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Regulation in Australia

This page examines the way in which regulations which protect citizens from unsuitable, even criminal corporate health care corporations have been undermined in the corporate interest.

  1. Introduction
  2. Nursing Homes
  3. The Foreign Investment and Review Board (FIRB)
  4. Probity and Hospital Licences
  5. National Medical Enterprises (NME) in Australia
    (After its criminal conviction in 1994 NME changed its name to Tenet Healthcare)
  6. Mayne Nickless - A Home Grown Problem
  7. Relationships Between Politicians and Corporations
  8. Sun Healthcare
  9. Politics, Ideology and the WTO
  10. Conclusion about Regulation
  11. A Better Way Ahead

Introduction -- (contents)

I am going to deal with what has happened in considerable detail as it is very important. The extent to which regulation has failed is critical. The extent to which government has compromised the operations of the arms length bodies responsible for protecting citizens is mind blowing. The way in which the government has put the full support of the country's resources behind disturbing and criminal organisations is doubly disturbing.

What has happened in Australia also provides a deep insight into the integrity of health care corporations and the dishonest way in which they relate to the structures in our society. The impotence of regulators who attempt to address the problems is revealing. Our experience beautifully illustrates the way in which regulators are worn down, how their positions are compromised by allowing exceptions, and how an accepting "status quo" is established despite clear regulatory requirements.

Graeme Samuel in his speech to the World Bank promotes a system which depends on regulation for its success. He fails to confront what has happened in Australia. Supposedly independent at arms length Australian state government departments are charged with independently evaluating applications for hospital licences. They have failed repeatedly to act on the requirements of the regulations. These were designed to protect citizens.

Corporations have had an unacceptable influence on politicians and indirectly on the influence which politicians in turn exert on supposedly arms length processes.

Instead of implementing the regulations government departments have on multiple occasions frustrated every effort to have the regulations enforced. To a significant extent this is a personal story but I can't help that. I have full documentary support. This is the real world which Samuel's theories must confront.

Please note as you read just how much independent effort from members of the community is required to make any impression on the system at all.

Nursing Homes -- (contents)

Government was Warned:- If the USA is bad in its regulation of nursing homes we have done no better. The most glaring and public example of failure in regulation has been in aged care during Feb/Mar 2000. Government had been warned repeatedly about the inadequacy and failure of regulatory structures to contain the misconduct of a privatised for profit system. Politicians, as well as state and federal departments had been supplied with large volumes of documents showing how the US system had failed repeatedly and how attempts to increase regulation had been unsuccessful. They were aware of the disastrous failure of deregulation in psychiatry 10 years ago and in aged care more recently. They knew of the way corporate interests had pillaged the system.

In objecting to the granting of licences for nursing homes to Australian companies in which Sun Healthcare was involved I stressed the failure of US regulatory structures in aged care and questioned the adequacy of our regulatory structures to contain the practices of multinationals. I indicated that there were good reasons why regulation and oversight did not work and could not work. The matter was taken to the minister herself during 1999 and I received assurances from her department and an indication of her commitment to make it work. There are now widespread problems in our nursing homes. As in the USA it is the nurses who have come forward and described what was happening. No action had been taken by regulators. Even though all parties had been repeatedly warned the system failed miserably.

CLICK HERE -- to go to the sections on US nursing homes

Australian Nursing Home Corporations Follow the USA:- Worse still those representing the for profit nursing industry immediately started making snide remarks suggesting that the outcry by the nurses was motivated by self interest - that the problems were not real. They hinted that the nurses allegations were related to the nurses efforts in the industrial commission to secure increased staffing for aged care facilities. The nurses complaints they hinted were carefully orchestrated. How strange that this is exactly the allegation made repeatedly by Sun Healthcare when nurses tried to warn the public in 1994 and again in 1998. Investigation by the US federal government has since shown how right they were.

CLICK HERE -- for more information about the Australian Nursing Home Scandal.

The Foreign Investment and Review Board (FIRB) -- (contents)

Does FIRB work as a Regulator?:- The NSW Health Department was very critical of the way in which the Foreign Investment and Review Board (FIRB) approved Tenet/NME's entry into Australia in December 1991. At the time the company was the subject of a massive scandal involving patient care in Texas.

One of FIRB's functions is to vet and approve the entry of multinationals. In contrast to the Australian states it has the full resources of consulates and the Australian Federal Police to call on. State departments have no resources for the international investigation of corporations applying for hospital licences in Australia. It is extremely difficult for them to adequately investigate, even when complaints are lodged. They can only write official letters. They are therefore very largely dependent on the willingness of interested citizens to do the work for them - to travel to the USA and secure documents. They do not pay for this or encourage it.

The protection of sick Australians from international exploitation of their vulnerability by unsuitable people therefore falls entirely on FIRB. This is an advisory body consisting of people from the business community and a trade unionist or two.

FIRB as a welcoming organisation:- FOI information from NSW and FIRB obtained in 1993 revealed that FIRB was essentially a welcoming mat for international corporations and was not the sort of body which could effectively vet and reject unsuitable corporations. These two roles are not congruent.

Corporations are not required to disclose information which might be detrimental to their application. There is no penalty for not supplying information or for misinforming when this is discovered later. Once approval is granted there can be no review of the decision. FIRB does not even require corporations to disclose the sort of information regularly supplied under law to for instance the US Securities and Exchange Commission (SEC). US companies are forced to disclose legal proceedings and government investigations to the SEC.

Changing FIRB:- I wrote to the federal treasurer about these deficiencies in 1993. Unbeknown to me the West Australian Department of Health identified similar problems and advised its minister to take steps to address the issue with the federal government. He did not do so. Since that time the FIRB have approved the entry of Generale de Sante Internationale (GSI), Sun Healthcare and Quest Diagnostics - three health care companies with tarnished records. But for the FBI raids it would probably have welcomed Columbia/HCA as well.

When their recent histories are examined then none of these corporations can be considered as suitable people to provide care to our citizens. They are not "fit and proper" persons by any reasonable definition. I have taken up the FIRB issue on multiple occasions since 1993, but there has been no response.

