality service and clinical excellence to justify the $A1,500 annual hit on their budgets.
Face to face. Hospital & Healthcare May 15, 2002 (ABSTRACT Business Intelligence International)

Aug 2004 Serving the Community

Healthscope's Melbourne Clinic has appointed Chris Tanti as general manager. Mr Tanti, is a social worker who has worked as a clinician and as a mental health administrator. As a founder of the first dual diagnosis program in Victoria, the SUMITT program in the late 1990s, Mr Tanti has first-hand experience of the complex care needs of clients in mental health. He says in his new role, running the 104-bed psychiatric clinic with its diverse range of inpatient and outpatient programs, he has the scope to assist many people who may not receive adequate help within the public health system. He will also oversee a multimillion dollar refurbishment of Australia's largest private psychiatric clinic.
New manager for Healthscope The Age August 14, 2004

July 2003 The Board

Directors: Mr Harry Kevin McCann (Chairman), Mrs Linda Nicholls (Deputy Chairman), Mr Richard Anthony Fountayne England, Mr Bruce Dixon, Mr Ron Evans, Mr Paul Choiselat

Managing Director: Mr Bruce Dixon, Company Secretary: Mr Jose Czyzewski, National Manager, Business Development: Dr Michael Coglin, National Manager, Operations: Ms Vita Pepe
Jobson's Year Book - Healthscope Limited. July 1, 2003

Mar 2002 Richard England

PROFESSIONAL company director Richard England has joined the board of City Holden. Mr England, an executive consultant to Ernst & Young, is chairman of Peter Lehmann Wines, GroPep and Tower Trust and a director of Healthscope.
PROFESSIONAL company director Richard England has joined... Adelaide Advertiser March 2, 2002

Feb 2003 Richard England

"He will be more than welcome around the ABB board table." A former partner and now consultant to Ernst & Young, Mr England is also on the boards of a number of public and private companies including director of Healthscope and Chairman of Ruralco Holdings, Peter Lehmann Wines and GroPep.
ABB Grain Limited (ABB.AX) Financial Specialist Welcomed. Australian Stock Exchange Company Announcements February 10, 2003

Mar 2003 Richard England

ALAN Bond liquidator Richard England is coming to a boardroom near you. With an eye for almost every balance sheet trick in the book, his skills as a chairman or company director have been eagerly sought.

He chairs listed South Australian firms GroPep and Peter Lehmann Wines, Tower Trust (previously Austrust) and national rural merchandising group Ruralco Holdings.

He is also a director of listed hospitals group Healthscope and most recently Adelaide-based ABB Grain.

"After 30 years, I am drawing to a close my career as an insolvency practitioner to spend all my time as a professional non-executive director," he says.
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Since dropping out of medicine at 21, Mr England found the world of accounting more to his liking. "It suits my temperament and interests much more," he says.

Specialising in corporate recovery has proved every bit as demanding as a doctor's life.

"As a liquidator, you are in a position of conflict with people and, normally, everyone you deal with is unhappy," he says.
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M R England - Ernst & Young's former national director of corporate recovery and insolvency - has honed his expertise in the worldwide hunt for Alan Bond's assets.
Bondy's nemesis still focused on the boardroom. Adelaide Advertiser March 8, 2003

Aug 2002 Linda Nichols

NICHOLS
Linda Nicholls (above) is back in banking, joining the board of St George Bank to replace the retiring Ms Geri Ettinger. Nicholls was a member of the Wallis inquiry into the financial services industry in 1996 and has more than 25 years experience as a senior executive in banking, insurance and funds management in Australia, New Zealand and the US. She chairs the Australia Post board, is deputy chairman of listed private hospital group Healthscope and a director of Sigma Pharmaceutical Group, Perpetual Trustees and Insurance Manufacturers of Australia. She is also an international advisor to Goldman Sachs.
Behind the screens. Australian Banking & Finance August 16, 2002

Aug 2002 Linda Nichols

Linda Nicholls does not have a lot of spare time. In addition to her main role as chairman of Australia Post, she is a director of Southern Health Care Network, Healthscope, Perpetual Trustees, Insurance Manufacturers Australia and Sigma Pharmaceuticals. She is also an adviser to PricewaterhouseCoopers, IBM Australia, Goldman Sachs and First Data Resources Australia, and a director of the Smith Family.
THE 20 MOST POWERFUL WOMEN Business Review Weekly October 3, 2002

Oct 2002 Linda Nichols - Too much to do properly

How many board positions are too many? There is no consensus on this question. Directors and corporate governance experts are loath to prescribe a maximum, but if investors start to regard this as a problem in the future, there may be changes.

