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section HEALTHSCOPE The
market at work
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Markalinga & AME
Mayne Health & HCoA
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This page documents the unsuccessful attempt by the Mosman Community and its doctors to stop Healthscope from removing surgical services from what had been their community hospital for 70 years.
Mosman Hospital Purchase
LINKS CORPORATE MEDICINE WEB SITE
The market at work
Healthscope's handling of Mosman hospital in Sydney is a good illustration of the way the market operates when contrasted with not for profit services. As I have said before the for profit market follows the money. Managers have a legally binding fiduciary duty to do so. They can justify all sorts of unsavoury behaviour on that basis provided they are able to find nuances which allow them to slip around the borders of the law. If it does not make a profit they can restructure it, sell it or close it. Profit comes first. This is commerce and what the struggling health system needs, the economists claim, is some hard nosed commercial thinking to reform it so that it works. The not for profit system is outdated and does not work economically. It pays service to and gives priority to soft and illogical thinking.
Healthscope learned the lessons of the market early on when it was forced to restructure a large number of hospitals into psychiatry/rehabilitation/extended care, sell others and close some in order to survive.
For profit companies meet the demands of their shareholders, to whom they are accountable, by exploiting the needs of the community for profit.
Not for profit services are run by members of the community to which they are accountable. They serve the community and follow their needs. They may of course have to do all of these things if they don't have the money and have to ration. They provide what the community, government or private ciizens will fund. They stretch what they have and close the least essential facilities when forced to do so.
Mosman hospital had a seventy year history of serving the community, providing medical and surgical services. Its ownership progressed from individual ownership, to church, to community. It was owned by the Mosman and District Community Health Service. In 1989 it was privatised and leased to Hospitals of Australia to run. As I read the reports they were required to provide medical and surgical services under the lease. Subsequently ownership was merged with a psychiatric group,Twilight house, with the same people on its board. They became the owner and managed the lease, but in the process the conditions requiring them to provide medical/surgical services disappeared. Many in the community believed that this requirement was still in operation.
Hospitals of Australia was acquired by Mayne who continued to run it as a medical/surgical hospital until it sold off hospitals in 2003. Mosman was losing money so was sold as part of a package to Healthscope who would probably have preferred to do without it.
I have lived in Mosman since 1934 and seen that hospital pass through various metamorphoses from being Glengarry owned by the matron, through a time as All Saints, a Church of England hospital and, later, becoming Mosman Community and then Mosman Private Hospital.
Disturbed by hospital move (letter M.J. Holmes) Mosman & Lower North Shore Daily January 13, 2005
Mosman in Sydney and Mersey in Tasmania were the only hospitals out of the six purchased that did not fit into Healthscope's policy of avoiding competition in order to obtain market leverage in negotiations with insurers. Healthscope managed to hand Mersey back to the government without cost to itself. Mosman was a money losing medical/surgical hospital in a big city, something Healthscope was avoiding. It was also a community facility leased to the company and it needed NSW government approval.
Initial reports suggested Healthscope was planning to turn Mosman into a psychiatric hospital. The company did not deny this. The sale was not approved for 6 months and it is likely that some negotiations were going on. The community and the doctors clearly wanted and needed a local community surgical service for routine procedures. When the sale went through Healthscope committed to revamping the theatres and upgrading its surgical service.
But he does not confirm market speculation that Healthscope will convert the Mosman Private Hospital into a psychiatric facility.
2003 Psychiatry rumour
Healthscope to bed down new hospitals. Australian Financial Review February 14, 2003
The only metropolitan hospital on the list of six is Mosman Private in Sydney's north, and this may be converted into a psychiatric facility.
2003 Psychiatry rumour
Hospital Pick-me-up Business Review Weekly March 13, 2003
THE new owners of Mosman Private Hospital, Victorian-based group Healthscope, have refused to confirm the hospital will remain community-based and continue to offer general medical and surgical services.
2003 Psychiatry rumour
Mayne began operating the 60-bed, 100-year-old hospital in 1989. In 2001, it closed its operating theatres to upgrade the airconditioning system and was accused by visiting doctors of a lack of communication over the move.
No decision on hospital Mosman Daily (Australia) March 20, 2003
Mayne Group Ltd advises it has completed the sale of Mosman Private Hospital to Healthscope Ltd, first announced on February 3.
