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The Corporatisation of Health Care in Australia

This page describes the Australian government's multiple attempts to introduce a corporate health care market into Australia. The strategies used and the depths to which they sank to accomplish this are described.


Money is tied to doctor's signatures. They authorise the treatment and everything else which happens to citizens who are ill. A government which can control doctors signatures can control costs. A corporation which controls doctors can make a profit. Other professionals who can wrest control of treatment from doctors can increase control over their own activities.

The only people who have controlled doctors successfully have been corporations which have found ways of linking their incomes to their signatures. It is not surprising therefore that government has sought to create a context in which corporations which make money by restricting care gain control over hospitals and doctors who provide that care, The only people whose interests are served by doctors retaining control over treatment decisions are the doctors and their patients. If they want this to continue they should be doing something about it.


Health care corporatisation in Australia first received strong support from the labour government in the late 1980's. Labour policy had swung from an attempt by Hawke and Howe to introduce a National Health system to the introduction of managed care contracts and encouragement of corporate providers by Keating and Lawrence. Keating was the driving force in introducing economic rationalism - a radical departure from traditional labour policy.

The labour government in Western Australia brought Tenet/NME into Australia in 1991. The federal labour government strongly supported them. The conservative government in New South Wales welcomed them with open arms. The more traditional labour oppositions in NSW and Western Australia were strongly critical. Individuals in both parties were disturbed by Tenet/NME but their criticisms were muted because of the involvement of their parties in governments which were complicit.

In 1992 Ron Williams published his book "Remission Impossible" warning that both major Australian political parties would introduce a medical system dominated by US megacorps. He warned of their power and the likely adverse consequences. He was ignored and his book did not sell.

The liberal/national coalition which won the election in 1996 was even more right wing in its thinking. It was not constrained by the labour force and the unions - mostly traditional labour voters whom labour dared not alienate. The new treasurer had been a member of a right wing think tank.

While condemning labour's health care policy this government pursued "marketplace reform" far more aggressively. Michael Wooldridge explained his policy and the ideological basis for it in May 1996.


The Australian government has attempted to follow the broad path sketched out by Samuel, but without fully explaining this to the electorate. They have publicly rejected "managed care" while making every effort to introduce managed care systems.

To implement the sort of competitive market model suggested by Samuel across a spread out country like Australia the government needed to bring into Australia sufficient multinationals to fill the roles of both purchaser and provider.

To accomplish this it has welcomed and encouraged into Australia a series of decidedly unsavory and criminal organisations. These are organisations which have ruthlessly exploited what was once a caring if expensive health care system in the USA. These corporations have not hesitated to misinform, misuse, exploit and neglect citizens whose trust, the heritage of centuries was systematically breached in the search for profits. It has welcomed and encouraged every group which put its foot in the door only to be embarrassed and frustrated by revelations of their disturbing conduct.


FIRB and Tenet/NME: - FIRB is the government advisory body which welcomes and encourages multinationals to enter Australia. It is also supposed to vet them. The commitment of this federal government to ideology was such that, despite the experience with Tenet/NME it was willing to bring into Australia people who were thoroughly unsavory. Government were unwilling to set in place sensible provisions to protect citizens. They not only ignored serious deficiencies in the Foreign Investment and Review Process when they were told of them, but they continued to do so even after these deficiencies were repeatedly exposed. Their enthusiasm for Samuel's principles was such that all governments actively supported Tenet/NME's expansion even though they were very well informed of its practices.

Welcoming Sun Healthcare: - Worse still the current federal government used the deficiencies in the FIRB process to bring Sun Healthcare into Australia over the objections of the state where it was to operate. New South Wales was sufficiently disturbed by the information it had received about Sun Healthcare to object to its admission to Australia. Sun clearly had plans to enter the Australian aged care market and it is difficult to accept that the government did not know this. Hospitals are regulated by the states but aged care is a federal government responsibility.

The departure of Tenet/NME, GSI and Columbia/HCA, amidst revelations of unsavory conduct had already thrown government's plans into disarray and it was clearly desperate.

Government and the FIRB had been repeatedly told of the regulatory problems and the dangers posed by multinationals. After each failure they had been forced to confront their earlier support in the light of revelations of corporate misconduct. They were fully aware of the threat. They had all been supplied with the West Australian health departments 1993 report.

Sun was an advocate and provider of the step down facilities our minister planned to use step down facilities as part of his plan to "reform" our hospital system and turn it into a common marketplace. In the USA Sun was primarily a nursing home and aged care provider. FIRB had been advised of its plans to enter this market in Australia.

The aged care market: - Our aged care system had been prepared for market competition by legislation in 1996. The government's plans were frustrated by the absence of sufficient corporate providers to compete on the aged care level playing field they had created. With the exception of Mayne Nickless there was little share market enthusiasm for corporate hospitals and corporate aged care corporations in particular. The public and the professions were not sympathetic to this model.


