LINKS CORPORATE MEDICINE WEB SITE Disclaimer 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. Links to Site Maps Central Initial USA Australian International Corporate Practices (to print) Path to this page Home Australia Austr Hosp Companies Mayne access page Other pages Entry to Privatisation Privatisation Background Australian states Gen. Pract. Corporatisation General Practice/Pathology:- Sonic&Co . . Foundation Lifecare . . . Endeavour Primary . . Revesco&related Hospital Companies Affinity Health Alpha Healthcare Austr. Hosp. Care Benchmark Healthscope Hosps of Austr (HOA) Insurer hospitals James Hardie & HCC McGoldrick's comps Markalinga & AME Mayne Health & HCoA Moran Healthcare Nova Health Ramsay Hlth Care US grps HCA & AMI Small Hosp groups Mayne Pages Mayne access page 1886-1994 - - - refs Collusion - - - refs 1995-2000 - - - refs Clippings 1998 Conflicts&Scan scam                         refs Privatisations 2000-2001 - - - refs Smedley - - refs Health Story 2002-2003 Purchasers Affinity Hlth & Citigroup 2004-2005 Break up Mayne Diagnostics Restrict Mayne Content Conflicts of interest involving Mayne staff. Catchlove's relationship with Dr. Wooldridge, his appointment to chair the HIC and the involvement of both in the scan scam which finally discredited Wooldridge and ended his political career. Australian section      Mayne Nickless, Governmant Appointments and Conflicts of interest

"The thing that motivates me and motivates the Government more than anything else is outcomes,'' Mr Kennett said. "What we want is the best people available to do a job Proust Soars To A New Challenge, The Age 27 April 1995

One of the defining features of the modern marketplace, of Mayne Nickless, and of politicians in the 1990's has been their imperviousness to the sensibilities of others and their willingness to fly in the face of established protective norms and community perceptions of propriety. They define success in terms of outcomes and pay little attention to how those outcomes are attained. They model themselves on modern management and adopt the marketplace ethics of modern managers.

In Mayne Nickless we have an organisation pursued and heavily fined by one arm of government for antisocial, dishonest and illegal behaviour detrimental to other citizens - a thoroughly unsavoury group of citizens. At the same time another arm of government, intent on a different set of outcomes has courted this company, given its staff senior government positions, used it as a vehicle for government policy and passed laws to make its activities legal.

Mayne's misdemeanours are ignored by politicians and government regulators. Its success in making money draws praise in our newspapers and adulation from the investor community. It is seen as leading the way in health care - an area where social responsibility, true humanity, and the nuances of our culture are central.

This mind set is well illustrated by the conflicts of interest, which arose in two government appointments of Mayne Nickless staff - Elizabeth Proust and Barry Catchlove. In both instances the government and Mayne staff arrogantly disregarded the concerns about propriety raised in the community - instead asserting their position without confronting the criticisms. Adverse consequences were predictable. Proust saved face by staring down her critics but then wisely got out quickly. Catchlove was less perceptive and stayed on. The chickens came home to roost in the scan scam.

Elizabeth Proust 1995

In the Victorian Public Service, Proust gained a fearsome reputation as the archetypal HR head-cutter. In late 1996, it emerged that her contract had included a "bounty" clause under which she could receive a bonus of up to $272,000 if she cut 57,000 jobs from the Victorian Public Service in five years. The bounty deal meant Proust would collect $5 for every scalp she delivered. The Firing Squad, Business Review Weekly 2 March1998

Proust, a very intelligent lady is the press reports suggest an extreme example of the successful modern manager, loyal only to herself and her role. She has had a very distinguished career across both political parties and across the private, public and political sectors. While those she worked for were sometimes heavily criticised she escaped unscathed and switched allegiances to meet emerging opportunities.

In her five years as chief executive of Melbourne City Council, Proust has refused to compromise her rigorous restructuring to the vested interests there, either The Company We Keep, Australian Financial Review, 28 April 1995

Referred to as the Teflon lady she was renowned for her ruthless cost cutting, her business professionalism and her dislike of the press, She was intolerant of opposition and ignored the concerns of those working in the sectors she reorganised. They were discredited by labelling them as vested interests. She seems to have defined the world in her own terms.

Ms Proust has two honorable options: to resign from the Mayne Nickless board, or to step down from the hospitals board. One or the other is essential to safeguard her own reputation and ensure public confidence in the hospital reorganisation. Ms Proust And The public Interest Sunday Age 12 Feb.1995

In July1994 Proust accepted a position on the board of Mayne Nickless. This was a company that was making headlines and 6 months later pleaded guilty to truly deceptive and illegal practices. Responsible senior citizens with a sense of propriety looking for trust in the community would be expected to distance themselves from potential criminals. Not so for modern managers - they join with them in their enterprises.

