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 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. Any comments made are based on the belief that there is some substance at least to so many allegations.

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Introductory page
This corporate web site addresses the issues of corporate health care within a broad framework. A web page describing this broad context should be considered as an introduction to each page on the web site. If you have not yet read it then
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Content of this page
This web page explore the dramatic growth of DCA Group in the ownership of Nursing Homes and of Radiology practices. The web page reviews DCA's growth and policies in the light of the US experience of similar growth companies with similar policies in health and aged care. A 2006 profit downgrade and adverse findings at a nursing home were an indication that some problems were developing. In September 2006 DCA sold itself to a group of Citigroup Venture Capitalists.

 Australian section   

DCA Group

Nursing Homes and Radiology  




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DCA group, which has two major businesses, is by far the largest corporate for-profit operator of nursing homes in Australia. Others trail behind and must emulate its practices to succeed. It leads the way in consolidating nursing home care and in turning a largely not-for-profit system serving the community into a profit generating enterprise for wealthy investors whose financial interests it must serve. It is also the largest corporate provider and consolidator of the radiology sector.

The processes, the commercial pressures, the marketplace motives and the rhetoric are remarkably similar to that in some sections of the US aged care marketplace. The pressures towards dysfunction in the for-profit marketplace are very strong. When one group develops rationalisations to justify profitable but questionable practices, competitors must follow or go under. It is too early to evaluate the impact of the share market on aged care in Australia. We can only look at what happened in the USA and speculate about the if and where of similar trends emerging in Australia.

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US examples

The obvious examples are nursing home care in the USA. The myth that aged care was inefficient and could be provided with fewer nurses and cheap untrained aids was strongly promoted by Sun Healthcare and accepted by the market, and by politicians. Those who did not do so could not compete. The potential benefits of consolidation were overstated in terms which were commercial. They gave lip service only to patient care.

At the same time one or two companies discovered that they could help hospitals make bigger profits from restricted hospital funding by the early transfer of patients to nursing homes where payments were not restricted. The patients' insurance or the Medicare system could be billed twice for the same care.

Corporate funds were directed to the employment of thousands of money making therapists who provided vast quantities of profitable therapies to these convalescent patients - much of it probably unneeded.

At the same time staff and services to the long term frail elderly were downgraded and they were whare-housed and neglected. These profitable practices spread across the industry. Profitability was accepted as an indicator of successful high quality care.

A similar situation developed at the end of the 1980s in psychiatric hospitals where a company called National Medical Enterprises (NME) was the leader in corporatising psychiatric care. NME found that by fanning community anxiety they could induce large numbers of people who had minor problems or were simply anxious to admit themselves needlessly to psychiatric hospitals. Children paid better and anxious parents were easily convinced. Children were specifically targeted. Staff were enthused by their success. Thousands were needlessly hospitalised and given unneeded intensive therapies to generate profits. Many were harmed. Others were forced to compete. NME managers were poached by competitors and the entire sector adopted these practices.

Companies like this seldom accept that they are wrong or that their successful practices are harmful. Ten years after paying a massive fine this same company, now renamed Tenet Healthcare targeted profitable Cardiology and Cardiac surgery in the same way. They marketed their busiest and most profitable hospital in Redding, California as a screening service for those at risk - an anxious group. The cardiologist whom they put in charge and whom they marketed to the pubic was inadequately trained and uncertified. He had a forceful personality not unlike that of Queensland’s notorious Dr Death (Patel). His profitability was equated with expertise and his poor training ignored.

The doctor, the hospital, and the company were all lorded for their efforts in the community and in the marketplace. Managers were proudly ecstatic as their bonuses soared. Attempts to inform corporate staff, who were blinded by their success, of what was happening were aggressively discounted claiming that those complaining were jealous competitors. Many hundreds of citizens who did not require surgery, many with normal hearts had coronary bypass grafts performed and a number died. The company has now paid US$ 400 million compensation to the victims.

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I hasten to state that I have not found any evidence to suggest that DCA has or intends to indulge in these or similar practices. They will not remain without major competitors for some time. Nor is this page intended to be an attack on the integrity of DCA’s leaders Purves or Vaux. I have no doubt that they are personable, genuine people and philanthropic with great faith and confidence in their mission. But the same can be said for the founders of some of the most disturbing health care companies in the USA. Their great weakness was their total faith in what they were doing and the self confidence which blinded them to evidence and other points of view. The market exerts extreme pressures. We frail humans are malleable in finding ways to meet these pressures - and then finding explanations to justify it.

DCA is for practical purposes the only major for-profit market listed corporation in aged care in Australia. I have therefore used it as the focus for my concerns about the corporatisation of aged care in Australia.

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My position

Motivated citizens have made their living and realized their lives by caring for their fellow citizens for thousands of years; and these citizens have paid for this. I am not taking issue with this "private care" although there have been black sheep who have abused the trust placed in them. My main concern is with the share market as a vehicle for the provision of health and aged care.

My examination of the marketplace in health and aged care has led me to the view that the provision of health care for the profit of investors as contrasted with care for the benefit of patients and the community is unethical, morally questionable and severely dysfunctional in multiple ways. These nameless and faceless investors have no knowledge or interest in the welfare of the patients from whose care their profits come; yet they exert a profound influence. The evidence that this market driven system is inherently dysfunctional in health care is now overwhelming but is ignored.

I am in good company. Two Pulitzer Prize winning New York Times investigative journalists Barlett and Steele published their book "Critical Condition" in November 2004. The findings from their analysis of marketplace medicine are clear. Earlier a Canadian Colleen Fuller wrote "Caring for Profit" showing that Canada was following the wrong corporate path and suggesting they try another. In the UK another book "Health Policy Reform - Drving the Wrong Way" by John Lister (which I have not yet read) is reported as examining the health system in several countries and reaching similatr conclusions.

A Canadian Royal Commission chaired by Roy Romanow, a distinguished politician and jurist, invited submissions from market advocates to support the changes they advocated and from their critics to support their claims that the system was dysfunctional. The critics successfully produced evidence to make their case. Market advocates were unable to support theirs. (Download an article in pdf format reviewing the report or go to the Commissions web site for the full report)

The issues were put to the community whose views and values were clear. Romanow’s report "Building on Values: The Future of Health Care in Canada" stressed the importance of values, rather than profits as the driving force in health care. The report was welcomed by citizens but not by the Canadian marketplace or many politicians. Both have tried to discredit it.

I make no apologies for examining the corporatisation of aged care in Australia suspiciously, for focusing on DCA - or for drawing parallels with the USA. To claim that Australians are different or somehow immune to these pressures is ethnic arrogance. Vigilance and community awareness are our best protection. They have protected us in other corporatised sectors of the health system over the last 15 years.

I confess to a lack of personal experience with nursing homes but I have carefully examined what happened elsewhere. This distance can result in a lack of understanding of detail and process. On the other hand an outside perspective looking at available information from a broader point of view often sees more clearly. The story itself is told with extracts in order to bring a large amount of information together and so that others with a different experience can look at it.


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DCA story overview

Development Corporation of Australia (DCA) was the market listed investment group formed by Robert and Sandra Purves in 1985. DCA funded a broad range of businesses. It turned to health care because it was persuaded that this would be more profitable

Feb 1999 DCA's operations

DCA is a listed investment company with interests including:

In 1998 David Vaux, an experience hardened and shrewd businessman, became managing director. He accepted the appointment on condition that his plan to expand into the fragmented radiology and aged care markets was accepted and that most of the other investments were sold off. The name of the company was changed to DCA Group to refect its more direct involvement in the businesses.

Vaux was spectacularly successful and led consolidation in these two areas. He turned the company into a market darling. By the end of 2005 DCA was one of the largest radiology businesses in the world and the largest market listed aged care corporation in Australia. The radiology empire had expanded into Great Britain, Europe and the USA.

Aged care had far lower profit margins. Smaller operators not only found it difficult to generate profits but had to raise large sums in order to make the capital improvements which government now demanded. DCA believed that it would be able to generate sufficient profits through economies of scale in order to make a profit from this employee dependent sector.

David Malouf's description of successful entrepreneurs as people with "an eye for the main chance and the weakness of others" fits well here - and can refer both to the weakness of not for profit nursing homes and the main chance provided by the vulnerability of the frail elderly and their anxious but often ill informed families.

DCA took the plunge and started to expand very rapidly into this sector in 1999. By the end of 2005 DCA operated over 5000 nursing home beds and was the largest for-profit corporate provider of aged care in both Australia and New Zealand.

DCA needed a high return business to fund its expansion in aged care where the returns on investment were lower. Radiology provided this.

Apr 2001 An eye for the main chance

If ever there was a company fitting the bill of an emerging situation it was DCA Group, which is changing its focus from property investment to a pure-play health-care services model.

Under managing director Mr David Vaux, DCA is rapidly building scale in three key areas: diagnostic imaging, aged care and retirement villages.
Investment : Healthy fix for DCA Australian Financial Review April 7, 2001

Jun 2004 DCA history

DCA listed in September 1985 as Development Capital of Australia with a market capitalisation of only $8 million . Its market cap has grown to almost $700 million and will almost double again to $1.2 billion with the MIA deal.
Vaux Builds New Empire Australian Financial Review June 8, 2004

Jul 2004 Vaux's eye for the main chance

Vaux has been at DCA for six years and is the architect of its dramatic growth. He was appointed chief executive when the company was a $50-million cashbox with an eclectic range of investments and no clear direction. Vaux says he accepted the job on the condition that DCA would focus on radiology and aged care.
A commitment shared Business Review Weekly July 22, 2004



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DCA Leaders


Robert Purves and his sister, Sandra stepped into their fathers engineering business and fortune. They were wealthy philanthropists and enthusiastic environmentalists. Purves made his mark as a businessman and was the money behind DCA. While remaining chairman Purves has been low key leaving it to Vaux to drive the business.

May 1994 The Purves story

Engineering, investment. Robert Purves: Sydney. 36. Married, three children. Sandra Purves: Sydney. 38. Although still well-known as the son of a famous father, the late Sir Raymond Purves, who headed the engineering group Clyde Industries for many years, Robert Purves' own stature as a company director has increased in the past few years. In addition to being chairman of Clyde Industries, he is a director of the investment group Development Capital of Australia and the garden supplies company Arthur Yates. He has shareholdings in both DCA and Yates, but the bulk of his and his sister's fortune resides in their father's legacy, an 18% stake in Clyde Industries. Robert's other business interests include directorships in the meat producer T.A. Field Estates (his mother was a member of the Field family), General Reinsurance Australasia and the funds management group Regent Pacific. He is also vice-president of the World Wildlife Fund for Nature's Australian branch and a trustee of the Lizard Island Research Foundation. He and his sister are also involved, through the Raymond Purves Foundation, in making bequests to hospital foundations and medical research projects. - $55 million
UNDER $100 MILLION Business Review Weekly May 23, 1994

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A successful sportsman, trained as a lawyer, David Vaux brought a wealth of business experience and entrepreneurial skills in aggressive takeovers to DCA. He undoubtedly had people skills. It is a measure of his adaptability that he recognised the difference between the environment in aged care and in radiology. From his public statements he seems able to apply his people skills to meet radiologists aspirations and to recognise the humanitarian role of those working in aged care. There is no doubt about Vaux’s commitment to his mission but whether company conduct ultimately matches his rhetoric remains to be seen.

We don’t know how Vaux will address pressures created in aged care by the conflicts between pressure from the business world to reduce costs, government’s constraint on funding, and nursing home’s dependence on costly and well trained staff. We can only hope that his dealings with nurses and their unions will not emulate those of his mentor Chris Corrigan on the waterfront during the 1990s confrontation. Whether the homes will maintain standards in the long term, and behave humanely remains to be seen.

There are also conflicts between market ethics, market pressures and the priorities and ethical obligations of radiologists.

As we have discovered in these web pages words are easy and self-delusion common. In the USA the conflict between mission and practical reality was resolved by morale destroying whare-housing. The elderly were processed through regimented ablutions, feeding and other required activities with fewer and fewer staff - all in the name of efficiency. Senior management maintained the illusion of care by distancing themselves from what was happening. When criticised they responded indignantly claiming to provide the best of care.

Like Ramsay (Ramsay Healthcare)and Dixon (Healthscope) Vaux’s stint with Australian Hospital care had persuaded him that when negotiating with government or insurers leverage (which included size and situation) was critical to success - a position of strength. He had probably learned from the BUPA experience that offshore holdings provided a financial buffer which allowed far more aggressive negotiation and confrontation.

Vaux is a private man and what we know about him is only what he has chosen to reveal.

Jul 2004 Vaux's story

Vaux was born in England and his family moved to Perth when he was young. He attended Hale School, completed his law degree at the University of Western Australia in 1980, and an MBA at London Business School in 1985. He moved to Sydney in 1981, mainly to play rugby union
Moved to Sydney in 1981, employed by Freehills. Decided that business offered better opportunities than law and in 1984 left to study for an MBA. Recruited by Macquarie Bank in 1985 and worked in mergers and acquisitions for two years before joining the investment company AFP. When AFP's Australian assets emerged as Lang Corporation in 1992, he worked with Chris Corrigan at Lang until 1998. Shortly after, Vaux was appointed chief executive of the $50-million cashbox, DCA Group. Six years later - if the proposed merger with MIA goes ahead - DCA will have a market capitalisation of $1.3 billion, will be the largest provider of private radiology services in Australia and be prominent in the consolidating aged-care sector.
A commitment shared Business Review Weekly July 22, 2004

Jun 2004 Reviewing Vaux and the waterfront dispute

David Vaux spent five years as Chris Corrigan's right-hand man and executive director at Lang Corporation. He was the architect of Lang's reorganisation including the sale or listing of assets such as Freedom Furniture and Australian Hospital Care which let Lang concentrate on its Patrick stevedoring business. Patrick's contribution to revolutionising Australia's waterfront through its dispute with the Maritime Union of Australia is now well-known.
Vaux Builds New Empire Australian Financial Review June 8, 2004

Jul 2004 Business philosophy

David Vaux knows the value of teamwork and a game plan, and he has trained with some of the best in the business world.

