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Sun Healthcare
The story ... Culture ... Updates .. References ... Turner interview ... Sun Growth
Sun's entry into Australia
Overview ... Arguments ... Documents ... Criticism letter ... FIRB

US Hospital Giant Sun Healthcare buys


Australia's Alpha Healthcare and Moran Health Care Group
(November 1997)

I gained access to documents obtained from the Australian Foreign Investment and Review Board (FIRB) under freedom of information. I saw a need to make those responsible for health care in Australia and at risk of any imported US business practices aware of what had happened and of the issues surrounding Sun and its entry into Australia. To do so I needed a brief overview but I also needed to back my views with documents, set out the issues and give the background needed to properly evaluate these documents. The "Summary" and "Overview of the contents of this package" were used to meet the first objective. The content of this document met the last two objectives. The documents themselves were bulky and I wrote an overview pointing to the main points in each. I have modified this and put it on the site as a separate document.



Sun Healthcare
The concerns about Sun
Sun's Entry into Australia
Parallel government activity
Lack of corporate muscle in Australia
The Yes Minister solution


Initial Discussion
The documents


1. Introduction

2. Disclaimer

3. Purpose of this material

4. List of Allegations made and concerns about Sun Healthcare's practices

5. The world of US giants

6. The nature of the settlements

7. Frames of reference in interpreting information about Sun Healthcare
     A. The US health care context
               a. US corporate culture
b. Possible rationalisation by Sun
c. Other rationalisations B. Similar companies
C. Similar executive styles and ideology
D. The behaviour of the pillars of corporate credibility
E. The pressures to expand internationally
F. The way in which the US justice system operates a. Criminal vs civil actions by government
b. Other civil actions
c. We must assume that the allegations have substance
d. The relevance to Sun Healthcare G. The context of the Australian health care scene
H. The policies of our politicians
I. The track record of government and of politicians a. Tenet/NME
b. Columbia/HCA
c. Politicians and their attitudes to fraud
d. Sun Healthcare and politicians J. Australian regulations
K. The conduct of FIRB and the deputy Treasurer a. Tenet/NME
b. GSI
c. FIRB and Columbia/HCA
d. FIRB and Sun Healthcare
e. FIRB and the treasury L. The protection offered to FIRB by restrictive FOI regulations
M. Propriety, businessmen and politicians a. Distrust, business and state politicians
b. Federal ineptitude
c. Getting politicians on side
d. The distance between policy and practice - form and substance
e. Stakeholders and the common good 7. Objectivity and the interpretation of evidence A. My objectivity has been repeatedly challenged
B. My biases
C. Validating my views 8. Our Obligations as citizens, politicians and health care personnel A. Corporate Medicine
B. Sun Healthcare
C. Obligations a. Citizens
b. Politicians
c. Health professionals i. Contracts
ii. The integrity of the health system
iii. A general threat to patient care
iv. Individual patients
v. The elderly

SUMMARY OF DOCUMENTS (in a separate document)

SUMMARY (to contents)

Sun Healthcare:- Sun Healthcare has bought a controlling share in Alpha Healthcare, a provider of integrated health services, rehabilitation hospitals and laboratory services. It has bought control of 6 Moran Health Group facilities. Moran is a provider of aged care services. Sun Healthcare is a giant US corporate health conglomerate which provides integrated services in home care, aged nursing homes, retirement villages, subacute step down hospitals, rehabilitation hospitals, pharmacy and managed care. Its driving founder Richard Turner sees corporation business practices as the only way to provide health care. He has adopted a similar expansionist approach to Columbia/HCA and his company has grown from only 8 facilities in 1989 to probably nearly 500 in 1998.

The concerns about Sun:- The company is under investigation by the US department of justice and several states for allegedly defrauding medicare. A senior staff member has supplied a statement alleging that Turner himself gave instructions for the fraud and was not responsive to the remonstrations of staff. Shareholders have commenced a number of actions alleging insider trading and a number of other dishonest corporate practices. Directors are alleged to have withheld information and deliberately misled the US Securities and Exchange Commission, shareholders and even members of the company's board. The court documents contain extracts from company reports which are strongly supportive of the allegations and suggest a disturbing lack of integrity. One of these actions has already been settled for US $24 million, indicating the likelihood that there is substance to the allegations.

Sun's Entry into Australia:- The Foreign Investment and Review Board (FIRB) was supplied with documents revealing these matters. Dr. Wooldridge distanced himself from the decision to bring Sun into Australia, indicating that the states were responsible for the licensing of private hospitals. He conveniently ignored the licensing of pathology laboratories and aged care facilities by the commonwealth. Sun was buying control of two pathology businesses. Its correspondence indicated its interest in nursing homes. New South Wales, the state in which the vast majority of the purchased health facilities were located objected to Sun's entry into Australia. The Foreign Investment and Review Board is an advisory body to the treasurer and has stressed that the decision to ignore NSW's objection and allow Sun into Australia was made by the deputy treasurer. They have refused to disclose the nature of the advice they gave the treasury.

Parallel government activity:- During the negotiations for Sun's entry to Australia the government was creating a nursing home market by introducing legislation which required the aged to pay more for their care themselves. It is government policy to contract care to private operators. Soon after Sun's entry was approved Dr. Wooldridge announced his intention to revolutionise health care by offering incentives to states to cut health costs and revolutionise health care by building subacute step down hospitals. Turner is a strong advocate of this step down approach, which is not surprising as it is one of the major providers of these revenue generating facilities in the world.

Lack of corporate muscle in Australia:- There are far too few Australian corporations to implement the governments policies in health and aged care. They lack the aggression and corporate power to ride roughshod over the inevitable opposition from the public and health care providers. Most health and aged care groups were founded by concerned citizens for humanitarian reasons and have reservations about the impact of the aggressive for profit competitive changes which are required by the minister. National Mutual/AXA, Mayne Nickless and Alpha are the major exceptions. Mayne Nickless which is being strongly supported by the government has a very disturbing criminal history. In 1994 it pleaded guilty to running a price fixing racket at the expense of its customers.

The Yes Minister solution:- Attempts to bring in US corporations like Tenet/NME, Columbia/HCA and possibly Kaiser to implement government policies have been frustrated by those who became alarmed when they examined corporate medicine more closely. They have exposed dysfunctional corporate business practices and/or criminal activity in each of them. They have shown how a corporate system misuses and abuses the trust of citizens at a time when they are most vulnerable. Such practices were integral to the corporate health system in the USA. Critics have challenged government policy by producing evidence to show that this was because greed and profit pressures rather than humanitarian considerations became the driving force in the provision of care. They have predicted that a similar situation would arise if government policies to corporatise health, force competition for profits and introduce managed care succeeded. Regulation and policing would be ineffective in controlling all but the most blatantly criminal conduct. It is apparent that the government has ignored the evidence in their possession and the welfare of Australian citizens. It has used a "Yes Minister" strategy to bring Sun into Australia in spite of the disturbing information available about its conduct and the situation in the USA.

Overview of the contents of this package (to contents)

Objective:- This material is intended to provide information which can be used by citizens, health professionals and politicians to reach an objective decision about Sun Healthcare or any other US health care corporation entering Australia. It therefore briefly examines the corporate health scene in the USA . It examines the corporate health scene in Australia and the past conduct of politicians. It addresses the pressures on our system. These matters are examined in greater depth in other sets of documents. It provides guidelines for medical practitioners, indicating their professional obligations. It suggests action which can be taken to protect patients and the integrity of our health system. It urges a wide ranging discussion about the provision of health services in Australia, a discussion which is not afraid to confront economic rationalist prescriptions when they are inappropriate.

