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section Markalinga
Trust
The many extracts on these pages are from
copyright material. They are owned by the reference
given or its owner. They are reproduced here for
educational purposes and to stimulate public debate
about the provision of health and aged care. I
consider this to be "fair use" in the common
interest. They should not be reproduced for
commercial purposes. The material is selective and
I have not included denials and explanations. I am
not claiming that all of the allegations are true.
The intention is to show the general thrust of
corporate practices as well as the nature and
extent of any allegations made.
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Markalinga Trust was founded by a group of
investors and listed on the market in 1985. It
overspent and was in trouble by 1991. The fraud
plagued US company, National Medical Enterprises
(NME), bought a controlling holding and it became
Australian Medical Enterprises (AME). As the
scandal in the USA unfolded NME's probity was
challenged by concerned citizens. NME was forced
out of Australia in 1996 after a complex saga in
which authorities were repeatedly
embarrassed.
and
Australian Medical Enterprises (AME)
(1985 to
1996)
CONTENTS
Markalinga Trust was a company founded by Dick Kernot and a small group of investors. It was probably the first health care groups to list on the share market in 1985. Its original shareholders maintained a majority holding. For a while Markalinga and Hospitals of Australia, also a trust were the two credible market listed operators of hospitals in Australia. It was unusual in that it not only owned and operated hospitals but also dealt in property. It built Markalinga House in Perth but then sold it to fund its health care activities.
Markalinga had hospitals in Western Australia and in Sydney. It built the private tertiary Mount Hospital in Perth, completed in 1987. This became Perth’s premier private hospital and the flagship for the company.
Like others at this time Markalinga spent too much on expanding existing hospitals and buying or developing new hospitals. It diversified buying pathology and radiology businesses. It went to the share market to raise more money on a number of occasions. It was soon overextended with too much debt and not making a profit. As in the Eastern states the local insurer Hospital Benefit of WA had an 11.6% interest in Markalinga.
As the 1980s boom turned to bust Markalinga found excuses for its losses and continued to pay dividends. Analysts continued to promote it. Its hospital occupancy remained low and like its competitors it looked to market its expertise in Asia and bring wealthy Asians to Perth for treatment.
It joined in the enthusiasm for colocated private hospitals and acquired the contract to build and run the St. George's Private Hospital when it acquired Dr. Bryant's bankrupt Sydney group.
In Western Australia, the Markalinga Trust which is structured around the New Mount Hospital has just released a prospectus and is looking to list on the local exchange. Another hospital company - Perth Surgicentre - also plans to float.
1985 Markalinga floats
HCA: A Staging Post For A Healthy Industry Australian Financial Review April 26, 1985
Markalinga was listed on stock exchanges only last July. Previously it was a private trust open to a select group of unit holders. It is still very tightly controlled with the top 20 investors in charge of 80 per cent of the $23 million trust.
1986 Structure
A couple of recent developments make Markalinga an interesting proposition. One is its business, namely the operation of private hospitals.
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While it may be described as a property developer and private hospital operator, the second part of the business has been behind the market price movement.
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The trust is still developing its hospital portfolio which will be enhanced greatly in May when the new Mount Hospital, in the Perth central business district, opens.
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The trust has three other hospitals, two of them in WA and one in NSW.
GPT Does Well But How About Markalinga? Australian Financial Review February 24, 1986
The Perth-based private hospital operating as Markalinga Trust is negotiating to buy a second hospital in NSW to be funded by a $13.3 million issue to existing investors.
1986 Raising capital to expand
Markalinga Seeks $13m For Hospital Australian Financial Review September 17, 1986
Another major improver was the Perth-based Markalinga Trust - which is heavily invested in private hospitals - whose units showed a strong performance on the sharemarket during the year, rising from 92c to $1.80.
1986 Shares doing well
GPT Heads Norths' Annual Rankings Australian Financial Review October 16, 1986
Perth-based private hospital operator and property developer Markalinga Trust yesterday blamed a $291,000 operating loss for the six months ended December 31 on growing pains - - - - - - - .