A company's head office usually says much about its philosophy. Three years ago, the head office of the aged-care and radiology company DCA Group was above Wynyard Station in Sydney, and the music in the elevator battled against the distant rumbling of trains. Compared with that, the new office - only 100 metres away - is palatial, although it is still spartan by modern corporate standards. Nobody would ever describe DCA, or its low-key chief executive, David Vaux, as flash.
Stockbroking analysts say Vaux is a straight-talker who has not over-promised or under-delivered. One analyst says: "There's a lot of charlatans in the health business. So far, he's always done what he says he's going to do."
There is no doubting his expertise as a deal-maker. He is linked to some of the best-known names of business in the 1980s and 1990s, and his excellent networks straddle business and sport.
Vaux says that while working with Corrigan, Scanlon and others he learnt the value of thinking strategically. He is interested in the opportunities offered by the scale of the health sector (nearly $70 billion this year). It is an essential service that will never stop growing and it is increasingly privatised.

His interest in health was pricked with Lang's purchase of a stake in Australian Hospital Care (AHC). AHC was one of the early groups to become serious about consolidating individual or small groups of private hospitals into large businesses.

Vaux says: "I sat on the board for five years, we floated it and sold out after it listed. It was a very profitable investment for us, and it also gave me an insight into the health business.

"It was pretty clear that running hospitals is a difficult business because you are often the price taker. If you are going to be in that business, you have to be large enough to negotiate from a position of strength."
Running DCA has changed Vaux's view about management. He still believes there is no substitute for a detailed strategic plan and good fundamental research that involves more than sitting in front of a computer. But he talks a lot about the importance of human input to business success and about the commitment of the staff to patients.
"But more and more it seems to me that the human side determines whether you are going to succeed or not. You have to be able to attract the clever, motivated managers who share the passion for the business. Having a shared set of values, where everyone knows the direction you're going, is critical to the business succeeding.

"I spend a lot of time travelling, talking to the doctors, the nurses and support staff - a key part of the job, to make sure they understand the goals. People are always keen to talk to the boss, and I find you get pretty good feedback on how things are really working if you listen."
A commitment shared Business Review Weekly July 22, 2004



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DCA Policies and Objectives

An aging population and the many services it requires has become the honey pot for greedy corporate bears. DCA had already invested in retirement villages.

During 1996 and 1997 the new coalition Australian government restructured aged care to turn it into a marketplace. A backlash from the community had forced it to back away from some of its plans, and a lack of profitability from struggling nursing homes was discouraging. Not for profits, small individually owned homes and private corporations like Moran Healthcare dominated. The market circled but did not rush to invest. DCA was the first to take the plunge in 1999 but when it did it raced to secure a commanding position.

Radiology was a profitable but capital intensive business that in 2000 had not yet been consolidated.

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Vaux had long had health and aged care ambitions and a condition he insisted on when he was made managing director was that the company allow him to create an aged care and radiology giant, and divest most of its other businesses. This was done gradually over the years and the proceeds were used to grow the health care businesses. By mid 2001 DCA had sold its metal, hotel and property businesses to raise capital for its focus on aged care.

Aug 2000 Sells Metal products and hotel businesses

David Vaux, DCA's Managing Director, commented: "After successfully selling our holdings in Touraust and Exparnet for a net profit after tax of $9m and realised $20m in cash, DCA's focus is now on high growth healthcare, eldercare and lifestyle businesses.
Development Capital Of Australia Limited (DVC.AX) DCA Expands with Healthcare Acquisition.
Australian Stock Exchange Company Announcements August 9, 2000

Apr 2001 Sells out of property

Another issue on the horizon is the divestment of its 22 per cent stake in listed property group Delfin and a 33 per cent stake in the unlisted LWP Property Group. The company hopes to recoup between $30-$40 million from the divestment program.
Investment : Healthy fix for DCA Australian Financial Review April 7, 2001

May 2001 Selling to fund acquisitions

Managing director David Vaux says the proceeds (from sale of Deflin) will reduce debt and fund DCA's aggressive acquisition program - - - - -
DCA has been offloading investments unrelated to health and aged care and Delfin is the last to go.

It previously exited a metal manufacturing group and a hotel management business.

"We have decided to focus on health and eldercare and the Delfin stake didn't really fit with that," Mr Vaux said.
Delfin stake sale to cut debt, fund expansion. Adelaide Advertiser May 14, 2001

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Aged Care and Radiology

Aged care and radiology are among the last of the health care sectors to be wrested from individual operators and consolidated into large corporations in the name of efficiency and cost effectiveness. This is seen to be desirable and an opportunity for huge profits.

There are two measures of corporate economic success, profitability and growth. Service to the community and standards of care are economic considerations only when they impact adversely on profits or growth. As is well illustrated in the USA cost reduction threatens care and all too often service and standards are compromised.

To maintain service and standards either those receiving the services, the professional staff who act for them, or government agencies must have sufficient leverage to impact on profitability. In aged care most residents have little leverage. Government is driving the consolidation so is disinclined to confront issues which undermine policy. Nursing staffs are employees who can be silenced. Doctors play a relatively minor role in nursing homes when compared with hospitals. Aged care is very vulnerable.

In radiology doctors have less direct contact with and responsibility for patients and usually don’t make the final decisions. They are closer to the corporation.

DCA entered aged care in 1999 and radiology in 2000. It became a holding company and changed its official name to "DCA Group" and its ASX code to "DVC". Both sectors grew dramatically.

Jun 2005 The economics of growth

DVC is the largest listed provider of aged care generating 17% EBITA margins where many are losing money. Management expect to derive cost synergies from acquisitions and is investing in management resources to enable further growth.
DVC has taken the first mover advantage to build a portfolio of over 3,200 beds at reasonable prices. Their scale of operations located across the country means further acquisitions are bolted on to a framework for economies of scale. The Hogan report has prompted many independent providers to ask more for their operations in anticipation of further deregulation. Higher bed prices means return on invested capital become harder to achieve. DVC is not over paying for assets but inactivity hampers growth. DVC has a lot of acquisitions to digest and we continue to monitor management ability to derive improvements from recent acquisitions.
DCA GROUP (DVC) $3.68 : Aged Care and Medical Imaging Your Money Weekly June 9, 2005

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Balancing profitability and growth

Radiology is a high profit enterprise. Nursing homes are currently generating little profit but demanding investment in refurbishment and staffing to meet new physical and regulatory standards. Nursing homes generate only 22% of DCA’s profit stream. It is likely to remain low until sufficient dominance of the sector is attained to leverage payments.

The current profitability of aged care by itself cannot generate the profit stream needed to secure sufficient funds, from the markets or bankers, for the planned growth in aged care. By combining radiology and aged care, the profits from radiology are used to raise funds for expansion in nursing homes. This has been so successful that the company has almost doubled its target of 500 new nursing home beds a year and within 7 years operated 5000.

The company increases its value through growth. Shareholders love this but ultimately the company will have to deliver a profitable return on the investment in nursing homes. It remains to be seen whether they can accomplish this without compromising on care and morality. A few analysts have reservations. US nursing home chains made vast sums by compromised care and aggressively working the funding system. Unlike pathology and to a lesser extent radiology, the primary costs of nursing home care are nurses and the benefits of consolidation and the supposed efficiencies it provides are very limited. Nursing needs depend on the patient load and nursing does not cost less when the industry is consolidated. But nurses and their representatives have much less leverage and so more difficulty in maintaining staffing and standards.

Oct 2002 Using radiology profits to grow aged care

What the restructure does do is enable DVC to access all I-Med's cashflows - - - - . DVC has indicated it will use these I-Med cashflows - - - to fund expansion in aged care.

The residential aged care market has revenues of $6bn but is highly fragmented; DVC sees its role as to lead the consolidation of the industry. The company already owns 1,603 bed licences at 21 facilities in four States and the ACT.
Growth is planned through acquisition, developing new facilities and extending existing facilities, with a target of an additional 500 beds per year. The company is currently evaluating acquisitions which would bring another 1,000 beds.
DCA GROUP LTD (DVC) $1.78. Your Money Weekly October 10, 2002

Jul 2005 Growing in New Zealand

DCA's aged care operations currently account for around 22 per cent of its overall business. Mr Vaux said DCA was already considering further acquisitions in New Zealand.
DCA scoops up NZ aged care provider for $300 mln Australian Associated Press Financial News Wire July 11, 2005

That DCA so rapidly became one of the largest radiology groups in the world was at least partly because DCA seized the opportunities which presented. The growth in profitable radiology enabled DCA to generate a larger income stream and so raise more money from the banks and the marketplace. They enthusiastically obliged and DCA expanded more rapidly in aged care exceeding its targets.

Oct 2005 Radiology and aged care - dynamics

DVC derives 80% of its earnings from its IMED division, which acquired Medical Imaging Australia (MIA). IMED is the largest radiology provider in Australia and is busy consolidating the acquisition to derive a best of breed operating system. Greater scale enables IMED to invest in new technology to optimise productivity. IMED uses digital equipment to enable a radiologist on one side of Australia to review images from a patient on the other side.
DVC is expanding its foot print in the aged care industry. The aged care market needs and expects government regulatory action to create an incentive for industry to invest capital. DVC is a low cost operator that makes profitable margins in a generally unprofitable industry. DVC continues to enhance returns by acquisitions to create efficiencies through increased scale.
DCA GROUP (DVC) $3.82 : Aged Care and Medical Imaging Your Money Weekly October 27, 2005


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Getting Staff on Side

Like other health care corporations DCA set store on aligning managers, doctors and other employees financial interests with those of the company. This creates a conflict when the interests of the patients whom the employees serve are in conflict with the corporate profit mission. A legal way to do this is to ensure that employees are shareholders, and to offer senior management share options.

Mar 2003 Staff are shareholders

We now employ over 2,500 professional and support staff, most of whom are also shareholders in DCA through our various share ownership plans
Development Capital Of Australia Limited (DVC.AX) Half Year Result - DCA on track to achieve ... Australian Stock Exchange Company Announcements March 6, 2003

Oct 2003 Radiologists and equity

- - - - - - the business model of encouraging radiologists to own equity in the group is a good move as small business operators always want to participate in the success of the company.
DCA GROUP LIMITED (DVC) $2.17 - Radiology & Aged Care Your Money Weekly October 2, 2003

Sep 2005 A great reward

Those 76 ¢ shares of yesteryear were worth $3.97 yesterday.

One of the pieces of paper that DCA has on issue are options that expire at the end of this month. Holders are required to pay $2.35 to exercise them.

As it happens, some directors have accumulated large holdings of the options and it is those holdings that have led to some recent dealing in both the shares and the options.
Options play gives DCA holders a good diagnosis The Age September 17, 2005

Staff training programs should improve standards of care but in some instances they have been used to train staff in market practices which resulted in serious harm. All Tenet/NME staff were required to attend corporate training sessions which emphasised dysfunctional commercial practices These resulted in the enthusiastic adoption of successful money making practices which included the needless admission of many hundreds if not thousands of profitable but vulnerable normal children to psychiatric hospitals for long periods of time. I am not suggesting that this is what DCA’s courses do.

Also of interest is the deliberate recruitment of nurses from poor countries whose desperate need for trained staff for their citizens is far greater than ours. This is seen as a positive activity. The immorality of this is seldom questioned. The Royal Commission into Healthcare in Canada challenged the morality of this practice in a report that re-emphasised the importance of values and morality in health care.

Jul 2005 Nurses from poor countries

DCA will also use this experience to expand and develop its aged care management training school. Guardian (recently acquired New Zealand company) developed a successful overseas nurse recruitment program. Guardian sourced qualified nurses from the Philippines, Zambia and India to address the chronic short fall in qualified staff. DCA will learn from this program and look to import qualified nurses into Australia.
DCA GROUP (DVC) $3.95 : Aged Care and Medical Imaging Your Money Weekly July 14, 2005

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Cherry Picking

One way of making more money out of aged care is to target those patients who can pay more. This can be seen as a form of cherry picking. Nursing homes in the USA targeted better paying private and Medicare residents, avoiding low paying Medicaid recipients who typically graduated to not-for-profit providers. Private money typically ran out after a year and Medicare payments were short term. When these patients reverted to Medicaid funding, care did too. Some companies found a pretext to dump these patients back on their families.

As in the USA any reservations about policies which make nursing homes more profitable by targeting wealthy seniors are drowned out by DCA’s marketplace success. It must be good if it is profitable! One can certainly argue that those who have funds are entitled to purchase additional comforts, not provided by government. Encouraging them to do so for the profitability of investors who have no interest in their welfare adds another dimension to the debate. Many have limited resources and anxious families can be unscrupulously bled in order to boost profitability.

Jul 2004 Not really a service for the wealthy

The reality of aged care, though, is very different from investment banking. It is not always a happy or uplifting area in which to work or run a business: people are old, sick, suffering from various dementias or other difficult problems. Many have very little in the way of financial resources or family support.
A commitment shared Business Review Weekly July 22, 2004

In radiology DCA has also made more money by adopting a policy called "shift to the right" which seems to be a similar strategy.


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Management style

Some idea of Vaux’s style is revealed in the section about him above and his policies in radiology and aged care are addressed later. The following extract after DCA had acquired the much larger MIA is also revealing. We should not doubt his commitment to "quality" but what will he do if and when he finds that quality and profit cannot coexist. Quality is an ill-defined concept. Some have found it expedient to equate profitability with quality.