2003 Sale approved
MAYNE COMPLETES SALE OF MOSMAN PRIVATE HOSPITAL TO HEALTHSCOPE Australian Company News Bites August 18, 2003
"Our aim is to increase the activity at the hospital to meet the needs of the community," she said. "We're targeting the surgical needs of the community, regardless of the age group."
2003 To be medical/surgical
The Daily understands Healthscope has plans to increase the number of specialist services available at the hospital and give the building a major revamp.
"We will remain a community-based hospital but we want to expand our surgical services.
Hospital changes hands Mosman Daily September 4, 2003
Healthscope made a brief but concerted effort to make Mosman profitable. It recruited some high flying young surgeons and persuaded them to do sessions at the hospital. The local newspaper ran a glowing advertorial describing their liver transplant work and the services they would provide to the local community.
The rest of the week, the two specialists are seeing patients in Mosman in a coup for the soon-to-be-revamped Mosman Private Hospital.
2003 Surgical advertorial
The dynamic team of young surgeons say - - - - - -
Mosman Private general manager Marilyn Wallace said the hospital had been very well supported by the community, showing a desire for it to remain open.
She said Healthscope had committed funds for the general refurbishment and upgrading of the hospital.
Surgeons' double lives Mosman Daily November 27, 2003
When in spite of these efforts and the wishes of the community the surgical service was not profitable after a year Healthscope closed down the surgical service. Mosman did not get psychiatry, but it did get rehabilitation and a number of other niche areas where Healthscope could dominate the market. The community got no choice in this.
The community and the hospital staff were devastated and angry. The surgeons felt betrayed. For Healthscope this was simply a commercial decision. They were a business not a philanthropic organisation. What did people expect them to do? There is a well documented precedent to this. The enormously successful US company Columbia/HCA's founders also made the point that restaurants were not expected to feed every tramp on the street yet they were expected to care for them in their hospitals. They did not think this was fair.
The key issue here for those who see health as a Samaritan service is that Healthscope like Columbia/HCA was making record profits yet it would not supply the service the communities it professed to serve wanted and needed. The other three hospitals purchased from Mayne were now profitable and they were not prepared to carry one that was not. Human and community issues and sensibilities were not a serious consideration when profit was at stake.
This is not Healthscope's fault. This is how an impersonal marketplace operates. It is what institutional investors expect. Decisions are based on graphs on computers not on people on the ground. Let the pieces fall where they might if the grand plan is met. Healthscope is praised and admired for its success in successfully restructuring money losing services in this way.
A not for profit service would have sought to serve the community and have used spare cash to this end. They would have cooperated with other not for profit groups to spread the benefits as widely as possible, rationing services only when forced to do so. They would have been in ongoing discussion with members of the community to reduce the least essential services.
This is not of course the way not for profits operate today in the USA or in Australia. They have all been required to operate under government's competition regulations and adopt marketplace ideas. They compete with one another and against the for profits. They have restructured to operate in this way. Cooperation in spreading services to serve the community has become collusion. Those that fail to operate in market mode go under more rapidly than those who do.
MOSMAN Private Hospital will close its theatres and surgical unit on December 17 after 14 months of "considerable financial loss".
2004 Closing down surgery
The 50-bed hospital, run by Melbourne-based Healthscope, will continue to deliver medical care and extend into chemotherapy, rehabilitation and sleep disorders.
It will also open a mood disorder clinic, while its Sydney clinic treating this psychiatric condition is refurbished.
Mosman Private Hospital, held in Trust, has been operated by Healthscope for the past 14 months, taking over from Maynes Health Care. Hospital general manager Marilyn Wallace said despite efforts to reinvigorate the surgery unit, it had continued to lose money.
One surgeon, Dr Tim Haymet, said doctors were "looking at the situation" and "trying to find a solution". He said medical staff had been informed by letter last week that the surgical unit would close.
Unhealthy bottom line cuts services at hospital Mosman & Lower North Shore Daily November 11, 2004
Healthscope Ltd reports a record half-year net profit of $11.6 million, an increase of 34%.
2005 Healthscope's profits
The increased profitability of the Group was largely due to the positive contribution of the hospital businesses acquired from the Mayne Group - - - - - -
Healthscope boosts profit 34pc to $11.6m Australian Business News February 16, 2005
"We're in front of where we thought the ones we bought off Mayne: the Hobart, St Helen's, Canberra and Geelong hospitals, are all well in front of where we thought they would be at this time," he said.
2005 Other purchases from Mayne
Gribbles to be growth engine Australian Financial Review February 17, 2005
Private hospital operator HealthScope delivered a record half-yearly profit driven by a better than expected performance from some of Mayne's discarded hospitals.
