October 21st 2000

  Buy Issue 2594

Articles from this issue:

Cover Story: Apples and AQIS

Editorial: Human-pig embryos: what next?

The Economy: Australia risks being left out in the cold

Canberra Observed: PM's "body surf" swamps ALP

STRAWS IN THE WIND: What peace process?

Bioethics: RU 486 - part of the disease, not part of the cure

The Media


Co-operatives: The growing threat to credit unions, mutuals

Law: Marcis Neave - Victoria's new Law Reform Commisisoner

Health: Who's buying up our GPs ... and why?

Asia: Is Hong Kong's democracy finished?

Books: 'The Lily Theatre', 'Mao's Children in the New China'

Film Review: East/West

Books promotion page

Health: Who's buying up our GPs ... and why?

by Bob Browning

News Weekly, October 21, 2000
When astute investors like Kerry Packer and Richard Pratt buy into the health care industry, the commercialisation of medicine can no longer be ignored. Bob Browning explains.

A recent sign of the times was the move by Kerry Packer's Australian Consolidated Press, Richard Pratt's Thorney Investments, the Rank Merchant Bank, and Colonial First State to deal themselves into what the Australian Financial Review called the corporatisation of Australia's health care industry.

By putting $75 million into the Perth-based operation Endeavour Health Care, the high-flying entrepreneurs secured immediate, national competitive clout for the operation. The AFR commented (September 15, 2000) that this enabled them to pit Endeavour Health Care "against a host of other corporates pursuing aggressive expansion plans in the burgeoning health care sector".

News of the big business moves into the health "industry" coincided with reports that general practitioners, particularly in Western Australia, were selling their practices to commercial ventures at an increasing, and for some, an alarming rate.

Corporations have two "good" business reasons for eyeing GP practices as profitable take-over opportunities. Revenue flow is guaranteed through Medicare, courtesy of taxpayers. Medicare funds free-at-the-point-of-service GP services through bulk-billing. Secondly, GPs are the gateway to more expensive but still taxpayer-paid services such as pathology, radiology, and so on. Health care corporations buy up these facilities also and link them to the corporatised GPs to enhance profitability.

This management linking strategy is referred to, somewhat euphemistically, as "vertical integration". The terminology diverts attention from the obvious moral hazard that the system creates. Vertical integration increases the incentive and opportunity for over-servicing. Governments make much of the need to eradicate taxpayer-funded over-servicing when the private profession is involved, but seem curiously blind to the practice when it comes to the big corporations.

While corporations are growing bullish about GP practices, they are becoming cool on private hospitals. Private hospital revenue is not guaranteed in the way GP revenue mostly is. Profits in private hospitals depend mainly on the private health funds, not generous Medicare. The Sun-Herald reported (September 24, 2000) that "all the biggest companies in health care have reported difficulties in making money out of their private hospitals in the past year".

The largest of such companies, Mayne Nickless, disclosed a $174 million loss for the year. Australian Health Care dropped $79 million. Ramsay Health Care profits fell by 22 per cent. In NSW alone, five private hospitals have already gone into receivership.

The Federal Government, once again courtesy of taxpayers, is doing all it can to keep private health funds healthy. Not only is it providing them with a massive subsidy, but its so-called competition policy in health gives insurance funds the power to force private hospitals into cut-price contracts.

Unless private hospitals offer the health insurance companies cut price services, the funds "de-register" them - that is, the funds refuse their high-premium paying members the right to choose their own hospital. Funds direct their members to those hospitals which the funds succeed in forcing into contracts. The funds are accused of selecting hospitals according to discounted fees rather than the quality of health care.

Policy consequences

Too few yet realise the seriousness of the struggle being waged for control of health care. Big business, especially the American multinationals, see health services as one of the more lucrative potential markets being thrown open by privatisation and corporatisation policy under the new neo-liberal globalising economy.

The Coalition is taking to new heights its efforts to further commercialise and corporatise health care. If things go according to plan, then the ideological orthodoxy of governments, together with the associated burgeoning power of corporations, will have succeeded in eroding the quality and availability of health care.

Health care as Australians once knew it will no longer exist. It will be increasingly denuded of its compassionate and humanitarian traditions - traditions worked into health care institutions by the long and arduous efforts of Hippocratically-motivated medical professionalism and the widespread involvement of dedicated, not-for-profit religious orders and benevolent societies.

