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Managed care by any name:- Politicians and "for profit" insurers in Australia have pressed strongly for a medical system run by contracts between insurers on the one hand, and hospitals and doctors on the other. They claim that this is not managed care but the distinction is unclear. National Mutual Insurance is owned by the giant French insurance group AXA. It has been the most aggressive in attempting to contract with hospitals and doctors. It has been the prime mover in making cost cutting contracts with hospitals in Australia. The Australian Medical Association has been implacably opposed to medicine under contract and doctors have simply refused to sign such contracts. Under the Australian constitution they cannot be forced to do so.
Tempting doctors to break ranks:- National Mutual has made several attempts to get groups of doctors to break ranks and enter into contracts. They are well aware that once a significant number of doctors sign contracts then they can generate sufficient financial pressures to open the gates.
Mayne Nickless and National Mutual:- In the last quarter of 1997 National Mutual and Mayne Nickless combined in an attempt to enter into confidential billing arrangements with doctors in Mayne Nickless' Hospitals in Victoria and Queensland. The arrangement was made very financially attractive and some doctors were persuaded. They claimed that this was simply to remove the unpopular "gap" payments for patients. The AMA felt that this was an attempt to establish contracts as a legitimate means of dealing with the medical profession. They strongly opposed the move and urged doctors not to sign.
The arrangement was illegal:- The AMA took legal advice and found that the proposed arrangement was illegal. Dr Wooldridge the minister for health promptly took executive steps to overrule this and is bringing special legislation through parliament in 1998 to make this arrangement legal.
Mayne Nickless track record:-
Most doctors and even the AMA were not fully aware of Mayne Nickless
track record in making confidential arrangements or of its business
philosophy. The public who were being told how recalcitrant the
medical profession were by the minister did not realise the sort of
company which the government was supporting - and its track record
for making arrangements to deceive its customers. The minister called
the profession obstructive and claimed that their resistance to
abolishing the unpopular gap payment was pure self interest.
I made a selection of newspaper clippings available to illuminate the debate. This is the front page from this set of documents.
Mayne Nickless fined $7.7m -- P Williams - Austr. Fin. Rev. 7/12/94
$7.7m in penalties as Mayne Nickless withdraws defence. The Australian 7/12/94
The Arrangement (and how it came undone) - Sally Jackson - The Australian 7/12/94
These document the way in which Mayne Nickless pleaded guilty to running a price fixing cartel which defrauded customers and then, in the face of damning evidence tried to pretend that it had not done these things.
Particularly revealing are the statements by professor Fels and by witnesses. These reveal the corporate jargon which was used to obscure and justify the criminal conduct. I have examined the behaviour of several corporate giants and the sad conclusion is that these groups develop a corporate jargon which disconnects them from the reality of their actions. They genuinely believe that their actions are legitimate and their indignation and denial is genuine. These are the sort of people who succeed in a health care market. I believe that this sort of behaviour is a feature of the "successful sociopathy" described by Robertson et al (MJA 1996) When I first encountered this disconnection of language from reality in National Medical Enterprises (NME) I called it "NMEspeak". George Orwell speaks of "newspeak" and "double think". The writer John Ralston Saul considers this misuse of language to be integral to corporatism.
Mayne stands by its man. Austr. Ivor Ries Fin. Rev. 7/12/94
An analysis of Mayne's behaviour. Note the comment that "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 think it much more likely that Mayne directors adhered blindly to its view that what they had done was OK, but that their lawyers insisted that the case could not be defended. This is the sort of behaviour I would suspect from my examination of the behaviour of health care corporations in similar trouble in the USA.
Another scalp for the TCP Editorial Fin. Rev. 7/12/94
The editorial indicates that "(Mayne) treated its customers like Milch cows. Considering the extent of its wrongdoing Mayne Nickless got of very lightly." It refers to "- - shocking allegations that customers' businesses were intentionally damaged to reinforce the power of the cartel." Note also the comment that "The answer is for the government to consider introducing criminal penalties for market rigging so that never again can a company simply make a deal, write a cheque and then raise doubts about its culpability."