In welcoming Ms Proust to the Mayne Nickless Board, Mr Webber said that she would bring with her valuable experience in the State public sector. MAYNE NICKLESS LIMITED: Co.Adminstration Personnel (Part A), Australian Stock Exchange Company Announcements 11 July 1994

In February 1995 Kennett, the premier of the state of Victoria appointed Proust to chair the Metroplolitan Hospitals Planning Board which was to plan the rationalisation of public hospitals - an activity which would impact on the interests of the private sector and the corporations which ran private hospitals - particularly Mayne Nickless.

"In a nutshell the Royal Melbourne has given Mayne Nickless a guaranteed market share courtesy of Victoria's public health system,'' the source said. "As long as the Royal Melbourne's doors remain open, Mayne Nickless will reap the profits,'' the official said. Lawrence Says Proust Job Raises Questions, The Age 13 Feb. 1995

Mayne Nickless operated a private hospital for the Royal Melbourne Hospital, one of the hospitals which might be closed with adverse consequences for Mayne Nickless. Mayne to which Proust now owed a fiduciary duty had pleaded guilty to dishonest and deceptive practices only 8 weeks earlier. It was her experience of the public system which Mayne planned to capitalise on.

It therefore seems strange that someone in as public a position as Ms Proust has decided to adopt a stance so seemingly at odds with prevailing notions of corporate ethics. ------------------------ - - - - - - - whether we ought to expect more than compliance with the letter of the law from persons occupying positions of such public responsibility --------------------- - - - - - - - - ought we not expect a higher level of ethical behavior from our leading citizens? Ethics Go Beyond keeping Clear of Relevant Laws, The Age, 23 Feb. 1995

The conflict of interest was glaringly obvious but what was happening was not illegal. Professional and community groups objected strongly and the press debated the issue very critically. The issue became political with federal coalition and labour ministers weighing into the debate on each side. It is relevant that Dr Wooldridge, then in opposition strongly supported Proust and Kennett. He was fully aware of the issues and only 3 years later he was to do the same thing and embroil himself in controversy and scandal.

"The appointment of Ms Proust does indicate there is an agenda to downsize and close hospital services" Mr Thwaites (shadow state minister for health) said. Hospital board chief rejects conflict of interest claim, The Australian 7 Feb. 1995

Kennett and Proust dug in their heals, insisted it was legal and refused to budge. They attempted to discredit their critics and claimed that the critics were addressing the individual rather than the issues, which was not the case.

Now we have the disturbing case of an unrepentant Premier and a defiant Ms Elizabeth Proust. - - - - It is a task for which Ms Proust, - - - - is admirably suited. Except for one troubling fact: she is also a director of Mayne Nickless, whose subsidiary Health Care of Australia owns five private hospitals in Victoria and is looking for opportunities to expand Ms Proust And The public Interest Sunday Age 12 Feb.1995

Kennett and Proust toughed out the criticism but this was politically damaging - a festering sore which undermined the credibility of the committee. Only two months later Kennett appointed Proust as "head of the Department of Premier and Cabinet in the Victorian Liberal Government" - a 5 year contract. She resigned from all her other positions in the public and private sectors to avoid any conflict of interest.

The perceptive Proust did not go down with the unpopular Kennett at the next election and then face her former labour colleagues when they regained power. She skipped off to join ANZ half way through her contract in Nov 1997. ANZ needed a ruthless downsizer and this was her specialty,

Former ANZ managing director Don Mercer stunned banking analysts in 1996 when he publicly endorsed a Coopers & Lybrand report that said one in two banking jobs could be eliminated by the year 2000. It was the sort of throwaway line that still sends shivers through the 35,000 staff in ANZ, where Elizabeth Proust, - - - - , has just been installed. Barry Smith says: "Proust isn't going in to ANZ to do hearts and flowers. She's in there to cut the numbers. They're bracing themselves." The Firing Squad, Business Review Weekly 2 March1998

CLICK HERE -- to examine the Proust References

Barry Catchlove 1998/1999

INTRODUCTION AND BACKGROUND

The saga of Catchpole's appointment to the chair of the Health Insurance Commission (HIC) and the "scan scam" which followed reveals a trail of political favouritism, political ineptitude, and the cynical exploitation of the vulnerability of others in order to protect a political career.

Behind it lie the imperatives of political ambition, an economic theory and a political agenda whose mantra of "responsible economic management" hides a narrow ideological agenda that does not have the support of confused Australian citizens.

An impossible agenda:- Dr Wooldridge embraced this theoretical agenda. Soon after he became minister he nailed his flag and his career to reforming health care by turning it into a competitive market. In attempting to do so he compromised his integrity and allowed political ambition to override propriety. His role in the entry of Sun Healthcare into Australia is a particularly low point. (for more background click here) His appointment of Catchlove and the scam scan which followed is another. I have no reason to doubt Wooldridge's sincerity. It is his objectivity and his "closed mindedness" about which I am concerned. I have compared him with Dr Verwoed, the highly intelligent theorist who developed the ideology behind apartheid. Both embraced solutions and theories which were flawed and inapplicable. Both were blind to alternative understandings. Hopefully Wooldridge has done less harm.

