I had earleir advised all state health
departments of my concerns about Sun Healthcare and supplied
documents. As soon as FIRB approved Sun's entry to Australia I lodged
a formal objection with NSW Health Department setting out the reasons
for my concern.
22 September 1997
NSW Department of Health
73 Miller Street
Hospital licences Alpha/Sun Healthcare -- Contracts with Alpha to treat public patients
Objection:- I write to restate and relodge my 1 August 1997 objection to hospital licences for Alpha Healthcare because of Sun Healthcare's major holding. This objection extends to
Matters of concern:- These relate to the corporate attitude to health care as well as FBI raids on Sun Healthcare hospitals and fraud investigations by the US Department of Justice and three US states into two of Sun's major subsidiaries.
Documents in support of these matters have been supplied to your minister for health and I understand that you have access to them. I respectfully submit that even if there is substance to only some of these allegations then Sun cannot be considered to be a "fit and proper" person within the meaning of the regulations. It is your responsibility to decide whether Sun staff including its chairman are the sort of people who can be trusted with the lives and welfare of Australian citizens at a time when these citizens are vulnerable and defenceless.
Priorities in making decisions:- I understand that your regulations specify that each and every person who has any involvement in the licences should be a fit and proper person. This is a matter of public well being and if there is doubt then the interests of Australian patients who are trusting and vulnerable should be given priority over the pecuniary interests of corporate shareholders in other countries.
Sun's dominance of Alpha:- Approval has been given by FIRB for Sun to buy a 38% stake in Alpha Healthcare. Sun becomes Alpha's largest shareholder with a major say in its operations. I believe that Australian shareholders are in a minority. The character of Sun Healthcare, its directors and its chairman are therefore critical in determining whether all those involved in Alpha can be considered to be fit and proper persons within the meaning of the act.
FIRB's track record:- FIRB has been particularly lax in its willingness to allow suspected corporate criminals into Australia, particularly when they come with dollars to invest and have political support. The criteria it applies are applicable to car salesmen. It is doubtful whether they consider the special problems which the business practices of many corporations create in health care. FIRB approved the entry of both Tenet/NME in 1991 and of General de Sante Internationale (GSI) in 1995 without a proper investigation. Information relating to corporate practices was readily available had they looked. They were likely to have approved the entry of Columbia/HCA in February, had the medical profession not learned of the sort of practices which resulted in 35 FBI raids on hospitals throughout the USA on 16 July 1997. Columbia/HCA abandoned its attempt to enter Australia.
State track records in granting licences:- In 1993 the West Australian Health department carried out a review of Tenet/NME and advised the minister for health that NME was not considered fit and proper, and to set up an investigative process with the powers to remove licences. The minister did nothing.
In June 1992 New South Wales Health naively accepted NME's misleading assurances over the evidence in their possession and without making any proper inquiries. By 1993 they realised that they had been mislead. They commenced a thorough investigation. Justice Yeldham who was at risk of improper influence because of his off the bench sexual exploits in public places was delegated to make a decision about the licence application. It is very likely that cabinet ministers were well aware of the ICAC's investigation of Yeldham. They were certainly aware of Tenet/NME's alleged track record of using improper influence to attain its ends. This is what the objections to licences claimed. NSW health department advised Yeldham to reject the application citing Tenet/NME's lack of frankness and candour. In spite of this Yeldham accepted a sworn affidavit claiming that NME directors including those who were directors in Australia knew nothing of the fraud and received only financial reports. The conditions Yeldham imposed were unenforceable and did not protect Australians as he claimed they would. Within months NSW Health were supplied with monthly reports from the hospitals where the fraud occurred to NME's top Australian staff. These dealt with business practices and indicated that directors maintained tight control of the hospitals where the fraud occurred. In spite of this further sign of 'lack of frankness" NSW Health repeatedly refused to review the licence application.
