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Generale de Sante Internationale

Letter to Australian Medical Enterprises

Comment:- Generale de Sante Internationale (GSI) was the medical subsidiary of a large French multinational group. It was the largest health care provider in Europe. It was sold to other European groups in 1997. Columbia/HCA and Mayne Nickless were both interested in purchasing it but they dropped out after the French and the Medical Associations became aware of the FBI raids and Mayne Nickless past history. In 1995 it bid to buy Australian Medical Enterprises or AME (The Australian arm of Tenet/NME).

The Foreign Investment and Review Board (FIRB) process rapidly gave its stamp of aproval for GSI's entry into Australia. FIRB then refused to reconsider its decision in the light of the material available. I had over the years written to the Treasury and to the Senate Community Affairs Reference Committee urging a review of the deficient FIRB process and the inadequcy of Australian state licensing regulations. These structures have large loopholes which allow predatory health care corporations and their legal teams to enter Australia and then exploit deficiencies in state regulations. Once corporations have FIRB's approval it is very difficult for state authorities to act.

Inquiries about GSI were made by people in Western Australia. They unearthed allegations of disturbing conduct. There was adverse publicity and the Australian Medical Association opposed GSI's entry into Australia. I received copies of the Woodley report and of a number of UK newspaper clippings. GSI issued a denial which was published. I was a shareholder and had written to the chairman of AME about GSI. He sent me a copy

I took the trouble to pick up the phone and speak to some of those in the UK who were involved. I responded to the chairman and sent copies to major shareholders.

GSI did not continue bidding. AME was sold to Mayne Nickless, an Australian company.

The letter is included below and describes the concerns about GSI's operations at the time. They were bidding for Tenet/NME's holding and I tried to show how similar the practices of the two were.

6th October 1995

The Chairman
Australian Medical Enterprises
255 St Georges Terrace
WA 6000 

Dear Mr ********,

"Bribe counts hit AME suitor"

Thank you for the faxed copy of the media release from GSI. It is interesting to see their explanations, but I must caution you against accepting them at their face value. It is too like the statements made by Tenet/NME.

Misinformation by Tenet/NME:- You can hardly have forgotten NME's claims made on many occasions and particularly on television to all Australians in 1992. NME claimed that their practices were "not systemic". They were localised to a small number of administrators who had misinterpreted the corporate mission. We were assured that standards in all NME hospitals were continuously monitored. Later we were assured that NME and AME directors knew nothing of the practices and received only financial reports.

Doctors have since testified that a "programmatic model" of care was introduced which maximised the financial benefits by giving unneeded and excessive treatment for excessive periods without any benefit to patients1. Standards of care were simply ignored. We now have evidence to indicate that NME's business practices were introduced into over 75% of NME's hospitals which have all been sold2. Over half are listed in a guilty plea to criminal charges3. Senior staff face prison sentences. Over US $600 million has been paid in fraud settlements and thousands of patients are claiming damages for mistreatment. People it is alleged were bought and sold. Doctors were bribed1,3. NME and AME's directors received monthly reports from these hospitals. In spite of all this NME and AME directors informed the Australian public in October 1994 that NME had "an infected appendix" which had been removed4.

It seems that sections of the business community feel that it is legitimate to misinform and mislead the public and shareholders when financial considerations dictate6. Such practices may be accepted by businessmen in waste management but cannot be accepted in the professional arena. Health care is provided by professional people who value integrity. They and the public expect this from all health care providers in Australia.

GSI's media release dated 6th October 

Deficiencies in GSI's media release:- Clearly a full and objective assessment of this release and it's truthfulness must be made. The release is strong on denial and heavy on criticism of the messenger. It is short on evidence. New South Wales advised against the granting of licences to AME on the basis of a "lack of frankness" and we cannot tolerate a repetition6. NME criticised responsible media for exposing it's practices as "overblown" and they referred to reports of unethical practices as a "feeding frenzy". Events have shown how responsible the media were. GSI's description of the reports as a "smear" and their suggestion of ulterior motives because the exposures in Australia occurred at an inopportune time is no substitute for facts. We have had too much of this sort of response over the last few years.

