MEDICINE WEB SITE Background Every attempt is
made to provide accurate and well written material.
Your contributions, suggestions, additional
information and advice sent to the web address at
the foot of the page are welcome. Where possible
they will be included in revised pages. The intention is
to show the general thrust of corporate practices
as well as the nature and extent of any allegations
made. Material contained here represents my views
based on my study of the operation of the health
care marketplace and the material available to me.
It should not be assumed to represent the views of
any other individual or organisation. Introductory
page It documents the
decline of corporate involvement between 2002 and
2004 then its resurgence with a new aggressiveness
in 2007 and 2008. Australian
Corporatisation of General Practice
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.
This corporate web site addresses the issues of corporate health care within a broad framework. A web page describing this broad context should be considered as an introduction to each page on the web site. If you have not yet read it then CLICK HERE to open it in another tab or web page.
This page examines the vulnerability of General Practitioners and describes the processes driving the corporatisation of General Practice. It comments on each participant in this marketplace and then links to pages examining them.
LINKS CORPORATE MEDICINE WEB SITE
Every attempt is made to provide accurate and well written material. Your contributions, suggestions, additional information and advice sent to the web address at the foot of the page are welcome. Where possible they will be included in revised pages.
The intention is to show the general thrust of corporate practices as well as the nature and extent of any allegations made. Material contained here represents my views based on my study of the operation of the health care marketplace and the material available to me. It should not be assumed to represent the views of any other individual or organisation.
It documents the
decline of corporate involvement between 2002 and
2004 then its resurgence with a new aggressiveness
in 2007 and 2008.
Corporatisation of General Practice
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.
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/IPN/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.
Update June 2009:- The company formed by the merger of Lifecare and Foundation in 2002 was renamed Independent Practitioner Network (IPN). It did not prosper had to be assisted by Sonic becoming increasingly dependent and very much a vasssal. The "Independent" in its name, reflecting its CEO's claims of not competing with its customers (independent GPs) did not reflect the true situation. Primary Healthcare put an end to the farce in 2004 by mounting a takeover bid for IPN. Sonic was forced to buy IPN to protect its referral base. IPN is now a fully owned Sonic subsidiary. Sonic and IPN bought what was left of Endeavour.
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 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. Packer, Pratt and other big investors lost interest and the business was broken up. General Practice and Diagnostics were bought by IPN and Sonic.
Click Here for more about Endeavour Healthcare
Revesco/Medical Care Services/Gribbles/Healthscope
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.
Update June 2009:- Gribbles sold its general practice operations to NMIG retaining a 25% holding in order to retain the referral base. In 2004 Gribbles was in serious trouble. It was taken over by Healthscope. With renewed interest in General Practice Healthscope bought back NMIG in November 2007. It has been expanding the business since but I have not yet followed this up.
Click Here for more about Revesco and Gribbles.
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 (May/September 2004) 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.
Update June 2009:- Primary has gone from strength to strength expanding its clinics and diagnostic services. Its business policies have made it very successful. In 2004 it acquired Health Communications Network (HCN) a company developing and selling software for medical practices, hospitals and ehealth. There was some controversy about the advertisements in its software and these were eventually withdrawn.
In 2008 Primary made its largest and perhaps most ambitious and risky takeover of the much larger Symbion Health. Symbion was the rump of Mayne Health after it broke up. Primary had been stalking Symbion for a year before it mounted a risky hostile takeover during a developing global economic crisis. It kept Symbion's general practices and its diagnostic divisions but sold off the rest. It is currently still consolidating its larger but less profitable rival, introducing its more successful business style. Primary now carries a large debt.
General Practice corporatisation seems to be on the march again with Primary leading the way. I have therefore written a new web page to document these events. It focuses on the underlying cultural conflict as the more market focused Primary (and I suspect also Healthscope but do not have the information) have outperformed competitors, Sonic/IPN and Symbion in their profitability from general practice. Sonic and IPN's management have sought to appease and work with establishment medicine and been less controlling of doctors.
CLICK HERE to go to the Primary 1996 to 2004 web page
CLICK HERE to go to the 2005 to 2009 web page
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.
Update June 2009:- When Mayne Health broke up its general practices and diagnostic services became the core of Symbion Health. Symbion was acquired by Primary Health in 2008.
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
By 2004 enthusiasm seemed to have gone out of General Practice corporatisation. With only a small percentage of doctors working for corporations and only Primary making a profit, it seemed to be going only one way - down. I stopped tracking the sector.
- - - - - look no further than the decisions of GP conglomerates such as Mayne (Health), Foundation and Endeavour (Healthcare) to scale back their operations "all these companies are jumping out".
