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In 1996 I made a submission to Tenet Healthcare's newly established and much advertised ethics committee relating to the conduct of senior staff in Singapore and Australia. It gives much more information about what happened in these two countries. The submission was ignored.
Multiple submissions with supporting documents have been made to the Tenet Healthcare ethics committee since 14 November 1995. None have been acknowledged. This document is an overview to highlight the central issues addressed in the previous submissions. It was sent to Tenet on 1 November 1996.
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Every attempt is made to provide accurate and well written material. Your contributions, suggestions, additional information and advice sent to the web address at the foot of the page are welcome. Where possible they will be included in revised pages.
The intention is to show the general thrust of corporate practices as well as the nature and extent of any allegations made. Material contained here represents my views based on my study of the operation of the health care marketplace and the material available to me. It should not be assumed to represent the views of any other individual or organization.
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One of the supporting documents was sent to Tenet's subsidiary in Australia and to the Federation of American Health Systems in Washington. This was followed by threats of three separate court actions in two countries, unless retractions were made and undertakings were given. Two actions for defamation followed one after the other, first in Australia and then in Singapore. Both have been withdrawn and costs were paid. No retractions were made, and no undertakings were given regarding Tenet/NME. There is no suggestion that the new owners of the hospitals have ever been involved in undesirable practices in their hospitals. A statement made to the Australian senate on 28 November 1995 [Hansard] was published in Healthcover Feb-Mar 1996 page 54--5. This summarises these matters and the circumstances of Tenet's departure from Australia.
NOTE THAT THESE ARE ISSUES WHICH THE ETHICS COMMITTEE HAVE BEEN ASKED TO ADDRESS IN THE LIGHT OF DOCUMENTS AND INFORMATION IN MY POSSESSION. TENET MAY HAVE ADDITIONAL DOCUMENTS AND IT IS NOT CLAIMED THAT THE ISSUES RAISED ARE NECCESSARILY TRUE. TENET HAVE NOT BEEN PREPARED TO ADDRESS THE ISSUE.
NONE OF THE MATTERS MENTIONED REFER TO THE SINGAPORE COMPANY PARKWAY HOLDINGS WHICH PURCHASED MANY OF TENET'S INTERNATIONAL HOSPITALS IN 1995.
Home page is (http://www.uow.edu.au/~bmartin/dissent/documents/health)
Additional Comment July 2007
The US Department of Justice and the US Securities and Exchange Commission were both sent copies of all the submissions and all of the documents supplied in support of my submission regarding Singapore as well as those supporting the subsequent one about conduct in Australia. Like Tenet's ethics committee both elected to ignore the matter and did not acknowledge or respond in any way. This does show the degree of collusion between corporations and government authorities.
Its interesting to look back and speculate what might have happened had authorities forced Tenet to confront the documents and examine the ethics and probity of those involved in Singapore and Australia. Would sufficient of Tenet's hard core NME indoctrinated staff have been terminated to prevent what happenedbetween 1999 and 2002? It would be nice to think that it would have but, if this is a deeply pervasive culture as I have suggested, then it probably would have made little difference.
This was not the only breach of integrity undertakings. Tenet had started gaming the system well before its integrity agreement had expired.
This illustration of the way the system works suggests that the more extensive purging of management and a new set of Corporate Integrity and Ethical requirements in 2006 and 2007 are unlikely to prevent another disaster in a few years time. The company has already started with market policies along similar lines to those embarked on after 1994.
A. Background Tenet Healthcare (National Medical Enterprises)
B. Tenet/NME's Claims to a new Integrity
C. Overview of Requests to Tenet's ethics committee
D. Criminal and unethical conduct in the USA
E. Singapore - allegations of trading in patients
F. The Federation of American Health Systems - refusal to address issues
G. Australia - a lack of frankness and candour
H. Tenet/NME's Integrity Agreement - possible breaches
Tenet Healthcare (National Medical
National Medical Enterprises was founded in the 1960's by three lawyers, Eamer, Cohen and Bedrosian. It was initially a general hospital company but when the regulation of hospitals were tightened in the early 1980's NME sold many of it's general hospitals and expanded into the specialty areas, psychiatry, substance abuse and rehabilitation. Through it's subsidiary Hillhaven it became the largest provider of aged nursing homes in the USA. Hillhaven was subsequently spun off as a separate company. NME also expanded internationally. Medical treatment was less clearly defined in the specialty areas and surveillance was rudimentary. These strategies proved very successful and the company was widely praised for its business acumen. By 1991 NME owned 150 hospitals in the USA. It was primarily a "specialty hospital" group. Only 35 were general hospitals. NME's administrators were centrally trained and their approach to the provision of healthcare proved so successful that others poached their staff. As a consequence NME's business practices were widely disseminated and others adopted the same practices. In the USA health care fraud has become a major problem estimated in the US senate to cost US $100 billion each year. Psychiatry, substance abuse, rehabilitation and aged care have been the prime targets. These are areas where patients are gullible or unable to object, where monitoring is difficult and where the support and cohesion provided to doctors by the main medical and surgical colleges is less effective. NME's full contribution to the $100 billion fraud figure is not known but it has paid several hundred million dollars in settlements.
Exposure of NME's fraudulent conduct:- The reasons for the company's financial success became apparent in 1991 when it was revealed that the company had indulged in criminal and unethical conduct and that it's wealth was based on the exploitation of the people who had come for help. It is alleged that their basic rights were abused. NME settled a series of fraud actions brought by state governments, by insurance companies and private individuals for in excess of US $600 million. In 1994 over half of it's hospitals were listed in a negotiated guilty plea to criminal conduct. Integral to the negotiation of this plea was the sale of its psychiatric, substance abuse and rehabilitation hospitals. In return the company was allowed to plead guilty in the name of a single subsidiary and so did not lose it's right to supply services to Medicare and Medicaid patients. The company was restricted to operating only general hospitals.
NME gave undertakings in regard to the operation of it's ethics committee and is required to run an ethics program. It entered into an integrity agreement with the US department of justice. It operates subject to court injunctions secured by the US Securities and Exchange Commission (SEC). My submissions relate to the conduct of Tenet's senior staff, as well as what I see as Tenet's failure to honour the spirit of the integrity agreement and the ethical undertakings by addressing the matters which I have drawn to their attention.
A new name:- National Medical Enterprises now changed it's name to Tenet Healthcare claiming that the new name reflected the values to which the company subscribed and which would form the basis for partnerships between the company and other providers including physicians. At the same time the company secured a massive loan from US banks and purchased American Medical International. This increased it's general hospital holding to 80 hospitals, making it the second largest group in the USA. Tenet and Columbia/HCA are the two dominant companies in the influential "Federation of American Health Systems" which protects corporate interests in Washington.
International problems:- During this period Tenet ran into trouble in overseas countries where it's US conduct was viewed more critically. The Australian government stepped in to restrict it's activities and there was adverse publicity in the United Kingdom. Tenet elected to sell all of it's international operations. Tenet has continued to claim that it's general and international operations were clean. Staff from the international division have been promoted to senior positions.
Tenet and the Federation of American Health Systems have both refused to acknowledge documents which raise serious concerns about NME's international conduct. Instead Tenet has funded actions for defamation against those who have raised concerns about their international operations and supplied the documents which they refuse to acknowledge.
Claims to a new Integrity
Over the years NME has made claims to high standards of care, to integrity and to ethical conduct. As long ago as 1985 the company was accused of bribing politicians. An NME spokesman claimed "This company does not engage in illegal and improper conduct. God help anyone that does". (Modern Healthcare 26 Apr 85 p20) NME's public claims to integrity and ethical conduct have become louder and louder as evidence of it's unethical and fraudulent practices have accumulated. This is reflected in correspondence with health authorities in Australia. Tenet's current claims must therefore be viewed with great skepticism and can only be accepted if its actions can be seen to clearly reflect these claims.
Tenet pleaded guilty to criminal convictions in June 1994. It undertook to introduce and maintain ethics structures in the corporation and entered into an integrity agreement with the justice department. A compliance program was set up. In the following extract from NME's annual report the company commits itself to these agreements.
"To ensure our ongoing integrity, NME has implemented what we believe is the most comprehensive ethics program in the health care industry. Nearly all of our 35,000 employees, including every one of our executive-level managers, have participated in our ethics awareness and training workshops. The program makes employees more alert to potential ethical dilemmas and gives them the tools to make the right decisions. And because we know that our written code of conduct cannot anticipate every ethical issue in our complex business, we have established a toll-free ethics hot line that employees can call with questions and concerns. Our compliance program is directed by a management-level committee, chaired by Michael H. Focht Sr., president and chief operating officer, and supervised by the ethics and quality assurance committee of the board. We have made it very clear that NME will not tolerate ethical misconduct."
NME now borrowed money to take over American Medical International (AMI). To escape it's past the company was renamed Tenet Healthcare. The following public release reflects similar claims to integrity.
We wanted a name that would convey the idea that a number of values are at the core of our business philosophy. Key among those attributes is our intention to build our business upon a foundation of partnerships: partnerships with employees, with shareholders, with physicians, with other providers, with suppliers, with payors and with the communities we serve.