The conduct of multinationals:- We have been sensitised by the exposures of severely dysfunctional business practices in multinationals operating out of the USA7. Dave Lindorff, in his book "Marketplace Medicine", has analysed the way the misapplication of market forces has operated to the disadvantage of patients and the health system8a. Arnold Relman, editor of the New England Journal of Medicine has repeatedly pointed to the dangers8b. At the same time corporate businessmen have devalued the traditions of the medical profession, traditions based on an ethic which protects the actual care of patients from market forces. Doctors who have adhered to the traditions of their profession have it is claimed been smeared and even threatened with libel when they dared to speak out. Doctors in the USA have formed the Semilweis society to combat these trends. Louis Feeh, director of the FBI in the USA has said "Drug dealers are switching to health care fraud because the risks are less and, if caught, they know they will face only minor punishments" and "Health care fraud is a top national priority for the FBI"9. A report from our own health department in Western Australia supports my contention that there is considerable potential for such practices in Australia. It stresses the need for legislative reform. Your minister for health in Western Australia ignored this advice. His motives in doing so have been criticised in parliament. 

Response to reasonable suspicions:- That we are highly suspicious of multinationals and want to keep our health system Australian is hardly surprising. Clearly those of us interested in these matters will make inquiries and ensure that multinationals are closely scrutinised before they enter Australia. We want from GSI the original investigation's reports, the coroner's reports, the audit of their hospitals referred to and the statements of witnesses. We want disclosure of any other investigations and inquiries into the operation of their hospitals. GSI's explanations and assertions can then be evaluated.

At the very least the following matters related to the GSI media release should be addressed by truly independent assessors including outside appointed medical practitioners. You should liaise with the AMA in this regard.

1. The nature of the allegations made against GSI on Reunion and who was involved. What investigations are planned and what statements have been made by witnesses? What steps are being taken to validate or refute the allegations. Another company which is prepared to make large settlements without admission of guilt will not be acceptable to the Australian public. The issues are matters of integrity, and a reputable organisation will be expected to challenge the assertions and clear it's name.

The denials made by GSI are unhelpful and might conceal a situation similar to that when NME denied the initial exposures in Texas. They too tried to pass the blame to a subsection, claiming they knew nothing of the practices. We now know that NME and AME directors received monthly reports in regard to the practices in the US hospitals where the fraud occurred. Dave Lindorff describes how NME's senior staff attempted to bribe politicians in New Mexico in 19868.

2. GSI's media release refers to a number of deaths at Kneesworth hospital. It states that "No other official investigations are taking place" and "Local Hertfordshire police interviewed staff over the claims and reviewed patients statements. No further action was taken. Other statutory health and mental health authorities did not see the need to investigate the claims further."

I have information relating to the Woodley team report10 which investigated the case of Stephen Laudat. I understand that this report was critical of many things including the care provided in this hospital which was being paid 1600 to 2000 pounds (over $4000) a week. It found that care was "barely adequate". As I read the material available to me, a decision to discharge this dangerous patient back into the community was made without consulting the doctors caring for the patient.

I understand that there was also an inquiry conducted by Detective Inspector Atkinson into the death of Oswald Morson in Kneesworth hospital. A coronial inquest was held and the matter was then referred to the prosecutor. A criminal investigation was set up under Chief Detective Inspector Beck on the 2nd October, four days before the media release. I understand that this investigation is broad and is intended to encompass the deaths of several other patients and any possible relationship of these to the mis-administration of drugs.

Clearly some inquiries must be made by an independent person to determine whether the information I have been given is correct. If so, it directly contradicts the media release and indicates a "lack of frankness".

3. Claims in regard to deficient practices in the hospitals were denied in the release.

My information from a press release dated January 199511 is that the allegations in regard to the deaths referred to "lack of care" and "excessive use of lethal tranquillising drugs". It appears that prior to these deaths a confidential audit found that ?staffing [illegible word in my copy] standards in the Kneesworth hospital were not of the same quality or type as in NHS psychiatric units"

This audit extended to two other hospitals run by the same company. It found that they adopted a "factory" approach to deeply disturbed patients, using "custodial" techniques rather than the individual treatment regimes in the NHS."