Initial Discussion:- The allegations about Suns conduct are listed and the implications for Sun's integrity as a "fit and proper" person under Australia's regulations are indicated. Attention is drawn to the extent of the fraud in the USA and the problems created by the way in which US fraud actions are resolved through massive civil settlements rather than criminal convictions. US corporate health care culture and its threat to Australia are discussed. The conduct of similar companies and their executives is described to provide an understanding of the US scene. Attention is drawn to the enormous pressures on health corporations consequent on fraud investigations, regulation, and policing. They are all looking for opportunities outside the USA. Our health scene and our health policies are reviewed. Our tarnished track record in dealing with US corporate health corporations is described. FIRB's involvement in this receives attention. I indicate the attempts which have been made to avoid confronting the evidence which I have provided by challenging my objectivity. I have now been proven right in the case of Tenet/NME and of Columbia/HCA. Relevant authorities have refused to examine the other matters arising from the conduct of these companies which I have put before them. I discuss our obligations as citizens, politicians and as health professionals.

The documents:- I discuss each set of document to indicate the reason for supplying it. I supply US and Australian reports documenting Sun's arrival and the governments new health care revolution. I include a segment of my submission to NSW Health department in 1993 objecting to licences for Tenet/NME. This analyses the political pressures and predicts the decision which Yeldham made in the face of overwhelming evidence. My assessment has been reinforced by the subsequent exposure of Yeldham's sexual exhibitionism and consequent vulnerability to influence. I supply material which indicates the vulnerability of our health system and particularly the aged care system to unscrupulous business practices. I supply the Declaration of Geneva and the statement by the World Medical Association in order to guide colleagues.

Articles from the UK and a study of Sun's conduct made by a London group concerned at their entry into the UK disclose the allegations about them. A 1994 article from the West Australian is used to focus attention on the dispute between state licensing authorities charged with protecting citizens and the politicians who are more interested in their votes. The article exposes a large loophole in the federal and state regulations. This permits corporate health care criminals to enter Australia and escape the provision of our regulations.

Included is a selection of correspondence with government and documents obtained from FIRB under FOI. These indicate that the deputy treasurer made his decision to allow Sun into Australia over the NSW objection. It also points to a lack of frankness and candour in Sun's dealing with FIRB. I follow this with my efforts in 1993 and 1995 to induce the government and a senate committee to address the deficiencies in our regulations which permitted Tenet/NME to get into Australia. This same loophole has been exploited by Sun and by the government in the form of the deputy treasurer. I attempt to analyse the behaviour of politicians - what makes them behave like this? It is not surprising that they have lost the trust of the electorate.

I supply information about the US Senate Inquiry which exposed the fraud in aged care and which was followed soon after by FBI raids on Sun's hospitals. Extracts from Sun's reports to the US Securities and Exchange Commission (SEC) give some hint at the nature of the federal investigations and of the actions by shareholders.

US material describes the concerns about nursing and standards in aged care in the USA. The bitter disputes about staffing levels between the nursing unions and the large nursing home operators including Sun are described.

Extracts are provided from some of the court documents, mostly from the one settled for $24 million as these can be considered to have some substance. They describe the conduct of corporate directors and the statement implicating Turner, Sun's chairman in setting up the fraud. I supply News clippings which address Sun's business practices. These include an interview with Sun's chairman Richard Turner. I ask whether the profit and expansionist attitudes revealed in the company's US Securities Exchange Commission (SEC) disclosures, in the court documents and in the newspaper reports are appropriate in a health care provider. Is it in the interests of our health system to bring in groups like this? Will it compromise the integrity on which effective care ultimately depends?

Material is supplied from Sun Healthcare's US web page, and about Alpha and the Moran group in Australia. Sun's preoccupation with corporate expansion is revealed as is Alpha's recent interest in expansion.


1. Introduction (to contents)

The issues here are simple but the background information, which is very relevant is complex. Sun Health care, a US based multinational has purchased a 38% holding in Alpha Healthcare which makes it the largest shareholder. Alpha has followed the financially rewarding but criticised US corporate policy of integrating services. It operates hospitals, general practices, radiology practices and pathology laboratories. It has also purchased a 51% controlling share of six Moran facilities. Moran is primarily a provider of nursing homes.

Sun Healthcare:- Like Columbia/HCA, called the PACMAN because of the way it assimilates competitors Sun has grown aggressively from only 8 facilities to over 450 throughout the world in only 8 years. It is one of the giants of aged care, nursing home facilities, rehabilitation hospitals and subacute step down hospitals. It operates in the USA, Great Britain, Ireland and Europe (Spain). It has now entered Australia. Available information indicates that hospitals, probably in two US states were raided by the FBI. It is being investigated for fraud by the US department of Justice and by authorities in at least one but probably three states. It is the subject of a number of civil actions and at least one has already been settled for $24 million, more than double the first really large $10 million health care civil settlement made by Tenet/NME in 1992.

FIRB:- We do not know what advice the Foreign Investment and Review Board (FIRB) gave to the deputy treasurer whom FIRB have repeatedly indicated was responsible for the decision to allow Sun into Australia. FIRB was in possession of the enclosed documents and was aware that Sun had not disclosed important and relevant information to it and also that it had been less than frank in supplying subsequent information. We do know that the deputy treasurer took the unusual decision to overrule the objection of the NSW government and allowed Sun into Australia on the basis that its entry was not considered "as contrary to the national interest".

Open government:- In a democracy government should be transparent and we are entitled to critically examine the basis for this decision. This is particularly so when governments are in conflict. In this instance the minister for health in NSW is an informed doctor with a long interest in health care reform. A past health reformer himself he has the sort of background which would enable him to see this matter through the eyes of potential patients and health care providers as well as government. The board members of FIRB are businessmen and economists. They will see the matter through corporatist eyes. The deputy treasurer has an economic background holding a BCom (Melb). He would be influenced by the urgent need of the government in its determination to corporatise Australian health care using a managed care framework. His colleague, the minister for health is having some difficulty in this because both the public who are the recipients of medical care and the medical profession who provide it are bitterly opposed to his policies. Corporate Australia has not rushed to implement his policies. At least one of his Australian corporate supporters and allies have an embarrassingly tarnished record. The government's other economic rationalist policies are under pressure. His job may depend on the government's success in bringing sufficiently powerful and wealthy foreign corporations into Australia to implement his policies.

2. Disclaimer (to contents)

The list of allegations included below was made as I examined the documents provided here. I have not made them and make no claim to their accuracy. They are referred to later by number as I review the documents. There is therefore no logical order and many are repetitive or cover the same ground. The allegations were made in the documents and I make no assertion that they are proven or necessarily true. In assessing Sun's impact in Australia, the possibility or even likelihood that there is substance to these allegations must be considered. In making an informed decision on which to base actions, the allegations must be seen within the context of the US health care corporate marketplace, the exposure of dysfunctional and fraudulent practices by the largest corporations and the allegations about the exploitation of patients for profit, staffing problems and falling standards of care in the USA. Sun's entry into Australia should be assessed within the context of the past conduct of businessmen, politicians and regulators in dealing with US corporations entering this country. Extensive information has been provided or is available in regard to all of these matters. I have examined vast numbers of documents relating to corporate practices in medicine and have had some direct experience with corporate medicine and with the legal world in which they operate. I have therefore used the understandings developed to comment critically on these documents. I have expressed my personal opinions. These opinions should be regarded as a guide only and their validity should be evaluated against the documents provided. My view that US style corporate medicine and Sun Healthcare pose a threat to the Australian Health System and to the welfare of Australian patients should be critically evaluated. You should be aware that corporate staff have repeatedly accused me of being vengeful and of not being objective in my assessment of their conduct. Please examine the documents and decide for yourselves.

3. Purpose of this material (to contents)

These documents and this information are provided in order to enable those Australians with responsibility for and an interest in health and patient care to properly inform themselves as well as their associates, and having done so to form their own opinions and then act in the manner dictated by their consciences. While these documents are directed towards Sun, this material must be considered as relevant to any health care corporation entering Australia from the dysfunctional and fraud ridden US system. It is also relevant to Australian health care corporations, to the broad issue of corporatising health care and other humanitarian endeavours, and to the political issues consequent on economic rationalist policies. The prime concern with Sun is because it is the only US health care group in Australia, because of the way it was brought into Australia, and because it is the subject of serious allegations which impact on its integrity. If we feel that Australian patients and the integrity of our health system is threatened then action may be called for in all these areas. To give guidance I have supplied copies of and information indicating the obligations of medical professionals as set out by the World Medical Association and the Declaration of Geneva. I have suggested actions which can be taken , by individuals who reach adverse conclusions, within the current health minister's framework of a medical marketplace and the rights of consumers and competitors on what he calls a level playing field. That we disapprove of this system which was forced on us, should not prevent us from using the rights we possess within the system to protect our patients and to preserve integrity in the provision of health care.