1987 But losing money
Building Delays Mean Loss For Hospital Operator Australian Financial Review March 17, 1987
Markalinga, which has 485 general surgical beds in six hospitals, has asked Austrade for a report on the quality and type of medical services in neighboring Asian countries so that it can start identifying gaps it can fill. It then hopes to start offering - in close consultation with referring doctors in those countries - high-quality services to fee-paying foreigners.
1987 Seeking rich Asians to fill beds
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Private surgical hospitals in WA are currently running at an average 60 per cent occupancy rate.
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Markalinga, listed on the Perth Stock Exchange under the Markalinga Trust, has as its key selling point the ultra-modern 126 million New Mount Hospital in Perth. This recently completed 150-bed hospital features some of the best heart, eye and general surgical facilities in the world.
Perth Seeks Asia's Well-Heeled Sick Business Review Weekly April 3, 1987
The manager of the Markalinga Trust, Markalinga Management Ltd, has announced a one-for-three bonus issue.
1987 Buying into pathology
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Markalinga also announced a meeting of unit holders on June 18 to approve the acquisition of the Westpath Services Trust which provides services to Western Pathology Services.
Markalinga Trust Makes One-for-three Bonus Issue Australian Financial Review May 25, 1987
In 1985 Markalinga Trust became the first group with ownership links to private hospitals to join the stock exchange lists.
1987 Explaining away losses
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The past 12 months were an eventful period: union obstruction and bureaucratic procrastination on bed number approvals held up completion of Markalinga's flagship, the 150-bed Mount Hospital in Perth.
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Markalinga is now in a period of consolidation and directors have forecast a major turnaround with a distribution of 17c per unit this year to provide an 11.0 per cent gross yield at $1.55.
Health Incorporated Australian Financial Review August 3, 1987
For instance, the Perth-based Markalinga Trust is 11.6 per cent owned by Hospital Benefit of WA, South Australia's Mutual Community recently bought two hospitals and in NSW, the MBF bought four hospitals.
1987 Insurers stake in hospitals
SGIC Takes $7.2m Stake In NT's First Private Hospital Australian Financial Review August 19, 1987
A Perth hospital management company, Markalinga Management, has plans to sell West Australian hospital services to South-East Asians. The company has already made approaches to Malaysia and Indonesia and hopes that patients will start arriving early next year. Patients will be offered package deals which will include return air fares, accommodation for an accompanying person and all medical and hospital fees.
1987 Selling health service packages to wealthy Asians
THIS WEEK IN WESTERN AUSTRALIA : HOSPITAL TARGETS S-E ASIA Australian Financial Review November 26, 1987
Markalinga Trust yesterday announced a 55 a share bid for Integrated Health, which runs a number of medical health service businesses in Perth including a pathology and radiology business and a private nursing home.
1989 Diversifying - pathology and radiology
MARKALINGA IN $13M BID Australian Financial Review March 15, 1989
Further to the west, Markalinga House, an eight-level office development owned by Markalinga Management, is for sale at $24.5 million.
1988 Selling property to support health
PERTH OWNERS CASH UP ON A BUOYANT MARKET Australian Financial Review May 6, 1988
In the short-term, she notes that Markalinga is due to make a special capital distribution of around 19 cents a unit on October 17. As a result, its unit price probably then will fall by a similar amount.
1988 Distributing capital
SICKNESS CAN PAY WELL Sydney Morning Herald October 5, 1988
The two most highly regarded listed private hospital operators, Hospitals of Australia Trust and Markalinga Trust, have both been on the boards for between two and three years, and have established track records.
1988 Credibility
PROS AND CONS OF HOSPITAL STOCKS Australian Financial Review December 12, 1988
The amalgamation of a number of small private hospitals in the Kogarah area into a 150-bed complex to be built by Markalinga Trust.
