Private insurance rates continued to fall and private hospital beds were empty. Companies found themselves competing frantically for patients in order to get the money to service their loans.
As losses increased share prices tumbled. The quality of hospitals. Most of the privately owned hospitals acquired were small dated cottage hospitals.
Medicine and surgery were changing rapidly. These changes required sophisticated organisation and expensive equipment. The overheads in providing this in these small hospitals made them noncompetitive. The companies had to invest funds to expand, consolidate and increase services or go under.
Those who managed to do so survived. Others struggled on through the early s with large debts. Competitive strategies. In the early and mid s a number of strategies were seen to improve financial performance and competitiveness. Size was seen to offer the benefits of scale so that purchasing was more efficient and cheaper. We know from the US experience that the benefits were marginal. Diversification was seen to encourage ready access to customers through "one stop" medicine. This was related to encouraging internal referrals between company operations.
This was the business reason for targeting general practices and medical centres. The widely held myth that "efficiency" would enable private operators to provide better services more cheaply led to cuts in nursing staff, the major cost. He had close links to government and the federal minister for health. Strangely he held back on implementing a full market management system along these lines.
It was left to the next manager of Mayne Health, Peter Smedley to do so. Doctors were certainly aware of the stresses placed on nursing services and there must have been adverse consequences from this. That this was accepted by most doctors may have been because hospital managers in underfunded public hospitals were being trained and driven into doing the same things. In the private system doctors were an asset bringing in patients but nurses were a cost reducing profits.
In the public system both were costs. Unlike the private system cost cutting consequently impacted on doctors as well as nurses so for them the private system was more attractive and worked better. The extent to which cost cutting and dis-empowering of doctors occurred in public hospitals is well illustrated by what was later exposed in the Bundaberg and Forster inquiries in Queensland in Doctors had been unhappy about this for 20 years.
The promise of privatisation. The liberal and coalition governments had promised pro-market changes which would increase private insurance rates and so boost private hospital occupancy if they gained power. The gloom occasioned by empty beds in the early 's was relieved by this prospect and by the policies of privatisation and colocation which were adopted by coalition governments in all states.
The myth that corporate efficiency could do it better and cheaper than government was unchallengeable. The running of public hospitals was contracted to private enterprises who bid competitively to provide the services. Private hospitals were to be built on public hospital campuses and the pressure on the public system relieved by siphoning insured and paying patients into them.
Corporations saw both as providing a steady basic income to carry them through a difficult time. Privatisation's tears. The privatisation of public hospitals proved to be a disaster for those who bid low enough to win contracts and the massive losses sustained led to disputes with government and near bankruptcies. Staffing and care suffered. Both sides abandoned the experiment.
Colocated hospitals proved more costly to build and less profitable than anticipated. Only those in affluent areas made money and this had little to do with the colocation. Several companies performed poorly at this time and were sold to competitors during the s. Only Ramsay Health Care came out of it well. Ramsay won contracts to run Veterans Affairs hospitals from the federal government early in the s.
These contracts differed from state public hospitals and were run along the lines of a private hospital with a guaranteed flow of patients. They were profitable and carried Ramsay through the difficult years enabling Ramsay to pay off debts, improve its spectrum of hospitals and put itself in a strong position for when government relief finally materialised.
Privatisation and colocation are addressed in detail on a set of web pages devoted to this topic. Managed care , originally a socialist inspired idea had been appropriated by the market in the USA.
It was being promoted as the key to reducing costs and fitted well with global economic thinking. Australian governments were interested. Until the mid s hospitals and doctors did their work and simply billed the insurers who paid.
This the economists argued pushed up the costs of health care. The labour government attempted to bring in a form of managed care in the early s but the medical profession resisted. Doctors reject contracts:- When the coalition gained power in they reinvigorated this process and formed an alliance with the French insurer AXA and Mayne Health to drive doctors into managed care style competitive contracts.
