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The page gives an overview of the rise of the
company from one hospital in 1964 to Australia's
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2005. It links to pages which explore facets of the
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(1963 to
2005)
CONTENTS
"We wouldn't be in it if there wasn't money to be made," he (deputy chairman of Ramsay Health Care Michael Siddle) said. "It makes a good profit when the occupancy is good. You have to remember there are many fixed costs."
1988 For profit health care
HEALTHY FUTURE FOR PRIVATE HOSPITALS Sun Herald October 9, 1988
Ramsay Healthcare was founded in 1964 when Paul Ramsay purchased a single psychiatric hospital. In 40 years it has grown to be Australia’s largest market listed hospital corporation. It has been very successful where others have failed. Based on an examination of the US marketplace I have suggested that success in the corporate health care marketplace is usually based on dysfunctional practices and that many of the markers of success are also markers of dysfunction.
My initial response was that either other factors operate or it is a remarkably deceptive operation. In this regard we have HealthSouth as an example of a company built on 30 years of fraud, but which, until it was exposed in 2003, seemed to behave impeccably - a model company. This gut response was because I was thinking of Ramsay Health Care as a market listed company serving institutional shareholders - but it is so only in appearance and not in practice.
Ramsay Health Care is not a true market listed company and has not been subjected to the same pressures from institutional investors. For most of its 40 years it has been privately owned by Paul Ramsay himself. When it has listed on the share market Paul Ramsay has retained a majority holding and personal control of management. It operates like a privately owned "for profit" company and some of these behave very differently.
Investors may question who actually controls a company dominated by one shareholder. The general view in the market is that ultimately, Ramsay makes most of the big decisions. Someone who recently sold a business to Ramsay Health Care says: "It's really a private company run in a public frame. It is all done in a very collegiate way; he listens to everything everyone says ... but at the end of it all, he has the casting vote."
2004 Really a private company
Old school and other ties Business Review Weekly October 28, 2004
Private for profit health care companies are not market listed. In the USA they are among the best and among the worst. This is because, on the one hand, genuinely motivated people escape the pressures generated by Wall Street investors and bankers so can fulfill their mission of care. On the other greedy entrepreneurs with criminal tendencies can exploit patients and Medicare more effectively when not constrained by public accountability.
In the past Australia’s probity requirements have constrained this latter group, but market pressures have now put our probity regulations under pressure.
Paul Ramsay is a very different sort of leader. He runs a company where people discuss and decide. Dysfunctional policies and practices are less likely to be swept under the table and out of consciousness. This is quite different to the one eyed, leader driven, US corporations where compliance with the vision of the founder or CEO is the road to personal success for staff.
Paul Ramsay displays few if any of the "closed minded" characteristics I have documented in US health care founders. Instead of dominating and controlling he has delegated. He has avoided publicity and seems to have played a low key but strong role in facilitating and restraining. He invites input and is admired rather than worshiped.
Ramsay Health Care is nevertheless very much a commercially focussed for profit company. As such it follows the money and does so aggressively. It buys and runs hospitals primarily to make money.
While Ramsay Health Care is a hard headed business, it considers that doctors are its customers and sets out to please them. In Australia Ramsay's ruthlessness has consequently not often flowed over into services and care. Care has been left to the doctors. This support of the profession has allowed Ramsay to take more money from services and increase profits without arousing their ire or seriously compromising the care they provide.
In addition Paul Ramsay's words and actions have a genuine ring to them. One can disagree with his views but he clearly believes what he says, even if he is reticent in arguing them publicly.
More than its competitors, Ramsay Health Care has successfully walked a fine line between a strong market focus and its responsibility to serve the community. It has only occasionally strayed. I argue that its success is due to its skill in walking this fine line, the failure of its market competitors to do so, and its considerable business and people skills.
Although Ramsay has been listed on the share market since 1997 its ethos, its culture and its management practices have remained intact. These have survived both good and bad times. Ramsay Health Care should not be seen as an exception but as part of a broad pattern. It operates like a privately owned company and as such its performance is heavily dependent on the character and motivation of its owner.
Paul Ramsay relinquished his total control over the company in 2005 when the purchase of the much larger Affinity Health resulted in the dilution of his share holding to 43 %. He remains chairman and his holding is dominant but not controlling. Although the company is now run by deputies his presence and aura still permeates the business. The culture he initiated survives.