The government was during this time globalising, and negotiating free trade agreements. Under the pressure of its own policies it was not prepared to take steps to protect our citizens by giving FIRB regulative support. There are still no requirements forcing disclosure of adverse information and no penalties for concealing it. The burden of investigation and proof is placed on FIRB.

CLICK HERE -- for more information about FIRB

Probity and Hospital Licences -- (contents)

Probity in Australia:- All of the Australian states have probity provisions in their hospital licensing laws. Probity provisions are the regulatory structures which protect vulnerable people from unscrupulous members of society. They are used when the susceptibility of patients or of the system to misuse is such that the need to protect citizens is given some precedence over the rights of the individual applying for a licence. Health and aged care are two good examples.

The onus of proof is reversed. The licence applicant is required to show that he/she or the company are fit and proper persons to provide the service - the sort of people who will not abuse the vulnerability of others. This is similar to the certificate of good standing which a medical practitioner once obtained from one professional medical organisation and brought with him when he moved to another country. This ensured that a doctor about whom there were concerns or who had been suspended from practice could not simply move elsewhere. People who have criminal records or have not confronted and disproven serious allegations against them cannot be considered to be of good standing or fit and proper. I am aware that Samuel is very critical of professionalism and simply considers the various ways in which it protects patients to be no more than a conspiracy for professional advantage.

Probity in the US Health Care Marketplace:- In a corporate marketplace probity seems to be an arcane concept. Criminals are welcomed back into the fold. Until changes were made quite recently doctors discredited in one state in the USA simply moved to another and registered there. In the psychiatric industry in the 1980/90's corporate groups brought in people like this to replace local doctors when these local doctors refused to be team players and support the company's practices. This is how the market worked.

I have taken up the issue of probity and licenses with state hospital regulators in the USA. I was sent copies of some state regulations. There are no probity provisions in licensing regulations. There is no regulatory structure to bar criminal organisations from owning and running hospitals in that country. They would not get medicare funding if they already had a criminal conviction for health care fraud - unless of course they are wealthy corporations like Tenet/NME.

Much larger fines are secured by prosecuting fraud in the civil courts. Very few cases against corporations are pursued through the criminal courts and this medicare restriction therefore has little value as a deterrent. The preference in the USA for massive civil settlements, usually with no wrongdoing admitted clauses makes it very difficult for Australian state regulators when they are required to evaluate an international applicants probity.

Probity and the Law in Australia:- In Australia the probity regulations for hospital licensing were designed to deal with welfare groups, churches, individual doctors and philanthropic groups. That someone would want to exploit the sick for corporate profit was not something which anyone in society at that time would have even considered. It would have offended every sense of decency. They are unlikely to have tolerated it. That US corporations would queue up to make money for their shareholders out of our sick citizens was definitely not anticipated.

In 1993 the West Australian Health Department found that they did not have the legal protection and the powers needed to reject or remove a multinational's licence using the probity provisions. In this instance it was Tenet/NME which they considered a threat to citizens and to our health system. They advised government to legislate to remove Tenet/NME's licences. In their report they indicated that, of all the Australian states only Victoria had sufficient legal protection to allow them to reject the licence of a wealthy multinational and successfully resist a court challenge. They advised that the commonwealth and the states should cooperate in addressing the problem. The WA government did nothing and continued to support Tenet/NME for another 2 years. It was only in 1995 when FOI legislation became law in WA that this document came to light

National Medical Enterprises (NME) in Australia -- (contents)
(After its criminal conviction in 1994 NME changed its name to Tenet Healthcare)

Probity and Tenet/NME in Australia :- Tenet/NME was to be the saviour of our crumbling private system. Politicians were enthusiastic. Tenet/NME formally took control of Markalinga, a West Australian company which was threatened by bankruptcy in December 1991. I had urged the West Australian newspaper to publicly oppose the sale but it would not publish on hearsay which was all I had. I clashed with the AMA when they refused to oppose the company's entry to Australia. Markalinga was renamed "Australian Medical Enterprises (AME).

Rumours and more Rumours:- I had during the preceding years put my ears to the ground. There were at the time rumours of criminal activity in the region where Tenet/NME operated. I had no evidence. I was acutely aware that Victor Chang was the only doctor in Australia who had done work in an international Tenet/NME hospital. As a past Australian of the Year his concerns would be taken seriously. He was gunned down during a critical stage of the FIRB approval process. If the things I suspected were happening he would very probably have heard of them. I now know that doctors in the hospital he visited were trying to resist pressures to indulge in unethical conduct.

Chang's murderers were caught and convicted. The motive extortion. While Chang's link with a Tenet/NME hospital was probably coincidental I was alarmed and decided to be very careful. I was aware of the extent of police corruption in NSW and had prior experience of corrupt police conduct and their willingness to behave criminally before I came to Australia. Chang's murder removed the only Australian who could have confirmed or refuted my suspicions.

Objections to Licences:- Tenet/NME applied for the transfer of licences for its NSW hospitals from Markalinga to the new company. A Scientology group opposed to psychiatry had been kept well informed by its US association. It lodged objections to the licences and supported these with documents which should have demanded thorough investigation.

NSW Grants Licences:- As a group the Scientologists lacked credibility in Australia. The department simply accepted the assurances from the company, and the fuzzy warm press releases made after the fraud settlements in New Jersey and Texas. These were supplied by the company as evidence that they had done no wrong. The department went through the motions. They did write to Texas to ask if Tenet/NME were fit and proper people. The NSW letter gave no room for manoeuvre. The department were so naive that they even sent a copy of their letter to Texas to Tenet/NME. When I was in the USA in 1993 I spoke to the Texas attorney general. He was scathing about the department and their expectation that he should make up their minds for them.

Texas did their best but their hands were tied by the agreement and the letter. They supplied the full court documents and the settlement agreement. What had happened was obvious, but clearly Texas could not contradict the wording of the agreed joint press release and label the company as not being fit and proper as the department had requested. The NSW department used the press release and not the court documents as the basis for their decision to grant licences.

