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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 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. Any comments made are based on the belief that there is some substance at least to so many allegations.

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Content of this page
This web page contains a selection of my correspondence with federal and state authorities at the beginning of 1999 before the major problems in aged care in Australia were recognised. The thrust of the material was an objection to the US company Sun Healthcare entering the Australian aged care marketplace. Sun Healthcare was soon in trouble and never did so.

The interest in this material is in looking back to see the comments about the system made by the minister's departments and my concerns about the practices and policies being introduced into Australia 7 years ago. The failures were predictable, they were predicted and authorities were warned. After multiple scandals they are still in denial.

 Australian section   

Correspondence about Aged Care 1998/9  

  

CONTENTS


Background

I found it interesting to look back at my correspondence with the government in regard to aged care in early 1999 - in light of what has happened in aged care in Australia during the last 6-7 years. This was a year before the failures in the aged care system were exposed in the Riverside scandal. At the time I was aware of the community backlash against the 1997 aged care policies and the government's back down. I was not aware of the other allegations of serious problems. I had not studied the sector. The issues I raised then are relevant to what has happened since.

Sun Healthcare, a nursing home company which the information I had suggested had built its empire by underservicing the frail aged and by overservicing step down care patients in its nursing homes entered Australia in late 1997. It bought a dominant interest in Alpha Healthcare and a controlling interest in 6 small Moran hospitals. At the time I had collected material and supplied it to the Foreign Investment and Review Board (FIRB) and to state authorities.

The company was buying into pathology and planned to enter aged care. Both were within Dr. Wooldridge, the health minister's portfolio. He disclaimed jurisdiction claiming this was a state issue as the company was buying hospitals. NSW, the state where Sun's operations would be based objected to Sun's entry into Australia. FIRB investigated but refused to release its final advice to the minister. FOI documents with many deletions show that it was qualified. The Health minister's junior colleague the deputy treasurer made the final decision. He overruled the NSW objection allowing Sun into Australia. Dr Wooldridge announced plans to revolutionise hospital care in Australia by introducing step down care.

Information obtained from FIRB under FOI late in 1998 indicated that Sun planned to enter aged care in Australia and its expertise had been one of the positives in Alpha's correspondence urging the FIRB process to allow them in.

I then lodged objections to licenses with the pathology licensing body and with the aged care licensing authority, using the address I had used in previous correspondence. The pathology body acknowledged the material but procrastinated by referring it to a committee which did nothing. The aged care body proved to be a black hole. Although the material was sent by registered mail and accepted all requests for acknowledgment were ignored. I also continued to supply material and lodge objections to state authorities as Alpha, which Sun now largely controlled was a bidder in state hospital privatisations. I had corresponded with the health minister in Queensland.

Alpha Healthcare was the preferred bidder for a privatisation in Victoria but opponents had succeeded in forcing a probity review because of Sun's conduct. Victoria is the only state where probity has legal force and can be applied. By December 1998 it was clear that this report would be unfavourable to Sun and Alpha withdrew from the bidding claiming it was being treated unfairly. It was now in a position where it had effectively failed a probity review in one state but the federal government and the remaining states where it operated were refusing to address the issue of its probity. It was not in an enviable position.

Towards the end of 1998 and early 1999 I obtained additional documents. Instead of submitting information I decided to force authorities to respond and ask for the additional material. I also used my possession of it to enlist support to put pressure on them to respond

The first few letters relate primarily to my concerns about Sun Healthcare and its mode of operations. If you are only interested in my concerns and predictions about the processes which were being followed and their likely consequences then skip ahead to the second half of the letter to the minister for aged care dated 13 January 1999 In retrospect they are prophetic!


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Correspondence Queensland Minister for Health

In November I wrote to the health minister in Queensland in regard to the possibility that Sun might enter aged care in our state.

Nov 1998 Letter to Queensland Minister for Health

10 November 1998

The Hon Wendy Edmond MLA
Minister for Health
GPO Box 48
Brisbane
QLD 4001

Dear Minister,

Sun Healthcare

Further to my previous letter I now have additional information about aged nursing homes and particularly Sun Healthcare. This includes two hours of disturbing video, government reports and the Qui Tam court documents alleging that thousands have died from neglect.

I include with this letter a review of Sun's conduct and the allegations. You have some of the digital material and I will email the rest to you. I include here only some samples of the material referred to.

I ask that you bring this material to the attention of the minister responsible for aged care and also to Dr Lange. If there is any possibility of the government or the health department acting to evaluate licenses for Sun related facilities or to evaluate applications to run hospitals in which Sun has an interest then I would like to provide full copies.

