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Regulatory Loopholes

In 2006/7 a Citigroup private equity subsidiary was able to buy Australia's largest nursing home company and then assume operation without seeking approved provider status - even when an objection to its approval had been lodged.

I responded to this by emailing politicians and many aged care organisations asking them to press for changes.

This or a similar email was sent.

Dear -------------,

While aged care is not a state responsibility, all elected representatives have a responsibility for the welfare of those in their electorate.

I ask that you should progress the important issues raised in this email through party channels and through state/federal dealings

I also draw your attention to the narrow terms of reference for the upcoming senate inquiry into the private equity explosion. Aged care has been a prime target of these groups.

I am disturbed by the practice of considering economic matters in isolation, without reference to the context in which they operate or of the general well-being of the communities on which they impact.

Yours sincerely,


Serious Problem in Aged Care Regulations

I believe that the following matter should be of considerable concern to all involved in health and aged care. Those who are genuinely concerned for the welfare of the aged.


In 1997 Australian aged care regulations were changed to turn aged care into a marketplace in decrepitude and to remove the probity requirements which were a barrier to for-profit owners and operators. In addition at some stage a loophole was created so that government could bring multinationals into Australia without being subject to regulatory requirements.

In spite of this firm assurances were given to me by government staff in 1999. These were breeched in late 2006 when a US multinational giant with a record for deceiving and defrauding citizens was allowed to bypass regulatory processes and buy Australia's largest for profit nursing home corporation. Restrictions had earlier been placed on its licences in the much less vulnerable hospital sector; restrictions which just may have precipitated the early sale of the hospitals it had purchased.

I respectfully suggest that all politicians have a responsibility to close that loophole. Those with an interest in aged care should use their influence on the political process to ensure that this happens.

The Story

A. 1999 Aged Care Objections. In 1999 I lodged objections with federal authorities to the approval of the notorious US aged care corporation, Sun Healthcare as an owner of nursing homes. In subsequent correspondence I criticised the removal, in 1997, of the probity provisions from the aged care regulations.

At the time I believed that by removing the probity requirement the government had deliberately created a loophole for dysfunctional multinationals like Sun Healthcare in order to further its economic agenda and a globalisation policy for health care.

State probity requirements have been a key factor in protecting Australian citizens from corporate predators like Tenet Healthcare - expelled from Australia in 1996 after I had exposed its practices. In the last 2 years it has paid US $400 million to compensate 769 patients who, in the company's drive for profits, had their sternums split to perform coronary artery bypass procedures when they did not need them. Some died others were crippled. It also paid about another US $1 billion in fraud and quality of care settlements.

The CEO in Australia in the 1990s later became a senior vice president of the company in California. According to a book describing what happened he dealt personally in negotiating the contract with the doctors involved in the unnecessary surgery. Had we not had probity requirements this company would still have been operating in Australia. Could this have happened here?

B. 1999 Aged Care Assurances.

C. 2003-5 NSW State Probity Review.

When Citigroup companies purchased Mayne Health's hospitals in 2003 a very thorough eighteen month probity review was carried out in NSW. The transfer of licenses was only approved in 2005 and then with conditions. It is perhaps significant that Citigroup had, by the time the transfer of licenses was approved, already announced a much earlier sale of the hospitals than was planned.

D. 2006 Aged Care Objections.

When the same Citigroup companies purchased the giant nursing home company DCA in 2006, objections to the approval of Citigroup as a nursing home owner were lodged. Regulatory approval was a condition of the sale.

E. 2007 Assurances given in 1999 Breeched

Four months later, after I had written again because the sale had gone through, I received a letter from the director of Capital and Approved Provider, Department of Health and Aging in Canberra. This was the same person whose 1999 letter had given me the assurances. This letter now indicated that

Reasons for Concern

As you are aware the owner of a company controls the purse strings, appoints management and ultimately controls the balance between care and profit, both of which compete for resources from the same funding pool.