 

As Dr Michael Wooldridge walked up to the podium to open the 1996 AMA summit proceedings, - - - - - - . ------------------- Less than five minutes into his prepared speech, his audience understood two things: the provision of healthcare across Australia was about to undergo a seismic shift; and the corporate sector's influence was now in ascendancy. Three and half years later, the scandal surrounding the Magnetic Resonance Imaging (MRI) machines has briefly illuminated the extent of that influence. Medicine And Power, Australian Financial Review 6 November 1999 Click Here to read Dr Wooldridge speech

The significance of the new agenda:- The seeds of the problem lie in an agenda which seeks to change what most of us consider to be humanitarian services provided by the community to help other sections of the community who are disadvantaged or inadvertently compromised. These services are there for our fellows and for ourselves when we fall on hard times. As a social animal we have responsibilities to one another and we identify with others in their need.

We express this feeling of community through empathic values and norms. Large sections of our society realise careers and ambitions by giving concrete expression to these values in their work and in their community activities. Involvement in these caring activities increases social bonds, reaffirms the legitimacy of values and norms, and builds social capital. Wooldridge's agenda threatens these value systems and the sort of society that is built on them.

Social problems:- There certainly were and are problems in the existing social agenda. Some citizens take unfair advantage of the system and others providing services exploit it. This reflects a lack of cohesion and responsibility in the community - a deficit in social capital - something which Wooldridge's profit centred agenda is likely to accentuate. This waste of resources inflames economists sense of efficiency. Doctors are seen within this context. A medical degree is seen as a licence to spend taxpayers money - a blank cheque which the profession exploited.

To the economist the conduct of doctors was interpreted purely as greed, part of Adam Smiths aphorism "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." Wooldridge expressed this view and then asked the rhetorical question "Is health different?''. Clearly he did not think so!

Stereotyping:- In our civil society the doctor has a primary responsibility to the individual patient. There is a fear of missing a diagnosis. Her reputation is based on making diagnoses and not missing them. She has a fear of litigation. She has a genuine desire to do everything possible to help the patient. A well motivated community has given her an uncapped funding system with which to do it.

The application of medical technology has had enormous social benefits but it is expensive. That successfully pursuing health care objectives and using technology to do so makes doctors wealthy and powerful is not a disincentive. I am not claiming that there is no greed and that the medical profession always performs well. I am pointing out that the real problem is complex and that economic stereotyping is counterproductive and harmful.

Getting to the root of the problem:- While the consequences are economic, the causes are cultural and existential. Those working in the health system are only able to realise their expertise through the use of complex and expensive technology - much as modern managers like Elizabeth Proust are only able to realise their expertise and prosecute successful managerial careers by destroying the livelihood of large numbers of workers. Proust's successful economic agenda produces social disruption and personal hardship. The doctor's social agenda has economic consequences.

The social consequences of Prousts activities can only be addressed by changing the marketplace. The underlying problem can be ameliorated but not addressed by social welfare solutions. The economic consequences of the health system's social agenda can be tempered by applying economic formula but the problems are not addressed and additional problems are created. It ultimately requires a social solution. I have suggested that this must come from the community, rather than theorists - economic or otherwise.

Wooldridge's failings:- The problem for Wooldridge and Catchlove was the adoption of economic explanations for social problems and then applying economic solutions based on theories developed in another context - the market context. These theories were generalised from market to society as an ideology which like most ideologies was all embracing and could not be challenged with reason and evidence.

Good intentions fail:- I have spoken to doctors turned businessmen who understand these problems in an economic context and see the market as the only possible solution. One businessman/doctor who was highly critical of Mayne Nickless, acknowledged the problems in corporatisation and the consequences described on this www site. He saw increased government regulation and oversight as the urgently needed solution to the problems created by corporatised medicine - itself the solution for the problems in health care. The US experience shows that this multiple lever approach does not work and there are good reasons why it will not work. The actual problem must be confronted within its social context.

This same businessman told me that Catchlove and those who started HCoA had originally embraced the market mission to address the problems in health care and I have no reason to doubt this. My assessment of Catchlove is of a man with a mission whose system for reform had no interest in his reforms and was ultimately more powerful than he was. He became a servant of a ruthless mechanistic inhuman system rather than its master. It did not share his mission. He was forced to bend before it and compromise his mission. When he would not bend far enough it dispensed with him.

The consequences:- When the ideological gloss and economic rhetoric which gives it legitimacy is removed, what Wooldridge and Catchlove set out to do was change a concerned community service into a business. Here the misfortune of citizens would become the vehicle for generating profit for the benefit of other citizens who have no personal interest in their welfare. Their only concern is personal gain. Most of them make their investments through institutional investors and do not know what is being done in their name.