STAFFING DETERMINED BY PROFIT:- I refer you to the file L-PressNov2/98.rtf. The awful things that are happening are a consequence of Sun's chairman's policy of "cutting the fat" in what any reasonable person would know was an already overstretched service. This is to increase profits and support Sun's massive corporate expansion. Sun has refused to employ nurses who are a nursing homes main expense. As individuals they do not generate profits. At the same time Sun has employed many thousands of "therapists". The services provided by these therapists are paid for by medicare. They are a lucrative source of income. Now that the system is to be funded differently vast numbers of these therapists are to lose their jobs.

WHO DECIDES TREATMENT:- This beautifully illustrates the way in which the care received by patients is determined by corporate profit priorities and not the needs of patients. The explanation offered by Sun is of course meaningless. The reality is that the need for therapy services is determined by the number of patients and the facilities. Sun has displayed a remarkable lack of "frankness and candour" in its dealings even with its board members and shareholders. We cannot believe them.

THE CORPORATE WORLD:- Included in the files are reports about Sun Healthcare which illustrate the corporate ethos. Business reports from Sun and other corporations are included to show the perceptual gap between the corporate controlling world and the world of those who care for the sick and aging. Genuine considerations about care do not intrude into the corporate world. Their prime concern is the profits which can be generated. They refer to practices and policies as if they had no other impact than that on the corporate bottom line. This is how they think.

I believe that all of the states should be acting together to rid Australia of this company.

Yours sincerely,

J Michael Wynne


The minister responded by referring the matter to the federal minister for aged care, At that time it was Bronwyn Bishop.

 

 


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 Correspondence with Federal Health and Aged Care

As the federal department of aged care had not responded to my material I now write to both the federal health minister Dr Michael Wooldridge and a similar letter to the aged care minister Bronwyn Bishop asking for their assistance in getting their departments to act. Dr Brand, the president of the Australian Medical Association (AMA) also agreed to take up the matter on my behalf. The AMA was also in possession of the Sun Healthcare documents. I reproduce only the letter to Dr Wooldridge here

January 7, 1999 Letter to Dr Wooldridge Minister for Health


7 January 1999

The Hon Dr Michael Wooldridge
Minister for Health and Family Services
Parliament House
Canberra
ACT 2600

Dear Minister,

Refusal to acknowledge documents. I ask you to intervene personally

I am writing to you personally because of the failure of the certification and approval section of your department to acknowledge letters and documents relating to the operations of Sun Healthcare in Australia. I ask that you should intervene personally to ensure that the matter receives attention. I have sent material by registered mail on multiple occasions for more than a year.

As you know Sun for practical purposes controls Alpha Healthcare which has indicated its intention to enter what it calls the nursing home and aged care "industry". It also controls at least six Moran facilities. Moran is primarily a nursing home provider. Sun's US statements indicate that it does now run nursing homes and/or long term care facilities in Australia. I understand that your department licences these facilities. I have correspondence from your department in 1994 in which the department boasts of the extent of its probity checks.

I am particularly concerned about this matter because it seems from the information available that a probity check in Victoria was about to report unfavourably on Sun's probity. When they were advised of this they elected to back away from their planned government contract. Victorian authorities were supplied with the same material as your department.

I believe that if the licensing authority has been changed then it would have been appropriate for your department to advise me and forward the material on.

I also supplied the same material to the Health Insurance Commission whose committee has been sitting on the matter for a year. I understand that they licence Alpha/Sun's pathology laboratories and are also responsible for policing health care fraud. Sun has been the subject of a series of allegations by US federal and state governments, as well as insurers that it has defrauded them. The federal investigation has been discontinued but in the USA such allegations are usually settled quietly out of court and we do not know what financial arrangements were made. Sun has not specifically denied the state and insurer allegations but is seeking to settle them.

I express my anxiety that corporate staff, appointed to senior positions in the HIC are exerting delaying tactics. It would not be in the interests of other corporations for there to be publicity and a public scandal about this matter. I believe that there is a conflict of interest here. To ordinary citizens like myself, it is disturbing that we now have a representative from a company with a serious criminal conviction in the recent past as chairman of the HIC. The HIC is responsible for policing and prosecuting fraud. I stress that I am not making allegations about the chairman himself or his integrity but expressing concerns about the situation. All I know of the chairman are his past public statements reported in the press and I find these worrying. They reflect business policies and practices which have been linked to fraud in the USA. They fail to reflect a genuine interest in the welfare of sick patients..

I have not written to you about these matters in the past as I understand the AMA is dealing with you and it is well informed.

