The many extracts on these pages are from copyright material. They are owned by the reference given or its owner. They are reproduced here for educational purposes and to stimulate public debate about the provision of health and aged care. I consider this to be "fair use" in the common interest. They should not be reproduced for commercial purposes. The material is selective and I have not included denials and explanations. I am not claiming that all of the allegations are true. The intention is to show the general thrust of corporate practices as well as the nature and extent of any allegations made.

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Corporate Practices

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Entry to Privatisation
Privatisation Background
Overview of States

Privatisation in
Australian States
South Australia
W. Australia

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Austr Hosp Companies

Companies A to I

Affinity Health
Alpha Healthcare
Austr. Hosp. Care
Hosps of Austr (HOA)
Insurer hospitals

Companies J to Z

James Hardie & HCC
McGoldrick's comps
Markalinga & AME
Mayne Health & HCoA
Moran Healthcare
Nova Health
Ramsay Hlth Care
US grps HCA & AMI

Small Hosp Groups

This page examines the privatisation of public hospitals and the co-location of private hospitals on public campuses in Tasmania by Mayne Health, Australian Hospital Care and Healthscope.

Privatisations and Co-locations



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Privatised Public Hospitals

There were two privatisations of public hospitals in Tasmania. One of the earlier in Australia was the Mersey hospital in Devonport in North West Tasmania. This was awarded to Mayne Health in 1994. There is little publicity about this earlier period but it is clear that the hospital ran at a loss.

May 1995 Mersey contract signed

THE private hospital subsidiary of the Mayne Nickless group has signed a contract with the Tasmanian Government to lease Mersey Hospital near Devonport for 15 years.
When HCOA takes charge of the Mersey Hospital, it will be managing five hospitals in joint venture arrangements.
Health Care Wins Mersey Hospital Lease, Australian Financial Review 15 May 1995

In the nearby town of Burnie, Healthscope operated the small Ulverstone and the larger North West Private hospital. Burnie was only 30 minutes from Devonport. In 1995 the North West Regional Public Hospital was built close to the North West Private hospital which became a co-located hospital. At the same time Healthscope built a medical centre between the two. From the reports I could find no information as to whether Healthscope built the public hospital or when it was contracted to run it. In 2003 the Hobart Mercury mentioned that Healthscope were managing it. In 2005 the health minister indicated that Healthscope held a contract to run it until 2010. Healthscope's reports made much of the profitability of the private hospital and that it was a model for other co-locations but it was not obvious from these reports that they also ran the public hospital. That they were in a position to manipulate the services between the two hospitals without restraint may account for some of this profitability.

All hell broke loose in Mersey after Healthscope took over the loss making contract for the Mersey hospital from Mayne early in 2004. The community discovered that the company was very strongly focused on the bottom line and this focus meant restructuring the services away from their hospital.

Healthscope intended to transfer most services to Burnie and downgrade the Mersey public hospital. It seems certain that the government had quietly agreed to Mersey breaching its contract in order to do that. The community had not been consulted and it is clear that they were repeatedly deceived. A great deal of dirty linen was exposed in the fracas which followed.

The government was eventually forced to take back the hospital from a relieved Healthscope, and to commit to maintaining and upgrading the services provided in the Mersey hospital.

The whole sordid saga provides a fascinating insight into the different way in which health is currently conceptualised and the depths to which the market and its political allies will sink when confronted with what they see as an illogical response from the community.

It illustrates thedeep divide in culture and understandings between the political/corporate complex, and that of the public and the bulk of the health care professions. If the allegations the community made, and which are supported by the reports of documents and meetings are true, then it illustrates the depth to which businessmen and politicians will sink to secure their objectives. A separate page has been written to examine these matters in greater depth.

Click Here to go to the Mersey Hospital Privatisation page


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Co-located Private Hospitals

In Burnie

I know of two co-located private hospital arrangements in Tasmania. The one in Burnie Tasmania was owned by Healthscope and operated on the same campus as the public hospital leased to Healthscope. It was very profitable and Healthscope promoted it as a model for other co-locations. In 2005 the health minister revealed that Healthscope also held a contract to manage the public hospital in Burnie until 2010 but I could find very little other information about this. There is more information in a section on the Mersey privatisation web page.