Four Corners Exposure:- Once again it was the public and not any regulatory action which exposed the deficiencies. Australian Medical Enterprises (AME), the new Australian company secured the tender to build the new St Georges private hospital in Sydney. It applied for a licence. Someone approached Four Corners who became interested. The NSW health department objected strongly to Four Corners running a program on this when they were approached. They considered it irresponsible. Andrew Ollie aired a British made TV documentary in October 1992. This disclosed exactly what was happening in Texas. Ollie attacked the NSW decision to grant licences. Ollie's program described most of the practices which I was aware of but for which I had no proof.

Prior to this I had a nagging doubt that I might be victim to conspiracy theory and was overreacting to rumours. This doubt was laid to rest by the Four Corner's program. I had also assumed that what I was aware of was isolated to the company's international division. I did not believe that such things would have been possible in the USA. I was dumbfounded by what I saw on the program.

I had been unaware of developments in NSW. The Australian Medical Association had written to the chairman of Tenet/NME's board in the USA earlier about their international operations. They did not respond even when the Australian Medical Association (AMA) took this up with them on my behalf. When the AMA raised the issue of their non-response and its possible negative impact on their planned entry to Australia in late 1991 they responded hurriedly. I believed that this response was dishonest and I clashed with the AMA when they accepted it and refused to make waves.

The NSW Response to the Four Corners Program:- When I phoned the NSW department the day after the Four Corners Program they were genuinely indignant and angry about the program. I followed with a letter adding my objection to licenses. By then someone in the USA had put a packet of damning documents including the testimony given to the April 1992 Senate Inquiry into the post to the department. To their credit NSW Health rapidly changed their position, admitting to me that they had been naive. They felt that they had been deceived.

The Scientology group received an undertaking that Tenet/NME would not run psychiatric hospitals in Australia. They then lost interest and withdrew objections.

Texas is more Forthcoming:- I had some past experience in dealing with governments. I wrote a carefully worded letter to the Texas attorney general which asked specific questions. This did not force him to contradict the joint press statement. I received a detailed and clear response addressing each question carefully and accurately. He explained exactly what had happened, the nature of the settlement and the failure of the accreditation processes to detect or address what had happened.. Similar information was readily obtained about an earlier settlement in New Jersey which was settled in a similar way.

NSW Position:- The department was now convinced. When I met with them they were concerned that the company would appeal rejection of the licence application to the courts. In the absence of a criminal conviction in the USA they would be faced with a multimillion dollar action dependant on witnesses being willing to come from the USA. The NSW government whose income from taxes was much less than that of Tenet/NME was already in financial difficulty. The company had advised NSW Department of Health that it might take action if licenses were rejected. NSW dared not reject the licence unless they could prove their case on documents alone.

The regulations did not specify a time limit for making decisions. The Director General of Health who was the responsible arms length person resolved the difficulty by simply announcing that he would not grant the licence until the investigations in the USA were completed and he was fully satisfied.

The minister for health, the government and other government departments who were supporting the company were alarmed but the decision was an arms length one delegated to the Director General of Health. His decision to wait was most unwelcome. It threatened the project.

Delegating the Decision to Justice Yeldham:- Tenet/NME had received strong political support in NSW and the government were extracting political mileage out of the new St Georges Hospital. The minister's political career was wedded to increased privatisation of health care. The hospital was badly needed and a popular venture. AME's Australian chairman was on first name terms with the minister.

Yeldham's sexual activities in public toilets had recently been investigated by the Independent Commission Against Corruption (ICAC). He was well known to the police who had apprehended him on several occasions. They had not prosecuted him.. When Yeldham took early retirement from the high court his private sexual activities were no longer a matter of public concern. They did not threaten the judicial process. The ICAC investigation was terminated. While this was common knowledge in legal circles, the public and NSW Health department did not know of Yeldham's private life.

The decision about a license was now delegated to Justice Yeldham. The director general of the health department signed a document agreeing to delegate his authority to Yeldham. This was in stark contrast to his recent strong public statement that he would not personally allow the licence until he was satisfied. The extent to which the director general's department then strongly opposed Yeldham's various decisions raises questions about willing acquiescence. It also asks whether Yeldham had been appointed to make a decision, or simply to grant the licence. NSW Health Department immediately made a strong submission to Yeldham advising him to defer the decision until the situation in the USA became clearer. He refused and pressed ahead.

NSW Advises Yeldham to Reject Licence Application:- I continued to collect information and supply it to NSW. I wrote a detailed assessment of all the material and information, describing its medical significance and the human consequences of Tenet/NME's practices. There could be no misunderstanding. I carefully confronted every rationalisation which might be employed and showed that it was untenable. I became increasingly distrustful about what was happening.

I went to the USA in June 1993 to make my own inquiries and collect more documents. All those involved in this investigation in the USA were angry and revolted. I did not have to explain to anyone and all gave me appointments and time. Staff in the pentagon, Senator Moncrief who had chaired the senate hearings in Texas, state fraud investigators, lawyers for all parties, whistle blowers of all sorts. They could not do enough to help. They spoke freely and supplied any material which they legally could.

The material I brought back convincingly showed that by any standards Tenet/NME could not be considered to be a fit and proper person. Rejection of the licence could be supported on the documents alone. NSW Health's legal department now submitted a strong legal document advising Yeldham to reject the licences and advising specifically against granting the licence with conditions. They argued that conditions were not applicable in this situation, that the regulations did not permit them in this situation, that they were unlikely to be enforceable, and that the department was unable to monitor them effectively. The company had been less than frank in its dealings with them and could not be trusted to adhere to the conditions

Yeldham Negotiates Conditions:- In the USA the disgraced NME founders were forced to resign. Yeldham pressed ahead amidst increasingly disturbing information coming from the USA including a US $200 million fraud settlement with insurance companies. He planned to grant licenses with conditions.

In fairness to Yeldham his second full draft of the conditions did have some clauses which just might have been effective. I suspect that he did try as best he could in the circumstances in which he found himself. He sent this draft to AME for consideration. AME lawyers made changes which they indicated were to clarify Yeldham's intention. They effectively emasculated his conditions. Yeldham incorporated the changes without any argument and approved the licence. The evidence that he may have been subjected to improper influence is circumstantial.