Such practices are reminiscent of NME's programmatic model of care in which financial considerations were given precedence over the welfare of trusting patients1. One UK physician11 is reported as saying "In the private sector, they have got to make a profit at the end of the day, so they have one policy and stick to it." The report indicates that the private sector in the UK has been very profitable. Health officials indicate that as in the USA there has been a lack of accountability in the private sector. It was this lack of accountability which allowed NME to introduce its business practices into "specialty hospitals" in the USA. They produced spiralling profits and enormous wealth at the expense of trusting people who came for help.

4. Concerns about levels of staffing.

In my letter to you dated 5th October 1995 I referred to the problems which arise when unscrupulous business executives cut costs by reducing full time staff at the expense of patient care. This audit of GSI hospitals found that the "hospitals used large numbers of lowly qualified nurses, fewer doctors and wards of up to 30 patients to limit running costs." This audit which, the report indicates, GSI attempted to suppress by threatening libel action, preceded the deaths of a number of patients. The use of powerful drugs is implicated in these deaths. In the understaffed situation described the excessive use of drugs to deal with disturbed and difficult to handle patients could be predicted and when dangerous drugs are used by staff under excessive pressure then fatal accidents are likely.

5. Attempts to silence whistle blowers.

The report indicates that the authors of the audit referred to above were threatened with libel action when they attempted to address the deficiencies which they had identified. This is exactly the strategy adopted by NME and by AME when attempting to silence their critics.

The same business practices and business expertise:- These allegations, if true reflect exactly those unscrupulous financial practices which have characterised NME's operations. Allegations in the USA indicate that financial considerations and greed for excessive profits took precedence over humanitarian considerations and the welfare of patients1,7. NME has been the major offender, but other large US and international corporations have indulged in similar practices. We do not have such practices in Australia and we must not import them. Politicians have behaved irresponsibly and have not followed the advice of their health departments. Our regulations have not been revised and remain inadequate. There is still no penalty for failing to disclose relevant material to FIRB. State health regulations in Western Australia still retain their 19th century form and have no teeth. The system can be manipulated by corporate lawyers. It is therefore up to the press, an informed public and shareholders to deal with these issues.

Your responsibility:- As a director and the Australian chairman of AME it is your responsibility to insist on the production of the audit referred to, the Woodley report, the coroner's reports and any other investigations carried out. These documents should be reviewed by independent medical staff. It may be necessary for a doctor to fly to the UK to speak to those involved. We have an outstanding public hospital system. We need to ensure that patients are not disadvantaged by taking out private insurance and then entering impressive looking hospitals where standards are inferior because of an excessive drive for profits. We are dealing in hundreds of millions of dollars and the lives of Australian citizens. Ron Williams who has studied the health system in the USA and Australia has indicated the dangers and the need for concerted action12.

Yours sincerely,                     Copy to major shareholders


Cited articles:-

1. "Profits of Misery" -- Hearing before the Select Committee on children, youth and families. US House of Representatives - One hundred and second Congress (Second Session) US Government Printing Office Washington 1992.

2. Kim H. "NME builds on specialty strength" and Taravella S "Turnover spotlights style of NME unit's chief" Modern Healthcare March 31, 1995 pages 24-30

3. Governments statement of facts and Plea agreement . US Department of Justice. US District Court for the District of Columbia. Case number 94-0268

4. Prior N "AME looks to China for medical services growth" West Australian. October 21, 1994 page 47

5. Evidence by John Bedrosian (NME founder) in Cross Examination by Greg Love. Hutchings Court Reporters, March 2, 1993

6. Crawshaw K "Submission in Reply" NSW Department of Health - FOI document July 1993.

7. Moncrief M. Report Senate Interim Committee on Health and Human Services (Public Inquiry in Texas) November 1992

8a. Lindorff D. "Marketplace Medicine. The Rise of the For-Profit Hospital Chains" 1992 Bantam Books, New York, Sydney

8b. Relman A "What market values are doing to medicine" Atlantic Monthly. March 1992

9. "FBI: Health care fraud the crime of choice" Hospitals & Health Networks May 5 1995 page 13.

10. "The Woodley Team Report " Report of the Independent Review Panel to East London and The City Health Authority and Newham Council September 1995

11. Gould M "Care fears after deaths in 'factory' hospital" OBS 8th Jan 1995

12. Williams Ron "Remission Impossible. The future of the Australian Heralth Industry." The Jacaranda Press. Brisbane, Sydney

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