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.
The sections on this page were written in early 2004 in response to a request by Primary Health lawyers that the University of Wollongong remove the Primary Health page (written in 2002) from the site. I argued that my words were poorly chosen but that the thrust of my arguments was sound. Since 2002 Primary Health has become a particularly interesting group to study and I have rewritten that page differently. This section describing the "divide in perception" seemed worth preserving separately and I have modified it slightly. Primary Health seems to illustrate the divide.
The way people perceive and understand situations plays a major role in the way in which they act. Nowhere is this better illustrated than in health and aged care where those who adopt marketplace definitions of health care experience the health system very differently to most of those who provide that care and receive it.
This page looks at the problems in the USA and their relevance to Australia. It examines the great divide in the way the marketplace and citizens perceive and experience health care. It looks at some pointers which should raise suspicions.
Medicine practiced for the benefit of stockholders rather than patients commenced in the USA in the 1960s. Spectacular success in their profit mission drowned out the debate about the morality and ethical consequences of exploiting frail and vulnerable citizens for the economic benefit of disinterested parties. Vast fortunes have been made and in spite of the problems which resulted the system has been embraced by the market, by economists and by politicians across the world. The health care marketplace started in the USA and dominates the US system. In spite of the failure of the system in the USA, US ideas about health care are being exported as the market globalises. The US has had most experience in trying to control health marketplace dysfunction and has failed to do so.
Not only is the US market system far the most expensive system in the world and the most inequitable, but evidence now indicates that it provides inferior care. It is essential therefore to examine the US system, something market advocates in other countries fail to do. Those advocating markets in health care must show not only that they differ from the US system but that the same forces will not operate. They were unable to persuade the Romanow Royal Commission in Canada. (see article in Health Issues Journal March 2003)
Even though corporatisation in health care started in Australia in the 1960s and has been intensely promoted since the late 1980s it has not succeeded in controlling the medical profession or in dominating the health care culture. US corporate predators have failed to establish a strong foothold, largely because of the local response to their misdemeanors in the USA. This does not mean that market advocates have seen the light. They continue to dominate the corridors of power and the Australian system remains under pressure.
In spite of intense publicity, years of repeatedly renewed regulatory vigour, and fraud settlements increasing in size exponentially, the problem in the USA seems to be getting worse. It took 20 years (1960s to early 1980s) for the seriousness of the problems in the USA to be recognised by people like Reagan's adviser, Joseph Califano. The "largest ever" recorded health care fraud settlements or estimates of fraud have risen from US $500,000 in early 1991 to between US $4 and 6 billion in 2004. These changes came as the market sphere grew to dominate health care and set the culture for health care. Prior to that not for profit providers of health care did so.
I argue that it was because the nature of these problems were wrongly specified by Califano and others that the remedial steps not only failed to stop the scandals but added fuel to the forces driving them. They increased their frequency and their adverse consequences (see Califano's 1986 solutions). The problem for the USA is that the market changes are so advanced that it is almost impossible to move in any other direction.
In Australia not for profit ethics and values still dominate, but Califano's arguments and solutions still drive policies. In spite of the difficulties, it is still possible to move in a different direction.
I could claim the same urgency and dire consequences which Joseph Califano so accurately predicted in 1986, but I believe a more reasoned and thoughtful approach is essential if we are to avoid the glaring mistakes he made.
Fraud and scandal is part of every sector of the US health care marketplace and in the majority of cases it is the most successful who are most at fault and who lead the way in unsavoury conduct. Their success is built on these unacceptable practices and in a competitive system others must follow or go under.
Corporate hospitals have generated vast profits by indulging in fraud and by misusing patients. The following have operated or sought to operate in Australia.
- National Medical Enterprises - now Tenet Healthcare (Approx. US $1 billion in fraud related settlements) The needless and prolonged psychiatric hospitalisation and over servicing of large numbers of gullible patients, very many of them children. Large quantities of treatment which did not benefit them was given purely to increase profits.