Jul 2004 Management style

Unsurprisingly, Vaux has little use for expensive consulting services. However, MIA's recently appointed chief executive, Paul Mirabelle, was previously with Boston Consulting Group. Radiologists at MIA have noted wryly that numerous BCG consultants have spent long periods in the company since Mirabelle moved into the job late last year.

With an eye on the long term, Vaux is very aware of the importance of maintaining DCA's reputation as a quality provider of aged-care and diagnostic imaging services. "We aren't interested in short cuts; the aim is to build a sustainable company."
A commitment shared Business Review Weekly July 22, 2004


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DCA’s entry into the radiology and aged care marketplace has been spectacularly successful appealing to those for whom profitability is important as well as those whose prime interest is growth. Company promotions and analysts advice do not target those whose interest in investing in aged care is to further a humanitarian agenda. So far Vaux has repeatedly proved his critics to be wrong.

Nov 2000 Refocusing

The 1999/2000 year was a very busy one for DCA built around the Company refocusing to become a holding company for healthcare, eldercare and lifestyle businesses"
Development Capital Of Australia Limited (DVC.AX) Chairman`s Address to Shareholders at AGM. Australian Stock Exchange Company Announcements November 6, 2000

Apr 2002 Market performance

Few health-care companies can boast a doubling in share price over the past year, with sentiment towards the sector near an all-time low.
By contrast, retirement home and radiology operator DCA Group is up 108 per cent over the past 52 weeks
DCA Stands Out In Ailing Health Sector Australian Financial Review April 29, 2002

Jun 2002 The market rides triumpnant

Aged healthcare centres are big business if you're the only serious player in town. DCA Group plans to take full advantage while the rest of the struggling healthcare sector only mutters about making a move into the market.
DCA marches on Sydney Morning Herald June 27 2002

Sep 2003 Best performing stock

Aged care and diagnostics group DCA was the best performing stock in the ASX 200 yesterday after the group beat prospectus forecasts.
Glowing DCA Tops Forecasts With $14.5m The Sydney Morning Herald September 5, 2003

Apr 2004 Shares go up and up

The share price of the DCA Group, a company involved in diagnostic imaging and aged health care, has more than doubled since January 2, 2001, when it closed at $1.07. On Thursday, it closed at $2.57.
Smart investors chase the grey dollar Sunday Telegraph April 11, 2004

Jul 2004 Some have reservations

Although some brokers and institutions regard Vaux as the latest wunderkind, a few sceptics in rival aged-care and radiology groups say that his practical challenges are enormous.

Top of the list is sorting out MIA's continuing underperformance, integrating the MIA business with DCA's radiology division (I-Med) as well as extracting decent returns from aged care.
A commitment shared Business Review Weekly July 22, 2004

Jun 2005 Most analysts praise DCA

One of the standouts in this field is DCA Group, which has established itself as a dominant private player in two major sub-sections of the health-care market: diagnostic imaging, where it is the largest operator in Australia; and residential aged care, where it is the No. 2 private operator with 37 facilities operating roughly 3000 beds.

Analysts say one of the firm's chief attractions is its ability to generate higher growth than the industry norm. In 2005-06, some tip DCA to deliver above-trend revenue growth, owing to a combination of market-share gains and improving co-payment fee structures. Merrill Lynch health-care analyst Michael Carmody says DCA is cheap.

"In a market being negatively impacted by regular earnings downgrades, we see DCA's defensive characteristics as being a key positive for the stock," he says. "The consistent margin expansion implied in our DCA forecasts incorporates the positive earnings impact we expect DCA's technology strategy to deliver over the medium term."
Taking the pulse of health care Australian Financial Review June 8, 2005

Aug 2005 Profitability

"The merger of I-MED and MIA has been very successful and operating margins have improved significantly," managing director David Vaux said.
""Our aged care business has also grown substantially with profit increasing by 21pc," he said.
DCA Group FY net profit $17.43m, div 4c Ralph Wragg Australian Business News August 25, 2005

Elsewhere I have used the US experience to describe the divide in perceptions between the market and citizens. I listed some red flags - characteristics of a companies at risk of misusing patients or indulging in fraud. Most of the worst US companies applied strict market principles and were spectacularly successful in generating profits from care and/or fraud. It is not surprising that measures of success are prominent among these characteristics.

Very rapid growth is a matter of particular concern in regard to DCA. Several US companies (eg Sun Healthcare) grew dramatically over only a few years. To support this they required a massive profit stream. They raped the services provided to the elderly and exploited every weakness in the funding system in order to secure it. When the government finally stepped in to stop what was happening these companies entered Chapter 11 bankruptcy. Government was unable to penalise them adequately because of the impact on the frail elderly and the consequences if the companies went out of business. Instead they were helped to trade out of bankruptcy.

A less savoury money making strategy has been to sell a model of care which is not economically viable to investors then sell out before it all goes wrong. Analysts once waxed lyrical about General Practitioner corporations and many citizens were conned into investing. Only one of those companies made money. Stockholders in the others lost heavily. It should have been obvious that the business model was not viable and had already failed in the USA.

A lack of profitability can be obscured in the complex accounting arrangements surrounding growth as it was in HealthSouth and General Practice in the USA. The giant financiers such as Citigroup advised and assisted companies like Enron and WorldCom to do so. The original owners can sell their shares and collect their profit before the company collapses.

It is possible that the original investors may be as deceived by the apparent potential of their model as those who invest, and there is no means of showing that they were not. When these are highly skilled and experienced businessmen then their naiveté should raise eyebrows.

At the present time we have no grounds for suspecting that Purves and Vaux are not as committed to building a long term profitable aged care service as they claim to be, but investors should be aware of the experience of others. The extract below is of concern.

Jul 2005 Getting information

But the broker said DCA was a company that was continually changing, making it difficult to asses the businesses on a steady basis.

Credit Suisse First Boston said there was little aged-care investment opportunities in Australia unless there were some fundamental changes to the way the industry was funded.
Flux leaves DCA on neutral BIG PRICE MOVERS The West Australian July 12, 2005

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Share Value Plunges in 2006

The business prospects from nursing homes are seen as uncertain and the market is jittery. The business depends very largely on goverrnment payment. When profits can't be made companies have no choice but to turn to government for funding. In May 2006 DCA predicted a profit downgrade precipitating a rush to offload shares pushing the share price down over 20%.

The company blamed this on competition in radiology from public hospitals. It seems unlikely that public hospital activities in the private sector would have a significant inpact and some analysts have questioned this explanation suggesting there may be something more fundamental.

It remains to be seen whether this sudden change is due to a jittery market's response to a minor hiccup in profitability or whether it is the start of a major slide. The company's business model is problematical and has yet to prove itself. The worry is that these pressures will cause the company to cut costs and we will see more examples of failures in care at its nursing homes.

May 2006

Shares in the aged-care and imaging company plummeted more than 22 per cent on Friday following the profit downgrade it issued after Thursday's market close.

The stock touched a two-year low as investors wiped more than $400 million from DCA's market capitalisation. It closed down 72¢, or 19 per cent, at $3.08. Before the slump DCA shares were trading at about 38 times earnings.
DCA wants beds but takes a bath Australian Financial Review May 13, 2006

May 2006

INVESTORS wiped more than $340 million from the market value of DCA Group on Friday as the diagnostics and aged-care company blamed a fall in its earnings forecast on public hospitals poaching its patients.

Analysts accept the loss of private patients is one reason for the earnings downgrade, but believe the company is also suffering from substantial increases in salaries for radiographers and radiologists in the past year.
He (Vaux) denied he was shifting the blame for the company's downgrade to a factor outside his control, saying the loss of patients was the primary reason for a 3 to 5 per cent fall in revenue.
DCA backers out as wages go up, patient figures down
The Sydney Morning Herald May 13, 2006

Shares in DCA fell 24.22 per cent in the three trading days after the profit downgrade announcement and broker Merrill Lynch dropped its rating to "neutral" from "buy", trimming its estimated revenue growth to 4 per cent from 6 per cent. Yesterday, the share price closed at $2.85, down 3.39 per cent or 10¢, on Wednesday's close.
DCA won't take setbacks lying down Australian Financial Review May 19, 2006

The largest to downgrade its earnings guidance was DCA Group. It had more than $400 million wiped from its market capitalisation as investors rushed for the exit door.
Forecasts flounder on consumer doubt Australian Financial Review May 20, 2006

Because most of the money comes from government these nursing home companies must get government to increase payments if they are to restore profitability. It is probably not a coincidence that at the same time DCA was urging government to increase payment and let them charge residents more. This is what the government wanted to do in 1997 but a public backlash prevented it.

May 2006

THE chief executive of Australia's biggest commercial aged-care provider is lobbying the Federal Government for an overhaul of aged-care funding.

Amity Group chief David Armstrong will today unveil his plan at a National Aged Care Industry Council forum in Canberra on the future of aged and community care in Australia.

The plan involves lifting the maximum that amount aged-care providers can charge self-funded retirees for accommodation from $16.63 a day to $40 a day, with the price depending on the features of the facility.
Mr Armstrong said the fee increase was necessary to allow aged-care operators to comply with the Government's 2008 certification standards, which require that their buildings meet stricter safety and privacy measures for residents.
Aged-care chief calls on government for funding overhaul The Age May 15, 2006

May 2006

The listed group works in a closely regulated sector and sources 60 per cent of its diagnostic imaging revenue and nearly 75 per cent of its aged-care revenue from governments.

The fortunes of operators in the sector shadow government policy, and margins are notoriously tight.

Now DCA, widely considered the most efficient and best-performing company in the sector, is feeling the squeeze.
Research analysts are scathing about the cap on charges to residents.

They say it has eroded margins in the sector and encouraged inefficiencies and poor standards of care by paying equal subsidies to all aged-care providers, regardless of their performance.

Analysts hope margins have dipped so low that reform of the system is inevitable.

"General market consensus is it is inevitable that the market has to be opened up with more subsidies or greater user-pays systems and that will reverse the margin erosion," Macquarie Research's Marcus Wilson says.
DCA won't take setbacks lying down Australian Financial Review May 19, 2006

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STOP PRESS Sept 2006 and Mar 2007
Citigroup Companies Buy DCA

September 2006:- After some rumours that DCA was trying to sell itself DCA announced that Citigroup's venture capital subsidiaries CVC Asia Pacific and CVC Capital Partners had made an offer. DCA has advised acceptance. The company will then be delisted from the share market and be operated privately. The takeover requires regulatory approval from a number of regulatory bodies and will require shareholder acceptance in November 2006.

The concern here is Citigroup's probity. Citigroup has been at the centre of multiple large scandals including the deception of trusting small investors which its analysts and brokers had a duty to advise. It has recently paid out about $10 billion to settle court actions related to its involvement in the Enron and Worldcom frauds.

It is relevant that NSW spent 18 months carrying out a thorough probity review when the same group of venture capitalists bought Mayne hospitals in 2003. They found the group wanting and only granted licenses with restraining conditions.

Nursing homes are far more vulnerable than hospitals and it will be interesting to see how aged care regulators will handle this problem. Will they stop the sale in order to protect the elderly or will they find some formula which will allow them to support the market.

March 2007:- Objections were lodged with the regulators. After a 4 months delay when the matter was off the front pages a reply from the department of aging indicated that under the legislation they were not required to evaluate multinational's buying Australian nursing home companies. It is revealing that the government had created the loophole so that multinationals could bypass our regulations and would not suffer the probity problems US hospital corporations had run foul of in state licensing regulations. The public statements, revelations about the minister's character, and a review of recent and earlier correspondence provide a facinating insight into the way the country is run behind the public facade. In March 2007 I wrote another page about it.

Click Here to go to the "Citigroup Buys DCA" web page


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The Nursing Home Business


Aged care is a person intensive activity and the standard of care is heavily dependant on the quantity and standard of nursing, the ambience of the home, and the motivation of all staff.

Running Nursing homes for profit is a business where the costs of matching increased occupancy with adequate staffing markedly reduces profitability. Finding and keeping suitably skilled and motivated staff has been and still is a problem for all nursing homes. Nursing home staff are already amongst the more underpaid employees in society. The potential for rationalising costs through changes in staffing without also compromising care is small but the market is unable to accept this. To a corporate cynic simply making working conditions unpalatable and not recruiting too energetically is an easy way to keep staffing low, costs down and profits up. A way to rationalise it is at hand, there is no way of knowing it is happening, and no one can challenge the excuses, because the nursing shortage is real.

Oct 2003 Achilles heel

However, aged care is the achilles heal for DVC with rising nursing costs hamstringing margins. Margins have already stated to showing signs of weakness with the EBIT margin falling from 17.5% to 16.5% in 2003. Rising nursing costs, which represent 50% of divisional revenues, will continue to place pressure on margins.
DCA GROUP LIMITED (DVC) $2.17 - Radiology & Aged Care Your Money Weekly October 2, 2003

Aug 2005 Impact nursing costs

DCA's aged-care business performed well with revenues up 26 per cent, but operating margins were crimped by a 2 per cent rise in remuneration costs.

This was due to nursing wages increasing at a higher rate than federal government funding.
"In the next three to five years we think there will be fewer players and expect to become the largest provider," he said.
DCA gets lift from a scan for synergy The Australian August 26, 2005

In the USA the blind belief that nursing care was inefficient and that efficient systems would permit large cost reductions by reducing both the number and the expertise of staff. The imperative was to reduce already overburdened staff further and the adverse consequences were ignored. Some Australian analysts attribute DCA’s success in aged care to similar policies, and the worry is that this information probably came from DCA. The benefits from centralised administration, group buying etc. are limited. Nursing is the main cost. What will DCA do when it can't meet these expectations without culling or deskilling staff? The US experience tells us that this will flow on to others. Those competitors who don't do so go under.