4. List of Allegations made and concerns about Sun Healthcare's practices
(to contents)

I have selected the allegations listed here from the material. While the selection is mine I have attempted to retain the original wording so as to give their content more clearly and avoid misinterpretation. As a consequence there is no order and many are repetitive. I have indicated the source of each by indexing the documents with numbers

  1. There is a wide ranging fraud investigation by the FBI, the US Dept Justice and the Department of Health and Human Services' Office of the Inspector General (OIG)
  2. Billing scandals involving medicare and medicaid payments are alleged
  3. It was company policy to inflate invoices and misrepresent the services provided. Sun facilities billed for "unnecessary and unordered services".
  4. The policy to defraud medicare was set forth by Andrew Turner, founder, chairman and CEO of Sun in or about April 1993. It was Sundance's (Sun's Rehabilitation subsidiary) policy to bill group therapy sessions as individual therapy. Turner instructed staff to do so. Patricia Brockman, the director of Sundance Rehabilitation supplied this information in an affidavit which FBI agents used to secure a search warrant on July 25, 1995. When Brockman confronted Turner about the illegal billing practices he responded "just bill it as individual therapy." (Comment:- I conclude from the wording of the court documents that a facility in Oregon was probably raided as well as the one in Seattle.)
  5. Turner gets an excessive annual salary of US $3..2m and owns US $90m in stock.
  6. Sun hopes to expand rapidly and make profits of 20% from its international operations ie 20% of the money paid by insurers will go to profits rather than patient care.
  7. An independent evaluation of US nursing homes by Consumer Reports in the USA (the equivalent of Choice magazine) ranked Sun 34th out of 43 chains examined. Twenty percent of Sun's homes were ranked among the "worst homes". "Integrated Health Services", a US health care company operating in the UK but which has not yet entered Australia ranked 40th. For profit corporate nursing homes performed poorly when compared with not for profit church and community facilities.
  8. Sun's chairman Richard Turner claims that there is plenty of excess fat in the health system and that the competitive corporate private sector will remove this.
  9. The FBI are investigating Sun's rehabilitation subsidiary.
  10. The FBI raided a nursing home in Seattle
  11. Shareholders have commenced litigation as a consequence of the way the company handled the FBI probes and its failure to promptly and properly disclose the investigation and the nature of the documents subpoenaed on Dec. 27, 1994.
  12. Two of Sun's directors resigned in protest at the chairman, Richard Turner's dictatorial conduct claiming that he had not done an acceptable job bringing information to the board and they felt that they had not been given sufficient information to carry out their duties as directors. They indicated that he had not permitted "Appropriate disclosure to shareholders to be made on a timely basis." Turner admitted on 29 July 1995 that there had been problems in communication with the board.
  13. The US inspector-general's office commenced the investigation in October 1994 and subpoenaed Sun's Headquarters for a broad array of records in December 1994. This was not disclosed to shareholders until June 1995.
  14. Aiding and abetting an alleged breach of fiduciary duty by directors of Careerstaff (case not prosecuted)
  15. Misrepresentation or failure to disclose facts about the OIG and FBI investigations until after the acquisition of Careerstaff and Golden Care.
  16. Misrepresentation or failure to disclose facts about the company's operations and financial results and so artificially inflating the price of the company's securities. Issuing "materially false and misleading public statements about the Company, which artificially inflated" stock during the period when Careerstaff were selling their company in exchange for Sun stock. Falsely portraying the company and its financial and operational condition optimistically to SEC and disseminating this to the investment community.
  17. Breach of Contract and breach of a registration rights agreement in regard to shares in the Golden Care deal. (An acquisition finalised in May 1995 prior to disclosing the federal investigation)
  18. Breach of fiduciary duty by directors and officers of the Company.
  19. Improper billing for services in the rehabilitation section. -- e.g. billing group therapy as individual therapy
  20. Unnecessary or unordered services to residents of rehabilitation facilities.
  21. Sun's long-term care subsidiary failed to disclose a relationship with its rehabilitation division
  22. Sun's long-term care subsidiary was involved in improper billing practices related to services provided by the rehabilitation group. This is being investigated by the FBI.
  23. The attorney general and the Department of Social Services in Connecticut are investigating whether the company's long term care subsidiary provided Medicaid cost reports containing false and misleading fiscal information.
  24. Turner signed the 10-K SEC report for the year ending December 31, 1994 and a May 23 1995 proxy-prospectus while knowing of the FBI investigation and without disclosing it. Brousard, treasurer of Sun signed these same reports as well as the Quarterly 10-Q report for Mar 31, 1995. Zev Karkomi, a director and member of the audit committee signed Dec 31, 1994 10-Q report and the proxy-prospectus on May 23 1995
  25. Richard Turner sold $11 million worth of stock during the period when he knew of the federal investigation and before the share value plummeted when information about the investigation was made public. Zev Karkomi sold $1.7 million worth of shares during this same period.
  26. The value of Sun's common stock was used in substantial part to accomplish acquisitions without disclosing the federal investigation.
  27. Representing that the rehabilitation division (Sundance Rehabilitation Corp.) complied with regulations, while at the same time the division engaged in improper billing practices.
  28. Sun filed form 10-Q for the quarter ending 30/9/94 on about 10/11/94. It represented that a 145% increase in revenue from the rehabilitation section was "primarily a result of an increase in services to non-affiliated facilities--" when it was in material part due to improper billing practices.
  29. On Dec 5, 1994 the company filed a prospectus in which it claimed that its "facilities are in substantial compliance with the various Medicare and Medicaid regulatory requirements." Litigants claim this was false.
  30. On or about Feb 10, 1995 Turner and Broussard arranged a conference call in regard to a large volume of shares traded on Feb 9, 1995 and "rumours of a threat to our earning stream from - - - Sundance". Turner claimed "We don't really see any problems out there" and insisted that they were simply keeping everyone properly informed. He claimed that the inquiry was "at a very low level" and "it is very routine." --- "Our outside council has concluded that we're fine" He claimed "There is nothing going on throughout any of our subsidiaries that could possibly be perceived as a serious threat." Shareholders claim that these statements were false.
  31. In February 1995 the company indicated greatly increased profits including a 215% increase in total net revenues. Turner attributed this to expansion of Sun's facilities when in fact it was achieved by improper practices. The court actions document many other instances in which Turner and the company boasted of the company's financial position, its projected profits and its intention to continue expanding. Directors denied any significant investigations and claimed that they were in compliance with regulations while selling 2.5 million more shares of common stock in March 1995.
  32. The company (e.g. form 10-Q for quarter ended Mar 31 1995 and filed on May 15, 1995) were in breach of GAAP regulations in failing to disclose the federal investigation.
  33. The proxy-prospectus for the acquisition of Careerstaff was filed on May 23, 1995. It claimed that there were no suits or proceedings pending or threatened. It stated that there had not been "any circumstance that caused a parent Material Adverse Effect". Sun disclosed the federal investigation for the first time on form 8-K filed on 16 June 1995. It indicated that Sun "continues to be under investigation" and it claimed that its billing practices were "not inconsistent with applicable - - - - rules or regulations". Shareholders claim that these statements were false as defendants had never before disclosed this even though they had known of the investigation since December 1994 and had been responding to subpoenas since January 1995.
  34. The merger with Careerstaff was finalised on June 21, 1995 and on June 27, 1995 the Company announced that the federal investigation had intensified and was spreading from the north-west region to other areas, causing the market to react swiftly and severely.
  35. Two of Sun's directors resigned because of Sun's disclosure practices. They accused Turner of failing to permit "appropriate disclosure to shareholders to be made on a timely basis".
  36. Sun failed to co-operate with the federal investigation to the extent that an application for a search warrant was asked for and granted. The raid on a Sundance rehabilitation centre in Seattle, Washington on July 26, 1995 discovered these documents.
  37. That the investigation also focussed on rehabilitation services at Sun facilities other than Sundance facilities was disclosed on Nov 28, 1995.
  38. The company also revealed that state-level regulatory authorities in New Mexico and Oregon as well as Connecticut were investigating company billing practices.
  39. It was revealed on Nov 14, 1995 that "the target of the federal probe was no longer just the Company's Sundance Rehabilitation division but also Sunrise Healthcare Corp. which operates 115 nursing homes in 14 states and accounts for more than 65% of the Company's overall revenue."
  40. The members of the company's audit committee were responsible for maintaining the internal integrity of Sun Healthcare's internal auditing function. These processes were wholly inadequate and permitted the alleged practices. They either knew or should have known that the accounting systems were not in order and either knowingly or recklessly permitted criminal and fraudulent activity to take place. Zev Karkomi who sold a large number of shares was a member of the audit committee and a director of Sun.
  41. "rather than ferret out such wrongdoers and take appropriate action against them, the Director Defendants participated in, aided and abetted, acquiesced in, and/or approved of the illegal and fraudulent scheme and artifice to defraud Medicare and Medicaid, in violation of their fiduciary duties of loyalty, due care, and good faith to the company and its shareholders."
  42. Directors benefited from their misrepresentation of the situation in that they were paid millions in compensation and awards based on company earnings which were inflated consequent on fraudulent practices. The profits generated enabled the directors to "preserve their positions of power, prestige and profit". They were able to increase their retirement benefits. (note that incentive payments linked to profit have been at the heart of the problems in medical fraud in the USA. 80% of hospital CEO's in the USA receive incentive payments and this practice by Mayne Nickless is considered legitimate in health care by our state regulators.)
  43. Reports and documents show an intense corporate preoccupation with profits and growth rather than patient care.

