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Some considerations

This page examines some issues surrounding overseas ownership of health care.

Welcoming Megacorporations into Australia

Since 1991 multinational health care corporations have been welcomed into Australia and strongly supported by our government. With few exceptions they have had disturbing track records at the time of their welcoming which have exploded into scandals soon after. Graeme Samuel still wants them. They are essential if his model of health care is to work.

There seems little doubt that the Australian government, if not checked will comply with US policy at the WTO giving foreign health care megacorps unimpeded access to Australia. They are already dismembering the regulatory structure which protects Australians from unsuitable people; regulations which have been a stumbling block for disreputable multinationals. At the same time they claim that government will control the megacorps. Contracts, regulation and oversight will prevent any undesirable outcomes.

I have already indicated and shown quite clearly that regulatory control, and in that I include control through contracts, has not worked in health care in the USA or Australia. It is clear from Ron Williams analysis of the health care marketplace in 1992 that this would be so. I have provided additional explanations.


The way in which regulation fails in Australia is well illustrated by what has happened in state hospital licensing. I have described this. As a consequence an organisation with a criminal record runs large numbers of hospitals in most states. Effective regulation presupposes politician's willingness to remain at arms length and to support the regulatory process. There is little evidence of this in the USA or Australia. Politicians appear to have little understanding of this concept. There has been little enthusiasm to embrace this principle. This is particularly so when their political futures are at stake. Conflicts of interest are no bar to public appointments when a politically desired outcome is needed.

Market advocates like Wooldridge and Samuel have not confronted the facts. The meteoric expansion of health care megacorps in the USA came from the money which was taken from care. Despite this wealthy multinational corporations are assumed to have generated their wealth in socially beneficial activities -- the care of patients. They enjoy a credibility which they do not deserve. Politicians court their favour. Special facilities and funding have been made available at the Olympic games to enable them to do so. In this environment corporations are in demand. They are able to dictate their own terms and their own contracts.


It is only the action of citizens and the impact of public anger on share prices which have had any impact on corporate behaviour. This comes in waves and is usually transitory. In the USA Tenet/NME, Columbia/HCA and Aetna have all seen their share prices tumble in response to public outrage at their practices in that country. In Australia Mayne Nickless' lack lustre performance is probably at least in part because of the poor image it has in the community.

The share market does not respond to the events themselves as they seldom have a large financial impact. It does respond temporarily to pubic outrage and this causes share prices to fall. The market is very forgiving when the public gaze falters and welcoming when public pressure for punishment is successfully resisted or reduced.

Columbia/HCA and Tenet/NME's business practices had been admired and praised. When there was a public outcry about treatment, when they were prosecuted for fraud consequent on these business practices, and when government stepped in to limit Pacman activity their share prices fell. When Tenet/NME was finally convicted and paid $1 billion for fraud and mistreating citizens the market rewarded it with massive loans and share prices climbed. It had survived. They had simply overstepped the legal limits. Their practices were financially sound and would be again provided they were more careful. That their mode of operation was fundamentally antisocial did not matter.

When Tenet/NME paid out US $200 million for fraud in the USA, but Justice Yeldham granted it licenses, the banks rewarded it with massive loans. The federal government supported its expansion into Queensland with taxpayer's money using the Australian Industrial Development Bank, a QUANGO.

The idea that the market regulates itself is an illusion. This formal structure has successfully insulated itself from the informal regulatory structures of society - ordinary people. The only factor is profit and any conduct which threatens profit. There is no stigma once the threat has passed.


Tenet/NME's conduct became an issue in Australia only because our community was sufficiently sophisticated and the media took up the issue. Some members of the public were informed by colleagues in the USA. Others were already attempting to expose problems in Tenet/NME's international division. Australians were potential victims. This would probably not have happened in a developing country. Many citizens in these countries do not have the legal protection and the culture to support this sort of activity.

In contrast the impact of Tenet/NME's international conduct had no impact whatsoever in the USA. International staff had been promoted to senior positions in the USA on the basis that they were not tainted by what had happened in the USA. They were put in charge of compliance and ethic programs. Their negotiated criminal plea with the US government allowed them to claim that what was exposed was localised to psychiatry and was not systemic - what they called an infected appendix.

The Federation of Health Care Systems, the American Medical Association, the US department of justice, and Tenet's ethics committee were all supplied with Singapore court documents and documents showing the "less than frank" conduct of these people in dealing with Australian Authorities. Short extracts were much more widely available and more detail was supplied on the www.

This had no impact in the USA, but it generated a brace of defamation actions unrelated to these documents but whose withdrawal was conditional on undertakings which would have prevented the disclosure of these publicly available documents in the USA. These actions were never prosecuted. The company was able to deny the evidence in the documents and support this by claiming they were taking these defamation actions.


It is clear that governments in one country and even citizens will be reluctant to impair that country's positive trading performance by publicly addressing problems which local corporations have created in foreign countries. The welfare of foreign citizens will not rate highly in the US marketplace. This means they will not be addressed.

The way in which government acts without concern for the citizens of other countries is revealed by the way the US government has accepted the submission of the Coalition of Service Industries. It has accepted their health care recommendations and is going in to bat for them in international trade negotiations at the WTO.

This is the same government which is battling a massive health care fraud problem estimated to cost government up to US $100 billion a year - only a fraction of which is recovered. This is the same government which has been repeatedly confronted by problems in care in psychiatry, in rehabilitation and in aged care - the latter both in the community and in nursing homes. It is exporting all this. Is this what US citizens want? Is this the sort of society they have become? Has government been "corporatised" and so lost contact with people and their values?

The marketplace has successfully persuaded world leaders to isolate it from human rights issues - to place a barrier between the formal marketplace and the informal structures of society. It is isolating itself from human revulsion at the abuse of others.

