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"I ask that the business practices of the owners of hospitals be considered when granting hospitals licenses and that the use of incentives of any sort, but particularly those linked to financial performance should be a bar to the granting of a license. I ask that you should obtain the relevant witnesses statements and other documents from Professor Fels inquiry as well as the agreements and injunctions. I ask you to reevaluate hospital licenses for Mayne Nickless hospitals to determine whether the company is fit and proper to hold licenses and to determine whether the injunctions which were introduced to control trucking misdemeanors are adequate to protect the much more sensitive health care arena. At the very least licensing should be conditional on the absence of incentives and any other practices which might divert attention from care of the patient to care of the company. This request I believe would be supported by every decent Australian if he or she were sufficiently informed. " Extract from the covering letter to the director general of the health department in Queensland accompanying my objection to hospital licenses in 1996.

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Background

Perspective:- I do not believe that health care corporations listed on the stock market should be providing care to sick citizens. The provision and rationing of care to vulnerable sick people purely to benefit the share portfolio of already wealthy investors, many of whom have no interest in the care of sick citizens is in my view a bizarre social aberration.

More specifically I do not believe that Mayne Nickless is a suitable company to provide health care to Australian citizens. I do not think that it is a good health care ambassador for Australia. I do not think we should allow it to provide health care for citizens in friendly countries. Its past history of criminal conduct and its business practices are in my view not congruent with what Australians would consider a fit and proper organisation to care for vulnerable citizens who need help. As Mayne is the controlling owner of Health Care of Australia (HCoA) the issue of probity applies equally to HCoA.

Initial Support for Mayne Nickless:- I was involved in forcing National Medical Enterprises (renamed Tenet Healthcare) out of Australia in 1995. When it decided to sell there were a number of foreign market listed bidders. As far as I was concerned a local corporation was infinitely preferable to a multinational. It would be much easier to control unsavoury practices. Publicity about failures in care would impact directly in the local share market. I believe that I was correct and that we have been able to retrain Mayne from some of the excesses which have characterised the health care marketplace.

In 1995 I was aware of press reports that Mayne had been involved in some misconduct but at the end of 1995 did not recall details. I spoke to a well regarded Mayne official in Brisbane and was assured that HCoA under Catchlove ran quite separately from Mayne Nickless and that Blythway and Webber, who were involved in the scandal did not exert any direct control over the way HCoA was run. I learned of their interest in buying Australian Medical Enterprise (AME) and also that unlike the other bidders they would not keep on any NME staff to run the hospitals.

Press reports indicated considerable antagonism between the two companies with NME's US staff publicly making snide remarks about trucking and health care. The takeover was a hostile one and AME pressed hard for a higher international bid. At this time I actively supported Mayne Nickless in my correspondence with politicians and medical bodies. I obtained information about Generale de Sante Internationale (GSI), the other bidder and circulated this to major shareholders, reminding them of NME's problems with probity and pressing for the acceptance of an Australian bid.

A change of heart:- My support was soon tempered by the Friends of Prince Henry. They were a community group in Sydney which had strongly opposed NME in Australia. They supplied me with details of Mayne's criminal plea which was an eye opener to me. Executives had displayed the same one eyed behaviour as NME executives in the late 1980's. From then on I kept an eye on the company's practices and tried to put pressure on them whenever these were inappropriate.

I soon became aware that Mayne Nickless was swinging the main thrust of its operations into health care and that the assurances I had been given about HCoA's independence did not stand up. In February 1996 Mayne announced massive incentive bonuses to Catchlove and Dalziel based directly on financial performance. It was clear that these bonuses depended on their success in making money for shareholders from health care. Similar monetary performance bonuses had been the main force in the misuse of patients and in fostering fraud in the USA.

In February 1997 Columbia/HCA announced plans to enter Australia. Mayne Nickless responded by promoting its Columbia/HCA-like integrated "one-step" medical model of care. This sort of integration had been a particular problem in the USA and in Columbia/HCA in particular. It encouraged unethical financial relationships with doctors. It facilitated the exploitation of Medicare by playing pass the parcel and encouraged fraud.

