6 March 2000
Mr A Hinton
Foreign Investment and Review Board (FIRB)
The Treasury Building
Dear Mr Hinton,
re rumoured break up of Mayne Nickless - international purchaser
I draw your attention to speculation in the Australian 1 March 2000 page 34 to the effect that Mayne Nickless is breaking up and that there is already a deal to sell its hospitals to a multinational.
I express my concern that the name of this purchaser will not be released, and that FIRB will approve the buyer behind closed doors. Citizens whose welfare is vitally affected will not have the opportunity to make inquiries about the sort of people who are being brought into Australia. FIRB and government process have been revealed over and over again to be totally inadequate to assess international health care corporations. Tenet/NME, GSI, Sun Healthcare, Quest (the residue of a group of Corning subsidiaries which paid massive settlement fines under operation Labscam), and but for the timely actions of the FBI Columbia/HCA
Look at what happened with Sun Healthcare. FIRB were fully informed of the concerns about the company. A senate inquiry (July 1997) had already revealed the dreadful problems in California where Sun is a major operator. Despite all this Australian government investigative processes found insufficient fault with the company and did not consider it a threat to Australian citizens. It now faces well over 300 suits for misusing and neglecting citizens. Thousands have suffered needlessly and died prematurely as a result. It has declared Chapter 11 bankruptcy. There are now vast numbers of allegations, supported by several studies to show that with other similar corporations it deliberately neglected care to fuel profits, that it worked the medicare system to maximise profits, and that it recklessly used those profits to raise massive loans which it would be unable to service when the government cracked down on the medicare racket. This company is still the major shareholder in Alpha Healthcare and effectively controls its activities. We are unable to get rid of it.
I remind you that local corporations are subject to local pressures and that shareholders respond to this. Mayne Nickless situation is at least in part due to the disenchantment of the public and particularly the local health care professions with its business philosophy. Another example is Aetna Healthcare. Its particularly disturbing practices in the USA have provided the focus for a nation wide outcry against Managed Care and attempts to legislate to protect vulnerable patients from exploitation by managed care corporations. Its hard line approach to care has exceeded that of its competitors. As a consequence its share price has fallen by over 50% and shareholders have fired the chairman who was a driving force. Local communities do exert some limited and belated control over local corporations and the way they operate.
Shareholders in another country are not subject to any of these social pressures and there is no social control over multinational corporate excesses. It is extremely difficult to get rid of them. The only protection enjoyed by ill citizens is the surveillance program mounted by the government. The total failure of such systems in health and aged care is now widely documented - most recently and most graphically in the Riverside scandal in Victoria. It is revealed that the problems are widespread in nursing homes. They are consequent on staffing problems due to cost cutting. The federal department responsible has not only failed to properly protect citizens but has a financial interest in not doing so.
I am asking that FIRB should not consider an application by a health care multinational to purchase Mayne Nickless hospitals or any other health care service until the name of that multinational has been adequately widely published in the press and interested parties have had an adequate opportunity to make inquiries and lodge objections.
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From NY Times on the Web:
Aetna Replaces CEO After Stock Loss
February 25, 2000
Filed at 6:11 p.m. EST By The Associated Press
NEW YORK (AP) -- Aetna Inc.'s outspoken chairman resigned Friday, succumbing to intense pressure from shareholders who want the nation's largest health insurer to boost its ailing stock price and improve its relations with patients and doctors.
Analysts welcomed the decision by Richard L. Huber to step down, but warned the company has left unclear how it plans to overcome rising medical costs and lawsuits alleging that the company unduly restricts care to build profits.
``I don't think Dick Huber losing his job solves Aetna's problems,'' said Todd Richter, an analyst with Banc of America Securities. ``The only thing this does is makes it appear as if the board cares and is doing something.''
The company, which provides health insurance benefits to 21 million Americans, wouldn't say whether Huber was forced out. Aetna's board of directors replaced him with William H. Donaldson, 68, a board member since 1977, and co-founder of the investment banking firm Donaldson, Lufkin & Jenrette. Donaldson, a former chairman of the New York Stock Exchange, is only expected to hold the top job for a short while.
Huber, 63, jolted the once stodgy Hartford, Conn.-based insurance company with a series of acquisitions and his brash management style. He had been expected to retire by the end of next year when he turned 65.
But with the stock down 60 percent in less than a year, some investors began calling for his ouster.
``The board and I share not only pride in the company's leading position in health care and financial services, but also frustration at the recent returns received by Aetna shareholders,'' Donaldson said in a statement.
Aetna's stock price has slumped from about $100 last spring to under $40. It was rose 18 3/4 cents to $40.75 on New York Stock Exchange trading Friday.
Last fall, the company became the target of several class-action lawsuits alleging, among other things, that its system of paying doctors rewards them for skimping on care. The suits were filed by the same trial attorneys who won big awards against the tobacco companies. The company denies wrongdoing.
Aetna has also had more difficulty than expected in turning around Prudential Healthcare and NYLCare, two money losing health insurance companies that it bought last year.
Aetna has also had to wage a public relations battle to maintain its image against consumer groups and doctors, who have complained that it frequently delays paying claims and drags its feet approving medical procedures.
Aetna's payment practices riled some hospitals and doctors so much that they resigned from its network, forcing patients to seek care elsewhere.
Some investors believe Huber made the PR job even harder with blunt remarks.
Last year, a day after a California woman won a $120.5 million jury verdict against Aetna for delaying care to her husband before he died of cancer, Huber said the award was the work of a ``skillful ambulance-chasing lawyer, a politically motivated judge and a weeping widow.'' Huber later apologized.
Analysts welcomed Donaldson's appointment.
``He understands shareholder concerns probably more closely and is likely to take a fresh look at everything the company is doing,'' said David Marsh, of Prudential Securities.
Aetna's options include selling its international division in order to generate some cash and focus solely on its domestic operations -- something Huber had ruled out. The company could also abandon unprofitable regions.
To improve its image, it could follow the lead of competitor United Healthcare and give more power to doctors make care decisions without being overruled by health plan administrators.
Huber took over the top position at Aetna five years ago and led the company through rapid expansion, punctuated by the purchases of U.S. Healthcare in 1996, NYLCare in 1998 and Prudential Healthcare in 1999.
Huber's rough style was just what Aetna needed in the mid 1990s when the company struggled to keep up with competitors, said Larry Marsh, an analyst with Lehman Brothers.
At that time Aetna's growth was stagnant because of its focus on offering traditional indemnity health insurance coverage that gives patients freedom to use any doctor but also had higher costs. When Huber arrived, he was unafraid to tell doctors and hospitals to change the way they operated because he believed they were inefficient.
``That was fine for slow, sleepy and stocky Aetna a few years ago but today that attitude is taken as belligerence and he became the lightening rod for what everyone hates about HMOs,'' Marsh said.
Last week, Aetna posted stronger-than-expected fourth quarter profits, but warned it was having trouble controlling rising medical costs. That startled many on Wall Street because several other managed care firms such as United Healthcare said they had costs under control.