In 1994 Mayne Nickless which owns and controls Health Care of Australia (HCoA) pleaded guilty to defrauding its customers by running a blatant and illegal price fixing racket. It paid $7.7 million in fines. During 1995, 1996 and 1997 HCoA was granted hospital licences in most states in Australia. In 1996 it pleaded guilty to misleading its customers again. It must be asked whether such practices are considered fit and proper conduct in modern Australia or whether state health departments are in breech of both the letter and the intention of the regulations. Are they allowing financial priorities to override their responsibilities to Australian citizens; the mad cow syndrome? The main thrust of Mayne's operations is now health care. Mayne is offering the two senior people in the health care chain of command $2 million and $800,000 incentive bonuses. This is linked to corporate profits rather than care. The cynic familiar with corporate practices in other countries will interpret this as a reward for success in squeezing maximum profits from the profit units (patients) admitted to hospital.
Track Record of US Corporate Healthcare:- The head of the FBI has indicated that drug barons are moving to health care and that health care fraud costs the USA up to $100 billion each year. Much of this is consequent on the exploitation of the system and of patients by health care corporations. Hospital raids by the FBI, criminal convictions, massive payment in civil settlements, often with a convenient "no wrong doing" tag characterise the US health scene. These include the largest corporation Columbia/HCA (currently a massive investigation), the second largest Tenet/NME (about $1 billion in fraud related settlements), the third largest OrNda Healthcare ($12 million and now merged with Tenet/NME) as well as SmithKline Beecham ($325 million "no wrongdoing" payment) and many others. The consequences for the trusting patients was most apparent in Tenet/NME where $115 million has been paid to compensate those who suffered as a consequence of Tenet's exploitation of their vulnerability.
Denial and dishonesty seems to be perfectly legitimate provided it is in the service of the corporation. The manner in which Tenet/NME mislead Australian authorities is described above. In addition to this NSW Health asked Tenet/NME to disclose court documents and matters relating to their conduct, not only in the USA but also in Singapore. Tenet/NME failed to disclose that a witness in a Singapore action alleged that an NME appointed Australian director as well as the administrator whom Yeldham had approved to run the Australian hospitals had attempted to trade in patient admissions. Later when NME were confronted by these documents they claimed that they were not required to disclose them. Tenet/NME subsequently placed these persons in senior positions in the USA, making at least one responsible for their publicly advertised integrity and ethics programs. Tenet claimed to have reformed but its ethics committee refused to acknowledge receipt of the Singapore court documents. This legal hair splitting is a characteristic of corporate health care and reflects the ruthless profits before all else policies which ensure financial success but cloud the need for integrity in the care of the sick and trusting. Columbia/HCA has been particularly ruthless in its subjugation of community interests to the corporate profit motive. It employed teams of lawyers to tailor its practices to the limits of the letter of the law.
Sun Healthcare's suitability and character must be assessed in the light of the conduct of other US health care corporations and the sort of integrity which characterises the industry. Its rapid expansion so closely resembles Columbia/HCA that other similarities in conduct must be sought. Sun provides rehabilitation services and runs aged care facilities and nursing homes. Patients in these areas are less able to exert commercial muscle and are vulnerable to exploitation. Tenet/NME's aggressive drive for profits caused it to misuse vulnerable psychiatric patients and children in order to generate profits. You will need to examine the way in which Sun provides care to be sure that it has not been similarly tempted.
Documents:- I have supplied your minister with a number of documents relating to Sun Healthcare and asked him to make these available to you. If you do not have them then please let me know. I include here copies of court documents which I may not have sent to your minister. These describe many of the disturbing practices which were alleged. I ask that you obtain and carefully study Sun's response to FIRB to determine whether the response is adequate for a health care corporation and whether FIRB checked Sun's response to ensure that it was accurate.
The US Senate conducted an inquiry into aged care in 1995/6. The committee chaired by Senator Cohen reported adversely on the services provided. I have not been able to obtain a copy of this report to see what conclusions were reached regarding Sun's aged care operations. FIRB were advised of this and may have a copy of this report.