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9 March 1999

Mr xxxxxx xxxxx
Chief of Staff
Minister for Aged Care
Parliament House
ACT 2600

Dear Mr xxxxxxx,


I write to thank you for the letter on behalf of your minister dated 2 March 1999 in reply to my letter to Ms Wendy Edmond, Minister for Health in Queensland dated 10 November 1998 and forwarded to your minister on 3 December 1998. I refer also to my letters to the minister dated 7 January 1999 and 13 January 1999.

Propriety and honesty:- I note the manner in which approved aged care providers are assessed and that this seems to differ very substantially from the way in which providers were previous assessed. In a fax to me dated 4 October 1994 a Mr Rainer Perring from the Aged and Community Care Division of the Commonwealth Department of Human Services and Health indicated that approval as an operator "involves checks of propriety, honesty, financial capacity and previous experience in the industry". I ask for an assurance that probity issues, including honesty are still major and important components in the assessment of the suitability of an approved provider of residential aged care services.

It concerns me that Sun Healthcare and most of the other corporations which have indulged in unconscionable conduct, particularly in the USA would easily qualify as approved providers under the terms specified in your letter. Sun can claim extensive experience as the third largest provider of aged care in the USA. It has been enormously successful financially. Tenet/NME and Columbia/HCA are similarly the two largest and most financially successful hospital chains in the USA. All have indulged in conduct which is totally unacceptable and which I sincerely trust would render them totally unsuitable to operate in Australia. I have examined licensing regulations from the USA and the major and most critical difference in Australia is the probity requirement. This has protected us from these organisations.

Despite major deficiencies in state regulations relating to the legal ability to enforce them, this provision this has been the single most important item in the legislation protecting Australian citizens. It was used by Victoria to protect citizens from Tenet/NME in 1994 and from Sun Healthcare in December 1998. The health department in NSW advised against granting a licence for Tenet/NME in 1993 on the basis of a lack of probity. Their advice was ignored by Mr Justice Yeldham who was delegated to make the decision after the health department indicated publicly that it would not grant a licence until it was satisfied about the probity of the company. Yeldham made a decision imposing licence conditions which the department had indicated to him could not possibly offer citizens the protection which he claimed it did, and which they could not police. It is now known that Yeldham was at risk of improper influence, and the government appointing him to make the decision were very probably aware of this.

To whom should I send material:- In the final paragraph you indicate to me that the information I have supplied will be taken into consideration when evaluating applicants for aged care services. I would be grateful if you would advise me whether you are referring to the material supplied to parliamentarians or to the more extensive but unacknowledged material sent to the department of Health and Family Services.

I refer you to my letters to the minister dated 7 Jan 1999 and 13 Jan 1999 in which I asked to whom I should send material to ensure that it was acknowledged. I would be grateful if you would advise me to whom I should address material, and if it is to this department ensure that they acknowledge material. It seems inappropriate to send it all to the minister.

As indicated in this correspondence I am in possession of several court documents in which patients and their relatives make very serious allegations about Sun Healthcare's services. That there is substance to this material is shown by a US federal government investigation and a decision by the Californian state to withhold further licenses for Sun Healthcare. The case in Connecticut has now been settled for US $8.4 million and there is a vast discrepancy between the explanation given by the company and the damning condemnation of the "arrogance and avarice" of corporate executives made by the attorney general in Connecticut. Any evaluation of probity will need to decide which is the more correct interpretation. I have in my possession the auditors reports and other material used in this case which should help to confirm the accuracy of the attorney generals criticisms. If probity and honesty are no longer issues in Australia then clearly I would be wasting my time sending all this material.

Regulation and accreditation to contain fraud and the misuse of patients for profit:- I thank you for the time which you have taken to so carefully explain the accreditation and other regulatory structures which have been so carefully set in place to protect patients and which reflect the concern of the government to provide high quality care.