The Singapore Court Action:- Tenet/NME were required by NSW Health to produce information about relevant court proceedings, including specifically those in their international operations. AME lawyers strongly contested the breadth of this requirement alleging it was unreasonable. Some concessions were made by NSW Health. As a consequence Tenet/NME did not disclose that a doctor had taken a breach of contract action against them in Singapore. He had in preliminary documents indicated the nature of the allegations he would make about directors and the manager of the Australian operation. These allegations would have made Yeldham's conditions untenable.

One week before Yeldham signed his decision this doctor gave evidence in a Singapore court describing in detail how a director of AME and the senior administrator in Australia had repeatedly attempted to buy patient admissions from him. The hospital denied the allegations but did not put any of the many witnesses to the discussions which took place on the stand to support their denial.

Yeldham and NSW were not told. The Singapore press reported it 3 weeks later and I supplied NSW Health with a copy. No action was taken to review the conditions. I suspect that Yeldham's original conditions may have given NSW health sufficient grounds to force these people to resign from AME. The final version made it more difficult. At about this time the director general of health retired and was awarded an Order of Australia for his services to the health department in NSW.

The Banks Swing behind the Company:- Despite Yeldham's conclusion in his decision that Tenet/NME posed a threat to Australia and that we needed to be shielded from its culture by strict conditions, AME now received strong support from the banks. Large loans were raised from the banks. They made these conditional on the Tenet/NME administrator who had dealt with the doctor in Singapore continuing to manage AME and the continuation of an agreement that AME would have full access to Tenet/NME's business knowledge and expertise. Tenet/NME's business practices were widely acclaimed and were seen to be essential for the company's future financial success. Yeldham did not mention this contract in his decision or explain how AME could be shielded from Tenet/NME's culture and influence while this agreement continued. Details of this agreement had been supplied to Yeldham.

WA Government Supports the Company:- The West Australian health department had received copies of all material. It had carried out its own investigation. It made a submission to the WA government advising it to introduce legislation to remove AME's hospital licenses. The department did not have the power to do so itself.

The minister for health in Western Australia had personally been sent a large amount of material and was fully informed about the company's actions. He knew why Yeldham had imposed conditions which he claimed would protect AME from Tenet/NME's undesirable influence. The WA department's advice was ignored and Yeldham's decision was accepted. Instead of being under a cloud AME received strong government support. The state government attempted to contract public hospital pathology to the company but I believe the medical profession stepped in to stop this..

The Federal Government Supports Tenet/NME:- The federal Industrial Development bank (a government QANGO) formed a joint venture with AME to expand into Queensland. This consortium was one of the preferred groups selected by Veteran's Affairs tendering process to manage Greenslopes hospital in Queensland. Tenet/NME knew that a criminal plea was imminent in the USA and urgently needed to establish a footing in Queensland and Victoria and so set a precedent by securing licences. It was important to have Yeldham's decision accepted in other states. They believed that Yeldham's decision would be accepted. This was extremely unwise.

I had a very interesting telephone conversation with a senior Veteran's Affairs Official who brushed my concerns aside on the basis that correct procedures were being followed. I responded by simply supplying a full set of documents to Queensland Health Department and my colleagues in the Greenslopes Hospital. There was no prospect of their bid being acceptable here. Doctors would have revolted.

Victoria Investigates:- All states had been supplied with some documents, had been advised of the Yeldham process and had been notified of an intention to object to licences. Victoria may have known more about Yeldham and his clandestine activities than I did. They elected to undertake their own investigation and contacted me. By now I had a full set of all the Yeldham documents and was concerned at the contents. These were supplied to Victoria in about January 1994. I had written to the Minister for Health in New South Wales indicating my view that the decision had been corrupt.

New Evidence:- Tenet/NME had insisted that the problems were localised to the psychiatric division which operated out of separate offices in New York. Tenet/NME's board had so they claimed not known what was happening. A statutory declaration was submitted to NSW to support this. I was now able to supply Victoria with detailed monthly reports of the psychiatric operations from the manager of the psychiatric division. These were addressed personally to the chairman of Tenet/NME's board of directors. They had recently been tabled in preliminary court proceedings in the USA. I was also able to give Victoria 5 months advance warning of the nature of Tenet/NME's guilty plea and the sum being negotiated.

AME now backed out of Victoria and Queensland complaining of unfair treatment. In June 1994 it pleaded guilty in the USA. The court documents detailing the charges and the conditions of the settlement were made available in Australia. The documents from an action taken by the SEC described the care of patients. The FIRB was finally forced to step in and restrict AME's further expansion in Australia.

The Company Refuses to Die:- One would have expected that to be the end of the matter and that Tenet/NME would now sell up and go home. Instead they mounted a public relations program boasting of their reforms, of their new compliance program, the recent takeovers and the profits they could generate. International staff had been promoted to run the US company. Tenet/NME claimed that they were distant at the time, so clean and not involved in any of the scandals.

Before AME's October 1995 shareholder's meeting shareholders were advised that AME and Tenet/NME were confident that the federal government would now accept that they had changed and lift the restrictions. Senior staff from the USA were coming to the shareholders meeting. They had appointments with ministers and government officials in Canberra during the previous week. The press published this information. I do not believe that they would have been so public or so confident if they had not already received assurances from government officials that the ban would be lifted.

Singapore Documents:- The doctor in Singapore had been awarded $1 million by the judge, who was scathing about the company's business practices. The hospital appealed. I did not wish to compromise the doctors position so had not sought the record of evidence. The appeal had now failed. I obtained the record of evidence and had it on the desk of the responsible people in Canberra shortly before the visit took place. Three of those visiting the ministers were either directly or indirectly implicated. The doctor described in detail how several Tenet/NME administrators, including two visiting the politicians repeatedly attempted to persuade him to enter into contracts. These related to the purchase of a guaranteed number of patient admissions. He described in detail how Tenet/NME staff had explained the way these unethical and illegal practices could be hidden so that there was no risk of exposure and prosecution before the medical council.