Paul Ramsay and the company strongly support community projects and are philanthropic. They are closely aligned with the conservative coalition government whom they support financially, and who in turn support the private system by diverting public funds to supplement and support the health care marketplace. Ramsay has benefited more than its competitors.
In Summary, Paul Ramsay is a focussed businessman and health care is only one of his businesses. Ramsay Health Care is now a market listed corporation which he no longer controls. Its prime focus is on increasing value for shareholders through profit and growth. It has sometimes been ruthless in its dealings with its competitors and there are some skeletons in Paul Ramsay's cupboard.
It buys hospitals and provides services to make money. It does not buy or build primarily to serve the community. It builds relationships with doctors because this is profitable. It proudly insists that it has a rigid policy of selling off facilities simply because they are losing money but in fact it has sold very few. This may be because it is much more discerning in its purchases.
Paul Ramsay is publicity shy and an enigma. The company is very much Paul Ramsay's company. There is much to praise in the way he has run the company, but the market focus is never far away and there are some skeletons in his international cupboard. I am ambivalent in my assessment of Ramsay, not because he has done anything bad in Australia but because of the market focus and of the way one of his companies quite recently responded to market pressures in the USA. These web pages express this ambivalence. I hope that I have been positive when this is justified and concerned when there are reasonable concerns. I am looking for signs of potential trouble and highlighting possible risks - not making allegations of misbehavior.
Paul Ramsay is a self made businessman with multiple business interests including television, radio and farming. He opened his first psychiatric hospital in 1963/4 and over the years acquired more.
During the 1980's bubble Paul Ramsay joined Skase, Bond and other entrepreneurs in a wild debt funded growth spree creating a complex mix of interlinked global companies of which the Australian Ramsay Health Care was only a part. He expanded his television empire and entered the US health care marketplace becoming a major operator there. He listed half of his Australian health care company on the Australian stock exchange in 1988.
The 1980s bubble burst soon after. Ramsay's empire collapsed and he very nearly went the way of Skase and Bond. His influential business friends came to his support and helped him to restructure his empire. His manner and approach to the problems so impressed his bankers, Westpac that they funded this restructure and he came through it intact, although for a period he lost majority ownership of some of his companies.
Ramsay Health Care's shares collapsed and Paul Ramsay was able to buy up and then forcefully acquire all shares turning it back into a private company in 1992.
Conditions improved during the first few years of the 1990's and the local company was steadily restructured. Paul Ramsay had learned some lessons. Had his companies been true public companies, like the problem companies in the USA, or like Bond and Skase then his head would have been on the block and he might well have been forced out - but perhaps not to prison!
Click Here to examine the early years
Australian Paul Ramsay has had more knowledge and direct experience of the US corporate health care system probably than any other non-medical person in Australia. He has invested and been heavily involved as chairman of both HMO and psychiatric hospital corporations in the USA for 16 years. He entered this marketplace in 1987 and left it in 2003. These were the years of the massive US scandals.
In 2005 Ramsay chairs and controls Australia's largest and dominant health care corporation. He has maintained extensive friendships and influential contacts throughout the business and political spheres in Australia. He has consequently been in a better position to influence politicians and introduce US style medicine to Australia than anyone else and to influence political opinion in this regard. He is also in a better position to avoid the pitfalls in the US system but his commitment to for profit medicine makes this more difficult for him.
Ramsay is a secretive person and seldom makes public statements so that one can only speculate on his role and the likely impact of his recent dominance in Australian health. As criticism of US health systems mounted in Australia he remained low key about his US activities and his belief in a similar system for Australia.
There is very little public information about Paul Ramsay’s international operations in Australia. His publicly listed Australian company sold off its holding in the US companies several years ago and he has since operated these companies separately. Ramsay Health Care in Australia does not have an international division but has nevertheless had international ventures. Ramsay’s US adventures have been funded and controlled through his private companies.
Paul Ramsay's interests in health care have included the USA, Germany, England, Ireland, Hong Kong, Malaysia and China. His television, radio and other interests have gone even wider.