HealthScope revives hospitals The Sydney Morning Herald February 17, 2005
Healthscope, the nation's third-largest private hospital owner, has gained a reputation in recent years for acquiring and improving struggling businesses.
Healthscope looks to Asia buys for growth The Age February 17, 2005
In our western societies hospitals and health care have traditionally been humanitarian endeavours and the community has seen them in this way. Doctors and nurses have embraced this ethic. The community has given these institutions their trust. Deviations from this model have been viewed negatively, and when the ethic has been widely breached the parties have had to rationalise and justify their actions.
For profit market medicine crept in under the skirts of the kindly not for profit private sector, then came to dominate it. The words "for profit" and "not for profit" are seldom used in Australia. Comparisons have been made between private and public but rarely between for profit and not for profit private care. Market medicine has been sold to the public as about choice, a choice they all too frequently can't exercise with discrimination.
Nobody has told Australians that his was really about caring for someone else's profits rather than caring for their well being. Like all marketing - a practice once considered unethical in medicine - the companies claim to be focused on serving the public. The business reports in the press, as revealed in the Healthscope extracts on these pages, show who they serve and the strong pressures exerted by their masters. The public don't realise that care is, for the companies, simply another vehicle for generating profit. The companies would cease to provide it if it was not profitable. The companies and managers currently or previously sold minerals, oil, cleaning services, trucking, building material, food, and even shares to make profits for themselves and their employers. They do not see health care any differently. Most turned to health care because they saw more profit there.
The shock of communities and of the professions who come up against the harsh new reality of health care is revealed by the angry and disbelieving response in the Mosman community. The mayor, the doctors and the public rose up in anger in the belief that the hospital was still committed to the original undertaking and was there to serve them. Their anger and frustration cut little ice with management who simply went on holiday. They exercised their rights within the rigid structures of the law. Healthscope's chairman's response that there was "nothing he could do" is a real one. It reflects, not on the chairman, but on the position in which the market places its employees. Profit is the ultimate justification for all decisions and the chairman of a public company cannot deviate from that. "Commercial agreements" and "business objectives" are put forward as justifications for any action on the basis that no credible person could challenge that. What is so scary is that they really do think like this.
Even the local politician got in on the act but instead of supporting and representing the community in their action she supported the legitimacy of Healthscope's marketplace justification. The community would not have remembered that a year earlier the health care corporations and their bankers had cemented the MP's loyalty with political donations exceeding $10,000, or that it was her party which had sold the idea of privatisation to the NSW public in the 1990s when it was in power.
A PUBLIC meeting will be held on Saturday to discuss Healthscope's changes to Mosman Private Hospital, under which the hospital will close its theatres and surgical unit on December 17.
2004 Public response
Meeting over big changes at private hospital Mosman & Lower North Shore Daily December 9, 2004
LAST-DITCH efforts including a legal challenge are being made in an attempt to stave off the closure of surgical beds at Mosman Private Hospital.
2004 Legal challenge
Mosman Mayor Shirley Jenkins said she was determined to fight the closures.
"We are determined to ensure that, at a time when the provision of quality medical and surgical services to local communities is being eroded, there will be no surgical closures at Mosman."
A public meeting of residents, doctors and hospital nurses was held in Mosman on Saturday to discuss the Healthscope decision.
Janis Salisbury, a nurse at the hospital for 30 years, said there was a feeling of "utter devastation" about the closures. "We are very popular with surgeons, who know the standards are high at Mosman," she said.
Healthscope chairman Kevin McCann, of Mosman, told the Daily there was nothing he could do to save the surgical services.
"Management has worked hard to improve the surgical lists but this has not been successful and we have to accept the financial outcome," Mr McCann said.
'Save surgery' bid Mosman & Lower North Shore Daily December 16, 2004
MOSMAN Private Hospital surgeon John Garvey said doctors were seeking legal advice on Healthscope's lease and licence. Speaking at Saturday's rally, Dr Garvey said the lease and licence stipulated the hospital was a general medical and surgical hospital.
2004 Legal challenge
"We want the hospital to be restored to its former greatness," Dr Garvey said.
"If Healthscope don't want to do it they should let someone else have a go. The hospital is going to have a dedicated bunch of fantastic surgical nurses about 25 out of work by Christmas." There are also 17 specialist surgeons working there. The hospital, which is held in trust for the Mosman community, has been operated by Healthscope for 14 months.