In a speech to doctors in , Dr. Michael Wooldridge, the new minister for health expounded market ideology and reasoning to the profession. He quoted Adam Smith to accuse them indirectly of conspiring to maximise their profits at the expense of the health system. Doctors were well informed on the consequence of the US system of competitive contracts for patient care, and for a reasonable work environment for doctors.
They challenged the minister and refused to comply. This resulted in a breakdown of communication and a bitter dispute in which Wooldridge and the president of the AMA exchanged defamation actions.
This was only resolved after Wooldrige's obsessional behavior led to damaging scandals and to his departure. Hospitals succumb:- The hospitals were in a less powerful position and succumbed to a system of negotiated contracts with insurers.
This put insurers in a powerful position to hold payments down. Hospitals now had to compete with each other for contracts to provide services to the insured patients of each insurer. The competitive landscape changed dramatically. Competition was less about providing care or about referrals but for contracts which paid well. What companies and hospitals wanted was "leverage" in the negotiating process so that they could squeeze more from insurers.
Mayne was Australia's health care giant but its hospitals were in large centres where there was competition. It relied on size to give it negotiating power and this helped but was less effective than Ramsay and Healthscope's strategies. Both Ramsay and Healthscope had nearly gone under after the 's boom burst. Healthscope had been further crippled by a privatisation project in South Australia.
Both read the situation more accurately than competitors and adopted a policy of avoiding competition for contracts by developing hospitals which were "must haves" for the insurers. Both already had a portfolio of specialist hospitals psychiatry, rehabilitation etc.
These became life savers. This gave them an immediate competitive advantage on what was claimed to be a level playing field. There were only a few specialist hospitals in each region and there were no competitors in rural centres. Insurers had no choice but to contract with these hospitals.
The companies could dictate the terms of the contracts and by linking negotiations with their other hospitals secure better payments across all their hospitals. Ramsay already had the cash flow from its Veteran's hospitals and continued to enlarge and upgrade its other hospitals, particularly the colocated hospitals. They added additional high level services which competitors with smaller hospitals could not provide so turning them into "must haves". Ramsay and Heathscope prospered and put themselves into a strong position to capitalise on government policies when they came through.
One consequence of this competitiveness was a series of acrimonious power struggles as insurers and corporations drove the negotiations to crisis point and then break down.
Insured patients became the meat in the sandwich and their vulnerability was exploited to the extent that their care, their wallets, and both private and public hospital systems suffered. The Losers. In addition to the patients the losers in all this were the smaller not for profit and individually owned community hospitals.
The playing field was steeply tilted against them. They lacked size and leverage. Their ethos was cooperative and community focussed. They did not operate in a competitive frame and were ill equipped to compete in this environment.
They were small and had no leverage. In most of the country they struggled and either sold to corporate groups, contracted them to run their hospitals, entered into some sort of joint venture which aligned them with the corporation, or adopted a for profit focus and mode of operation. Most became part of the corporate negotiating block and agreed to corporate managers. The consequence was not only an increase in the corporate sector at the expense of the not-for-profit sector but a progressive erosion of the not for profit ethic of community and care.
Brisbane seems to be the exception. Not for profits already owned most of the large private hospitals in the city so had leverage. They survived by adopting a profit focussed corporate management style and competing as they were "must haves".
Competing for doctors. Because specialists retained their independence and their financial security by rejecting contracts they actually gained leverage. This has served them and their patients well.
They retained control over the flow of patients. Because they chose where to work and advised their patients accordingly they could have a major impact on the bottom line. Hospitals were now forced to compete with each other for the patronage of doctors. This gave doctors leverage in this competitive pressure cooker. They were able to press for resources and services for their patients as well as better working conditions for themselves, by imposing financial costs.