US style corporate health care has been criticised and under pressure in Australia. As a consequence dysfunctional practices have been constrained. Ramsay Health Care comes across as the good guy in the Australian health care marketplace.
An examination of Ramsay’s conduct in its international operations where these constraints do not occur is therefore useful in assessing its likely future behaviour when the pressures are lifted. There are a few worrying signs. One was the employment of a National Medical Enterprise (NME) executive between 1993 and 1999. NME infected much of the US system with its dysfunctional thinking.
In the USA the company followed the money. In 1998 it was in a dispute with authorities about allegedly improper payments obtained from Medicaid. The disturbing scandal which embroiled one of its US subsidiaries in 2003 is particularly revealing of its involvement is marketplace dysfunction. A grand jury investigation was commenced into a scandal involving solitary confinement, excess use of restraint, physical injuries, and sexual abuse of disturbed and criminal teenagers in an institution for rehabilitation of female teen offenders. Paul Ramsay and the company he chaired were responsible for their welfare and charged with turning them into useful citizens. This was one of many juvenile correctional and rehabilitation centres, and schools contracted to Ramsay's publicly listed company Ramsay Youth Services. Ramsay was the controlling shareholder.
The company’s willingness to deal in shares with medical consultants in Ireland as recently as 2002 should also raise eyebrows.
It is worrying that these events are quite recent. By this time Paul Ramsay should have been well aware of the pitfalls.
Because of their relevance I have written a separate page describing Paul Ramsay’s many international operations.
Update:- Ramsay Health Care acquired three hospitals in Indonesia when it purchased Affinity Health in 2005. It is once again talking about international expansion using these as a jumping off point.
Click Here to examine Ramsay’s international operations.
Since the Reagan era in the USA, and during the 1980's right wing think tanks across the word had been developing the economic and management theories commonly called economic rationalisation. By the beginning of the 1990s federal labour and state conservative governments were seeking to restructure health care as a primarily commercial corporate enterprise. Contracting with private for profit companies to run public services became an unchallengeable good and the US system the example to follow. Health care corporations in that country had become enormously wealthy and within this framework profitability was seen as evidence that this was successful. Paul Ramsay had close ties with influential people and one can speculate that he played a significant role in pressing for the commercialisation of health.
Because of the late 1980s health care corporate failures (including Ramsay) there was initially little interest in investing in health in the Australian business world. Between 1990 and 1998 attempts were made to entice US multinationals into Australia. As this became untenable interest turned to existing Australian corporations which by 1994 were recovering. At the same time private health insurance rates had started to fall and things were looking increasingly bleak for hospital groups who were dependent on private insurers.
A steady stream of government funding for companies contracted to run privatised public hospitals offered them a way out. Companies became over enthusiastic about the prospects which were soon seen as a pot of gold. They were unrealistic in their belief that they could provide the same services at a much lower cost than government and still make a profit.
The development and failure of policies to privatise public hospitals and to piggy back new private hospitals on public hospital campuses (called colocation) and their ultimate failure are described in a separate section of this web site and details are supplied on those pages.
Ramsay Health Care was more enthusiastic than most of the other companies. It was the only company where privatisation really helped through the difficult years of the late 1990s.
In 1994 Ramsay Health Care was successful in buying and turning two big veterans hospitals into private hospitals and then contracting to care for veterans and their families. These were both very profitable and supported the company through the difficult 1990s until the decline in private health insurance was reversed.
Its enthusiasm for the privatisation of public hospitals was tempered by some common sense. It was regularly underbid and so secured only one privatisation which generated little profit and was spared the massive losses sustained by its competitors.
Ramsay tendered for and secured a number of colocation contracts across Australia but enthusiasm for these rapidly withered. They were either abandoned or else Ramsay withdrew from the contract.
In the end Ramsay built two colocations, one in Sydney and one in Adelaide. Both were much more costly to build than anticipated. One continued to sustain losses and was sold but the other became profitable. It acquired Westmead, a further colocation in Sydney when it mounted a hostile takeover of Alpha Healthcare in 2001. It was profitable.
Click Here for an account of Ramsay's privatisation program and why it worked for them and not for others.
It was not until near the end of 2000 that government changes to private insurance translated to a higher insurance rate and more profits for hospitals. During this period the veterans hospitals generated a large share of Ramsay's profits helping to sustain it.
