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section Paul Ramsay
The many extracts on these pages are from copyright
material. They are owned by the reference given or its
owner. They are reproduced here for educational purposes and
to stimulate public debate about the provision of health and
aged care. I consider this to be "fair use" in the common
interest. They should not be reproduced for commercial
purposes. The material is selective and I have not included
denials and explanations. I am not claiming that all of the
allegations are true. The intention is to show the general
thrust of corporate practices as well as the nature and
extent of any allegations made.
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This page
describes Paul Ramsay's international operations
concentrating on his health care operations in psychiatry,
managed care, and disturbed adolescents in the USA. It looks
at reports suggesting overcharging of Medicaid and of a
grand jury investigation into the mistreatment and sexual
exploitation of adolescent girls under Ramsay's
care.
International Projects
Paul Ramsay is an Australian entrepreneur who has made his fortune in health care and in television. He has kept personal control of his companies. When he has listed them on the stock market he has whenever possible kept overall control and a dominant holding in his own hands. He has been chairman of most of them.
Ramsay Health Care has recently become Australia’s largest hospital corporation and there is very little opposition. Ramsay also has considerable political influence. His company is no longer under the sort of social criticism and pressure which has been directed at corporations providing health care in Australia over the last 15 to 20 years. He is in a better position to ignore it.
The corporatisation of health care in Australia has been controversial and heavily criticised. The US health system has been held up by many as an illustration of what Australia does not want. Tongue in cheek politicians have promised citizens that this is not what they will get while, at the same time, supporting the corporatisation of health care. This is the US system.
Paul Ramsay himself has had extensive experience operating in the USA. He has however kept this experience low key and it receives little publicity in Australia. His publicly listed Australian company once had a large holding in the US health care operations but they sold this. Ramsay’s heavy involvement there has been through his private Australian companies and through companies listed separately in the USA. Few Australians are aware of his extensive involvement in the US system or of his past support for the introduction of major facets of that system into Australia.
What happened in Ramsay’s operations in the USA, and in other countries where social constraints on corporate health care, similar to those in Australia, do not exist, may give some indication of the direction Ramsay will take in Australia now that it is powerful enough to thumb its nose at critics and regulators alike.
The scandal surrounding the operations of Ramsay Youth Services in the USA as recently as 2003 is therefore disturbing, as is the suggestion that the company was happy to deal in shares with prospective consultants in Ireland. I have therefore devoted this page to the information I have unearthed about Paul Ramsay’s international operations so that Australians can access its significance.
Paul Ramsay bought US psychiatric hospitals establishing Ramsay Health Care Inc. in the USA in about 1987. He even considereed buying Hospital Corp of America's (HCA) large psychiatric division. He set up a US managed care company Ramsay-HMO Inc. soon after. Ten years later Ramsay Health Care Inc., with 12 hospitals, was the third largest psychiatric hospital chain in the USA. It was dominated by its two very much larger competitors and not performing well. In 1998 it elected to sell its psychiatric businesses and rename the company Ramsay Youth Services. It had already entered the teenage correctional services sector and continued to expand there. Ramsay sold Ramsay Youth Services in July 2003, soon after extensive adverse publicity about the mishandling of teenage residents occurred.
Mr Ramsay's private company, which sold Ramsay Health Care its Australian hospital chain after listing, spent an additional $US22 million on a chain of US psychiatric hospitals just a few weeks before the listed company made its acquisition of a Health Maintenance Organisation.
1988 Entering the USA
------------------------------------
But Ramsay Health Care is not planning to sit still. Its international and local hospital divisional general manager, Mr John Randall, said yesterday he would like to consolidate but "there are likely to be good opportunities" such as a sell off of Hospital Corp of America's psychiatric division in the US in which Ramsay would be interested.He said problems with Ramsay's US subsidiary were resolved this week and he was hoping to refinance its debt.
MALAISE HITS PRIVATE HOSPITAL BOOM Australian Financial Review December 12, 1988
Ramsay’s companies prospered during the late 1980s boom years. At the start of the 1990s Ramsay’s complex empire collapsed and he was forced to rationalise and restructure his companies in the USA and Australia. He reduced his interest in the US companies and attempted to raise money by unsuccessfully offering stock in the USA.
The US businesses survived Paul Ramsay’s financial difficulties. At some stage during the 1990s the Australian company, Ramsay Health Care, ceased to have any ownership in the USA.
The US companies became separate ventures and not part of the Australian operation. Paul Ramsay and his personal companies had large and often controlling holdings. Paul Ramsay remained chairman of the US companies. They operated 80 US facilities in 1997. The US psychiatric services are not reported as a major source of his wealth in Australian newspapers although the HMO’s were reported as very profitable for him.
Paul Ramsay will substantially reduce his holdings in his two US health care companies as part of stock offers aimed at raising $US102 million ($A134 million) for the two companies.
1991 Financial difficulties
Mr Ramsay's private interests will raise $US14.75 million from the offers, while his Australian company Ramsay Health Care Ltd will raise $US12 million.
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The first of the two stock offers will be made by the smaller of the companies, Ramsay-HMO Inc., next week and is aimed at raising $US33 million, while a $US69 million offer by Ramsay Health Care Inc. is scheduled for July.Ramsay Health Care Inc., controlled by Mr Ramsay since late 1987, runs 15 psychiatric hospitals throughout the US.
Ramsay-HMO Inc., controlled by Ramsay Health Care Ltd since April 1988, operates a Florida health maintenance organisation.
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It is unclear how the two offers will fare, given that information in the prospectuses make clear that neither company will be free of their financial troubles after the offers.
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The money raised by the Ramsay interests will be used to pay off debt to Elders Finance which now has a charge over the shareholding.
RAMSAY TO CUT STAKE IN US HEALTH GROUPS Australian Financial Review June 6, 1991
Ramsay Health Care Ltd's American offshoot Ramsay-HMO Inc. has fallen well short of its proposed $US33 million ($A43 million) share offer and has raised only $US21.25 million.
1991 Ramsay Health Care (Australia) sells its US holding
-----------------------
The prospectus on the offer showed that Ramsay-HMO has financial problems which the issue cannot fully solve.Of the 1.7 million shares, 700,000 were sold by Ramsay Health Care, the Australian listed company which owned 33 per cent of Ramsay-HMO before the offer.