The guiding principle would change from stretching the available resources for maximum benefit. Instead it would be directed to making as much money for shareholders as possible by squeezing services and diverting available resources to profit. Catchlover and Wooldridge did not see it this way.

The justification given was that because health consumed large amounts of money it was an industry. Because it was an industry it was an economic entity and therefore a marketplace. Market theory and market solutions would work. Dysfunction would be be controlled by rigorous competitive marketplace pressures. These justifications are a play on associative meanings and are logically flawed.

Dr Wooldridge's determined attempt to force his agenda onto a hostile health system lies at the heart of the appalling and unproductive relationship between Wooldridge and the Australian Medical Association (AMA) during his term of office.

Additional background:- When Medicare was formed a schedule of fees was established to pay doctors. Governments of both political colours were payers for medical services. They used their unopposed muscle and the profession's powerlessness to steadily erode medicare payments over the years. Payments were allowed to fall way behind the rapidly spiralling cost of living index. Doctors remonstrations were discounted as greed and they were attacked. Doctors responded by exerting their right to make a higher charge and pass the difference on to patients.

This gap payment was unpopular in the community and was used by government as a vehicle for doctor bashing and labelling as greedy. Most doctors would have preferred another method of maintaining income and many did not charge the higher rates recommended by the AMA. They were united in their belief that gap payments should not be abolished by exploiting the medical profession, yet this is what Wooldridge tried to do. This dispute resulted in ongoing conflict and extreme distrust between the two sides. Any government action was viewed with extreme distrust by the profession. Woodridge's agenda fuelled their suspicions and his subsequent conduct has shown that they had good reason for distrusting him. This is not to suggest that their responses and behaviour was always responsible.

CATCHLOVE AND THE HEALTH INSURANCE COMMISSION (HIC)

 

Dr Barry Catchlove should never have resigned as chairman of the Health Insurance Commission on Thursday, because he should never have been appointed. (This) - - - - - - was according to one industry insider like putting Dracula in charge of the blood bank. Despite concerns raised at the time by the Australian Consumers Association, individual radiologists and the Australian Doctors Fund, the Federal Minister for Health and Aged Care, Dr Michael Wooldridge, chose to do nothing about it. The question is: why? - - - - - it was always going to end in tears. Catchlove Conflict Inevitable, Australian Financial Review 30 October 1999

Dr Wooldridge had weighed into the Proust Affair, a debate involving several sectors of the community including citizens, academics, lawyers and ethicists - mostly critical. He was consequently well aware of the arguments about conflict of interest and the likely consequences. He cannot escape blame.

Wooldridge was advised against Catchlove's appointment:- Wooldridge was advised by his own department that there was a potential conflict of interest in the appointment of Catchlove to chair the Health insurance Commission. Wooldridge ignored this advice and not only appointed Catchlove to chair the HIC on the 6 August 1998 but also appointed a member of the corporate health insurance marketplace to chair a body with similar regulatory and data handling responsibilities in health insurance.

 

Catchlove was Wooldridge's personal choice to chair the HIC despite advice from his department about potential conflicts of interest arising from Catchlove's former position as managing director of Health Care of Australia. Negative Imaging, Sydney Morning Herald 13 May 2000 It is now apparent that, during the same period in 1998, he also appointed another corporate heavyweight - Gary Richardson, previously general manager of National Mutual Health Insurance - to be Commissioner for the Private Health Insurance Administration Council, a position he still holds today. Medicine And Power, Australian Financial Review 6 November 1999

Catchlove's position:- For Catchlove this appointment provided access to the centre of power and an opportunity to further his and Wooldridge's objectives. On the other hand HCoA was his baby and he could not bring himself to sever his relationship with Mayne Nickless. He resigned from the board but continued his other roles, including his position on the select inner executive group where most decisions were made. He too found ways to overlook the conflicts of interest involved and denied that they existed.

The most glaring conflict was Mayne's role as one of the major providers of pathology and radiology services, areas allegedly riddled with corrupt practices - (allegations never substantiated with convictions). The HIC was responsible for regulating and policing this sector.

Catchlove and Wooldridge:- Wooldridge's corporate agenda and his determination to bind the medical profession to managed care type contracts became clear when he explained his policies to the medical profession in May 1996, soon after his appointment as minister. His campaign had been resisted by an implacably opposed medical profession who refused to enter into these contracts. They were well aware of the consequences for doctors and their patients when US doctors had done so.