Comment:- In my view the most striking and obvious feature in these allegations and in the documents I have read is the apparent lack of frankness which the company displayed in its dealings with the US Security and Exchange Commission, with shareholders and even with Sun's corporate directors. There is enough factual information supplied in the court documents to form a firm opinion about this even if some is quoted out of context. This is regardless of whether the remaining allegations are correct or whether the company successfully defends the remaining cases. A lack of frankness and candour is not necessarily illegal. A similar lack of frankness was displayed in the company's lack of disclosures to FIRB and this also was not illegal. These are matters of concern in a provider of health care because of the importance of trust and integrity in the provision of health services. They are relevant considerations in determining whether a corporation is fit and proper to hold a hospital licence. NSW Health advised that Tenet/NME's licence be rejected on the grounds of a similar lack of frankness and candour. Judge Yeldham who had been appointed to make the decision found a formula which he used to grant the licence. If you concur that an assessment of the available material reveals a lack of frankness and candour then it logically follows that you should not believe any statement or material supplied by Sun or a Sun controlled company. Before trusting them in any way we should insist that they adequately explain the evidence of these documents and refute this perception of dishonesty.

5. The world of US giants (to contents)

Sun must be evaluated within the context of its corporate peers. Tenet/NME** was the giant of the psychiatric, substance abuse and rehabilitation sectors until the exposure of its practices in 1991 and the payment of probably over $1 billion in civil settlements. The third largest general hospital owner OrNda Healthcare** recently paid $12 million to settle actions alleging they paid kickbacks to doctors. Columbia/HCA**, the most aggressive predator in the corporate world runs mainly general hospital and integrated services. It backed out of Australia in March 1997 amidst revelations of its unsavoury practices. Columbia/HCA seems to be mortally wounded by the FBI's investigation "Restore trust". Reports predict a $1 billion government fine. Insurance company and patient actions will follow. Kaiser Healthcare** and US Healthcare dominate the managed care business. Both have been the object of intense criticism and government action. The FBI's "Operation Labscam**" has investigated laboratory fraud, netting $800 million in settlements from 10 large laboratories. The prime offenders were the giants National Health Laboratories and Smith Kline Beecham which paid $325 million. The vast majority of these actions, including those against Tenet/NME were civil actions which were settled out of court and without admitting guilt. The reasons why civil actions are preferred will be addressed later**. A common thread through most of these actions has been the involvement of doctors who were in some sort of advantageous relationship with the corporation. Most often this was in the form of illegal kickbacks in a variety of forms.

6. The nature of the settlements (to contents)

Like Mayne Nickless in 1994, the US companies have paid large amounts to settle court actions and then denied the allegations or their extent. In the non-government settlements the complainants were usually prevented from speaking out by the terms of the settlement. The Australian Financial Review was highly critical of Mayne Nickless' stance and concluded "The only conclusion likely to be reached by a reasonably minded observer of the case is that Mayne Nickless board withdrew its defence in this case because it knew - after viewing the TCP evidence - that the company did not have a remote chance of winning the case." I believe that we are entitled to draw the same conclusions about US corporations and about the US health care environment. I make no apology for doing so. Sun Healthcare is the giant of aged care and subacute hospitals. We are entitled to examine the allegations made about its conduct, its US $24 million settlement and ask whether it is any different to the others.

7. Frames of reference in interpreting information (to contents):-

In assessing and acting on the information available about Sun Healthcare we have two obligations as doctors, citizens and politicians. We have an obligation to be fair to Sun and its chairman. A number of accusations have been made and settlements reached but none have as yet been proven in a court of law. While we must examine Sun's conduct in the context of the environment in which it practices, under the law - as it stands today - Sun is innocent until proven guilty and we should be mindful of this. We also have an obligation to society, to the integrity of our medical system, to our fellow citizens and as doctors to our patients. These two conflicting obligations must be balanced when examining available information. I would argue that as responsible Australian citizens our assessments should be weighted towards the interests of Australia, of its citizens and of our patients rather than those of a corporate multinational. Sun, like Tenet/NME and Columbia/HCA has displayed an enormous capacity to expand rapidly and dominate the health care marketplace in the USA. Once Sun has a major holding in Australia it will be impossible to remove them and they will be in a position to dictate the sort of health care given to citizens and its cost. Its interest in Australia is in the profits which can be made for its US shareholders. It is our society and our citizens which must be protected. We are entitled to see Sun as a serious potential threat. We are entitled to the public disclosure of the information we need to assess this threat. This information has not been disclosed on the basis of FIRB's confidentiality of business information FOI provisions.

In evaluating Sun Healthcare and its entry into Australia I draw your attention to the following considerations:-

A. The US health care context (to contents):- We need to evaluate available information about Sun Healthcare and the allegations made about it within the context of the US health care scene and the culture of US corporate medicine.

a. US corporate culture (to contents):- US managers move from company to company and they bring their culture, their attitudes and their values to Sun with them. When they come to Australia they will do their best to persuade Australian managers and Australian doctors to adopt their financially successful approach. They are skilled in accomplishing this and many will have been trained in business schools which see "culture management" as legitimate. They will assert that the claims of dysfunction are unproven and therefore untrue. (The US is very credible in Australian eyes. Where the US goes we follow. ) US corporations have mostly shown a willingness to do whatever is needed to generate profits if they feel that they can get away with it. The have been "less than frank" in their statements and their dealings with authority. In the USA Medicare regulations have been stretched to their limits and in many instances medicare and medicaid have been systematically defrauded. It is widely perceived by doctors, nurses and not for profit organisations that standards have been compromised and patients either over-treated or denied care depending on the direction of financial pressures and the incentives offered to managers.

