The references and extracts on this page relate to the conflicts of interest surrounding
Elizabeth Proust,
Barry Catchlove and
The Scan Scam

Elizabeth Proust

MAYNE NICKLESS LIMITED: Co.Adminstration Personnel (Part A)
Australian Stock Exchange Company Announcements 11 July 1994

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.

Hospital board chief rejects conflict of interest claim
The Australian 7 Feb. 1995

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.

Proust Denies Conflict In Hospital Post
The Age 7 Feb.1995

A spokesman for the Health Minister, Mrs Tehan, also dismissed Opposition claims that the Government had plans to privatise public
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Mr Thwaites said: "Mayne Nickless clearly has indicated it wishes to be involved in health ventures with state governments. How can Ms Proust possibly act impartially when a company she is a director of has its own financial interests?'' Ms Proust said she did not believe there was a conflict of interest but, if there was, she would not be involved with those decisions.

Pressure Mounts On Proust
The Age 8 Feb.1995

The Australian Medical Association, the Australian Nursing Federation and a leading doctor have joined the State Opposition in calling for Ms Elizabeth Proust to resign as chairwoman of the Metropolitan Hospitals Planning Board.
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The Victorian president of the AMA, Dr Peter Beaumont, said yesterday that Ms Proust, who is also the City of Melbourne's chief executive, should acknowledge the strength of community feeling about the issue and step down.

"There is no doubt that the information Ms Proust gathers in undertaking this process could be of commercial benefit to Mayne Nickless,'' he said.
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A spokesman for the Health Minister, Mrs Tehan, also dismissed the concerns.
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The Federal Opposition health spokesman, Dr Wooldridge, defended the appointment, accusing the ALP of hypocrisy

Stay Put, Ms Proust
The Age 8 Feb 1995

The controversy, however, usefully highlights a difficulty faced by many Australian governments: that of finding enough suitably qualified people to fill the public posts available.

The Teflon Lady Comes Unstuck
Sunday Age 12 Feb. 1995

There were other glitches besides ``bureaucracy'' in the career of the City of Melbourne's chief executive officer last week. One of the most powerful women in town, and occupier of what colleagues describe as the world's tidiest desk, had endured almost four days of unprecedented battering in the media.
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There was still no flinching over the main issue: questions about a conflict of interest between her membership of the board of Mayne Nickless, which through a subsidiary owns five private hospitals, and her appointment as head of the new Metropolitan Hospitals Planning Board.
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``I just hope her judgment on this one is correct, because only she knows what Mayne Nickless is up to, what their agenda is and what are the terms of reference of the hospitals board. It is all right for board members to walk in and out of rooms, to absent themselves from decisions, to put up Chinese walls, but it is very hard for chairmen to do so.
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``Elizabeth is extremely professional and extremely efficient,'' he said. ``Quite simply she gets things done and she delivers: that has been demonstrated by her achievements at the City of Melbourne".
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``Sure, there are lots of people who would like to see me leave town. I've made plenty of enemies, you do that if you get things done.''

Ms Proust And The public Interest
Sunday Age 12 Feb.1995 

In spite of this salutary experience, the Kennett Government has been dogged by conflict-of-interest controversies, concerning the casino licence, Government advertising contracts, private ambulance services, and freeway projects.

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.
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In our view, it is not so simple as that. The reorganisation of public hospitals has consequences for private hospitals. Indeed, Health Care is to open a private hospital wing of the Royal Melbourne Hospital in May. We do not question Ms Proust's integrity or competence, but she has accepted an important advisory post in which conflicts of interest could readily arise, or be suspected of arising. It is an awkward situation for her, the Government, the health-care industry, and public trust.

It is extraordinary that Ms Proust should have accepted a directorship in a multinational firm while still a local government executive. Not so long ago, it would have been unthinkable for a career public servant to hold commercial directorships.
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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.