Apr 2004 reducing fixed cxosts ?? nurses

The company can reduce its operating costs of supplying aged care because the fixed costs of running the combined operation is spread over a greater number of revenue generating beds.
DVC's low comparative cost of supplying aged care services ensure that they will derive the biggest earnings impact (from increased government funding). The DVC share price has increased 58% over the last year and has already factored into account the predicted growth in revenue through the consolidation of the aged care market.
DCA GROUP (DVC) $2.61 Your Money Weekly April 22, 2004

Motivation driven by empathy and dedication is a key factor in retaining staff who could make more money elsewhere. One of the consequences of the efficiencies introduced by corporate nursing home chains has been to reduce the time for interaction between staff and residents. Empathic motivation is lost, staff become alienated and find employment elsewhere. As is well illustrated by the USA, the shortage of dedicated staff throughout the industry is compounded when they cannot give their patients the care they know is needed. Increased reliance is placed on recruiting staff from poorer countries whose need for these trained staff is greater than ours.

Corporate chains legitimately claim that they are victims of the shortage but as reduced staff levels improve profitability there is little incentive for them to find staff or to pay more than lip service to addressing the problem.

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Costs of refurbishment

The government set new physical standards for nursing homes in 1997. The costs of developing or refurbishment facilities to these standards are high. Many smaller not-for-profit and personally owned nursing homes simply could not raise the needed capital. They were forced to sell to groups who could raise that capital from the share market.

It is clear that government’s un-stated policy is to consolidate the sector through corporatisation and market mechanisms. Its regulations are directed towards that end. The Salvation Army owned and managed homes for the less fortunate sections of the population. They elected to sell when faced with the prospect of paying many millions to refurbish these homes. Even DCA backed out of the sale.

Other groups eyeing nursing homes had been holding off and these regulatory and funding constraints were putting pressure on the system. Government used its surplus to come to the rescue in 2004, and give corporatisation a push, with a one off cash injection as well as increased payment.

May 2004 Government to the rescue

The five-year package included a one-off cash injection of $3,500 for every nursing home resident, designed to help operators invest in deteriorating facilities.
Managing director David Vaux said the one-off payment would contribute about $8 million to DCA, while changes to recurrent funding would net the company $1,000 per bed per year.
DCA Group shares soar after budget gives aged care $2.2b boost Australian Associated Press Financial News Wire May 12, 2004

May 2004 Good news for DCA

DCA managing director David Vaux said the news boded well for DCA's "aggressive" expansion strategy, which aimed for 5000 beds in the next two to five years. With recent acquisitions, the group now has 34 aged care facilities and 2562 beds, with a further 188 under development.
Package puts a spring in the step of aged care providers - Budget Reaction The Australian May 13, 2004

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The dynamics of corporatisation

The funding of nursing home care comes largely from taxpayers. The market recognises this and responds rapidly to any changes in public funding.

May 2004 Shares respond to government largesse

SHARES in aged care provider DCA Group shot up 5.5 per cent yesterday on expectations that programs in the federal budget deliver the group an $8 million one-off grant in addition to higher patient subsidies.
Package puts a spring in the step of aged care providers - Budget Reaction The Australian May 13, 2004

Taxpayers cannot be expected to pay permanently for a gravy train, although governments who control the money frequently do try. It is therefore difficult to rationally and ethically justify investor enthusiasm or pretend that this will be a bottomless pot of gold as some analysts have indicated. This can only happen when corporations can hold citizens to ransom.

Large nursing home chains in the USA have been very profitable but much of this has been accomplished by exploiting the vulnerability of the funding system, fraud, and by short changing care. Additional factors have been the close relationships between businessmen and government, and their influence through political donations and lobbying.

As important has been the leverage secured by size, by the essential nature of the services provided, and by the vulnerability of those who are served. Once a company gains a critical mass, the political costs of acting to close down corporate activities become prohibitive as is well illustrated by the USA. Corporations were and are in a strong position to negotiate favourable settlements. Governments fell over backwards to keep threatened corporations guilty of fraud and neglect of the elderly in business. Governments no longer had the resources to step in and care for the aged citizens.

Problems with care are compounded when governments try to restrict the profitability to which now powerful companies think they are entitled. Companies simply blame the government's unwillingness to pay more.

Marketplace theory indicates that apposing economic forces balance themselves out in the best interests of citizens. The US experience shows us that this is not so in health and aged care.

The market can and does raise the capital needed to build hospitals and nursing homes from the superanuation and other savings of the same citizens who would complain bitterly about increased taxes. While it is a bit of a lottery the lucky winners are ultimately repaid with interest. In Australia the taxes paid by all the people are used to pay this. The consequence of this financial sleight of hand is a complex system built around economic levers which generate forces that continuously put pressure on care.

Corporations of course strongly deny this pattern of reasoning, and justify their activity in other ways. They claim the allegations about the USA are exaggerated. Whether it is intentional or not they ultimately find themselves with political influence, money to donate, and money to lobby with, as well as the leverage need to support their profit agendas when dealing with government. They have a responsibility to their investors to utilise these for economic benefit and can boost their own bonuses by doing so. That is the US system of health and aged care.

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The Consequences of Leverage

Large aged care companies are almost immune from major punitive action by regulators as is well illustrated in the USA. Studies have shown that homes run by for profit chains have consistently provided poorer care than not for profit services.

In the USA regulation did little more than skate around the edges of the problems. Fines for poor care were not punitive. They were whittled away in expensive negotiation and appeals. Fraud settlements were waived or markedly reduced to ensure that the companies were able to continue services and did not go out of business.

The only effective punitive action was through the courts where horrified juries awarded appropriate fines against wealthy companies who had deliberately understaffed and neglected residents to boost profitability. Groups of concerned citizens banded together to encourage and guide relatives in this endeavour. The companies have succeeded in inducing politicians in many states to cap damages for these cases. Companies have vacated those states where litigation costs remained punitive.

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Enthusiasm for aged care

The potential costs of caring for the aging population fuels the drive to privatise aged care and the wild enthusiasm in the marketplace for aged care services. Goverments know that they are unable to fund the infrastructure to meet future needs without raising taxes. They have promised not to do so. This is at a time when the country is booming and so well able to meet the increased costs. The marketplace is only too eager to help them out at a profitable price. This is quite apart from the ideological forces driving privatisation. Thereare a number of studies which suggest that the future impact of an aging population has been exagerated for political and market selfinterest.

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The First Mover Advantage

DCA’s was the first of the market listed groups going into aged care and it grew rapidly clearly intending to dominate the market. When he was a director of Australian Hospital Care (AHC) Vaux learned the importance of size and leverage when negotiating with competitors and with government. Vuax used the advantage gained by being the first into the market to grow very rapidly and strategically. DCA believes that its nursing homes will eventually be very profitable. How it will accomplish this remains to be seen.

Oct 2002 DCA's position

"Our move into aged care is driven by three factors," said Mr Vaux. "Demand for aged care will increase substantially in the next 10 to 20 years; the industry is really fragmented; and we have, I think, the best aged-care management team in Australia. There is an outstanding opportunity to grow a very substantial company."
DCA chief sees big growth in takeover. Australian Financial Review October 2, 2002

Oct 2003 First mover advantage

"Although radiology remains the largest earnings contributor . . . the growth potential offered by [DCA's] first-mover advantage in the Australian aged-care industry is the primary basis for investment," Michell says.
So Many Floats, So Much Choice The Sydney Morning Herald October 10, 2003

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Targeting better paying residents

DCA’s reasons for entering aged care include the expected demand created by an aging population. Recognising the limitations of government funding they have targeted the wealthy sector of the marketplace and are particularly eager to capitalise on the large numbers of baby boomers who have accumulated wealth and are accustomed to buying the best. They will pay for more. This would make DCA less dependant on government funding; a strategy also adopted by US nursing home chains.

The situation in the USA was not dissimilar with three levels of increasingly lucrative funding from Medicaid, through Medicare to Private funding. In the USA companies cherry picked, targeting better paying Medicare and self-paying residents. They were admitted to homes ahead of needy Medicaid citizens. They were often housed better and given better care.

Medicare funding was time limited and personal funds were soon exhausted. Residents were then downgraded to Medicaid level wharehousing and sometimes simply dumped back with relatives. There were disturbing practices and scandals. It remains to be seen what the future will provide for Australians.

The descriptions of luxury nursing homes are reminiscent of the failed luxury health care plazas advocated by Doug Moran who targeted wealthy Asians during the 1990s

Jun 2000 Targeting the wealthy

The group is also planning to launch a series of top-end aged care facilities, aimed at Australia's wealthy. Mr Vaux said the move would attempt to cash in on rich individuals looking for premium care in their later years. He said the company was investigating several possible development sites.
DCA Agedcare Takes Another Step On Acquisition Trail Australian Financial Review June 27, 2000

Jun 2002 Going to wealthy areas

Obviously it is important to build or acquire facilities in areas where large numbers of old people live. Upon completion of this year's acquisitions DVC will have five centres in Sydney's affluent North Shore. These should be particularly profitable acquisitions over time. Anyone with grandparents or elderly parents on Sydney's North Shore will be familiar with the scarcity of quality nursing homes and retirement villages.
Your Money Weekly June 27, 2002

Jul 2002 Luxury nursing homes

Healthcare specialist DCA Group is putting the finishing touches to its $15 million aged care facility at Mosman, the first in a chain targeting wealthy people across Sydney.
A further $120 a day is charged for use of additional services, which include an in-house hairdressing salon, aromatherapy treatment and a fully catered dining room for private family functions. The Federal Government pays a further $50 to $80 depending on a resident's classification. David Vaux, managing director of DCA, is developing another three premium-style facilities in Sydney's affluent north corridor and plans to take the concept further afield.
DCA targets aged who want to go out in style Sydney Morning Herald July 12 2002

Jul 2002 Flagship at Mosman

He added "Amity at Mosman" would set new standards in residential aged healthcare with 60 private rooms featuring dedicated en-suite facilities and "the ambivalence (?ambience) of an exclusive hotel".
DCA settles acquisition of Mosman aged care centre Australian Associated Press Ralph Wragg Equities News July 17, 2002

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Spinning off assets into a trust

Selling all the physical assets into a trust is a common way of raising more capital through the market, reducing debt for the main company and shielding the assets from creditors should the company go under. The banks and some retirement companies have gone this way. By 2006 DCA was planning to go this way too.

May 2006 Planning a property trust

In a first for the listed property trust sector, aged care and diagnostics company DCA Group will review its ownership of residential aged-care assets and investigate establishing its own trust.
(Vaux) "As you can imagine, for us to materially grow our portfolio and look to double our size in the next three to five years there are implications for the management of our balance sheet and how much debt or new equity we want to raise," Mr Vaux said.

"It's getting close to the time where we set up our own listed property trust. Then we can finance part of the growth in the company through that means.

"Having a specialist entity owning the properties in turn attracts specialist property investors, and that can reduce our cost of capital and give shareholders a more value-enhancing way of owning facilities."

DCA would continue to operate the facilities in the trust and would have a close working relationship by taking a large stake in it.
DCA listed trust on the cards Australian Financial Review May 5, 2006

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Growth of DCA's Amity Group (Nursing Homes)

Vaux poached three key staff from Moran Healthcare. In 1999 DCA formed Amity Group which was 75% owned by DCA and 25% by the three executives poached from Moran Health Care. DCA set out to invest $50-60 million in nursing homes and rapidly bought 5 homes in Brisbane, Toowoomba, Sydney and Tamworth. The plan was to raise further capital by floating on the share market and then spend $250 million over 5 years. The principal target for profitability was the more profitable luxury end of the market - catering to the wealthy.

Feb 1999 Amity Group created

Listed investor Development Capital of Australia plans to float a $250 million nursing home trust within three years after snaring three key executives from Australia's largest private sector nursing home operator, the Moran Health Care Group.
DCA has spun off an unlisted trust, the DCA Aged Care Trust, in a joint venture with former Moran executives Mr David Armstrong, Mr David Farrugia and Mr Armando Sgroi.
Recognising the market's potential, Mr Vaux led a sortie on the Moran Group late last year, recruiting its business development manager Mr Armstrong, nursing home operations manager Mr Farrugia and information systems manager Mr Sgroi to form Amity Group Pty Ltd, a joint venture company 75 per cent owned by DCA and 25 per cent owned by the former Moran executives.
DCA Targets Health Care Float Australian Financial Review February 2, 1999

Mar 1999 Growth plans - planned listing

The group will pump $50 million to $60 million into acquisitions in the next six to 12 months, with a view to listing Australia's first nursing home trust within three years.
Development Capital Buys Into Aged Care Australian Financial Review March 16, 1999

Oct 2002 Structure

Amity leased facilities from DCA Agedcare Group and operated the nursing homes.
DCA Group Limited. Jobson's Year Book October 31, 2002

DCA was growing its aged care division using the profits from radiology, but the complex structure of its radiology subsidiary I-med made this difficult. I-med was restructured in 2002 by buying out all other shareholders. This change allowed accelerated aged care growth from 2003 onwards using I-Med revenue.

At the same time DCA bought out the other shareholders in Amity. Both radiology and aged care became wholly owned subsidiaries. The plans to float these companies separately had long since been abandoned. By the end of 2005 DCA operated over 5000 nursing home beds.

Dec 2003 Buys all of Amity Group

DCA Group Ltd has increased its shareholding in its aged care operator, Amity Group Pty Ltd, from 75 per cent to 100 per cent.

The additional 25 per cent interest was acquired from interests associated with Amity's executive directors, who have entered long-term employment contracts with DCA.
DCA Group lifts interest in Amity Group to 100pc Ralph Wragg Australian Business News December 18, 2003

Aug 2004 Radiology funds nursing home acquisitions

DCA's strategy has been to skim the excess cash flow thrown up by its diagnostics business to invest in the aged-care industry, giving it double the exposure to the lucrative health and health services market. Mr Vaux said he expected the imaging business to lift earnings by at least 5 per cent this year, but it should do "significantly" better than that.
Healthy DCA to spend $45m on 500 more beds Australian Financial Review August 25, 2004

May 2004 MIA becomes part of this

In fact, DCA sees the MIA deal as an opportunity to improve cash generation, providing the liquidity needed to deal in the capital-intensive aged-care sector.
Radiology Merger Under The X - Ray Australian Financial Review May 31, 2004

DCA had set a target of 500 new beds each year but it was soon exceeding this.