The onus is on Sun:- I would argue that the onus is not on Australia, its citizens or its doctors to prove that Sun has indulged in similar practices before taking steps to protect themselves. If Sun wants to buy up Australian hospitals, if it wants Australian patients to enter its hospitals and nursing homes, if Sun wants Australian doctors to practice in its hospitals then it must openly and publicly confront the allegations and the conduct of US corporate medicine. It must show us with proof that it has not indulged in these practices. Australian doctors and Australian patients are the customers. In a real marketplace we can choose whether we will support the Sun/Alpha/Moran complex or not. Our politicians have promised us a level playing field and if Sun wants our custom then we must insist on openness and accountability. In the USA customer choice is restricted by corporate control and market dominance. In spite of our minister's assurances this is what we are getting.

b. Possible rationalisations by Sun (to contents):- Sun might justifiably claim to us that this is the way the US system operates and that they could not survive if they behaved differently. In a different environment they would behave differently. Our gullible politicians and businessmen may have been only to willing to accept this commonly used rationalisation. I have been saying the same thing about US corporate practices for years but reject the claim that they would behave differently in Australia. I contend that our politicians and our businessmen are introducing these same forces into Australia. The West Australian Department of Health concluded in 1993 that there was a real danger of a similar situation developing in Australia. I would argue that to bring in a corporation which rationalises fraud in this way is untenable. Rationalisation like this only confirm my assertion that a dysfunctional form of Social Darwinism operates in health care.

c. Other likely rationalisations (to contents):- Many US corporations claim that US medicare regulations are vague and difficult to interpret. This is both a valid assertion and a useful rationalisation. Critics of corporate medicine have indicated that the US system was set up to be raped and it has been. Corporations now claim that they believed at the time that what they did was legitimate. The latest articles from the New York Times suggest otherwise. The allegations against Sun and its chairman are set out in the attached court documents. The alleged facts in the claims - if there is substance to them - indicate a deliberate intent to defraud medicare. If the allegations have substance then this excuse is not tenable. The same sort of criticism that our system is vulnerable can be made about the Australian medicare system and the state regulations which our politicians refused to change even when West Australia pointed this out to them.

B. Similar companies (to contents):- We need to see Sun within the context of other health care giants which have dominated their sectors. Columbia/HCA and Tenet/NME have like Sun grown very rapidly to dominate the US health care marketplace. Their success was based on greed, placing profit before care and indulging in unacceptable and/or fraudulent practices including the misuse of patients for profit. Sun's formula for success may well be similar. The allegations suggest that this may be so.

C. Similar executive styles and ideology (to contents):- We should consider whether any parallels can be drawn between Sun's executives and the executives of the companies where disturbing disclosures have been made. I have supplied information about Scott, Vanderwater and Rainwater** from Columbia/HCA. I have also provided information about Bedrosian, a founder of Tenet/NME. Like Scott he argued that health services were a commodity to be bought and sold like any other commodity. In 1985 he vehemently denied - in the face of corporate documents - that NME had attempted to influence a government decision by making campaign donations - He claimed "God help anyone that does"!. In 1992/3 under cross examination about dishonest corporate statements, he considered that it was legitimate to misinform in the corporate interest as this was only "singing to the choir". I have not provided reports on Eamer, the chairman and driving force in NME. A report from the LA Times describes him as eccentric and dominating with a single minded eye for measures of financial performance. He insisted that staff met corporate financial objectives which Tenet/NME called "plan". Witness' statements and monthly reports from the hospitals where the fraud occurred are revealing of the pressures applied. It is reported that he was a manic depressive and took lithium. I have argued that, because the health care customer is uninformed and vulnerable he or she is largely powerless in the corporate health marketplace. As a consequence a form of Social Darwinism** based only on the success in generating profit operates. It selects for individuals who can rationalise dysfunctional and dishonest practices, and who have the ability to disregard the consequences of their conduct for others. This explains why all of the most successful health care corporations have indulged in dysfunctional and illegal activities.

D. The behaviour of the pillars of corporate credibility (to contents):- We should consider similar conduct by other large nonmedical corporations operating in the "humanitarian marketplace". We expect such groups to operate in the interests of their vulnerably human customers. There are many reports which indicate that they follow very aggressive business practices at the expense of their customers. We need look no further than the bank managers who get financial incentives based on the bank's profits rather than the interests of customers. Then there are the insurance companies which invest in tobacco and defraud the vulnerable and elderly. Many like prudential invest in corporate medicine including managed care companies. Banks and insurers have been the pillars of corporate credibility. The Sydney Morning Herald recently raised serious questions about members of the Australian Reserve Bank, the ultimate repository of corporate and economic propriety in Australia. Do we want this in health where "customers are even more vulnerable?

E. The pressures to expand internationally (to contents):- I have supplied information indicating the pressures on corporate medicine in the USA and the extent of the fraud investigations. The reports show how US corporations are spreading overseas** as rapidly as they can. There has been a proliferation of international health care consultants, most prominent of whom are past Tenet/NME staff who have not confronted allegations that they were directly involved in Tenet/NME's illegal practices. We should view Sun's entry within the context of the advice given by US international health care consultants. They point to "silos of opportunity". They advise corporations to deal directly with politicians and play on their "pain". They give advice on how to discrediting medical critics. They advise US corporations to come in under the umbrella of existing companies and urge them to target groups of key doctors.

F. The way in which the US justice system operates (to contents):- The actions against Sun must be evaluated within the context of US fraud prosecution practices. Mr Parisi a health fraud investigator in New Jersey explained the problems to the US House of Representatives in 1992. Mr Freeh, the director of the FBI also spoke of these problems in 1994.

a. Criminal vs civil actions by government (to contents):- In the USA the criminal courts are overburdened by violent crime and there are long delays in prosecution. The emphasis is on crimes against the person. Fraud convictions are difficult to prosecute, the costs are large and the penalties imposed by criminal courts are insufficient to act as a deterrent. As a consequence the vast majority of the fraud cases are prosecuted by government agencies through the civil courts. The actions against Tenet/NME by the attorney general in Texas in 1991 and the action against SmithKline Beecham by the US department of justice in 1996 were prosecuted in this way. These actions are usually settled in negotiated settlements which reduce the costs of prosecution. The penalties paid are much larger and are a greater deterrent. The settlements are reached without admitting guilt and as a consequence the allegations are never tested in court and are never fully reported in the press. The companies can then continue to deny the allegations in the face of evidence. They continue to threaten their critics.

Criminal convictions can result in being barred from medicare payments and so be put out of business. Companies won't enter into settlements which put them out of business. The consequence of this is that they all continue to provide services. The international implications are that the corporate record is legally unblemished as no wrongdoing has ever been proven. Companies can object strongly to being barred from foreign markets and to allegations made about them. There are consequently some procedural difficulties for FIRB. State health departments are powerless to withhold hospital licences because they are at risk of a legal appeal and being forced into a costly defence. This would depends on inducing foreign citizens to give evidence voluntarily as they cannot be forced to do so. Evidence and witnesses would have to be brought from the USA. Corporation's are in a powerful position to exert influence on such witnesses. Tenet/NME threatened to take court action were licences rejected by NSW in 1993.

b. Other civil actions (to contents):- In court actions by insurers, past employees, shareholders and patients, corporations have very aggressively denied and contested the allegations, making the whole process very difficult. They have eventually paid large sums to settle confidentially. They have succeeded in imposing conditions of nondisclosure or silence on the complainant. The matters are never contested in court and the companies continue to deny them. In some cases the financial losses consequent on disturbing practices are small or the recovery of share prices makes them so. Because of the legal costs and limited damages such cases will be withdrawn or settled with both sides paying costs. Corporations will claim that the allegations were disproved. This is misleading. The allegations were never tested.

c. We must assume that the allegations have substance (to contents):- These ways of settling allegations made in civil actions are so prevalent and the sums so large that we are entitled to assume for our purposes that the facts given in these settled claims and the bulk of the allegations have substance. Our responsibilities are to Australian citizens and to Australian patients. In making practical decisions to protect Australians there is no point in splitting these legal hairs. Integrity is an essential feature of our health system. If a very wealthy company and its officers are not prepared to clear their names by standing up in court and confronting serious allegations then we cannot give them the benefit of the doubt.

d. The relevance to Sun Healthcare (to contents):- These matters are relevant because the FBI has decided not to continue with criminal investigations but is continuing its civil investigation of Sun's practices. Sun may claim this as exoneration, but it is simply the normal legal practice in the USA. If Sun reaches a settlement agreement it will probably be coated in the same explanatory sugary words used in the Texas settlement by Tenet/NME. The critical issue is whether Sun reaches a settlement, what the actual charges made are and how much it pays. The other relevance is that Sun has settled a civil action by shareholders in which serious allegations were made for $24 million, more than double the amount paid by Tenet/NME in Texas in 1992. The allegations in this case deserve critical examination.