The importance of size and leverage in securing reimbursements from insurers became increasingly important following the partial introduction of competitively negotiated managed care contracts. Mayne Health concentrated on size whereas Ramsay and Healthscope concentrated on leverage. Leverage proved to be more effective during negotiations and was one reason these two did better. They were better positioned to benefit from the new boom in health care when it came.
The benefits of a strong profit stream translated into a higher share price, and the ability to raise more capital from the market and loans from banks. This was a sector where success was characterised by growth and where size and leverage were critical in negotiating profitable contracts with insurers. This resulted in a flurry of mergers and takeovers with rapid consolidation of the industry and an absorption, of smaller individually owned for profit and not for profit enterprises without leverage, into corporate enterprises by purchase or some sort of joint venture. Without leverage these smaller groups could not survive.
Ramsay Health care had developed a policy of only buying hospitals which fitted its strategy and which would be profitable. The company bought for profitability and not to meet community needs. During this period it steadily bought individual or small numbers of hospitals. Equally importantly it expanded bed numbers and increased services at existing hospitals to increase their leverage and profitability.
In 2001 Ramsay capitalised on Alpha Healthcare's weakness following the collapse of its dominant shareholder, the US company Sun Healthcare. Ramsay reached a deal with Sun's liquidator and another major shareholder which put the remaining shareholders in a position where they were forced to accept what they felt was a well below real value offer from Ramsay. They believe this was deceptive and anticompetitive. They are pursuing the matter through regulators and the courts. The 8 hospitals acquired from Alpha proved very profitable.
During the period when the market was recovering Mayne Health which owned half of all for profit corporate hospitals suffered from the antagonism it had generated in the medical profession and their rebellion against the changes introduced by Peter Smedley. Their doctors shifted their practices and patients to other hospitals often Ramsay or Healthscope who capitalised on this. Mayne sustained massive losses and after struggling to catch up they sold their hospitals in 2003. Ramsay Health Care's $800 million bid to buy the hospitals was pipped by a Citigroup led consortium.
In 2004 Ramsay Health Care acquired another 10 hospitals in a takeover of Benchmark.
Since about 2002 Ramsay had been talking up the potential of the untapped aged care marketplace which they felt was "ripe for consolidation" and provided opportunities for profit and growth. Others have doubts about this potential.
Once again the company was very choosy about what it would pay for nursing homes. Aged care owners were not prepared to accept what Ramsay offered. Growth in aged care was consequently slow and interrupted by other takeover activity. Frustrated by this Ramsay obtained licenses for new beds and is building its own nursing home facilities. It purchased a home care group and then later a nursing home company in Victoria. It tried repeatedly to purchase the large Moran nursing home group. The Moran family agreed but the banker, AMP which owns the facilities and leases them to Moran has refused to sell.
The frail elderly have no market power and in the USA they have been the victims of corporate greed. The aged sector is commonly squeezed by government funding systems. The conduct of the various Ramsay companies' in the USA, in psychiatry and particularly the care of disturbed teens for whom a Ramsay company was responsible is relevant to assessing possible future problems here. In both situations the "patients" were vulnerable and powerless.
Click Here to examine these years in greater depth.
Ramsay Health Care owns 72 private hospitals and five aged-care facilities in NSW, Victoria, Queensland, South Australia and Western Australia. It owns three hospitals in Indonesia. Its business divisions are veterans' hospitals, rural medical-surgical hospitals, psychiatric hospitals, rehabilitation and co-located hospitals. With more than 7000 beds, Ramsay Health Care employs more than 20,000 people. It is Australia's largest private hospital group.
Oct. 2005 Ramsay profile
Ramsay Health Care The Sydney Morning Herald October 11, 2005
Affinity Healthcare was formed by a venture capital supported management buyout of the hospitals of Australia's largest hospital owner, Mayne Health. These new owners had planned to float the company after a few years of making Mayne's old hospitals profitable. The boom in public floats which occurred in 2004 was too soon for them and it began to fade in 2005. Affinity had also had some difficulty in securing the transfer of hospital licenses in New South Wales. Affinity decided to float before the interest in floats disappeared.