As a consequence of these developments I tried to put pressure on Mayne Nickless and use it to challenge these practices in Australian health care.

Pressure to restrict Mayne Nickless

Hospital Licenses:- Mayne had a criminal track record for defrauding its customers through collusive practices. Tenet/NME had been pushed out of Australia for very similar practices in the USA. As I understood the regulations Mayne could not possibly qualify as a "fit and proper person". Being a fit and proper person was a requirement in any successful hospital licensing application in Australia. The regulations were however weak and difficult to apply. They were not supported by the state coalition governments. Clearly our understanding of a suitable person to operate in the marketplace differs from that of a suitable person in health care. A criminal conviction does not prevent you from trading but it certainly should prevent you from caring from those vulnerable to exploitation. There was no guarantee that the courts would use the health care understanding.

In 1996 Mayne offered massive bonuses to senior staff linked directly to profits, a practice at the root of the problems in the USA. Soon after they identified with the vertically integrated model of health care used by Columbia/HCA and other US groups.

I first wrote to the director general of health in Queensland about these business practices expressing my concern. He was a past Mayne Nickless executive. His reply indicated that these were normal business practices and there was nothing wrong with them.

I prepared a detailed submission objecting to hospital licenses for Mayne Nickless in Queensland on the basis of a lack of probity in its criminal plea and in its business practices. This was prepared to show that dysfunctional corporate business practices were not localised to Tenet/NME or to the USA. It was written to highlight the potential dysfunctional consequences of the incentive payments offered by Mayne Nickless to senior executives and the inadequacy of Australian regulations. The submission described the way these same incentive practices had caused serious problems in the US health system and supported this with a large selection of documents. I used this submission and this correspondence to lodge objections to hospital licenses for Mayne Nickless and HCoA in other states.

Not surprisingly none of them took up the matter! I received some lame excuses from some states. The minister of health in Queensland later indicated that wholly owned HCoA was the license holder not Mayne Nickless. It seems that a controlling influence did not disqualify the license holder in Queensland.

This submission and list of documents has now been removed from this web site as the same points are made elsewhere. Anyone wanting a copy can email me.

Overseas Expansion:- By 1997 I was supplying medical bodies, some community groups and politicians with material from the USA revealing the dysfunction of the market system of health care and describing the scandals surrounding Tenet/NME, OrNda, Columbia/HCA, Kaiser, Aetna and other HMO's, as well as Sun Healthcare and other aged care chains. I made brief summaries and stressed the way in which what were considered to be "acceptable business practices" such as those employed by some Australian corporations contributed to the problems in the USA.

I had not restricted myself to attacking Tenet/NME's credibility in Australia. During the early 1990's I had also ensured that the governments of all foreign countries where they operated or might buy were fully informed and had access to selected key documents. A repository of documents was sent to the World Medical Association. Member associations were made aware of this resource of material.

When Columbia/HCA attempted to enter Australia I continued this practice particularly when both Columbia/HCA and Mayne Nickless targeted the French multinational Generale de Sante Internationale (GSI). Europe's largest hospital owner was for sale.

At the time that both dropped out of the bidding for GSI the World Medical Association, the relevant National Medical Associations, and French authorities were in possession of publicly available material describing the track records of both companies. Mayne has not made another attempt to enter the European hospital market. Asian countries were also in possession of this material.

Privatisations:- During 1996 and 1997 the Queensland coalition government enthusiastically embraced the privatisation of public hospitals and colocations. The Queensland minister and the local press were positive about Mayne Nickless.

I supplied the opposition shadow health minister with information about Columbia/HCA and Mayne Nickless. Questions were put to the minister in Queensland parliament. I challenged the minister's response by writing to him and learned from his reply that in Queensland only the licensee and not its controlling owner was required to be fit and proper. The regulations were under review and I suggested to the minister that this omission should be addressed. I lodged a submission pressing for changes in hospital licenses prohibiting those practices which had characterised the Columbia/HCA fraud pointing out that Australian companies including Mayne followed similar practices.

