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. I have made my comments on the
basis that there is substance to the
reports.
This page will be expanded with references in the future. This is an outline for now.
The Vulnerability of General Practice
General Practice has proven to be the weak link which has allowed corporations into the care of patients. General Practitioners often practice in greater isolation and are perhaps less cohesive than the specialists who work with colleagues daily. Government initiatives have loaded them with unwanted red tape and administration. Their remuneration has fallen way behind as the government has refused to increase Medicare payments in line with the cost of living. Their income is further eroded by their willingness to bulk bill at lower rates particularly for poorer patients. In order to maintain a fair standard of living they are forced to see far more patients than they can provide a caring service to. Several studies show that they are dispirited and worn out. Many would like to retire or find other work.
Buying up GPs
It is not surprising therefore that they have welcomed corporations offering to relieve them of administrative burdens and office activities so that they can concentrate on patient care. They also offer to house the doctors in smart corporate medical centres with colleagues and other medical services. After hours and leave relief are provided. They also offer to buy GP' practices for far more than their value then re-employ the GPs taking a percentage of their earnings. These offers are often irresistible. Vast numbers of GPs have entered into contracts starting in Western Australia and then spreading across the rest of Australia. A number of GPs were the initiators of the companies and have been enthusiastic advocates.
The corporate advantage
The carrot that attracted entrepreneurs was potential access to GP referrals. By placing GPs in medical centres with corporate pathology, radiology, pharmacy, paramedical and alternate medical services and encouraging them to refer to these services they hoped to make huge profits.
Potential unethical practices
The concern of doctors and particularly of specialists and the AMA was that pressure and inducements would be offered to doctors to refer to these services with consequent overservicing and misuse of patients.
The use of incentives to align the care given by doctors with the financial objectives of the companies was particularly worrying. The companies were paying for the doctors practices with shares so that these doctors had a personal financial interest in referring patients to these facilities - even when alternatives were more competitive and provided better care.
This sort of financial interest has been a source of many problems in the USA. It has resulted in overservicing. It is usually considered to be a form of payment for referrals or kickback. Following the FBI fraud investigation Columbia/HCA was forced to buy back all of the shares doctors held in its facilities.
Profiting from GP services
Corporations also promoted an ideological belief in efficiency claiming that by rationalising large profits could be made. The market and its analysts embraced this nonsense enthusiastically. In fact smart medical centres are expensive, staff are still required and doctors can only make more money by seeing more patients and this is not what most of them want to do or why they joined companies. GP corporatisation as such was never going to make money. Pathology and radiology were. The unsavoury fast food style medicine which is associated with a high turnover rate, excessive investigations and referrals was shown by the notorious Dr Edelstein to be very profitable in the 1980's. The majority of GPs don't want this.
Corporations have tried to introduce a number of suspect practices to incentivise health care and have even resorted to franchising. They deny any interference in the way doctors practice or refer but the inducements are there. Some preliminary work suggests that corporate doctors do more investigations than those who are not corporatised.
Medical opposition
The AMA has taken up the matter on behalf of its members and convened a summit at which most of the corporations agreed to a voluntary code of conduct. A number including Primary Healthcare refused to sign. Voluntary codes of conduct are probably not worth much in a strongly competitive marketplace where corporate survival is at stake but the process is worth while as companies are forced to commit to something and cannot later claim that conduct they have agreed to avoid is acceptable.
Not doing so well
Not surprisingly the profits from General Practice have not lived up to the promises given to the shareholders who bought into these companies in 1999-2000. There was a wild frenzy of buying with companies like Foundation Healthcare paying far too much for practices. When the profits (read losses) started to come in the bubble burst and share prices in most companies plummeted. Those doctors who accepted shares in payment have lost money. The buying of general practices has slowed if not stopped. Some of the founding doctors who persuaded big business to invest in their companies have resigned and been replaced.
Only Primary Healthcare has continued to be very profitable and there may be reasons for this.
The Sonic/Foundation/Lifecare nexus.
Sonic Healthcare is a pure pathology and radiology company. Its CEO is a doctor who has refused to follow conventional market wisdom. He runs the service as a service and has enjoyed enormous success - success at the expense of competitors like Mayne Nickless. He refused to enter into any other health services as he considered this as competing with his referral base. Sonic has a good image among doctors. His success in making money has ensured his business survival. GP corporatisation by other companies has threatened Sonic's referral base.