In an attempt to circumvent opposition from the Australian Medical Association, exploit the communities dislike of gap payments and play on doctors perceived greed to induce them to break ranks Wooldridge enlisted the assistance of Catchlove's Mayne Nickless and the insurer AXA. Together they hatched a plan to tempt doctors in Melbourne and Queensland into lucrative contracts which abolished the gap payments. The doctors stood firm and were blamed for torpedoing the abolition of gap payments. Legal opinion suggested the contracts with Mayne Nickless were illegal. Dr Wooldridge and his government passed legislation to make them legal. Catchlove and Wooldridge were consequently already an item aligned against the medical profession. Mayne Nickless and Catchlove's standing in the medical community had probably never been high, but they now reached an all time low.

Dr Wooldridge's lack of insight and level of delusion is revealed in his first statement about Catchlove's appointment.

 

"Dr Catchlove is highly regarded within the medical profession with 34 years experience in the public and private health sectors and I am pleased that the HIC will benefit from his knowledge, energetic commitment and vision," Dr Wooldridge said in a statement. Former Mayne Nickless health chief to head commission, AAP News 6 August 1998

Opposition:- Not surprisingly there was an outcry about this appointment and the conflicts of interest but Wooldridge and Catchlove were not about to listen to the self interested elite medical groups, nor to leftist academics and community groups. They denied any conflict and defended the appropriateness of the appointment. They chose to believe what they wanted to believe in the face of reason and expert views.

 

According to the HIC's corporate plan, its tasks include policing inappropriate practice and fraud in pathology. Mayne's Strength Raises Eyebrows, Sydney Morning Herald 8 August1998 The Howard Government is facing questions over its decision to appoint a businessman with ties to one of the country's largest pathology providers as chairman of the body which polices pathology claims. ------------------- Dr Catchlove is a senior executive with Mayne Nickless, which has extensive interests in health care including ownership of private hospitals, and, as of recent days, Macquarie Pathology - one of the largest pathology groups in the country. -------------------- A spokesman for the Australian Doctors' Fund said it was "staggered he hasn't had to resign from his business connections and cut all employment and financial ties with a corporation that is such a dominant player in Australian health care Conflict Of Interest Concern Over New Health Body Chief, Sydney Morning Herald 7 August 1998 Dr Catchlove, whose appointment - - - - - unleashed a storm of controversy, told the Herald he hoped that the review would alter the focus of the commission. Medicare Review To Seek Curb On Costs, Sydney Morning Herald 17 September1998 From the outset, Catchlove's appointment as chairman of the HIC was considered controversial by many of his peers, consumer groups and the Federal Opposition. But only now has a picture emerged showing the extent of the difficulties he confronted as he attempted to chair the HIC and remain an active executive director of Mayne Nickless, on a total remuneration package of $1,110,634. --------------------------- Both the Federal Minister for Health, Dr Michael Wooldridge, and Catchlove have maintained that Catchlove's appointment to the HIC did not pose any conflict of interest because he was no longer involved in any decision making for HCoA. Dr Catchlove Straddles Two Jobs, Australian Financial Review 28 October 1999

CLICK HERE -- to examine the Catchlove conflict references

The Scan Scam

I am not going to analyse the entire complex scan scam here but simply look at Wooldridge and Catchlove's conduct with particular reference to the obvious conflict of interest and their behaviour.

Radiologists are bitter, the industry is in turmoil and the Government is embarrassed The "scan scam" was one of the political controversies of 2000, an event that exposed greedy radiologists in wholesale rorting. Right? Well, not quite. Look a little closer at the after-effects of the political furore over magnetic resonance imaging (MRI) machines and it is hard to avoid the conclusion that an unedifying exercise in politicking has resulted in more than 100 radiologists being wrongly accused of criminality; the radiology industry being split into distinct groups of "haves" and "have-nots"; and the geographical distribution of MRI machines being distorted so that it is not properly serving the needs of patients. The controversy also shows how effective a political campaign can be when it exploits community prejudice against well-off professionals. The Scam That Wasn't, Business Review Weekly 8 June 2001

Background:- MRI machines which cost about $3 million each are a major radiological advance. They make a large contribution to the diagnosis and treatment of many conditions. The cost of radiology machines (CAT scanners, MRI, PET Scanners) are very high - too high for individual practitioners. This is one of the reasons behind the consolidation of radiology groups and their purchase by large corporations. High fees and a rapid turnover were required to cover the costs but once the machine was paid for profits were large.

Whoever controls pathology and diagnostic practices controls Australia's health industry. At first glance, these new power meisters would appear to be the independent radiologist acting through their peak organisation, the Royal Australasian College of Radiologists and pathologists. But because these industries are capital-intensive, with MRI machines costing $3million each and pathology laboratories being extremely expensive to set up and maintain, individual operators have become an endangered species. According to one recently retired radiologist, within three years there will be two, possibly three, corporations supplying these services nationwide. Having begun a series of ambitious acquisitions into pathology and diagnostic practices in 1997, Mayne Nickless controls the lion's share of both sectors. Catchlove Conflict Inevitable, Australian Financial Review 30 October 1999

This corporate consolidation is a process fostered by Dr Wooldridge. His policies had encouraged the development of a highly competitive corporate marketplace. Successful radiologists were also successful medical entrepreneurs and this is what Wooldridge had advocated. With cut throat competition no one could to be left behind and survive. The pressures to keep up with the latest equipment were extreme. Wooldridge was soon to be hoisted by his own corporate competitive petard.