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In Hobart

Australian Hospital Care (AHC):- The second co-location project was at the Royal Hobart Teaching Hospital. Although Mayne was interested it went to Australian Hospital Care (AHC) amid some concerns about the process. AHC already owned the St. Helen's Private Hospital in Hobart and there was some restructuring and rationalisation with a downgrade of services at St. Helens. The new private hospital, called The Hobart Private Hospital was located on two floors of the old Royal Hobart maternity hospital which was renovated for the purpose.

Oct 1997 Planned co-location

There is also a co-location project on the drawing board at Tasmania's Royal Hobart Hospital.
Mayne player plans hospital spree, Australian Financial Review, Saturday, 18 Oct 1997

Feb 1998 Services and AHC

The Company (Austr Hosp Care - AHC) was recently shortlisted for the co-location at Royal Hobart Hospital and a new health campus for Armadale in Perth. The latter is a unique opportunity to provide a total public health service including acute care, extended care, psychiatric care, as well as for school and dental health services.
ASX-Australian Hospital Care Limited (AHX.AX) Half Yearly Report & ASC accounts.
Australian Stock Exchange Company Announcements February 18, 1998

Mar 1998 Potential minefield

The Tasmanian Government's decision to grant a licence to the successful tenderer for a leasehold on the top three floors of the Queen Alexandra Hospital in Hobart could become a legal minefield. Unsuccessful bidders could launch legal action against the Tasmanian Government.
Hospital lease fears, The Mercury March 7, 1998 ABSTRACT:- Australasian Business Intelligence

Apr 1998 AHC and the contract

Australian Hospital Care Limited (AHX) was today announced as the preferred tenderer to operate the Royal Hobart Hospital (RHH) collocation, to be located on the six floors of the Queen Alexandra Building adjacent to RHH.
The AHX proposal involves the relocation of 100 acute beds from the company's existing St. Helens private facility in Hobart to the RHH and increasing the size to 150 beds to take account of the benefits of collocation. AHX will also add 60 sub-acute beds back to the St. Helens Campus to create a 75 bed sub-acute facility. The total development will be 225 beds.
The new Hobart Private Hospital at RHH campus will be self-sufficient with regard to operating theatres and will offer a comprehensive range of medical and surgical facilities, an accident and emergency department, coronary care unit as well as angiography and obstetrics.

The coronary care and angiography services are being provided jointly with RHH to optimise efficiency and maximise services.
ASX-Australian Hospital Care Limited (AHX.AX) AHX announced as Preferred Tenderer to operate the RHH. Australian Stock Exchange Company Announcements April 28, 1998

June 1998 Contract signed

Australian Hospital Care Limited today finalised the contracts for the latest private hospital collocation - with the Royal Hobart Hospital. The project will commence construction in February 1999 and open at the end of 1999.
AHCL believes the 'consortium' approach to the project was a key element in its success with the tender. AHCL and its financiers, ABN Amro, provided an innovative financial structure to Royal Hobart Hospital and the Tasmanian Government that optimised the financial benefit of the collocation to the public sector, whilst providing a good return to AHCL.
ASX-Australian Hospital Care Limited (AHX.AX) Hobart Contract Finalised. Australian Stock Exchange Company Announcements June 30, 1998

July 1998 AHC buys old maternity hospital

In June, 1998, Hobart's Queen Alexandria hospital has been sold to Australian Hospital Care Limited (AHCL). Renamed Hobart Private Hospital, it'll offer surgical and medical services from mid-1999, and maternity cases will now go next door to the Royal Hobart, with which it will be linked.
Public maternity hospital's reign is over. Hospital And Healthcare July 31, 1998

Nov 1999 In maternity hospital

Next door to Royal Hobart Hospital in the former maternity division, it is owned by Australian Hospital Care Ltd, owner of Hobart's St. Helen's Private Hospital.
New private hospital to open on Monday. Hobart Mercury November 26, 1999

Feb 2005 Looking back

The Hobart Private is attached to the Royal Hobart Hospital and was leased out to private operators by Tony Rundle's Liberals in 1998 for 20 years.
The building formerly known as the Queen Alexandra maternity hospital in Argyle and Collins Sts became the Hobart Private Hospital in 1998 when former premier Tony Rundle signed a 20-year lease with private operator Australian Hospital Care Limited.