In addition to their commitments on listed companies, many directors are involved in unlisted companies and philanthropic organisations.

For example, Linda Nicholls is a director of three companies on the S&P/ASX 200 and her commitments extend much further. In addition to being chairwoman of Australia Post and of her corporate advisory consultancy, Nicholls is a director of Perpetual Trustees, Sigma Pharmaceuticals, Insurance Manufacturers Australia, St George Bank and Healthscope. She is also on the boards of the medical research organisation The Walter and Eliza Hall Institute, Melbourne University's Ormond College, The Smith Family charity and the Macquarie Graduate School of Management. A leading head-hunter says: "If people knew how good she was, she would be invited on even more boards."
A new board order. Business Review Weekly October 31, 2002

Dec 2002 Linda Nichols - Shareholders object

Shareholders at an often fiery St George AGM yesterday questioned whether director Linda Nicholls, who was up for re-election, could devote enough time to her duties at St George.

Aside from being a St George director, Ms Nicholls is chairman of Australia Post, deputy chairman of Healthscope and a director of Sigma Pharmaceutical Group, Perpetual Trustees Australia and Insurance Manufacturers of Australia.

One shareholder said: "I think three or four directorships is quite adequate." Shareholder activist Jack Tilburn said given her other boardmemberships, Ms Nicholls was only able to dedicate "one sixth of her work to St George".
Dragon holders breathe fire at board. Courier-Mail December 14, 2002

Apr 2004 Linda Nichols - still more

She was appointed to the Board in August 2002. She is Chairman of Australia Post, Deputy Chairman of Healthscope, a director of Sigma Pharmaceutical Group, Perpetual Trustees Australia Limited, Insurance Manufacturers of Australia and an international advisor to Goldman Sachs. Mrs Nicholls is also a Member of Council of the Walter and Eliza Hall Institute of Biomedical Research, the Board of Trustees of The Conference Board in New York and a Governor of The Smith Family. Mrs Nicholls has an MBA from Harvard University and more than 25 years experience as a senior executive and company director in banking, insurance and funds management in Australia, New Zealand and the United States. She was a member of the Wallis Inquiry into the financial services industry in 1996. She is a member of the Board's Risk Management and Nomination and Remuneration Committees.
St George Bank. Australian Banking & Finance April 16, 2004

Dec 2004 Linda Nichols - more protests

Among the list of overcommitted directors is St George Bank director Linda Nicholls, who has a workload equivalent to seven board seats.
Serial directors put under siege The Courier-Mail December 23, 2004

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Incentivisation

Healthscope embraced the market management practice of offering massive incentives linked to profitability - a practice at the heart of the problems in the US marketplace. This excess emphasis on measurable economic outcomes severely skews hospital activities towards market activities and away from clinical services - particularly those which are not readily measured. As a consequence care suffers. In the USA incentives of this sort were and still are the major driving force operating at a personal level to cause serious dysfuncion, foster the exploitation of vulnerable citizens and encourage fraud.

Healthscope made much of its management practices and corporate governance.

Oct 2002 Incentives

Much has been written about the appropriateness of a Company issuing options to Executives. Healthscope has issued a total of 3.8 million options to Executives over the last 4 years (ie since the introduction of the executive option plan) representing 4.4% of the issued shares.
Healthscope Limited (HSP.AX) Chairman`s AGM Report. Australian Stock Exchange Company Announcements October 22, 2002

Oct 2002 Justifying incentives

In regard to executive remuneration, Mr McCann said it would pay its senior executives packages that were "market competitive".

He said the packages comprised a base salary and short-term and long-term incentives.

The equity-based long-term incentive has performance hurdles that need to be reached and vest three years after the grant.