Federal Court of Australia--extracts from court proceedings No NG807 of 1992 - Sydney 6 Dec 1994
Note item 9 indicates that "What was alleged, supported by voluminous evidence, and is now admitted - -" It then describes the price fixing cartel and the practices to which Mayne Nickless admitted. Item 10 refers to "an arrangement to maintain a cartel by deliberately providing poor service in order to compel customers to turn or to return to a supplier with whom they might be dissatisfied, must be particularly pernicious." Item 11 states "Arrangements so fundamentally affecting the operations of the companies could not have been reached, and maintained for such a lengthy period, without the involvement of senior management. The contraventions of the law were serious, deliberate, and systemic."
All of our states have regulations which specify that hospital owners/licence holders be fit and proper persons to hold hospital licences. Mayne Nickless is the largest owner of private hospitals and integrated systems in Australia. None of the state health departments in Australia addressed the problem of Mayne's being fit and proper in 1994 and none attempted to withhold licences for new hospitals subsequently. I believe that the medical profession is entitled to carefully review the available information about Mayne Nickless practices and take such steps as it feels are necessary in their dealings to protect the integrity of the health system and the welfare of patients. The involvement of people who were allegedly prepared to "deliberately providing poor service in order to compel customers to turn or to return to a supplier " in the care of patients is disturbing. We might like to believe that businessmen would not behave in this way when dealing with patients. The evidence from the USA indicates quite clearly that businessmen intent on generating profits will have no hesitation in doing so and that significant numbers of doctors can be induced to help them do so.
Major transporter misled clients on air parcel claims. Courier Mail 6/9/97
In spite of its guilty plea for grossly dishonest conduct in 1994, the company did not mend its dishonest ways. In 1996 it once again pleaded guilty to misleading its customers. I rest my case about the one eyed mind set of many successful corporate business executives. They are able to rationalise and justify dishonest practices. Similar mind sets are apparent in the USA. In NME's world view dishonesty was considered to be perfectly legitimate if it was in the corporate interest. John Bedrosian, the NME founder who was responsible for NME's public information to shareholders, the public and investigative bodies made this quite clear when cross examined about corporate claims. Like Mayne Nickless he legitimised this by calling it "singing to the choir" which in NME corporate jargon made it OK.
The Mayne link between incentive and outcome - Australian 17/2/96
Large incentives linked to profits are part of the economic rationalist manager's tools to increase profits. It is considered legitimate business and has been a particularly successful profit generating tool in health. It has been one of the major causes of fraud and the misuse of patients in the US health system. Directors looked the other way and pretended not to know the methods used by their managers. A condition of NME's negotiated guilty plea was they markedly change this practice. This had no impact on other corporations and by 1996 over 80% of hospital managers received incentive bonuses. Columbia/HCA followed this practice. In the face of the FBI's investigation it has hurriedly abandoned this practice, tacitly admitting that it was a root cause of the problems. This article describes the massive incentive bonuses being offered to the two senior managers in Mayne Nickless health care chain of command (Dalziel $2 million and Catchpole $800 thousand).
Brain drain of top executives gathers pace
This article urges Australian corporations to get with it and offer their managers financial incentives to increase profits. They are advocating the use of greed to drive corporate activities. The failure of our companies to do so is leading to a brain drain. In the USA this practice has been one of the major strategies used by corporations to induce hospital managers to misuse patients and their care in order to generate profits. In the general business community it is legitimate. Economic rationalists are unable to accept that their theories are not universally applicable. Practices which work in one area are severely dysfunctional in another. They elect to look the other way and rationalise.