I enclose a copy of my most recent letter to the certification section of your department.

Yours sincerely,

J Michael Wynne


During the following week I received a number of court documents from the USA in which Sun was accused of deliberately understaffing nursing homes and so causing patients to die. I wrote again to the minister for aging. At this time the government had initiated one of its recurrent productivity commissions, this time into aged care. For those looking at what has happened in aged care since, my 1999 comments and advice to the minister about the processes at work are of interest. The editorial from the St Jose Mercury News that I attached to the letter in support of my predictions describes the problems in California in January 1999. It could be describing the problems in Australia in 2006.


13 January 1999

The Hon Bronwyn Bishop MP
Minister for the Aged
Parliament House
Canberra
ACT 2600

Dear Minister,

SUN HEALTHCARE DOCUMENTS - WHERE TO SEND THEM

PLEASE ADVISE:- I write to you for advice. I am now in possession of detailed information relating to the court proceedings taken by 5 separate aged citizens or their families against three facilities owned and/or run by Sun Healthcare in California. I do not know who to send them to. I understand that these actions are representative of those being taken by elderly citizens and their families against Sun Healthcare and other corporate chains across the USA. It is equally clear that a large number of these actions are succeeding. There is consequently every reason to believe that the serious allegation that Sun deliberately and systematically neglected patients to boost profits, made in all these cases has substance. It is increasingly obvious that the suffering and serious complications described in these documents were a direct consequence of Sun's business practices. These court documents illustrate the concrete human consequences of these practices. They give detailed meat and meaning to the newspaper reports and senate hearings.

As I indicated to you in my letter dated 7 January 1999 Sun/Alpha/Moran have indicated their interest in providing long term care facilities which will be used by our senior citizens. In fact Sun's reports in the USA indicate that they already run long term care facilities here. I understand that the Department of Health and Family Services are responsible for assessing the probity of the providers of these facilities prior to granting licences. This department has for over a year refused to acknowledge registered documents and correspondence impacting on Sun's probity.

I am therefore writing to you as the minister responsible for protecting the welfare of the aged to ASK YOU TO WHOM I SHOULD SEND THIS MATERIAL SO THAT ACTION WILL BE TAKEN. There is little point in sending it to state authorities. A 1993 report by the WA Health department indicated that Victoria was the only state with the powers needed to address the problems created by foreign multinational health care criminals from countries where the legal system allowed them to escape criminal convictions. The court documents are far too bulky to photocopy and send to all those involved in the health debate, or responsible for health care regulation.

THE CONNECTICUT FRAUD:- I am also accumulating material about the investigations in Connecticut where Sun is accused of fraud. The information which I have is that an audit in 1993 by the department of social services into Sunrise, Sun's nursing home subsidiary disclosed numerous instances of overcharging. An inquiry was also commenced into whether false and misleading reports had been given by the company. An audit report (I think in 1995) indicated problems. In 1995 documents were subpoenaed to get more evidence.

I understand that the investigation has been finalised and that there is little dispute about what happened. In keeping with US practices a financial settlement is being negotiated. Sun will pay money in some way but will not be required to admit guilt. Sun will also be required to send a letter to all other states in regard to some of the matters.

I have not been able to confirm the accuracy of this account. As indicated above I do not know to whom I should send the documents, already in my possession relating to the investigation in Connecticut. I believe that they support the allegations of fraud made by Connecticut authorities.

To the best of my knowledge none of this additional material was available to Victoria when they did their probity assessment. I did not supply it to them.

SUN'S SEC FILINGS:- Finally I note with interest that all the filings made by Sun Healthcare to the US Securities and Exchange Commission since 1 July 1998 have been pulled off the SEC www site. I have previously examined 9 recent reports which are no longer there. While there may be a simple explanation for this I believe it more likely that these documents have been pulled because the information in them was not accurate and because the SEC believes that the market and Sun's shareholders have not been properly informed.

THE PRODUCTIVITY COMMISSION:- Finally I note that the Productivity Commission is due to hand its report on aged care in Australia to you today. The very name "productivity" reflects the paradigms being used and the likelihood that the commission's members will be drawn primarily from business, economics and management and that they will concentrate exclusively on cost savings and efficiency. Like other government committees they will very probably work within the competition policies around which Australian society is being restructured. Our health minister, Dr Wooldridge indicated in 1996 that he was restructuring health care within this framework. The commission is therefore likely to favour corporate marketplace solutions. Members might have little hands on experience in actual care and as a consequence they are likely to rely entirely on measurable outcomes. They might not understand the difficulties in quantifying "humanity" - the critical and most time consuming component of aged care.