RAMSAY HEALTH US SHARE OFFER FALLS WELL SHORT Australian Financial Review June 21, 1991
The reports I have found describing Ramsay’s psychiatric business in the USA between 1988 and 1991 have been positive and suggest it played a useful role but my searching during this period was limited.
I did not encounter any reports suggesting that Ramsay had indulged in any of the dysfunctional fraud and exploitative practices which were popularized by the US giant National Medical Enterprises (now Tenet Healthcare) at that time. These practices generated vast wealth and pervaded the for profit psychiatric sector in the USA at this time. Corporate survival in this market depended on following the same or similar practices.
Children and adolescents were specifically targeted and needlessly admitted to hospitals for long periods. Their insurers were systematically milked by needlessly providing treatment. This was because children’s insurers paid better than adults. Children and adolescents seldom require hospital admission and in many instances it is harmful. Ramsay denied involvement in this scandalous conduct.
It is also possible that as a newcomer Ramsay might not have had time to fully implement these successful business practices. A member of the FBI told me in 1993 that they were understaffed and overburdened by the massive fraud which had been ongoing in the other large established corporations. They did not have the resources to investigate concerns about general hospitals so may not have investigated the smaller new company Ramsay Health Inc.
Paul Ramsay and his integrity must be given the benefit of any doubt. We must accept that he resisted these market pressures. His record here remains clean.
When the scandal broke in 1991/2 admissions to psychiatric hospitals fell sharply and many closed. During the 1990s psychiatry became a service provided primarily in the community. The lucrative market in troubled teenagers vanished and Ramsay’s profitable psychiatric hospitals emptied. Ramsay followed the money by providing more outpatient services but by the mid 1990s the psychiatric company was struggling.
Instead of admitting troubled teens to psychiatric hospitals governments opened prisons and community correctional services where the teens were placed by courts and social services. These ranged from what were essentially high security unisex prisons for young offenders to day care services and special schools in the community.
Building and running these facilities was contracted out to private for profit corporations on the basis that this was more cost effective.
As well as growing in managed care operations, Ramsay followed the money by moving to outpatient psychiatric services and using its claimed expertise with troubled children as a lever in securing contracts to provide correctional services. It seems likely therefore that Ramsay developed this expertise and had considerable prior experience with troubled teenagers in its psychiatric hospitals. By 1998 juvenile care was its prime activity.
(Added June
2007)
Between 1993 and 1999 Ramsay employed, Reynold J. Jennings, an up and
coming manager, fresh from 10 years at the notorious National
Medical Enterprise (now renamed
Tenet
Healthcare) to help him restructure
his companies. Many of Ramsay's more questionable ideas about health
care may perhaps originate from Jennings. NME's practices were
highly infectious. Jennings returned to Tenet in 1999 and rose
steadily during Tenet's second scandal, although his role, if any, in
that is unknown. He became COO of Tenet in 2004 and then Vice
Chairman.
Looking back one wonders if the business changes introduced by Jennings contributed in any way to the Youth Services Scandal described below. NME's disturbing but economically successful business strategies were very infectious. NME's mobile staff have carried them to multiple health and aged care corporations in the USA. This has resulted in a great deal of misery for those these corporations claimed to serve.
Paul Ramsay's American offshoot, Ramsay Health Care Inc., is changing direction and plans to focus more on outpatient psychiatric care rather than on growth in the inpatient psychiatric hospital sector.
1992 Problems in psychiatry
The change, precipitated by the appointment of a new chief executive early this year, flows from the adverse impact on the psychiatric hospital industry by a lot of bad publicity earlier this year and growth of "managed care" health insurance programmes.
Ramsay's pre-tax earnings dropped 28 per cent in the third quarter to$US3.3 million and, for the first nine months, to March 31, were down 30 per cent at $US5.7 million.
---------------------------
Business was also affected by critical stories about the psychiatric facilities operated by another US company. Mr Browne said that although Ramsay's hospitals were not mentioned in the stories, "it's affected the fundamentals of the business".
--------------------------------
As a result of the increase in managed care, Ramsay has decided to move more into outpatient facilities which require less capital, Mr Browne said.
RAMSAY HEALTH CARE TO CHANGE ITS PATIENT FOCUS Australian Financial Review July 27 1992
In 1991, he (Jennings from NME) was promoted to Senior Vice President responsible for the company's (NME) acute care hospitals in Texas, Missouri and West Florida. In 1993, he left Tenet to join Ramsay Health Care Inc. as a senior executive and played a key role in stabilizing the financial performance of that New Orleans-based hospital company.
1993 Jennings from NME joins Ramsay (added 2007)
Tenet Healthcare's web site accessed June 2007
But just as Ramsay-HMO has benefited from a growing movement towards HMOs, Ramsay Health Care Inc has been hurt by a trend away from in-patient care in psychiatric hospitals and by bad publicity for the industry that arose from the troubles of another psychiatric-hospital operator.
1993 Bad publicity in sector
RAMSAY TO EXPAND US HEALTH-CARE OPERATIONS Australian Financial Review August 2, 1993
Ramsay Health Care, Inc. (NASDAQ:RHCI) today announced that its managed mental healthcare subsidiary has acquired Florida Psychiatric Management, Inc., a regional provider of mental health care cost management services, based in Orlando, Fla.
1993 managed care acquisition
-----------------------------------
Ramsay Health Care, Inc. is one of the largest psychiatric services companies in the United States.
Ramsay Health Care, Inc. announces acquisition of Florida Psychiatric Management Business Wire November 1, 1993
- - - the company (Ramsay managed Care Inc) reported a loss in the quarter ended Sept. 30 because of startup costs of its health mantenance operations. - - - - - - - Ramsay has managed-care operations in 13 states covering 650,000 individuals.
1995 Growing in managed care
EARNINGS SNAPSHOT The New Orleans Times-Picayune 1 November 11, 1995
- - - - . Ramsay provides alternate-site behavioral healthcare in 16 states.