Chief executive Bruce Dixon earned a total package of $645,000 including a base salary of $325,000 as well as a $160,000 bonus and $100,000 in options.

It was less than the $2.00 million package of the previous year when he received $1.6 million in options on top of a base salary of $281,000.
Healthscope comfortable with broker forecasts of $15.5m NPAT. Australian Associated Press Financial News Wire October 22, 2003

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Embedding a culture

It is clear that a corporate culture that identified with the company's ideas and practices developed. Its management style was directed at measurable economic outcomes within this framework. Decisions and rewards were based on these and patterns of market thinking established. Within such a culture the humanitarian focus and motivation of individuals, which is so important in health care, withers. The commercial focus is driven down through the system by a management style which forces employees to set economic goals and then exert every effort to reach them. They are rewarded for doing so. Doctors are part of this community and soon focus their health care activities on economic outcomes rather than humanity and service.

As Healthscope expanded it ensured that its patterns of thinking would be adopted by appointing its own management into its acquisitions. In joint ventures with not for profits, market listed companies typically appoint their own managers to the hospitals so effectively altering the paradigms of understanding from a cooperative service mentality to a competitive commercial one. Not for profit community culture is destroyed. The consequences must impact on the community - its values and norms, and on its perception of itsself.

Oct 2004 Management style based on outcomes rather than motivation

The managing Director undertakes annual performance reviews with each sector Executive member, with specific focus on performance against set objectives.
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- - - - the Remuneration Committee links the nature and amount of executive directors' and officers emoluments to the companies financial and operational performance.
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The role of the Remuneration Committee - - - - - - and make recommendations in relation to long term equity based incentive schemes for executives.
Director's Report Annual Report October 2004

Oct 2004 Changing new acquisitions

For one, on its ambitious expansion trail in recent years, Healthscope acquired 20 hospitals, to 13 of which it appointed new managers (a stockbroker for instance). The stock had a majestic run on this spending spree before the market worked out that new acquisitions took time to bed down.
Margin Call The Australian October 20, 2004

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Healthscope's perspective on the market

The company's stated views of health care and the role of the marketplace are conventional wisdom in Australia at this time. The rhetoric promoting the markets superiority in managing every facet of health that was so prominent during the 1990s is gone. There is no longer any attempt to denigrate the public hospital system and claim that it would be better run by the private sector. This is no longer credible. Instead market believers claim that the public sector needs the private sector to take some of the load if it is survive. In spite of the assertiveness with which this claim is made, it is debatable. A cooperative and integrated not for profit private system based on care rather than profit may be desirable for many individuals. On the available evidence one focussed on competition for profits is not.

Healthscope which so closely embraces corporate marketplace ideology attacks its critics as ideologically based and without evidence. At the same time it ignores the volume of evidence which shows that the competitive market system it embraces is not only more costly but supplies inferior services. It lacks insight, ignores evidence and attacks the messenger for its own failings. This is typical of what I have called "closed minded" behaviour and it is particularly well developed in the marketplace.

Very interesting is the Freudian slip by Healthscope's chairman when using the word "private". Prior to about 1990 the bulk of private care was supplied by not for profit organisations that set the tone and ethos of the services. Citizens paid for care by someone who cared for them. Private referred to the patient paying some of the costs of the service provided and not to who provided it. Corporate for profit health care slipped in under this umbrella by seeking to identify with this private system and its humanitarian focus. The Fruedian slip illustrates the new meaning of private. It refers to making a profit and not about who payment by the patient.

As competition policy advantaged the corporate sector and disadvantaged the not for profit ethic, the tone and ethos of health care changed to a market focus. Not for profit operators have not prospered in this environment. As in the USA they are stressed and often in financial difficulties. The market both in the USA and in Australia has moved in to capitalise on this by forming alliances which give for profit entities control without disrupting the image of care and service associated with this sector. Patients don't realise that they are paying for the care of shareholders, ahead of their own need for care.

It is interesting that a little over 10 years after the private sector was dominated by not for profits, the chairman of Healthscope talks of not for profit hospitals as if they are not part of the private hospital sector.

