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In 1993 I wrote to the treasurer Mr. Dawkins about deficiencies in FIRB and state regulations. When the same thins happened in 1995 I took up this matter and some of the issues relating to care with the Senate Community Affairs Reference Committee which considered staring an investigation. This died when Tenet/NME vacated Australia. After the debacle surrounding Sun's entry to Australia I collected this early correspondence and a set of documents and on 3 March 98 asked the Senate Community Affairs Reference Committee if they would now examine this matter. Understandably they would not. Both parties were in the process of liberalising our regulations to remove "obstructions" to "legitimate" business activities as part of the globalisation process. I could not expect them to tighten regulations simply to protect Australian citizens - or even debate the issues!

3 March 1997 (incorrectly dated - written 1998)

The Chairperson
c/o Mr xxxxxxxx
Senate Community Affairs Reference Committtee
Parliament House
ACT 2600

Dear Mr xxxxxxxxx,

Deficiencies in FIRB regulations which allow potential criminals into Australia.
- The predicament created for state regulatory bodies.
- dysfunctional corporate business practices in health care

I am writing to ask whether in the light of recent developments and large volumes of additional information your committee would reconsider its 1995 decision not to address these matters. The manner in which severely dysfunctional corporations have succeeded or would have succeeded in entering Australia and dominating our private system, but for vigilance on the part of citizens is very disturbing.

National Medical Enterprises:- The company National Medical Enterprises (NME), which has now been renamed Tenet Healthcare obtained approval from the Foreign Investment and Review Board (FIRB) in December 1991. NME did not disclose that it was under investigation in the USA for fraud, and the abuse of human rights. This information subsequently emerged. Over half of the company's hospitals pleaded guilty to similar practices in 1994 and it has paid probably over $1 billion in civil settlements including US $135 million to compensate the victims, mostly children who were mistreated.

The WA report:- In February and March 1993 the West Australian Department of Health concluded that NME posed a threat to both public and private health systems. They indicated that NME was representative of the problems of the future. They drew attention to deficiencies in their regulations, their legal limitations and the mismatch between state and federal regulations. They recommended that a process be set up to deal with NME and that a cooperative state and federal effort be made to address the emerging problem posed by corporate multinational health care companies.

The Treasury:- In October 1993 I independently took up the deficiencies in FIRB regulations and the difficulty created for state regulators by FIRB's lack of process. I wrote to the treasurer. I had examined documents obtained under FOI from FIRB and NSWHealth. NSWHealth had been critical of FIRB's conduct of this matter.

The Senate Community Affairs Reference Committee:- I wrote to the members of your committee on 19 March 1995 when I obtained a copy of the WAHealth report. I asked that they undertake a review of the threat posed by corporate medicine and also the loophole in FIRB regulations. No immediate action was taken but I understand the matter received some attention. When NME decided to sell up in Australia the committee lost interest.

Generale de Sante Internationale:- In late 1995 the company Generale de Sante Internationale applied to FIRB and bid for Australian Medical Enterprises. It failed to disclose matters of serious concern. The FIRB process once again rapidly and uncritically granted permission before those of us with information could object. FIRB refused to review their decision. There was criticism from the AMA with adverse media publicity. I supplied major shareholders with information showing that the company's press release was less than frank. GSI stopped bidding. I wrote to the members of your committee again on 18 October 1995 pointing out that the same loophole had been employed by GSI.

Senate Community Affairs Legislation Committee:- In 1996 I became disturbed by the US style business practices adopted by the company Mayne Nickless and its subsidiary Health Care of Australia (HCoA) because they were adopting many of the business practices which had been so destructive for care in the USA. I therefore made a submission to the Senate Community Affairs Legislation Committee on 19 August 1996 in regard to the role of corporations in the provision of health care and in regard to the appropriateness of many currently legitimate business practices.