The owner has far more power to determine the outcome for vulnerable elderly citizens than any other person in health and aged care organizations.

To exclude the owner of nursing homes in this way is to render the approval body ineffective. It is a betrayal of citizens by those they have trusted to serve them.

This is a nursing home system where since 1997 nursing homes providing care have progressed from neglecting the frail elderly as exposed repeatedly since 2000 to raping them in 2006. These are not isolated exceptions as claimed by the now disgraced aged care minister but red flags to a system in a spiralling crisis as a consequence of the changes made in 1997 - a potential crisis I drew attention to in 1999.


The reassurances given to me in 1999 were false and deceptive.

The government either at the time or in a subsequent amendment very deliberately created a loophole in the 1997 regulations to ensure that aged care multinationals did not suffer the same difficulties that the severely dysfunctional US corporations (Tenet Healthcare, Columbia/HCA, Sun Healthcare and others) experienced with state probity requirements in Australia. My fears are confirmed. The vulnerable elderly may be at even greater risk.

Copies of the correspondence and more details are available at




Publicly listed DCA is Australia and New Zealand's largest for profit nursing home operator, growing very rapidly since it decided in 1998 to move all its operations into aged care and radiology. After a profit downgrade in 2006 sent its shares plunging it was purchased by CVC Asia Pacific, Citigroup's Asian Venture Capitalist and turn around arm. It was de-listed and now faces less public scrutiny.


Formed in 1998 by the merger of Citicorp and Travellers this is probably the largest financial institution in the world. Its predecessors and its subsidiaries have been involved in scandal after scandal across the world and it is currently being prosecuted by ASIC in Australia.

In the early 2000s it was the leading Wall Street offender and paid hundreds of million dollars in criminal fines for deliberately and systematically deceiving those who trusted it to give them objective advice and act in their interests. Many lost their life savings and were ruined.

By the time it purchased DCA, reports indicate that Citigroup had paid out at least another US $10 billion. This was to settle actions taken by the shareholders of other companies that Citigroup had assisted in setting up fraudulent schemes. These included their involvement in setting up the Worldcom and Enron frauds.

Salomon Smith Barney, one of Citigroup's major predecessors was banker and financial adviser to the giant US health care company HealthSouth during 15 of the 20 years of its admitted US $4 billion fraud - a fraud in which its Australian division (sold in 2006) participated.

For more information about Citigroup's track record see

The corporatised health and aged care system in the USA is the biggest perpetrator of fraud in that country and is characterised by a brutal commercialism that results in the exploitation and misuse of trusting and vulnerable citizens for profit. Treatment is frequently compromised.

All of these companies rely on bankers and financiers who advise them. The financially motivated business advice from these credible sources, all too often, makes the unconscionable, not only desirable, but essential for success in the competitive marketplace.

For further information see

US companies entering Australia

Tenet Healthcare -- (About US $2.5 billion in recurrent fraud and patient care settlements since 1991)

Columbia/HCA - now HCA (US $1.7 billion fraud settlements)

Sun Healthcare -- (Quality of care, fraud and bankruptcy)

HealthSouth - (Admitted US $4 billion fraud over about 20 years)

Other related matters

Corporate Health care in the USA

Aged Care in the USA

Development of corporate medicine and aged care in Australia

Understanding how corporate medicine operates

For a more detailed and up to date description of the unnecessary heart surgery in a Tenet hospital see

"Coronary: A true story of medicine gone awry" by Stephen Klaidman published in 2007 by Scribner (New York, London and Sydney)

For an analysis of the consequences of a marketplace in illness and decrepitude based on an examination of the US marketplace see

"Critical Condition: How Health Care in America Became Big Business & Bad Medicine" by Barlett & Steele Nov 2004 (DoubleDay 2004)

"Money Driven Medicine: The Real Reason Health Care Costs so much" by Maggie Mahar (HarperCollins 2006)

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This page created July 2007 by
Michael Wynne