Apr 2003 Growing by 500 beds a year - earnings forecast

Mr Vaux said the company wanted to acquire 500 new beds a year and he predicted the group's earnings before interest and tax would increase from $15 million to $45 million over the next three years.
DCA nurses growth program. Australian Financial Review April 23, 2003

Apr 2004 Growing costs

Management has indicated the aim to increase beds under management by 500 per year. The average cost of a bed is currently just over $90,000, therefore we expect the DVC to pay $50m per year in acquisitions to maintain this growth rate.
DCA GROUP (DVC) $2.61 Your Money Weekly April 22, 2004

Both DCA and Ramsay were interested in buying a large package of nursing homes put up for sale by Moran. The sale was blocked by a consortium including AMP and a US company. Moran had sold the hospitals to them and then leased them back.

May 2003 Interest in Moran homes which serve wealthy

Nursing home magnate Doug Moran will sell most of his A$300 million empire to competitors to help reduce debt, with listed healthcare company DCA Group Ltd. (A.DVC) thought to be in the box seat to pick up the assets, the Australian reports Thursday.
DCA Grp Tipped To Buy Moran Nursing Homes Dow Jones International News May 15, 2003

Reports indicate that DCA was interested in buying the Salvation Army’s nursing homes but backed away after determining the costs of required refurbishment. The Salvation Army’s clientele were not the wealthy Australians who would make this investment profitable.

Jul 2004 Not Salvation Army homes

"DCA confirms that it withdrew from the sale process several weeks ago and therefore is not involved in the sale of the Salvation Army aged care facilities in any fashion," DCA said in a statement.
DCA denies it is bidding for Salvation Army age care assets Australian Associated Press Financial News Wire July 8, 2004

 The number of groups, led by DCA, talking up the potential for nursing home profitability caused sellers to demand top dollar. Ramsay elected to concentrate on building its own nursing homes, a much slower process. DCA did build some but preferred to pay for existing nursing homes or refurbish unprofitable or closed hospitals.

Jul 2004 Looking back at history

By the time the chairman of DCA, Robert Purves, asked him (Vaux) to take on the job as chief executive, he had seen the opportunity in aged care. "You don't often see opportunities that are too good to miss, but that is what we saw with aged care - a large sector that had, until then, gone unnoticed," Vaux says. "From an industry analysis point of view, aged care has many attractive features. It is a big business - $6 billion a year now - it's growing, ownership was fragmented, there were no major corporate players, the quality of service varied. It is also an essential service.

"Then I came across the core management team from [the rival aged-care provider] Moran, who were looking to run their own business. DCA at the time had a range of investments, including a sheet-metal fabricator, the Country Comfort motel chain and retirement villages. We jointly developed a plan to develop the aged-care business and decided to sell off the non-health businesses."
A commitment shared Business Review Weekly July 22, 2004

Nov 2003 Structure and growth

DCA, which entered the market four years ago, claims a market capitalisation of $550 million and about 2500 beds. All the facilities are run through a property trust and leased to the Amity Group, of which DCA has a 75 per cent stake.

Managing director David Vaux intends to double DCA's size over the next year. He maintains financial support is already out there as long as the formula is robust.
Old Rockers Spark A Boom The Age November 1, 2003

Nov 2004 Contrasting DCA and Ramsay

Rather than buying existing aged-care centres, Ramsay intends to buy land and design and build from scratch.

This model differs from DCA Group's aggressive strategy of buying established centres.
Seniors set to drive profits Sunday Mail November 28, 2004

Jun 2005 Growth by acquisitions

DVC grows through acquisition aiming to acquire a pipeline of aged care facilities which would add at least 500 beds under management a year. This strategy has seen the bed price paid rise sharply. - - - - - - DVC has paid around $110,000 a bed.
AGED CARE SECTOR : The Ageing Time Bomb, Tick, Tick, Tick........Boom! Your Money Weekly June 9, 2005

By 2006 DCA Group was a big global business in radiogy and aged care

May 2006 Size

DCA has a market capitalisation of about $1.7 billion and operates diagnostic imaging services in Australia and the United Kingdom, and residential aged care in Australia and New Zealand.
DCA has more than 6000 beds in its aged-care business, with occupancy at 94.2 per cent.
DCA listed trust on the cards Australian Financial Review May 5, 2006

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Facilities purchased or developed

The following reports do not embrace every purchase but do indicate the scope of DCA’s activity. There was a temporary slow down in 2000 and 2001 as DCA focused on growing and establishing its profitable radiology services. This accelerated again in 2002. It is not clear how many not for profit nursing homes became for-profit in the process, but many smaller owners sold out.


Oct 2002 Looking back on the first year

Two nursing homes were acquired: Rangeview in Toowoomba and Tamworth Nursing Home in Tamworth.

During 1999/2000, the Company acquired the following nursing homes for a total consideration of $20 million: July 1999 Colonial nursing home in Bexley, NSW; August 1999 Chateau nursing home in New Farm, Queensland; September 1999 Milton nursing home in Roseville, NSW; and June 2000 Ashbury nursing home in Ashfield, NSW.
DCA Group Limited. Jobson's Year Book October 31, 2002


Jun 2000

Yesterday, DCA announced it had spent $12 million on two new facilities in Canberra and Melbourne, boosting its assets to eight residential centres with 623 beds.
DCA Agedcare Takes Another Step On Acquisition Trail Australian Financial Review June 27, 2000

Aug 2000

DCA Agedcare has acquired another aged care facility in Victoria.
Development Capital Of Australia Limited (DVC.AX) Healthcare Acquisitions top $50m. Australian Stock Exchange Company Announcements August 14, 2000


Jun 2001

- - - - - the acquisition of two additional aged healthcare centres, at Greenacre and Ashfield in Sydney.
DVC - Announces aged healthcare expansion 1/1 (S). Australian Associated Press June 28, 2001


Mar 2002

As part of the plan the facility (at Griffith) will be expanded by around 30 beds, to include a dementia-specific unit.
Nursing home to expand with takeover. Australian Broadcasting Corporation (ABC) Regional News March 5, 2002

Apr 2002

However, DCA plans to have bought five existing centres around Newcastle, Sydney and the Central Coast by June. A high-care service will be bought in Mosman. A further two high-care service facilities being developed in Sydney are expected to be completed next year.
Earlier this month, the group announced agreements had been signed to acquire two recently built aged healthcare centres (Tweed Heads and the Gold Coast) for $13.4 million.

In February it unveiled another two centres (Waverley, north of Sydney, and Griffith in the NSW Riverina district) for $10.5 million, and in early March, the purchase of a 2500 sq m site on the lower North Shore to build a 40-place facility to open in early 2004 at a cost of about $10 million.
DCA Buys More Aged Care Centres Sydney Morning Herald April 24, 2002

Jun 2002

- - - its three newly purchased homes. They are Betheden Nursing Home, in Cardiff, Toukley Lakeside Nursing Centre and Rosemary Lodge Hostel, at Bateau Bay.
New owners for homes. The Newcastle Herald June 12, 2002

Oct 2002

DCA Agedcare has executed agreement to acquire, for $23 million, five Adelaide based aged healthcare centres from Lifeplan Australia Friendly Society Limited.
Development Capital Of Australia Limited (DVC.AX) Acquires Five Aged Care Centres in Adelaide. Australian Stock Exchange Company Announcements October 14, 2002


Mar 2003

The facilities are Le Grand 135-bed extra service facility in Caulfield South and a 41-bed low-care centre at Windsor.
(MR) Ferret's MARKET REACTORS [ Part 1 ] Ralph Wragg Australian Business News March 20, 2003

Apr 2003

The Sydney-based company has more than doubled in size in two years as it continues to aggressively acquire nursing homes in several states.

The company acquired two Melbourne nursing homes last month for $33 million and, with two new Sydney centres under construction, it will soon operate 30 aged-care centres, including 2415 beds with a total asset base of $235 million.
DCA will complete the purchase of a new facility at Dural in May and take over another new centre at Killara in 18 months. It also retains a site in Sydney's Willoughby where it plans to begin building a $10 million aged-care centre early next year.

Mr Vaux said the two new centres were designed to be "premium, extra-service" nursing homes which would enable DCA to charge residents a co-payment on top of federal government funding.
DCA nurses growth program. Australian Financial Review April 23, 2003

Sept 2003

During the year DCA settled the acquisition of 15 residential aged and healthcare centres for $116.8 million to take its portfolio to 28 centres and 2,125 beds.
DCA expects strong trading conditions to continue. Australian Associated Press Financial News Wire September 5, 2003

Sept 2003

The group in effect doubled in size in 2002-03 - - - - -
DCA Flags Further Growth After Doubling In Size Australian Financial Review September 5, 2003

Sept 2003

- - - Fyson in Kempsey and Hilton in Armidale. Together they add another 168 beds to the 2381 beds in 31 centres already controlled by the DCA Agedcare Group .
BRIEFS : DCA buys NSW sites Australian Financial Review September 9, 2003

Sept 2003

- - - a 40 bed residential aged healthcare facility at Tamworth in regional NSW.
DCA TO PURCHASE AGED CARE FACILITY IN TAMWORTH Australian Company News Bites September 15, 2003


Apr 2004

The two centres are high-care facilities in the eastern Sydney suburb of Maroubra and the eastern Melbourne suburb of Croydon. Both were owned by a private operator.
DCA Finds Amity In Growth Australian Financial Review April 1, 2004

Jul 2004

- - - - - purchase a recently decommissioned hospital formerly known as the Christo Road Private Hospital at Waratah, Newcastle. The vendor is a subsidiary of Affinity Health Ltd.
DCA buys hospital in Newcastle Ralph Wragg Australian Business News July 20, 2004

Jul 2004

- - - - - Osburn Lodge, a 60-bed high care facility in Wodonga, Victoria
DCA Group to make acquisition in regional Victoria July 23, 2004

Aug 2004

DCA Group will spend as much as $45 million this year to expand its aged-care business and is seeking to lift total beds under management by at least 500 to 3100.

During the last financial year DCA, which also operates a quickly growing diagnostics imaging division, bought four residential aged healthcare centres housing 351 beds at a total cost of $43 million. DCA has another 120 beds at two centres under construction.
Healthy DCA to spend $45m on 500 more beds Australian Financial Review August 25, 2004

Nov 2004

- - - Chelsea Park and Chelsea Private are located in Kingston approximately 30 kilometres south from central Melbourne. ( - - a total of 244 beds)

- - - - - - will take DCA's aged care portfolio to 2852 beds and including beds under development the group's portfolio now exceeds 3000 beds.
DCA Group buys two healthcare facilities Ralph Wragg Australian Business News November 15, 2004


Apr 2005

- - - - appointed the preferred proponent to enter a venture with the South Eastern Sydney and Illawarra Area Health Service to build, own and operate a new 112-place residential aged care facility
DCA to build aged care facility at Sutherland Ralph Wragg Australian Business News April 5, 2005

Aug 2005

- - - - a 65-bed aged healthcare facility in South Morang, Melbourne, known as Regent Aged Care Facility.
DCA GROUP TO BUY 65-BED MELBOURNE AGED CARE FACILITY Australian Company News Bites August 26, 2005


Feb 2006 Buys Perpetua

DCA TO ACQUIRE LEADING AGED CARE OPERATOR IN VICTORIA Sydney: DCA Group Ltd (ASX: DVC) has entered into agreements to acquire the aged care business (excluding the freehold properties) of one of Victoria s leading operators known as the Perpetua Group. Perpetua currently has 390 approved extra service high care and standard low care places located at four sites with another 60 low care places under development which are due to be fully operational in the first half of 2007.
DCA GroupASX / MEDIA RELEASE February 3, 2006,  

May 2006 Buying Regis

DCA Group Ltd (ASX code: DVC) has started "an exclusive due diligence exercise" that may lead to the acquisition of the Regis Group.

DCA CEO Mr David Vaux said Regis was regarded as the leading private aged care operator in Victoria and Queensland.

He said the group owned a total of 1575 beds in 18 facilities, comprising 455 low-care beds, 960 standard high-care beds and 160 extra service high-care beds, as well as an extensive portfolio of aged care development and construction projects.
DCA Group looks at expanding aged care; profit warning Ralph Wragg Australian Business News May 11, 2006

Aug 2006 Regis deal fails

Early last month the DCA Group broke off acquisition talks with Regis for its aged-care business, saying an agreed price could not be reached. The retirement villages bought by the PLT were not part of that proposed deal.
Trust buys Regis homes Australian Financial Review August 1, 2006

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International Expansion

DCA’s growth in Australia slowed in 2005 as it joined the rush of Australian companies carving out strong positions in the struggling New Zealand aged care sector. It bought Guardian Healthcare, New Zealand’s largest for-profit nursing home owner almost doubling its aged care beds.

Vaux was soon talking about further expansion. He planned to target not-for-profit and charity groups so turning not-for-profit services to the community into for-profit money making enterprises for Australian shareholders. Most of the citizens whose money is invested have no idea where the profits from their retirement and managed funds come from and what is done to extract these profits.

Note the way analysts define success in financial terms and see management as the key to success. The US experience tells us that "good management" is a code for cost cutting and that in nursing homes this means reducing staff and skills.