Sun Healthcare had a vast experience in making profits from the care of the aged. Its public rhetoric mirrored that of our minister. It had built much of its empire on step down care. It is a measure of our Wooldridge's existential angst, and the government's ideological commitment that, despite its previous embarrassing experiences with FIRB it elected to ignore disturbing information and disregard an objection to Sun's entry into Australia by New South Wales (NSW).

Sun Healthcare is now in financial disarray, amidst revelations claiming that it neglected to provide the care it had promised. Thousands have allegedly died as a consequence. The silence from both sides of the Australian parliament is deafening.


The lack of morality or principle in governments in Australia and their blindness to social issues is illustrated by their willingness to meet the age bulge by bringing into our country corporations which from all accounts had not hesitated to take enormous profits from the money paid to them to buy care for the aged in the USA. They simply did not bother to look. Information was available and they were advised of the need to look for this. This is the way we would expect ideologists to cope with paradigm conflicts.

In marketplace thinking large profits from the misery of others is a measure of credibility and the good care that is provided. I mimicked George Orwell and called this "NMEthink". This form of thinking was well developed among Tenet/NME staff and was assimilated by the stock market analysts who were so full of praise.

It is difficult to fathom how government thought that Sun Healthcare could continue to make large profits in Australian aged care. The government, as it has now disclosed, knew the system was already underfunded and stretched to the limits. If we use NMEthink then Sun's financial success in squeezing even more from this underfunded system would have been accepted as proof of ideology and policy.

We must consider whether Mrs. Bishop, Minister for Aged Care would have acted when serious complaints were made - complaints which were a challenge to ideology? If her response to Riverside was tardy, imagine how slow she would have been with Sun Healthcare after the government had made such a profound commitment to it. Logic and ideology do not sleep well together.


Regulatory failure: - To further their objective governments across the country have refused to give important regulations which protect citizens the legal backing which they require to deal with multinationals. Australia differs from the USA in that providers of health and aged care have to meet probity requirements. This is a stumbling block for multinationals which would seldom meet the sort of probity requirements required to care for vulnerable citizens.

Emasculating aged care regulators: - Probity provisions were removed from federal aged care regulations in 1996. The aged are the most vulnerable people in our society. More than any other group they require empathy, patience and time - all unmeasurable in terms of productivity. The only protection they had was the probity provisions which ensured that operators were motivated to provide this sort of care rather than profit by greater efficiency and productivity.

Arms length failure: - In 1993 regulators in NSW indicated that they were prepared to use the probity provisions to deny a license to Tenet/NME. They would not grant a license until they were fully satisfied. A judge who was at risk of "improper influence" was appointed within weeks to grant a license. He granted a license in the face of a strong recommendation from regulators in the health department that it should be rejected on the basis of probity. While the judges vulnerability was known to government this was not disclosed to the public until 1996 when his sexual misdemeanors were publicly exposed and he committed suicide.

States ignore probity issues: - Across the country state government health departments have simply ignored the probity provisions when corporate groups which they knew could not claim to be "fit and proper persons" because they had criminal convictions applied for licenses.

When objections to licenses were lodged in order to challenge these decisions these objections were ignored, or lame excuses were made. None claimed that these were fit and proper people to care for our citizens.

When Victoria, the only state where the probity process was at arms length from government found Sun Healthcare's probity to be in question, none of the other states acted or investigated. We now have the anomalous situation where care in NSW is provided by a group which Victoria considered unfit to care for its citizens.


Our government has not opposed or objected to the proposals by the Coalition of Service Industries in the USA to include health care in the new WTO global trade processes. It is clear from their statements and from Samuel's speech that the government and their official body the National Competition Council support this.

It seems very likely that the probity provisions in our licensing procedures, like the limitations placed on deceptive marketing in health care will be identified by US corporations as "obstructions" which should be "liberalised". Should a public outcry force politicians to resist then it will be appealed to the World Trade Organisation (WTO) who are unlikely to support our case.

Government's failure to reform the FIRB process and to support probity regulations is a good indicator of their intention to support the inclusion of health care in WTO agreements. Any effective probity legislation would be interpreted as obstructions to legitimate business activities and appealed to the WTO. WTO agreements would open Australian health care to multinational corporations and solve the governments problems.


Governments problem: - Government needed to find or develop groups to fill the role of Samuel's purchasers. The medical profession had successfully boycotted the contracts introduced by Lawrence (Labour health minister) on the basis that they were simply managed care. The government had distanced itself from Lawrence's proposals. The medical profession was well informed about managed care and bitterly opposed. Any attempt to bring in a multinational HMO such as Aetna Healthcare would have generated a massive outcry, intense publicity and a doctors revolt. The government was forced to look for corporate "purchasers" within Australia and then claim that this was not managed care.