Next up: one step medical care. Sydney Morning Herald 15/2/97
Vertical and horizontal integration have been the buzzwords for corporate success in the USA. These practices are plausible and a strong argument can be made that they offer better services for the patient. In a system which aimed to maximise available funds for the benefit of patients these benefits might be recognised. In a marketplace driven by profit they have provided endless opportunities to influence the medical profession, control medical treatment, control patient referrals, limit consumer choice, secure regional market dominance, and indulge in a number of illegal and fraudulent billing and cost shifting practices. Columbia/HCA, a major proponent of integration has been heavily criticised for misusing the processes in this way. It has indicated that it is moving away from this policy, selling some of its services. The article indicates that Mayne Nickless is following this practice by buying up radiology, pathology and general practices. While Columbia/HCA models itself on the fast food chain Macdonald's, Mayne Nickless models itself on a travel agent talking of one step medicine. The article indicates the similarity of their policies. While Catchlove denies that contracts with doctors require them to refer patients to Mayne Nickless hospitals it is clear that it will be very easy to exert social pressures to do so and these will be impossible to detect or prosecute. Catchlove repeats the mythical claim that Australia is different and US practices would have different consequences here. Catchlove admits that the company operates within the rules which it does not set. Does he consider that this exonerates the company from indulging in practices which doctors, concerned for their patients might consider unacceptable? US corporations believed that the medical perspective was obsolete.
Health care growing pool for big fish, says giant - Courier Mail 8/9/97
In this little gem HCoA is predicting what our politicians have so far failed to accomplish, reorganisation of health care around a corporate model and "an influx of foreign investment". Catchlove describes the not for profit groups which supply most private health services in Australia and until recently in the USA as "little suburban lumps and bumps stuff". He claims that our health system is dependent on the private sector so conveniently at the same time equating HCoA with not for profit community hospitals. Dr Catchlove says that the larger players will continue to increase in size and that the little players are a thing of the past. "Even doctors will have to put themselves in bigger groups so they can negotiate". He makes the claim that private operators are likely to cut health care costs, exactly the claim made in the USA. It was managed care which checked costs in the USA, not corporate hospital operators like Mayne Nickless.
This article needs to be examined beside Dr Wooldridge's policy statement to the AMA in May 1996 and press reports from the USA. Dr Wooldridge promised that we would not get the US system but this is what Catchlove is describing. Wooldridge is now strongly supporting deals between Mayne Nickless and doctors. These deals are not open for scrutiny for reasons of "commercial discretion". The minister for health is charged by citizens to organise the service which cares for them when they are vulnerable and ill. He is supporting a company which has admitted that it has deceived and defrauded its customers. Court documents fining Mayne Nickless $7.7 million referred to the hidden and illegal arrangements as "-- deliberately providing poor service in order to compel customers to turn or to return to a supplier with whom they might be dissatisfied, - - " Our minister is encouraging doctors to make hidden confidential agreements with Mayne Nickless. Can we trust Mayne Nickless to act in the interests of its customers this time? Is this the level playing field Dr Wooldridge promised us in May 1996? Hidden agreements and contracts with doctors have been so pernicious and dysfunctional in the USA that in many states doctors are legally required to disclose all relevant contracts and arrangements to patients. Dr Wooldridge is well aware of this. Australian patients are not to be given even this protection.
Health strategy vital to Mayne Courier Mail 9/10/95
Mayne in $1bn French bid -- The Sydney Morning Herald 1/4/97
Mayne off short list for French group The Sydney Morning Herald 5/4/97
Mayne Nickless is a multinational company and the main thrusts of its business is now health care. The first article documents its interests in Indonesia and the second its interest in buying GSI, the largest hospital owner outside the USA. Outside Australia it will be competing with the US multinationals, Columbia/HCA, Tenet Healthcare, Kaiser and many others. If it fails to follow the US style of business practices it is likely to go under. As indicated in the article, when referring to Parkway Holdings the buzzword for corporate success is "aggression". It is used by stockbrokers and newspapers praising the success of health care corporations. Corporations use it in their internal documents and in instructions to staff (eg about marketing). The term is applied positively to advertising, to money making strategies, to billing, to market dominance and to relationships with doctors and others. Patient care depends on caring and empathy. For a health care provider to be valued for being aggressive and to promote aggressive practices among staff is a conflict of terms. This reflects the closed minded (one eyed or double think) approach of the business community.