Lawrence Says Proust Job Raises Questions
The Age 13 Feb. 1995

The Federal Health Minister, Dr Lawrence, yesterday weighed into the controversy surrounding the appointment of the State Government's new health board chief, Ms Elizabeth Proust, saying her directorship of Mayne Nickless raised serious ethical questions.
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"The minister is especially concerned that someone so involved in the private sector will be making decisions (on) the possible closure and amalgamation of (hospitals) in the public sector,'' she(a spokeswoman) said.
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In May, the Mayne Nickless subsidiary, Health Care of Australia, will take control of a $13.5 million private hospital Royal Parade Private built and owned by the Royal Melbourne Hospital.
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The Royal Melbourne Hospital's chief executive, Mr Jonathan Tribe, has confirmed that hospital officials are negotiating with Mayne Nickless about a series of joint staffing and service agreements with Mayne.
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"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.

New Calls For Proust To Quit One Position
The Age, 14 Feb 1995 

A leading ethicist, Professor Seamus Miller, backed State Opposition claims of a conflict of interest between Ms Proust's position on the board and her role as a director of the health and transport company Mayne Nickless
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"Ms Proust has two competing moral duties . . . On the one hand she has a moral obligation to the shareholders of Mayne Nickless to maximise that company's profits... while on the other hand she has a duty to determine the future role of Victoria's public (hospital system). She cannot secure both obligations at the same time,'' Professor Miller said.

``It is highly inappropriate that Ms Proust remain on the board when almost every issue the board discusses could potentially affect Mayne Nickless.''

The Salvation Of Proust
The Age, 15 Feb. 1995

 Ms Proust has an admirable record of competence, but she is being naive in expecting the public to trust her to deal with the conflict of interest according to her own judgment.

Proust's Way
The Age. 02/18/1995

Elizabeth Proust is toughing out the controversy about her appointment to the hospital review board. State political editor Shane Green reports.
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Labor has continued to gun for Ms Proust, backed by unions and health professionals. Ms Proust, backed by the Premier and the Health Minister, Mrs Tehan, has remained defiant.
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"What I am concerned about is that we haven't been able to get the issues out. I'm concerned it has become a focus on an individual as opposed to the issues. You can either say, well, that's politics or you can say that there are enormous vested interests in the health industry, many of whom are opposed to any kind of change, and it suits them to run this as an issue.''
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Mr Kennett offered her the job. She says she was surprised because she had no experience in health, but had made no secret of the fact that her appointment at the Melbourne City Council would end this year.

Ethics Go Beyond keeping Clear of Relevant Laws
The Age, 23 Feb. 1995

Saul Fridman (who teaches corporate law at the Australian National University) argues that it is time for corporate regulators to review the duties of company directors.
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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.
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- - - - - - - whether we ought to expect more than compliance with the letter of the law from persons occupying positions of such public responsibility
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Australian judges have expressed some disquiet with the practice of retaining multiple directorships in circumstances where the potential for direct conflict of interest is so obvious. Many have observed that this area of law is in need of serious review.
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In any event, whatever the strict legal position and I have endeavored to suggest it is in serious need of review ought we not expect a higher level of ethical behavior from our leading citizens?
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It is not that Ms Proust is likely to behave in a dishonest or openly unethical way. Far from it. The point is that she must appear to be beyond reproach. This is the one aspect of the law relating to conflict of interest that has not been emphasised.

Proust Wins Vic's Top Public Service Post
Australian Financial Review 27 April 1995

FORMER Labor Government administrator Ms Elizabeth Proust is to resign from the board of transport group Mayne Nickless and will replace Mr Ken Baxter as head of the Department of Premier and Cabinet in the Victorian Liberal Government.
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Ms Proust's decision to withdraw from all other managerial roles - she is a director of Mayne Nickless, Regent Management Company, the advisory board of the Department of Administrative Services and chairman of the Metropolitan Hospitals Planning Board - removes the potential for allegations of conflict of interest in her role as the State's most powerful bureaucrat.
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He said Ms Proust would be resigning from the Metropolitan Hospitals Planning Board on Sunday after delivering an interim report of the board's review of health infrastructure and health services delivery.