CONJECTURE:- Sun Healthcare is likely to have followed the advice of international health care consultants. If so, then Sun's chairman and staff will certainly have lobbied politicians over the last 18 months to "exploit their pain" and offer corporate solutions to their problems. I do not know whether Sun's influence contributed to the decision to establish the Productivity Commission's assessment of aged care services. My past experience of corporate chains, and the accuracy of my predictions about their behaviour have made me overly suspicious.

STAKEHOLDERS AND THE COMMISSION:- It is currently fashionable either to appoint "stakeholders" with a direct interest in outcomes, rather than independent authorities to government bodies. These bodies will also seek input from stakeholders. It is therefore likely that the Sun/Alpha/Moran complex would have had a major input into the commission and have promoted the notion of "cutting the fat", claiming that there is plenty of fat to cut. As you will by now be aware corporations like Sun Healthcare claim credibility on the basis of their extensive international expertise. I trust that the extensive material I have sent you over the last many months has persuaded you of the fallibility of this and revealed the true nature of this expertise.

CUTTING THE FAT IN AUSTRALIA:- The idea that there is fat in the system which can be reduced is already prevalent in government and corporate administration. This is evident from a report from Australian nurses which found that in 31% of instances in Queensland nursing home staff were not replaced when they left. Extensive unpaid overtime was worked in 32% of homes. It is easy to discredit nurses by claiming self interest but the situation in the USA shows that their accounts of the misuse of patients and their bitter battles with corporate chains were soundly based. They had a lot to be unhappy about. The consequence of ignoring their whistle blowing is now only too clear.

HUMAN CONCERN:- The purpose of these comments about the Productivity Commission is to remind you that care comes from human concern and this is what motivates it. Overwork, poor salaries and a surfeit of temporary agency staff destroy team spirit and this impacts adversely on care. A management structure which fails to genuinely recognise the humanitarian contributions made by staff, which fails to address the paradigms used and which ignores the impact of the working environment cannot maintain proper care over a period of time. The consequences of profit generating management practices like these is revealed in the US nursing home situation and particularly in the conduct of Sun Healthcare.

RATIONING:- Finances for the care of our aged citizens may well be insufficient and we may have to ration services. Clearly money should be spent efficiently. Rationing and efficiency at the expense of care, simply to take more money out of the system and boost corporate profits is immoral and unacceptable.

I ask therefore that the productivity Commission's report should be carefully considered in the light of all the material which I have made available to government departments (FIRB & Health and Family Services) and yourself - including of course the court documents.

PROPER PROCESS:- I am reminded of a conversation I had with a pompous Canberra bureaucrat from Veteran's Affairs in late 1993. He boasted of his experience in making decisions, indicated that he knew all about National Medical Enterprises, did not need any more information about the fraud settlements, and that proper processes had been followed when the company was short listed to buy a Vets Affairs hospital in Brisbane. Queenslanders took a very different view when they saw the documents Canberra had refused to consider. I sincerely hope that in assessing the Productivity Commission's report common sense will triumph over "proper processes".

THE USA SEES PROFIT PRESSURES AS A PRIME CONCERN:- I enclose a copy of an article from the Mercury News in San Jose in California, the state where there is so much concern about Sun Healthcare. US parties who have studied corporate nursing home chains first hand consider removal of the profit motive as one of the critical factors in addressing the problems. The article tactfully suggests that corporations should follow the advice which Andrew Turner gave to government in 1996 and "butt out" of health care. It points to the benefits of restricting the operation of nursing homes to community groups which are motivated by a genuine desire to care for the weak and frail. This is what I have been saying for many years.

Yours sincerely,

J Michael Wynne

ATTACHMENT TO LETTER (Note this is copyright material and reproduced here as fair use)

Jan 1999 Describing in California what is happening in Australia today


Nursing homes: the final indignity
San Jose Mercury News , January 11, 1999
EDITORIAL The opinion of the Mercury News

MORE than 20 years ago, investigations of California nursing homes revealed a shameful tale of neglect and abuse. Stung into action, legislators passed laws reforming the industry and demanded that nursing homes treat residents properly.

Thirteen years ago, the Mercury News revisited the issue and found that a decade of reform efforts had failed to end conditions that made the last months of life undignified and miserable for thousands of patients. Despite some improvements, poor care and outright abuse still led to many deaths.

Then, last July, news stories showed that the suffering is still going on.

A report by the federal Government Accounting Office revealed that patients in California nursing homes are dying from malnutrition, dehydration, bed sores and other results of poor treatment.