1989 The St. George's colocation
GREEN LIGHT FOR 30 PRIVATE HOSPITALS Sydney Morning Herald May 13, 1989
Interim earnings of Perth-based private hospital and nursing home owner the Markalinga Trust fell 62 per cent from $9.59 million to $3.6 million, - - - - -
1990 But still losing money
BUSINESS BRIEFS Sydney Morning Herald March 13, 1990
During the period the trust sold the non-pathology assets of Integrated Health Care for $6.8 million and three private hospitals in NSW for $17.4 million.
1990 Selling off assets
MARKALINGA TRUST REPORTS LOWER PROFIT, DISTRIBUTION Australian Financial Review March 13, 1990
Despite the sound earnings record, most institutions have moved out of the stock. Before the 1987 crash the price was about $1.85. It then started sliding but there was a lot of activity around $1, which had looked like the bottom.
1991 In spite of the positive press Markalinga is not profitable or financially sound
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Another problem was gearing. Markalinga is about 50% geared, a figure that, since the crash, has been considered too high for some investors. A few months ago, it was rumored that one of the trust's bankers, Westpac, had asked Markalinga to reduce its borrowings; this caused a fall in price.
STOCK OF THE WEEK Business Review Weekly January 25, 1991
Markalinga was one of the under-performers in the 80s. Earnings rarely achieved market expectations and profit fell in three of the six years prior to National Medical Enterprises of the USA obtaining effective control in 1992,
1992 Review - an under-performer
HEALTHY OUTLOOK IN MEDICAL SECTOR Australian Financial Review January 13, 1994
By early 1991 Markalinga was in trouble although it did not admit to this. There was even a delay in paying some of its staff. It started negotiating with the US giant National Medical Enterprises (NME) to take a controlling interest in the company. An agreement was reached in May 1991 which included the purchase by Markalinga of NME’s US business expertise and the service of NME’s international staff from Singapore. This was reported in the Australian press. It is not known what role politicians played if any. Doctors under the new pro-business chairman Bruce Shepherd supported the purchase but they did try unsuccessfully to get a medical representative on the board.
NME (renamed Tenet Healthcare in 1994) was at the time involved in an unfolding scandal in the USA. A doctor in Singapore would later allege similar conduct there by the new Australian administration. The only Australian who had worked in this hospital and who may have known and spoken out about these practices, cardiac surgeon Victor Chang, was unfortunately gunned down in a Sydney street only 3 weeks after the deal became public. The Malaysian perpetrators were convicted of an extortion attempt.
The agreement was terminated and was then renewed in December 1991. The reasons for this are not known. The new agreement specified that Markalinga would cease to be a trust and become a public company.
Markalinga was also asked (by the stock exchange) to explain why it had signed and released a half-yearly report on March 28, which declared a six-monthly distribution to unit-holders would be paid three days later, on March 31, when funding of that pay-out had not been arranged.
1991 Still paying shareholders
CHANGES POSSIBLE AT MARKALINGA Australian Financial Review April 12, 1991
US health care giant National Medical Enterprises has put its foot in the door of the Australian private hospital market after agreeing to inject $56 million into Perth-based Markalinga Trust.
1991 NME takes control
The capital injection will take place over two years and entitle California-based NME to 51 per cent of the expanded capital of the private hospital operator at an issue price of 80c a unit.
US GROUP BUYS INTO MARKALINGA Sydney Morning Herald May 30, 1991
The company is understood to be on the point of signing an agreement with NME first mooted in May this year.
1991 Agreement terminated then renewed
Under the original agreement, which was terminated in September, NME was to inject $56 million into Markalinga in return for a 51 per cent interest, with$20 million to be paid immediately.
BIG TRADE IN MARKALINGA TRUST UNITS Australian Financial Review November 14, 1991
Negotiations between NME and Markalinga date back to the beginning of the year, surviving the termination in September of a similar agreement which did not involve a change of corporate structure.
1991 A change in structure
HOSPITAL TRUST SIGNS WITH US GROUP Australian Financial Review November 15, 1991
Most of the board supported the move but one director, Mr Jack Bendat, has recommended unitholders vote against the plan and another, Dr. Michael Jones, has offered no recommendation but outlined several concerns about the restructure.