Proust Soars To A New Challenge
The Age 27 April 1995

Ms Elizabeth Proust, a former principal adviser to the then Labor Premier, Mr John Cain, has been appointed Victoria's top public servant by the Kennett Government.
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``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

The Company We Keep
Australian Financial Review, 28 April 1995

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. By August, she will have cut back the directly employed council staff from the 2,300 she inherited to just a few hundred. Change, she says, has become a normal part of working at City Hall. It's an even bigger chunk of the Proust working life.

ANZ Changes Management Lineup
Australian Financial Review, 11/06/1997

ANZ Banking Group announced three big changes to its senior management
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In a surprise move, Ms Elizabeth Proust, 47, the most senior public servant in Victoria, has been appointed head of group human resources. She will have strategic responsibility for overseeing cost management initiatives across the group.

Proust Quits Kennett Government
The Age, 6 Nov. 1997

Victoria's top public servant, Ms Elizabeth Proust, has quit halfway through her five-year contract in a move that has caught the Kennett Government by surprise.

The Firing Squad
Business Review Weekly 2 March1998

 Relentless corporate downsizing means busy times for human-resources managers charged with deciding which heads are to roll. Their new duties have elevated them to the right hand of corporate rulers and they are well rewarded for their efforts
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Workers walk home with redundancy slips and never know their fate was sealed the day these people were hired. They are the new breed of human resource managers taking power in Australia's major corporations and nothing gets in their way.
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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, the former high-profile Kennett Government bureaucrat, 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."
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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.

Role Models In Model Roles
Review Weekly, 16 April 1999

Twice she encountered controversy: in 1995 when she took a board position with the diversified health-services provider Mayne Nickless while serving as chairwoman of the Metropolitan Hospitals Planning Board, and in 1996 when the Victorian Opposition revealed arrangements attempted by Kennett that could have given her a bonus of $272,000 if she fired a target of 57,000 public servants within five years.

Catchlove

Former Mayne Nickless health chief to head commission
AAP News 6 August 1998

Barry Catchlove will become the new HIC chair for a five-year term, federal Health Minister Michael Wooldridge announced today.
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"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.

MAYNE NICKLESS LIMITED: Director Appointment/Resignation (Part A : Section 01 Of 01)
Australian Stock Exchange Company Announcements 6 August1998

Whilst Dr Catchlove remains in his executive role at Mayne Nickless, he is standing down from the Mayne Nickless Board as a consequence of accepting the Government's invitation to join the HIC.

Companies And Markets; Briefs ::: Mayne director joins HIC
Australian Financial Review 7 August 1998

But Dr Catchlove, who is a former chief executive of Mayne's health division and has been a company director since October 1994, will remain part of managing director Mr Bob Dalziel's new four-man executive committee, and retain his new role as executive director of acquisitions.

Conflict Of Interest Concern Over New Health Body Chief
Sydney Morning Herald 7 August 1998

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.
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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.
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But a Mayne Nickless spokesman confirmed Dr Catchlove was a shareholder in the company.

A spokeswoman for the Australian Consumers' Association, Ms Sally Nathan, said yesterday: " - - - - why jeopardise consumer confidence in the administration of the health care system by a situation which puts him in an awkward position of potential conflicts of interest?"
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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 including services like radiology and pathology which received rebates from Medicare"

Mayne's Strength Raises Eyebrows
Sydney Morning Herald 8 August1998

The company employing the new chairman of the Health Insurance Commission (HIC), which polices pathology payments, has just captured 20 per cent of the $1 billion-a-year pathology market.
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According to the HIC's corporate plan, its tasks include policing inappropriate practice and fraud in pathology. Dr Catchlove's appointment has therefore raised questions in the medical community about a conflict of interest. 