Successful partnerships require that the parties share certain beliefs; that they hold philosophies, expectations and standards in common. And That's exactly what the word "tenet" conveys. Our new name says that we have strong values and beliefs and that we will seek out others with similar views for the benefit of both.
Among our core beliefs are the importance of integrity, teamwork and innovation. We will put these into practice daily as we provide the full spectrum of quality, cost-efficient services.
Modern Healthcare (20 Nov 1995) reports that when challenged about its commitment to these new values W Randolph Smith an executive vice president of Tenet states
"Tenet is a very different company. It has a brand new management team, and is a company that is intensely steeped in an environment of high ethical standards"
Smith is also quoted as saying that Tenet's current president and chief operating officer, Michael Focht Sr., was far removed from psychiatric operations during his tenure at NME. He once again perpetuates NME's misinformation about the real extent of NME's conduct and ignores Focht's role as president of the international division.
That Tenet senior staff do not accept the reality of what happened and do not share the ordinary persons revulsion at the contents of NME's own documents is clear from the comments they make. David Layne, a senior Tenet lawyer spoke to the American Bar Association. I quote from Modern Healthcare 13 May 1996.
"They treated us like criminals. We had to enter into an agreement with the government. It was a very irritating process for some of us to go through. -- - - - - - - - - - - - - - - - - - - - - - We have to do background checks and can't hire anybody with criminal backgrounds; - - - - We worry about DFEs (disgruntled former employees) and PWBs (potential whistle blowers) reporting problems on their own.."
Statements like this provide a window into Tenet's mind and fuel concerns that Tenet staff see no need to change their underlying philosophy.What reputable company would want to employ criminals and complain when they were not allowed to do so? Being prohibited from employing criminals and fulfilling the compliance, ethics and integrity processes are perhaps also seen as a "very irritating process". Documents show managers in NME's hospitals were instructed to "look for a shark" when interviewing prospective employees. Do we have any reason to think that Tenet has really changed the way it thinks and behaves? They obviously see no need to address matters put before them by PWBs! Tenet responded to the Modern Healthcare article by writing to the editor ( 27, May 1996 page 52). The letter stated
" - - - - we hold integrity and honesty as our most important principles"
Tenet's chief spokesman in 1992 explained away the misinformation he had given as only "singing to the choir". We are entitled to ask for evidence to show that Tenet's is no longer "singing to the choir". They could start by addressing issues raised about the integrity of staff.
I believe that a company with a genuine commitment to such principles would not employ or promote staff when allegations of unethical trading with doctors for patient referrals and of displaying a "lack of frankness and candour" have not been properly and openly confronted. Such a company would be expected to acknowledge documents and thoroughly address all concerns about senior staff. They would not ignore documents which raise serious concerns about the past conduct of very senior staff, particularly conduct which occurred during the negotiations with the US department of justice and following the integrity agreement.
Overview of requests to Tenet's ethics
My submissions to Tenet's ethics committee directly and very specifically challenge Tenet's claim to hold integrity and honesty as its most important principle.
I have written to Tenet's ethics committee repeatedly over the last year and supplied the committee with information and documents which must raise serious concerns about senior staff. My previous letters were dated 14 Nov 1995, 20 Nov 1995, 20 January 1996, 31 January 1996 and 22 April 1996. In this last letter I referred to the promotion of one of those who failed to confront Dr Ng's allegation of trading in patient admissions to the position of vice-president of physician management services. I questioned the appropriateness of this as he had never been exonerated by an open investigation. I wrote directly to Mr Barbakow in April 1996 about Tenet's committee's apparent failure to meet the corporate undertakings. He did not respond.
I am concerned that Tenet's failure to acknowledge and confront these documents speaks for the company's lack of commitment to the principles which it publicly claims, and possibly to the direct involvement of Focht, the second most senior corporate executive in many of these matters.
The matters I have put before Tenet's ethics committee relate to the implications for the integrity and ethical commitment of senior staff.
These matters include
i. the allegations of trading in patient admissions during the time when Mr Michael Focht was president of the international division. These were made by Dr Ng in Singapore
ii. the failure of the company and the persons concerned to make any attempt to confront these serious allegations with evidence.
iii. the inferences for integrity which can reasonably be drawn from this in the light of the subsequent guilty plea to similar practices listing over half of NME's hospitals.
iv. the information not supplied and the apparent misinformation given to Australian health departments. This led the health department in New South Wales to advise against a licence on the basis of the local company's lack of frankness and candour. Current senior Tenet staff including Focht were directors.
v. the correspondence between the local company and Mr Justice Yeldham, who had been delegated to decide on the hospital application in New South Wales. Did the company behave with integrity in not informing Mr Yeldham that the person who was to run the Australian hospitals was a past director of NME companies. What are the implications for ethics and integrity of not immediately informing Mr Yeldham of the Ng court action and the allegations which Dr Ng made about this person who was to run hospitals in Australia.
vi. the failure to disclose both the Ng allegations and the fact that NME was negotiating a guilty plea with the US department of justice when applying for a licence to run a hospital in the state of Victoria.
vii. the refusal of the local company in Australia and the Federation of American Health Systems to confront the Ng court documents and investigate the conduct of the persons involved.
viii. the use of the courts in an attempt to silence me when I asked the Australian subsidiary, the Federation of American Health Systems and Tenet's ethics committee to confront the implications of the Ng court documents and the behaviour of senior staff while they were corporate officials in Australia.
I believe that Tenet's committees inaction in these matters and the company's repeated efforts to ensure my silence speaks loudly for the seriousness and validity of these matters.
Criminal and unethical conduct in the USA
New Mexico 1985:- NME's willingness to indulge in unacceptable conduct was first apparent in 1985 when it was accused of making campaign donations in return for the state government in New Mexico overturning a local council ruling preventing NME from building a hospital. The company denied the allegations claiming that "This company does not engage in illegal and improper conduct. God help anyone that does". (Modern Healthcare 26 Apr 85 p20)
New Jersey and Texas:- Fraudulent practices were next exposed in New Jersey in early 1991. NME used a provision under the New Jersey law which allowed first offenders to reach a confidential settlement by paying a $450,000 fine. The bubble finally burst in Texas in late 1991 when bounty hunters paid up to $2000 by NME hospitals for each admission kidnapped a teenager. A wide ranging public senate inquiry chaired by Senator Moncrief followed. Hundreds came forward to speak publicly of their misadventures and suffering in NME's hospitals. The Texas attorney general commenced an action for fraud which the company settled for slightly less than US $10 million. The company settled without admitting guilt but $10 million was the maximum penalty. The attorney general later indicated to me that they were confident they could prove the case but would not have obtained more than this by prosecuting rather than settling. This was a civil action. The court also imposed 26 permanent injunctions restricting NME's conduct. NME were required to place an ombudsman in each of their hospitals to protect patients from abuse.
America wide:- That the practices extended throughout the USA became apparent to an April 1992 US House of Representatives Inquiry into the abuse of children by psychiatric hospitals. This was chaired by Congresswoman Schroeder. The proceedings were published under the title "Profits of Misery". Adults were insured for 28 days hospitalisation whereas children were insured for 6 months. Each child was a potential gold mine. Children were therefore specifically targeted for admission to hospital. Witnesses giving evidence described how community anxieties had been fanned so that thousands of unsuspecting parents were persuaded to admit their children to hospital needlessly. Many were kept in hospital for the duration of their insurance. The evidence indicates that they were provided with an excess of services, many of which were valueless. Ms Schroeder referred to the adverse consequences for these unfortunate children. Large numbers are seeking redress through the courts. NME was the ring leader and NME hospitals were the prime offenders.
Insurance companies:- A total of 19 insurance companies now commenced actions alleging that the company had indulged in a carefully planned and executed conspiracy to defraud them. NME settled these actions paying $89 million and $125 million in two separate settlements.
Shareholders actions:- Groups of shareholders commenced a number of actions in 1991 alleging that the company had represented itself as a bone fide corporation supplying high quality services when in reality it was indulging in unconscionable practices. They alleged insider trading, breach of fiduciary duty as well as a variety of other offences. Further shareholders actions followed in 1993. Following the purchase of AMI in 1994 nine groups of AMI shareholders commenced actions. After protracted legal proceedings the 1991 actions were settled for US $60 million. The fate of the other actions is not known.
Actions by administrators and doctors:- Court actions were taken by administrators and doctors alleging that they had been wrongly terminated because they would not comply with unethical corporate practices. These actions were settled confidentially out of court.
Actions by patients:- Thousands of patients have taken to the courts alleging that they suffered harm as a consequence of their exploitation by the company. One lawyer was paid $15 million for his 50 clients. Large numbers of cases are still in progress.
Criminal convictions:- After an investigation by the FBI, NME negotiated a $379 million settlement with the US department of justice in June 1994. Prior to the settlement NME sold off its rehabilitation hospitals and amalgamated it's substance abuse company (Recovery Centres of America) into it's psychiatric operations. Over half of it's hospitals were listed in a guilty plea by this reconstituted and expanded psychiatric arm. NME was required to sell over 75% of it's hospitals including it's psychiatric, substance abuse and rehabilitation hospitals. It's activities were restricted to the more controlled general hospital area. Because it had pleaded guilty in the name of only one subsidiary it was allowed to continue services to medicare and medicaid patients. NME was required to fire a number of staff, to reduce it's emphasis on profits rather than care, to introduce a compliance program, to set up an ethics committee, to establish an ethics hot line and to enter into an integrity agreement with the department of justice.