The potential costs to medicare were large and MRI scans had not been approved for medicare payments. Several radiology groups had purchased MRI machines and worn the losses, recouping some of the costs through private payments. This early entry would give them an advantage once medicare agreed to pay. There was a limit to how mlong Australians could be denied the benefits of MRI technology. When this occurred anyone without an MRI would no longer be competitive.

Lead up to the scan scam:- The College of Radiologists, most of whose members worked in large corporate groups had been in negotiation with Dr Wooldridge about Medicare payments for MRI scans. MRI was a major advance and it was clear that this was essential. Dr Wooldridge was concerned about containing a massive cost blow out for medicare. The companies for whom the radiologists worked were, not surprisingly apprehensive about the consequences of Dr Wooldridge's measures to contain a cost blow out for their businesses.

 

"Without the rebate you're dead in the water,'' explained one radiology business boss who did not want his name used. ------------------------- Embarrassingly for Dr Wooldridge, many of those machines put under scrutiny were not ordered by small radiology practices but by some of the biggest private health providers in the country which had been strong supporters of the Government's health policies. Minister Found Wanting In Bad News Story, Australian Financial Review 30 December 1999

The fatal meeting:- On 5 May Dr Wooldridge and his department decided that only MRI machines purchased or on order by the upcoming budget day, 12 May would be eligible for medicare payments. This was according to the health department a snap decision made without formal documentation or minutes. Clearly any group not already owning MRI machines would be seriously disadvantaged. They expected that only about 8 machines would be on order.

On 6 May 1998 Dr Wooldridge met with the College of Radiologists. What happened at that meeting is hotly disputed. The sworn evidence given by radiologists contradicts that given by Wooldridge and his department. What is clear is that radiologists walked away from that meeting with an understanding of what Wooldridges measure to contain costs would be - that advertently or inadvertently there had been a leak. By the 12 May 1998 budget day there were over 50 additional MRI machines on order, six of them by Mayne Nickless and approved by Catchlove.

On the issue of a control mechanism, the radiologists state categorically that there was a discussion at the meeting with Dr Wooldridge that included the option that rebates would be given to machines on order by Budget night. Three of the radiologists say Dr Wooldridge initiated this discussion, the fourth says either he or his departmental officer did. These accounts contradict the accounts given to the auditor-general by Dr Wooldridge, his ex-staffer and the departmental officer who all say they "do not recall the specific matter of machines on order being discussed''. No Salve For Any Reputations When Truth Is Still Hidden, Sydney Morning Herald, 11 May 2000 Everyone at the meeting says Wooldridge did not disclose what was actually in the Budget. But college officials swore that Wooldridge did discuss the option of machines on order on Budget night. Wooldridge and his staff can't recall this. However, the Auditor-General finds that "on the balance of probabilities the evidence suggests that this discussion led some of the radiologists to deduce or conclude that machines on order by Budget night would be considered for a rebate.'' Negative Imaging, Sydney Morning Herald 13 May 2000

Complaints and Catchlove's appointment:- A number of radiologists were unhappy about what had happened. There were complaints to the HIC during the latter half of 1998. The Payment of rebates for MRI's commenced in September 1998. Applications would have been lodged some time before this. In December 1998 the HIC began an investigation into what had happened.

I find it difficult to believe that Dr Wooldridge was not aware by August 1998 when he appointed Dr Catchlove that there were complaints, that the HIC had concerns about the MRI purchases, and that Mayne Nickless had ordered MRI machines. Dr Catchlove did not stand down when the HIC started investigating Mayne Nickless, nor did he personally disclose his involvement in ordering these machines to the HIC. He stood down nearly a year later when the scandal broke and only admitted his involvement when the investigation revealed it.

What actually happened?:- One of the remarkable things revealed in the subsequent investigation was the absence of any documentation relating to the advice given to Dr Wooldridge and his decision to limit medicare payments. Wooldridge claims that the advice was verbal and that he took the decision. I have obtained large numbers of government documents under FOI and this is not the way government departments operate. Radiologists and Dr Wooldridge's department gave conflicting evidence - one group was being less than frank.

One of the most disturbing revelations of this week's Auditor-General's report on the so-called "scan scam'' is that almost no paper trail exists to explain why the Health Minister, Dr Michael Wooldridge, made the key decision that helped trigger the largestmedical rort in Australia. Negative Imaging, Sydney Morning Herald 13 May 2000

The bubble bursts:- The scandal only erupted 18 months later in October 1999 when the federal labour opposition obtained information and mounted a sustained attack on the minister and his department. They demanded a Royal Commission and his resignation.