1997 Business activities outside hospitalso
News Today Modern Healthcare Feb 1, 1997
In the US, Ramsay's empire involves about 80 sites, including hospitals, clinics, outpatient centres and treatment centres. One unusual contract, held since 1993, is to diagnose and treat, for a fixed annual fee, the mental problems of the Walt Disney group's 70,000 employees (in Florida, this includes their families).
1997 Diversified sites for care
Ramsay Hitches His Star To The Public System Business Review Weekly Mar 24, 1997
The company sees opportunities in broadening its youth services programs and believes that its experience in treating at-risk and troubled youth will enable it to increase its market share in treatment of this segment of the population. Synopsis Of Ramsay Health Care, Inc. Presentation At Southeast Research Partners Sixth Annual Institutional Conference PR Newswire November 20, 1997
1997 Youth Services
By 1998 Ramsay must have accepted that its psychiatric services were not competitive with the dominant industry leader Charter which owned many times as many psychiatric hospitals. It would not have had leverage when negotiating with HMOs. Ramsay restructured into a correctional education company and sold off all of its psychiatric services.
It sold its FPM Behavioural Health Inc. to Horizon Health Corporation in June 1998, and its hospitals to Charter Behavioral Health Systems, not for profit West Virginia University Hospitals and to an undisclosed buyer.
At the same time chairman Paul Ramsay and his related personally owned Australian companies (Paul Ramsay Hospitals Pty and Paul Ramsay Holdings Pty. Ltd.) which owned only about 30% of Ramsay Health Inc. pumped money into the company and increased Ramsay’s holding to a controlling 52.2%
In April 1998 it acquired two youth services facilities, one located in Palm Bay, Florida and the other in Dothan, Alabama. In November it purchased "Rader Group, an educational company managing four contract/charter schools that served over 500 students in four counties in Florida, to establish programmes for youth at risk of dropping out of school and troubled students". It won a contract from the Florida Department of Juvenile Justice to operate the Okaloosa Youth Academy, a 100-bed residential treatment program for moderate-risk boys ages 14 to 18 in Crestview, Florida.
In January 1999 Ramsay Health Care Inc. renamed itself Ramsay Youth Services Inc.
Ramsay Health Care Inc. said in a "not timely" filing with the Securities and Exchange Commission today that it anticipates reporting a net loss of approximately $40.9 million for the third fiscal quarter ended March 31.
1998 Losses in psychiatry
Ramsay Health Care Inc. Sees 3Q Loss Of $40.9M Federal Filings Newswires May 19, 1998
As has been reported, the company decided to change its strategic direction from an organization that provides behavioural healthcare services to an organization that provides services for at risk and adjudicated youth with special needs. In connection with this decision, the company has decided to divest itself of certain facilities and managed care operations.
1998 Change of direction to youth services
Ramsay Details Op Sales, Reserves, Finance Pacts Federal Filings Newswires May 22, 1998
Ramsay Health Care Inc. said Monday it expects to record additional losses totalling $2.5 million for the first six months of fiscal 1999, primarily for the early extinguishment of debt.
1998 More losses
The youth service company said in a statement that it lost $58.6 million, or $5.52 per diluted share, for the fiscal year versus a profit of $0.32 in the year-ago period.
Ramsay sees additional $2.5mln losses in H1. Reuters News October 5, 1998
Ramsay Health Care Inc. (RHCI) changed its name to Ramsay Youth Services Inc.
1999 Changes name
Ramsay Health Care Changes Name To Ramsay Youth Svcs Dow Jones News Service January 5, 1999
1998 Reference list
- Ramsay Health Care, Inc. Acquires Two Youth Services Facilities PR Newswire April 4, 1998
- Horizon Health Corporation and Ramsay Health Care, Inc. Announce the Sale of FPM Behavioral Health, Inc. Business Wire June 3, 1998
- Ramsay Health Care Sells Psychiatric Hospital For $1.6M>RHCI Dow Jones News Service June 6, 1998
- Ramsay Health, Facility -2: Deal To Close Restructuring Dow Jones News Service July 6, 1998
- Ramsay Health Closes Sale Of 4 Hospitals, Pact Mgmt Business Dow Jones News Service October 1, 1998
- Ramsay Health Care 13D(A): Group Has 40.0% Stake Federal Filings Newswires November 13, 1998
- Ramsay Health to acquire education company. Reuters News November 25, 1998
- Ramsay Health Care, Inc.'s Youth Care Division Awarded Contract In Florida PR Newswire December 8, 1998
- Ramsay Health Care 13D(A):Group Has 52.2% Stake Federal Filings Newswires December 12, 1998
- Ramsay Health Care, Inc. Announces Exchange Of Debt And Conversion Of Preferred Stock December 29, 1998
Ramsay purchased and successfully operated Health Maintenance Organisations under different company names. His efforts were rewarded by the business community and he was awarded the title "entrepreneur of the year" by the business community.
United Health, which has since become a dominant US HMO bought one of these from Ramsay in 1994. Others were merged into Ramsay Health Care Inc. and were then sold in 1998.
By 1998 community anger had put pressure on HMOs, which had become very unpopular. Citizens were clamoring for legislation to protect them and for removal of the ERISA legislation which protected HMOs from the legal consequences of their activities. Citizens were mounting class actions against HMOs. The value of HMO shares had plummeted.
During the 1990s Paul Ramsay was a strong advocate for the introduction of managed care into Australia.
Ramsay, which listed in August last year, moved aggressively into the US last year, spending $US32 million ($A36.1 million) buying a Health Maintenance Organisation, but has just had to pump $US7 million into the HMO to keep it within US government prudential requirements and within loan covenants.
1988 Buying HMOs in the USA
MALAISE HITS PRIVATE HOSPITAL BOOM Australian Financial Review December 12, 1988
Mr Ramsay's more successful HMO company, Ramsay-HMO Inc, has $US100 million ($A147 million) in cash and is looking to diversify out of Florida through the purchase of an HMO in a State such as Louisiana, Mississippi or Alabama.
1993 The HMO bonanza
------------------
Ramsay-HMO Inc has been listed for the past three years by Fortune magazine as one of America's 100 fastest-growing companies, and Mr Ramsay was recently voted Entrepreneur of the Year by a panel that included Ernst & Young in Florida.Driven by a big increase in members and the growing movement towards HMOs in America generally, Ramsay-HMO has gone from a loss of $US5.8 million in 1989 to a profit of $US7.5 million in 1992, and the company increased profit by 60 per cent in the first nine months of the financial year just ended.