Medicare Review To Seek Curb On Costs
Sydney Morning Herald 17 September1998

The Herald has confirmed that the chairman of the Health Insurance Commission, Dr Barry Catchlove, is overseeing a complete review of the HIC since his controversial appointment by the Federal Health Minister, Dr Wooldridge, last month.

The review could radically alter the way doctors operate.
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Dr Catchlove, whose appointment - - - - - unleashed a storm of controversy, told the Herald he hoped that the review would alter the focus of the commission.
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News of the review comes as the Public Health Association yesterday sought assurances from the Coalition Government that it had no plans privatise the HIC as a first step to demolishing Medicare - a proposition dismissed by Dr Catchlove as "laughable".

The Scan Scam

Aust's health MRI bungle biggest scam in memory, says Beazley
AAP News19 October1999

Wooldridge is under pressure to resign over what Opposition Leader Kim Beazley describes as the biggest scam against the commonwealth health budget in memory.

The Health Insurance Commission chairman stood down and Medicare rebates were frozen as Dr Wooldridge was forced yesterday to admit radiologists may have cashed in on a budget leak.

The opposition called for a royal commission into the scam, in which as many as 52 high-tech, $3 million magnetic resonance imaging (MRI) machines may have been bought using insider knowledge of an upcoming Medicare rebate.
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Dr Wooldridge said he was appalled that some members of the radiology industry had exploited a genuine effort to improve public health to line their own pockets.

Minister Denies Radiology Rort Role
The West Australian 19 October 1999

HEALTH Minister Michael Wooldridge has denied involvement in a multi-million-dollar scam of taxpayers' money by rogue radiologists.

Dr Wooldridge refused to stand aside and rejected Opposition calls for a royal commission into the matter yesterday, despite admitting an extraordinary blow-out in the number of radiology machines eligible for a Medicare rebate announced in last year's Budget.

The rebate is worth about $1.5 million a year to each machine but applied only to machines already in use or on order at the May 12 Budget date.
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Dr Wooldridge continued to deny Labor allegations he contributed to insider trading by leaking the rebate plans to members of the Royal Australian College of Radiologists before the Budget.
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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".
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Opposition health spokeswoman Jenny Macklin accused Dr Wooldridge of trying to hide behind the Auditor-General and of covering up a big fraud against the Commonwealth for eight months.
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Dr Wooldridge said there was no evidence of improper action by Dr Catchlove and he was taking leave only to avoid the appearance of conflict of interest.

Doctors Fund tells Catchlove to choose Mayne or HIC
The Australian Financial Review 21 October 1999

Abstract by Australasian Business Intelligence:
He said that Catchlove was open to accusations of conflict of interest. Shepherd added that Catchlove, as chairman of the HIC, has access to highly confidential information and has the ear of the Australian Health Minister. Catchlove has had to step down. Health Care of Australia is now being investigated by the HIC.

Suppliers Quizzed In Imaging Scam
Sunday Age24 October 1999

Some of Australia's largest medical equipment suppliers are being interviewed as part of a national inquiry into a multi-million-dollar Medicare scam.
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The revelation came after a week in which the federal Health Minister, Dr Michael Wooldridge, came under sustained attack in Parliament over the introduction of a Medicare rebate for magnetic resonance imaging scans.
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And last week The Sunday Age reported that the Health Insurance Commission's chairman, Dr Barry Catchlove, faced a potential conflict of interest because the health care company of which he was managing director in 1998 ordered several machines prior to the Budget announcement.
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"It would appear that a significant number (of radiologists) have behaved in a manner that can only be described as a scam,'' he said. "Had people behaved in a similar manner in the sharemarket, they could expect to be treated with the utmost severity.''
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Dr Wooldridge said he was not directly involved until 5 May, when department officials recommended that access to the rebate be restricted to machines already operating or on order by 7.30pm on 12 May.

