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This page looks at integration in a corporate health care context and relates this to Graeme Samuel's proposals. It goes on to address the related issues of flagship hospitals, corporate control of markets, difficulties in enforcing contracts and the problems of gate keeping.


Strangely integration is promoted as one of the strengths of a competitive marketplace. Corporate chains have all enthusiastically adopted models of care embracing vertical and horizontal integration. The systems which have been introduced in the marketplace have served corporate interests well and have allowed them to work the system for their advantage. it has not served patients who have become the meat in the sandwich. Columbia\HCA's Macmedicine and Mayne Nickless "One stop" medicine are examples of the way the market seeks to boost profit by integrating their services. It establishes very profitable paths for referrals and it is easier to persuade doctors to use these services. A variety of inducements can be offered to induce doctors to care for the corporation rather than the patient. Several corporations including Revesco have now adopted this model. They are buying general practices on the basis that this will provide referrals to their radiology, pathology and ancillary services empires. Mayne Nickless has expressed a renewed interest in this model of integration. They do not doubt that the doctors will comply. One wonders what future they will have in the system if they don't.

Graeme Samuel's marketplace model also promotes integration. He considers that his purchaser, a version of managed care is essential for integration. What he proposes only becomes meaningful when you have very large corporate groups, principally corporate providers. In any other competitive situation competition makes integration difficult. It limits the ability to rationalise services and to obtain cost and care benefits - the sort of rationalised services which an integrated cooperating community services can provide.

I have suggested that instead of a complex economic model care should be simply and cooperatively structured on the basis of the services provided in order to bring those services to the community. These services would be motivated to use resources in a rational manner balancing cost and need. Duplication would be reduced. This would be integration in the interests of the community. It would eliminate the sort of problems revealed by the scan scam, where vast numbers of unneeded MRI scanners were hurriedly purchased in order to remnain competitive.

While Samuel does refer to single person providers he must be planning a service run by large corporate groups, probably multinationals. His model would not work without them. In a scattered country like Australia or most developing nations corporations would soon gain complete regional dominance. There would not be room for more than one - certainly not efficiently and certainly not if you are looking for integration. Real competition would be limited to one or two centres like Melbourne of Sydney.


The sort of integration which Samuel will get and I think he envisages is the integration of services by large corporate groups. This is likely to follow the vertical and horizontal integration strategies of the US corporate giants such as Columbia/HCA. This sort of integration was designed and used to generate profits and reduce costs. It was not designed to care for patients. They could be shuttled round from service to service to maximise the economic potential of the integrated system. Integration made it easier to offer incentives legally and so get doctors to comply with corporate practices, and to engage in costs shifting - minimising tax and defrauding the payer.

Any system of integrated care within a corporate framework should be very strongly opposed. I strongly support the idea of an integrated not for profit system to facilitate care and increase efficiency. I believe that it is essential. I am totally opposed to any system of integration within a corporate marketplace. This is so vulnerable to misuse that it must be stopped at almost any cost. Corporations have shown time and time again that they cannot be trusted. The evidence indicates that the larger and the more credible they are, the more likely is it that they have been engaged in dishonest or deceptive practices.


Previous experience in the USA and Australia suggests that corporations will run "flagship" hospitals in the big centres near the government and the regulators. They will be the hub of vertically integrated systems. These will be used for marketing purposes and to build credibility. They will get everyone on side. Corporations will make their profits elsewhere. They will display incredibility and even anger if any one had the temerity to criticise their services pointing to their flagships as examples of what they provide. Columbia/HCA and Tenet/NME used this strategy very effectively. Tenet/NME did so in their dealings with NSW Health department.

Examples: -In response to the objection to licenses by the scientologists in 1992, New South Wales Health Department sent a representative going to a wedding to visit Tenet/NME in the USA. This person was given the red carpet treatment in a flagship hospital. The report back to NSW Health Dept. complete with photographs and brochures was glowing - this is what Australia would get. NSW were impressed! Tenet/NME also set up the Mount hospital in Perth, close to their headquarters as their Australian flagship.


Because of our geography Australia or any other spread out country would be in danger of facing the situation which Dave Lindorff described at the end of the 1980's. Nursing home groups which had succeeded in gaining control of regional markets in the USA simply thumbed their noses at regulators. They could not close homes because of the consequences for the patients. Our government is introducing a system of accreditation and closing down homes which do not measure up. What would happen to the patients if the only nursing home in say Bourke was closed because it was worse than Riverside in Melbourne. Where would these patients be sent - Sydney or Melbourne? Imagine the outcry. The regulators would be in an impossible position.


Under Samuel's system any attempt to terminate a contract or impose penalties if this were done publicly would be challenged in the courts. Regulators would only do so when the problems were enormous - problems like Riverside nursing home or worse. A small nursing home or hospital in central Australia would be out of sight and out of mind.

Once multinationals entered the marketplace the World Trade Organisation would become the final arbiter in any dispute. International trade agreements will allow them to do so. The WTO acts in the interest of the big multinationals. Government regulator's cases would not be sympathetically received. The market would be seen as self regulatory and regulatory intrusion would be seen as obstructions to this process. These legal battles would be enormously costly and few governments would embark on them.

Corporations accused of substandard care would challenge and dispute in order to cloud the issue and allow it to die. They would sow confusion.

Large corporations routinely stretch the legal challenge for years. They exploit all the legal processes to minimise the adverse impact. By the time it is proven it is stale news and any publicity has little impact on business. Serious problems which occurred 3 years ago can be easily managed by simply claiming to have reformed. Look at how readily government in Australia forgave Tenet/NME. Columbia/HCA is following the same strategy.

Gate Keeping

Advocates of managed care and market systems do not talk publicly about gate keeping. They simply apply it. Who is going to decide whether care is to be given and when it is to be withheld? The US experience tells us that corporations are paying they will not want to leave it to the doctors. This problem is compounded for us in Australia? It is most unlikely that the gate keeper will be in the local community. In all probability care for people on Cape York will be decided in Brisbane or even Sydney!

I cannot believe it would be the patient and that the purchaser would purchase in response to her demands. She would want to get as much benefit for herself and her family as she could from the money which has been paid. This would result in overservicing - certainly not efficiency. The first step in the market is to restrict her individual purchasing power. She would shop only from the limited options the contracted providers offer. The further from major centres the less the choice. The market supposedly works because people have choice. This is what controls quality!

Samuel's purchaser is not going to pay out money without having some control and being able to limit what can be purchased. It would become a gatekeeper whose profit or financial integrity would be improved by denying or restricting care. To do so the relationship between the doctor and the patient would be targeted. This is managed care and this is why the US system is in such a mess. Graeme Samuel calls his version Health Improvement Agencies or HIA's!

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This page created October 2000 by Michael Wynne