Aug 2002 Marketplace beliefs

Private hospital operators have benefited from the Commonwealth Government's reform of health insurance. We need to be proactive in defending the programme against criticism which is largely based on ideological grounds and ignores the benefits it confers on the community. The Australian community needs and requires a vibrant private hospital sector operating side by side with an effective public system.
Healthscope Limited (HSP.AX) Preliminary Final Report. Australian Stock Exchange Company Announcements August 20, 2002

2004 What is "private"?

The consolidation of the private hospital sector is almost completed. The next phase will be consolidation of the not for profit sector and we are ready to work collaboratively with them to enable this to occur in an orderly fashion.
Chairman's Statement Healthscope Annual Report 2004

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A part of the wider marketplace

The close relationship between commercial entities and health care corporations has been a major factor in the commercialisation of health care particularly in the USA. This is not something of which most are aware. It became apparent when the HealthSouth scandal broke in the USA . The inappropriately close relationship with, first Citigroup, and then UBS was exposed. What happened there closely parallels what happened in the Wall Street frauds and scandals where financial groups like Citigroup played a major role in setting up the frauds. Senior executives moved freely between health care corporations and auditors, bankers etc. Close relationships were formed. Bankers and market analysts attended board meetings to advise on market practices. The full extent to which financial institutions assisted in and gave legitimacy to the extensive dysfunction in the US system can only be speculated on. The consequence of this close association in both the USA and Australia is that health care's legitimacy is now tied to its market thinking, its market practices and its commercial achievements. Healthscope rates highly. Australians companies turn to these Wall Street multinationalks for advice. Primary uses UBS. Affinity uses Citigroup, of which it is a part, and UBS. Healthscope uses another Wall street investement banker, Global Markets Capital Group.

Feb 2003 Cross fertilisation to and from the marketplace

Glenn Davies has been appointed as head of BankWest's new healthcarebusiness banking unit. Davies is a former regional manager of HealthScope and a former healthcare manager of Spotless Services. The bank already operates a financial service for pharmacists, PharmacyConnect. The service has generated more than $A100 million in loan referrals since its launch in September 2002. The bank plans to expand into other areas of the health sector such as nursing homes, retirement villages and public hospitals.
Medico heads bank unit. Hospital & Healthcare (ABIX abstracts) February 18, 2003

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Change in Investors

By 2002 the company was doing well and its prospects looked very good. Its focus more closely reflected market expectations. The spectrum of investors had changed with more of the major banks and financial institutions in the top 20 shareholders.

Sept 2002 Top 20 Shareholders

TOP TWENTY SHAREHOLDERS AS AT 31/07/2002

National Nominees Ltd
Corkery Pty Ltd
Citicorp Nominees Pty Ltd
JP Morgan Nominees Australia
AMP Life Ltd
Commonwealth Custodian Services Ltd
Westpac Custodian Nominees Ltd
Mirrabooka Investments Ltd
Beconwood Securities Pty Ltd No 3
Colin Boltman
Cogent Nominees Pty Ltd
Zonda Investments Pty Ltd
ANZ Nominees Ltd
Dene Nominees Pty Ltd
Ronald Barry Evans
GJL Investments Pty Ltd
Permanent Trustee Aust Ltd (Syd)
Invia Custodian Pty Ltd
Faleura Nominees Pty Ltd
A&M Slade Nominees Pty Ltd

Taken from Healthscope Limited (HSP.AX) Annual Report/Top 20. Australian Stock Exchange Company Announcements September 25, 2002
 

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In the USA political influence has been crucial to commercial success. There have been many analyses of the large political donations made by health related corporations, the amount spent on lobbying, and the close relationships formed. There has been intense criticism.

In Australia we have only occasional hints at political donations publicly. It is clear that the political process is now largely market focussed and the country has been restructured along market principles regardless of whether contexts are appropriate or not.

There are reports of donations to politicians by Healthscope. It is worth noting that the opposition MPs who received donations failed to back the community and expressed platitudes favouring Healthscope during the dispute between Healthscope and the Mosman community. Salomon Smith Barney is not, as claimed below, unrelated to health care. It has a large health care division. It actively advises and supports health care corporations and makes money by providing services to them. It has a major interest in political decisions involving health.