- Columbia/HCA (US $1.7 billion fraud),
- Tenet Healthcare (allegations of unnecessary Cardiac surgery and of Medicare fraud). US $54 million has already been paid for one hospital and more hospitals are under investigation. A fraud settlement is being negotiated with authorities. The word is that it will be for US $1.6 billion.
- HealthSouth (US $4 billion fraud going back to 1986. Founder recently charged with 85 counts of fraud), and
- most recently the financial giant Citigroup, which has specialist health care divisions.
The story is similar in other sectors. The needs of those the system is intended to serve are bent to the profit mission and that service is compromised or defrauded. On these web pages I have addressed the issues as they affect nursing homes, clinical laboratories, the pharmaceutical industry and managed care. Problems have also occurred in intravenous services, in renal dialysis, in medical equipment and in home care but are not addressed on this site. Sun Healthcare (nursing homes), Quest diagnostics and most of the pharmaceutical companies have operated in Australia.
The large financial institutions have been close advisers and bankers to some of the scandal prone health care corporations in the USA including HealthSouth. Bankers who worked for a Citigroup subsidiary's specialist health department, covering HealthSouth between 1986 and 1999, took their HealthSouth business with them to UBS Warburg in 1999. These bankers are accused in a civil case of complicity in the HealthSouth fraud throughout this period. These same financiers have been involved in large scandals and frauds of their own and have paid large settlements for assisting Enron and others in their frauds. These issues are addressed on this web site by a study of Citigroup which was one of the buyers of Australia's Mayne hospitals in 2003.
These matters are particularly relevant because HealthSouth, Citigroup and UBS operate in Australia. They have invested in, or own hospitals here (Citigroup through its subsidiary CVC Asia Pacific's has purchased a share of Mayne hospitals). Reports from the USA indicate that corporate medicine is performing poorly and share prices are falling. The response to this in the past has been to migrate globally, looking for profit.
There is continued concern about the globalisation of corporate market medicine through venues like trade agreements and the WTO. The US has actively supported this and the Australian government has probably only been constrained from including this in the US Free Trade Agreement by the potential political backlash had they done so. Australian regulations do not adequately constrain corporate activity. It may be that Citigroup plans to sell Mayne hospitals to a US predator. To compete Australian companies will have no choice but to copy US practices if they are to survive.
The West Australian state health department stressed the potential risk posed by some corporate practices as long ago as 1993. Tenet Healthcare, the company they were concerned about offended again spectacularly in the USA in 2002. Some of the state department's comments now seem prophetic, except that they were made for Australia. Had the company not been pressured to leave Australia this might conceivably have happened here too.
It is therefore critically important and in the public interest that public, academic and health care personnel critically examine Australian health care companies, scrutinise them, and draw attention to the use of similar business practices in Australian Health Care, and to any sign of adverse behaviour or outcomes.
A case in point is Mayne Nickless. Warnings put on this web site about Mayne's business practices in 1996, and more recent critical analysis of Peter Smedley's business practices, gave early warning of the problems created for health care by the application of market practices - problems which subsequently engulfed the company. Critics were not engaged.
My argument has been that the sort of business philosophy, policies and practices pursued by market listed corporations sooner or later follow a common pattern. When this happens in health care the consequences can be very unfortunate for every one involved.
Companies have sought to muzzle critics with the threat of litigation. Tenet Healthcare related entities commenced two defamation actions against me. Neither was prosecuted. Primary Healthcare's lawyers wrote to the University of Wollongong and a web page about them was temporarily removed from this site and has been rewritten more carefully.
Imperfect as it may be, criticism is how democratic societies control their structures and harness efforts to the common good. If these companies wish to change the way society operates then they have a responsibility to enter the debate and argue their position and not be media shy. It is this lack of debate by one side of the divide (see below) which has caused it to be so wide.