Institutional investors were unsympathetic to Affinity's proposal, so opening an opportunity for Ramsay to buy the hospitals. Ramsay seized the opportunity paying $1.4 billion, $600 million more to buy the hospitals in April 2005 than it offered in its failed bid in 2003.
When it had finished resolving issues with the ACCC Ramsay owned about 70 hospitals comprising 27% of the private health care market. Five years ago it owned only 15 hospitals. It has grown by a factor of 5.
Ramsay was required to divest 19 hospitals, 14 sold to Healthscope and 5 to not for profit and individual private operators. Healthscope now owned 17% making this a two corporation corporate marketplace.
As over half of all private hospitals are still not for profit this means that Ramsay represents over 50% of the for profit corporate sector. In the process Paul Ramsay's controlling 51% stake has been diluted to 42% and the company is heavily indebted. While still dominant and chairman, Ramsay no longer controls the company. The institutional investors and the banks have a much greater influence and they will be looking after their financial interests.
In a not for profit cooperative system rearranging the players would probably have little long term impact as power is less important. In a competitive marketplace where political influence and confrontation with insurers are central to the competitive operation, a change in power of this magnitude must result in a dramatic change in the dynamics of the situation and have flow on effects. The 40 insurers many of them small will be forced to respond accordingly.
The other major consequence will be for the not for profit and small private operators who will be heavy losers in a market where leverage is all important, unless the government steps in to protect them
Ramsay's thinking will profoundly influence the thinking of the private health sector. The purchase of Affinity Health is examined in more depth on another web page.
Click Here to explore the purchase of Affinity Health by Ramsay Health Care.
Paul Ramsay, Pat Grier and the other managers are hard headed businessmen and they are in health care in order to make money. Health is only one of Paul Ramsay's money making enterprises. Ramsay Health Care is the vehicle they use in health care. Profits come from the action of doctors in bringing and ordering treatment for the patients from whose insurers the money comes.
All groups may get a nice fuzzy feeling about serving the community, helping patients and filling a needed place in society. These ideas and the positive identity they bring, can motivate, and can certainly influence the way staff and even leaders behave but this is not why they are there. The profit motive drives the process and largely determines how conflicts are resolved.
Big corporate business is a hard headed and ruthless endeavour where the weak go under and the strong and manipulative prosper. Ramsay Health Care's hard headedness has not yet spilled over into its dealings with doctors and their patients.
Paul Ramsay and Ramsay Health Care's hard and ruthless edge is displayed on a number of occasions.
The way Ramsay dealt with his company's own shareholders was criticised when he privatised the company back in 1992.
Alpha Healthcare share holders were bitter about what they consider to be the aggressive and manipulative way in which Alpha's long term supporting shareholders were treated when Ramsay Health Care mounted a hostile takeover in 2001.
Ramsay's aggressive and hard nosed battle with insurer NIB in 2002 is another illustration of the ruthlessness of market processes but in this case it was the patients, to whom both owed a duty of care, who were squeezed and misused to pressure the other in the battle.
These matters are routine in the corporate marketplace but the NIB dispute illustrates how easily market processes spill over into the care of patients. The question this web site asks is whether this is the right context, and whether the people who operate and succeed in this context are the sort who should be caring for citizens when they are ill and vulnerable.
Click Here to explore these examples of corporate behaviour
In evaluating Ramsay Health Care's business policies and the people involved it is worth looking at the gap between market theory and the "market in action" in health care. Market theory is all about one set of people competing to sell a better product or service, more cheaply on a level playing field to informed customers who bear the costs and have choice. Because customers shop around, have insight and interest they keep prices down and maintain quality. The benefits it is claimed come from this competition. It is a mechanism which in the past was filtered by humanity and understanding at the interface with people. Businesses were closely connected to the community and its expectations.
As markets and products become more complex and are broadened to embrace more and more of society other factors like marketing, leverage, dominance, political support, credibility, customer's knowledge and their time play a greater part. Competition is less about quality and cost. In some areas customers are less discerning and cannot spare the time to shop around. Size and centralised administration combined with training in customer relations ensures that our humanity becomes more distant, instrumental, and manipulative. Patterns of thinking are developed to make all this, not only legitimate, but desirable.