A $45 million renovation was commenced, but in 2001 it was taken over by Mayne Nickless.
Minister asked for return of hospital Hobart Mercury February 11, 2005

The private sector in Hobart was already well served with private hospitals and the new hospital was not profitable. As always happens when managers are unable to make a hospital profitable the company restructured the Hobart private, replacing managers with people they believed would do what needed to be done to make it profitable. It is the nature of the process that this cycle of losses and restructuring continues until the company finds managers sufficiently ruthless to make it profitable. This all too often means removing the doctors who earlier supported the project from decision making. In this instance it also meant changing companies by selling, until one could make the hospital profitable.

The competitive bidding process for payment from insurers means that the successful bidder has often bid below real costs to secure the contract, and is then faced with cutting care or else incurring large losses. The first tactic when faced by large losses is to go back to government cap in hand and expect them to bail the company out. As the government does not want to to face criticism of its privatisation policies it does so.

Jan 2000 Profitability

The group's new co-location project, Hobart Private, will come on stream this month. It is unlikely to be profitable in the first 12 months and, according to some analysts, will put pressure on a the crowded Tasmanian private hospital market.
The Prognosis For Health-care Stocks, Australian Financial Review 5 January 2000

June 2000 Not yet profitable

The results during the second half of this financial year have been adversely affected by a number of factors including -- - - - - - time for growth in start up volumes at the new Hobart Private Hospital which opened in November 1999, - -

Hobart Private Hospital has been improving monthly and is expected to be profitable next year.
Australian Hospital Care Limited (AHX.AX) Profit Outlook.
Australian Stock Exchange Company Announcements June 2, 2000

Aug 2000 Restructuring

THE Hobart Private Hospital has axed four senior managers from its executive team - less than nine months after it opened.

The hospital's executive director, Neil Beer, insisted yesterday that the hospital was "not in financial difficulty"
Mr Brown said the union's understanding was that the restructure was at least partly a cost-saving measure.

He said the private hospital sector was a highly competitive marketplace, particularly in southern Tasmania, and private health insurance companies were putting the squeeze on hospital profits.

Concerns have also been expressed that the hospital's executive team has been "de-medicalised".

Dr Sexton also said the AMA was increasingly concerned about doctors being removed from executive management teams in health-care institutions.
Private hospital axe falls. Hobart Mercury August 18. 2000

Sept 2000 Still unprofitable

"Our biggest problem remains Latrobe Regional Hospital and, to a lesser extent, the Hobart Private Hospital co-location, and these two facilities have significantly impacted on our overall result. We are working as quickly as possible to resolve issues at both sites," Dr Stanford said. "
The company has begun to focus on a series of cost management strategies and increased revenue opportunities and remains hopeful that Hobart will be profitable in 2000/2001," he said.
Australian Hospital Care Limited (AHX.AX) Media Statement/Preliminary Final Report. Australian Stock Exchange Company Announcements September 7, 2000

Sept 2000 $3 million loss

It said that most of the fall in EBITDA was due to a $7.5 million decline in contributions from the La Trobe hospital and another $3 million from the Hobart/St. Helens co-locational facility.
Our biggest problem remains the La Trobe Regional Hospital and, to a lesser extent, the Hobart Private Hospital co-location, and these two facilities have significantly impacted on our overall result.
La Trobe Factor Blamed For Hospital Losses, Sydney Morning Herald September 8, 2000

Sept 2000 $3 million loss

The $A45m Hobart Private Hospital has contributed to a huge loss by Australian Hospital Care Limited in early September 2000.
Hobart hospital drags down company profits.
The Mercury September 8, 2000

Oct 2000 Cap in hand to government

In its first full year of operation, I am pleased to say that patient uptake at Hobart Private Hospital has been good and that revenues are increasing.

A range of strategies are being aggressively pursued to improve the hospital's financial performance.

Already this year the local management team has been restructured, realising savings of $0.5 million. We will continue to focus on operational performance, both managing costs and maximising revenues.