Jul 2005 Planned well ahead

Renwick, (founder of Guardian) 62, says DCA had been eyeing Guardian for two years. The acquisition will give it a transtasman business of 5700 beds and units across 69 locations.
The battle for a rest-home bed New Zealand Herald July 16, 2005

Jul 2005 Buying Guardian

DCA Group Ltd will buy New Zealand residential aged care business, Guardian Healthcare Group Ltd for $NZ300 million ($A272 million) from Pacific Equity Partners and Management.
DCA managing director David Vaux said Guardian Healthcare was the largest "for profit" aged care business in New Zealand with 32 facilities and 2,163 residential aged care beds across the country. It owns 379 independent living units and serviced apartments and says it is a market leader in the medical alarms business.
It increases DCA’s portfolio to more than 5,700 beds, units and apartments across 69 sites in Australia and New Zealand.
DCA BUYS NZ AGED CARE BUSINESS FOR $272M Australian Company News Bites July 11, 2005

Jul 2005 New Zealand marketplace

"New Zealand's industry is similar to Australia's. It has the same sort of drive that is an increasing demand but shortage of supplies of beds, occupancies are increasing, government funding is increasing," Mr Vaux said.
Guardian has 8 per cent of the New Zealand market and is the largest for-profit aged-care business, - - - -
"There is a great deal of opportunity in New Zealand," Mr Vaux said. "There are a lot of church and charitable groups looking to exit [the industry] and so we think the industry will consolidate quite quickly."
He (ABN Amro Morgans health-care) said DCA had proved itself a first-class manager of aged-care businesses and that management in this industry was vital to success.
Aged-care market buoyed by $270m deal Australian Financial Review July 12, 2005

Jul 2005 Basis from which to expand

"We'll certainly be looking to leverage off Guardian and make further acquisitions in New Zealand," he said.
DCA scoops up NZ aged care provider for $300 mln Australian Associated Press Financial News Wire July 11, 2005

Jul 2005 Size of purchase

Managing director David Vaux, - - - - - , has added 2500 aged-care beds and units in 32 facilities to DCA's 3200 beds in 37 homes in Australia.
Kiwi acquisition nearly doubles DCA's aged care The Sydney Morning Herald July 12, 2005

Sep 2005 Sale completed

DCA Group Ltd has settled the acquisition of Guardian Healthcare Group for NZ$300 million (AUD$277 million).

May 2006 Buys in NZ again

DCA Group Ltd (ASX:DVC) said its NZ aged care business, Guardian Healthcare Group, has completed acquisitions comprising 329 beds at six residential aged care facilities.
Facilities are located across both the north and south islands and take the total number of aged care beds operated by Guardian to over 2500.
DCA's Guardian acquires 6 facilities in New Zealand Ralph Wragg Australian Business News May 3, 2006

The New Zealand nursing home industry was in a parlous state, chronically under funded and with low morale. There had been pay rises for nurses across the sector but Guardian, now profitable and managed by venture capitalists had stalled on pay rises. The nurses eventually went on strike.


Jul 2005 State of NZ aged care

NZNO officials hope that much of the estimated $44m promised since last December will be passed on to health care workers to help compensate for years of poor pay, low staff levels and bad working conditions.
"The present state of residential aged care is appalling. It has reached a point where even the best and largest of charitable and religious agencies are pulling out. Fewer trained care givers, fewer available beds, and an increasing number of unit closures are expected to handle the rapidly increasing numbers of elderly New Zealanders seeking aged care."
The Guardian Health Care Group recently offered rest home staff a two per cent wage increase that was rejected. The company then secured an instant $70m profit from the sale, after having owned the business for less than a year.
Private takeover of rest homes a possible threat New Zealand Nurses Organisation July 13, 2005

Jul 2005 Nursing problems

Renwick (Guardian founder) says Guardian has lost nearly 20 per cent of its nursing staff, who are paid between $19 and $23 an hour, to higher pay in the public health boards in the past six months.

Government subsidies cannot be banked on from year to year. Private providers still do not know how much, if any, they will get of the extra $71 million promised in the Budget.

Taylor says DCA and Macquarie are long-term players who see the crisis and are buying at the bottom of the market.
The gold in oldies New Zealand Herald July 16, 2005

Sep 2005 Strikes

New Zealand Nurses Organisation and Service and Food Workers Union members are set to strike for six hours on Friday, September 30, with a further 24-hour strike scheduled for October 6.
GUARDIAN HEALTHCARE SET TO STRIKE New Zealand Press Association September 25, 2005

Oct 2005 State of aged care nursing

The registered nurses, caregivers and support staff want the pay rise amid concerns the private sector is falling far behind the public sector after it received pay rises, Service and Food Workers Union (SFWU) spokesman Alastair Duncan said.
"Aged care workers are paid a pittance for the essential work they do in our communities,'' CTU president Ross Wilson said. "They do work of enormous value and there is strong community support for paying these workers at a better level.''
REST HOME WORKERS STRIKING FOR PAY RISE New Zealand Press Association October 6, 2005

The reason why there is this sudden enthusiasm for New Zealand is unclear and some have expressed reservations. The market has repeatedly used the claimed benefits of consolidation to drive its agenda. The word consolidation has become an ideological buzzword equated with "good", with "market", and with "opportunity". It can no longer be credibly challenged or qualified. Politicians are suckers for this sort of assertive oversimplification.

Jul 2005 Claimed opportunities

"There will be good opportunities to be the leader in the consolidation of the aged- care industry in New Zealand," DCA managing director David Vaux said from Sydney.
PEP SELLS GUARDIAN The Press (Christchurch) July 12, 2005

Jul 2005 Why NZ -- dangers for residents

A key question is why DCA took the trans-Tasman growth option over buying out any number of local, privately owned providers. ABN Amro notes the Kiwi business is higher margin.

Despite the favourable big picture for the sector, it would be erroneous to view nursing homes as a licence to print money. Many of them struggle and there's the inherent conflict between turning a quid and subjecting residents to poor food and kerosene baths. The biggest, the privately owned Moran group, has been rumoured to be on the market for years.

DCA plays mainly in the more profitable high-care sector, as opposed to retirement villages, which have proved troublesome for the likes of Prime Life and Village Life.
Criterion : DCA Group (DVC) $3.84 The Australian July 13, 2005


This sudden rush certainly suggests that New Zealand government policy has embraced consolidation and that there will be increased funding to the industry. It is likely that they are using multinationals to drive this. The Australian government did the same thing with hospitals in the 1990s attempting to bring corrupt US multinationals who had exploited the vulnerability of their own citizens into Australian health care.

As the US experience and the conflict with BUPA shows there are other advantages for corporations in having a global business. A large foreign holding provides a financial buffer when there are financial problems in one country, or when regulators pounce.

Jul 2005 Role of Venture capital

PACIFIC Equity Partners's sale yesterday of its Guardian Healthcare business marked the latest of a series of swift private equity exits.

Private equity money is normally seen as patient, long-term money but these deals demonstrate that is not always the case.

PEP bought the New Zealand business for $167 million in December last year and sold the business yesterday for $270 million.
Swift exit shows private equity not always patient The Australian July 12, 2005

Guardian Healthcare had grown from a backyard venture by one couple who became so involved that they roped in friends and neighbours a real community effort. Some eventually wanted out of this difficult sector and there were not many buyers. They sold to a venture capital group who made a few acquisitions and then sold to DCA seven months later, pocketing $100 million profit. One wonders how this family based care-focussed entity will change under for profit management - where investors and community are in separate countries and have no accountability to one another.


Jul 2005 The Guardian History

But Renwick (founder) had no idea back in 1990, when he and his wife Jan and a couple of friends paid $1.5 million for a struggling Gisborne rest-home, that they would enjoy the industry so much they would go on to buy the Stokes Valley home the next year.

They did not imagine that Renwick, an accountant and credit charge systems specialist, would switch careers and end up employing 2100 nurses and caregivers for 2200 elderly people countrywide.
The portfolio bulged in the 90s as more family, friends and friends-of friends invested in the rest-home syndicates.

"In hindsight it was a pretty dangerous strategy. If it hadn't gone well I'd have no friends and family wouldn't have talked to me.''
By then some shareholders were saying to Renwick: "You got us into this, how are you going to get us out?''

He suggested rolling everything into one company for greater ease of share trading, and Harbourside Group Holdings was the result. It was renamed Guardian Healthcare last year.

Guardian chairman Bryan Mogridge, an old friend of Renwick's, recalls that even when PEP arrived, the company "still had a club feel about it''.
Renwick says the Government has "opted out'' of geriatric care, delegating the costly job to the private sector and in danger of "strangling it'' with uncertain funding.
Renwick says 65 per cent of people in residential care are subsidised, 35 per cent are self-funded.
The battle for a rest-home bed New Zealand Herald July 16, 2005

Jul 2005 Gruardian's beginning

But Renwick never made that trip. Instead he found himself painting the inside of the rest-home's cupboards while fellow investors and friends, a builder and a professional painter, refurbished the rest of the Stokes Valley, Wellington, property.
Those efforts were the genesis of New Zealand's largest residential aged-care business, which has been sold to Australian aged-care heavyweight, DCA Group.
The gold in oldies New Zealand Herald July 16, 2005


New Zealand has a history of community provided social services and attempts to privatise health care some years ago was one of the factors resulting in a backlash which brought the labour party to power. It is not surprising that a number looked at the track record of corporate care and the dynamics. They voiced their opposition.

Jul 2005 Political dissent

"New Zealand First has grave concerns for the future of non-profit aged care providers in New Zealand who are being squeezed out the market because of rapidly rising costs, making way for business-focused groups to move profitably into the sector", says New Zealand First Leader, Rt Hon Winston Peters.
"This is not good news for the thousands who only have their pensions to live on and require affordable rest home care.
Aussie Takeover Not The Way To Treat Elderly New Zealand First Party July 12, 2005

Jul 2005 Nurses concerned

NZNO sees private takeover of rest homes a possible threat to aged-care workers and rest home conditions
"We need to remember these corporations exist solely for profit. If the welfare and religious groups are not able to sustain the low funding, where do the new owners think their profits will come from?"

Jane Kostanich says the usual practice is to skimp on labour costs. "It means fewer people, untrained, and at lower wages. The result means hardship for thousands of vulnerable older New Zealanders."
Private takeover of rest homes a possible threat New Zealand Nurses Organisation July 13, 2005

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Standards of Care - Accreditation Problems

I have only limited information about standards of care in DCA’s nursing homes other than that provided by the marketplace. The only report I do have is worrying. The marketplace equates high standards of care with profitability and analysts have been profuse in their praise of the worst offenders such as Tenet/NME’s which so tragically misused and damaged children whose trusting but anxious parents they betrayed. At that time there was no public knowledge of what was happening.

Accreditation, government oversight and monitoring by insurers all failed. All of the Texas psychiatric facilities where Tenet/NME’s practices were first exposed were accredited by national bodies, inspected by the insurers who were bilked and by government authorities - as were the many corporate owned Californian nursing homes where elders were whare-housed and neglected.

DCA’s reputation for extracting every dollar, and the praise received for doing so, should set alarm bells ringing.

Jul 2004 Extracting every last dollar

Vaux has shown he can extract every dollar from DCA's aged-care businesses and in radiology has squeezed out better returns from scanners and diagnostic imaging devices than MIA and Mayne Group, although DCA's margins are still lower than those of the industry leader, Sonic Healthcare.
A commitment shared Business Review Weekly July 22, 2004

That all may not be what it seems in DCA's nursing homes is revealed by an accreditation report on Amity at Caulfield. Experience in the USA and also more recently in Australia is that accreditation does not work - particularly when there are strong financial pressures. It is a good marketing tool for the companies.

Among the reasons for this failure are the personal costs for assessors of undermining the credibility of the big companies and the fact that the assessors are often colleagues from other institutions. Most important is political support. The agency is reluctant to penalise a group that enjoys strong political support because it fits government policy, makes political donations or has friendships.

Accreditation has not been an effective means of exposing dysfunction in the large corporate sector in the USA. It is more effective against smaller less credible groups without influence. Whether these factors played any part in Caulfield is not clear.

May 2006 Governement supportive

"Yes, we are certainly sensitive to government policy but as everyone knows and understands, government policy towards health care is very supportive." (Vaux said)

Supportive only to an extent, say analysts.
DCA won't take setbacks lying down Australian Financial Review May 19, 2006

After the outcry surrounding the Riverside and Milstern scandals, critics complained that homes were notified and allowed to prepare for accreditation. This was because accreditation was meant to be a formative process to get homes up to speed and not punitive. The consequence was that assessment results measured a state that was contrived and did not represent the norm. The authority was forced to undertake a number of spot checks on each of the homes accredited.

The team who did the accreditation at Amity of Caulfield in September 2004 did their job thoroughly finding that the home was not compliant with 16 of the 44 accreditation items. This and the nature of the reports might well have mandated the removal of accreditation. A senior in the accreditation agency normally reviews the assessors findings. They have the authority to overrule the accreditation and sometimes do. In this instance the assessor overruled nearly half of the non-compliant assessments making 7 compliant. This meant that there were only 9 (still a significant number) instances of non-compliance.

In the decision to simply reduce the period of accreditation the senior assessor was influenced by the alacrity with which the company rushed staff in from elsewhere in the company to sort out the problems and make the company compliant with a new assessment.

Sept 2004 Accreditation

Decision to Vary Accreditation Amity at Caulfield
Following a review audit the Aged Care Standards and Accreditation Agency Ltd has decided to vary the accreditation of Amity at Caulfield in accordance with the Accreditation Grant Principles 1999.

Amity at Caulfield is now accredited until 4 October 2005. Previously, its accreditation was to expire on 26 April 2006.

The Agency has found that the home complies with 35 of the 44 expected outcomes of the Accreditation Standards. This is shown in the "Agency Findings" column appended to the following executive summary of the assessment team's review audit report.

The assessment team reported non-compliance in 16 expected outcomes, however, the Agency has considered the timely actions taken by the approved provider to address some deficiencies. While the home was identified with significant noncompliance, the approved provider through their actions and proposed actions in terms of human and other resources has demonstrated a desire and commitment to address the non-compliance. The Agency is satisfied with the full implementation of their action plans that the non-compliance will be addressed.