A California nursing home inspector testified before the U.S. Senate's Special Committee on Aging that patient care has, if anything, gone downhill in recent years. She said nursing home operators hire too few staff members to provide adequate care, use political influence to avoid aggressive inspections, and fail to prevent staffers from abusing patients or demented patients from hurting each other.

Something is very wrong when the nursing home industry makes tidy profits while our parents and grandparents, our former teachers and retired engineers endure humiliation and pain in the final months or years of their lives.

There are laws in place which are intended to make nursing homes, their owners and staffs accountable. But many times, they are not enforced. Fines are waived or reduced. Abusive staffers escape punishment. Filth and carelessness are excused if operators promise to clean up their act before the next annual inspection. Some laws actually perpetuate poor conditions by giving the homes financial incentives to cut staffing and trim levels of care. And the staffs the homes do have are mostly poorly paid aides who lack adequate training.

Advocates for the elderly have many suggestions to improve this abysmal situation:

Keep as many people as possible out of institutions by making it easier for the elderly or disabled to stay in their own homes or in relatives' homes. President Clinton's long-term care proposals announced earlier this month are a small but important part of this.

Change federal and state funding formulas so that assisted living facilities, home health care and other arrangements can help more people. The On Lok Senior Health Care Facility in San Francisco is cited as a model of how a non-profit organization can provide excellent care in the least restrictive settings for poor senior citizens, when rigid rules are waived. Staff members move clients in and out of different care settings depending on what they need at the time, not on whether they fit into one bureaucratic box or another.

Increase enforcement of nursing home regulations. State and federal laws are good as far as they go, say advocates, but enforcement is poor. Fines should be collected fully and promptly. Inspections should be rigorous and unannounced, and should include evening and weekend visits. Deficiencies should be corrected immediately, under threat of sanctions.

Require more registered nurses and licensed vocational nurses per shift, and require more training and better pay and benefits for the aides who do the vast amount of patient care.

Create capital funds, or expand existing state loan programs, to allow more community-based, non-profit organizations to build or buy nursing homes. Removal of the profit motive is seen by both the National Senior Citizens Law Center and the California Advocates for Nursing Home Reform as an important route to quality care.

Government cannot do it all, of course. Most nursing home residents have living relatives who should be monitoring their conditions. Nursing home operators should either make patient care a priority or get out of the business. Employees should routinely treat the elderly with compassion. But human nature being what it is, government still has to look out for the frail, vulnerable elderly by setting minimum standards and seeing that they are met.

California's legislators should look carefully at the GAO report and the recommendations that advocacy groups are preparing this month. Then they should take action. In the not-too-distant future, some of them -- and many of us -- will be among the nursing home population. Anything they do now to ensure quality care will help; whatever they fail to do will come back to haunt us all.

Copyright San Jose Mercury News


On 2 March 1999 the chief of staff for the federal minister for aged care replied to the letter of 8 November sent to the Queensland minister for health and forwarded by her to the federal minister. Particularly interesting here are the claims made for the accreditation process and for the complaints mechanism. These should be seen in the context of the subsequent problems across the aged care sector and the the clear failure of accreditation and complaints mechanisms. See also the 2005 senate inquiry. The Riverside scandal was less than a year away.


I took the opportunity to challenge this letter by addressing the issue of probity, the failure of accreditation in other jurisdictions and the reason why both the marketplace system and their attempts to make it work would fail. I indicated the difficulties in closing a nursing home, so well illustrated at Riverside less than a year later. In retrospect these criticisms describe some of the reasons why the aged care system in Australia has failed.


9 March 1999

Mr David Learmonth
Chief og Staff
Minister for Aged Care
Parliament House
Canberra
ACT 2600

Dear Mr Learmonth,

SUN HEALTHCARE

I write to thank you for the letter on behalf of your minister dated 2 March 1999 in reply to my letter to Ms Wendy Edmond, Minister for Health in Queensland dated 10 November 1998 and forwarded to your minister on 3 December 1998. I refer also to my letters to the minister dated 7 January 1999 and 13 January 1999.

Propriety and honesty:- I note the manner in which approved aged care providers are assessed and that this seems to differ very substantially from the way in which providers were previous assessed. In a fax to me dated 4 October 1994 a Mr Rainer Perring from the Aged and Community Care Division of the Commonwealth Department of Human Services and Health indicated that approval as an operator "involves checks of propriety, honesty, financial capacity and previous experience in the industry". I ask for an assurance that probity issues, including honesty are still major and important components in the assessment of the suitability of an approved provider of residential aged care services.