There is a clear divide (Kuttner calls it "a stunning imbalance of ideology") between the views of the marketplace on the one hand and those of the health professions, large sections of the public, and in some instances regulatory bodies on the other. This is a feature of the marketplace in the USA and Australia. It is well illustrated by what happened in the Citigroup scandals, and even in statements made by the chairman of the Australian Business Council. In my view it is increasingly clear that the negative views of a growing body of public opinion coming from the opposite side of the divide have validity.
One of the most striking observations in the corporate health care system was the total conviction of some companies and their senior staff in the validity and acceptability of what they were doing. Critics were seen to live in another world, which they certainly do. It is this world which has exposed corporate failures and is arguably the real world - the world of suffering and communicating humanity.
Tenet/NME for example had no doubts about its practices. Even after pleading guilty to criminal offenses they believed that they had been unfairly victimised - perhaps because the US free press had kept the issues before the public. They could not accept that they were criminals. When the scandals exploded in 1991 and again in 2002, they were like stunned mullet and could not comprehend the revulsion of the community - those who had come in trust. They simply did not see it.
The Australian executive who sued me for defamation had no doubts about the legitimacy of corporate practices and considered me to be simply vengeful. He said so publicly. He probably genuinely believed that I had acted inappropriately and that he had been wronged. I consider it significant that this executive is now a senior executive in the Californian region where the company is alleged to have performed large numbers of unnecessary cardiac procedures including bypass surgery. Hundreds of people, including relatives of the deceased, are suing. The company has already paid US $54 million to settle this issue and the hospital was sold to avoid having its Medicare license revoked. Investigation and probable exposure of other unsavoury corporate practices is ongoing. Senior staff were once again incredulous. As they saw it they had simply followed normal business practices.
The executive above had earlier been accused of unethical and illegal trading in patients while in charge of a hospital in Singapore. In the most recent scandal his personal and corporate documents have been subpoenaed by a US senate committee. I do not know if he was summoned to appear before the committee's investigation into this scandal. The West Australian Health Department's complete 1993 report about this company is almost prophetic, except that it was outlining what might happen in Australia and not the USA. My subsequent efforts in raising the matters for evaluation were instrumental in exposing the issues which forced this company out of Australia. Could this have happened here if they had stayed?
The divide separating corporate advocates and outside observers is particularly well illustrated in Australia by the quoted reports about Primary Health. On the one side market praise for Primary Health is profuse, yet on the other side strong criticisms have came from highly credible parties like the Australian Medical Association and the Australian Health Insurance Commission. Press reports suggest that Primary Health felt victimised, and it responded aggressively.
One should not confuse a difference of perspective with deliberate criminality or unsavoury motives. In spite of the failures in the USA, I do not think that many of the the people involved necessarily indulged in deliberate and premeditated criminality. They did respond to market pressures by indulging in criminal, illegal, and unethical activities but found ways of justifying this to themselves. Many genuinely believed that they were acting in the interests of patients and the US Health system, and some were almost messianic about it. I have argued that the health care market selects for individuals more likely to behave like this. They are prone to step off the rails. They are frequently dominating and supremely self confident, and are unable to see any one else's point of view, or recognise social boundaries which conflict with their aspirations.
This divide between corporate and non corporate is well illustrated by what has happened in the USA. It is critically important because outcomes are different when those providing care are on different sides of this divide. This web site argues that the outcome from market listed corporate health care, and globalised market listed corporate health care in particular, is not what the public or health care professionals would want. Others who have studied marketplace medicine have reached similar conclusions and stated them forcefully - see Ron Williams' dire predictions for Australia.
Dave Lindorff wrote a landmark analysis, "Marketplace Medicine" in the late 1980s before the major scandals broke. He too commented on this divide.
Studies now suggest that morbidity and mortality are higher in for profit hospitals. Some eminent critics, like Professor Arnold Relman (past editor of the New England Journal of Medicine), have reasoned and predicted this since 1980. Others have intuitively realised that this was happening from their own experiences. In aged care the differences in standards of care between for profit and not for profit are even more striking.