Columbia/HCA - the loophole was blocked:- In February 1997 I learned that Columbia/HCA planned to buy into Australia and was seeking FIRB approval. Columbia/HCA was a company whose conduct had previously been considered by my contacts in the USA to be worse than NME. I immediately sent FIRB sufficient documentation to force them to delay and made some inquiries. During the next few weeks a vast quantity of disturbing material was obtained from the USA and supplied to FIRB and to many others in Australia. Doctors from South Australia went to the USA and reported adversely on their return. Columbia/HCA abandoned its plans. I do not know if FIRB planned to reject Columbia/HCA's application. In July 1997 the FBI swept through Columbia/HCA's hospitals across the USA taking truck loads of documents to examine. It is now the subject of a massive fraud investigation. News reports suggest that a settlement in the region of $1 billion is likely. Available evidence indicates that the same underlying business practices adopted by NME and by Mayne Nickless in Australia were at the root of the problem in Columbia/HCA. It is clear that such practices and policies, which are widely accepted in the business community are severely dysfunctional in health care.

Citizens and the medical profession protected Australia from FIRB's failures:- It is clear that had Australian citizens relied on FIRB and state regulations then our health service would by now be controlled by NME (now renamed Tenet Healthcare), GSI and/or Columbia/HCA. We would be in the same mess as the USA and with so large an investment there is little we could do to control their dysfunctional practices or get rid of them. This did not eventuate because concerned citizens groups such as the Friends of Prince Henry and members of the medical profession obtained information and acted responsibly in the interests of the public. Dr Wooldridge's recent comments about sections of the medical profession are therefore particularly demeaning. This is particularly so in the light of the position he took in regard to Columbia/HCA and his strange hands off response to Sun Healthcare's arrival in Australia.

FIRB does it again in 1998 with Sun Healthcare:- The case of Sun Healthcare is far more disturbing because the decision to allow Sun into Australia was made after federal bodies in the form of the Minister of Health and the Department of Health and Human Services had thrust the responsibility for advising FIRB onto the states on the basis that the states licensed hospitals. The federal government licenses the pathology laboratories which Sun was purchasing and the minister's own department licenses the nursing homes which Sun indicated it planned to operate. The federal government is responsible for policing and prosecuting medicare fraud. Sun was being investigated by the US government for defrauding medicare. The federal government then overruled the objection of the main state involved and approved Sun's entry.

  • The US Healthcare marketplace and Sun Healthcare:- Sun, like Columbia/HCA has grown very rapidly and its public statements indicate the same sort of business approach to health care exhibited by Columbia/HCA and NME. Fraudulent practices in laboratories and in hospitals are almost a way of life in the for profit side of US health care. Health care fraud has become the major thrust of the FBI's activities. In July the FBI swept through Columbia/HCA hospitals across the USA. Such objective investigations as have been done are based on government figures. In both hospitals (eg Columbia/HCA) and Nursing Homes (including Sun's) these have consistently shown lower standards of care in for profit facilities than in not for profit community run facilities. Furthermore community facilities supplied more complex type services and services which were less revenue generating. These surveys and the criticisms of nurses and doctors indicate that the poor standards are consequent on inappropriate cuts in quality and quantity of staff in order to generate the profits promised to shareholders.

    All responsible Australian parties were very well informed of these matters. I supplied them with large numbers of documents describing what was happening. By any reasonable standards extreme caution was required before allowing any US corporations into the Australian Health system. Sun's hospitals had been raided by the FBI and it was the subject of an ongoing fraud investigation by the FBI. Hospital staff alleged that the chairman, who is now a director of Alpha Healthcare personally gave instructions to defraud medicare and was not receptive to their objections. In addition a grouped action by multiple groups of shareholders has been settled out of court for US $24 million. The action alleged insider trading and the misinformation of shareholders. Documents quoted in the claim suggest a lack of integrity in the manner in which some directors informed the public and even board members. I believe that the evidence available to us in Australia indicates that giving approval to a health care corporation from the fraud ridden US system when that corporation was under investigation for fraud was a most irresponsible act. That the unconfronted allegations impact so directly on the integrity of the chairman who is to sit on Alpha's board in Australia is doubly worrying.

    The states - the federal government and FIRB:- NSW, the principle state in which Alpha operated objected to Sun's admission to Australia because of the fraud investigation. NSW has had most experience with NME, with Mayne Nickless, with Alpha Healthcare and probably with the Moran Health Group. Sun was buying into the last two. No state advice was sought in regard to the purchase of Moran Health Group facilities, not even from the department of Health and Family Services which licenses the Moran aged care nursing homes which Sun may have purchased. NSW's objection was disregarded and Sun was allowed into Australia. FIRB have not been prepared to disclose their advice to the treasury. They have indicated that they are only an advisory body and that the decision was made by the deputy treasurer. To the citizen looking in on the political process it appears that the government is playing political games with the future of the Australian health system in order to implement unpopular policies. There must be serious concern that the government is gambling with the future of Australian citizens, particularly the vulnerable aged.