Prosecution of staff:- A small number of more junior staff and a number of doctors have been prosecuted for the fraud. Norm Zober who administered the entire specialty arm was retired but never prosecuted. Eamer and Cohen received monthly reports from Zober and these reveal that they met regularly. Both retired with suitable bonuses. Bedrosian was fired after revealing during cross examination in court that misinformation to the public and to inquiries was considered acceptable by the company. He called this "singing to the choir". Claims he had made in a statement to the Australian public on behalf of the company were considered to be less than frank by health authorities. Many of the remaining board members remain.
Court Injunctions:- The US Securities and Exchange Commission commenced a court action and obtained court injunctions to restrain NME from unethical and criminal business activities. The SEC stated
"Unless restrained and enjoined, Defendant will continue to engage in acts, practices and courses of business as set forth in this complaint or in acts, practices and courses of similar object and purpose."
Business approach:- Documents in my possession support allegations that the company developed a business plan for each hospital. These plans I have heard specified financially based requirements such as the number of admissions, the census, the duration of stay, the cost per patient per day and the payor mix. Hospitals were required to meet plan and witnesses alleged that large bonuses were paid for "going over plan". Those who failed to meet plan were terminated. The allegations claim that as a consequence, the likelihood of admission, the diagnoses made, the duration of stay and the treatment given were based on corporate financial priorities and not on the patient's clinical condition. It seems that many thousands of people were admitted to hospital needlessly. The diagnoses were tailored to the best insurance cover and patients were subjected to large amounts of needless treatment for the duration of their insurance. There are allegations that patients were kept against their will and were denied basic rights. One hospital has pleaded guilty to kidnapping.
The business approach is exemplified by an extract from a 1988 NME memorandum to hospital managers. Managers were instructed to call staff meetings. The goals for the meeting included
"To Clear up misconceptions. Example. We exist as a company to provide a high quality service to our patients (and in some cases society). I have heard individuals within the company make remarks along these lines and it is absolute nonsense. Lets call a spade a spade: We are here for one reason only - to make a profit for the shareholders who put up the money so that we could exist in the first place."
NME settled most of the actions against it without going to court. The following are some of the allegations made in these actions.
Securing admissions:- Documents indicate that administrators took over from doctors in admitting patients to hospital. It was alleged that the company fanned community anxiety by advertising, by promoting public seminars and by publishing books. People were urged to phone hot lines for help. Each activity was intended to induce as many people as possible to come for free evaluations. Those who performed the evaluations were not medically trained. They were given targets specifying the percentage of persons they were required to "convert" to admissions. Their conversion rates were monitored by computer and they were praised and rewarded for meeting the required number of conversions.
Bounty hunters:- It was alleged that hospitals contracted with bounty hunting organisations for the admission of a specified number of patients each month. They were paid for each head on a bed. These groups scoured the community for people who could be persuaded into hospital. The company also paid bounty for patients recruited by agents in Canada.
Providing services:- The company developed the concept of programmatic care. A program was designed for each patient. It was alleged that each program was designed to maximise profits by providing as much treatment as possible. Much of this was valueless and did not require admission to hospital. Treatment was provided by unqualified staff and group therapy was charged as individual. Charges were rendered for therapy which was never provided
Length of stay:- Patients were allegedly kept in hospital for the duration of their insurance regardless of their clinical condition and then pronounced cured. Nurse managers countermanded doctors discharge orders and staff were appointed specifically to increase the length of stay.
Obtaining medical cooperation:- Corporate managers took control of admissions and then allocated patients to favoured doctors. Doctors were expected to sign for admissions and then hand care over to the programmatic system while continuing to charge for services. Team players were handsomely rewarded using a variety of financial inducements. The hospitals paid kickbacks for patient referrals. Those who refused to be team players starved and were pushed aside. The SEC alleged that these practices resulted in "howdy rounds" and "wave therapy". Charts it was alleged were doctored for profit and refreshments were provided for the doctors when they came to do this. These were called "charting parties".
Consequences for patients:- It is apparent from the US House of Representatives inquiry, from letters from doctors and from internal corporate documents that profits were pursued to the extent that standards of care were ignored. Many patients were not benefited and others, in particularly children and adolescents suffered needless and permanent trauma as a consequence of needless admissions. Thousands have taken to the courts. One lawyer secured $15 million for his 50 clients.
Corporate culture:- Allegations indicate that NME supported a deeply entrenched corporate business culture which legitimised the practices. Administrative staff attended central training programs. Documents lend support to this assertion. That the practices were financially successful is clear. Competitors poached NME trained staff.
The extent of the problems:- I possess documents which show that NME's business practices were introduced into Recovery Centres of America (RCA) and Psychiatric Institutes of America (PIA). All these hospitals are listed in a guilty plea. Newspapers in 1989 describe the introduction of NME's business practices, particularly the programmatic system of care into rehabilitation hospitals. The full extent of these practices is not known but other rehabilitation hospital groups are alleged to have adopted practices similar to those used in NME hospitals. NME's rehabilitation hospitals were sold prior to the guilty plea settlement. A Singapore doctor alleged in court in 1993 that NME introduced similar unethical business practices into it's international hospitals and it did so soon after it purchased these international hospitals in 1985.
Involvement of NME's directors:- The extent to which NME's directors were directly involved in these matters is important because several of the same people remain directors of the company. In my view this is particularly disturbing because of the nature of the culture which characterised the corporation and the allegations made by the Securities and Exchange Commission. This culture is reflected in video programs developed by NME groups. Insurers and patients allege that they were the victims of a systematically planned and executed corporate fraud.
NME's directors claim that the practices were localised to psychiatric hospitals. These were run from offices in Washington. NME's directors were not aware of what was happening. The true extent of the involvement of NME's board in these practices has not been established. Dr Stuckey, the whistle blower who had the longest association with Psychiatric Institutes of America (PIA) and who had dealings with senior staff unfortunately died rather suddenly alone on his boat shortly before he was to give evidence to the US House of Representatives inquiry in 1992.
It is known that Norm Zober who headed the specialty hospitals sent monthly reports to three members of the board in regard to the hospitals where the fraud occurred. These reports indicate that he met regularly with them. The reports dealt with the running of the hospitals where the fraud occurred, with marketing activities, with arrangements with doctors and with problems with some administrators. It seems that some board members at least took an interest in and were involved in what was happening.
Stockbrokers praised the way the company was run. It is difficult to believe that after moving from general hospitals to specialty hospitals, directors played no part in the administration of of these hospitals, the most profitable 75% of NME's empire.
Main Issues in the USA
1. Whether Tenet healthcare has suitably pruned itself of NME staff who indulged in unethical practices
2. Whether persons who embraced the corporate ethic of profit over care still sit on Tenet's board.
3. Whether Tenet's new claims to integrity are any more valid than the earlier claims which Bedrosian implied were "singing to the choir".
Note that the US Securities and Exchange Commission indicated their view that Tenet/NME would re-offend if given the opportunity.
- allegations of trading in patients
The possible introduction of NME's documented dishonest and dysfunctional practices into its international operations in Singapore is of particular concern because Michael Focht, president and chief operating officer of Tenet, and responsible for Tenet's "compliance program" was at the time president of NME's international division and his vice president Michael Ford is directly implicated by Dr Ng's in the allegations which were made. Tenet has claimed that Focht was far removed from the hospitals where the fraud was perpetrated. Other members of the now defunct international division also hold senior positions in the USA. NME has claimed that the fraudulent practices did not extend to it's general hospitals. The hospital in Singapore was a general hospital, and the international division at the time operated under the wing of the general hospital group in the USA. The consequence of neglecting clinical standards in the pursuit of profits in general hospitals would be much more serious than in the specialty hospitals. There would be a lowering of standards as occurred in the US specialty hospitals, but in general hospitals there would be more deaths and more preventable complications.
My correspondence:- On 14 June 1990 I wrote to my lawyer in the United Kingdom in regard to another matter. In that letter I stated
"With regard to the other matter in Singapore the situation becomes worse as I speak with people who have had dealings in Singapore, stories of over servicing, passengers removed from aeroplanes without sufficient cause and hospitalised (one doctor known as the "bandit of Singapore"), administration of unneeded expensive treatment and difficulties in getting the authorities to confront issues and act."
On the 5 August 1991 I wrote to the president of the Medical Council in Singapore and advised him of my concerns. I stated
"Almost all the information I was given was hearsay but with the exception of the teaching hospitals and one of the private hospitals this was largely critical. - - - - - It suggested the exploitation of patients and the presence of unscrupulous and criminal activities in some portions of the medical services provided. Even allowing for the fact that many of those I spoke to might have an axe to grind, I feel that there cannot be so much smoke without a large fire." (The private hospital was Gleneagles hospital run at the time by a group of doctors and for some years by Parkway Holdings)
I did not know that NME was alleged to have indulged in practices in the USA similar to those I wrote about until I saw a television documentary in October 1992.
