This page gives a broad overview of the privatisation and colocation processes in each state as the processes moved from wild enthusiasm to disenchantment. It links to pages which give more detail. A previous page descibes the global and national ideology behind these processes and the development of the Australian health system. It gives a general overview of their introduction and failure.
Overview of Privatisation
The coalition government in NSW led the way in privatisation in 1992 by entering into a contract with Mayne Nickless to build and run the new public hospital in Port Macquarie. At the same time they commenced co-location by awarding Australian Medical Enterprises (controlled by the US company National Medical Enterprises - NME) a contract to build a co-located private hospital on the St George teaching hospital campus. Both projects were dogged with controversy and intense opposition.
The Port Macquarie contract was signed by the government in the face of bitter opposition from the large majority of citizens in Port Macquarie, and despite a majority vote in the parliament against the project. The contract was confidential and parliamentary committees were denied access to the relevant information and documents. The contract was subsequently shown to be severely flawed and the state severely disadvantaged financially by its terms.
"This inexplicable grant is additional to the significant fees paid by the private sector-provided hospital services. The Government is, in effect, paying for the hospital twice and giving it away."
NSW Bureaucrats Blowing Deals: Harris (Auditor Generals Report) Australian Financial Review 30 May 1996Instead of saving some $15 million, as estimated by the NSW Health Department prior to privatisation, the deal would cost the state around $93 million.
Case Studies of Public Hospital Privatisation by Meredith Carter, Health issues Centre Journal September 1998
Despite more funding than other public hospitals this hospital was soon in trouble with one of the longest waiting lists and one of the poorest performance records on health department measurements. The hospital kept coming back for more money.
Reports indicate other public hospitals in the area are angry that a private operator can be bailed out, while public hospitals are expected to operate under strict budgetary and activity restrictions.
PRIVATISATION OF PUBLIC HEALTH - IN THE PUBLIC INTEREST?, Queensland Nursing Union web site - accessed 1998The privately managed Port Macquarie Base Hospital has waiting times for elective surgery patients more than double the State average and is the worst hospital performer in NSW, according to a range of health department indicators.
Private Hospital Rated `worst', Sydney Morning Herald 30 May 1998
The community remained unhappy with the services over the years. This unhappiness increased to a revolt in the Smedley era when respected senior management who would have opposed Smedley's new management direction and the franchising of hospitals were terminated. Plans to downsize nursing were vigorously opposed. There was an outcry when services deteriorated even further and patients were turned away. There were public meetings and government ministers came to sort out the mess and confront Mayne's intransigence.
There was a strong move for the government to buy back the hospital but the terms of the contract prevented this. Nursing staff, doctors in the hospital, the hospitals own community management board and community groups all passed motions of no confidence in the management. A parliamentary inquiry has been commenced and the government is negotiating with Mayne about the situation.
THERE’S never been a fight quite like it. It is widely accepted that the establishment of Port Macquarie Base Hospital effectively split a community in a manner never experienced before.Six years down the track, the publicly funded, privately operated base hospital ignites the same emotions.
A critical look at privatisation, Port Macquarie News 5 January 2001""A Melbourne-based culture is running a hospital with no local presence, no local culture and a complete breakdown of communication.
"The alarm bells are ringing and they’re not even willing to talk about it.
Knowles discusses hospital buyback, Port Macquarie News 9 March 2001The medical staff council’s "low-confidence" motion, passed at a meeting on Monday, resulted from what chairman Dr Robert Clarke said were concerns that had been building for some time.
Industrial unrest grows at hospital, Port Macquarie News 16 March 2001
The Port Macquarie hospital was to have been
the flagship for privatisation - to show what the private system
could do. It is one of the best examples of the failure of this
system and its problems. With a change in government in 1995
privatisations came to an end in NSW but continued in other states.
Overview of Co-location
The co-location project at St Georges hospital ran into trouble of a different sort when objections to licences were lodged based on the lack of probity of controlling shareholder NME, a company involved in unconscionable conduct and the misuse of patients in the USA. NSW Health department refused to grant licences and the state government brought in a retired judge widely known to be at risk of improper influence to grant the licences against their advice.
When summoned to appear at a Royal Commission into paedophillia 3 years later he committed suicide. His double sex life was then exposed. I have had free access to all of the NSW documents under FOI and have no doubt in my own mind that NME failed to meet probity standards and was a threat to our health system.
Both NSW Health and the health department in Western Australia reached the same conclusion and advised their ministers accordingly. Their advice was ignored by the judge and by the government. There is insufficient evidence in the documents alone to prove that the judge was forced to act against his better judgement. Both the police and the NSW Independent Commission into Corruption were asked to investigate further. The requests were rejected on the basis that I had supplied no evidence.
Alpha Healthcare, a company dominated and funded by the US company Sun Healthcare was contracted to build a colocated hospital at Westmead. Mayne Nickless has also been awarded co-location projects.
Following the granting of licences to AME by the judge in 1993 senior management in NSW Health retired and there were changes at the top. I have lodged objections to hospital licences for Alpha Healthcare (dominated and funded by Sun Healthcare) on the basis of a lack of probity in Sun Healthcare's US conduct and also Mayne Nickless on the basis of its December 1994 criminal conviction in Australia and its inappropriate business practices, particularly the use of large financial incentives for managers based on profit targets.
My examination of the US system had led me to the conclusion that this practice is one of the main factors encouraging fraud and the misuse of patients for profit. Documents were supplied to support this. My submissions objecting to licences to state health departments including NSW did not lead to an investigation and in fact have generally not been acknowledged. Sun Healthcare subsequently failed a probity investigation in Victoria in 1998. This did not result in a probity review in NSW - or any other state. A company which was considered to lack probity in Victoria was allowed to operate in the rest of Australia. All state regulations have probity requirements.