Wooldridge is under pressure to resign over what Opposition Leader Kim Beazley describes as the biggest scam against the commonwealth health budget in memory. Aust's health MRI bungle biggest scam in memory, says Beazley, AAP News19 October1999

It is typical of this minister that he immediately used the medical profession as a scapegoat and mounted a sustained attack on them accusing them of criminal behaviour. He refused to allow medicare payments for any of the MRI machines purchased after February 1998 more than 2 months before the leak and commenced a criminal investigation of about 250 radiologists involved. He refused to accept that there was any impropriety in his or Dr Catchlove's conduct.

HEALTH Minister Michael Wooldridge has denied involvement in a multi-million-dollar scam of taxpayers' money by rogue radiologists. --------------------- He said information provided by the Health Insurance Commission last Friday pointed to a number of radiologists behaving in a manner that could only be described as a scam and "sheer greed". Minister Denies Radiology Rort Role, The West Australian 19 October 1999 The Magnetic Resonance Imaging (MRI) scam is set to go down in history as Australia's biggest Medicare fraud. Up to 250 radiologists, or a quarter of the profession, are facing prosecution and deregistration, while Commonwealth authorities attempt to reclaim up to $10 million of tax payer funds from suspect doctors. As the Minister responsible for this new benchmark of professional misconduct, Dr Wooldridge's response is nothing less than pathetic. He shows no insight into the extent or nature of the problem when he says: ``I have to say I have been enormously disappointed that this has potentially involved so many people. Minister Found Wanting In Bad News Story, Australian Financial Review 30 December 1999 "It would appear that a significant number (of radiologists) have behaved in a manner that can only be described as a scam,'' he (Wooldridge) said. "Had people behaved in a similar manner in the sharemarket, they could expect to be treated with the utmost severity.'' Suppliers Quizzed In Imaging Scam, Sunday Age24 October 1999 The suspicion is that, to deflect attention from the Government, Wooldridge conducted a campaign against radiologists. This is certainly suggested by a press release from the minister's office in October 1999, in which Wooldridge says he is appalled and saddened. "I am bitterly disappointed that some individuals within the industry appear to have exploited the opportunity to line their pockets at the public expense ... this is an act of sheer greed that has undermined my efforts to protect the community and ensure a fairer and more equitable system of care." If it was an attempt to re-apportion blame, it worked. ------------------------- Coutts (a lawyer and chief executive of the management consultancy Coutts & Connor ) says: "The minister said the radiologists are terrible people: they are greedy, he is going to punish them, and it is a rort of the system. But if you put yourself in the position of a radiologist who has been given information to the effect that it is going to be in the budget, are you going to be holier than thou, and say 'Heavens above, nobody should have told me that, I can't possibly act on that information', knowing full well that your competitors are going to do it? "It puts people in an unenviable position. And, if they did have that information, it has to have been leaked by someone. It couldn't have been the radiologists, so it must have been given to the radiology profession by the Government. So that is where the wrongdoing - if there was any wrongdoing -occurred." The Scam That Wasn't, Business Review Weekly 8 June 2001

One should not assume that Wooldridge was being deliberately deceptive. His paranoia about the medical profession was by now glaringly obvious and he was blaming their self interest and greed for all of his failures. His conviction was such that he and the government instituted two criminal investigations in an attempt to prosecute the doctors at a cost of over $8 million. None were ever prosecuted as there was no evidence of wrongdoing. The government refused calls for a Royal Commission but blunted the labour opposition's attack by agreeing to an inquiry by the auditor general.

Wooldridge had changed the provision of radiology services from a professional service primarily focussed on care to a competitive market focussed on profit. What did he expect?

Two criminal investigations were conducted - - - - - In neither investigation was there sufficient evidence of fraud against the radiologists named. - - - - The total cost of the two inquiries, and related expenses, has been put at $8.4 million. Throughout the controversy there has been a blurring of the distinction between opportunism and a criminal offence. It is likely that there was some opportunism, but there is no evidence of orchestrated criminality. Wooldridge's office was contacted by BRW but he was not available for comment. Another question is: why investigate those responding to the leak and not those leaking the information? When there is a government leak, investigations are typically directed against those responsible, not those who act on the information. (No one investigates journalists for acting on federal budget leaks, even though they are deriving a professional advantage.) -------------------------- No companies were investigated, only radiologists. Mayne Nickless, which bought six machines after May 6, was not subject to an inquiry and Barry Catchlove, then chief executive of Mayne Nickless and chairman of the HIC, was exempted. Wooldridge has vehemently denied that Catchlove had any conflict of interest, and BRW is not alleging any wrongdoing but, if radiologists who had purchased MRI machines in that period were considered worthy of investigation, why not companies that had done the same? The Scam That Wasn't, Business Review Weekly 8 June 2001 The Auditor-General's report into the affair, released this week, criticises Dr Catchlove, saying that as chairman he should have informed all board members of the commission that his former company was involved in ordering MRI machines, and of a potential conflict of interest. --------------------- Dr Catchlove acknowledged yesterday that as then managing director of Health Care of Australia, the ordering of the MRI machines was done under his authority. Health Chief Spared In MRI Investigation, Sydney Morning Herald 13 May 2000