Doctors get legal advice to stop hospital closures Mosman & Lower North Shore Daily December 16, 2004
The 50-bed hospital, leased by Healthscope, is owned freehold by Twilight House, which runs three aged-care facilities, including the adjacent Glengarry.
2005 Stymied by market processes
Mosman general manager Viv May said as far as the council was concerned there appeared to be no legal avenue to have Healthscope re-open the units.
"We have had a meeting with Twilight House and we are in the process of organising another meeting with Healthscope chairman Kevin McCann about the closures," Mr May said.
Mr May said Healthscope had made what appeared to be a commercial decision.
He (Mr McCann) said attempts by management to improve the surgical lists had not been successful and the company had decided to change the service lines to include rehabilitation, mood disorders and sleep disorder programs.
North Shore State Liberal MP Jillian Skinner said this week that unfortunately the hospital was a commercial enterprise and the community could not expect Healthscope to run it at a loss.
"I know how much the community hates to lose something they love," Mrs Skinner said.
Talks on hospital continue Mosman & Lower North Shore Daily January 6, 2005
Received donations from several sources during her campaign including health-related companies and others:
2004 Political donations* Salomon Smith Barney Aust Pty Ltd $7500
* Healthscope Ltd $1500
* Ramsay Health Care $1500
Jillian Skinner : North Shore MP North Shore Times February 13, 2004
MOSMAN Private Hospital visiting surgeon John Garvey has lashed out at Healthscope's closure of the hospital's theatres and surgical ward and a transfer which preceded it.
2005 Doctors and community vs "business objectives"
Dr Garvey said the medical professionals had enough responsibility looking after their sick patients with breast cancer, bowel cancer and malignant melanomas without "the aggravation of hospital administrators".
"We don't need to cope with these people putting financial issues first and pulling the rug out from under our feet," he said.
The Daily has learned the hospital's title was officially transferred from Mosman and District Community Health Services to Twilight House on June 10 last year, meaning it is no longer required to operate as a general medical and surgical facility.
The title was transferred for $1.
"Until the first public meeting on the surgical closures was held in December and Healthscope's lease was examined, we did not realise the title had been transferred," Dr Garvey said.
"Every patient who has spoken to me about this matter has been shattered and outraged by the news that a community resource one they believed they once owned had been transferred without the knowledge of community leaders, including Mosman Mayor Shirley Jenkins," he said.
Cr Jenkins said it was true the title had been transferred without the knowledge of the council or others and she and general manager Viv May were in the process of investigating how it had happened.
Dr Garvey said there needed to be "a thorough investigation of how the Mosman and District Community Health Services had the right to dispose of such a valuable asset without appropriate community consultation".
The Daily was unable to contact Healthscope chairman Kevin McCann and Mosman Hospital general manager Marilyn Wallace, who are both on holiday.
TWILIGHT House chairman John Laurie has defended lease arrangements between Twilight House and Healthscope operators of Mosman Private Hospital saying they had been achieved under a commercial agreement.
He confirmed Healthscope's decision about what services it would offer at the hospital were entirely related to "business objectives".
In a letter to the Daily, Mr Laurie said the hospital had been closed as a public institution in 1989 with the board entering into a lease arrangement with Hospitals of Australia to operate it as a private hospital.
"At the same time the hospital board approached Twilight House and proposed the companies enter a merger agreement and this was executed between the two companies in 1994 following a unanimous resolution by board members of the Mosman and Community Health Services," Mr Laurie said.
He said following the merger, Twilight's "flag-ship" dementia care unit Glengarry opened in 1999, adjacent to the Mosman Private Hospital.
"The transfer of assets from Mosman and District Community Health Service to Twilight House was the finalisation of a process that has taken 10 years to execute and is unrelated to the service changes proposed by Healthscope," he said.
He said one of the hospital's visiting surgeons, John Garvey, had been incorrect in his assertion that the Mosman community owned the hospital.
"Until the merger of the two companies, the hospital was owned by members of the Mosman and District Community Health Service. It is now owned by the members of Twilight House who are the same persons," he said.
Mr Laurie said there had been a meeting before Christmas between Mosman Mayor Shirley Jenkins, general manager Viv May and Twilight House representatives.
"A productive discussion took place with the history of the changes and the company's operation presented in full."
Mr Laurie said as far as Twilight House was aware, Healthscope was operating within the terms of its lease with the company.
Hospital deal defended Mosman & Lower North Shore Daily February 10, 2005
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This page created May 2005 by Michael Wynne