I supplied documents to the health departments and asked that these be put before the selection committees evaluating contracts. I also supplied documents to medical bodies which might have representatives on selection committees to be sure that Mayne's track record and business practices were debated.

Mayne did secure a privatisation but I do not think that it did as well as expected. Many of the contracts went to not for profit groups.

Seducing doctors into contracts:- At the end of 1997 Mayne Nickless, AXA and HBA attempted to overcome the opposition of the AMA to managed care by offering doctors enticing contracts in Melbourne and then in Queensland. I did what the AMA could not do and ensured that the doctors in targeted hospitals were fully informed of Mayne's track record, particularly the agreements disadvantaging customers to which it had pleaded guilty in 1994.

CLICK HERE for the covering documentation and a summary of the material sent

Political appointments

The AMA objected strongly to Catchlove's appointment to chair the HIC. I supported this in my objections to licenses for Alpha/Sun (nursing homes and pathology) and other groups by alluding to the difficulties created by Catchlove's appointment and the issues of credibility and accountability it raised when licenses were granted. Here was a senior executive in a company with a criminal record who was ultimately responsible for decisions involving the probity of other companies - in this instance a competitor in the diagnostic sector.

There was little anyone could do about Smedley's arrival except shudder and ensure that the medical profession had access to some of the reports about him. I wrote the web pages about him soon after.

I had been away and was then busy upgrading the US pages on Tenet and HealthSouth when Mayne sold its hospitals to the Citigroup consortium. While I knew of the sale and encouraged it I did not know of Citigroup's involvement. This information was kept out of the Australian newspapers. The information about the companies was not disturbing, and at the time the Australian consortium which included Ramsay Healthcare was the favourite. I would have supported a sale to them as a lesser evil.

It was a Canadian who pointed out to me that CVC Asia Pacific was a part of Citigroup and just how unsavoury Citigroup was. This had been widely reported in the international press as I discovered when I looked.

The best I could do was to make sure that professional bodies, politicians, community groups, and regulatory authorities knew who CVC Asia Pacific was and understood the nature of the Citigroup scandals and their involvement in health care. Groups were circulated.

Mayne required state government approval to sell public and collocated hospitals. They also needed to transfer the licenses to Affinity. I lodged objections with state authorities to the transfer of licenses to Affinity and to the sale of public and collocated hospital businesses to Affinity. This was on the basis that Citigroup (CVC Asia Pacific), the group leading the sale was not a fit and proper person within the meaning of the regulations. I then wrote the Citigroup, the Affinity, and the purchasers web pages to support this and make the information more widely available. I wrote an article alerting doctors (pdf file) which was published in the winter 2004 edition of New Doctor.<http://www.drs.org.au/new_doctor>

Only NSW acknowledged my objection to the transfer of licenses. One of my concerns had been that turn-around expertise from Citigroups US health-care division would be brought in.to restructure Affinity along US lines. The health section of Citigroup's Saloman Smith Barney had been an adviser to some of the large dysfunctional US chains - notably HealthSouth during 15 years of its US $4 billion fraud.

I subsequently recieved a letter dated 27 May 2005 indicating that an "extensive fitness and probity profile" was carried out. Affinity Health care supplied additional information in response. After "careful consideration license conditions were agreed to which included matters relating to "the clinical and corporate governance structure of Affinity Health Ltd including the notification of any changes to the Directors of the licensee companies".

The government elected to buy back the privatised Port Macquarie public hospital. The other transfers occurred on 18 April 2005. This was four days after Ramsay Healthcare had purchased Affinty's hospitals. Whether there was any subtle pressure exerted on Affinity to sell is pure speculation. This sale to Ramsay is described on another page.

Web Page History This page created March 2002 by Michael Wynne Modified August 2004, Oct 2005, Dec 2005