The government did not lift its restrictions. Embarrassed directors hurriedly promised Australian shareholders a joint Tenet/NME/AME major expansion into China. A series of defamation actions were commenced against me. They were never prosecuted.

Tenet/NME Sells Up:- The governments and medical associations in all of those countries in which Tenet/NME operated had been briefed with a selection of documents illustrating what had happened in the USA and Australia. They were advised of the Australian decision and received copies of the relevant sections of the doctors evidence. Tenet/NME sold in England, Europe, Asia and Australia. It claimed this was part of its long term strategy to recover the loans raised for the takeover of American Medical International (AMI). This was despite the recent promise of expansion into China.

CLICK HERE -- to access the pages about Tenet/NME on this www site

Mayne Nickless - A Home Grown Problem -- (contents)

Mayne Nickless in Health Care:- Mayne Nickless, an Australian trucking multinational bought Health Care of America's Australian hospitals in about 1990. It expanded these operations over the next few years. When AME sold in Australia in 1995 it was the successful bidder. I had heard of some trouble in its trucking business, but had no details. I accepted the assurances of someone whom I trusted. I certainly had some doubts but as an Australian company it was much preferable to any of its international competitors. I did all I could as an AME shareholder and citizen to help them.

Second Thoughts:- With the acquisition of AME Mayne Nickless became very aggressive in its health care expansion and business practices. It adopted the same growth model as US corporations. It adopted business practices very similar to Columbia/HCA, marketing its own version of integrated care which it called "one stop" medicine and likening it to a travel agent. It seemed little different to Columbia/HCA's "Macmedicine".

Mayne Nickless introduced a system of massive incentive payments linked to profits. It was exactly this practice which was at the root of most of the patient care and fraud problems in Tenet/NME and Columbia/HCA. The public face presented by its corporate directors and the sentiments expressed were similar to those from the USA.

There were a number of television programs exposing problems in Mayne Nickless' contracts with government. There were examples of its less than accurate advertising. It had set up a series of fast food style clinics to feed its hospitals. Some were not happy with its relationship with doctors. There were groups of ordinary citizens in Australia who were very disturbed by Mayne Nickless. They supplied me with some newspaper clippings.

I started asking around and took out all the press reports from southern states. This company had pleaded guilty to running a price fixing racket and disadvantaging its customers. To me this was the least worrying aspect. Much more worrying was the electrifying evidence which indicated that its senior staff simply did not believe that they were done anything wrong. They believed price fixing was the way business was conducted in Australia. Even when they pleaded guilty they denied the charges and aggressively attacked their critics. I obtained the judges decision and read the details of their crime and the very critical comments by the judge. They were fined $7.4 million.

Personality Structure and Corporate Staff:- I had already used internal documents and press reports to analyse the senior staff in large US health care corporations, particularly Tenet/NME. I had identified a typical pattern. These people were assertive, even charismatic, they had no doubt that everything they did was right. They were often eccentric. They simply disregarded any information or argument which was not congruent with their point of view. They were persuasive and no one dared disagree. Such people simply looked past patient care issues in their drive for profit. They readily adopted criminal practices but did not believe that they were doing anything wrong. I had characterised them as extreme "closed minded", a term coined by Rokeach in 1960. More recently psychiatrists Robertson et al (MJA 1996) described the same extreme behaviour, more appropriately calling it successful sociopathy. They indicated that some of the features were common in successful members of the business community - the same insight provided by Malouf.

Social Darwinism at Work:- As I have studied health care corporations it has become apparent that, because patients are not effective consumers those who are able to look past and ignore patient care considerations succeed in the marketplace. While these people may well believe that they are providing superior care, any executive or company that actually does so in the strongly competitive marketplace goes under. Sun's chairman Andrew Turner is a good example. From the press reports it seems that he has infused staff in the administrative centre of his empire with this strong belief in the excellent care they provide. There is no reason to doubt that he is genuine. The situation in the companies homes tell a very different story.

Dave Lindorff as long ago as the 1980's described exactly this problem in his book "Marketplace Medicine". He interviewed impressive corporate executives who clearly did not doubt that they were providing good care. When he investigated he found the opposite.

A dystocian form of Social Darwinism seems to operate in the health care marketplace. It selects for the most unsuitable people in health care. Those who have no insight and can ignore or rationalise away anything which is not congruent with their beliefs. They are intelligent, impressive and plausible. Their success is because they can push the care versus profit conscience decision referred to on this site much further than competitors.

A Columbia/HCA Look-a-like:- In supporting Mayne Nickless I had unwittingly supported a Columbia/HCA look alike with Tenet/NME personalities. It was unlikely that they would change and this soon became apparent. They were caught dishonestly sending material advertised and charged as air mail by road. There were concerns about some of their operations in the security division. They were alleged to have marketed and sold an alarm system to the elderly then did not properly manage the emergency services on which the lives of these elderly depended when they used the system.

Being Fit and Proper:- The organisation had a criminal record and was clearly not "fit and proper" on this basis alone. Although many of the regulators across Australia must have known of this none had challenged their licences. Whether this was because of the strong political support which the company enjoyed is not clear. Clearly setting a precedent and ignoring clear provisions in the regulations by giving licences to a company with a criminal conviction was extremely stupid. This would make it almost impossible to use these same clauses against any other corporation - particularly US corporations whose crimes had attracted only civil repayments.

Objections to Licences:- I felt that the state departments should be forced to confront this. I lodged an objection in all states on two main grounds. First that the company had a criminal record and second on the basis of its inappropriate and potentially dangerous business practices. I supplied the disturbing Australian material and extensive material from the USA to show how similar business approaches had led to fraud and the misuse of patients.

CLICK HERE -- to for more about Mayne Nickless and to see the objection

Some did not acknowledge the correspondence, others indicated that our surveillance processes would prevent these things from happening. None defended the company's probity. When pressed the minister for Health in Queensland indicated that the licences were held by the wholly owned HCoA and not by Mayne Nickless so no action could be taken. In this Queensland differed from other states. The government were reviewing the regulations and I suggested that this was an opportunity to close this loophole.