G. The context of the Australian health care scene (to contents):- We need to evaluate the entry of Sun Healthcare in the light of the warnings given by Ron Williams in 1992 and by the West Australian Health Department in 1993. We should also examine the money making practices and policies adopted by corporations like Mayne Nickless and Alpha Healthcare operating in Australia. Are they moving towards US style systems of care and will they welcome financially successful US practices in Australia? I have argued that they will not be competitive against US multinationals operating in Australia unless they adopt US business practices. West Australian businessmen and politicians welcomed Tenet/NME into Australia in 1991, turning a blind eye to allegations in Texas that it had indulged in a massive fraud by abusing the rights of US patients. They brought in a Tenet/NME trained executive to run the hospitals and paid Tenet/NME over $1 million a year for access to NME's deviant but financially successful business practices. Could these shrewd businessmen have been unaware of the nature of the practices they were purchasing and their role in the serious allegations made about the company? One of the documents released by FIRB indicates the advantages of access to Sun's business practices but it is not clear whether Sun and Alpha have entered into a similar contract to introduce it. A letter from Alpha Healthcare to FIRB extolls the benefits which Sun's expertise in nursing homes and subacute hospitals offers. This reflects the view of Australian businessmen. As in the USA profit is automatically equated with "quality".

H The policies of our politicians (to contents):- We must examine the policy statement made by the minister in Canberra in May 1996 as well as the public statements of federal and state health ministers, and the policies they are pursuing. The application of economic rationalist policies is very evident in the emphasis on privatising hospitals, in the contracting out the care of public patients, in the support given to insurers and to managed care, in the pressure on doctors to become "allies with" and make contracts with corporations, and in aged care legislation. We are entitled to ask whether these policy priorities lie behind the unusual and controversial decision by the deputy treasurer to overrule the objection of NSW, the state where Sun will operate most of its hospitals. Was the decision to allow Sun into Australia made because of strategic considerations relating to government policy. Sun provides managed care under a package called "Sun Solutions". It is one of the largest providers of aged care in the USA. The minister has now announced a new initiative to reform health care by introducing subacute "step down" hospitals in Australia. A wholly owned subsidiary of Sun Healthcare provides such hospitals in the USA. They are also provided in nursing homes. Sun is a major provider of rehabilitation hospitals. Is a major "reform" planned in this area as well? I would argue on the basis of the available documents that Sun's prospects of entering Australia would have been virtually zero had it not been for government policy priorities.

I. The track record of government and of politicians (to contents):-

a. Tenet/NME** (to contents):- Politicians seized on the Yeldham decision** to ignore the advice of two health departments and grant hospital licences to Tenet/NME in 1993. Politicians were, at the time in possession of a large amount of information documenting Tenet/NME's corporate practices. The West Australian government immediately attempted to give a pathology contract for public hospital pathology services to the company. The federal government rapidly provided support with taxpayers money through the government controlled and taxpayer funded Australian Industrial Development Corporation (AIDC). The AIDC went into partnership in an endeavour to expand into Queensland. Veterans Affairs short listed the company to take over and run Greenslopes Repatriation hospital in Queensland. There was an embarrassing back down and government supported plans were aborted when state health departments stood firm amidst further disclosures, massive fraud payments and a criminal conviction in the USA. Tenet/NME departed in 1995 with its tail between its legs.

b. Columbia/HCA** (to contents):- Reports indicate that Columbia/HCA secured the support of the governments in Victoria and South Australia before attempting to enter our health care market. Columbia would certainly have spoken to the federal government as well. Senior members of all these governments were well informed about Tenet/NME's practices. They had been sent large numbers of documents and knew that these practices were representative of many other corporations, some of which had been fined for the same practices. Some members of the medical profession who were aware of US business practices obtained and distributed readily available US material. Australian doctors went to the USA on a fact finding mission. Columbia/HCA backed away. 

c. Politicians and their attitudes to fraud (to contents):- Perhaps it was a different set of politicians which only a few years ago were accusing the medical profession of fraud and off ripping off medicare. More recently the elected representatives of the people have been intent on bringing into Australia, groups from the USA where they have refined medicare fraud into a massively successful business.

d. Sun Healthcare and politicians (to contents):- We are entitled to ask whether Sun Healthcare approached our politicians and obtained their support before it made its bid to enter Australia? Did our politicians make any inquiries? They were well aware where relevant material could be obtained in Australia. Did they enter into any agreement with Sun? Were any undertakings or guarantees given to Sun? Is there any reason to link the decision of our health minister to reform health care further by building stepdown hospitals with the controversial decision to bring Sun in over the objections of state health departments? International consultants** have indicated that governments are "silos of opportunity" and that there are "opportunities galore" if corporate executives understand their pain and play on it. They indicate that "business can help government learn new ways of delivering health care effectively. (See The New World of Managed Care - Modern healthcare 3/11/97). Is this what has happened in Australia? How severe is the government's health care "pain"? The public statements by Sun's chairman, Richard Turner are congruent with those of the minister and they would soon find common ground.

J. Australian regulations(to contents):- Our politicians and government departments have claimed that regulations and contracts would prevent the practices which developed in the USA. None of them have confronted the considerable cost and training implications of setting up effective monitoring and policing mechanisms in health care. We have never had this problem before so do not have the years of experience of the USA nor the expertise of the FBI. Health care is notoriously difficult to regulate and police. In Australia health services have largely worked for the "public good" because of the integrity of health care providers and their real humanitarian motivation. When this has wavered then patients have suffered. I have argued that the profit priorities of corporate health care subverts this integrity by diverting motivation towards profits. While regulation may control the worst excesses of corporate medicine it will have no impact on corporate thought processes. It will serve only to suppress the more obvious manifestations of dysfunction and make the problems ultimately more difficult to deal with.

K. The conduct of FIRB and the deputy Treasurer (to contents):- FIRB is a secretive advisory body only and we do not know when decisions are made on the basis of their advice and when their advice is ignored by government.

a. Tenet/NME (to contents):- FIRB approved the entry of Tenet/NME into Australia in December 1991 at a time when it was being prosecuted for fraud, the misuse of patients and the abuse of human rights. Australian newspapers had reported on this in October 1991 and the Australian Stock Exchange had received information and a response from the company. NSW Health was later very critical that no investigations were undertaken by FIRB. Victor Chang, the only Australian who had recently worked in a Tenet/NME hospital and might have had the knowledge to inform FIRB was unfortunately gunned down in a Sydney street in a claimed extortion attempt. This occurred during the period when FIRB was examining Tenet/NME's application. At least one of Tenet/NME's hospital executives is now in jail for threatening a whistle blower with death.

b. GSI** (to contents):- In 1995 FIRB approved the entry of the French controlled multinational General de Sante Internationale (GSI) to buy out Tenet/NME. Once again FIRB failed to investigate. It refused to review its decision when faced with disturbing evidence about operations in the UK (the Woodley Report), information that the company had adopted a dysfunctional money saving "factory" approach to health care and information which revealed that whistle blowers were threatened to silence them. 

c. FIRB and Columbia/HCA (to contents):- Over the last 5 years FIRB has been supplied with a large amount of documentation by Australian sources. This related to Tenet/NME, Columbia/HCA, Kaiser Healthcare and other corporations. FIRB never made a public decision about Columbia/HCA's application. Columbia/HCA withdrew without a decision being made public. This is out of character. Columbia/HCA were at the time a very aggressive and persistent company. We can speculate as to whether FIRB had finally grasped the nettle of corporate medicine and planned to advise the treasurer to reject Columbia's application. Columbia/HCA were planning to expand into South Africa and France so could not risk a public rejection.

d. FIRB and Sun Healthcare (to contents):- FIRB did not approach obvious Australian sources for information when Sun applied to enter Australia. Information about Sun's purchase of a 38% holding in Alpha was eventually published in the press. I have been unable to find any reports of Sun's purchase of a controlling interest in Moran Group hospitals. This information was obtained from the USA. We must ask what else they have purchased? Are the various parties being deliberately secretive in order to bring corporate USA into our hospitals behind the backs of Australian citizens?

e. FIRB and the treasury (to contents):- Decisions are made by the deputy treasurer. FIRB is an advisory body only. In their correspondence about Sun Healthcare FIRB have carefully stressed that the decision was made by the deputy treasurer. I have obtained access to correspondence and material obtained from FIRB under FOI. I enclose the relevant documents. I must leave you to draw your own conclusions as to what FIRB's advice was and whether the government in bringing Sun into Australia accepted FIRB's advice or rejected it.