    Political pressures and citizens interests:- The minister's policies are not popular with the medical profession, with patient advocacy groups, with consumer groups, with the aged or with the public. His policies are seen to threaten medicare and the aged. The direction in which he is taking health care is fraught with potential problems and the very real danger that we will follow the USA. Most alternate approaches to health care would challenge some aspects of the governments economic rationalist ideology. As a consequence a forum for open and unhindered public discussion of the future of health care has not eventuated. The public have instead been exposed to the spectacle of aggressive interest driven stakeholders attacking each other with the minister taking a very partisan approach. The government has set up a nursing home market of paying pensioners but there are few traditional Australian health care groups eager to operate the sort of aggressively competitive nursing homes and hospitals which the government sees as the future for aged care and health. They realise that such a system favours impressive physical facilities but results in reductions in quality and quantity of caring staff. The consequences for care are very apparent to those in the system but are not always reflected in the sort of easily measured objective criteria used for accreditation.

    The governments dilemma and the vulnerable FIRB process:- If the ministers unpopular policies are to succeed then he must find international corporations prepared to operate medicine his way. His own profession have repeatedly indicated the dangers. The concern here is that the short term political policy pressures on a government facing an election were sufficient to cause them to disregard the prime interest of citizens. Serious deficiencies in the FIRB processes and in the state regulations for vetting and licensing hospitals in Australia have allowed them to do so. One must whether the process was used appropriately.

  • I would respectfully like to suggest an inquiry into

    1. The powers, regulations and practices of FIRB with a particular emphasis on the steps needed when health care corporations are involved. Hospital licensing authorities must advertise their applicants and ask for objections. One of the major problems has been that FIRB is not required to publicise the names of applicants to enter Australia. As a consequence those in a position to help FIRB in its deliberations are unable to do so. Practical legal, financial and sometimes political considerations severely limit the state's ability to withhold licences from foreign nationals. In addition to this there is no requirement that foreign nationals disclose matters of concern to FIRB and there is no penalty when they fail to do so. In the case of Sun their failure to do so was disregarded as they were not required to disclose such information. They were allowed into Australia even though they had withheld important information. In each of the instances involving FIRB the interests of corporations and their right to confidentiality has been placed before that of Australian citizens and before the need for open and accountable government.

    2. The deficiencies which allow corporate criminals to find a safe harbour in Australia by slipping between the regulations governing the operations of FIRB, the state licensing bodies and the Australian Securities Commission.

    3. The appropriateness of the corporate model of health care for Australia and the dangers posed to our system by strong commercial pressures and practices such as incentive's linked to profit as well as profit driven integrated services. Are there alternative ways of resolving our health care problems which do not expose trusting and often vulnerable citizens to the risks of exploitation by aggressive profit hungry corporate predators? The situation reveals that regulation and policing has been a costly and unrewarding solution to the problems in the USA. Our own experience with contracts in NSW and Western Australia is not reassuring. Public trust in the US health system has been destroyed andthe same could happen here. These are matters which I raised with the review carried out in 1996 by the Senate Community Affairs Legislation Committee. Since that time much additional insight and much additional information reveals how the for profit system responsible to shareholders is severely destructive of a humanitarian health system. It disadvantages patients

    I shall be out of Australia on a long promised and previously cancelled trip from April until early July. Should your committee decide to open discussion on these issues then I would welcome the opportunity to make a submission when I get back. I would like to canvas and evaluate various alternatives which might address our difficulties and also be more acceptable to the public. This would require some effort and time.

    Yours sincerely,

    Copies to members of the committee


    Letter to Hon Treasurer of Australia -- October 1993
    Letters to Senate Community Affairs Reference Committee -- dated 17 March 1995 and 14 October 1995
    Letter to Senate Community Affairs Legislation Committee dated 19 August 1996
    Deficiencies in FIRB and state regulations - a loophole for criminals

    In this I expand on the problems revealed by Sun Healthcare's entry into Australia and ask the questions which disturb me. I enlarge on the impossibly difficult position created for state health departments by FIRB's decisions.