More recently Canadians have become alarmed at the consequences of market care. In 1998 Colleen Fuller wrote a critical analysis "Caring For Profit : How corporations Are Taking Over Canada's Health Care System". In 2002 the Canadian Royal Commission into the Future of Health care in Canada <http://www.healthcarecommission.ca> under the Honourable Roy Romanow confirmed the validity of her concerns. His views about market medicine have been brought together in an article published in Australia's Health Issues Journal March 2003 which I wrote jointly with a Canadian. It is available on line from their web site <http://home.vicnet.net.au/~hissues/resources.htm#bookmark2 >. Strong forces in Canada continue to press for more corporate involvement in health care.
I have argued that it is essentially the context created by this market system and the belief systems under which it operates that are responsible for many of the problems now widely reported in US health care. As other analysts (like Robert Kuttner) have indicated these systems of thought mis-specify human nature and the nature of health care. I argue that this serious misunderstanding is the reason why measures to prevent problems have failed in the USA and are likely to fail in Australia in the long term.
Eminent Canadian social analyst John Ralston Saul expresses related views about the way current western civilisation specifies its condition (see his Massey Lectures published as "The Unconscious Civilisation"). In Australia, Eva Cox in her Boyer lectures published as "A Civil Society" addressed some of these issues. Even Australian of the year Professor Fiona Stanley touched on the problems in her speech to the Australian National Press Club during 2003.
The issues are current, global, topical and directly applicable to health care.
In the USA it is very largely citizens and not doctors or government who have identified the problems and acted to expose them. Qui Tam laws have provided the protection and the incentive to act. Without these laws many of the scandals, frauds and exploitative practices would have gone undetected. I argue that in Australia it is the doctors who have so far acted to constrain adverse outcomes, as is well illustrated by the Mayne Health saga and criticisms of Primary Health. Australian laws do not provide citizen whistle blowers the same protection or the incentive they get in the USA. It cannot be argued therefore that a lack of exposure equates with an absence of similar problems.
But for the actions of private individuals, citizens groups and the profession, Ron Williams dire predictions may have come true and our system would be dominated by criminal or dysfunctional organisations from the USA (Tenet, Columbia/HCA, Sun Healthcare, Aetna) and even Europe.
A Four Corners investigative television program on 6 September 2004 suggested that up to 10% of Medicare billing is fraudulent as contrasted with the 1% claimed by authorities. This approximates the estimated incidence in the USA. They suggest that neither the government nor the insurers want to address the issue and prosecute fraud. Both have a vested interest in maintaining the image of the private system which is under attack by many in the community.
The local market argues that this is not the USA, that Australia is different, that my assessments are not objective, and that these things could not occur here. They are entitled to express their view as I am and to argue it.
The marketplace has argued that health care is a product like any other because it employs people and provides a service for which they pay. It can therefore be packaged and traded. This is rather like arguing that because a mouse has four legs then all four legged animals are mice. An elephant is a mouse.
They cannot logically make this argument on the one hand and then claim that, even though both countries have corporate health care markets, Australia's is different to the USA. It is much more complex than this. One must examine the differences and the similarities and then determine whether any of the similarities contributed to adverse outcomes and explain how and why this happened. This is what I have tried to do and I have concluded that the similarities do matter much more than the differences because they were at the root of the problems in the USA.
While I have used the USA as an example I have also argued and repeatedly pointed out over the years that the same business belief systems, and business practices operate in Australia as in the USA. These include bonuses and incentives, and also financial arrangements/dealings with doctors who work with the company and in particular the ownership of shares. The difference between incentives and kickbacks is a murky one. General practice corporations have for example bought GP practices with shares then re-employed these doctors creating what I view as perverse incentives to maximise profits. Even companies which paid large fraud settlements have acknowledged the role of these business practices in what happened. That these practices are global in western societies does not deny one the right to criticise or the argument that they were causal in what has happened. I argue that it is the responsibility to the share market that creates tensions with the Hippocratic tradition and that this is not in the interests of society. The share market and the pressures it generates are common to all capitalist countries.