Both Ramsay and Healthscope attempted to walk a fine line between commercial cost cutting considerations essential for economic competitiveness, and providing services and work opportunities to entice doctors. Ramsay in particular made much of its relationships with doctors and of its concern for the well-being and morale of nursing and other staff. The federal government did not introduce effective measures to combat the fall in private health insurance until their reelection in This took the form of penalising younger citizens who delayed insuring and a massive tax payer subsidy to those who took out private insurance.
Economists who criticised this ideologically driven policy claimed that far more services could have been supplied to more citizens if those funds had been spent on expanding and improving the public system. This was an immediate bonanza for the insurers who were reluctant to pass on this largesse to the hospitals and used their negotiating position to this end. There were a number of disputes. It was not until some time in that the benefits of the governments legislation flowed through to the hospitals.
Doctors show their muscle. In the meantime institutional investors and the financial institutions had grown tired of waiting for the profits which Mayne Health had promised since They stepped in.
Catchlove departed and a business Mr. Fixit, Peter Smedley, who had no experience of health care took over. Both investors and Smedley misread the competitive dynamics of the health care marketplace. Smedley immediately fired existing hospital managers and put in his own business team. He restructured the hospitals and centralised all services.
His market model cut staffing and resulted in allegations of unethical practices. Doctors alleged compromised care. The restructuring dis-empowered them and their patterns of work were disrupted. Already angered and distrustful because of Mayne's earlier support of managed care and its alignment with Wooldridge, the doctors simply walked away with their patients.
Ramsay and Healthscope which both recognised the importance of a degree of local hospital autonomy and the role of doctors in this were waiting and made much of what they had to offer doctors.
They benefited as Mayne's hospital division sustained huge losses from which it never fully recovered. The gravy train arrives at last. Ramsay and Healthscope which had very different management styles to Mayne were well positioned to capitalise on Mayne's problems and to extract payments from insurers. The flow on from the governments subsidies boosted the profits from hospitals. They became very profitable and both companies expanded rapidly acquiring not-for-profit and individually owned hospitals as well as smaller for profit companies.
Mayne continued to struggle and in sold its hospitals to a Venture capitalist consortium led by a Citigroup subsidiary. Ramsay's bid was unsuccessful. Citigroup, which had urged the breakup of Mayne in , is the largest US financial conglomerate in the world and its divisions have been involved in a series of scandals on Wall Street and across the world.
Not only was it a central actor in financial scandals on Wall Street but it was an adviser and coconspirator in the Enron , Worldcom and possibly Parmalatt frauds. That Citigroup was the prime mover in this venture capital group was concealed from the public and the profession in Australia. This was drawn to the attention of state regulatory bodies. The now renamed Affinity Healthcare had some difficulty in securing hospital licenses.
Analysts had been praising the progressive reduction in the number of private operators consequent on corporate acquisitions and take overs on the basis of economies in size in spite of the mechanisation and depersonalisation of health which this entailed. In less than 2 years after it had bought Mayne's hospitals, Affinity's owners decided to float or sell the company. Ramsay bought the bulk of Affinity leaving Affinity with about 20 hospitals the acquisition of which the ACCC considered would be anticompetitive.
Affinity wanted to continue operating at least fourteen hospitals and the plan agreed to by the ACCC was for Ramsay to sell them back to Affinity.
Affinity dissolved. A two corporation private hospital system. The consequence of this rapid consolidation of the market is that the corporate for-profit sector has come to dominate in Australia even though it does not yet own a majority of private beds. With few opportunities for further expansion in Australian hospitals, Healthscope has branched into pathology.
Ramsay is talking about aged care and international expansion. Both are still performing well in the marketplace. Both are enormously powerful, much more so than any of the 40 separate insurers with whom they will be negotiating fees - and very much more so than any of the private and not for profit groups which provide the remainder of private hospital care. To those who don't understand the market or its logic, a reduction of the numbers of competitors in the marketplace to two with such a large disparity in size seems to markedly reduce competition and if the theory is correct the benefits.