I have described how it has barricaded itself against all but the crudest forms of social control by the community. It has also rejected its citizen's responsibility to exert social control. Explanations and justifications to make this legitimate have been generated from within the marketplace paradigm.

It is clear that economic ideology has generated a social movement with its own logic and its own momentum - in one sense separate from the context in which it finds itself and the society which it should serve.

In a civil society the values and norms of our informal structures are mediated and implemented through formal structures. Values and norms are translated into action and so "objectified". By doing so society and its members gain a sense of being a cohesive self - a human enterprise. The market may serve society by generating wealth but it fails society in this broader context. Society loses a sense of who and what it is - a grasp of its humanity.

These concepts are congruent with the paradigms of understanding which I have advanced.


Graham Samuel argues that cash will not leave the country and will be ploughed back. Multinational companies as I understand them are not philanthropic institutions. If they invest money they expect to get that back and make profits as well for their shareholders. If we examine the vast profits made by Columbia/HCA, Sun Healthcare and many others then the amount of money likely to leave the country can be guessed at. The same argument applies to the reinvestment of some of this profit in Australia. It will only be reinvested if the company believes that it can make even more money for shareholders.

Samuel claims that multinational corporations increase employment. This is not true. If we are attending to the needs of our population then the same number of employees will be required regardless of who runs the system. The evidence is that fewer people will be employed to provide care because money will be diverted to the business of competition and profit -- more money managers and marketing experts.

The health care "industry" does not produce a commodity which can be sold on the international market and so generate benefits for Australia. The only commodity dealt with are the profit bodies - sick people. The government is simply trading the use of these profit bodies by corporate interests in return for their taking a difficult and unwanted problem off the government's hands. It puts politicians at arms length from responsibility for substandard care. They blame someone else. A recent SBS television programme revealed how prisoners became profit bodies in corporate prisons in the USA.
(For profit bodies See Lindorff D - Marketplace Medicine)


Samuel assumes that government holds all the levers when signing contracts. This is not so.

Government seeks to induce corporate groups to invest more, fund the services citizens need and increase employment. It wants them. Corporations can hold most of the cards. Examine the way in which Virgin Airlines was induced to come to Brisbane. It had to be bought by the Premiere, Peter Beattie. Imagine the egg on his face it if becomes public that Virgin is indulging in fraud and unsafe flying practices. If he learns of this will he prosecute or will he hush it up?

A Health Care Example: - Health care corporations can and often are in a powerful bargaining position when entering into contracts and when failing to meet their obligations. Tenet/NME was for instance rescuing a bankrupt Australian company and had offered to resurrect the crumbling private hospital system in NSW and WA. Private medicine was threatened. It was consequently in an extremely strong position when it entered into negotiations with government and when its practices were questioned. At the time Tenet/NME was the centre of a massive scandal in Texas. Australia was careful not to go looking or ask questions and when they were forced to confront this they supported the company and failed the community.

Doctors in Sydney did not want Tenet/NME but the new St. George's private hospital was badly needed. Surgery was being practiced in a number of small ill equipped private hospitals in Sydney. One of the reasons why Tenet/NME was contained in NSW and Western Australia and not forced out of Australia earlier was in order to allow it to build this new hospital first. I do not know whether this played any part in federal government actions but it did in mine. I had spoken to doctors involved and this influenced my actions. I held my hand. It was never my intention that they be allowed to run this hospital. I think the doctors who were in possession of information about the company knew this. I only acted decisively when it was too late to abandon the project.

A nonmedical Example:- In Queensland coal companies were in breach of the environmental sections of their contracts. They were also looking for new coal to mine and Queensland was an option. Many jobs would have been created. When the head of the relevant government department attempted to enforce the clauses of the contract he was pushed aside by government and the minister assured the companies that they would not be required to meet these clauses. It would have cost the companies many million dollars to fulfill their undertakings. The Queensland mining projects went ahead. Ministers featured prominently at the opening of the new mines - a public relations exercise.


The contracts with health care corporations to run public hospitals in Australia have been found wanting by auditor generals. They have been heavily criticised and this move to sell public patients to corporations is not popular.

Samuel's claim that contracts will ensure that his model will work well is not supported by past experience with contracts. It cannot be accepted.


It is also important to consider the implications for Australia when a multinational is in financial trouble elsewhere. Our experience shows that corporations expand internationally when they are aware of developing local problems, such as fraud investigations. Tenet/NME, Columbia/HCA and Sun Healthcare were all on the brink of scandals involving their practices when they entered Australia. They use these foreign investments to cushion problems at home and there are strong pressures to exploit the less regulated foreign businesses. Developing countries are particularly vulnerable.

In Australia we placed intense pressure on Tenet/NME which made it very difficult for them to limit care or understaff. In spite of this there was a death at their flagship, the Mount Hospital in Perth. The circumstances suggested a serious problem in staffing.

We have a similar problem in NSW at the present time. Sun Healthcare is Alpha's major shareholder and in a position to exert control. Sun is in Chapter 11 and desperate for additional money. The NSW Health department have been made aware of the potential problems which this poses for patients and of the concerns which US governments have. Hopefully they are performing better than the federal aged care department which was also warned of potential problems in a corporate aged care marketplace. Four of Sun Healthcare's Australian facilities have now entered bankruptcy.

Graeme Samuel was selling his model to developing countries at the World Bank. These countries are less likely to be aware of or to be able to address problems like this.

Central Map ..... Initial Map ..... USA Map ..... Australian Map ..... International Map ..... Corporate Practices Map..... (to print)
  Home ...... Australia
This page created October 2000 by Michael Wynne