The Alan Ng vs Mount Elizabeth Hospital court action:- Dr Ng is a gynaecological surgeon who was involved in protracted and drawn out negotiations with NME administrators running NME's Mount Elizabeth Hospital in regard to the purchase of consulting rooms in the hospital's office building. There were numerous meetings and eventually Dr Ng commenced action claiming a breach of contract.
Michael Focht was at the time of these events president of NME's international division and Michael Ford was his vice-president. Dennis Brown was the Chief executive of the hospital. Focht and Ford were both subsequently directors of Australian Medical Enterprises (AME). Brown became chief executive officer of AME. Focht is now COO of Tenet, Ford holds a responsible position for hospital acquisitions. Brown in Vice President of the company's Physician Management division.
In pre-trial documents the hospital's lawyers indicated
"The substance of any oral statements made between Dr Alan Ng of the Plaintiffs and Mr Dallas Riddle and Mr Dennis Brown of the Defendants will be adduced as evidence at the trial of this action."
"The substance of any oral statements relied on - - - - - - - - - will be made available when the Defendant's witnesses Mr Dallas Riddle, Mr Dennis Brown and Mrs Theresa Poh give evidence at the trial of this action."
In a pre-trial document dated 5 January 1993 Dr Ng's lawyers refer to a meeting between Dr Ng, Ford and Brown. In this Ng indicated the nature of the evidence he would give.
"Discussions continued on the purchase price. Brown suggested $700 psf. Dr Ng felt that this was too high. Ford suggested a discount based on admission rate of Plaintiff's patients to Defendant's Mount Elizabeth Hospital and also offered free rent if Dr Ng admitted sufficient patients. Dr Ng refused these proposals."
The date of this document is particularly important because it predated a request for disclosures of all relevant court actions. This request was made by the NSW department of health under it's regulations. The existence of this court action was not disclosed to NSW Health.
The case came to trial in August 1993 and again the date is important because at this time AME were negotiating with a judge to change restrictions the judge had placed on AME. Changes were made in such a way that Mr Brown was specifically excluded from the restrictive conditions imposed. The judge handed down his decision in September. The following extracts from Dr Ng's evidence which were not confronted by the hospital and would have been very relevant for the judges decision.
page 13 (meeting Ford and Brown):-
"I said I was buying in bulk, 3 units. Therefore the price should be less. Mr Ford then told me that he could give me a lower price if I could admit more patients to the hospital. If I admitted enough I could even be given rent free premises. - - - - This was something I could not guarantee. Ford insisted on a guarantee, saying my reduction of price would have to correlate with the number of patients admitted. I rejected this offer. It was unethical. Brown then suggested a price of not more than $700. He asked me to think this over."
page 14 (meeting Brown and Riddle):-
"At the 17.11.86 meeting, they made me the same offer as before, ie they would sell the units to me for not more than $700/- per sq ft, any price reduction would have to relate to the number of patients admitted. I would have to guarantee. I rejected this also. Brown has mentioned figures of $50,000 and $100,000 and also 200 patients a year, but I forget exactly how much reduction was to be given for how many patients and for how many years."
page 18 (meetings Brown and/or Riddle):-
"I met Brown and/or Riddle 3 times in February, 7, 19, and 24 Feb. At these meetings, Brown and/or Riddle made various proposals about discounted prices based on number of patients I admitted into the hospital. They mentioned $50,000 and $100,000 related to number of patients. I can't remember how they were related because I rejected it outright.
They then made several proposals how the discounted price could be disguised so that it would not look unethical. Brown suggested that the discount could be in the form of free refurbishment of the units. I rejected this. They then suggested free or subsidised equipment, free or subsidised rent, and free trips abroad, ostensibly to help them in their medical projects. I rejected all these proposals as being unethical. Riddle then said in Brown's presence that you don't have to worry anything about ethics. He said that all these incentive documents could be signed and hidden in a safe where no one could see them. I rejected his suggestion."
"At the time they were very keen to increase the hospital admission rate, and they wanted to control the other units so that they could rent to high hospital admitters."
"Meeting of 25.4.87 held at my office in the units. Mr Riddle, Brown, myself, my wife. I told them that if they went around offering doctors incentives to increase hospital admissions there would be such a scandal that a public inquiry would be held into the business practices in Mount Elizabeth Hospital. I told them that things were done differently here from USA, Japan. I said they could go to prison for this."
The hospital's lawyer did not contest the meetings or the discussions about patients. Instead he alleged that Dr Ng had made the unethical proposals.
Q. I am instructed that the suggestion to link the purchase price to hospital admissions came from you?
Q. I'm instructed that when defendants wanted a written assurance of this, you were concerned that it might be misinterpreted by others as a breach of ethics.
A. They made the proposal. I refused to accept it.
Surprisingly the hospital elected not to call any of the witnesses present at the meetings to refute Dr Ng's evidence or to substantiate the serious allegations they had made about his conduct. They advanced no other evidence to support their allegations.
page 64:- "I elect to say no case to answer. I elect not to call witnesses."
The reasons for this decision are unclear. Dr Ng's lawyer drew his own conclusions in the summing up
"Defendants case has been characterised by blatant inconsistencies, after thought. - - - - - We hear nothing of the counter-claim as pleaded. Since no case, Dr Ng's evidence to be accepted at face value unless court finds unreliable. Defendants' council has not suggested it."
"Dr Ng dragged through the mud because of this alleged effect on defendants' obligations. The point has been dropped because they would have had to call Poh, Brown, Riddle. Defendants would have been shown to engage in deplorable commercial conduct."
" - - - and thirdly they attacked him for unethical conduct. They have not come to court to defend those allegations. Court invited to exonerate Ng."
"Poh has been in court since the beginning of the trial. No explanation why she was not called."
"(1) They refused to perform
(2) They pleaded they would bring witnesses
(3) A host of defences
(4) Witnesses not produced
(5) One material point suddenly dropped
(6) new point in closing not foreshadowed."
The judge decided in favour of Ng and awarded him $1 million. He commented on the "disquieting side of the business practices of the defendants."
Neither the hospital's lawyer nor any of NME's companies have offered a reasonable explanation for not calling witnesses. The explanation offered by Dr Ng's lawyer that "Defendants would have been shown to engage in deplorable commercial conduct." seems the most reasonable. Less than a year later over half of NME's US hospitals were listed in a guilty plea to similar practices. I believe that the weight of circumstance strongly supports the account given by Dr Ng. His evidence strongly points to the introduction of NME's unethical US business practices into NME's international general hospitals . Senior persons in the international division were implicated. This dispute had been ongoing for some time and Focht, Brown and Ford could not have been unaware of the issues when they made submissions in Australia in 1992 and 1993. These persons were subsequently promoted to senior positions in Australia and in the USA.
Main issues in regard to staff who worked in Singapore
1. Whether there is substance to the allegations of trading in patients made by Dr Alan Ng.
2. The ethical implications of the unsubstantiated and unwarranted accusations about Dr Ng's conduct made by the NME hospital as reflected in their lawyers statements.
3. The implications for the ethics and integrity of Michael Focht, at the time president of the international division and of Brown, Ford and Riddell who were named by Dr Ng. I refer to the decision not to put up witnesses or any documentary evidence to refute Ng's allegations or to confirm the slur cast on his character by the hospital's lawyer. This slur was cast on the instructions of NME staff. I refer you to the claim by Dr Ng's lawyer that "defendants would have been shown to engage in deplorable commercial conduct" had they given evidence. A subsequent guilty plea admitted to similar practices in the USA.
4. Whether there are ethical and integrity implications for the company's international division, it's Australian subsidiary and for NME directors in the refusal of all parties to address the implications of the Ng court documents when they were drawn to their attention in late 1994.
Federation of American Health Systems - refusal to address
Curriculum vitae revealed that Michael Focht was a director of the American Federation of Health Systems and that Michael Ford was a member of the Quality Assurance Board of the federation. I was concerned that Ng's allegations were accurate and that the Federation would not wish to have such people in senior positions. I supplied the federation with copies of the Ng court documents on 24 October 1994 asking them to look into the matter. I wrote again on 2 November 1994, 3 December 1994 and 29 December 1994 asking for acknowledgment. The material was sent by registered mail. The American Medical Association subsequently took the matter up without any resolution. The federation refused to acknowledge the documents in spite of repeated requests to do so. Not long after this I received lawyers letters threatening three separate defamation actions unless I made admissions of unreasonable conduct and gave undertakings which would have prevented me from addressing this matter further in Australia, in the USA or with the federation. Writs followed when I refused.
Issue in regard to the Federation
I ask Tenet's ethics committee to determine whether any NME staff may have improperly used their position in the federation to block the proper investigation of this matter by the federation and whether the threats made to me and the court actions which followed were part of a coordinated attempt to circumvent the necessity to address the issues. I ask the committee to consider whether any of these matters impact on the integrity of staff who still hold positions in Tenet.
Australia - a lack of frankness and
Concerns in Australia relate both to the limited information about NME's practices supplied to Australian shareholders, the Australian public and to Australian regulatory authorities, and the apparently inaccurate claims made by and on behalf of the company. These claims must be examined in the light of the information which was available to NME and AME staff at the time. As early as July 1993 the discrepancies were such that the Health Department in New South Wales advised against granting licences to the Australian company. It considered that it had displayed a lack of frankness and candour in it's dealings. Further exposures indicating the nature and the extent of NME's practices followed soon after. Senior NME staff including Focht were directors of Australian Medical Enterprises (AME). Mr Scott Brown a member of NME's board indicated that he supplied AME with information in regard to NME's conduct in the USA.