L. The protection offered to FIRB by restrictive FOI regulations (to contents):- While FOI regulations in regard to FIRB are intended to protect the confidentiality of commercial information they have also protected organisations who have indulged in criminal conduct or who face other disturbing allegations. They give government the opportunity to act outside the scrutiny of the press and the public. Our system of open and transparent government can be ignored.

M. Propriety, businessmen and politicians (to contents):- We should take account of the track record of our political representatives and their association with businessmen. I would suggest that the enduring feature of Australian businessmen and politicians is their inability to take account of and learn from experience. Citizens still suffer from the aftermath of the many debacles involving Scase, Bond, West Australia, South Australia and Victoria. Politicians and businessmen have conveniently forgotten. We should remember. The willingness of many of our corporate and political icons to indulge in dysfunctional behaviour is clear. The credibility of business tycoons is undimmed by revelations of the performance and ethical misdemeanours of colleagues.

a. Distrust, business and state politicians (to contents):- A continuing matter of concern is the lack of integrity displayed by politicians in their dealings with the public and with powerful business groups. A disturbing feature of the Australian political system is a distrust of politicians. As a consequence political parties gain power by default. Some politicians seem able to rationalise almost any conduct which will ensure power or which will bolster political policies on which their continued political careers depend. Their role as custodians of the "common good" is ignored as is the trust placed in them. In Queensland we are faced daily by such conduct and I do not believe that the situation is any different in other states. In Queensland we have had confidential electoral agreements made with the police in order to gain power. These were followed by an enormously costly and inappropriate legal exercise designed to prevent proper evaluation of that conduct. The antics of our attorney general are comical if tragic. Large mining companies happily ignore the environmental conditions imposed by their contracts. When concerned departmental staff demanded that the mining giants honour their undertakings they were moved aside and the minister assured the companies that the matter would not be prosecuted. It seemed that the minister wanted them to invest in further mining in Queensland and that there was political mileage for the minister in this.

b Federal ineptitude (to contents):- In the federal arena we have the debacles in health care, the remarkable display of ineptitude in aged care policy and the travel rorts affair. The ability of politicians to rationalise their positions in the face of overwhelming evidence is amply illustrated by the travel rorts affair and the way politicians have responded to it. Senior politicians have pinned their careers to economic rationalist solutions and the corporatisation of many humanitarian services including health care. The evidence regarding corporate medicine directly challenges these policies. I have little faith in the ability of our politicians to deal with this evidence in an objective and disinterested manner. There is no sign of this. 

c. Getting politicians on side (to contents):- A less obvious consequence of the imposition of policies in the face of opposition is that politicians invest their political image in these policies. They strongly deny that there will be adverse consequences. There is consequently a strong incentive to minimise and ignore dysfunctional practices when they do occur. Exposure of deficiencies will impact adversely on prior actions. This makes subsequent exposure of dysfunctional practices much more difficult. Whistle blowers face a hostile environment. Corporations like Tenet/NME capitalised on this by involving politicians in their activities and gaining their public support for the company. By being close to politicians who were publicly supportive of them they could more easily discount evidence and discredit whistle blowers. It is significant that the Singapore corporate staff whose conduct Dr Ng described in such detail in his allegations were never required to explain before an inquiry and were never imprisoned. Instead Tenet/NME sold in Singapore and then rewarded these staff with promotion in the USA.

d. The distance between policy and practice - form and substance (to contents):- The present government claimed that it was the party of small businessmen, and that it would govern for "all of us". Perhaps my bias leads to the perception that it is governing for big business and foreign multinationals. There is a marked discrepancy between its claims and its actions. This is not to assert that the opposition have behaved any differently. They were thrown out of power for the same reasons, further evidence that politicians driven by ideology simply won't learn. 

e. Stakeholders and the common good (to contents):- The input of health care stakeholders into the decision about Sun is not known. John Ralston Saul points out that in the corporate world the legitimate way of making decisions is by negotiation with or by taking advice from stakeholders. The term stakeholders now appears frequently in Australian corporate and government literature. This strategy was used to revise hospital regulations in Queensland. These stakeholders represent particular interests in the decisions to be made. They accept that their role is to press for a decision favourable to their members. These processes are given further legitimacy by the process of political lobbying by power groups. Politicians accept this as legitimate and respond. In these processes the outcome will depend on the credibility as well as the economic and political power of the various stakeholders. It has little to do with objectively evaluating evidence and making wise decisions. The way in which decisions about health care are being made in Australia is illustrative of the process. Saul stresses that this legitimised promotion of personal interest is antidemocratic. Democratic processes depend on disinterest, on the ability of participants to distance themselves from their own interests. They are able to use their expertise to evaluate information objectively and wisely, so reaching decisions in the interests of the "common good". This concept of the "common good" together with the Socratic principle of continuously questioning and challenging are the foundations of democracy. Both were the first casualties in Germany and in South Africa. In South Africa leaders continued to make loud claims to democratic process while simply ignoring dissent. Corporations similarly claim to be democratic. In Australia dissent is increasingly ignored and compliance with solutions is imposed using the logic of economic rationalism. Practices are justified by claims of efficiency, economic necessity and global inevitability.

7. Objectivity and the interpretation of evidence (to contents).

A. My objectivity has been repeatedly challenged (to contents):- You should be aware that, over the last 8 years since I developed my interest in corporate medicine I have been repeatedly accused of a lack of objectivity. I am aware of a number of even less flattering assertions about my mental state! I believe events and the documents I have supplied bear testimony to the validity of my concerns. The unfolding revelations about Tenet/NME and Columbia/HCA in the USA have confirmed my early suspicions and many of the assertions I have made over the years. 

B. My biases (to contents):- I readily admit to biases which are consequent on my personal experience in corporate hospitals, and my past direct experiences of fascism and apartheid. Without these experiences I would not have pursued these matters. It was the remarkable similarity in the patterns of behaviour of corporate staff in Tenet/NME hospitals when compared with the behaviour of fascists and apartheid supporters which first alerted me to the dangers of corporate medicine. The blindness to reason was very apparent as was the precedence, which corporate "profit first" belief patterns were given when confronted by conflicting evidence and common sense. This was accomplished by using corporate jargon which I called "NMEspeak" because it bore so little connection to reality. I find the progressive appearance of similar patterns of thought and behaviour in Australia disturbing. Because of my biases I ask that you not accept my conclusions and advice but carefully examine the information I have supplied and test it against my assertions. Questioning in this way is the first step back towards a civil and democratic society, and away from a society which is captive to corporate thought patterns.