1991 Some directors have reservations
MARKALINGA PLAN SUPPORTED Australian Financial Review November 20, 1991
NME took a 37.5 per cent stake in the company on March 4, when Markalinga Ltd became the sole beneficiary of the Markalinga Trust, which was suspended from quotation on the stock exchange at the request of its management company last month. The conversion to a corporate structure was a condition of the subscription agreement with NME signed in November.
1992 The new structure
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A Markalinga director, Mr Dennis Brown, said part of the initial payment had been used to retire existing debt. The company has also made several purchases connected with its 200-bed St. George Private Hospital project in Sydney.
MARKALINGA GETS BOOST FROM US SHAREHOLDER Australian Financial Review March 18, 1992
Click Here to go for information about the St. George's Private Hospital.
The company continued to operate as Markalinga Ltd until October 1992 when it changed its name to Australian Medical Enterprises. By now its parent, NME was caught up in a massive unfolding scandal in the USA involving the deception misuse and mistreatment of patients in large sections of its US operations - all part of a massive fraud. I was already concerned about hearsay stories suggesting similar practices in Singapore where it was involved in an undisclosed court action relating to similar practices. I was not aware of the US scandal.
In Australia hospital owners are required to be "fit and proper people". NME clearly did not meet this standard yet during the subsequent months of its investigation it played hard ball and repeatedly misinformed authorities. The Australian Medical Enterprise saga of political intrigue, administrative ineptitude, a judge compromised by his own sexual misconduct, and support by politicians and bankers who were fully informed of NME’s conduct is told on one of the National Medical Enterprise’ pages.
It gives a profound insight into the workings of the Australian marketplace and the relationship between politicians, government departments and the influential corporate sector. It is a sad but revealing story of the extent to which those in authority would neglect the interests of those for whom they were responsible. It was only when they were outmaneuvered, the continued dishonesty was exposed, and when the material relating to the past conduct of NME staff from Singapore could not be ignored that they ultimately acted to force the company to sell up in Australia. In 1999 they allowed a closely related Singapore company Vista Healthcare, founded and managed by some of the same Tenet/NME international staff who had run Tenet's operations in Singapore, to buy back into Australia without any publicity. It is difficult to find a more graphic illustration of political chicanery than the NME/AME story, although the politicians conduct in regard to Sun Healthcare in 1997 comes close.
Click Here to go to the story of Australian Medical Enterprises in Australia.
Click Here for the story of my battle to get the company out of Australia and other countries.
Click Here for the Australian senate statement in this regard.
I include below only a few press reports which supplement the story. In 1994 NME was convicted of criminal conduct in the USA and eventually paid over $1 billion in fines, settlements and compensation to mistreated patients. It was forced to sell well over half of its 150 hospitals, those where the fraud had occurred. It changed its name to Tenet Healthcare. Ten years later it was involved in a very similar scandal involving cardiac patients and needless surgery. The Australian CEO in 1991 was by 2002 a senior operative in the region where this occurred. Could this have been Australia?
According to allegations raised in this week's ABC TV Four Corners program, NME has been involved in detaining sane adults and children against their will, in order to make a profit on their health insurance.
1992 Television exposure in Australia
NME also faced investigations by the FBI, Department of Defence and US Congress, according to the Four Corners report.
News and Features Sydney Morning Herald October 21, 1992
Markalinga's independent Australian Directors are fully satisfied that the allegations regarding NME are isolated in the context of NME's operation as a whole and no not reflect he overall outstanding quality of health care NME has delivered for many years.
1992 Typical deceptive statement by AME
MARKALINGA LIMITED: COMPANY STATEMENT (Part A) Australian Stock Exchange Company Announcements October 21, 1992
5. That the name of the Company be changed from "Markalinga Limited" to "Australian Medical Enterprises Limited" and - - - - .
1992 Change of name
MARKALINGA LIMITED: Notice Of Meeting Results (Part A) Australian Stock Exchange Company Announcements October 23, 1992
Australian hospital group Markalinga Ltd, is focusing on the Pacific Rim for its expansion.