The consequence of all this is exactly what I feared, a precedent had been set which effectively made probity regulations ineffective. Even though NSW later advised against Sun Healthcare's entry into Australia, there was nothing they could do to withhold licenses when it was allowed in.

There is another very disturbing aspect of this story which illuminates the problems which have beset regulation in the healthcare marketplace in the USA and Australia - the relationship between dysfunctional health care corporations and politicians.

Relationships Between Politicians and Corporations -- (contents)

Mayne Nickless and Government Contracts:- The government and particularly the federal minister of health established a supportive relationship with Mayne Nickless - a company with a disturbing criminal record. Mayne Nickless was used as the vehicle to drive the government's privatisation policies and to induce doctors to enter into contracts.

Experience with Contracts:- Health care contracts have been a source of endless problems during my lifetime. In my early years I sought evidence which I could use to have some doctors who were misusing contracts suspended from practice. I failed. Steve Biko, the black activist fell foul of these same doctors. A specialist consultant called in to attend him advised immediate admission to my hospital. Instead a doctor working under a contract system authorised a 2000 km journey in the back of a truck so that he would not be admitted under the care of myself or one of my colleagues.

Tenet/NME used lucrative golden handshake contracts to ensure doctors were compliant with its practices. It was contracts which first alerted me to Tenet/NME's international practices. It was the contract with a doctor in Singapore which finally torpedoed Tenet/NME in Australia. Contracts are at the heart of the problems with managed care. Contracts with state governments for Mayne Nickless to care for public patients have been a problem in at least two states.

The Health Minister and Mayne Nickless:- In Australia we had the startling spectacle of the minister for health urging a company to enter into contracts with doctors which involved the treatment of patients. This company already had a criminal record for making unethical and criminal arrangements which disadvantaged its customers. The minister even passed a special provision through parliament to make this legal!

The Fox Guarding the Hen House:- Even worse a senior executive from Mayne Nickless was made chairman of the Health Insurance Commission, the body responsible for monitoring health care fraud and prosecuting health care criminals. This is despite Mayne Nickless' criminal record. It is extraordinary.

The consequences of this appointment was that no employee of a corporate health company could safely lodge a complaint or supply information to the HIC - particularly about Mayne Nickless. We do not need to look to the USA to see the consequences of this. Australia's record for victimising whistle blowers is truly dreadful. I am aware that people have elected to stay mum and I advise people not to speak out when they ask me.

It is hardly surprising that in this climate there should be a leak of commercially sensitive information about MRI funding, nor that Mayne Nickless should be one of those which bought scanners. Catchlove has resigned from the HIC and is leaving Mayne Nickless.

Sun Healthcare -- (contents)

Sun Healthcare Enters Australia:- This is another disturbing saga. In dealing with Tenet/NME in 1995 I had established contacts in the UK where I knew NME was expanding. They were far more concerned about Sun Healthcare's conduct than about Tenet/NME. At the time they supplied me with information about the federal fraud investigations, the personality of Sun's chairman, and the disturbing findings of a US consumers group when they studied government surveillance data in 1994.

Sun Healthcare and FIRB:- When Sun's purchase of a dominant holding in Alpha Healthcare became public (subject to FIRB approval) I submitted this material to FIRB and objected to their entry. I also supplied it to governments in NSW and WA where Alpha operated.

At the time Tenet/NME was a continuing problem for citizens in the USA as it was competing with Columbia/HCA, taking over not for profit groups and establishing market share. Columbia/HCA and Tenet/NME were systematically squeezing other competitors and not for profit groups out of each market. I had established a www site and had become a resource of documentary material for these people. Sun's compulsory disclosures to the SEC were also a useful source of information and one of my contacts knew where to look for legal documents for a case disclosed to SEC. This contact was able to secure disturbing Sun court documents for me. Sun paid $26 million to settle this action, giving credence to the allegations.

I did not have contacts directly involved in aged care issues at the time. I was therefore unaware of what was happening in California and of the US Senate hearings. I could not get more information about patient care.

The FIRB Process:- NSW advised the FIRB that it objected to Sun Healthcare's entry into Australia. FIRB asked the Australian Federal Police to Investigate. Their findings have not been disclosed. Any basic inquiry through the embassy or by an officer in the USA should have disclosed concerns in California, the GAO investigation and the senate hearing. Whether FIRB had this information is not known.

The FIRB process approved Sun's purchase into Alpha and also a 51% controlling purchase of 7 Moran facilities. The FIRB indicated to me that they are only an advisory committee and that the decision was made by the deputy treasurer. They would not disclose the nature of their advice.

An objection to licences had already been lodged with states where Alpha operated. They did nothing. They had already granted licences to another company with a criminal conviction. Sun did not have a criminal conviction.

Sun Healthcare Trips up In Victoria:- Victoria was the only state with effective probity legislation which really was at arms length from government influence. When Alpha became the front runner for the Mildura privatisation project I was stimulated to further action. I was able to make a number of contacts in the USA and elsewhere with access to information, about care. I was soon flooded with vast quantities of disturbing material. The Victorian opposition were also concerned at Sun's arrival in that state. I suspect that they had established their own sources in the USA. The opposition were able to force a probity check by the health department. The minister for health with whom I had corresponded and disagreed on a number of occasions continued to publicly support Alpha and Sun Healthcare.

The Probity Review:- When I contacted those carrying out the probity review I found that they did not have the earlier material I had sent or know about it. It had been pigeon holed in another department. This was retrieved and they continued to receive information as it became available. The review findings at the end of December 1998 did not consider Sun to be a fit and proper organisation to provide hospital services in Victoria. Alpha and Sun abandoned their Mildura bid, complaining bitterly and blaming everyone else.

A Truly Disturbing Situation:- We now have a unique and disturbing situation. The only objective assessment of Sun's probity in Australia has found Sun an unsuitable organisation to care for Australian citizens. Alpha which is dominated by Sun, and a group of Moran facilities which Sun controls still hold licences to operate facilities in NSW and other states. In spite of the findings of this probity assessment no other states have examined the issues themselves. They have simply pretended that the Victoria assessment never happened.