The auditor general did not report until May 2000 by which time the matter had gone cold as a political issue. The minister survived. While the report did not restore the radiologists reputations or compensate them for their considerable legal expenses during a harrowing investigation it largely exonerated them and laid most of the blame at the foot of the minister and his department. It strongly criticised Dr Catchlove's conduct.

The report also reveals for the first time how Dr Wooldridge's personal appointee as chairman of the Health Insurance Commission (HIC), Dr Barry Catchlove, was present at HIC board meetings where the progress of the MRI investigation was raised even though his former company, Health Care of Australia, was involved in ordering MRI machines in the period under question by the HIC. No Salve For Any Reputations When Truth Is Still Hidden, Sydney Morning Herald,11 May 2000 The report discloses for the first time that Catchlove approved his company's orders for MRI machines shortly before the Budget. It also finds Catchlove failed to disclose this to all the members of the HIC board despite the MRI investigation being raised at board level. --------------------- The findings are a rebuke for Wooldridge, who heavily defended Catchlove as the "scan scam'' unfolded. It also undercuts Wooldridge's assurance to the Parliament in October last year that Catchlove "had no contact or involvement in any way with the [HIC] investigation''. Negative Imaging, Sydney Morning Herald 13 May 2000

Dr Wooldridge's credibility was destroyed and he limped on to the next election. The medical profession negotiated over his head directly with the prime minister. He did not stand for re-election.

Even though the HIC had been investigating the fraud and Mayne's purchase since December 1998 Dr Catchlove only suspended himself when the crisis broke in October 1999, nearly a year later. He fell on his sword and formally resigned 2-3 weeks later.

Catchlove and Dalziel were at the time also heavily criticised by the market because of their failure to turn Mayne Nickless into a profitable business. Catchlove and then Dalziel left Mayne Nickless in 2000.

Many radiologists about whom there was no suspicion had been pilloried and subjected to a demeaning and costly investigation. People who had made a legitimate investment on Dr Wooldridge's level playing field were not allowed to benefit from it. The entrepreneuralism which Dr Wooldridge supported involves siezing opportunities and entrepreneurs have never been too picky about the way they do it. It is a cut throat business and this is what Wooldridge wanted for health care. He has no one but himself to blame. It is only a matter of time before the same ruthlessness and opportunism causes a crisis in care. As the scan scam reveals with a system like this it will inevitably end in tears.

There was a feeling we were going to be treated like criminals. It was even envisaged that some people would go to jail. Yet I could not think of anyone who backdated the contracts. It was done quite legitimately. It was appalling behavior to treat people like criminals when they were just making a legitimate business decision. (Radiologists comment) ---------------------- Radiologists feel angry and powerless about the community assumption that they engaged in wholesale wrongdoing. The prevailing mood is a mixture of resentment and resignation. One radiologist says: "We have had a blowtorch applied to us. We do not really know how to affect the situation, other than just get on with our jobs." The Scam That Wasn't, Business Review Weekly 8 June 2001

It is difficult not to conclude that Wooldridge and Catchlove behaved with a lack of propriety and were less than frank in their explanations and accounts of what happened. They only acknowledging failures after the attorney general's investigation reported on them. The concerns which the doctors, the nurses and sections of the public had about Wooldridge and his policies were shown to be well founded.

If one looks back at what happened in Tenet/NME when it entered Australia way back in December 1991, at its lack of frankness in its dealings with health departments in 1992/3, at its subsequent support by government and the market and at its ultimate departure the similarities in conduct and ethics are striking. It is clear that these ideologists are blind. No one has learned anything and they are incapable of learning.

One really wonders what all this has to do with society's empathic response to the misfortunes of others and why health care should be embroiled in it. Surely we can design something better. Perhaps Dr Wooldridge and his healthcare economists could please explain in simple terms that the rest of us can understand so that we can make sensible decisions about Australia's future at the ballot box. I doubt their ability to do so without exposing the fallacies in their arguments. This sort of explanation is what patients expect from their doctors - explanations which they can use when making sensible decisions about their own health.

CLICK HERE -- for more information about the Scan Scam

CLICK HERE -- to examine the Scan Scam references

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Web Page History This page created January 2002 by Michael Wynne Last Modified March 2002 Format changed Nov 2005