To marketplace cynics the reduction in competition is desirable as this gives the companies an opportunity to cooperate in funding good care while outwardly paying service to the damaging competition ethic. Sadly experience tells us that success is a strong inducement to do more of the same. Ramsay is urged to "bring these assets into line" as if doing so has nothing to do with compromising care. Two common marketplace strategies for cutting costs and improving profits have been to entice doctors to perform more profitable surgeries and to cut nursing levels.
The one pushes the envelope towards unecessary surgery and cherry picking profitable healthy patients with quickly treatable conditions, rather than sick and costly ones.
The other pushes the envelope towards poor care. The others who will suffer from this are the smaller not for profit and private hospital owners geared to serving their communities.
In a marketplace where size and leverage is all important in negotiating payment these groups which have neither size nor leverage are very vulnerable. A lack of funding will compromise care. The size of this sector, which puts patients first, will decrease rapidly as hospitals close or are sold. Market analysts see these hospital groupings as obsolete anachronisms and out of keeping with the modern world.
They welcome their demise. A consequence of this is likely to be that the not for profit ethic, which provides a set of ideas critical of market practices, will lose status and credibility in the community. Marketplace thinking and practices will be unrestrained. We will more closely resemble the USA and be more likely to develop the same problems.
Sept A two player corporate health system. In boosting Healthscope's bed numbers by 70 per cent to , the deal will give Healthscope more clout when negotiating with the health funds on price, which is the name of the game. Oct Implications of leverage and size. They use their size to knock down the prices paid to hospitals. The health funds bully the price down to the point where they can't make money. As a result, private hospitals are being bought up by a small number of large players.
Health not a game for the faint of heart Sunday Telegraph October 2, We need to look back at what we were promised when the government which gave us this system took power in Dr Wooldridge, the new minister for health made it all sound so sensible and fair with "consumers" ultimately driving the process for their benefit. We need to ask who is benefiting from what we have?
For full speech click here. May Speech to the medical profession. Choice because the end beneficiary of competition is the consumer, who is able to make a choice between the widest range of products meeting his or her needs. Quality, because it is in the interest of the individuals or groups competing for the consumer's custom to ensure that the product or service that they offer is of the best possible quality and therefore likely to be most attractive to that consumer.
Cost, because the other crucial determinant of a consumer's decision is the impact of that decision on his or her pocket. Similar steadily increasing competitive corporate pressures to those generated by the share market in the USA have been introduced into Australia.
This has been driven, at least in part, by market ideology, globalisation and the presence of multinational investors and financiers. I have supported Ron Williams contention that a corporatised global health system would become severely dysfunctional and that we would see the development of fraud, and misuse of patients similar to that which has occurred in the USA. While there is much to suggest that the for-profit corporate system we have developed has little to commend it, we have not yet experienced the exposure of fraud and the uncaring exploitation seen in the USA - but it is early days.
Instead it has been the public system which has been accused of financial mismanagement, compromising care by cost cutting, and the neglect or misuse of patients. These differences deserve exploration and some comment. Fraud is occurring but is not being exposed. There has been strong criticism and opposition to the corporate for profit ethic in Australia.
There is an argument that the pro-corporate positions of health care businessmen, insurers and government would be severely compromised by revelations of widespread health care fraud, or the mistreatment of patients in private hospitals. It is clear that, as in the USA, regulatory bodies have become politicised and serve government rather than the people. In the USA regulators have been singularly ineffective in exposing fraud and care problems.
The vast bulk of exposures come from whistle blowers using Qui tam laws. Australia does not have Qui Tam legislation to encourage, protect and richly reward whistle blowers. This has been the basis for the vast majority of convictions in the USA. Whistle bowers in Australia are muzzled. This argument claims that there is no will among any of the powerful players to investigate these matters. They documented a small number of frauds which had been allowed to languish by authorities.
They interviewed experts who had looked at the system and believed that fraud was as common as in the USA. While the evidence presented was thin the fact that they took this to air is significant.