1992 The real reason for international expansion
"Growth opportunities in the US are very limited right now," said NME's vice-president for corporate communications, Mr David Olson.
And according to Sanford Bernstein analyst, Mr Ken Abramowitz, "They want to invest more in Australia ... they like Australia. They think it's a big opportunity."
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And although NME is unlikely to admit it, a big reason behind its focus on overseas opportunities are the revelations of the past year which have blown out of the water its main engine of profits and growth - US psychiatric hospital business.
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This report was followed by lawsuits filed by NME shareholders and by the Texas Attorney-General, and in recent months by 10 big insurance groups, although NME has responded with a lawsuit of its own against three of those insurers.
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NME's share price has dropped from around $US24 in September 1991 to a low of just over $US9 last month before recovering in recent weeks to trade above$US12.
US HOSPITAL GROUP TARGETS PACIFIC RIM FOR EXPANSION Australian Financial Review November 17, 1992
Dr. Amos's (NSW Director General of Health) heartburn is not helped by the fact that documents obtained under Freedom of Information legislation reveal that although the Health Department was warned about the allegations surrounding NME, the inquiries it subsequently made were embarrassingly scant.
1993 NSW Health acts responsibly
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In his letter to the Health Department, Mr Brown said, "NME acknowledges that there were isolated problems in Texas" but that the press reports of the case were unbalanced and that because of "very strict laws regarding patient confidentiality, NME had been unable to go into specifics of patient complaints". While acknowledging that some of the complaints were legitimate, Mr Brown said in the letter, "NME believes that many of the complaints were part of a pattern of treatment denial by former psychiatric patients."
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The position of the Health Department is now a waiting one. Dr. Amos said he was not going to issue AME with an "in principle approval" for the proposed $90 million St. George private hospital until the allegations surrounding NME in America were clarified.
CHEQUEBOOK HOSPITALS Sydney Morning Herald March 6, 1993
A former NSW Supreme Court judge, Mr David Yeldham , has been appointed as an independent delegate to make the final decision on whether to grant a licence for the proposed $90 million St. George Private Hospital to an American-controlled hospital group.
1993 Outmaneuvered by a state government committed to supporting NME
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The appointment was immediately condemned by the NSW Opposition's spokesman on health, Dr. Andrew Refshauge.Allegations regarding NME were "of the most serious nature" and the delegate's inquiries would be conducted "behind closed doors" when they should be open to public scrutiny, he said.
HOSPITAL DECISION UP TO EX-JUDGE Sydney Morning Herald June 16, 1993
NME was quoted in US reports as saying that as part of a continuing inquiry, federal agents requested records and documents at some of its locations, including its corporate headquarters.
1993 Further serious disclosures only weeks before Yeldham granted licenses
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US reports said the latest news was "the first official indication that the various investigations around the country are being co-ordinated at the highest levels in Washington".
FBI TURNS UP HEAT ON HOSPITAL PARTNER Australian Financial Review August 30, 1993
On 3 September 1993 the New South Wales Health Department released Mr Yeldham's decision granting approval in principle for the St. George project to proceed subject to certain conditions.
1993 The licence is granted
AUSTRALIAN MEDICAL ENTERPRISES LIMITED: ANNUAL REPORT, TOP 20 SHAREHOLDERS, LETTER TO SHAREHOLDERS (Part A) Australian Stock Exchange Company Announcements September 27, 1993
The truth is appalling. It appears that special branch were covering up for the judge for its own purposes. We may never know if any of his judgments were tainted by improper influence, but the evidence suggests that he should never have been on the bench, never in a position of public honour and influence
1996 Yeldham's secret life exposed
Editorial Sydney Morning Herald Dec 12, 1996
For the remainder of the AME story go to the Australian section about National Enterprises, to the page about Yeldham, to the Australian senate statement, to the Australian material in my submission to Tenet's ethics committee, and to the story of my rather bruising eight year battle with NME across three countries - with brief sorties into all those where it operated. It was during my research into Tenet/NME's practices in this battle that I learned how widespread similar conduct was across the corporate health care marketplace.
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Michael
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