Australian citizens are now being cared for by people whom Victoria have, after a thorough review considered to be unsuitable to do so. Few know about this as it happened on 23 December when Australia was on holiday. There was no debate..

Even worse there is now a vast amount of additional information about patient care. Sun Healthcare has since paid a US $8 million fraud settlement in Connecticut. Sun's unsustainable business practices have pushed it into bankruptcy. That the pressures of impending bankruptcy is a threat to patient care is illustrated not only by Sun, Vencor, and IHS in the USA but by Riverside in Australia. The Health Insurance Commission (HIC), a federal government responsibility and chaired by Mayne Nickless' Barry Catchlove licences pathology laboratory services. It has received objections to Alpha's pathology licences. It has done nothing.

Sun Healthcare and Australian Aged Care:- While we did not need Sun's participation to reveal the problems, in our own privatised aged care system, there is an interesting twist to the sorry story of Sun Healthcare, which throws light on arms length regulatory failure and the unwillingness of politicians to support the arms length process.

One of the arguments advanced by Alpha for Sun's entry to Australia in its dealing with FIRB was the vast experience in aged care and the benefits which Sun's entry would therefore provide for Australian aged care. They indicated their intention to use Sun's experience to expand into aged care.

Arms Length when it is Convenient:- Aged care nursing homes, like pathology services are licensed by the federal government, the minister for health's own department. The FIRB and a liberal senator advised the minister for health of the problems with Sun Healthcare and asked for his opinion/advice. He replied to both that hospital licensing was a state matter and he could not intrude or comment. How nice to see proper arms length process at work - or was it opportunistic? That Sun was buying pathology and planned to enter aged care was conveniently ignored - both licensed by Dr Wooldridge, the health minister's own department. It was the deputy treasurer, Dr Wooldridge's close colleague who decided to allow Sun into Australia - presumably an arms length decision! There is of course much much more!

Aged Care and Probity:- I had been suspicious that when Tenet/NME's hospital expansion was blocked it would seek to quietly enter aged care. In 1994 I wrote to the federal aged care licensing section expressing my concerns and supplying information. The faxed reply informed me that Tenet/NME had not applied. It described the rigorous procedures used to evaluate any applicants probity.

Objections to Sun Healthcare:- In February 1998 I obtained a copy of Alpha's letter to FIRB under FOI. I immediately lodged an objection and supplied documents to the federal department licensing aged care. I drew their attention to their claimed commitment to probity, enclosing a copy of the fax. I continued to supply material as it became available. None of this material was acknowledged despite repeated requests. Written questions were eventually put to the government in the senate and the president of the AMA took up the matter with the minister for me during the latter part of 1999.

The documents were finally acknowledged and I was assured that Sun Healthcare's subsidiaries had not applied for licenses. They would be used should a Sun subsidiary apply. I corresponded briefly with the minister's department requesting assurances that probity was still an important requirement, and expressing concern about the adequacy of regulation. From the responses it is clear that the probity requirements were removed when the regulations were revised in 1996 by the present government.

Politicians are the people elected by citizens to legislate to protect them. Instead of reaffirming and bolstering this important clause with badly needed legal protection, politicians have removed the only measure which has been effective in protecting citizens from dangerously disturbed persons and dysfunctional corporations. They have removed this protection from the most vulnerable group in society.

One can obnly wonder whether this was a preliminary step, "removing obstructions" to "legitimate" business practices in preparation for international agreements at the World Trade Organisation. The opportunity was taken to "liberalise" aged care and turn it into a US style marketplace while no one was looking.

CLICK HERE -- to acess the pages about Sun Healthcare

Politics, Ideology and the WTO -- (contents)

Economic and Marketplace Thinking:- Sun Healthcare's chairman Andrew Turner perhaps gives the best insight into the patterns of thought behind what is going on in politician's minds. In a 1996 press interview Turner attacked government involvement in health care and even government regulation telling government to butt out. He claimed that the market itself would ensure high quality care because it would weed out the poor performers. As I read Graeme Samuel's speech to the World Bank I get the same message. This sort of rhetoric can only cause intense discomfort for anyone who has had any real experience in dealing with vulnerable people and/or experience of the way in which self interest, primarily financial has compromised care. To be fair Samuel does acknowledge that the market requires intense regulatory oversight - but why we need to create a situation which requires so much regulation escapes me.

The economic purist will claim that Turner has been proven correct. Sun and other aged care facilities which provide poor care have tumbled - but how can they justify the human cost? Governments across the USA are faced with the prospect of having to assume responsibility for many thousands of helpless elderly. There is the prospect of dislocating the lives of vast numbers of people - Riverside many times over. This is untenable and government has been forced to bail out the companies which exploited medicare and keep them operating. They are relaxing the regulations which stopped these practices. The human costs of marketplace competition are far too great for it to be allowed to take its course.

Probity and the WTO:- There is another development central to concerns about the effectiveness of regulation. This is the commitment of the government to globalisation and what is called market reform using trade agreements and the WTO process. They have been extremely reticent in debating these issues fully in the public arena. The opposition has failed to effectively challenge government. Once again it is citizens group across the world, mostly people who favour international trade who have had to forcibly raise issues of concern about the WTO processes. It is the human and environmental consequences, not of trade or of health care as such but of the cognitive processes and ideological underpinnimngs used by the market and the practices which result from them. These are reflected in the way the WTO is operating.

The US Coalition of Service Industries (CSI) and the US government have identified health care as a very profitable area for US corporate activity. They have indicated the presence of barriers to legitimate business activities and the need to "liberalise" these. It is clear from Samuel's speech (he represents the opinion of an important government body), and from government behaviour that the Australian government is a strong supporter of the USA in this and in the liberalisation of health care.

Multinationals and Probity:- With few exceptions multinationals have fallen foul of our probity legislation. To them this provision is arcane, a relic of the professionalism which they so distrust. It is an obstruction to legitimate business activity. It is going to be a prime target for liberalisation.