The next day Dr Wooldridge met college members to explain how the rebate would appear in the Budget the following week. But he denied revealing details of the measure to limit access to the rebate.
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Six days after the meeting the rebate was announced in the federal Budget.

The Health Insurance Commission has revealed that since then 52 claims have been lodged of machines on order on the night of the 1998 Budget.
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The Opposition health spokeswoman, Ms Jenny Macklin, has claimed that at least some radiologists had acted on leaked information from the Government when lodging contracts, referring to the minutes of a College of Radiologists meeting on 21 April 1998 and information supplied by the Health Department to justify her allegation.

Dr Catchlove Straddles Two Jobs
Australian Financial Review 28 October 1999

An internal memorandum dated March 11, 1999, shows Catchlove continued to be involved in a role that presented a potential conflict of interest with his position as chairman of the HIC.

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.
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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.

But the internal memorandum put out by Bill Kirk, chief operating officer of Mayne Nickless, dated March 11, 1999 states; ``Peter Flett has been appointed CEO Pathology and a CEO Diagnostic Imaging will be recruited to expedite the growth. Each of these positions will report to the undersigned and I will continue to work with Barry Catchlove and the executive committee regarding growth strategies.''

MRI Scandal Claims A Scalp
Australian Financial Review 29 October1999

Dr Catchlove, who is a former chief executive of Health Care of Australia which is under investigation by the HIC over its purchase of MRI machines, wrote to the Minister for Health, Dr Michael Wooldridge, to tender his resignation.

Chief Quits Over Scan Scam Claims
The West Australian 29 October 1999

Dr Catchlove has been dogged by conflict of interest claims - that he was still involved with health provider Health Care of Australia -since his appointment by Health Minister Michael Wooldridge in July last year.

The issue came to a head this month in the controversy over allegations that a Budget leak enabled radiologists to cash in on the new MRI rebate, worth up to $1.5 million for each machine.

Catchlove Conflict Inevitable
Australian Financial Review 30 October 1999

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.
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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.
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For the past 10 years the pathology industry has been plagued by rumours and allegations of rorting. Dr Catchlove was one of the fiercest critics. 

Medicine And Power
Australian Financial Review 6 November 1999

Health Minister Michael Wooldridge might well choke on his own medicine for the healthcare industry, as Julie Macken reports.

As Dr Michael Wooldridge walked up to the podium to open the 1996 AMA summit proceedings, - - - - - - .
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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.

MAYNE NICKLESS LIMITED: Chairman's Address To Shareholders (Part B : Section 02 Of 03)
Australian Stock Exchange Company Announcements 9 November 1999

Six of those orders are now part of a broad, industry-wide inquiry by the Health Insurance Commission considering 52 MRI orders placed between 10 February and 12 May 1998, We are co-operating with the HIC and providing every assistance requested by the inquiry.

Minister Found Wanting In Bad News Story
Australian Financial Review 30 December 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.
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While Dr Catchlove has since resigned as chair of the HIC to avoid the appearance of a conflict, Dr Wooldridge still maintains that his appointment was a good one and he would no doubt make such an appointment again.
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Today, few radiologists investigated by the Medicare watchdog, the Health Insurance Commission, believe they will be charged. Fewer still believe they will be convicted. And many, helped by financial wizards, big legal firms and public relations advisers, are poised to make a commercial killing on their new high-tech medical companies.

Those confident that they will be cleared include some of the Government's firmest supporters in the private health industry.
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Last week, Dr Catchlove revealed to the Herald that although he was in charge of Mayne Nickless's health division at the time the company ordered the six machines under investigation, he had never been questioned by HIC investigators. The reason, he said, was that he personally did not order the machines or sign the documentation for their Medicare rebates.

