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This web page documents the difficulties Affinity Health had in securing licences for its hospitals in NSW and the implications of this for the takeover of the nursing home operator DCA in 2006.
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CVC Asia Pacific and CVC Capital Partners (Citigroup's European operator) have now purchased the far more vulnerable DCA nursing home empire. CVC Capital Partners and Citibank were joint founders of CVC Asia Pacific. The deal is subject to regulatory approvals.
When Citigroup subsidiary CVC Asia Pacific led the purchase and turn around of the money losing Mayne hospitals to form Affinity Health, the health department in NSW mounted an 18 month probity investigation. This was because of Citigroup's involvement in a series of scandals and its exploitation of vulnerable investors whose interests it was required to serve. NSW Health granted licenses subject to conditions. The letter from NSW below tells the story. Since that time Citigroup has paid about $10 billion to settle lawsuits related to its involvement in setting up frauds for other companies including Enron and Worldcom.
Nursing homes are far more vulnerable to the misuse and exploitation of those they claim to serve than hospitals. This is because doctors in Australia (unlike the USA) are financially independent of hospitals. Their professional standing among colleagues depends on the quality of their work. They bring the patients and if the hospital threatens the care they provide then they take their patients elsewhere. They exert economic leverage.
Doctors have no leverage in nursing homes, as they do not refer patients. Instead it is the nursing homes that recommend and call in a doctor when a resident is ill. This gives them some leverage over the doctors' incomes. Those who upset the home by criticising are unlikely to be called again. This is the situation that existed in those hospitals, which misused patients in the USA. The hospitals gained control of admissions and referred to the doctors.
The other problem in Australia is that the federal government removed the probity requirements under which NSW mounted its review from commonwealth aged care regulations in 1997. I corresponded with the minister's department about this.
It will be interesting to see if approved provider status will be granted to this group for vulnerable nursing homes when the activities of the same purchasers were curtailed in NSW for the much less vulnerable hospitals. To what extent has the federal aged care approval process been a corporate friendly government stacked initiative? Have they any teeth and is anyone ever turned down. Their track record to date is not good. ( see McKenzie Aged Care Group, Tolega and Karoona, Dampier Bay Pty Ltd and Peninsula Care Pty Ltd .)
SEE UPDATE AT FOOT OF THIS PAGE
After the sale was out of the public eye there was an interesting reply to my objection from the federal department. The government had legislated (presumably in 1996/7) to ensure that multinationals buying local companies were automatically granted approval status and were not assessed for suitablity. The department had delayed telling me for 4 months. The press reports and the corrrespondence is particularly revealing and interesting. I have therefore written a separate web page addressing what happened.
Click Here to go to the "Citigroup Buys DCA " web page.
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This page created Sept 2006 by Michael Wynne
update March 2007