C. Validating my views (to contents):- I have sought support in the works of those who have studied corporate medicine, but I hope not uncritically. I disagree with some of their less informed views. These authors include the now vindicated Ron Williams, Dave Lindorff, Rochelle Jones, Walt Bogdanovitch, Robert Kuttner, Professor Arnold Relman, Steffie Woolhandler and many others. In linking corporate medicine to economic rationalism I owe a dept to Robert Kuttner, to Eva Cox's Boyer lectures, to the collection of essays published by Stuart Rees under the title "The human costs of managerialism" and to John Ralston Saul's Massey lectures. These were recently repeated on ABC radio and have been published as the best seller "The Unconscious Civilisation". His analysis of corporate language has been invaluable in supporting my contentions. These works have assisted in bringing coherence and order to perceptions about the direction which our society is taking and the impact on health care. These disturb me because of the similarities between their implementation and events in Germany in the 1930's and South Africa in the 1950's. Saul has also drawn this parallel. I am not suggesting that the consequences will be as malign. Like Saul, I am suggesting that they will be destructive of our society and that it is past time that we all did something about it. The issues are most starkly apparent in health care because profit for shareholders competes directly with care for the insurance dollar. The mental and physical well being, even the lives of our citizens may be at stake. Health care is too important to leave to businessmen, economists and the politicians who become the victims of their lobbying.

8. Our Obligations as citizens, politicians and health care personnel (to contents)

A. Corporate Medicine (to contents):- On the evidence available you should be able to form a reasonable opinion about corporate medicine and its potential consequences. It is my view that the evidence that corporate medicine is severely dysfunctional for the health system and for individual patients is now incontestable. Health professionals in the USA have spoken out. The evidence has been accepted by the Vatican. The strong stance taken by the catholic church is reflected in the recent damning condemnation of primarily for-profit medicine by the pope.

B. Sun Healthcare (to contents):- In the case of Sun Healthcare our general assessment of US corporate medicine is grounded in an actual company operating in Australia. We have to decide to what extent Sun Healthcare has adopted US corporate practices and whether these practices pose a threat to our health system and to our patients. We are entitled to demand that Sun discloses its defence and its explanations. Doctors who treat patients in Alpha and Moran facilities are in a position to insist that Sun supply them with satisfactory rebuttals supported by evidence. If these are not satisfactory then they are entitled to maintain an open mind on the issues and take such steps to protect our system and our patients as they feel are prudent. The government in NSW objected to Sun's entry to Australia until such time as the allegations were resolved. That the minister is a doctor and that his objection was overruled by businessmen should fuel our concerns. As citizens we are entitled to make our decisions on the evidence available to us and act on it.

C. Obligations (to contents):- If you conclude that any corporate health care provider including Sun Healthcare is a potential threat, either because of the allegations about its practices, because you conclude that corporate medicine is a threat, or more specifically if you are persuaded that US corporate medicine is a threat then certain obligations follow.

a. Citizens (to contents):- As a citizen in a democratic country there is an obligation to act in the common interest and for the common good. Each person must decide how strenuously they will pursue this. Steps include writing to state and federal politicians, discussing the issues with social groups and simply expressing views in the corporate marketplace with your feet.

b. Politicians (to contents):- Politicians have an obligation to examine available evidence objectively and act on it for the public good. They are in a position to exert pressure and social control on senior colleagues who are blinded by their beliefs and ambitions. They face the ultimate test of integrity in a democratic society - the use of their vote to oppose party policy which is in conflict with the common good.

c. Health professionals (to contents):- Health professionals, particularly doctors have additional obligations and additional matters to consider.

i. Contracts (to contents):- Doctors are under extreme pressure to enter into contracts with corporate providers and corporate insurers. Sun is for example, a provider of managed care in the USA where contracts have been a major factor in the destruction of professional values. We have no information about the contracts which Sun makes. Each member of the medical profession is entitled to the information which will enable him or her to make an informed decision about entering into any relationship with Sun or with other for profit corporations. I have attempted to supply information which will permit informed decisions.

ii. The integrity of the health system (to contents):- Health professionals have a long tradition of ethical responsibility in the provision of health care. They have a unique responsibility to uphold the traditions which have been passed down to them. This responsibility must extend to protecting the integrity of the health care system in Australia.

iii. A general threat to patient care (to contents):- Health professionals have a special responsibility should they perceive circumstances which might impact adversely on the care of patients. These obligations were set out in a statement by the World Medical Association in 1993. I have attached a copy. The first requirement is to inform authorities of the threat. Our authorities have been inundated with documents describing corporate business practices and their consequences for the last 6 years. They have been fully informed but persevere in their policies. The World Medical Association indicates our obligation to take further action, but fails to indicate what action to take. This is a personal decision which each health professional will have to make. The minister has stressed the power of the user in the marketplace in regulating business practices. He claims that a competitive marketplace will regulate for cost and quality. Doctors ultimately decide where they will work. While we may not agree with the minister we should not hesitation in following his advice and use our marketplace power to ensure that the marketplace is used to protect our ethical values as well as the quality and cost of care.

iv. Individual patients (to contents):- We have a prime responsibility to each of our patients. They have placed their lives in our hands and trust our integrity and the advice we give. Great stress has recently been placed on our obligation to fully inform our patients of the nature of their condition, the pros and cons of the various treatment options available to them and the complications of these treatments. It is equally clear that we now have an obligation to fully inform our patients about the pros and cons and potential problems in the hospitals, the health insurers and the managed care companies which they might use. Patients should understand the difference between for profit corporations whose prime interest in their care is the generation of profits for shareholders, and not for profit groups whose prime interest is in providing this care. Profits from church and community groups are directed to improving care, expanding services and other community projects. The patient should also be told of any contracts and arrangements between doctors and corporations and of the potential adverse consequences of these. In some US states there is now a legal obligation to disclose such potentially dysfunctional arrangements to patients.

Patients should be informed about the general conduct of the company running the hospitals, their record for integrity, and of any matters which might impact on care. These include nursing levels, the extent of the use of agency staff and the disruption of working medical teams. In particular patients need to know if corporate executives and directors owning health care services receive incentive bonuses. They should be told of the way in which such bonuses have contributed to the misuse of patients in US hospitals. I have supplied the information which you will need to give this advice fairly and objectively and which will enable you to back it with examples and reputable opinion. If you have any difficulties in regard to any one of these issues then I can supply you with more documents. I have selected only a small sample. You will need to make inquiries from your hospital to determine the way each corporation operates, the nursing practices and the use of incentives. You should have no difficulty in justifying these requests to the hospital managers, using the documents I have supplied. Our minister has indicated his determination that health care customers be able to use market forces effectively by shopping for cost and quality. We should indicate to our patients the need to also evaluate the value systems and ethical integrity of the providers as this is as important in health care. We should supply our patients with the information they need to do this. Some of the documents I have supplied will be useful.

v. The elderly (to contents):- Clearly similar obligations exist in regard to advising the elderly and their relatives about aged care facilities controlled by for profit companies and by Sun Healthcare. Social workers, occupational therapists, physiotherapists and speech therapists play a major part in these institutions and in the referral of patients. These professionals are often employed directly by corporations who do the billing for their services. Some of the unproven allegations about Sun relate to these activities. In the USA some institutions including Tenet/NME have insisted that these professionals take a major part in marketing the company's hospitals. They were rewarded for doing so and for generating admissions. In addition many US corporations have been offering doctors kickbacks in return for referrals. Some including Tenet/NME targeted other health care professionals and paid them for referring patients. Hospitals even paid the salary of counsellors who gave free services in schools. They were expected to generate referrals to the hospitals. Many children were harmed by needless admission to hospital as a consequence.

I believe that we have an obligation to make inquiries into the relationship between corporate aged care providers, social workers and other providers of health care in our region. We should ensure that social workers and OT's who refer patients as well as potential providers of "corporate health services" are fully informed of the unethical nature of such US corporate practices and the risks to patients. Patients and their relatives need to be told of the nature of US corporate practices and of their track record for placing profit ahead of care. They should be advised of the extent of the influence or control exercised by US corporations. If we detect practices which are disturbing then we should inform our patients. They have the right to exert their power as customers in the marketplace and we should encourage them to follow the ministers advice in doing so. In the USA corporations have attempted to introduce clauses into managed care contracts which prevent doctors from giving their patients the information they need to make informed decisions in the marketplace and to prevent them from acting as advocates for their patients. We must be continuously alert and reject any moves in this direction.

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