RAMSAY TO EXPAND US HEALTH-CARE OPERATIONS Australian Financial Review August 2, 1993
Ramsay Health Care, Inc. (NASDAQ:RHCI) today announced that its managed mental healthcare subsidiary has acquired Florida Psychiatric Management, Inc., a regional provider of mental health care cost management services, based in Orlando, Fla.
1993 Acquisitions
-----------------------------
Ramsay Health Care, Inc. is one of the largest psychiatric services companies in the United States.
Ramsay Health Care, Inc. announces acquisition of Florida Psychiatric Management Business Wire. November 1, 1993
United HealthCare is further strengthening its southern presence by acquiring Miami-based HMO CAC Ramsay.
1994 Selling an HMO at the peak
----------------------
United is paying $500 million to acquire Ramsay, which originated as a clinic for exiles from Castro's Cuba.
United Healthcare Adds to Fast-Growing Network Via Deals with Ramsay, Healthcare Compare Health Alliance Alert Faulkner & Gray, Inc February 25, 1994
The payback has come at some cost to Mr Ramsay, who said that he would have been worth "half a billion" if he had retained his interest in the Florida-based Ramsay HMO.
1994 Looking back - if only!
Mr Ramsay owned more than 40 per cent of the company in 1989 but his interest was diluted to 11 per cent through a series of share issues and placements that formed part of a group restructuring implemented by Westpac, which included the sale of non-core assets in the US and Australia.
REHABILITATED RAMSAY ON THE PROWL Australian Financial Review March 1, 1994
The founder of one of Australia's largest private health-care groups, Mr Paul Ramsay, has fuelled the debate over the Federal Government's controversial health reforms by urging Canberra to implement US-style managed health care in Australia.
1994 Promoting managed care in Australia
-----------------------
Mr Ramsay was recently voted Entrepreneur of the Year in Florida for returning a bankrupt managed health-care hospital in Miami to profitability.
COPY US-STYLE HEALTH CARE, CANBERRA URGED Australian Financial Review March 3, 1994
Mr Ramsay said last night that shareholders in the US had approved the merger of his US health insurance business Ramsay HMO Inc with United Healthcare Inc.
1994 Merging Ramsay businesses
RAMSAY WILL LIFT STAKE IN PRIME Australian Financial Review June 2, 1994
Ramsay has managed-care operations in 13 states covering 650,000 individuals.
1995 Size of HMO businesses
EARNINGS SNAPSHOT The New Orleans Times-Picayune November 11, 1995
Ramsay Health Care, Inc. (Nasdaq: RHCI) and Ramsay Managed Care, Inc. (Nasdaq: RMCR) today announced that their merger will become effective on June 10, 1997. - - - - - Ramsay Health Care, Inc. also announced that it is continuing its refinancing efforts.
1997 Consolidating poorly performing psychiatry and HMOs
Ramsay Health Care, Inc. and Ramsay Managed Care, Inc. Announce Effective Date of Merger PR Newswire June 9, 1997
In January 1999 Ramsay Health Care Inc. changed its name to Ramsay Youth Services, specializing in youth with problems and in juvenile criminals. Its operations extended from high security criminal correctional centres, day care correctional services and schools for problem children. It sought government contracts on the basis that outsourcing was more economical.
The nature of the services Ramsay provided can be deduced from the contracts it won. Outsourcing contracts for prison and correctional services, and for incarcerating illegal immigrants have all been a source of serious dysfunction in regard to the mistreatment of inmates in the USA and Australia. Ramsay Youth Services was to be no exception.
The company was clearly still in some financial difficulty. In October 2000 Ramay announced plans to move from NASDAQ's national market to its small-capmarket, because it has not been able to meet the national market's market-value requirements. In November it received a waiver for noncompliance with a credit agreement. The staffing scandal which surfaced in at least one of its facilities in 2003 can be seen as a response to these market pressures
Paul Ramsay put in more money pushing his holding to 61.4%. He remained as chairman. He cannot therefore distance himself from this company’s practices and what happened there. He was ultimately responsible.
Ramsay Health Care Inc had already made several purchases and entered into government contracts. When it became Ramsay Youth Services it continued this expansion.
Purchases
In August 2000 Ramsay acquired Charter Behavioral Health System of Manatee Palms, LP and the corresponding real estate from Crescent Real Estate Funding VII, L.P. - with 225 total beds and an aftercare case management program serving over 200 adolescents in Florida.
Contracts
Ramsay won
The company operated in 10 states and Puerto Rico. By October 2000 its financial performance was not meeting expectations. It failed to maintain the required total debt-to-EBITDA ratio and the fixed charge coverage ratio. It was forced to transfer its securities from NASDAQ's national market to its small-cap market. It had not been able to meet the national market's market-value requirements.
In 2003 one of the companies facilities was caught up in a predictable massive and very public scandal involving substandard services, the injuring of residents by staff and sexual relations between male staff and female juveniles. Perhaps Ramsay had by now recognized the dangerous market dynamics involved in screwing profits from the defenseless. He promptly sold the company.
In June 2003 Psychiatric Solutions, Inc. completed the acquisition of Ramsay Youth Services, Inc. in a transaction valued at approximately $77 million.