It concerns me that Sun Healthcare and most of the other corporations which have indulged in unconscionable conduct, particularly in the USA would easily qualify as approved providers under the terms specified in your letter. Sun can claim extensive experience as the third largest provider of aged care in the USA. It has been enormously successful financially. Tenet/NME and Columbia/HCA are similarly the two largest and most financially successful hospital chains in the USA. All have indulged in conduct which is totally unacceptable and which I sincerely trust would render them totally unsuitable to operate in Australia. I have examined licensing regulations from the USA and the major and most critical difference in Australia is the probity requirement. This has protected us from these organisations.

Despite major deficiencies in state regulations relating to the legal ability to enforce them, this provision this has been the single most important item in the legislation protecting Australian citizens. It was used by Victoria to protect citizens from Tenet/NME in 1994 and from Sun Healthcare in December 1998. The health department in NSW advised against granting a licence for Tenet/NME in 1993 on the basis of a lack of probity. Their advice was ignored by Mr Justice Yeldham who was delegated to make the decision after the health department indicated publicly that it would not grant a licence until it was satisfied about the probity of the company. Yeldham made a decision imposing licence conditions which the department had indicated to him could not possibly offer citizens the protection which he claimed it did, and which they could not police. It is now known that Yeldham was at risk of improper influence, and the government appointing him to make the decision were very probably aware of this.

To whom should I send material:- In the final paragraph you indicate to me that the information I have supplied will be taken into consideration when evaluating applicants for aged care services. I would be grateful if you would advise me whether you are referring to the material supplied to parliamentarians or to the more extensive but unacknowledged material sent to the department of Health and Family Services.

I refer you to my letters to the minister dated 7 Jan 1999 and 13 Jan 1999 in which I asked to whom I should send material to ensure that it was acknowledged. I would be grateful if you would advise me to whom I should address material, and if it is to this department ensure that they acknowledge material. It seems inappropriate to send it all to the minister.

As indicated in this correspondence I am in possession of several court documents in which patients and their relatives make very serious allegations about Sun Healthcare's services. That there is substance to this material is shown by a US federal government investigation and a decision by the Californian state to withhold further licenses for Sun Healthcare. The case in Connecticut has now been settled for US $8.4 million and there is a vast discrepancy between the explanation given by the company and the damning condemnation of the "arrogance and avarice" of corporate executives made by the attorney general in Connecticut. Any evaluation of probity will need to decide which is the more correct interpretation. I have in my possession the auditors reports and other material used in this case which should help to confirm the accuracy of the attorney generals criticisms. If probity and honesty are no longer issues in Australia then clearly I would be wasting my time sending all this material.

Regulation and accreditation to contain fraud and the misuse of patients for profit:- I thank you for the time which you have taken to so carefully explain the accreditation and other regulatory structures which have been so carefully set in place to protect patients and which reflect the concern of the government to provide high quality care.

Regulations and accreditation have not worked elsewhere:- I do not have the expertise to evaluate the processes you describe but have very considerable reservations about the efficacy of this approach. The USA has had far more experience of corporate misconduct than any other country. They have been trying to accredit, regulate, prosecute and put in place compliance programs since the 1980's. They have been world leaders in accreditation processes. Despite the tightening of regulations after the exposures in psychiatry, chemical dependence and rehabilitation across the USA in 1991, fraud at the expense of care increased with first the revelations of operation labscam in pathology, then the exposure of Columbia/HCA, Quoram and other corporations in February 1997 and finally the revelations of fraud and neglect in aged care across the USA in June 1998. The ongoing exposure of denial of care and poor standards of care provided by managed care corporations intent on maximising profits by restricting care across the USA is legendary. It is now the subject of large numbers of television soapies. Australia is relatively inexperienced and even if as is likely you have been advised by US "healthcare experts" experience indicates that regulations would have to be unique to be successful.

Corporations and care:- Corporate entities enter health and aged care in order to make a profit and not to provide good or compassionate care. As is well illustrated in the USA, profit priorities in the marketplace conflict directly with the care requirements of patients. Corporations must expand and secure market dominance to survive. To do so they must generate a large profit. They justify this expansion by claiming efficiency and cost savings. In reality they create impersonal monoliths whose decision makers are far removed from the human dimension of care. The driving forces in the corporate system are consequently in direct conflict with the intention of the regulations to protect patients and maintain standards. The decision makers are shielded by distance from the consequences of their actions. Those corporations which are most successful in stretching the regulations to limit care or who are able to limit care without being detected will be most successful. The sociopathic features displayed by the leaders of the most successful corporations are particularly disturbing in this regard. Some have an ability to bend words and so turn unconscionable behaviour into desirable business practices.