Feb 2004 Political donations

Electoral returns provided to the State Electoral Commission by the three MPs show companies associated with portfolios the MPs held during the three years prior to the election were strong donors.
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North Shore MP and former Opposition health spokeswoman Jillian Skinner was given $1500 donations from St Leonards company Ramsay Health Care Pty Ltd and also Healthscope Ltd.

Mrs Skinner's biggest donor outside of the Liberal Party was unrelated to the health industry finance group Salomon Smith Barney donated $7500.
Big business backs MPs North Shore Times February 13, 2004

Healthscope has clearly had close ties and close dealings with government when this suited it, but it has not always responded to government's requests to it for assistance.

When it listed on the share market in 1994 Healthscope entered into an arrangement with the South Australian government in which it acquired government run hospitals in return for 14% ownership (the largest shareholder). It became the largest operator of for profit private hospitals in the state, behind a not for profit group in Adelaide. It was also contracted to run the privatised Modbury Hospital. This relationship soon soured and there were repeated disputes.

Healthscope won the contract to build and run the Northern Territory's only private hospital, a colocated hospital in Darwin. This colocated venture struggled but seems to have worked when the government helped by involving it in joint ventures and when it arranged to treat patients from hospitals in Indonesia.

In Tasmania Healthscope seems to have entered into some sort of under the table agreement with the state government when it bought the privatised public Mersey hospital from Mayne. The local community took exception to what was planned and forced the government to buy the hospital back from Healthscope. It had also acquired a colocated private facility on the Hobart General Hospital campus from Mayne Health and made this profitable. When the government wanted the building back to allow the public hospital to expand Healthscope refused.

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When Mayne and AXA failed to drive specialists into contracts with corporations and insurers, coercion became impractical. The only way to get doctors to cooperate with corporate objectives was to meet the doctors needs and to align their financial interests with those of the corporation. Corporations in Australia increasingly seek to align their doctors' financial well being with the interests of the company through share holdings or joint ventures. I did not find reports documenting that Healthscope did either. The way in which it marketed and built relationships with doctors is not described.

Healthscope has actively sought to support its doctors. It capitalised on Mayne's discomfort in 2002 when doctors rejected Mayne's business practices and took their patients to Healthscope and Ramsay hospitals. Healthscope made much of their good relationship with doctors. This was good business when it did not clash with other commercial considerations as in Mosman and Mersey.

The claim, in 2003, to devote resources to supporting doctors practices jars with those of us who are familiar with the USA. How are these resources devoted and which doctors are supported?

In the USA resources were devoted to supporting doctors who followed corporate prescriptions and were profitable. Companies marketed the skills of their favoured doctors to the profession and the public. They gave them senior positions in the hospital, arranging lecture tours and even provided free secretarial assistance and loans. The concerns of less successful but ethical peers were ignored.

As a consequence people of doubtful competence and propriety flourished. More and more doctors went along with what the company wanted. In one company this resulted in thousands of children being needlessly admitted to psychiatric hospitals and many hundreds of patients being subjected to bypass cardiac surgery when this was not clinically indicated.

1997 Strategic review - marketing - doctors

"To this end, the company has stepped up its marketing program and undertaken new initiatives with doctors and surgeons to improve earnings," he (Kricker) said.
AUSTRALIA'S HEALTHSCOPE POSTS HALF-YEAR NET LOSS ASIA PULSE March 11, 1997

Aug 2002 Doctors

A key strategic advantage is Healthscope's strong and valued relationship with Doctors practice. This partnership has enabled the hospitals to continue to grow providing excellent clinical services, and enabling a win/win outcome.
Healthscope Limited (HSP.AX) Preliminary Final Report. Australian Stock Exchange Company Announcements August 20, 2002

Aug 2002 Doctors

Contrary to the situation at its larger rival Mayne, Healthscope said its relationship with doctors was a "key to our success".
Healthy Healthscope raising $28m. The Sydney Morning Herald August 21, 2002

Oct 2002 Doctors

The theme of our Annual Report this year is valuing relationships - a key element in Healthscope's ongoing success. We enjoy an excellent working relationship with our medical practitioners - this is a key competitive strength.