Ramsay Youth Services, Inc. Awarded Contract In Puerto Rico PR Newswire February 10, 1999
1999 to 2003 reference list
Ramsay Youth lands $40 million pact. Reuters News February 12, 1999
Ramsay Youth 13D(A): Group Has 61.4% Stake Federal Filings Newswires February 13, 1999
Ramsay Youth Services, Inc. Announces The Opening Of A Residential Treatment Program In Florida PR Newswire October 19, 1999
Ramsay Youth Services, Inc. Awarded A Juvenile Justice Program In Florida PR Newswire February 7, 2000
Youth service provider to operate Fla. program.(Ramsay Youth Services Inc.)(Brief Article) Mental Health Weekly May 15, 2000
Ramsay Youth Services, Inc. Announces The Acquisition Of Charter Behavioral Health System Of Manatee Palms, LP PR Newswire August 5, 2000
Ramsay wins contract in Puerto Rico.(Ramsay Youth Services Inc.)(Brief Article) Mental Health Weekly October 2, 2000
Ramsay Youth Gets Waiver For Credit Pact Noncompliance Federal Filings Newswires November 21, 2000
Ramsay Youth Services, Inc. Announces the Opening of a Specialized Juvenile Justice Program in Florida PR Newswire February 26, 2002
Drug Rehabilitation: Ramsay Youth Services, Inc., enters the Georgia market Pain & Central Nervous System Week October 14, 2002
Ramsay Youth Services, Inc. Awarded Two Therapeutic Day Schools in Florida. PR Newswire February 4, 2003
Substance Abuse: Ramsay to operate residential program in Florida Managed Care Weekly Digest March 3, 2003
Psychiatric Solutions, Inc. Completes Acquisition of Ramsay Youth Services Reuters Significant Developments June 30, 2003
The situation in the correctional services market has similarities with psychiatric care and aged care. In both those being cared for were powerless, vulnerable, and lacked credibility. They could not act for themselves so could be readily misused to fuel profits.
The contracts were with government bodies which were looking for economies on the basis that private contractors could provide the same service more cheaply by introducing efficiencies. As this web site shows this is an illusion. Market processes are not more efficient in those people dependent services involving care of others. Motivated staff and time are critical for these services.
Not only are efficiencies not attainable but competitive companies have additional overheads related to market activities and to profit generation which is a primary consideration for them.
As a consequence success is attained by bidding below government’s estimated costs and so below requirements in order to win the contracts. Profits can only be attained by deskilling and understaffing and this is presented as efficiency. Those who fail to follow this path are not competitive in securing contracts and fail. The consequences are predictable.
As I have set out in more detail on another page the dysfunctional practices are carried out by people who are not deliberately malign. It is the way normal individuals respond when they find themselves in situations like this. They split their perceptions in two and put a barrier between them. On the one hand there is the public face with which the company and its employees identify. On the other there is the reality of the services provided. It is compartmentalized and never confronted. There is an impenetrable divide between two halves of a split consciousness.
Ramsay Youth Services was struggling in 2000 when the contract to run these services was negotiated. It was desperate for new contracts. This was a staff intensive and skills critical activity. The decisions made about staffing which resulted in the scandal would have been made at this time. We can only surmise that it was a case of cutting staffing costs or going out of business. That Paul Ramsay was insufficiently reflective and fell into this trap is very disturbing because Ramsay Healthcare is now moving rapidly into aged care in Australia. Similar dynamics in regard to vulnerability, costs and profitability apply in aged care.
Perhaps Pauk Ramsay was holidaying at his luxury residences on the NSW coast and took his eye off what was by now a small struggling US operation when compared with his flourishing Australian one. Hopefully he has learned a lesson. It would be doubly worrying if he were a party to these decisions.
The divide in perceptions within Ramsay Youth Services is revealed when company statements and aspirations are contrasted with what is revealed in their operations - the poor salaries, deskilling and rapid turnover of staff who were poorly trained. In this instance the nature of the physical restraining often needed in correctional centres resulted in a predominance of young male employees. Cost constraints ensured that they came from the bottom of the social pile, had a high turnover, and that people with poor past employment and even criminal records were employed. This is what happened in aged care in the USA and to a lesser extent in psychiatry.
The scandal broke in a high security centre for female teenagers. Experience in psychiatry and in aged care indicates that an exposure like this very probably represents the tip of an iceberg of dysfunctional practice.
These were lonely, isolated and disturbed teenage girls who had indulged in criminal activity. They were away from their homes, family, friends, and the opposite sex. They were subjected to a fairly harsh disciplinary reform program. The male carers were not much older. It is not surprising that there was sexual predation, that the girls led the men on and traded favours for sex, or that in the resulting milieu some of the girls were injured by robust restraint. In this situation oversight processes found services to be substandard and eventually a grand jury investigation was set up.
In the reports there is no indication that either the authorities or the grand jury understood the dynamics of the underlying marketplace situation. As in aged care they seem to be regulating and patching the service rather than revising and restructuring the system in order to remove the market pressures. Government authorities typically planned to continue the contract and expressed confidence in Ramsay. I do not know the ultimate outcome.
Extracts from the press tell the story better than I can.
The company’s side of the divide is put in their own statements. Note the references to cutting costs.
As an organization committed to serving the special needs of female juvenile offenders, we are excited to provide a quality program that will enable each girl to receive the treatment, academic, vocational and life skills they need to be productive in society."
2002 The company's perception
Ramsay Youth Services, Inc. Announces the Opening of a Specialized Juvenile Justice Program in Florida PR Newswire February 26, 2002
Ramsay Youth Services doesn't care if you're a rebel with or without a cause. The company provides youth services, primarily through contracts with state and local government agencies trying to cut costs by privatizing juvenile social-services programs. Its rehabilitation programs for young people with behavioral or psychiatric disorders, substance-abuse problems, and developmental difficulties are offered through inpatient facilities and group homes, as well as through outpatient programs. Services for adults are provided at a limited number of locations. Ramsay has operations in ten states (primarily in the South) and Puerto Rico. Chairman Paul Ramsay owns more than half of the company.
2003 Breadth of the services
Ramsay Youth Services, Inc. - Hoover's Company Capsule. Hoover`s Company Capsules July 2, 2003
An article "Last corridor of hope" in the local Florida newspaper in August 2000 is positive and clearly has considerable management input. It describes the girls, the facility where they were "warehoused" and the reform regime as probably seen by management, by regulatory authorities and perhaps much of the community. It paints the picture and one can more readily understand what happened.
One wonders if, in this harsh and rigid structure of penalties and rewards, the girls could find any semblance of human empathy and warmth to encourage the development of meaning and values in their lives - any sense of community - anything to motivate them - any way of achieving the stated goal of making them "productive in society".
This leads one to speculate whether in the light of this recent 2003 track record Ramsay’s aged care facilities in Australia will provide homely and empathic involvement with the frail elderly by permanent and familiar staff. This is critically important in giving them some meaning at the end of their lives. To do so staff require not only adequate time to meet with residents but the rewards which come from the acknowledgment of dedication and service.