Samuel gives a masterly outline of the way our governments think. Once we understands how our leaders think then their failure to give FIRB teeth, their removal of the protection of probity provisions from the most vulnerable sector of our society, and the manner in which the probity provisions for the licensing of hospitals has been allowed to die by attrition can be understood. There must be some concern that if the probity regulations are challenged at the WTO then the WTO will not support them. Imagine the outcry in Australia and the anger of citizens should this happen.

Political Thinking:- It is not that politicians are deliberately evil and determined to destroy our society. It is simply that they are committed to a system of belief, a very simplistic belief about the nature of society. Their political future is wedded to solutions based on this belief system. To them the probity provisions are part of the selfserving professional system - obstructions to be liberalised. Belief systems whether religious or secular pay little attention to fact or logic. We can no more blame them than we can blame the Germans for the holocaust, the Afrikaners for apartheid or the Catholic church for the inquisition!

Conclusion about Regulation -- (contents)

Track Record:- Samuel promotes regulation as one of the pivotal roles of his not so new health care marketplace. An examination of the situation in the USA and the history of marketplace regulation in health care in Australia shows that instead of facilitating the regulation and control of undesirable practices., the marketplace has undermined the regulatory process and rendered it ineffective. Regulatory structures which have a proven record of success have been delegitimised. In an area subject to strong market pressures, government has not supported existing regulations by giving them legislative support. Under pressure from competitive groups government has ignored regulatory requirements. It has actively undermined them. It has even elected to remove them. Government has not set in place any effective arms length structures. When these have been in place governments have intruded and except in Victoria they have not been allowed to function independently or at arms length.

The Australian experience throws a very disturbing light on the extent to which corporations will dishonestly deceive regulators and undermine the intention of regulatory processes. It illustrates the way in which politicians willingly tolerate and even connive in this. Above all else it shows the willingness of our leaders to enter into disturbingly close relationships with criminal organisations - groups which should fill us all with revulsion. If instead of prosecuting petty criminals and obtaining political mileage by overfilling our goals with the helpless flotsam and jetsam of our society, government applied the same frames of misunderstanding and revulsion to corporate criminals we might be much better served.

Bond receives 4 years for an ongoing multimillion dollar fraud which ruined vast numbers of people. A social dropout gets a year for stealing a packet of biscuits. People who have dealt with him still talk of "Bondy" affectionately and predict a comeback. This is a feature of our relationships with plausible and likeable sociopaths. I could pull out a sheaf of articles relating in the same way to disgraced health care founders and chairman. Some show how readily these people are welcomed back into the corporate fold..

Samuel and Regulation:- The inescapable conclusion is that the competitive health care marketplace which Samuel advocates has been very successful in undermining and emasculating the regulatory system which he claims is an integral and essential role in this marketplace system. The prime offenders in doing so are those who support Samuel's policies for health care.

A Better Way Ahead -- (contents)

As I write a Dr William Thomas who founded the "Eden Alternative" used in 200 nursing homes across Canada and the USA is speaking in Queensland. He echoes what I am saying -- that we are taking the wrong road and need to try another. He is not critical of Riverside but of the system. He indicated that government was treating the symptoms and not the malady. The malady of course is the sort of thinking displayed in Samuel's model. (Courier Mail 24 Mar 2000 page 9)

Dr Thomas shares my view that there will be "lots more" like Riverside. He indicates "you cannot legislate for kindness, tenderness, compassion and respect" and of course this is exactly where Samuel's model falls down and has fallen down completely.

His advice to Bronwyn Bishop, the minister for aged Care is to "to become more concerned for the needs of the human spirit". Again he echoes my assertion that Samuel's model does not address the cognitive aspects -the way people see and understand the world they live in. Once we do this and step outside the rigid frames used by economic theory we can see why unconfronted market thinking is so dangerous for citizens and why a system built around the values of the community and the professions for all their faults and their failures is the only reasonable way ahead.

This criticism about neglecting cognitive aspects applies equally to those working, providing services, buying services or simply living in our society. It is a fundamental underlying problem in much of government policy and in modern management. Health and aged care are simply areas where the consequences are particularly unfortunate.

Once we understand this we can understand the way in which the successful corporations listed on the share market have behaved the way they have. If we adhere to Samuel's model we will get Tenet/NME's, Columbia/HCA's, Sun Healthcare's, Vencor's, Mayne Nickless', Riverside's and endless more like them.

Dr Thomas goes even further in supporting what I have suggested. His comment that it is loneliness, helplessness and boredom which are killing the age mirrors what I said about nursing care earlier. He even proposes the same solution, bringing the community into the nursing homes and involving them. He has brought young children, whole kindergarten classes into the nursing homes with great success. The nursing home where Mrs Bishop has put her father illustrates the same principle. What I have suggested is that in a civil society care is something provided by people in a community to one another. Health and aged care systems should be built around this understanding.


CLICK HERE -- to examine regulatory failure in the USA

CLICK HERE -- for more about the failure of regulation and oversight

CLICK HERE -- for some explanations why regulation and oversight fails

CLICK HERE -- for another page dealing with corporate developments in Australia

CLICK HERE -- to go to a 2006 web page looking at the failure of accreditation and complaint handling in Australian nursing homes.


Brief Update Note Oct 2007

Two other US companies were welcomed into Australia. Columbia/HCA was welcomed by our politicians in 1997 in spite of widesprtead very public concern about its operations across the USA. It was only when the FBI swept through its hospitals in the first stages of a US $1.7 billion fraud that this attempt desolved.

Soon after at the end of 1997 HealthSouth, the giant US rehabilitation company bought a hospital in Melboure. In March 2003 HealthSouth almost exploded with revelations of a US $4 billion fraud. That the fraud occured was not contested. Authorities were kept fully informed on every aspect of this scandal but declined to take any action even when it was revealed in 2004 that the Australian operations had participated. It was not until 2006 that HealthSouth sold this hospital.

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This page created April 2000 by Michael Wynne
Update Oct 2007