My detailed 30 page submission to Tenet's ethics committee dated 30 Jan 1996 sets out my concerns in detail. There are many matters in these documents which I believe raise serious concerns about the company's conduct and the integrity of staff. I have listed only a few matters here to summarise the main concerns.
What information did NME staff have?:- The knowledge available to the persons responsible for supplying the information and approving documents in Australia is critical to determining whether they behaved honestly, ethically and with reasonable integrity in their disclosures and arguments.
At least 3 members of NME's board received monthly reports from Zober in regard to activities at the hospitals where the fraud was perpetrated. Two were also directors of AME. Stock market analysts believed that the board had a sound grasp of company operations. Scott Brown was a member of the board and so was Zober. I spent several hours examining corporate documents in the USA and these indicated to me that the practices were driven from a central level and the whole process was tightly monitored and coordinated using computer tracking systems. The expenditure on these systems must have been approved at a senior level and the reports generated would have been freely available to senior staff.
It is difficult to accept that senior staff and the board were not fully aware of the nature and extent of NME's practices. Three board members received monthly reports indicating success in "meeting plan" and the senior executive running the specialty hospitals was a member of the board. It is not conceivable that largest and most profitable section of the company received no attention at board meetings.
The action against NME in Texas commenced in September 1991 and the Texas senate inquiry followed soon after. In October 1991 Michael Focht was made Chief Operating Officer and all the hospital groups reported directly to him. He must have had a sound grasp of the extent of the practices in NME's specialty hospitals. He is likely to have received many reports like those about Great Plains Hospital and Brookhaven Pavilion at this time. These described what was happening and the poor standards of care in the hospitals.
NME set up it's own internal investigation in 1991, claiming in October 1991 that "exhaustive internal investigations" had been carried out. This should have revealed the extent of the problems. John Bedrosian claimed that this investigation showed that the practices were not systemic. NME later refused to disclose the contents of this investigation. To the outsider this internal inquiry was either structured as a cover up and Focht as the new chief officer would have been involved in this. Alternately a carefully prepared corporate disclaimer made by John Bedrosian in October 1992 was dishonest. Either way there must be implications for the integrity of those concerned.
The April 1992 US house of Representatives Inquiry "Profits of Misery" revealed just how widespread the fraudulent practices were. Court actions by multiple insurance companies and by shareholders followed soon after. These spelled out exactly what had been happening.
Senior staff had information at an early stage, prior to their dealings with Australian health departments.
Failure to disclose information and denial of deviant practices?:- After Australian newspapers published an account of the court action in Texas in October 1991, NME sent a brief letter to the Australian stock exchange. This stated
"NME was founded on the highest ethical principles and the pursuit of the highest quality of patient care -- both of which come before profits. We have always insisted and will continue to insist on such standards at all of our hospitals."
The letter refers to "exhaustive internal investigations". NME subsequently refused to reveal the content of these investigations.
Share holders deciding whether to approve NME's purchase of a local company were later given an assessment of the financial issues but no attempt was made to address the implications of the court action and of the public inquiries in Texas. They were not told what the charges against NME were. I do not know whether any NME staff were implicated in this?
NME's true philosophy is revealed in a circular sent to hospital managers in 1988. They were asked to call staff meetings to emphasise the corporate profit ethic. One of the goals was
"To Clear up misconceptions. Example. We exist as a company to provide a high quality service to our patients (and in some cases society). I have heard individuals within the company make remarks along these lines and it is absolute nonsense. Lets call a spade a spade: We are here for one reason only - to make a profit for the shareholders who put up the money so that we could exist in the first place. "
The nature of this philosophy is further reflected in the monthly reports to members of NME's board.
NME's continued denials:- NME's subsequent approach was to deny the extent and implications of the allegations, suggesting that the practices were localised to psychiatry and that psychiatric patients were different. By some tortuous logic this exonerated them. They claimed that the practices were limited to a small number of administrators in Texas who had misinterpreted the corporate mission. Documents now available indicate that these managers were simply responding to the pressures generated by corporate policies. The information available I believe suggests that NME made every attempt to avoid the disclosure of information and concealed the reality and the full implications of what was happening in the USA and Singapore. This is a company which claimed sufficient integrity for it to be trusted with the lives and welfare of Australian citizens.
Failure to disclose:- NME applied to the Foreign Investment and Review Board (FIRB) to enter Australia in December 1991. It did not disclose to FIRB the nature of it's conduct or the investigations and court actions in the USA. AME applied to the health department in NSW for the transfer of hospital licences in early 1992 without disclosing that NME was facing charges of fraud and the abuse of basic human rights in the USA. Australian Health Departments are required to determine whether hospital owners are "fit and proper" persons to operate hospitals before they grant licences. AME later issued a public statement claiming that it had fully informed NSW Health department. The documents I have indicate that they did not do so until after objections were lodged.
Objections to licences in NSW:- A human rights group lodged objections to licences in NSW. The inexperienced state health department commenced an extremely inept investigation, supplying Mr Michael Ford with copies of all the letters written to the USA where NME had not yet been convicted of any offences. They were in a position to insist that replies be restricted.
Unfortunately the one Australian who could have given the NSW department of health accurate information about the activities of NME's Australian staff had died. Dr Victor Chang Australia's leading cardiac and heart transplant surgeon was a man of great integrity and courage. He traveled widely in the pacific rim countries teaching and demonstrating. He was a regular visitor to NME's Mount Elizabeth Hospital in Singapore and is likely to have known of any dysfunctional practices in that hospital. He was killed on 4 July 1991 during the period when NME was negotiating the purchase of an Australian healthcare company. He was consequently not able to advise on NME's suitability at this time or later. His car was forced down a side street in broad daylight and he was gunned down. The motive attributed to the two foreign assailants who were caught and imprisoned was extortion. Australians were puzzled that the extortionists selected broad daylight and a busy highway for their hurried attempt. During the last few months their doubts have been resurrected by the revelations in a judicial inquiry. It was shown that Sydney police were accepting bribes and cooperating in drug crimes and in paedophilia. Video footage showing large bribes being made to senior policemen were shown on national television. This police corruption extended to the highest levels. Chang was well known in the Mount Elizabeth Hospital. Australians would welcome any light which Tenet's ethics committee's inquiries might throw on the mysterious death of a national hero.
AME's response to the objections:- On 5 June 1992 the Australian company wrote a letter of assurance to NSW department of health. The letter was signed by Dennis Brown.
"While NME does acknowledge that some mistakes were made, as individuals placed their own agendas ahead of the corporate mission, it believes that the press coverage was overblown and inherently unbalanced."
"In many cases, press reports of patient's complaints were not balanced."
"After a thorough review of the situation, management found no evidence of systemic practices that negatively affect the quality of patient care."
"NME is encouraged that its psychiatric hospitals are now, and always have been, providing superior care, and they continue to attract outstanding physicians from leading academic and government settings.
By following the plan. they can achieve the goals set out for them, and by their commitment to the highest clinical ethical and legal standards they stand apart from other psychiatric hospitals"
"NME acknowledges that there were isolated problems in Texas but also notes that the balance of it's psychiatric hospitals have not been the subject of any extraordinary regulatory or governmental activity."
"It (ie NME) has always operated such facilities -- operations that have been models of quality patient care with the highest ethical and legal standards."
"We hope this letter answers your questions and allays your concerns"
NSW Health accepted the assurances given in the letter signed by Dennis Brown and granted licences. Scott Brown later claimed that he had supplied the information on which it was based. In my 30 page submission I asked Tenet's ethics committee to consider whether the company deliberately used exaggerated terms and made the most extreme claims in those areas where their submission was weakest, and then became highly indignant when this was challenged. I asked the committee to consider the ethical implications. Attempts to distort reality by manipulating language in this way has been called "NMEspeak" in Australia. This draws a parallel with George Orwell's use of the word "newspeak" in his book "1984". He describes the misuse of words to manipulate reality.
The Four Corners TV program:- In October 1992 the Australian Four Corners television program showed a program exposing what had happened in Texas. NME refused to speak to the program but instead carefully prepared a statement which was read by John Bedrosian. This reiterated the claims made in Brown's letter. I quote
"Our company has a long tradition and a well earned reputation for high quality patient care"
"We gained the reputation through a quarter of a century of placing the welfare of our patients and physicians above all else."
"It is important to note that the instances cited were at a very small number of our 61 psychiatric hospitals, ----- "
"More than a year ago, questions were raised about practices at a few of our psychiatric hospitals in the state of Texas.
" -- -- -- We immediately launched a comprehensive management review of our psychiatric operations with particular emphasis in Texas"
"We learned that our strict standards of high quality patient care were, in fact being met in the vast majority of cases. -- -- -- -- "
"It is crucial to note, our review did not find anything systemic that negatively affected patient care"
"National Medical's corporate mission isto provide high quality health care services that respond to individual, family and community needs in a safe and healing environment. We work diligently to ensure that we succeed in that mission. We can assure you that those standards are being continuously monitored at each of our hospitals throughout the world.... and we will not tolerate any practices that do not meet the highest, ethical and legal standards."