As in correctional services empathic involvement does not occur when staff are poorly trained, low paid and overworked, especially when there is a high turnover rate. In practical terms providing care means that money paid for care is spent on staff and not diverted to shareholders - with the pretence that reducing staff skills and numbers is efficiency. Which path will Ramsay follow if it finds aged care is not as profitable as it hoped.
I have rearranged illustrative extracts slightly.
The Florida Institute for Girls, or FIG, is barely visible amid warehouses and mounds of fill near the South Florida Fairgrounds. The facility's low profile belies its significance: It is the first maximum-security prison for girls in Florida and one of only three in the nation. The prison opened in April and was at full capacity, 50 girls, by June. Construction to double its size is under way.
2000 The Florida Institute for Girls
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Did she make the bed each morning in her tiny room? Did she finish her schoolwork? Did she respect the staff and the other girls?Or did she lose points for cursing? Fighting?
Her life has been reduced to a rigid schedule of mandated behavior in the state's only maximum-security facility for criminal girls.
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The clatter begins a few minutes after 5 a.m. Doors slam, chairs scrape across concrete, girls shout at one another. Under the glare of fluorescent lights, they shower and pull on shorts and T-shirts for calisthenics.
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Still, every touchstone of teen life is gone. There is no makeup. No fancy hairstyles. No TV. No CDs.
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Every time Monique cut herself, she was put in restraints, her hands tethered to her body. They restrained her four times in 24 hours. In the two weeks since, she has cut herself only once, Layne says.
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FIG director Jacque Layne lectures a girl in one of the confinement rooms. The 18-year-old will be there overnight: she charged though a classroom door left momentarily ajar and attacked a 14-year-old. Layne tells her she is "this close" to being sent to adult prison.
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The people on the treatment team hold a girl's future in their hands. They can make her repeat orientation. They can advance her to the next level of responsibilities and rewards: Secret deodorant instead of generic, Cokes, videos on the weekend. Even a single photograph of family, to keep in her room, must be earned.They send the judge a monthly report: A girl's progress determines her stay, typically 18 to 36 months.
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The girls want sympathy, their counselors say. They want to feel important. They want attention.
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The 13- to 18-year-olds here flunked out of other programs for juvenile offenders. They assaulted staff or other girls or ran away only to be arrested again. Four are murderers. One robbed a sandwich shop. Another sexually abused a handicapped 7-year-old.
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On the wall in one of the dorms, there is a wipe board with a handwritten message: Think Before You Act. But the girls are all emotions.They veer from violent outburst to sweet flirtation. They saunter like thugs, then fuss like toddlers.
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"Boys get in trouble because of their behavior. Girls get in trouble because of their relationships," says FIG director Jacque Layne. "It's the most god-awful mess. You peel a layer, you find another layer."Originally planned as a halfway house for boys, the facility was given a new purpose as juvenile justice officials grappled with one of the fastest-growing problems they have: dangerously criminal girls.
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Before FIG, girls who were violent felons or repeat offenders were put in programs ill-equipped to deal with them or sent to adult prison. By failing to address their special needs, say Layne and others, the system turned out irredeemable criminals.FIG is a ground-breaking attempt to change that, its creators say.
The institute combines, for the first time in Florida, maximum- security detention through age 21, if needed, with treatment tailored to girls.
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The people who work at FIG are social workers and therapists, special education teachers and doctors, military veterans and former prison guards. They all say 50 girls are harder to deal with than hundreds of anyone else.
Last corridor of hope St. Petersburg Times August 20, 2000
The Florida Institute for Girls opened in April 2000 and was praised as an innovative way to treat the state's most troubled and violent female offenders ages 13 to 21. National consultants helped to design the treatment programs at the girls-only, high-security center, only the third of its kind in the country.
2003 Background
Judges from across the state send girls to the specialized center near the South Florida Fairgrounds.
SEX, ABUSE COMPLAINTS SPUR PROBE AT GIRLS FACILITY SITE FOR TOUGH JUVENILES INITIALLY PRAISED The Palm Beach Post June 17, 2003
Extracts from some of the many press reports describing what was exposed in 2003 tell the other side of the story and what was actually happening.
A grand jury will investigate the state's only maximum-security facility for girls following reports of inappropriate sexual contact, improper use of physical restraints and excessively long stays in isolation units.
2003 The scandal breaks
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Barbara White, who heads the Juvenile Division of the Palm Beach County Public Defender's Office and represents many inmates at the institute, said she wants the state to look into the training and qualifications of the therapists.
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The Department of Juvenile Justice contracts the management of the institute to Ramsay Youth Services Inc., a for-profit corporation based in Coral Gables. Ramsay runs similar facilities all over Florida, several other states and Puerto Rico.
SEX, ABUSE COMPLAINTS SPUR PROBE AT GIRLS FACILITY SITE FOR TOUGH JUVENILES INITIALLY PRAISED The Palm Beach Post June 17, 2003
When the state's only maximum-security prison for girls hired Jason Crawford in August 2001, he had a high school diploma and some experience with juvenile offenders.
2003 Staff issues
He was 23, only a few years older than the troubled girls he was paid $8.50 an hour to supervise and mentor.
Bosses at the Florida Institute for Girls in suburban West Palm Beach did not know the state Inspector General had faulted Crawford for using excessive force with male offenders in his past job.
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Crawford was arrested less than a month after he was hired by FIG, accused of fondling a 15-year-old girl. He denied molesting the girl, but is serving 18 months' probation for a lesser charge.
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That troubling pattern prompted Palm Beach County State Attorney Barry Krischer to announce a grand jury investigation last week. He hopes an in-depth review will help find the underlying reasons FIG has employed some dangerous and unqualified staffers. Juvenile justice officials agreed last week that neither Crawford nor William Likely, a second guard with a history of improper use of force, should have been hired.
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The most disturbing incident for FIG officials was the arrest of Larry Curry, accused of having sex with a 14-year-old and 18-year- old in the staff bathroom. Arrested in March 2002, Curry faces several felony charges and up to 60 years in prison. He has entered a plea of not guilty.
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Around the time most of the incidents occurred, as many as 18 of about 75 youth care positions were vacant, Layne said. Staff turnover averaged 60 percent a year.