Privatising insurers: - In Australia health insurance has traditionally been provided by mutual associations responsible to members. This was in keeping with the health care tradition of keeping profit pressures at arms length. In response to government pressures some have demutualised and become shareholder owned. While these groups have followed the path towards managed care, my reading is that with a few exceptions they have not done so with any great enthusiasm.

In their desperation the government even courted the banks in an attempt to get them to act as purchasers, selling health care products. This died by attrition.

National Mutual: - National Mutual had been purchased by AXA, a French multinational less sensitive to Australian sensitivities. It became the the vehicle for the introduction of managed care contracts in Australia. It linked with Mayne Nickless in an attempt to induce doctors to break ranks and enter into managed care style contracts. The government enacted legislation to make these legal. The government succeeded in forcing hospitals into a system of contracts with purchasers - the first step but the profession held out.

Corporatising general Practice: - At the same time government has made life ever more difficult for medical practitioners, increasing their administrative burden. Another foreign company, Kiwi Gold quietly entered Australia, changed its name to Revesco, received a massive injection of funds then switched its operations to health care. It has targeted general practice, offering lucrative purchase prices for them, re-employing the doctors under contracts and relieving them of the many nonmedical burdens of running a practice. The offers are very attractive. Large numbers have been tempted into the corporate bag. A number of other Australian groups have entered this market and are competing with Revesco.

It will be interesting to see whether and how soon Revesco enters into contracts with purchasers - how soon the doctors find their golden handshake agreements have become golden handcuffs binding them to managed care contracts. Revesco is following a well trodden path. Tenet/NME introduced it in the 1980's. It enabled them to gain control of doctors incomes and so the use of their MD degrees. Revesco wants their referrals to its pathology, radiology and paramedical empire.


Globalisation: - There was wild enthusiasm about international markets in managed care in 1997. International health care consultants marketed the opportunities enthusiastically. Managed care in the USA was becoming ever more unpopular and less profitable. There was a rush to expand.

Australia: - The medical profession was up in arms because it was well informed about managed care. Unlike the US profession it united in opposition and simply refused to sign contracts with any of these groups. Had Aetna or any other US HMO been brought into Australia there would have been an outcry. Whether these groups had ambitions is not clear but they would not have seen Australia as profitable. Their ability to make profits depended on doctors agreeing to contracts. They would have walked into a hornets nest.

Other countries: - Most English speaking countries were well aware of the problems in managed care and their doctors made sure that they realised the implications. It is likely that they were not welcomed.

Instead US HMO's selected countries which did not read English language newspapers. Aetna for instance selected Brazil, Argentina and Chile. One HMO tried Malaysia and received a blast from its English speaking doctors. I note that Aetna's South American ventures have not been profitable and that it is now looking to find a buyer. The locals may have been more perceptive than Aetna anticipated. Aetna also needs cash to prop up its acute problems in the USA and fight the large class actions it faces.

AXA in Australia: - The French insurance giant AXA bought control of National Mutual and of its health insurance section. This became the vehicle used by the government to drive doctors into contracts. They refused. Government has succeeded in forcing hospitals into contracts with these purchasers of health care. An insightful clause in the Australian constitution, ensures the independence of the medical profession in their duty to patients. They cannot be forced to sign contracts without changing the constitution.


So desperate was our government to pursue its market model of care that it turned to Mayne Nickless, despite its criminal history of under the table verbal contracts to defraud customers by fixing prices - the very thing which Samuel and the NCC now accuse the profession of doing! AXA and Mayne Nickless tried to tempt doctors into contracts with the minister's strong support. He even passed legislation through parliament to make what they were doing legal. He appointed Mayne Nickless staff to senior government posts.


If government had succeeded in developing Samuel's model then Tenet/NME, GSI, Columbia/HCA, Sun Healthcare, Mayne Nickless and probably also Aetna and Kaiser would have been here to introduce their US understanding of Samuel's competitive purchaser (managed care) and provider system into Australia. Samuel's model would already be reality and we might already be experiencing the full profit before care benefits we have seen in the USA - the dystocian situation we were warned about by Ron Williams. His warning that care for the patient would be replaced by care for the corporation might well be with us today.


Fortunately a few of us with a different experience of health care realised that Ron Williams knew what he was talking about and we did something about it. It was only because citizens pressed the issue of probity so hard that governments were embarrassed into some sort of action to restrict these companies. Continued support became politically untenable.


If the behaviour of governments in attempting to introduce a Samuel-like market model over the last 10 years is reviewed then by any standards their conduct was secretive, manipulative, in breach of their responsibility to citizens, and in breach of the principles of democracy. It is almost as if Samuel has been the mind behind the various minister's mouths.


CLICK HERE -- for a more detailed account of the way regulations in Australia have been eroded in the corporate interest.

CLICK HERE for more information about FIRB

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This page created October 2000 by Michael Wynne