Form versus substance:- Corporations may persuade themselves that they genuinely identify with the goals of the regulations. Corporate interests and regulators will indulge in a public relations exercise which both may believe. The US experience shows that the pressures of the marketplace ultimately triumph. A silent and unseen war of attrition between regulators and corporate interests reaches an equilibrium in which weary regulators choose to simply look the other way. Their most serious sanction, the "revocation of Approved Provider status" is hollow indeed once corporate interests control a significant fraction of aged care. No regulatory body can withstand the trauma to frail long term elderly residents and the consequent allegations of heartlessness when residents are transferred elsewhere or thrown out into the streets. (examine the Mount Carmel reports I sent the minister) The assertion that quality can be maintained by informed consumers shopping around in a competitive corporate marketplace where corporate marketing strategies exert a profound effect on community perceptions is a myth. The outward form of a corporate health and aged system is at variance with its substance.

The long term:- I have no reason to doubt that you and your minister are deeply committed to the processes which you have set in place and that you will apply them with zeal and perhaps with some initial success. You may be more successful than US politicians in resisting the pressure of corporate donations and lobbying. Corporations may also be on their best behaviour. Your positions are however ephemeral and experience indicates that your successors may not exhibit the same zeal, nor will corporations maintain their integrity.

Summary:- The essence of what I am saying is that it is illogical to set in place a competitive health or aged care system when the pressures motivating those operating the system are in direct conflict with the intention of the system. Success in a system like this will ultimately depend on an ability to find ways around regulations designed to protect citizens and the state. The situation created is the direct opposite of the "civil society" envisaged by Eva Cox. In this congruity of purpose and mutual trust ensure that regulations "rest lightly". A past minister of this government publicly supported the concept of a civil society.

A corporatised health and aged care system cannot logically work in the long term. Once a corporate health and aged care system is established it is almost impossible to turn back. Look at the USA!

Health care corporations have been exceptionally aggressive in their endeavours to circumvent the intention of regulations. They have happily defrauded government. They have placed the requirements of care second to their primary corporate responsibility to extract profits from that care. They have been genuinely indignant when their practices were challenged.

Yours sincerely,

J Michael Wynne

Attachments:- Press reports describing Sun Healthcare's fraud settlement in Connecticut Please indicate to whom I should sent the financial reports on which this case was based.

For those who are interested I wrote a web page about the importance of probity in 2001. My letter seems to have crossed a second letter from the minister's chief of staff in response to my letters to the minister briefly restating the position. One wonders how many hands were writing to the minister and her chief and whether the right knew what the left was doing.

 


I continued to correspond with various sections of the department of aged care in regard to Sun Healthcare and in the process repeated many of my concerns about the direction in which the sector was being taken. By this stage Sun Healthcare was in serious troubles in the USA. Its position in Australia had been compromised. Its homes in the USA were being closed and its share price had tumbled by 90%. I pressed these matters with the agencies. Sun entered bankruptcy in the USA followed soon after in Australia. Its hospitals in Australia were sold. Ramsay Healthcare bought the debt owed by Alpha Healthcare to Sun Healthcare. This put it in a position to force Alpha into bankruptcy and it used this to force a takeover of Alpha at advantageous rates.

During this period I received the letter below which responded to my concerns about probity. You should read it in the knowledge that at this time the commonwealth departments were looking the other way as a man with a criminal conviction operated two nursing homes in Victoria

 


I responded by questioning the utility of the concern which had been expressed

April 27, 1999 Response to letter about probity

27 April 1999

Mr Andrew Stuart
Certification and Approved Services
Residential Care Program Management Branch
Aged and Community Care Division
Department of Health and Aged Care
GPO Box 9848
CANBERRA ACT 2600

Dear Mr Stuart,

Approved providers for aged care

Thank you for acknowledging my correspondence so promptly and also for responding to the questions of probity I raised with Mr Learmonth. I appreciate that you and your department are "very concerned" that only suitable persons are approved.

With all due respect I do not believe that "concern" is any substitute for clearly specified probity requirements in the regulations - the sort which exist in Victoria. Without legally binding probity requirements corporations applying for licences or whose licenses are removed can and will successfully challenge the regulations in court. US corporate chains have in the past threatened our regulators. Because of the potential legal costs and the legal advice that such a challenge will succeed regulators will not act to protect citizens. This is well illustrated by what has happened in NSW in the past. Could it be that this reliance on concern, rather than legal process is because the treasurer has entered into free trade agreements which define health care as an industry and the terms of the agreements make probity requirements impossible to enforce?