General Practice In Critical Condition The Sydney Morning Herald June 3, 2004
DOCTORS and support staff at an Armadale medical centre have quit en masse because they were unhappy with its corporatised and interstate management
The new Armadale centre the doctors have joined is run by local doctor Hai Ngo, who left the Champion Drive centre five years ago because he disliked corporate medical practices.
Dr Sakarapani, who was principal doctor at the old centre, said doctors in the practice were independent-minded and did not like to work under the influence of a corporate structure.
"In the past five years, we had three corporate practices managing the centre and to a large extent we were powerless," he said.
"We did not have a say in the day-to-day running of the practice.
"At the end of the day, we had less in our pockets because we paid NMIG a percentage of our income as a management fee."
He said that the mass move of doctors from corporate practices to locally managed practices run by doctors was a sign of things to come.
Medicos in mass walk-out Sunday Times (Perth) July 17, 2005
State of Play 2009:- Things have changed recently and the process seems to be on the march again with Primary in the lead. There are now only three major players in the general practice sector and all of them are market listed. They are Sonic, Primary and Healthscope. All of them operate diagnostic and other services and their sucess depends in large part in how successful they are in funneling referals from their legally "independent" contracted practitioners to these other services. This is where the competition is and where management style makes a big difference.
Veteran Endeavour Healthcare pioneer Joe Kosterich predicted the way it would go as long ago as 2005 ie "buying doctors" and "have the GPs", not their practices. The choice of words tells the story when you consider the implications of buying and having practitioners who need to be independent in their care of patients - and he is now with IPN.
Dr Joe Kosterich, former chairman of Endeavour Healthcare and now medical adviser to Independent Practitioners Network, said corporate practices had discovered there was not a great deal of value in buying practices.
"You need to buy doctors. What we are seeing is signing-on fees - similar to what athletes get. In a marketplace where there is a shortage, for these companies who have invested in the centres, they can't make a dollar unless they have the GPs," he said.
$350,000 to sign with Primary September 23, 2005
There has been cultural tension between the health care professions (and the expectations of the general population) on the one hand, and the market focussed corporations entering the sector on the other. The differing world views and cultural values have been a festering problem for the health and aged care sector for at least 30 years.
The market has dominated in Diagnostic services but professional economic leverage and professional/community values have exerted some restraint in both. In the hospital sector that restraint has been greater because of the leverage maintained by medical specialists and their demonstrated willingness to use it. Over the last few years there has been an equilibrium.
My assessment is that there is now a widening cultural gap opening up within the diagnostic and general practice sectors. This is reflected in different management styles. Sonic and Mayne/Symbion have, perhaps for different reasons, been more willing to cooperate with and give doctors a greater role in managing the services they provide. They have been less aggressive and prepared to be less profitable in order to accomplish this. They have been more willing to accomodate to non-market value systems and expectations.
Primary Health is more market focussed. It is described as "micromanaging" every facet of its business. It likes to control the way services are provided. It has gone to greater lengths to make it more difficult for its health care staff, whether under contract or as employees to object to its decisions. It has shown that its managment style is more successful in the marketplace by being more profitable.
The successful acquisition of Symbion by Primary is a major victory for the market culture moving the focus of services in this direction. I have not looked at the way Healthscope managed its general practices. From the odd comment I have heard it seems to be closer to Primary than to Sonic. It is also on the march expanding its general practice services.
Healthscope acquired NMIG Medical in November and New Zealand Diagnostic Group in December.
Former Coles CFO joins Healthscope Sydney Morning Herald May 30, 2008
WORK will begin on Monday on the new Healthscope medical centre to be built at Park Beach Plaza.
The centre is expected to open with 12 general practitioners, later expanding to 16 GPs.
Mr Burns said he would travel to the UK in November to try to persuade some English, Irish and Scottish doctors to relocate to Coffs Harbour.
The centre will also have a satellite radiology site and a pharmacy.
He said it would also have space for visiting specialists.
New medical centre start on schedule The Coff's Coast Advocate May 8, 2009
Is this a red flag or an isolated development?:- It worries me that this may herald another march of the market into health care, overturning the tenuous balance achieved between market profitability, and professional/community culture and values over the last few years. This is likely to move us closer to the US market dominated system. Healthscope owns hospitals as well as diagnostic services. If it follows the new strategy of "buying doctors" and brings them into its hospitals and follows Primary in its management style then things will really be on the move again.
created June 2002 by Michael
(Adjustments February 2004),Modified September 2004
Updated and reformatted June 2009
created June 2002 by Michael