I argue that the conduct of health care corporations should be closely scrutinised, publicly debated and energetically criticised. Critical scrutiny from alternate positions outside the marketplace is essential in view of the divide. The criticisms made by those outside the marketplace have been more accurate than those within it, and they have exposed misconduct where regulatory structures have failed abysmally. I have closely studied corporations that have behaved in unacceptable ways in the USA and feel a responsibility to do so in Australia using my experience to flag early signs of trouble. I see my role as that of drawing attention to concerns about corporate practices and opening up debate about them. Any health care company, operating within a democratic society, would be expected to contribute to any debate and justify their position and actions.
This is how social control works in a democracy and how citizens act to control, restrain and direct the different sections of society, including the marketplace. This is how we ensure that our structures serve society. I welcome feedback and have no wish to be unreasonable or dogmatic about my point of view. To date I have received only large amounts of positive feedback, and the criticisms have been minor. The site would benefit from criticism and answers from the other side of the divide.
Funding of health care is restricted by government, by insurers (e.g. managed care) or by employers in all Western Countries. This money is paid for the care of the patient. Profit can only be made by getting more money from the funding system, by providing more patients with medical care, or by taking money away from the care it was intended to provide, and one of the biggest costs is nursing. Much of this is promoted as efficiency, but the line between efficiency and fraud, exploitation of patients, unnecessary care, and reduction in care is readily blurred and under market pressure is readily crossed.
Examination of the US marketplace reveals that there are many pointers to problems in companies. These might raise the possibility of a risk to the community, and the more pointers the greater the risk. While these are all features displayed by marketplace corporations they are displayed with greater intensity by those at risk - who are also usually those more successful in the marketplace. Success and dysfunction all too often go hand in hand.
1. Large Profits particularly disproportionate profits. Strong institutional investor support. Market praise. Rapid expansion, particularly when others are struggling.
The US experience suggests that in general the more profitable a health care company, the more glowingly it will be praised and the more likely are its practices to be questionable. Excessive analyst praise and high profits are red flags. Most health funding is capped in some way, yet these profits must come from somewhere. When one sector booms too spectacularly or a particular company makes much larger profits in an area where others are struggling it should set red flags flying until an adequate explanation is found.
This is well illustrated in analysts reports during Tenet Healthcare's first life as National Medical Enterprises (NME) when contrasted with its actual practices. It was little different for Columbia/HCA and the aged care chains that faulted (see here). For years vastly profitable HealthSouth seemed to be a role model for propriety. In 2003 it was shown that its entire success was built on a US $4 billion fraud. In Australia Primary Health Care is a market darling, not only does it make vast profits out of general practices when others are losing money but it does so by bulk billing, so charging less than its competitors. While there have been some criticisms from the medical profession Primary has aggressively rejected this criticism, and no one has been able to show wrongdoing.
Institutional investors put impersonal market pressures into the system and so pressures to dysfunction. Where individuals have a large holding they may exert a social perspective. The contrast between Mayne Health conrolled by institutional investors and Ramsay still controlled by Paul Ramsay is revealing.
2. An emphasis on rapid growth and acquisitions rather than business consolidation.
Growth is accomplished by raising loans. Interest on loans must be met. The pressures to service loans has been a powerful force driving companies to cut costs and defraud the system.
3. Financial difficulties
Unacceptable practices are usually well established by the time the companies are threatened with bankruptcy. Poor performance puts more pressures on care. The practices may be increased to the extent that they are exposed. This is particularly so when the company is servicing large loans. This was particularly so in aged care in the USA.
4. A strong market focus on performance indicators expressed publicly or evident in corporate culture.
This has been at the root of problems in the USA, in Tenet Healthcare and also in Mayne Health. All too often the effort directed to market activity and economic objectives results in the neglect of responsibility for care or distortion of the way care is provided - to the extent that it is compromised for profit. When this extends to economic pressures on doctors major problems are very likely.