We have also recently entered into discussions with the Tasmanian Government to ensure Hobart Private Hospital achieves satisfactory returns for investors.
AUSTRALIAN HOSPITAL CARE LIMITED: Chairman's Address To Shareholders, Australian Stock Exchange Company Announcements 26 October 2000

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Mayne Nickless:- The large losses at Latrobe in Victoria and at Mersey pushed AHC down and threatening its viability. When the Victorian authorities helped AHC out of its mess by agreeing to take back the La Trobe hospital the company became a tidy morsel for Mayne Nickless' new aggressive MD, Peter Smedley. He mounted a successful takeover and the Hobart/St. Helens Private Colocation became part of Mayne Health.

Smedley immediately installed his own nonmedical managers and set about cutting costs and restructuring, pushing costs on to other health services, the government and the public. Loss making Hobart Private was targeted. It is likely that it was one of the hospitals accused of practices which the doctors claim resulted in cherry picking patients with profitable disorders at the expense of those who were likely to be unprofitable.

Specialists, particularly profitable surgeons were disgusted by what was happening and took their private patients to other hospitals. Mayne's profits plummeted and its first step was to sell off six of its least profitable hospitals including Mersey and Hobart Private. Healthscope bought them and the transfer occurred early in 2003.

Nov 2000 A likely target, AHC was taken over by Mayne soon after La Trobe dumped

The timing would be opportunistic, with AHC recently appointing its new CEO after a disastrous period. AHC's core hospital portfolio is in pretty good shape but until recently it was haemorrhaging because of losses flowing from the La Trobe Regional Hospital and the Hobart Private Hospital co-location.
Mayne Gets The Classic Smedley Care And Attention, The Age 21 November 2000

Sept 2001 Shifting costs

Some private hospitals in Hobart are refusing to pay for ambulance transfers, leaving privately insured patients to bear the costs. The operator of Hobart Private Hospital and St. Helens Hospital, Mayne Health, has informed patients it will not pay for ambulance transport home after they are discharged. The new policy includes elderly patients returning to nursing homes.
Ambo fee shift leaves patients out of pocket, The Mercury 3 September 2001 ABSTRACT:- Australasian Business Intelligence:

Oct 2001 Closures and cherry picking

Insiders also say that Mayne, which boasts 60 hospitals, is considering closing emergency wards across Australia. Earlier this year, the emergency department at its John Fawkner hospital in Melbourne was closed and replaced with a small Rapid Assessment Unit.

The company is now considering a similar closure at Hobart Private, which means that more than 10,000 patients will be pushed back onto the already stretched public hospital nearby.

The president of the Australasian College for Emergency Medicine, Dr Ian Knox, said further private closures would "greatly increase pressure on public emergency wards''.

He said cherry-picking was not limited to Mayne, but was a system-wide problem requiring a change in the way health funds pay for care.
AMA Looks Into Patient Allegations
Australian Financial Review October 10, 2001

Oct 2001 Closures and cost shifting

Fresh revelations that Mayne is considering closing more emergency wards, including one in Hobart, will also add to the numbers of private patients diverted back to the public sector.
Sickness At Heart Of Health System Australian Financial Review October 24, 2001

Nov 2002 For sale

Mayne Health hospitals Hobart Private, St. Helen's and Mersey Community Hospital at Latrobe are believed to be open to deals if sold as a single package.
Tassie hospital sell-off tipped. Hobart Mercury November 21, 2002

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Healthscope:- Healthscope bought the six hospitals from Mayne Health as most of them fell within its goals of buying hospitals which were in areas where there was little or no competition so giving it leverage in negotiations with insurers. Hobart Private would not have fitted this description. In spite of this Healthscope was able to make it profitable. No doubt it was helped by the surge in insured patients when the federal government subsidised insurance and penalised those who did not insure.

The Royal Hobart in the meantime was in serious trouble and needed to expand but the Hobart Private was in the way. When, after agreeing to take back the Mersey hospital, the health minister put out feelers offering to take the Hobart Private Hospital back Healthscope rejected this out of hand. They were happy to cooperate with government when government were kindly taking a money losing hospital off their hands but not when they were being asked for one which was profitable. Government were trapped by the contract in a 20 year legal minefield until 2018 - although not the same one referred to by the Hobart Mercury in 1998.