Doctors utilising our facilities acknowledge Healthscope's core capability in hospital ownership and management. In turn, we respect and support our Doctor and specialist partners, believing they are in the best position to determine good outcomes for patients. Our nursing workforce provides our Doctors with the support necessary to ensure superior patient care.
Healthscope Limited (HSP.AX) Chairman`s AGM Report. Australian Stock Exchange Company Announcements October 22, 2002

Feb 2003 Doctors

Healthscope's strong and valued relationship with our Doctors is a key to our ongoing success. Considerable resources are being allocated to support Doctors' practices, with plans to further strengthen our business development activities in the second half year.
Healthscope Limited (HSP.AX) Half Yearly Report & Half Year Accounts. Australian Stock Exchange Company Announcements February 20, 2003

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Healthscope's management of nurses seems to have been exemplary. There is a local and global shortage of nurses so that understaffing, high staff turnover and the overuse of agency staff all occur and threaten care in Australia.

Healthscope has been assiduous in its attempts to recruit, train and hold staff by meeting their needs. It has poached staff from other countries whose needs are probably as great or greater than ours.

Sept 2002 Incentives for nurses

Healthscope, which owns Melbourne Clinic, is providing incentives to improve nurse retention. It is offering scholarships for postgraduate education and refresher training for nurses who have left.

Ms Walker's colleague, Caroline Hardwick, said the hospital's self-rostering system, in which nurses can choose the days they work, kept nurses motivated. Regular team meetings, conferences and education programs had boosted morale, she said.
Time to care for the carers. The Age September 17, 2002

Oct 2002 Nurses

It has been well publicised that both in Australia and worldwide hospital operators (whether public or private) have experienced difficulty in recruiting nurses to their hospitals. I am pleased to report that our nurse recruitment and retention initiatives enabled us to employ a greater number of full time nurses. We still however, require more nurses as we expand operations in our hospitals.

Healthscope strives to be the employer of choice in the Australian health industry by offering staff superior work environments that are attractive and flexible and provide career development opportunities. We have initiated a number of programs to make a career in our hospitals more attractive, including employee benefit programs, nursing education programs, financial scholarships for nurse post graduate training, and a structured career progression throughout Healthscope's hospital network. To attract and retain a quality workforce will remain a key focus of our senior management team in the year ahead.
Healthscope Limited (HSP.AX) Chairman`s AGM Report. Australian Stock Exchange Company Announcements October 22, 2002

Mar 2003 Nurses pay

Ms Kiejda said only one private sector operator, Healthscope, had offered NSW's private nurses parity with public sector nurses.|
State Pay Lures NSW Nurses Australian Financial Review March 4, 2003

Mar 2003 Nurses pay

Association general secretary Brett Holmes congratulated Healthscope, which is shortly taking over ownership of the hospital, on its "business sense" for being the first private hospital employer in NSW to offer wage parity with the public sector.
Pay rise offer at hospital. Mosman Daily April 10, 2003

Sept 2004 Occupational health

The hospital in Bigge St achieved the best improvement in occupational health and safety of all the facilities managed by the national private hospital group Healthscope for the 12 months ending in June.
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Announcing the award, Healthscope managing director Bruce Dixon presented a certificate and a cheque for $10,000 for the hospital to buy new equipment and to contribute towards a staff social function.

Hospital general manager Simon Boag said: "Sydney South West Private Hospital is a facility where staff care about each other. As well as caring for patients we look after our own health and safety."
Hospital wins safety award Liverpool Leader September 15, 2004

Jan 2005 International recruiting

FOR the first time, Australian hospitals are offering international nursing graduates positions on their nursing programs. Healthscope - Australia's third-largest provider of private hospital care - will this year welcome 45 new nurses from England and Ireland to many of its 30 hospitals nationwide. The nurses, most in their early 20s, will start their graduate programs in March and May.