There may well have been legal constraints to their putting more examples in the program. The fact that they devoted an entire hour to this is in itself significant. If we consider the many government and departmental failures exposed in Australia over the last few years, that something like this might be occurring is less fanciful than it sounds.
Fraud has not occurred because Australia has responded differently. The corporatisation of Australian hospitals has been a contentious and divisive issue in the health professions and with the public. The misbehavior of US corporations in their own countries has led to criticism and to their departure from Australia.
US health care and managed care, once openly promoted as the future for Australia have become dirty words. Any exposure of dysfunction would have been used in the political debate. For profit care has consequently never gained the support and self evident legitimacy which it enjoyed in the USA.
This critical context may well have acted as a deterrent to dysfunctional practices, temporarily at least. This could change now that Ramsay and Healthscope have become so powerful. They are in a position to ignore criticism. Probably as important is that specialists who work in hospitals have resisted managed care type contracts and so retained their independence. They are not bound to corporate interests. They are able to monitor and use their leverage to ensure that staffing and care are maintained, and that fraud is stopped.
Their response to Mayne is a good example of this but it must be remembered that the doctors were already angered and that the changes introduced by Mayne compromised their position.
Other companies have adopted an alternative strategy to secure the cooperation of doctors. US companies have very successfully aligned doctors financial and research interests with those of the corporation by research assistance, secretarial assistance, joint business ventures and by encouraging them to own shares.
Some of these practices have been prosecuted as illegal kickbacks but others are legal. That particular practices are legal does not make them any less dysfunctional in aligning doctors interests with the company rather than the community, and so inducing doctors to go along with practices they might otherwise reject.
Australian corporations have realised that doctors are much more likely to bring their patients and turn a blind eye to what is happening if they have a financial interest. They have boasted of the steps they take to align doctors and see this as eminently desirable. It is valid to argue that alignment of objectives and cooperation are important in the delivery of services and the not-for-profit system exemplifies this.
The problem is that in the for profit sector the objectives are usually not aligned and the commercial alignment results is a shift in objectives by the doctors. As a consequence much depends on the morality of the medical profession and their willingness to align themselves with the needs of their patients and the community rather than the corporations. The US experience in controlling doctors tells us that while doctors are financially secure and independent of the corporations then the majority will do so but if their financial security is threatened then they are likely to adopt corporate thinking and values if this restores their financial position.
The AMA recognised this and warned the new coalition government in Australian corporations have been active in these areas, particularly Affinity Health. You can learn more about private health insurance at the Private Health Insurance Ombudsman website.
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In addition to Medicare, there are a range of health care and financial benefits available to support families in Australia. Medical Is malnutrition an issue in Australia? Is malnutrition an issue in Australia? Malnutrition is a major public health issue in Australia.
Read more on Dietitians Australia website. What is the problem and how much of a problem is it? The year set the scene for one of the most significant public health milestones in history — the discovery of penicillin. Read more on HealthEngine website. SABSI is associated with complications such as prolonged hospital stays, admission to critical care services, increased healthcare costs and death.
Read more on Ausmed Education website. Australia and New Zealand are well known internationally for having implemented national medicines policies that aim Read more on Australian Prescriber website. How do we determine which new anticancer drugs are cost-effective and how do we pay for the ones that are?
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You have to consider your priorities and what you value the most before you choose between a publicly or privately run facility. If you want to help a certain population of society who is in need of quality care, you may want to stay with a public facility that cannot refuse service to any patient. If you, however, would prefer a smaller work setting where you are expected to provide excellent service in an upscale environment, publicly run institutions are ideal.
Choosing which type of health system you would like to be employed in can be intimidating when you are on a path to graduation. You should review the demand and potential salaries for professionals in each setting and then you can choose whether a public or a private hospital is the right work environment for you. AD Healthcare-administration-degree.
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