    US Hospital Group Sun Healthcare Buys into Australia - submission and documents

    In this I list the allegations against Sun Healthcare. I set out the issues and argue the case. I try to balance our obligations to our citizens against Sun's right to be considered innocent until proven guilty. I argue that the interests of our citizens must be given priority over the rights of a foreign multinational because of the seriousness of the allegations and the potential consequences should they establish themselves firmly in Australia. These arguments are supported by a set of documents from Australia and the USA. Material obtained from FIRB under FOI is included. Included is almost all of the relevant material with which FIRB was supplied. FIRB were however in possession of full sets of the court documents. The deputy treasurer had access to this material. I apologise for the comments about politicians on pages 23-25. It is too late to take them out. They reflect the deep disillusionment with politicians in Australian. This is also reflected in the public's desire for an independent and publicly elected president. Mr Beattie was vocal about this at the recent republic convention.

    National Medical Enterprises -- renamed Tenet Healthcare

    This contains a published article reviewing the impact of corporate medicine on care, and using NME's documented corporate practices as an example. I also describe NME's years in Australia. Other corporations including Columbia/HCA followed similar business practices

    Recent Documents Mostly Columbia/HCA

    This set of reports deals primarily with the fraud investigation of Columbia/HCA but there are also articles describing Tenet/NME's settlement with patients. In one report patients describe exactly those practices which doctors told me about in 1993. There is also material about Kaiser and about the massive fraud payments by US laboratory corporations. This is all very recent material. It indicates the extent of dysfunctional practices in the USA. FIRB were in possession of large quantities of similar material.

    Mayne Nickless press reports

    These press reports and the court documents reveal a culture very similar to that of health care giants Tenet/NME and Columbia/HCA in the USA. The use of language to legitimise corporate conduct is well illustrated. There is the same pressure for profits and growth, the same prime responsibility to shareholders, the same enthusiasm for profit generating integration by supplying "one stop" medicine and the same use of incentives linked to profit. Mayne and Alpha are the two health care companies which started as opportunistic business groups operating in other areas. They then switched to health care because of the perceived opportunities for profits. Most other health care providers in Australia have had a much stronger primary commitment to the community and patients.

    US Newspapers support my assessment of corporate practices

    This review is based on earlier press releases after the July raids on Columbia/HCA. I used this to support my contention that the sort of practices which I had described in Tenet/NME were not localised to that company or to psychiatric care but were US wide, and were the direct consequences of the application of corporate paradigms to health care. A form of Social Darwinism selected for dysfunctional people with problems in handling conflicting information from alternate paradigms of interpretation. I use newspaper articles to argue that Australia is not immune and that similar people respond to similar forces. This causes problems here too.

    Corporate Medicine - Hospital licences - Revising the regulations

    US newspapers reported changes planned by Columbia/HCA. These changes showed a tacit acknowledgment that the fraud in their company was driven by the sort of business practices which I had been criticising. I used these extracts to press for changes to state regulations which might go some way towards limiting the threat of such practices in Australia. This submission was also based on earlier press reports most of which I have not included.

    Corporate Medicine in Australia

    I include this short review because it addresses directly the application of economic rationalist principles in health care. The intention is to link what is happening in health care to the issues of our times. I have deliberately taken a very critical position and quoted from some of the strongest critics of economic rationalism.

    A rash of articles about opportunities in foreign countries

    This set of reports describes the pressures on health care in the USA and the way in which this has generated interest in foreign opportunities. Opportunistic international health care consultants are advising companies how to play on the pain of politicians internationally and persuade them of the value and cost savings of their dubious US corporate wares. This set of articles illustrates the potential threat to our health system as plausible corporate con men offer governments in Australia utopian solutions and then use the loophole provided by FIRB to force themselves into our health system. Following Sun and Columbia/HCA's experience no tarnished health care company will publicly announce a purchase in Australia to the press until they have obtained FIRB's approval. It will all be done surreptitiously. Australian citizens will not be in a position to expose problems until after companies have established a firm foothold. That they will be very difficult to dislodge is illustrated by our experience with Tenet/NME.
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