By encouraging nurses to stay on once they've completed their training, Healthscope managers say they are "combating the national nursing crisis".
Hospitals open their wards to overseas graduates The Age January 22, 2005

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Newspaper analyst's rhetoric is usually lifted from company reports or press releases. Some comments about Healthscope mimic the distorted phrases employed in the USA in the late 1980's. Phrases applied to Healthscope include "a very high end orthopedic facility", "high profile sports professionals", "a pace-setter in terms of psychiatric programs", "specialised rehabilitation services" and "dominates the treatment of". Most would infer that these comments refer to the care provided and suggest quality. In the USA such terms used in corporate reports and by analysts were no more than a code for potential profits. Care was often substandard and exploitative. Tenet/NME's psychiatric hospitals, its "Books as Hooks" program, and its "programmatic" system of care were praised in a similar way.

These phrases were taken from a single paragraph about Healthscope in Shares magazine. Even the word "orthopaedic" is spelt "orthopedic" the American way! Note also that care is no longer a professional cooperative service to meet need. It has become a niche market to be "defended" - presumably against anyone who might compete.

This same commercial defensive approach led Tenet/NME and other US corporations to deny patients second opinions. They also failed to transfer patients to competitors when they could not provide required services themselves. Columbia/HCA hospitals that did not treat certain conditions failed to transfer patients to local competitors across the road. Instead they transferred them long distances to a Columbia/HCA hospital away from family and friends. This is what corporatisation and competition does for health care

Note the rhetoric "leading private provider" below. Most would think that all this was because Healthscope provided good care whereas it simply indicates market share. They would not realise that it was a consequence of marketing skills and a policy of securing market share in niche markets. It might well reflect cost cutting and poor care. Healthscope may of course provide good psychiatric care. I don't know but the words make me suspicious.

Sadly our community swallows this sort of rhetoric uncritically. These are not advertisements. They are written as fact by a supposedly objective journalist advising the public and investors.

Most worrying is that corporate staff are flattered by all this meaningless verbal distraction and come to think of the company this way. They behave as if it is real and confidently echo the words in their conversations. It helps insiders to blunt conscience and look past evidence.

Sept 2001 Press rhetoric

Healthscope now operates almost 900 beds with a fairly even mix of income from five psychiatric facilities, five rehabilitation hospitals and seven medical/surgical hospitals. It is the leading private provider of psychiatric services in Victoria and of rehabilitation care in Adelaide and Melbourne. Indeed, the corporate strategy is very much based around building highly defensible niches within the broader private hospital sector.

Victoria House, for example, is a very high end orthopedic facility that includes high profile sports professionals within its clientele while Darwin Private is the only provider of acute services in the Northern Territory, Melbourne Clinic is a pace-setter in terms of psychiatric programs, Griffith Private is the only provider of specialised rehabilitation services in Adelaide, and Ivanhoe Manor dominates the treatment of Acquired Brain Injury cases in Victoria, especially from traffic accidents.
Hospitals Bed Down Better Margins, Shares Magazine 1 September 2001

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Advertorials

Advertorials are common in health care. An obliging journalist and newspaper dish out corporate marketing under their own name or write glowing reports about some facet of the company's activities based purely on company promotions.

Healthscope is no exception and what appear to be advertorials appear in small local newspapers.

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One man turned Healthscope from a company in trouble, to a darling of the marketplace and then, in the face of criticism, into a giant in Australian terms. He bought Gribbles, Nova and then a large chunk of Affinity Health's assets. We know little of Dixon as a man as he avoids the public eye. His business skills are undoubted. His courage in seizing opportunities has pad off well for shareholders. They have rewarded him generously.

Aug 2005 Dixon's success

Healthscope was selling at 72 ¢ on the day Dixon took the reins; they are now $5.20.
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Enough said about Dixon's skills, although they will be tested in the current year as he attempts to bed down satisfactorily a string of acquisitions.

As one fund manager remarked yesterday: "He has seriously performed; he has done really well. A very unassuming sort of a bloke, a truly nice person. He doesn't big-note himself.

"He is just a star, a five-carat star. He's done a sensational job."

Dixon is now being rewarded for his efforts.

In his first full year he was paid $301,000.

The actual moolah he collected for the year just completed was $946,186, up from $607,346.
Rising star cleans up after Spotless twins The Age August 18, 2005

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Web Page History This page created May 2005 by Michael Wynne Update October 2005