In health care these trends have virtually turned competition theory on its head. Not only are patients often not the customers but they don't pay for the services themselves. They are dependent on the good will of doctors and insurers for this. For these reasons competing successfully on the basis of service and cost too often ends in failure and does not bring success.
Success comes from avoiding competition and influencing the doctors and the insurers who stand in for the "customer" by coercion, reward or power plays. All groups have their own market interests and priorities. Patients and their illnesses become the profit bodies, and each groups makes money from their misfortunes. Increasingly profitability determines the way patients and their illnesses are treated. Each participant in the health system is under pressure to manipulate the system and the care given for their personal gain. If they do not do this successfully they go under and those who do prosper.
Obviously in real life it is not as stark or simple as that. Some humanity remains and the majority of the health professions still gain personal satisfaction from providing good care ethically. In the marketplace both humanity and the health professions sometimes stand firm as other groups exert pressure on them. There is also a limit to the number of medical disasters the community will tolerate.
Ramsay and Healthscope have prospered because unlike their competitors they have both realised that success comes from avoiding competition, keeping doctors on side by attention to staffing and working conditions, and by using leverage and size to force more money from insurers.
Ramsay and Healthscope would argue that all of that benefits patient care and that market competition is working. This is not true because it has little to do with competition and any benefits are byproducts from avoiding competition and from limiting efficiency to allow room for some humanity. We can use the concept of leverage to illustrate what happens.
In the market good service comes to depend on the forces coming from a complex system of impersonal levers, many of them driving away from care. Ultimately, successful care depends on those people at the heart of the system maintaining dedication, enthusiasm and commitment. They use the leverage they have, to make service to these unprofitable attributes relevant for the corporation. What happens represents the balance of the levers towards these attributes and the heavy commercial pressures away from them. Once again our humanity softens the harshness.
Doctors control the income generated by the hospitals and this gives them leverage. While they maintain, financial, career and cognitive independence they can resist pressures and exert independent leverage. Controlling doctors and eroding the leverage that they exert can be very profitable for corporations (see also the influential views of Joseph Califano).
Unlike Mayne Health, Ramsay has recognised the leverage doctors have and also the importance of humanitarian motives for other employees in the health system. It has tried to walk a fine line between market pressures and the humanitarian culture of employees.
Wouldn't it be more sensible, cheaper and efficient to provide care in a simpler way? Even some of those in schools of management recognise that empathic groups motivated to provide services to suffering humanity can do it better.
Only churches seem able to run hospitals efficiently. But why would any corporation want to compete in an industry dominated by not-for-profit, tax-free, church-run enterprises on one hand, and a free-for-all public system on the other?
June 2004 For-profit and not-for-profit
--------------------
Operators end up competing on price against the churches, but still have to generate a return.So why is Ramsay Health Care doing so well?
-----------------------------------
"By avoiding big private hospitals in highly competitive markets, Ramsay avoids church-run hospitals and regains the upper hand in negotiations with health funds," Finch (Market observer Nigel Finch, adjunct lecturer at the Macquarie Graduate School of Management) says.
Ramsay Health defies the odds Sunday Telegraph June 13, 2004
Grier maintains, however, that it would damage the company financially and culturally if management chased only the dollar.
May 2004 Balancing for ultimate profit
-------------------------
"It's very much a balance and it starts with people; patients, doctors, nurses and staff, so therefore you start with the good people, get them on side to do the right thing; good management then generates efficiency, the doctors are our partners, it's all a big balancing act to finally come out with a profit on the bottom line."
Ref In The Private Hospital Scrum Australian Financial Review May 28, 2004
Paul Ramsay, a businessman with many commercial interests, is the dominant and controlling figure in Ramsay Health Care. He shuns publicity but in his personal life is gregarious, likeable and influential. He comes from a prosperous catholic background and is loyal to his school and fellow students. Unlike the founders and CEOs of many other health corporations he does not drive his employees but motivates them. His senior management have been with him for many years and some are old school friends. He allows others to lead the discussions but ultimately makes the decisions. His staff admire him.
Patrick Grier, a Zimbabwean has been with Paul Ramsay for many rears and is a great admirer of his management style. He is the enthusiastic public face of Ramsay Health Care and is rather more aggressive in his market focus than Ramsay seems to be. There is no doubt about his motivation or pride in the company's achievements. Ramsay is aging and Grier is likely to play an increasing role in managing the company.