Queensland Health for sale -- The Queensland Nurse September/October 1996
This article criticises the contracting out of public patients to corporate health care providers. A section is devoted to Mayne Nickless contract in NSW to run a public hospital in Port Macquarie. The concerns expressed here were supported and greatly amplified soon after this by the 1996 NSW Auditor General's report which was scathing about this contract. It was subsequently the subject of an ABC program. The NSW minister of health gave an undertaking to the NSW public not to contract any more public hospitals to business corporations. My copy of the auditor generals report is of poor quality but I can supply it, as well as a copy of the ABC program and the relevant pages from Hansard if needed.
Mayne chief formulates his prescription -- Alan Kohler 1996 from www BRW Media
Mayne revamps to target health care Courier Mail 15/8/96
Mayne sells logistics in Europe for $202m Syd. Morn. Herald 21/8/97
Optus stake jams Mayne Profit. - Austr. Fin. Rev. 3/9/97
Mayne deals bolster cash reserves Courier Mail 3/9/97
Mayne Nickless not happy with $100m profit
These articles reveal that Mayne is not doing well in its non-medical businesses and is dependent on profits from its health care subsidiary HCoA to keep its shareholders comfortable. One of the reports describes Mayne Nickless activities in restructuring as ruthless - not what one expects in a health care provider! The company has shifted the main thrust of its activities to health care. This division is consequently under considerable pressure to perform well. Mayne and our federal minister for health have both claimed that Australia is different and that the sort of financial pressures which exist in the USA do not exist here. The articles, particularly the last one show Mayne's prime interest in maximising profits and its total dependence on its health care division in this regard. It is not clear how this differs from the situation in the USA. In the health care marketplace care and profits compete directly for the available dollar. If the going gets tough how will Mayne Nickless equate the interest and welfare of its patients against its need to generate profits for shareholders. Its past conduct is not reassuring.
Mayne takes stock of AME prize after last-minute deal -The West Australian Saturday Oct. 28 1995
This 1995 article which describes Mayne's purchase of Australian Medical Enterprises from NME, is of interest in retrospect because it raises the issue of character and being fit and proper which has so concerned me. Note the comments about health departments not being concerned about it. I have not received what I consider a plausible explanation of these apparent double standards from any of them. Note Dr Catchlove's claim that their legal advice was that the fraud involved another part of the company and was "totally separate and isolated from the company's health care division". There are two aspects of this worthy of comment. The first is the resort to legal rather than moral justification - a characteristic of corporate medicine. If you can get away with it then it is OK. The second is to ask whether in the light of the 1994 reports describing the boards direct involvement in the cartel, the subsequent newspaper reports, and the conduct of Mayne Nickless and HCoA any reasonable person would conclude that HCoA, Mayne's health care arm is indeed "totally separate and isolated"? Are they "singing to the choir"?
Mayne's Day to head new AME board - The West Australian Saturday October 31 1995
This describes Mayne's take over of AME and also the withdrawal of one of the defamation actions taken against me when I pressed them to confront allegations that Australian staff had been involved in bribing a doctor to admit more patients to their hospital in Singapore. These law suits are known as "Strategic Lawsuits Against Legitimate Public Participation" or SLAPPS. They are commonly used by US corporations when confronted by criticisms and evidence which they are unable to refute. Such lawsuits which drag on over the years and usually have little prospect of success are used to silence individual critics who are vulnerable and do not have the financial resources to mount a costly defence. The psychological costs to the recipient are considerable and they serve to discourage others. They also serve as a means of discrediting the criticisms by attacking the messenger. The company can look indignant and bolster its credibility by pointing to its intention of prosecuting the critic and prove him or her wrong. NME did this repeatedly, successfully silencing the Medical Observer and preventing it from printing any further material about NME and AME. I have been served with two NME related SLAPPS, one in Australia and another in Singapore. Both would have been withdrawn had I given them retractions in regard to allegations I had not made, and given undertakings not to criticise further. Both were withdrawn when it became clear that I would not agree and intended to contest the actions. My expenses were paid.
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This page created 1998 by Michael Wynne
Last modified October 1998
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