Large well equipped private hospitals are badly needed in NSW and co-location has gone ahead with little opposition. Most co-location agreements have been with corporate for profit groups.
The story of what happened in Port Macquarie and the bitter battle between corporation and community is a long one. This is explored on another web page.
CLICK HERE to for more information about NSW, Port Macquarie with references and extracts.
Victoria embraced privatisations and colocations earlier and more enthusiastically than any other state. Privatisations were bitterly opposed by the labour party. The failure of privatisations is well illlustrated in Victoria because there were so many of them.
The first the privatisation of La Trobe was such a financial disaster that the company's financial viability was threatened. To protect the quality of care the government agreed to take back the hospital and run it themselves.
The Mildura privatisation ran into probity problems and delays when it was awarded to Alpha Healthcare. This fell through and the contract went to Ramsay Healthcare. How it will fare remains to be seen.
The privatisation of the Austin and Repatriation Teaching Hospital was soon dogged in problems and controversy. There were large consultancy fees and an enormous cost blow out. Partners in the privatisation began to fall out and lose enthusiasm. It was eventually abandoned and the government decided to build the new hospital itself. There were cheers from the hospital staff when this was finally announced. A detailed review of this privatisation gives considerable insight into the problems in privatisation.
The Berwick Hospital privatisation ended with delays and long discussions with Ramsay who were offered the contract. By this time they had reservations. They finally withdrew and the contract was offered to the not for profit Sisters of Mercy. They also withdrew some time later. The government finally decided to contract only the building of the hospital and then run it themselves. All this resulted in considerable expense and a delay of several years.
The promised Knox privatisation simply never got off the ground. Enthusiasm had died and the plans to build a public hospital were put on long term hold.
The Victorian privatisations are well worth studying in more detail.
CLICK HERE for more about privatisations and colocations in Victoria - and references.
In South Australia the story is of an unasked for privatisation at Modbury by Healthscope which went very sour. As in La Trobe in Victoria the company sustained huge losses which threatened its viability. The coalition government was still in power at this time and instead of taking over the hospital as was done in Victoria they bailed the company out.
This was one of the scandals that finally brought the coalition government down. The government, the health department and Healthscope all refused to produce documents or give evidence to the parliamentary inquiry that followed. The inquiry was highly critical of this but because of the lack of information it was unable to form an assessment of the financial basis for the decisions made, the reasons for failure, or whether claimed problems in the provision of services had substance.
Healthscope went back to government on a number of occasions for relief and by 2003/4 managed to run the hospital at a small profit - but amidst claims of closures, long waiting lists and sometimes questionable care.
CLICK HERE for more information about South Australia and references.
In Western Australia the coalition government granted the privatisation of the new Joondalup public Hospital to Mayne Nickless. The story follows that of Port Macquarie. The Auditor General produced a scathing report challenging the financial basis of the transaction. He was highly critical of the adequacy of the protection given to patients and of the lack of public accountability.
There have been concerns about the quality of care in the hospital and about inappropriate arrangements with doctors.
CLICK HERE for a detailed account and references about Western Australia
Privatisation in Queensland was delayed until the coalition parties regained power in the mid 1990's. They made up for lost time by awarding Mayne Nickless two co-locations and then putting two privatised public hospitals and four more co-locations out to tender. Mayne seemed to have the support of the coalition health minister and of the local press. Privatisation and co-location by corporate groups was opposed by the nurses and most of the medical profession. Steps were taken to ensure that government and selection panels were well informed of the concerns about Mayne Nickless and also the corporate provision of health care.
In the end Mayne Nickless was awarded one privatisation. Not for profit community and religious groups were awarded the second and also the majority of the colocation projects. As for as I am aware Queensland is the only state where not for profit groups have been given this sort of support.
CLICK HERE for more information about privatisations and colocations in Queensland - and references
The privatisation of the Mercy Hospital in Devonport in North West Tasmania went to Mayne Nickless in 1995. It was not profitable.
A colocation project, The Hobart Private Hospital on the Royal Hobart Hospital campus went to Australian Hospital Care (AHC). This performed very badly with large losses. Mayne Nickless later acquired AHC in a takeover. It was unable to make this hospital profitable but succeeded in upsetting the doctors.
Healthscope owned a private hospital in Burnie not far from the Mercy hospital. In 1995 a public hospital was built adjacent to the private hospital which became a co-located entity. There is almost no press information about the original arrangement but in 2003 and again in 2005 it was revealed that Healthscope was running both the public and the private hospital. The public hospital did not feature often, if at all, in their public documents.
In 2003 Healthscope purchased both the Hobart Private and the Mersey Public Hospital contract from Mayne Health. With governments apparent connivance Healthscope set about downsizing the money losing Mercy by transferring services to Burnie, finding excuses to close.
Both the Devonport community, served by the Mersey and the staff at the Mersey refused to accept this. They mounted a strong challenge forcing the state government to take back the hospital and reinstate services.
The Hobart Private Hospital was by now obstructing badly needed development at the Royal Hobart hospital. Healthscope claimed they had made it profitable. When the government offered to take it back they refused.
CLICK HERE for the Hobart Private story and more about Tasmania.
CLICK HERE for the Mercy Hospital and Burnie story
In the Northern Territory the government commissioned a report from a business group. It then set out a policy paper based on this trumpeting its new privatised hospital program.
The aboriginal community commissioned a review and report on this policy by academics from Sydney University. This was very critical. There was some embarrassed backtracking and modification of the policy. There was a change of government and I suspect the policy ended in the bin.