The competitive marketplace which was to solve so many of our problems is making it ever more difficult to do so. It is not about helping the community but about profits for groups who haven't thought of anything like that - and if they did they would be defaulting on their fiduciary obligations to their shareholders.

Feb 2003 Mayne sells to Healthscope

Yesterday, Mayne Group Ltd announced it had finalised an agreement for the sale of the Hobart Private, St. Helen's Private and Mersey Community hospitals to Healthscope Limited.
Jobs talks as hospitals sell. Hobart Mercury February 4, 2003

Feb 2005 Healthscope won't give profitable hospital back

Health Minister David Llewellyn revealed yesterday he had approached Healthscope to see if it was interested in returning the hospital (Hobart Private Hospital) to the State Government.
"However they are quite happy with their position and there is no response in that regard."
It shares the same inner-city site as the Royal, and both the Premier Paul Lennon and Mr Llewellyn have been expressing regret that the deal had been done and the Royal had no room to expand on its current site.
"She (the state manager for Healthscope) said it was a decision for the board and they had no intention of handing it back.

"It's one of the flagship hospitals in our company."

The under-performing Royal Hobart Hospital has outgrown its current site, and is having difficulties retaining staff and meeting the needs of patients.
Healthscope continues to operate the North West Private Hospital, which shares premises with the North West Regional Hospital at Burnie, and the St. Helens psychiatric hospital in Hobart.
Eighteen months ago, Healthscope became the third private operator of the hospital in four years, and Dr Coglin said it was now performing well.

Under the terms of the agreement, Healthscope pays $1.2 million a year to the government in rent and a further $750,000 in funding to be used for research.

"We manage 27 hospitals around the country and this is one of our best," Dr Coglin said.

"It's a very successful hospital, both clinically and from a business sense. We couldn't be happier with the hospital -- it's the jewel in our crown."
Minister asked for return of hospital Hobart Mercury February 11, 2005

During 2005 the Hobart private hospital had to be evacuated because of a water leakage. In addition to this the two Hobart hospitals performed poorly in their accreditation process. While Healthscope were critical of the way the press reported this, it also raises questions about whether maintenance and safety processes sufffered as Healthscope focused on turning these two hospitals from losers to profit generators.

June 2005 Hospital evacuated

HOBART hospital services were thrown into chaos yesterday when a burst hot water cylinder caused a mass evacuation of patients at Hobart Private Hospital.

Wards were plunged into darkness as 15,000 litres of water cascading from the sixth floor cut power to one entire side of the hospital.

When it became clear that the remaining power could not adequately run the heating and airconditioning systems, and many pieces of medical equipment could not be used, the decision was made to relocate all patients to other hospitals.
Hospital care thrown into crisis as Hobart Private forced to close Flood chaos Hobart Mercury June 8, 2005

June 2005 Accreditation problems

Two Tasmanian hospitals have failed to meet certain risk management or service delivery criteria in a national accreditation process, but the reason has not been made public.

The findings have been published in the Australian Council on Healthcare Standards report for 2003-2004.

Hobart Private and St Helen's Hospital, both owned by Healthscope, were granted accreditation by the council, but were given a high priority recommendation for improvements needed.

This recommendation can be given when patient care is compromised or when the safety of patients, staff and visitors is at risk.
No one from Healthscope was available for comment.
Hospitals' failure to meet service criteria remains a mystery Australian Broadcasting Corporation (ABC) News June 24, 2005

June 2005 Among 26 with problems

TWO Hobart hospitals are included in 26 nationally which have had issues flagged in a review by a healthcare standards organisation.

The issues for the Healthscope operated Hobart Private Hospital and St Helens Private Hospital emerged following a Tasmanian Fire Service inspection.
Heat on hospital standards Sunday Tasmanian June 26, 2005

June 2005 Healthscope indignant

However, Healthscope's chief medical officer, Michael Coglin, says the reporting was misrepresentative because the requested improvements related to infrastructure, not patient care, and all had been addressed.
Healthscope attacks newspaper hospitals article Australian Broadcasting Corporation (ABC) News June 27, 2005

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Web Page History
This page created February 2002 by
Michael Wynne
Rewritten May 2005 Updated October 2005