Because this company operates like a private for profit company the personalities and policies of the principle participants are critical for its operations and the reason for its success. I have therefore devoted a separate page to them.
Click Here to learn more about Ramsay and Grier.
Business Policies and Practices
Like Healthscope one of Ramsay's key but unstated aims was to avoid competition. It did so by buying where there was little or none, first in psychiatry and later rural hospitals.
During the fall in private insurance numbers in the 1990s Ramsay Health Care sought successfully to diversify its sources of income, by winning contracts to privatise veterans and public hospitals. Care was paid for by the federal government so providing a steady steam of money to buffer its portfolio of private hospitals.
During the latter part of the 1990s and the 2000s leverage and size became important considerations in negotiating prices with insurers. Ramsay grew rapidly and bought strategically to secure leverage.
Ramsay Health Care also concentrated on close links with teaching hospitals, and on providing key services. It spent large sums upgrading key hospitals to make them "must haves" for insurers so enhancing the company's leverage.
Grier has been very enthusiastic about the company's move into aged care although some analysts are doubtful about the move.
Ramsay Health care has applied strict profitability provisions to all of its purchases and to its privatisation contracts. As a consequence it secured few privatisation contracts from state governments and few hospitals lost money. It boasted of its policy of selling any hospitals which were not profitable. It actually sold very few
One of the major differences between Ramsay Health Care and other corporations is its management of staff and doctor relationships. It operates like a 1950s US company adopting a rather paternalistic approach. It ensures that employees are contented in their work and remain motivated and satisfied. As a consequence there is loyalty among senior and junior staff. Some have been with the company for many years despite better payment elsewhere. It adopts similar strategies with doctors and ensures that their needs are met. Employees feel that their humanitarian mission is not restricted.
Ramsay has been successful in walking the fine line between pleasing staff by providing opportunities for good care and applying sufficient cost constraints to be very profitable. Good relations with staff makes this possible. Interpersonal relationships have been a major factor in Ramsay's success.
Paul Ramsay has had very close political and business friendships and has been a big donor to the coalition government. It is likely that he has had a strong behind the scenes influence on government health policy.
These matters are important in understanding the way the company operates and why it has been so successful. I have devoted a web page to exploring the issues.
Click Here to explore Ramsay Health Care's business policies and practices.
Paul Ramsay is nearing 70 but remains very active. He and his legacy are likely to have a continued impact on the company and so on health care in Australia.
In assessing his likely future impact on Australian health care we can only look at the pluses and minuses of his international and local conduct.
On the negative side is his strong support for the introduction of some dysfunctional US practices like managed care (he owned US HMOs at the time), the way his businesses follow the money, the ruthlessness of some of his business dealings, and some worrying information about his companies international practices.
On the positive side has been Ramsay’s overall track record, his old fashioned staff dealings, the corporate culture he promotes, the positive reports about his character, and his retention of a controlling interest in his companies so shielding them from the full pressures of institutional investors.
That Ramsay is far more reflective in his approach to health care acts as a break on his more enthusiastic market employees. He has steered a moderate and balanced course - as much as that can be said about any health care corporate giant.
Overall then the assessment of Paul Ramsay and his companies is guardedly positive in spite of recent concerns that arise from his international operations and some of the statements by his deputy, Pat Grier. Overall he has been a restraining influence.
We can be concerned about Ramsay's reduced share holding and so of control. After Ramsay’s departure his personal holdings may be dissipated and personal control lost. Institutional investors and banks will have a far greater influence and his successors may not be so willing to resist these pressures.
The share market looks for gains from growth by takeovers and mergers. There are no more takeover targets in Australia. As a consequence private not for profit groups, weakened by their size and poor leverage will be increasingly targeted by Ramsay and Healthscope. Unless government and the community take steps to protect them, this sector is likely to decrease rapidly and become irrelevant.
Ramsay Health Care operates within a market system which values money above care and like all market companies is subject to periodic market pressures. Vigilance and careful oversight is required, particularly as Paul Ramsay's influence declines.
Web Page
History
This page created August 2005 by
Michael
Wynne
Minor modifications June 2007