Regulations and accreditation have not worked elsewhere:- I do not have the expertise to evaluate the processes you describe but have very considerable reservations about the efficacy of this approach. The USA has had far more experience of corporate misconduct than any other country. They have been trying to accredit, regulate, prosecute and put in place compliance programs since the 1980's. They have been world leaders in accreditation processes. Despite the tightening of regulations after the exposures in psychiatry, chemical dependence and rehabilitation across the USA in 1991, fraud at the expense of care increased with first the revelations of operation labscam in pathology, then the exposure of Columbia/HCA, Quoram and other corporations in February 1997 and finally the revelations of fraud and neglect in aged care across the USA in June 1998. The ongoing exposure of denial of care and poor standards of care provided by managed care corporations intent on maximising profits by restricting care across the USA is legendary. It is now the subject of large numbers of television soapies. Australia is relatively inexperienced and even if as is likely you have been advised by US "healthcare experts" experience indicates that regulations would have to be unique to be successful.

Corporations and care:- Corporate entities enter health and aged care in order to make a profit and not to provide good or compassionate care. As is well illustrated in the USA, profit priorities in the marketplace conflict directly with the care requirements of patients. Corporations must expand and secure market dominance to survive. To do so they must generate a large profit. They justify this expansion by claiming efficiency and cost savings. In reality they create impersonal monoliths whose decision makers are far removed from the human dimension of care. The driving forces in the corporate system are consequently in direct conflict with the intention of the regulations to protect patients and maintain standards. The decision makers are shielded by distance from the consequences of their actions. Those corporations which are most successful in stretching the regulations to limit care or who are able to limit care without being detected will be most successful. The sociopathic features displayed by the leaders of the most successful corporations are particularly disturbing in this regard. Some have an ability to bend words and so turn unconscionable behaviour into desirable business practices.

Form versus substance:- Corporations may persuade themselves that they genuinely identify with the goals of the regulations. Corporate interests and regulators will indulge in a public relations exercise which both may believe. The US experience shows that the pressures of the marketplace ultimately triumph. A silent and unseen war of attrition between regulators and corporate interests reaches an equilibrium in which weary regulators choose to simply look the other way. Their most serious sanction, the "revocation of Approved Provider status" is hollow indeed once corporate interests control a significant fraction of aged care. No regulatory body can withstand the trauma to frail long term elderly residents and the consequent allegations of heartlessness when residents are transferred elsewhere or thrown out into the streets. (examine the Mount Carmel reports I sent the minister) The assertion that quality can be maintained by informed consumers shopping around in a competitive corporate marketplace where corporate marketing strategies exert a profound effect on community perceptions is a myth. The outward form of a corporate health and aged system is at variance with its substance.

The long term:- I have no reason to doubt that you and your minister are deeply committed to the processes which you have set in place and that you will apply them with zeal and perhaps with some initial success. You may be more successful than US politicians in resisting the pressure of corporate donations and lobbying. Corporations may also be on their best behaviour. Your positions are however ephemeral and experience indicates that your successors may not exhibit the same zeal, nor will corporations maintain their integrity.

Summary:- The essence of what I am saying is that it is illogical to set in place a competitive health or aged care system when the pressures motivating those operating the system are in direct conflict with the intention of the system. Success in a system like this will ultimately depend on an ability to find ways around regulations designed to protect citizens and the state. The situation created is the direct opposite of the "civil society" envisaged by Eva Cox. In this congruity of purpose and mutual trust ensure that regulations "rest lightly". A past minister of this government publicly supported the concept of a civil society.

A corporatised health and aged care system cannot logically work in the long term. Once a corporate health and aged care system is established it is almost impossible to turn back. Look at the USA!

Health care corporations have been exceptionally aggressive in their endeavours to circumvent the intention of regulations. They have happily defrauded government. They have placed the requirements of care second to their primary corporate responsibility to extract profits from that care. They have been genuinely indignant when their practices were challenged.

Yours sincerely,


Attachments:- Press reports describing Sun Healthcare's fraud settlement in Connecticut Please indicate to whom I should sent the financial reports on which this case was based.


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