I appreciate your position but I find it a matter of concern that the welfare of our vulnerable citizens should rely on the unenforceable "concern" of government departments, rather than the provisions of enforceable regulations. In this regard I refer you to the GAO report which I sent you and remind you that in the corporate dominated US health care industry it has been citizens and not government departments which have exposed the misuse of aged citizens for profit. While regulation in the absence of effective complementary "social control" has failed, it is essential for effective social control that the values and intentions of society be given explicit form in regulatory structures.

Yours sincerely,

J Michael Wynne


On 7 May I received a letter from another department along the same lines

 



I responded by reiterating the problems with Sun Healthcare and the serious consequences which a market system like that in the USA had for citizens. That of course is exactly what we now have in Australia and which our current minister Mr Santoro so strongly supports in 2006. The delay in replying is probably because I was away.

I supplied a large amount of supporting material in order to directly challenge any attempt to bring another US multinational into Australia. At that time HealthSouth, a company whose $4 billion fraud was only exposed 4 years later, was the only US group owning a hospital in Australia. It sold this in 2006. There was a fiasco when Citigroup briefly owned Mayne hospitals under the name of a subsidiary not known to be part of Citigroup. When a probity objection was lodged because of Citigroup's criminal record NSW investigated. This delayed licenses until Citigroup had sold the hospitals. It was only in 2006 that our new aged care minister once again welcomed a US giant, Home Instead, into our aged care marketplace.

Jun 26, 1999 Letter re Sun Healthcare and a US style marketplace


26 June 1999

Prue Karmel
Director
Certification and Approval Services
Aged and Community Care
Bowes Street
Woden
ACT 2606

Dear Ms Karmel,

Aged care licences.

I refer to your letter of 7 May 1999. Unfortunately I have no means of knowing which foreign multinational is applying to you for licences in Australia. During the last few weeks I have received a vast amount of material from the USA, particularly regarding corporate chains providing nursing home and aged care services. These companies are under extreme pressure and will make every effort to expand to countries where the health care pickings are more rewarding.

The matters raised impact on the quality of care, on corporate probity, on management ineptitude, and on financial capacity as many of these companies are threatened with bankruptcy.

You will note particularly that Sun Healthcare is one of the companies threatened with bankruptcy and has fired large numbers of staff from its already understaffed facilities. The nurses have commenced a class action accusing the company of understaffing ruthlessly and of exploiting the humanitarian commitment of staff ruthlessly for corporate advantage. They are alleged to have breeched employee legislation in multiple states. The US federal government are so concerned that they have written to all state regulatory agencies asking them to monitor standards of care in Sun Healthcare's facilities particularly closely. Arizona has advised federal authorities that they would not be in a position to protect nursing home residents should Sun and other threatened companies collapse. Patients would die. Federal Senators are debating legislation requiring financially threatened corporations to notify authorities and setting up provisions to protect patients when and if bankruptcy occurs.

I enclose a floppy disk containing two files. The smaller (66 pages) contains comments, summaries and relevant extracts from a large number of articles. The larger (400 pages) is the scratch file containing the full text of all the material. These articles have been sent to me by international contacts over the last few weeks.

Please understand my position.

Australia is a member of the WMA. In October 1993 the WMA issued the following directive:-

Should medical practitioners perceive circumstances which might adversely affect patient health, it is their duty to inform responsible authorities so that remedial action may be taken.

Should responsible authorities decline to take remedial action, reasons for the decision should be made known to the medical practitioners who reported the circumstances. Should such notification not be provided or should the rationale for the decision prove unconvincing, the medical practitioners concerned have a duty to take further actions.

By any standards the corporate "level playing field" which has been created in health care in the USA and which our minister has supported as his model for health care in Australia creates a situation which "might adversely affect patient health". The business practices and track record of Sun Healthcare clearly pose a serious potential threat to patient welfare and this is now recognised at the highest level in the USA.

I am acting within the guidelines of this directive and believe that you are the responsible authority in aged care and nursing homes.

Yours sincerely,

J Michael Wynne

UPDATE MARCH 2007

In September 2007 two Citigroup subsidiaries putchased the giant Australian nursing home group DCA. Objections were lodged. What happened makes a mockery of the assurances given by Ms KarmeL and others above. It confirmed that government had legislated to ensure that mulktinationals buying into aged care would not have their probity, let alone their suitability evaluated. In fact they would not be evaluated by any aged care or health related body at all. I have written a separate page comparing what happened with the letters above.

Click Here to go to the "Citigroup Buys DCA" web page

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Web Page History
This page created Sept 2006 by
Michael Wynne
Updated Mar 2007