But, he agrees, ``I was aware that the orders had been placed. As CEO it was part of a strategy, but it was a delegated responsibility.''
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But the investors doctors and businessmen alike are looking for big returns on this hi-tech medicine. The size of the Medicare rebate which the expensive new technology can attract is critical in their figuring. ``Without the rebate you're dead in the water,'' explained one radiology business boss who did not want his name used.
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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.
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The issue for Dr Wooldridge is just how many convictions for fraud out of the ``scan scam'' will eventuate.

No Salve For Any Reputations When Truth Is Still Hidden
Sydney Morning Herald,,11 May 2000

But by the end of the day, some college members were having the last laugh at Dr Wooldridge's expense, courtesy of the Auditor-General's findings. While the telling report on the so-called ``scan scam'' will not restore the reputation of radiologists, it will severely dent the reputation of Dr Wooldridge.
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Put bluntly, the Auditor-General's report cannot decide who is telling the truth about this: four senior members of the college of radiology, or the minister, his former staffer and departmental officer, who all came together for a fateful meeting on May 6, six days before the Budget and just days before 33 orders for MRI machines went in.
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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''.

But despite these denials, the report finds that, ``on the balance of probabilities, the evidence does at least suggest that negotiation and consultation with the college representatives and open debate on supply control issues created an environment where some participants may have deduced, or actually become aware, that the Commonwealth was giving consideration to the inclusion of machines on order in the Budget measure.''

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. The HIC is the watchdog body in charge of the MRI investigations. Dr Catchlove resigned from the post last year.

Health Chief Spared In MRI Investigation
Sydney Morning Herald 13 May 2000

The former chairman of the Health Insurance Commission has not been interviewed by "scan scam'' investigators, even though he had been managing director of a company which came under the commission's scrutiny.
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"Why should they interview me?'' he asked. 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.
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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.

Negative Imaging
Sydney Morning Herald 13 May 2000

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.

Buried in the detail of the report is the finding that the minister's decision, which gave some radiologist practices lucrative Medicare rebates on expensive MRI scanning machines, relied on an oral briefing from his department.

On the basis of that oral briefing, with less than a day's consideration, Wooldridge made his decision. That decision has now brought Wooldridge's career to a crisis point, shattering the reputation of a man many believed was an exemplary health minister.
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All Wooldridge's problems flowed from this decision, including the allegation that he inadvertently leaked details of it the following evening, May 6, during his meeting with the College of Radiology. This leak, the Opposition alleged, prompted a surge in MRI orders before Budget night.
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The flaw in the decision was obvious to those in the radiology profession. Why should either the department or the minister care if entrepreneurial radiologists and medical companies gambled on what was in the Budget and lost?

The minister and the department had a responsibility to the taxpayers, to limit the MRI machines eligible for rebate and prevent overservicing.

Indeed the College of Radiologists itself in late April that year warned members against gambling on the policy change in the upcoming Budget.

Why then were the department and the minister so sensitive to the issue? There is nothing in the Auditor-General's report to answer this question. The most likely explanation is that some radiologists or practices threatened legal action if machines on order were not included. However, Wooldridge told the Herald he had no recollection of this.
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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.''
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Equally embarrassing for Wooldridge are the Auditor-General's findings on the HIC itself. In particular, the report reveals for the first time official concerns about the potential conflict of interest for the chairman of the Health Insurance Commission, Dr Barry Catchlove, whose former company was caught up in the MRI investigation.

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.

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.
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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''.

The Scam That Wasn't
Business Review Weekly 8 June 2001

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.

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.)
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The problems do not stop there. If there was a leak, as seems likely, then it almost certainly occurred after May 5, 1998, when the recommendation was made to Wooldridge to provide the rebate (before then, any rumor would not have been conclusive). The sudden rush of 33 purchases after that date (see table, page 71) suggests that there was an indiscretion from the Government. Yet the inquiries were backdated to February 10, 1998

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. The Sydney Morning Herald, for example, pronounced that medicine is "not a field for financial speculation".
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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?
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Coutts 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."
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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."

 

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