A corporate press statement was released on 20 October 1992. Extracts include
In Relation to the recent transfer of bed licences in New South Wales, Markalinga (the name was changed to AME soon after this) fully informed the New South Wales Department of Health about all recent and relevant allegations relating to NME, which were fully considered by the department prior to granting approval for transfer."
"Markalinga's Independent Australian Directors are fully satisfied that the allegations regarding NME are isolated in the context of NME's operation as a whole and do not reflect the overall outstanding quality of health care NME has delivered for many years."
One must ask whether Australian directors were party to this misinformation or whether they had been deliberately misinformed. I have asked Tenet's ethics committee to consider the ethical implications of this correspondence when seen in the light of information available to the persons involved.
Further investigations:- This television program described very closely matters which I had been concerned about in Singapore and which I had referred to when writing to the Singapore Medical Council and which were also the subject of the allegations made by Dr Ng. I obtained material from NSW Health department under freedom of information legislation and then made my own more penetrating inquiries in the USA. The responses I received were very different to those obtained by NSW health department. The department were also sent copies of the US House of Representatives Report "Profits of Misery".
AME applied for a licence to build the new St Georges Hospital in Sydney. Newspaper reports at this time indicate that NSW health department were angry and felt that they had been deliberately deceived. They indicated that they would not grant further licences until they were fully satisfied.
Non-disclosure of documents:- In March 1993 NSWHealth wrote to AME under the terms of the licensing regulations requiring that AME and NME disclose the nature of all court actions taken against them and supply documents. AME's lawyers contested this claiming that the requirements were excessively onerous. NSW slightly relaxed the requirements and AME subsequently claimed that because of this they were not legally required to disclose the Ng court action or the many court actions in the USA. In their letter relaxing the requirements NSWHealth asked for disclosure of the relationship between NME hospitals and a group of doctors operating a service for visitors at Singapore airport. Two of these doctors had been suspended from practice for infamous conduct in 1991.
I am not qualified to address the legality of NME and AME's actions. I ask Tenet's ethics committee to address the integrity and ethical implications of the failure to disclose the nature of the actions and court documents available in the USA and in Singapore for those concerned. This request was made in the light of the obvious relevance many of these documents would have had to the licensing decision. The company was being assessed to determine whether it was fit and proper to hold licenses. It's integrity was therefore being assessed.
AME threatened to enforce their rights through the courts should licences be rejected. They repeated this later on 11 May 1993 stating
"If, as a result of delay in reaching a decision on our client's application for approval in principle, the St Georges project falls through, then as stated in our letter of 20 April, our client will consider all legal remedies available to it to protect its interests."
NME had reached settlements in the USA without admitting guilt. Politicians whom AME subsequently thanked for their support would have had to approve the funding of NSWHealth's defence of the decision to withhold the licence. Witnesses could not be subpoenaed from the USA.
AME's lawyers continued to claim that the problems were localised to psychiatric hospitals and that NME's directors were not implicated in any way.
Delegation to a retired judge:- NSW Health indicated that it intended to withhold a decision until the situation in the USA clarified. There was intense lobbying and NSWHealth eventually accepted that it had a "conflict of interest". The matter was delegated to a retired judge. NSWHealth immediately made a strong submission to the judge urging him to delay his decision until the outcome of the legal proceedings in the USA. It is clear that the judge did not intend to do so.
AME's responses:- AME responded to NSW Health in a number of letters.
20 April 1993
Item 29 (a) states "these problems and the resulting litigation were confined to the Psychiatric Division (PIA)"
Item 29 (b) states "Administrators of PIA hospitals reported to senior management in Washington and not to NME's board in Santa Monica, California".
Item 30 (c) states "NME owns and operates acute hospitals, rehabilitation hospitals and psychiatric hospitals. In the past, each of these three branches had operated as individual companies under the overall umbrella of the parent corporation."
(note that the substance abuse company "Recovery Centres of America" where similar practices occurred is conveniently omitted from this list. I have documents which show that there were three individual companies PIA, RCA and Rehab in the specialty group)
Item 34 states "None of the matters concerning the Psychiatric Division of NME are relevant to any of the directors of AME hospitals or any person concerned in the management of AME Hospitals."
Item 35 states "However, if you consider that it is relevant to look at the directors of AME, including Messrs Eamer, Cohen and Focht, we do not consider that any of the allegations concerning the Psychiatric Division of NME could be regarded as relevant to their fitness and propriety, unless it can be shown that they were directly involved in wrongdoing"
(Cohen and Eamer were among those who received monthly reports, but this information was withheld. Focht was directly in charge of the international division at the time of the Ng allegations)
Item 39 (b) "NME's response does not deal with litigation for alleged breaches of contract of employment by the individuals XXXXXX and YYYYYY which may have been referred to by Dr Wynne. Both of these individuals were terminated in consequence of the restructuring of the Psychiatric Division and have raised these allegations in the context of economically self serving litigation;"
(XXXXX's action was against RCA where he was employed and not PIA . The documents tabled in court indicated the introduction of NME's practices into RCA hospitals. The settlement with XXXXX was confidential)
Item 39 (c) "As stated in our letter of 26 March 1993 and except as in paragraph 40 below, we have not dealt with litigation which would be considered to be in the ordinary course of business, such as malpractice claims."
I have asked Tenet's ethics committee to consider whether these documents are an accurate reflection of the situation as it was known to those concerned and to examine the implications for the integrity of the persons involved in supplying information and drafting this letter.
Threats of litigation:- I had supplied Tasmanian Health authorities with documents from the USA. They consulted with a leading and well informed US health authority in Tasmania at the time. They wrote to me.
"I also assure you that National Medical Enterprises will not be registered in this state."
AME lawyers wrote to Tasmania threatening them with litigation unless they withdrew this undertaking. In a letter to NSWHealth dated 16 June 1996 AME's lawyers stated
"our client has instructed us not to take proceedings against the Tasmanian Department of Community and Health Services"
The Medical Observer a small 5 man medical newspaper published articles critical of NME. AME immediately commenced a defamation action. The action was never prosecuted but prevented the Observer from publishing further articles.
I have asked Tenet's ethics committee to consider the implications for integrity of this belligerent stance in the light of the information which was available to NME's staff in the USA and Singapore at the time as revealed by subsequent exposures.
My journey to the USA:- I visited the USA in June 1993. I met with doctors, administrators, fraud investigators, the pentagon, lawyers and senator Moncrief who carried out the investigations. I saw large numbers of incriminating documents and shared the revulsion and disgust of those who were aware of the nature, the consequences for vulnerable people who had come in trust and the full extent of this carefully planned and executed fraud. I was able to bring a small selection of these documents back to Australia.
NSW advises against licences:- NSW immediately advised the judge of the new information. It prepared a submission to the judge advising against the granting of licences and specifically advising against the granting of licences with conditions. NSWHealth indicated a lack of frankness and candour in that AME and NME had failed to disclose these documents. I quote
It is the Departments view that the application should be refused on the following grounds:
(a) a real question exists as to the power to grant conditions of the type forecast by you; and
(b) the lack of frankness and candour of the present applicant speaks strongly both against the application being granted and effects the utility of any conditions that may be imposed.
". . . . On 10 and 11 June the Department again requested information, narrowing its previous request in an attempt to accommodate any difficulties the applicant might have. The applicants submissions both fail to avail themselves of that opportunity and significantly seek to rely upon the very absence of evidence created as a reason for approval. Given the applicants conduct you are entitled to infer that the information that the applicant is refusing to supply must be detrimental to its application"
"In any event, the additional material obtained by the department and contained in its supplementary submission of 26 July 1993 includes information on proceedings and investigations which concern allegations of false imprisonment, patient abuse and fraud. These proceedings were not disclosed by the applicant, and it is the Departments submission could not be said to concern allegations that are 'within the normal business environment', on even the most liberal interpretation of that phrase."
"Separate from the question as to the power to impose conditions is the question as to the utility of any condition however drafted in circumstances where an applicant such as the present has failed to disclose relevant information and demonstrated a manifest lack of frankness and candour.
AME now made additional submissions to the judge. In August they supplied a statutory declaration by a Scott Mclean Brown who was company secretary and present at all board meetings. This stated :-
"4. Other than Norm Zober no director of NME took part in the day to day operations of any psychiatric hospital of any subsidiary of NME."
"6. Although the NME board received financial reports on the operations of the psychiatric division ("PIA"), the board did not determine and was not involved in formulating admission and other operational policies for PIA hospitals"
"8. The factual matters contained in the correspondence from MSJ (ie AME's lawyers) concerning NME and PIA have mainly been supplied to AME and MSJ by me and my staff ----------"
(Three members of the board received monthly reports from Zober describing the business activities in these hospitals. They met regularly. I subsequently obtained copies.)
Did AME deceive the judge delegate?:- The judge decided adversely to NME but elected to grant licences which he claimed would shield AME from NME's influence. These conditions specified that NME should not have a majority of directors on AME's board and that no previous directors of NME owned companies should have any involvement in the running of the hospitals. The judge sent a copy of his decision to AME's lawyers for comment.