The Approved Provider has been advised of a number of matters where improvement must be made to ensure that the home complies with its responsibilities for continuous improvement.

The Agency will undertake support contacts to monitor progress with these improvements and compliance with the Accreditation Standards.

Matters of non-compliance have been referred to the Secretary, Department of Health and Ageing, in accordance with the Accreditation Grant Principles 1999.

Ken Jones State Manager Queensland
Accredeitation report 7/9/04 to 14/9/04

The adverse assessment report was not on the agency's web site when I looked. It had already been replaced with a new accreditation. In this instance I obtained it separately. The report had not been put on to the web site until the home had been reviewed and found to be compliant with all 44 criteria.

Adverse reports usually receive some press coverage. This one did not.

There is too often a delay before the agency places adverse reports on the web site. This ensures they are soon replaced with a compliant one. While this may be a lever to ensure that nursing homes rapidly address problems it does little for accountability. The elderly and their families looking for a nursing home are denied the history of the nursing home - a history which would expose the repeat offender - the homes to avoid. To do any research you have to request the reports and the ongoing figures that the agency keeps on accreditation failures are not available so that the agency itself is not transparent or accountable.

That said the interest here is in the report itself and what it reveals about this nursing home and DCA's Amity. As I read it I was reminded of US reports from corporate run homes. The core problem in both seems to be the disillusionment of caring staff with the commercial focus of the corporation and the pressure on efficient process and away from care. They lose heart and leave or else despair and stop trying. The consequence is a culture that does not care, a high turnover of staff and a continuous recycling of management. Feeding, turning of patients, cleanliness and medication administration all suffer.

Click Here to for a review and some extracts from the assessors' report on Amity at Caulfield

Feb 2006 Occupational Health and Safety

Occupational Health and Safety Issues have also been an inssue in DCA nursing homes. The nursing unions have taken these matters up with them.

ANF has been negotiating on behalf of members employed at Amity at Edithvale agedcare facility to resolve occupational health and safety issues.

ANF has assisted members to establish health and safety committees, known as Designated Work Groups (DWGs) under the Occupational Health and Safety Act. At the time of print employees had elected new Occupational Health and Safety Reps.

ANF is also involved in negotiations with Amity management to improve its policies and procedures to prevent and manage incidents of workplace violence and aggression and bullying and harassment."
AMITY HEALTH AND SAFETY FOCUS...Belinda Clark, Organiser.February 2006 edition of 'ON THE RECORD' produced by the ANF (Australian Nursing Federation.) Page 4


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The Radiology Diagnostic Business

In 2000 DCA sold off some of its non-medical businesses and formed a radiology group, I-med Limited. This bought 75% of Southernex Imaging Group, a large operator in Queensland. I-med indicated its intention to benefit from the rush to consolidate radiology, and to float as a separate company.

Dec 2000 Plans to float - sector ripe for consolidation

A new player is set to swell the ranks of the listed medical imaging sector, with the I-Med radiology group announcing it will pursue a sharemarket float in the first half of next year.
Mr Vaux said despite the scramble for radiology assets now under way, the top three players still only accounted for 30 per cent of the fragmented market.
Mr Vaux believed the first round of rationalisation in the radiology market would be completed in a matter of months.
I-Med turns X-rays on float. The Australian December 5, 2000

Jul 2004 Looking back

Radiology was another opportunity. Six years ago, the private pathology sector was already highly corporatised, but private radiology practices had been slower to form into bigger groups. Mayne had just started buying practices and Sonic was looking at the market.
A commitment shared Business Review Weekly July 22, 2004

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Structure - I-Med

In radiology Vaux initially adopted a very different strategy to other corporations. He entered into joint ventures with the radiologists. Not only did they own shares in I-med but also about 50% of their original businesses.

Aug 2000 Shares for radiologists

I-Med will be owned 74% by DCA, 21% by the Southernex partners and 5% by Bob Sheraton, who has been appointed Managing Director.
Development Capital Of Australia Limited (DVC.AX) DCA Expands with Healthcare Acquisition. Australian Stock Exchange Company Announcements August 9, 2000

Aug 2000 Only radiology

I-Med will only invest in radiology businesses and will therefore avoid the potential conflicts of interest which vertically integrated healthcare companies face".
Development Capital Of Australia Limited (DVC.AX) DCA Expands with Healthcare Acquisition. Australian Stock Exchange Company Announcements August 9, 2000

Dec 2000 Business strategy

"I-Med plans to build a national network of medical imaging practices in joint venture with radiologists rather than buy out the practices entirely,"

"This strategy differentiates the company from other mainstream radiology operators, because it means the partners who built the practices retain ownership in them."

"The I-Med model appeals to medical practitioners who wish to maximise the value of their practice while at the same time maintaining control over operational and clinical issues."
Development Capital Of Australia Limited (DVC.AX) To list expanded I-Med Radiology Group. Australian Stock Exchange Company Announcements December 4, 2000

Dec 2000 Radiologists insist I-Med lists separately to DCA

The radiologist owners of I-Med's eight practices - with combined revenues of $130 million - had insisted on a separate listing from the listed DCA Group, a property, aged-care and healthcare concern.
I-Med turns X-rays on float. The Australian December 5, 2000

May 2001 Listing delayed

I-Med is expected to be listed on the ASX, although initial plans for an ASX debut later this year have been delayed.
Delfin stake sale to cut debt, fund expansion. Adelaide Advertiser May 14, 2001

Part ownership of I-Med and of the radiology practices made for a complexity inimical to floating. Potential investors found the complex accounts difficult to understand. It prevented the use of profits from money making radiology to fund growth in aged care. To simplify this DCA bought out the other share holders in I-Med and in the individual radiology businesses during 2002. They got DCA shares instead. There was no longer any talk of a float.

I-med also planned to swallow the much larger MIA and integrating this differently structured entity would have been a nightmare under its old system.

Sep 2002 Cleaning up I-Med

"The deal cleans up the structure of DCA, but David now has to really prove that aged care can make money something which those before him have struggled with," the analyst says.
DCA new for old Australian Financial Review September 26, 2002

Oct 2002 I-Med's structure

I-Med has minority holdings in a network of five radiology businesses that claim to have emerged as one of the top three private providers of diagnostic imaging with more than 100 clinics and more than 1 million patients a year.
DCA chief sees big growth in takeover. Australian Financial Review October 2, 2002

Oct 2002 Taking it all over

The problems were that DVC's internal structure increased the effort required to understand the stock and this deterred a number of investors from considering it for investment.

DVC's solution to the problem is to move to full ownership of the radiology assets. Subject to shareholder approval DVC will acquire the 35% minorities in I-Med and I-Med will acquire all the minorities in all the radiology businesses. Upon completion, DVC's ownership structure will be tidy and transparent, with full consolidation of cashflows, assets and liabilities. Total consideration is 126.8m DVC shares and $10m in cash.

What the restructure does do is enable DVC to access all I-Med's cashflows - - - - . DVC has indicated it will use these I-Med cashflows - - - to fund expansion in aged care.
DCA GROUP LTD (DVC) $1.78. Your Money Weekly October 10, 2002

DCA was the best performer in the radiology market with the possible exception of Sonic Healthcare. There is an interesting review which attributes this to a company strategy called a "shift to the right". It is not clear exactly what this is but if as the name suggests to me this is about focusing on more profitable or expensive services, promoting them to radiologists, and marketing them to general practitioners, then this might be seen as the radiological equivalent of cherry picking the more profitable services. 

Oct 2003 Shift to the right

Diagnostic Imaging (I-Med)
Management's implementation of the "shift to the right" strategy, which focuses on the higher end modality revenues helped achieve above average growth rates.
DCA GROUP LIMITED (DVC) $2.17 - Radiology & Aged Care
Your Money Weekly October 2, 2003

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In 2000 I-med raised $14 million from the market to buy 7 east coast radiology practices then bought 8 practices in South Australia, Queensland, New South Wales, Victoria and the Northern Territory. These were joint ventures with the radiologists. The company continued to expand in radiology through 2001 and 2003 by purchasing radiology groups. 


Aug 2000

A DCA subsidiary, I-Med Limited, has today announced that it has acquired a 49.8% interest, in Southernex Imaging Group - a radiology business.
The partners will retain a 50.2% direct interest in Southernex.
Development Capital Of Australia Limited (DVC.AX) DCA Expands with Healthcare Acquisition. Australian Stock Exchange Company Announcements August 9, 2000


Mar 2001

When current Heads of Agreement are completed the I-Med radiology network will consist of more than 80 clinics in South Australia, Victoria, Queensland, Tasmania and the Northern Territory. Practices that are either part of or in the process of joining the I-Med group include;
  • Southernex Imaging Group - South-east Queensland
  • Dr Jones & Partners - South Australia, Mildura, Alice Springs, Broken Hill
  • Border Medical Imaging - Albury, Wodonga
  • Riverina Medical Imaging Group - Wagga Wagga, Griffith
  • Albury Wodonga Nuclear Medicine - Albury, Wangaratta
  • Clarke & Robertson - Ipswich, Queensland
  • Northern Imaging Group - Northern Tasmania
  • Roger Burgess Imaging - South-east Queensland

Development Capital Of Australia Limited (DVC.AX) Announces Major Radiology Deals. Australian Stock Exchange Company Announcements March 5, 2001

Jul 2001

The Launceston-based Northern Imaging Group, with revenues of $12 million, has been bought by Regional Imaging Limited (Part of I-med).
Interstate merger for northern practice. Hobart Mercury July 2, 2001

Aug 2001

- - - - - - to purchase Gippsland Diagnostic Services (GDS), the leading radiology practice in the Gippsland region of Victoria.
Development Capital Of Australia Limited (DVC.AX) I-MED Acquires Gippsland Diagnostic Services. Australian Stock Exchange Company Announcements August 21, 2001


Feb 2002

- - - - to acquire up to 49 per cent of Gold Coast Medical Imaging.
DCA Group to acquire Gold Coast Medical Imaging Australian Associated Press Ralph Wragg Equities News February 12, 2002

Dec 2002

- - - Albury Wangaratta Nuclear Medicine practice ("AWNM") late on Friday 20 December 2002. - - -
DCA Group to acquire Gold Coast Medical Imaging Australian Associated Press Ralph Wragg Equities News February 12, 2002


Wins contract for WA public hospital

- - - a contract with Mayne Health to operate the inpatient and outpatient radiology departments at Joondalup Health Campus, Perth, WA. PRC has also agreed to acquire the nuclear medicine practice located at the hospital.
DCA GROUP TO OPERATE MAYNE RADIOLOGY DEPTS AT JOONDALUP Australian Company News Bites September 15, 2003

It is clearly a difficult area but one wonders about the involvement of radiology companies in formulating government policies from which they are likely to be financial beneficiaries. Have lessons been learned from the scan scam that ultimately brought down health minister Dr Wooldridge?


Jun 2004 Involvement in government decision making

DCA Group Ltd and MIA Group Ltd - - - - welcomed a federal government announcement of 23 new MRI machines across Australia.
"As I-Med was involved in the consultation process, yesterday's announcement is broadly in line with expectations and the assumptions underlying DCA's forecasts," DCA said in a statement.
Australia's largest radiology company welcomes MRI announcement Australian Associated Press Financial News Wire June 10, 2004


Feb 2005 Wins licences

DCA Group Ltd announced that the Federal Government has awarded its diagnostic imaging company I-MED/MIA Network Ltd seven new Medicare funded magnetic resonance imaging (MRI) licences. Five of the licences are for MRIs that are currently not funded by Medicare.
DCA GROUP AWARDED NEW MRI LICENCES Australian Company News Bites February 21, 2005


Mar 2006 Buys in Perth

Six Perth doctors have walked away with about $20 million cash after selling their radiology business Perth Imaging to Sydney-based health-care company DCA Group.

Perth Imaging is a specialist in X-ray, CT and MRI scans, mammography and ultrasound at three sites in WA, including its key clinic at the Mount Hospital.
Doctors scoop $20m on sale of imaging practice The West Australian March 20, 2006

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Takeover of MIA in 2004

The takeover of troubled Medical Imaging of Australia (MIA) in June 2004 made DCA the largest provider of radiology in Australia by a factor of two.

The larger MIA, which owned 170 mostly metropolitan clinics, was almost double the size of I-Med with 101mostly rural so there were competition issues only in South Australia. The ACCC forced DCA to sell off seven South Australian facilities because of competition issues.

May 2004 The MIA merger

DCA Group will emerge as the nation's biggest radiology group with 33 per cent of the diagnostic imaging market, and reap healthier margins if a merger with rival MIA is forged, according to analysts on Friday.
A compelling feature of any tie-up will be the combination of DCA's portfolio of mainly regional radiology practices with MIA's city-heavy presence. Also, the new company will command more buying power and is not expected to be snagged by any Australian Competition and Consumer Commission concerns.
Mr Power said DCA could have picked the perfect time for the takeover bid. "MIA has disappointed the market . . . with a failed move into the UK pathology market, together with a number of specific underperforming centres in Australia.
He said the upside for a DCA takeover would include MIA operations moving to higher margins and anecdotal evidence suggesting that doctors were happier under the DCA philosophy. Analysts said DCA was the only likely suitor for MIA, as main rival Sonic Healthcare would be hampered by ACCC issues.
Radiology Group To Make Bid For Rival Australian Financial Review May 29, 2004

May 2004 Focus still on aged care

But becoming the nation's largest radiology player overtaking Sonic Healthcare and Mayne Group doesn't mean DCA is shifting its longer-term focus away from lifting its exposure to the aged-care sector.
Radiology Merger Under The X - Ray Australian Financial Review May 31, 2004

Jun 2004 Plans for radiology and aged care

The deal will see DCA operate in all states and territories, and expand to more than 350 doctors across 275 clinics.
"We want to be the market leaders in both diagnostic imaging and aged care and this transaction will certainly enable our aged-care business in due course to attain that position."
Merger creates health giant The Australian June 8, 2004

Aug 2005 Growth plans

The company wants to enlarge the combined diagnostic imaging businesses by 5 per cent a year.
BUSINESS BIG SHOT The Australian August 25, 2004

Sep 2004 Merger goes through

The $700 million takeover of diagnostic imaging firm MIA Group Ltd by rival DCA Group Ltd has today been approved by shareholders of both companies.
MIA shareholders approve merger with DCA Australian Associated Press Financial News Wire September 13, 2004

Sep 2004 Competition issues

Australia's competition watchdog has approved a merger between diagnostic imaging companies DCA Group Ltd and MIA Group Ltd, on the condition that they sell off seven radiology clinics in South Australia.
ACCC gives conditional approval to DCA and MIA merger Australian Associated Press Financial News Wire September 17, 2004

Jul 2005 Sales in Adelaide South Australia

A CONSORTIUM of 20 Adelaide doctors has bought three of Adelaide's largest radiology clinics (from DCA).