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There is no one explanation for the sexual misconduct, Layne said. One of the guards seemed calculating, predatory, she said. Others were "stupid and immature" and took advantage of girls who were blatantly sexual around them.
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But for now, the department has confidence in Ramsay, the publicly traded company that manages the girls prison, Olson said. DJJ opted last month to renew Ramsay's $5.2 million annual contract for three more years. The company holds its profit margin to less than 10 percent, and FIG's numbers so far have been below that, Layne said.
PROBE PUSHES PRISON'S HIRES INTO SPOTLIGHT The Palm Beach Post June 22, 2003
The state Department of Juvenile Justice has been making changes to prevent inappropriate sexual contact between staff and the 13- to 21-year-old inmates at Florida's only maximum-security prison for girls. An upcoming grand jury investigation of the accusations at Florida Institute for Girls should add even greater protection for the troubled girls.
2003 Underpaid and poor staff - poor care
Last year, state inspectors barely rated the institute "acceptable." Ramsay Youth Services Inc., which runs the prison, had failed to meet state standards for staff training and managing the offenders. At least seven staff members have been fired for sexual misconduct with the girls. Two of them have been arrested since Ramsay began running the prison in April 2000. The prison's executive director, Jacqueline Layne, conceded that background checks sometimes were incomplete and that agency officials were desperate to fill a large number of vacancies. "We just simply were trying to get folks in."
GIRLS PRISON IMPROVES, BUT WILL REFORMS LAST? The Palm Beach Post June 26, 2003
The state's top juvenile justice official visited the detention facility where in the past month two teenage girls have sustained broken arms while being restrained by staff members, saying he had a "heartfelt responsibility" to examine conditions at the troubled institution.
2003 Training deficiencies and low pay
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Still, training required for guards at the facility does not differ from that required for guards at facilities for lower-risk adolescent inmates, south region facilities director Darryl Olson said. Because the guards work for a private company - Ramsay Youth Services Inc. - they are not required to be certified.Pay for guards, who must have a high school diploma, starts at $8 an hour, said Olson. The turnover rate is steady, Olson said. Sixty- five percent of the guard staff has worked at the facility for less than a year.
Ramsay, a for-profit corporation based in Coral Gables that runs similar facilities all over Florida, also is working on a plan to address problems at the institution.
TROUBLED GIRLS UNIT EYED FOR CHANGES The Palm Beach Post July 19, 2003
Will (almost) 70 year old Paul Ramsay read these events clearly or will he maintain the divide between what he professes and what he sees on the ground? Will he continue to see market mechanisms and managed care with its impersonal contracts for services at the lowest price as an appropriate mechanism for providing health and particularly aged care? Alternately will he be sufficiently reflective to understand how market forces really work in health and aged care and then respond accordingly? He did not learn from the psychiatric scandals which he was very close to, and where similar profit pressures on staffing occurred.
- - - - says Ramsay. "But I believe mistakes are a wasted experience unless you profit by them."
1995 Maybe he will?
Back From Brink And Into His Prime Sydney Morning Herald March 25, 1995
The reimbursement system in the USA is incredibly complex and there seem to be endless loopholes which are regularly exploited by corporations to rort the welfare system. It is simply how the US system works. In a system driven by incentives and disincentives rather than values and community norms the mode of operation is that if you can get away with it you do it.
It is perhaps to Ramsay’s credit that by US standards I found only one instance where Ramsay was accused of overcharging the government. By US standards this is good. The danger is that operating through incentives and disincentives is becoming the norm in Australia so that this mode of operation is readily transplanted. Ramsay employees with past experience in the USA may be asking why not.
What is also interesting in this report is that, as in Australia, Ramsay had political connections in the USA.
The fight is coming to a head over more than $5 million in Medicaid funds two politically connected psychiatric hospitals allegedly improperly received in the early 1990s.
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The case involves the now-defunct Three Rivers Hospital in Covington from which the state is seeking $4.89 million and Bayou Oaks in Houma from which $560,613 is sought.DHH claims the hospitals received Medicaid payments in which they were not entitled.
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So, DHH plans to seize the remaining $4.62 million out of Medicaid dollars owed other hospitals DHH claims were connected to Ramsay Hospital Corp. of Louisiana and Ramsay Health Care Inc., the firm that also owned Three Rivers.
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DHH action in the Three Rivers and Bayou Oaks case is the latest in efforts, which began in 1996, to recover $57 million in overpayments made to various psychiatric facilities.
DHH threatens to withhold funds :: Agency seeks over $5 million in improper payments The Baton Rouge Sunday Advocate July 19, 1998
In the 1990s Ramsay Health Care expressed ambitions to expand into Asia but it failed to find suitable targets. It has had relationships with Indonesia and China but has not bought facilities in these countries. It once owned a facility in Hong Kong.
RHC expansion in Asia has been a bit slower than expected. "We are taking a long time to find the right projects," Ramsay says. Health work in Asia depends critically on staff having modern attitudes to hygiene and sterilisation, and owners being prepared to pay whatever it costs. This has made Ramsay determined to run ventures only where he has good control.
1997 Asian activities
In Beijing, RHC is working with Macquarie Bank and the People's Liberation Army on the first new Western-style hospital in China. It is a 300-bed five-star hospital alongside a 1000-bed public hospital site. The Chinese CEO is both a general and a cardiologist and the hospital is owned by the navy. In Shanghai, RHC is negotiating with the air force on a similar project. Neither venture would involve Ramsay in big investment, but he is keen because of his military counterparts' experience in health care.
The Malaysian connection
Malaysia's Year 2020 plan provides for 20 big new hospitals. A year ago, the Ramsay group won a bid to help with the medical brief (demographic analysis to determine the surgical mix) for five 450-650-bed hospitals. Follow-on work with design and commissioning is possible. Indonesian executives were seconded to Perth's Hollywood Hospital last year and now help run Ramsay's commissioning contract in Jakarta for a newly built 160-bed hospital.Ramsay does not see much potential for hospitals in Hong Kong. A 150-bed psychiatric unit he opened there in 1984 was bought by monks three years later and converted into a retreat.