Ironically, the unacceptable aspects of commercialisation and corporatisation of health care are being realised and opposed more at the home of the big corporations, at the very epicentre of globalising neo-liberalism and the Washington Consensus, than they are in Australia.

The lead article in the latest issue of the internationally regarded US magazine New Republic, declares that "our health care system has been transformed into a vast commercial market. Once considered primarily a social service and a public responsibility, health care is now commonly viewed as a private industry, best controlled by private forces".

The writer, former editor-in-chief of The New England Journal of Medicine and a Harvard Medical School Professor, Dr Arnold Relman commented:

"Painful experience in the past few years may be forcing a re-examination of that view [market primacy in health care], for many the free market recently has begun to look more like the cause than the solution of our current health care problems. Evidence of its deficiencies is accumulating, and public dissatisfaction with the market-based system is growing rapidly."

Relman points to the growing disillusionment with market-based medicine among doctors, the essential providers of medical care. He says the market "threatens not only their economic security but also their professional values and practices". Doctors believe their ability to take care of their patients is being compromised by the cost management and the coverage decisions of the insurance companies.

Relman concludes that a major change is inevitable. Certain simple realities are ultimately inescapable. Medical care is an essential human service, he says. "It must be responsive to needs and be governed by ethical values. It cannot be successfully distributed, therefore, by unregulated market forces."

Another internationally influential US magazine, The Public Interest, takes up the same theme. Under the heading "The Cultural Revolution in Health Care", physician and writer Ronald W. Dworkin, explores the inadequacies of the ruling economist mindset. It fails to compute such a complex human activity as health care:

"The health-policy expert, whose sole purpose for a generation has been to address problems of efficiency, economies of scale, and distribution, is ill-equipped to confront the revolution in health care that is underway. Economic models are useful when everything in an industry is agreed upon and the only thing in flux is the amount and allocation of resources. But in health care today much more is in flux than just money. There are very basic issues - cultural, sociological, even spiritual - that need to be resolved before the economists can get back to the business of organising and delivering."

Dworkin attributes blame to doctors and patients as well as the economic rationalists. Many doctors are all too ready to relinquish their ethical, professional traditions and embrace the economic and social status of skilled technicians, he says, and their patients have increasingly unrealistic expectations. They think health and various physical enhancements can and should be gratified as readily as their demands for other commodities in the consumer society.

In Dworkin's view, medicine is declining as a profession. Doctors no longer have the sense that their profession constitutes a special brotherhood devoted to a higher purpose, like the clergy or soldiery. Medicine used to be about more than money. It had "a higher purpose, which imposed upon its practice certain ethical norms of behaviour that were rigorously adhered to" - partly because the profession enforced these norms, but also because doctors believed in them:

"They were not organisational men and answered only to their patients. [But now], for many doctors, what they do is a job like any other, a notion that is reinforced when insurance executives, as well as politicians and policy makers, call doctors 'providers'.

"Doctors now see themselves as mere cogs in the machine - just another set of 'worker bees' in the industry hive ... Doctors will become like plumbers though perhaps better paid, and they will be constantly fighting over the dollar, just as other unions do. This is what happens when the medical profession is shorn of its transcendental qualities - its mystique, its notion of duty, its code of honour - and made into a rational economic enterprise."

Patients also have their faults. In Dworkin's view, today's policy makers aim to empower patients by transforming them into consumers. Their goal is to increase happiness by making more health goods available, just as in any other commercial enterprise:

"In the health economist's model, the patients' dissatisfaction is made seem somehow abnormal, a temporary glitch in the smooth functioning of a service. Sickness is not an act of Divine Providence but the result of inefficiency in the health care system. That's why consumers grow angry and confused about their health care ... Our human mortality has all but disappeared from the health care horizon."

Dworkin laments that the line is blurred that once separated unhappiness brought on by physical illness from the unhappiness that was "mysterious and inexplicable". It is no longer clear where the province of health care ends, nor how consumer demand can be contained. For example, the demand for mood-modifying drugs is already huge. Heavy promotion by pharmaceutical corporations of Prozac, Wellbutin, Viagra and other of their drug products - together with consumer readiness to accept them - are contributing to the cultural revolution in health care.

Serious rethinking by all parties is called for, but especially government policymakers.

- Bob Browning's previous articles are available on www.sprint.net.au/~rwb

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