Michael Boyd was the big money behind Sonic Healthcare. He founded and floated Foundation Healthcare to corporatise GPs and Lifecare to corporatise paramedical services, dentistry etc.
Boyd formed an alliance between the three companies and an association with a drug company. Foundation built medical centres across the country. Sonic and Lifecare services and the drug company became tenants. Sonic paid much more than its competitors for GP practices and secured far more GPs than its competitors. Not surprisingly the profits from this went to the associated companies and not to Foundation whose high priced shares soon fell precipitously. These captured doctors still work in the same complex as Sonic's services and Sonic has secured its referral base. Foundation shareholders and doctors are out of pocket.
Click Here for the story of Sonic and its relationship with Foundation and Lifecare
Click Here for the story of Foundation Healthcare
Click Here for the story of Lifecare
Endeavour Healthcare
Endeavour Healthcare was founded by an enthusiastic Dr Garside. Like Foundation Healthcare it started in Western Australia and then spread across the country. It adopted the "GP's referrals are profitable" model buying up pathology laboratories. It was strongly supported by big business including Kerry Packer. It did not do well, shares started to fall and Garside resigned in 2001.
Click Here for more about Endeavour Healthcare
Revesco/Medical Care Services/Gribbles
This company which keeps changing its name also originated in Western Australia. It too adopted the "GP referrals create profit" model and started buying up practices in Western Australia as well as pathology and radiology businesses. It also spoke of adding paramedical and other services to its centres.
It bought a half share in Gribbles Pathology a giant operating in the eastern states but did not follow by buying GP practices. Pathology proved more profitable than GPs and Revesco never attempted to compete with Foundation and Endeavour in the eastern states. Instead it bought the remainder of Gribbles and absorbed itself into this company adopting Gribbles name. It is focussing its efforts into expanding pathology into India and other Asian countries. Reports indicate that it is likely to sell its GP business.
Gribbles has been in an ongoing legal dispute with Australian authorities who are investigating it for arrangements with doctors which they consider unethical and a form of kickback. Gribbles dispute this.
Click Here for more about Revesco and Gribbles.
Primary Healthcare
Primary Health:- In early 2004 Primary Healthcare persuaded the University of Wollongong to remove the web page I wrote about it in 2002 from the web site. I recieved no explanation from either of them. I examined the page in and concluded that my choice of words was poor but that my comments were defensible. I replaced the page with one acknowledging my mistake and setting out my reasons for concern. Some of that page related to general issues which applied to the entire heath market and was relevant to Australia as much as Primary. I have now put that section is a separate page entitled "THE GREAT DIVIDE IN PERCEPTIONS about the CORPORATE MARKETPLACE". The page deals with market failure, with the great divide in perceptions between market enthusaists and the rest of us, and with red flags which should alert citizens and regulators to potential problems. They are relevant to my concerns.
I have now carried out additional research and updated the Primary Health web page. It has become a particularly interesting company.
General Practice corporatisation has failed in the USA. In Australia all other companies are losing money or just breakng even. None of them are buying more GP practices. Primary has been successful from the very beginning and remains very successful making large profits. It is still expanding rapidly. Market analysts are full of praise. More surprisingly still, other companies are charging gaps as are noncorporate GP's. They all complain of insufficient remuneration. Primary bulk bills all patients so gets less per visit and says this is adequate. It is not clear what the successful formula is. Has it found answers the others have not? Primary has been particularly aggressive in taking legal actions against its critics, both newspapers and the HIC. It strongly rejects the criticisms made.
CLICK HERE for more information
Mayne Nickless
Mayne is the giant of health care and has adopted the One stop diversified model running hospitals, pathology, radiology and a number of other services. It has however bought only a smaller number of medical centres and general practices and has been a low key and unsuccessful player in this market.
Click Here to explore the pages about Mayne Nickless
If the findings of a survey from Victorian risk management specialists Lincoln Indicators are to be believed, healthcare investors should be running for the hills.According to the survey, 64 per cent of the sector is now at extreme risk, exhibiting the characteristics of failed entities.
Healthcare scare, Sydney Morning Herald May 28, 2002