In his decision he stated
"I have carefully considered the material placed before me concerning Mr Brown - - - - - - - - and have concluded that, like the other three directors, he should be regarded as fit and proper to be a licensee of the private hospital if, but only if, the conditions to which I later refer are imposed."
Eamer and Cohen resign:- During this period Eamer and Cohen resigned from NME, presumably because the monthly reports from Zober to Eamer and Cohen had been tabled in court. AME advised the judge of their resignations but failed to indicate the reasons or to supply these documents. I asked Tenet's ethics committee to consider the ethical implications of this. AME had repeatedly claimed that these persons were more than fit and proper to hold licences in Australia.
AME changes the judges conditions:- AME's lawyers immediately wrote back proposing changes to the conditions. Documents suggest that the judge did not know that Mr Dennis Brown had been a director of the company in Singapore and would have been excluded by the conditions.
"We assume that because of the comments made in respect of Mr Dennis Brown, there is no intention of limiting his role as Chief Executive Officer of AME.
Although Mr Peter Doust will be the senior executive in charge of the Hospital, he will report to Mr Dennis Brown. Mr Dennis Brown will therefore be involved in the administration of the hospital. We have suggested words to clarify his position."
They proposed the following change
"Except in the capacity as director of AME in accordance with conditions (ii) and (iii), no person shall be involved in the administration of the Hospital who is a present or former director, secretary, or executive officer (within the meaning of the Corporations Law) of any of:
(a) NME Inc; or
(b) any company (other than AME or a subsidiary of AME) which is a related body corporate to NME Inc within the meaning of section 50 of the Corporations Law; or
(c) any company (other than AME or any subsidiary of AME) which is an associate of NME Inc within the meaning of Division 2 of Par 12 of the Corporations Law;
and neither the applicant, AME nor any other body corporate or person shall appoint any such person. For the avoidance of doubt this does not apply to Mr Dennis Brown."
The bolding is mine and shows the addition made to the conditions. These were accepted by the judge. AME's lawyers did not disclose in their letter that Brown had been a director in Singapore. I have asked Tenet's ethics committee to consider whether the judge was deliberately mislead and what the implications of this are for the ethical integrity of the directors of AME and NME.
Failure to disclose the Singapore court documents:- The Ng Singapore court case went to court in August 1993 and the judge signed his conditions in September 1993. It is difficult to believe that Focht, Ford and Brown were not immediately informed of the evidence given by Dr Ng. I have asked Tenet's ethics committee to examine the implications for the ethical integrity of the persons concerned of not promptly informing the judge of this evidence.
Subsequent documents:- Subsequent to this decision monthly reports from Zober to three NME directors including Eamer and Cohen became available in Australia. An internal report directly to Focht dated 18/11/91 also became available. This referred to exactly those practices described in Texas in regard to "Great Plains Hospital" which is not in Texas. This internal report stated "Essentially all allegations were true". Also available were newspaper reports describing the Alan Ng case in Singapore, including the judges adverse reports about the hospitals business practices.
The report in regard to Great Plains contradicts all the elaborate claims made by the corporation in 1992 that the practices were localised to psychiatric hospitals in Texas. I asked Tenet's ethics committee to consider whether Focht and other members of the current board were party to any deliberate lying, and what the implications are for their continued employment in health care.
Further failure to disclose:- AME now attempted to secure a footing in other states. It purchased a hospital in Victoria and bid for one in Queensland. It also attempted to expand into pathology services in NSW. It applied for a licence in Victoria without disclosing that at the same time it was negotiating a US $379 million guilty plea with the US department of justice. Victoria soon became aware of the monthly reports, the Ng news clipping and the Great Plains report. They elected to obtain the NSW Health documents and conduct their own investigation. Victoria also obtained advance warning of the guilty plea. AME elected to withdraw from Victoria and Queensland. After the guilty plea in the USA the Federal government consulted with state health departments and then stepped in to prevent NME's further expansion in Australia so making their position untenable. I have asked Tenet's ethics committee to consider the ethical implications.
Main issues in regard to the conduct of NME staff in Australia
I have supplied Tenet's ethics committee with correspondence between Australian health authorities and NME companies. I indicated the extent of the information which it is now known was in the possession of NME at the time of this correspondence. Australian authorities were not well informed. I ask Tenet's ethics committee to consider this correspondence to determine whether in the light of what NME knew
1. the correspondence shows a persistent pattern of misinformation and exaggerated claims in regard to the activities of NME and its subsidiaries; to the extent that the persons drafting this correspondence can be seen to have deliberately misled and deceived regulatory authorities in order to secure hospital licences for their subsidiary Australian Medical Enterprises.
2. the persons involved in negotiations with Australian authorities deliberately and deceitfully withheld important documents which they would reasonable have been expected to disclose had they possessed the sort of integrity expected of a health care provider. These documents included relevant court material from the USA and from Singapore not only alleging but also including documents proving unethical practices. They also revealed patterns of thought which the committee might consider to be severely dysfunctional in the health arena.
3. the persons deliberately and deceitfully negotiated with an Australian judge to induce him to alter a legal determination which he had drafted in order to protect Australian citizens from the sort of practices to which NME hospitals have since that time pleaded guilty. The judge was induced to exclude an NME administrator from the conditions he was imposing. In reaching an adverse conclusion in regard to NME's conduct the judge had not found sufficient information in the submissions objecting to the licence to find this particular person unfit to run the hospitals. NME staff concealed the fact that he was a past director of an NME company and so would have been excluded by the conditions the judge imposed. In addition Dr Ng was about to give evidence in Singapore implicating him and his immediate superior in such practices. The doctor gave his evidence well before the judge signed his determination, yet the judge was not notified of this evidence. The judge altered his determination incorporating the suggested changes.
4. the persons involved participated in an application by AME for a licence to operate a hospital in the Australian state of Victoria on or about December 1993/January 1994. In their negotiations with the health department in Victoria they did not disclose that NME were at the time negotiating a guilty plea in regard to over half their hospitals in the USA. Such information would very likely have caused the authorities to reject the licence application. They did not disclose that a staff member running their hospitals in Australia had been named in the action by Dr Ng in Singapore and this action made similar allegations to those to which the company was about to plead guilty.
5. In their dealings with Australian authorities the persons adopted an unnecessarily aggressive and legalistic stance exploiting the legal possibilities of the Australian regulations. These were not drafted to deal with multinational health care providers. I question whether this was appropriate for a health care provider.
I ask Tenet's ethics committee to address the moral and ethical implications of the correspondence. The legality or illegality of the actions is not the main thrust of my concerns. I am raising the question of ethical integrity and the suitability of the persons involved to hold senior positions in a health care organisation responsible for the welfare of trusting and vulnerable people; particularly one which boasts about integrity and the values associated with the name "tenet".
Integrity Agreement - possible breaches
In conjunction with the guilty plea in June 1994 NME entered into an integrity agreement with the US department of justice. It also undertook to maintain an ethics committee and an ethics hot line for staff. It set up a compliance program supervised by Focht. Tenet/NME made elaborate claims in regard to it's new ethical commitments and the values associated with it's new name. It was claimed that Focht who was responsible for compliance was distant from the unethical practices. Most people would believe that as an ethical company Tenet/NME would have removed all staff who had shown a propensity to indulge in or to ignore unethical conduct. Most would anticipate that it intended to behave with complete integrity and would address any issues pertaining to senior staff. I do not have a copy of the integrity agreement but I ask Tenet's ethics committee to consider whether the subsequent conduct of senior staff is in breach of the spirit if not the legal letter of this agreement. My concern is that subsequent conduct does not reflect the undertakings given to the US department of justice and publicly to US citizens. I ask you to consider whether the conduct of senior staff continues to reflect a "lack of frankness and candour".
NME attempts to overturn the Australian decision:- Company officials including Focht and Ford came to Australia in October 1994. They claimed that they were confident that they could persuade the federal government to reverse their decision. I believe that it is unlikely that they disclosed their own implication in Dr Ng's allegations to those they came to see. The full transcripts of the Ng court proceedings were now available in Australia, and it is likely that they were confronted by their own individual "lack of frankness and candour". NME were unsuccessful. I ask the ethics committee to investigate the implications of any deception practiced here.
Further misinformation to the Australian public:- Michael Focht was interviewed by the Australian press in October 1994. He is reported to have made elaborate claims to reform and to a new commitment. He failed to comment on the reasons why federal officials had rejected NME's approaches. He continued to under represent the true extent of NME's fraudulent conduct in the USA. He is reported to have said
"We had an appendage that had become infected, that appendage has been removed and we are in the process of healing"
Over 50% of NME's hospitals had been listed in the guilty plea and it had paid well in excess of US $600 million to recompense those it defrauded. NME had been forced to sell off over 75% of its US hospitals. I ask you to consider the morality, the ethics and the implications for Focht's integrity in misinforming the public and shareholders by calling this an appendage. This is the man responsible for Tenet's compliance program and for fulfilling the integrity agreement signed only four months earlier.