Ramsay Hitches His Star To The Public System Business Review Weekly Mar 24, 1997
The Australian public company, Ramsay Health Care, does not have an international division and it seems that most international activities have been by Paul Ramsay himself and his private companies. The press reports refer to Ramsay Health Care (RHC), the Australian listed company as operating hospitals in Germany and Ireland. Yet a search of the company’s annual reports for 2002 and 2004 revealed no mention of any businesses in Germany, Europe, Ireland or Beaumont all key words in the press reports. It must therefore be assumed that, unless the company was hiding information from its shareholders then these operations were actually by Ramsay’s personal companies.
The reports are worrying because Ramsay Health Care and not Paul Ramsay is reported as negotiating share holdings with consultants at a hospital it was developing in Ireland as recently as 2002.
Negotiation for shares, a means of aligning doctors interests with the corporation, would hopefully be frowned on by most Australian doctors. While it is not illegal and is practiced by some companies in Australia I have not found any reference to Ramsay’s doing so in Australia. This report indicates his willingness to do so in a situation where he can get away with it.
There is a vast amount written about Ramsay and his companies. I have not attempted to read it all - only a selection so may have missed something.
In the 1984 Ramsay Hospitals Pty Ltd abandoned a planned bid to buy 32% of London Private Health Group when a rival bought 14%, sufficient to block a subsequent takeover and control by Ramsay himself.
Irish newspapers report that Ramsay responded to tax incentives to companies willing to develop hospitals in Ireland and then negotiated share holdings with consultant doctors.
Ramsay Hospitals Pty Limited of Australia is to take a 32% stake in London Private Health Group. Textline Multiple Source Collection (1980-1994) January 28, 1984
1984 London
The private Australian hospital group, Paul Ramsay hospitals, has decided to withdraw its stake bid in the London Private Health Group. Textline Multiple Source Collection (1980-1994) February 18, 1984
At least eight private hospital groups are seeking to develop hospitals in Ireland following the Government's introduction of generous tax incentives aimed at for-profit hospitals. These incentives were introduced by the Minister for Finance, Mr McCreevy, following representations from private hospital developers and despite objections from the Department of Health and his own officials, according to documents released under the Freedom of Information Act.
2002 Negotiating shares with doctors
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One of the planned private hospitals is on the site of the public hospital in Beaumont, where consultants are currently negotiating the size of their shareholding in a development by the stockmarket-listed Ramsay Healthcare group from Australia.
Tax changes gave a boost to private health clinics Irish Times May 2, 2002
Ramsay’s operations in Germany seem to be by either the listed US company or one of his other private companies.
He (Paul Ramsay) is now considering an invitation by Harvard University to jointly manage a hospital campus in Germany; this could be an entry to a huge new privatisation market.
1997 Germany
Ramsay Hitches His Star To The Public System Business Review Weekly Mar 24, 1997
Ramsay Health Care Inc. An international company with a major interest in psychiatric facilities. Ramsay owns private hospitals, psychiatric facilities in Australia, USA and Germany.
1998 Psychiatry in Germany
The Players Centre for Development and Innovation in Health downloaded Nov 1998 http://www.cdih.org.au/marketplace/players.htm
Ramsay Health Care is one of the largest Australian health care groups with experience in Australia, the United States, Asia and Europe.
1999 Australian company links itself to all international operations
Company News : Ramsay Healthcare Australian Associated Press February 24, 1999
Paul Ramsay has been a global entrepreneur pursuing profits in multiple enterprises in multiple countries. He searches for commercial opportunities and then exploits them. If they are not profitable he gets out. One must assume that he has focussed on health care and television in Australia because he has been able to make them very profitable. He failed to do so in health in the USA and in television in South America, and therefore sold up.
During the 1980s Paul Ramsay owned Capital radio network and dabbled in outdoor advertising in the UK. In 1998 he is reported as still owning radio stations. His other major business is Prime Television in Australia. In 1997 Prime made a disastrous investment in Argentina - an enterprise which resulted in large losses. He also has media interests in "other countries around the world" including New Zealand.
Back From Brink And Into His Prime Sydney Morning Herald March 25, 1995
1995 Prime Television recovers from Ramsay's 1980s excesses
Paul Ramsay's regional television and media group plans to spend $217 million buying an Argentinian TV network.
1997 Into South America
Mr Ramsay's Prime Television yesterday revealed it had signed a deal which would see the broadcaster double its revenue base and triple its local audience.
PRIME BUYS INTO ARGENTINE TV Daily Telegraph November 26, 1997
He is also heavily involved in television and radio stations and recently bought $147 million worth of television stations in Argentina. Ramsay now has major media holdings in Australia and Argentina along with other countries around the world.
1998 Global businesses
Bayou Oaks and Ramsay Healthcare: Keeping up with growing needs BusinessNews February 23, 1998 http://www.businessnewsonline.com/%20Web%20Site%20Files/Feature_Business/Bayou_Oaks_Ramsay.html
INVESTORS have applauded news that Prime Television chief executive George Brown has quit his post after paying the price for the regional network's disastrous investment in Argentina.
1999 Losses in South America
The TV veteran's departure comes after the recent plunge in profits and ahead of the sale of its 50 per cent interest in the Azul Argentine TV network, an acquisition Mr Brown had championed two years ago.
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The regional telecaster posted a 98.9 per cent plunge in annual net profit in September thanks to softer advertising, expensive start-up costs in New Zealand and the loss-making Azul Television.
Argentina loss was Prime cut. The Australian November 11, 1999
After earlier denying an interest in international expansion, Ramsay bought Affinity Health. It acquired three Affinity hospitals in Indonesia. Ramsay Health Care changed their tune and claimed a new interest in foreign markets. This may have been related to maintaining share holder enthusiasm in the absence of any more corporate takeover targets in Australia.
RHC has three hospitals in Indonesia. Management say these assets are a core holding and represent a significant opportunity to grow offshore. Overseas expansion, uplifting margins from acquisitions and consolidating the aged care market represent a number of avenues to grow earnings.
Sept 2005 Ramsay Health Care goes international again
RAMSAY HEALTHCARE (RHC) $9.20 Your Money Weekly September 1, 2005
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This page created August 2005 by
Michael
Wynne
Addition June 2007