Radiology SA will open today following its multimillion-dollar purchase of the radiology and nuclear medicine clinics at the Memorial and Calvary hospitals and Mayo House, all at North Adelaide.
Dr Lott said there was scope to grow both locally and in the innovative use of technology. For example, with a high-speed internet connection, high-definition radiology images could be sent to Adelaide from remote or even overseas locations.
Radiology deal pulls three SA clinics together The Advertiser July 1, 2005

Reports suggest that there may have been a clash in management styles between Paul Mirabelle, MIA’s senior manager and Vaux, although those involved said nothing about this. Mirabelle was due to take charge of I-med but resigned instead. Within 4 months DCA was claiming that MIA had been successfully integrated.

Jul 2004 Integration difficulties

Vaux says integrating MIA is a big challenge. A key issue is how DCA's no-frills culture and flat management structure will blend with the different culture at MIA. One indicator will be the approach that the enlarged group takes towards employing consultants.
A commitment shared Business Review Weekly July 22, 2004

Oct 2004 Culling MIA management

However, Mr Mirabelle made the unexpected decision to leave the group altogether, which includes stepping down from the DCA board.
Mr Mirabelle is not the only senior executive to leave, with another 30 management and administrative positions to go across the organisation.
DCA merger with MIA unexpectedly loses key CEO Australian Associated Press Financial News Wire October 18, 2004

Feb 2005 Successfully integrated

Health care company DCA Group Ltd said today it had successfully integrated its I-MED and MIA Group Ltd acquisitions into its diagnostic imaging network.
DCA says it successfully integrated recent acquisitions Australian Associated Press Financial News Wire February 25, 2005

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Internet radiology

DCA bought practices with an interest in the ability to send images across the internet so that Xrays taken anywhere in Australia could be reported on by skilled metropolitan radiologists. The extent to which it utilised this potentially profitable technology is unclear nor is the profit generated. They were still talking about its potential in late 2005. Digitisation of images prevents the diffusion of expertise and so increases efficiency. Whether this accounts for I-Meds success and growth is not clear.

Aug 2000 Southernex a leader

Southernex has an advanced tele-radiology IT system to transfer digital images across its network of clinics to quicken the reporting process and maximise efficiencies.
Development Capital Of Australia Limited (DVC.AX) DCA Expands with Healthcare Acquisition. Australian Stock Exchange Company Announcements August 9, 2000

Aug 2005 Digitisation policy and promise

"Our focus in Australia will be putting in place digitisation of radiology which will improve productivity. Hence, with good management, good systems and ability to improve margins, we should be able to maintain this type of growth rate."
Strong demand drives good DCA diagnosis Australian Financial Review August 26, 2005

Nov 2005 DCA chairman is upbeat about its potential

DCA Group Ltd (ASX code: DVC) chairman Mr Robert Purves told the annual general meeting in Sydney this morning that the focus in diagnostic imaging for the new financial year would be on maximising the inherent potential of the I-MED Network and continuing the rollout of the radiology digitisation strategic plan, which was already confirming its potential to improve workflows and productivity.
DCA Group to 'maximise potential' in 2006 Ralph Wragg Australian Business News November 4, 2005

MIA owned a large radiology business in the UK where it supplied radiology services to the NHS under contract. Radiologists were in short supply. DCA planned to capitalise on the opportunity presented by this acquisition, using the internet to send NHS images to Australia for reporting.

Jun 2004 International potential

The growth opportunities include fully digitising X-rays across all DCA's operations. Mr Vaux wants to turn Australia into a centre for transmitting and interpreting patient scans, even from Europe.

There is a one-year backlog for radiology in the UK, and Mr Vaux believes DCA doctors could deliver timely and accurate analysis of these tests results on behalf of Britain's National Health Service (NHS) .
$1.3bn Merger Fuels Health Shake - Up Australian Financial Review June 8, 2004

Jun 2004 And extend this to other countries

MIA is a major provider of MRI services in Britain and the new combined entity has plans to build on this and venture into other overseas markets.
Merger creates health giant The Australian June 8, 2004

There is no mention of the thorny medicolegal and administrative problem of radiologists providing services to patients in a country where they are not registered to practice medicine so this remains a potential problem.

A group of US radiologists has established a unit in Sydney that provides emergency night time radiology services to the USA over the internet working during the Australian day. These were US trained radiologists registered in the USA.


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International Expansion

The merged DCA and MIA radiology business was soon profitable and planned to grow further. MIA’s radiology business in the UK, Lodestone, had not prospered as planned. During 2005 DCA concentrated on its new UK business bidding for NHS radiology contracts, as well as planning to expand internet connections and digital reporting from Australia.

DCA found that it was advantageous to be able to bid to provide a broader range of services to the NHS. It formed a liaison with Sonic Healthcare’s UK pathology business. It entered into a joint venture with a UK construction company, Carillon to bid for the construction and operation of surgical clinics.

Jun 2004 International expansion

DCA managing director David Vaux said yesterday he planned to more than double revenue from the UK within three years. Continental Europe also provided growth opportunities. "We are interested in mainland Europe, preferably a European Union nation but there are no plans set up as yet," he said.
$1.3bn Merger Fuels Health Shake - Up Australian Financial Review June 8, 2004

Feb 2005 UK radiology not profitable

The operating margin in Lodestone was down due to the lower than expected revenue of STG8.9 million ($21.7 million) following cutbacks in NHS patients in the UK, Mr Vaux said.
DCA says it successfully integrated recent acquisitions Australian Associated Press Financial News Wire February 25, 2005

Nov 2005 Upbeat about UK NHS contracts

"In addition, we will be focused on Lodestone, the UK imaging business, which will be bidding for a number of National Health Service outsourcing contracts which, if successful, has the potential to double the size of Lodestone once contracts commence in late 2006," he said.
DCA Group to 'maximise potential' in 2006 Ralph Wragg Australian Business News November 4, 2005

Nov 2005 Joint ventures to improve profitability

The joint-venture company with Carillion will be called Clinicentre and will use Carillion's expertise in building and operating medical and elective surgery centres, as well as its local knowledge. DCA believes this is one of the best ways to capture a number of outsourcing contracts offered by the NHS.
The NHS is expected to offer as much as £70 billion a year in health contracts, with a sizeable amount up for grabs for radiology and diagnostic companies. 

DCA operates 17 diagnostic imaging clinics in the UK under its Lodestone brand, but it will need to build more centres and extra capacity if it wins NHS contracts.
DCA poised to team up for UK health contracts Australian Financial Review November 24, 2005

Nov 2005 Winning contracts

The Clinicenta joint venture was also today appointed the preferred bidder to provide services to the Bedfordshire and Hertfordshire regions by building and operating two NHS independent sector treatment centres at Lister Hospital and Hemel Hospital.
The Clinicenta joint venture has also been short listed for four diagnostic outsourcing contracts.
DCA AND CARILLON JV TO BID FOR UK DIAGNOSTIC, CLINICAL DEALS Australian Company News Bites November 24, 2005

Nov 2005 Grand ambitions

The Clinicenta joint venture has been constructed so DCA has limited exposure to non-radiology services and a greater exposure to diagnostic imaging. It will invest about £3 million over two years bidding for NHS contracts and will target contracts worth more than £100 million.
DCA venture bids to build UK clinics Australian Financial Review November 25, 2005


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Humanitarian considerations

Radiologists generally carry out services authorised by other doctors and have less direct clinical responsibility for decisions. Their findings do have a profound impact on those decisions.

There is less direct ongoing patient contact and so less opportunity to place profit ahead of service to the community.

MIA seems to have shown a human face in its service to aged care residents. An interesting report suggests that this may have fallen victim to commercial pressures during the merger with DCA.

Sep 2004 Mobile radiology service withdrawn

A MOBILE service that provides aged care residents with on-site X-rays will fold tomorrow, placing more strain on the Central Coast's embattled public health system.

The elderly will have to go hospitals for X-rays also stretching ambulance services.

Central Coast Radiology provided the service to thousands of people in many of the 40 aged care facilities on the coast, as well as elderly frail people living in their own homes.

The closure has alarmed aged care providers who said it would inconvenience residents and further burden the health system.
Mr Morrow (aged care manager) said many were putting the decision down to the pending acquisition of MIA, operators of Central Coast Radiology, by another medical company, DCA, in a deal worth $700 million.

"It means that all the people who need chest X-rays, hip X-rays, and many other X-rays will all need to go to Gosford Hospital by ambulance," Mr Morrow said.
Mr Morrow said Central Coast Radiology did not make the decision public until the last minute.
Lights go out Mobile X-ray service closure will put pressure on hospitals Outcry over X-ray closure Central Coast Express Advocate September 2, 2004


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Other Health Care/Lifecare Ventures

While DCA did consider involvement in other high tech specialist services it retained its focus on radiology and nursing homes. While it had some exposure to surgical clinics in the UK this exposure was limited. It did involve itself in two radiology related areas.

Rumour has it the group is looking long and hard at adding a third arm to the healthcare and radiology bits. No decisions have been made, but something in specialist areas like orthopaedics is a possibility. Pathology is not.
DCA marches on Sydney Morning Herald June 27 2002

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Modern cardiology is heavily dependent on high quality imaging and many of the most lucrative cardiology procedures are performed using radiological techniques. During 2005 the company bought into Cardiology businesses.

DCA Group Ltd associate, Heart Care Group, has announced the expansion of its cardiology network with the acquisition of a 40 percent stake in Adelaide Cardiology, a practice based in South Australia. Heart Care already holds a 40 percent interest in Heart Care Partners a leading cardiology practice in Queensland with 13 cardiologists.

DCA Group owns a 75 percent stake in Heart Care and will hold a 40 percent interest in each of Heart Care partners and Adelaide Cardiology. The balance of shares are owned by doctors and management.

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A newly developed test for measuring iron and screening for conditions like haemachromatosis was based on imaging technology. DCA assisted in its development and had a stake in its marketing.

Resonance Health, its subsidiary Inner Vision Biometrics Pty Ltd (IVB), and radiology company the DCA Group will jointly launch and market a technology that measures iron levels in the liver.

FerriScan is a new non-invasive test, developed by IVB, which uses magnetic resonance imaging to measure iron levels, helping test patients with iron overload diseases.
Resonance Health and DCA Group to launch new liver test Australian Associated Press Financial News Wire March 24, 2005

Highlights of the year included the FDA clearance for the US marketing of FerriScan in January 2005 and Australia’s largest diagnostic imaging company, the DCA Group, deal with the company in March 2005 to launch FerriScan through their MRI operations in Australia.


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Retirement Villages

When Vaux joined DCA it already had a substantial investment in retirement villages (Retirement By Design). Others had seen a synergy between retirement villages and nursing homes, as these would provide a continuum of care for residents - a one stop care system. Vaux does not seem to have seen it this way. Some retirement village operators have had difficulties.

Vaux did not grow DCA's retirement village business. He sold off DCA’s interest in co-owner Deflin in 2001 and reduced DCA’s direct holding from 50% to 15% in 2004 in order to fund nursing home acquisitions. It retained the right to build nursing homes in Retirement by Design complexes.

There is limited comment in the press reports.

Aug 2000 Retirement Village interest

Retirement By Design (50% interest): Retirement By Design is one of Australia's leading retirement village managers and owners. Retirement By Design has in excess of 1,650 units under management in 10 villages in Queensland, New South Wales and Victoria. Assets under management are in excess of $270m. Over 300 units are planned for development over the next 2-3 years. Delfin owns the other 50% interest in Retirement By Design.
DCA also owns interests in two leading lifestyle businesses. Delfin Limited (22% interest): Delfin is Australia's market leader in the design, management and development of large scale urban communities.
Development Capital Of Australia Limited (DVC.AX) DCA Expands with Healthcare Acquisition. Australian Stock Exchange Company Announcements August 9, 2000

Mar 2004 sells off Retirement vallages

In other recent developments, Delfin Lend Lease increased its stake in retirement village group Retirement by Design from 50 to 85 per cent, after buying aged-care and radiology provider DCA Group Limited's stake for $22.1 million.

As part of the deal DCA retained a 15 per cent shareholding in Retirement by Design and locked in a "preference agreement" where it is offered sites for aged health care complex's within DLL developments.
Investors Enjoy The Village Life Australian Financial Review March 1, 2004


Click Here to go to the "Citigroup Buys DCA" web page

For Updates:- A good way to check for recent developments in aged care is to go to the aged care crisis group's search page and enter the name of the company, nursing home or key words relating to any other matter in the search box. Most significant press reports are flagged there. The aged care crisis web site has recently been restructured and some of the older links used from this site may not work.

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Web Page History
This page created January/February 2006 by
Michael Wynne
Updated Sep 2006, Mar 2007