AME refuses to confront the Ng court documents:- I attended AME's shareholders meeting in Perth in October 1992. I placed the Ng court documents in the hands of AME's chairman asking AME to stand the persons concerned down. AME refused. Ford, Focht and Brown were at this meeting. I ask Tenet's ethics committee to examine the implications of this refusal to investigate this serious matter for all these persons in the light of the integrity agreement so recently entered into and the importance of this matter in Australia.
The American Federation of Health Systems:- I now sent the Ng documents to the Federation of American Health System asking them to address the implications of these documents for their senior staff. The federation refused to acknowledge these documents which were sent by registered mail. Focht and Ford were senior members, Ford was a member of the federations quality assurance board. I believe that a company and their staff adhering to an integrity agreement would have insisted that the federation address the issue in order to clear their name and show Tenets new commitment to integrity. These persons had been promoted to senior positions in Tenet and the company would surely have wished to exonerate them and justify the corporate decisions to promote them. I ask the ethics committee to address the implications.
Threats and demands:- I now received threatening letters from lawyers in Australia and Singapore. These threatened three separate defamation actions, by Brown, by AME and by the NME hospitals in Singapore. These demanded that I acknowledge that I had conducted a defamatory campaign against the company and that I give undertakings which would have prevented me from bringing these matters to the attention of Tenet's ethics committee and of responsible authorities in the USA. I refused. I ask the committee to consider whether these threats were intended to prevent the disclosure of NME's conduct as alleged by Dr Ng and as revealed by Australian documents.
Defamation action by Brown:- Brown commenced a defamation action against me alleging that I and not Ng had made the allegations about his conduct. This was funded by NME. In spite of repeated requests to do so he was unable to formulate claims acceptable to the judge. Seven months and $62,000 later he withdrew the action and paid my expenses.
I ask the ethics committee to examine this issue in the light of all the information available to Tenet/NME in regard to it's own conduct to determine what the intention of this action was and whether there are any implications for the integrity of the persons involved in deciding to prosecute me in this manner.
Defamation action in Singapore:- Three days after withdrawing the Brown action the Singapore hospitals served me with a writ again alleging that I and not Dr Ng had made the allegations and that I and not Ng had referred to payments of about $500 for each patient admitted. Instead of prosecuting this action the Singapore hospital offered to settle the action if I gave undertakings which would have prevented me from prosecuting this matter with Tenet and US authorities. I refused. They took no action until the case was so overdue that the judge called a conference. The hospital were given 2 weeks to proceed. Instead of proceeding the hospital unilaterally obtained a further extension of the deadline claiming that they were negotiating a settlement with me. Instead they offered a settlement which required me to sign almost identical undertakings. I refused.
The hospitals are now owned by a Singapore company. It has some sort of an arrangement with Tenet to run the hospitals. I suspect that this action is being prosecuted under the terms of an agreement with Tenet. Parkway can have little interest in prosecuting this matter as court proceedings will reflect adversely on their business regardless of the outcome. I have offered a statement fully exonerating Parkway of any involvement in unethical practices and giving them undertakings in this regard. This statement preserves my right to press in the USA matters which occurred prior to Parkways' ownership of the hospitals . They have refused to accept this. I am asking Tenet's ethics committee to consider whether this action is another attempt to shield US staff and the company from the implications of their conduct. I am asking Tenet's committee to examine the implications for the ethical integrity of the persons concerned.
The failure of Tenet's ethics committee to acknowledge documents and address the matters I have raised.:- I have written letters dated 14 Nov 1996, 20 Nov 1996, 20 Jan 1996, 30 Jan 1996 and 22 April 1996 raising all these issues with the ethics committee. I enclosed the Ng documents and the Australian documents with these letters. Tenet have elected not to acknowledge any of this material. Instead David Layne has complained to the US bar association about the inconvenience of the efforts made by whistle blowers. In the past Tenet failed to address the complaints of whistle blowers in their hospitals. Instead they were attacked as disruptive. The company even reported one doctor who spoke out to an assessment committee as mentally impaired. Mr Layne's statement reflects a persistence of Tenet's inappropriate behaviour. I am concerned that senior Tenet staff who feel like Mr layne and who are implicated in these matters may be exerting improper pressures on Tenet's ethics committee and that this is preventing the committee from carrying out it's brief and it's duties under the various agreements reached with the department of justice.
Issues in regard to NME's June 1994 Integrity Agreement
1. In October 1994 NME staff, who were involved in the Ng allegations came to lobby our politicians to persuade them that NME was a reformed company and fit to operate hospitals in Australia. I ask Tenet's ethics committee to determine whether these persons honestly disclosed and discussed the implications of the Ng allegations, before they were confronted by them.
2. I ask Tenet's ethics committee to determine whether the public claims made to the Australian press by Focht in October 1994 reflected the sort of integrity expected of a person in his position, one who had recently signed an integrity agreement.
3. I ask Tenet's ethics committee to determine whether any involvement of Tenet staff in the refusal by AME and of the Federation of American Health Systems (Focht was a director of both) to confront the Ng documents was in breach of the spirit if not the letter of the integrity agreement.
4. I ask Tenet's ethics committee to determine whether the threat of three separate defamation actions and demands that I give undertakings was an attempt to silence my insistence that the company confront the Ng allegations. I ask the ethics committee to consider the implications for the integrity of the persons concerned.
5. I ask Tenet's ethics committee to determine whether the unsuccessful Tenet/NME funded court action by Dennis Brown alleging that I and not Ng had made the allegations about his conduct reflects the integrity to which the company has committed itself.
6. I ask Tenet's ethics committee to determine whether the court action taken in Singapore and the attempt to settle this by forcing me to give undertakings is any more than an attempt to circumvent the necessity for Tenet's ethics committee to address the matters which I have drawn to their attention. In this action I am again alleged to have made the Ng allegations.
In my actions I have been guided by the requirements of the World Medical Association. Both Australia and the USA are signatories. The 1993 guidelines state.
"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 action."
NME's own reports show that it's past conduct and lack of integrity adversely affected patient health. As I interpret the available documents which I have supplied to the committee there is evidence to suggest that staff may have behaved unethically and without integrity. NSWHealth seemed to think so as long ago as July 1993 . They referred to a lack of "frankness and candour". I am particularly concerned about Focht because he is so influential in Tenet's affairs and Brown because he is once again in a position where he can influence the conduct of doctors. Others will be influenced by their example. The promotion of people who may not have displayed a genuine commitment to integrity, to senior positions in health care, suggests that patient health may again be affected adversely. I believe that in pressing these matters with Tenet's ethics committee I am acting in the spirit of this directive. I believe that Tenet's ethics committee should do likewise. They have failed to do so and if they fail to respond then I have "a duty to take further action".
Directors of NME Companies
Tenet/NME's Current directors:- Several current or recent directors of Tenet/NME were directors of NME in 1991, 1992 and 1993. My records indicate the following.
Jeffrey C. Barbakow, Edward Egbert, M.D.
Michael H. Focht, Sr. Raymond A. Hay
Bernice B. Bratter, Lester B. Korn
Maurice J. DeWald, James P. Livingston
Peter de Wetter, Richard S. Schweiker
Eamer, Cohen and Focht were the initial NME appointed directors. Mr Denis Brown, Mr Scott Brown and Mr Michael Ford were made alternate directors. The directors of NME (Australia) Pty. Ltd. were Mr Austen, Mr Focht and Mr Scott Brown. Mr Ford became a director of AME following Eamer's resignation in July 1993. Carl Stanifer and Scott Brown became alternate directors in November 1993. Bedrosian was also at one time a director.
Directors of Mount Elizabeth Hospital Ltd
Chuang S Ling (Singapore)
D M Brown (Singapore)
F D Harrington (NJ)
D E Riddle (Singapore)
R C Joyner (CA)
J A Meyers (CA)
T V Papaniclcolas (CA)
M H Focht (CA) 1988
J R Clapp Jr (Singapore)
M E Powers (CA)
J F Osten (CA)
M E Heindel (FL)
M H Ford (CA)
This document was posted to Mr Neil Hadley, chairman of the Tenet ethics committee (Tenet Healthcare, P O Box 4070, Santa Monica, CA 90404) by registered mail by Dr J Michael Wynne on 2 November 1996.
Addendum:- Subsequent to the submission of this document Mr Yeldham the retired judge who overruled the advice of the investigating health department in New South Wales committed suicide. He made the controversial decision to grant hospital licences to the local company in Australia. It was then revealed that he had been summoned to appear before a Royal Commission investigating police corruption and police complicity in shielding prominent paedophiles. He had been apprehended because of sexual activity with young males in public places on several occasions. Police witnesses indicated that they were instructed by senior police to protect him because he was "on side". The royal commissioner expressed concern about possible blackmail and improper pressure. This was drawn to the attention of the Tenet ethics committee in 1996 and they were asked to investigate whether any Tenet officials had known of and exploited the judges vulnerability to secure a decision which by itself was very questionable.
More information is given about Tenet/NME's practices in a paper published in 1996
CLICK HERE -- to go to the beginning of the paper
CLICK HERE -- to go to the sections on the marketplace
CLICK HERE -- to go to the sections on NME's conduct in the USA
CLICK HERE -- to go to the sections dealing with control of staff and doctors
CLICK HERE -- to go to Australia's experience with Tenet/NME
Formatted for html on 29 December 1996 by Michael Wynne
Additional Comment July 2007