Tenet, Columbia/HCA and the aged care chains all illustrate the consequence of an aggressive focus on economics and profits. Managed Care giants like Aetna and Kaiser illustrate the consequences of excessive financial pressure on doctors.
5. Contracts and financial arrangements with doctors. Doctors bound to the corporate mission especially when there are other red flags.
Any contracts or financial arrangements with companies in which the doctors' financial interests, careers or loyalty are at stake should set off a host of flags. With few exceptions most of the unsavoury practices were implemented and remained undetected only because doctors were tied to the company by self-interest, contracts or misplaced loyalty. While these may not be kickbacks legally they function similarly. "Legitimate business practices" regard financial incentives and disincentives as legitimate but the consequences are often little different to those of kickbacks. The majority of fraud related settlements in the USA involve kickbacks to doctors in one form or another. Legal kickbacks (e.g. share holdings or options) are no less worrying. Columbia/HCA was forced to undo all of its joint ownership arrangements with doctors. Similar arrangements are promoted in Australia by the General Practice Corporations, notably Primary Healthcare.
6. Strong Profit Pressures within the company including incentives, bonuses, share options and economic report cards.
These are considered good business practices, but in the health care context these pressures drive staff to indulge in conduct that boosts their pay packets and preserves their careers. These are seldom beneficial for the health system and managers seldom look closely enough to see where their profits are really coming from. Companies which compromise care or defraud the system are, with few exceptions, particularly aggressive in this regard. Their bottom line swells accordingly earning them high praise and no condemnation - until some one blows the whistle. Since 1996 I have argued that these practices should be forbidden in health care providers.
7. Criticism by the health profession, whistle blowers, or by patient or health groups.
These are the people who experience the company first hand. They stand on the other side of the divide. They are typically vindicated when frauds and scandals are exposed. Regulatory bodies and accreditation processes are notorious for their inaction, their willingness to identify with the corporate position and their disregard for whistlblowers and employees.
8. A more than average number of litigation cases
Falling standards can be reflected in court actions by patients or employees. All too often these corporate groups are arrogant and reject criticisms, so driving their victims to act against them. This has been a feature of the nursing home chains in the USA. Tenet's practices have caused large numbers of injured children and also hundreds of cardiac patients to sue them for damages.
9. Repeated interest by regulators.
All too often regulators turn a blind eye or put it in the too hard basket. When there are regulatory records kept these records may show a higher incidence of problems. Regulatory effort is often impeded by blockages higher up the system, nominal penalties and aggressive legal action by companies who, believe they are right, are better funded and typically fight all the way. Medical opinion is often contradictory and prosecuting cases can be difficult. This has been a particular feature in nursing homes. It will be helpful if accurate mortality and morbidity figures are available and comparable. The sort of figures kept by regulators in the USA are limited but useful. They are not as readily available elsewhere.
10. Aggressiveness in response to criticism.
Very typically corporate chains are supremely confident and defend their practices aggressively. They work closely with lawyers and seek to attack their critics. Threats of litigation and defamation actions may be the response of someone who has genuinely been maligned and wishes to protect his or her reputation. All too often they have been an indication of a lack of insight and an unwillingness to meet criticism in health care.
11. Close association with others who have indulged in unsavoury practices.
Birds of a feather flock together. Bankers and auditors advise companies, often attending board meetings. Many have been directly or indirectly involved in their own and frauds by the companies they advise. At the very least they have turned a blind eye. Citigroup and UBS Warburg spring to mind and both have been heavily involved in health care. Andersens, and Ernst and Young have been tarnished by their associations with fraudulent companies including health care groups. These are the groups who are supposed to be gate keepers but whose financial interests are in not doing so. Following the Wall Street scandals glowing reports from analysts employed by global financiers should always be suspect, but particularly Citigroup, UBS Warburg (see also here), Andersens and Ernst and Young.
12. A large divide in perceptions
Opinions and allegations showing a large divide in perceptions between different groups should always arouse suspicions and the US experience shows that those who are unhappy are most often correct.
This page adapted and rewritten August 2004