The many extracts on these pages are from copyright material. They are owned by the reference given or its owner. They are reproduced here for educational purposes and to stimulate public debate about the provision of health and aged care. I consider this to be "fair use" in the common interest. They should not be reproduced for commercial purposes. The material is selective and I have not included denials and explanations. I am not claiming that all of the allegations are true. The intention is to show the general thrust of corporate practices as well as the nature and extent of any allegations made.

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This page describes the disastrous first privatisation in the LaTrobe region of Victoria. There were great plans and much enthusiasm in government and corporate corridors for the contracting of public hospital services to big companies. This privatisation was a rapid disaster for government, for citizens and for the company. The company gave the hospital back to government and further privatisations were abandoned.


The LaTrobe Privatisation





Brief Overview

The manner in which the conservative coalition state government pursued privatisation in Victoria is described on the Victorian web page. LaTrobe was both the first and most enthusiastically pursued privatisation in Victoria and the biggest failure.

The LaTrobe and Modbury privatisation in South Australia are the two most striking examples of the way both businessmen and politicians embraced the deceptive illusions about the efficiency and superiority of marketplace mechanisms. They rejected experience elsewhere and rationalised in order to justify their beliefs and actions. As a consequence their expectations were quite unrealistic.

When confronted with the debacle in Port Macquarie the Victorian minister was quick to explain that this was different and it would work. The contract went to Australian Hospital Care (AHC). It was a very rapid failure.

An attempt by the opposition to gain access to the contract under Freedom of Information legislation was resisted and appealed to the high court. The lack of accountability in the running of public facilities is staggering.

The company really did believe that market mechanisms would provide better care. The government too believed that the contracts would contain any negative practises and ensure good care.

The illusion that private companies could squeeze a large profit from hospitals when the public system with its many years of cost cutting could not keep costs down was rapidly brought down to earth.

The corporate horse was being whipped with the pressures of competition and spurred by the spectre of failure. At the same time authorities expected the bridle of under-funded regulatory vigour to prevent the horse from bolting. The stupidity is evident.

It was impossible for AHC to make any profit under its contract. If it provided the care it had contracted to provide the company would have gone under. The hospital was soon in financial trouble and losing many millions of dollars each year. The losses from this hospital threatened AHC's viability and made it a poor takeover target.

AHC tried to sue the Victorian government for breech of contract and was forced into negotiation. The government eventually agreed to take back the hospital and run it.

The minister indicated that "the losses incurred by Australian Hospital Care meant it could no longer guarantee the hospital's standard of care".

This is an acknowledgment that care is threatened by corporate financial problems - ie bankruptcies. Government has no choice but to bail out these companies when they collapse.

Without LaTrobe, AHC was seen as a potentially profitable takeover target. It was acquired by Mayne Nickless in 2000.

June 2001 Case study: La Trobe Regional Hospital

-* In 1996 a contract was signed between the Victorian state government and Australia Health Care Ltd (AHC) for the provision of a 257 bed public hospital. The hospital was to be owned and operated by the private company.

* In February 2000 AHC alleged that the State Government had breached the contract relating to the LaTrobe regional Hospitals and issued proceedings in the Supreme Court of Victoria seeking compensation.

* The AHC accused the State Government of refusing to honour its contractual obligation to pay appropriately for a range of services including mental health, child and adolescent community health, women's health and a suicide prevention programme.

* Whilst the AHC maintained that the court action was designed to maintain high quality health services standards it was also clear that the allegations were designed to protect the share holder interests. AHC which operates 16 hospitals nationally made a total loss in 2000 of $79 million. LaTrobe hospital was the single biggest contributor to this loss.

- On 31 October 2000 the LaTrobe Hospital was transferred back to the Victorian Government on 31 October. AHC had reported a loss of $6.2m in 1999 for the hospital. The Victorian Minister for Health stated that the losses incurred by Australian Hospital Care meant it could no longer guarantee the hospital's standard of care'
A response to the IPPR's (Institute for Public Policy Research) Commission on Public Private Partnerships June 2001 By Allyson Pollock, Jean Shaoul, David Rowland and Stewart Player.. Health Policy and Health Services Research Unit at UCL




AHC's view

The contract for the LaTrobe privatisation was awarded to Australian Hospital Care in 1996 soon after the company floated on the share market. The company boasted of its achievenment, its expectation for profits, and the likelihood that the LaTrobe would be the model for successful privatisation across the country.

Oct 1996 Gets contract

Australian Hospital Care Ltd is set to be chosen as preferred tenderer to build and run a new $50 million hospital in Victoria's Latrobe Valley, according to Victorian Government sources.
AHC To Get $50m Latrobe Hospital Australian Financial Review October 3, 1996

Oct 1996 AHC's view

The Australian Hospital Care Group believes that private sector management of healthcare facilities providing services to public patients will enhance the level of service currently provided to the local community while proving to be commercially viable for the Company.

Oct 1996 A first and a new direction

It will be the first time a private company has completely run a public hospital in Australia. AHC's chief executive, Dr Mark Bryce, said the project was a new direction for the company, Australia's third-largest private hospital group, which recently listed on the stock exchange.

The contract involves building a comprehensive health campus at Morwell East and providing health services to public patients for the La Trobe Valley region for 20 years.
Contractor Is Chosen For La Trobe Hospital The Age October 17, 1996

Jan 1997 Advisers and Underwriters

BZW Australia, financial advisers to the Australian Hospital Care Limited for this development, have underwritten the funding for the healthcare facilities.

Feb 1997 The way of the future

Dr Mark Bryce, from Australian Hospital Care - a private hospital group contracted to manage the La Trobe Regional Hospital and build a hospital in Traralgon - predicted up to 25 per cent of public hospitals would be privately managed by 2010.
Plan For Elderly Population, Minister Urges The Age February 27, 1997

Aug 1997 Profitability

The construction of the new 257 bed Latrobe Regional Hospital, - - - - is expected to be completed in mid 1998. This facility is expected to contribute significantly to the group's earnings in the 1999 financial year.
ASX-Australian Hospital Care Limited (AHX.AX) Preliminary Final Report and placement. Australian Stock Exchange Company Announcements August 28, 1997

Aug 1998 Hospital opens

VICTORIA'S first privately built, owned and operated public hospital, LaTrobe Regional Hospital, has opened at Morwell




Government's view

The government too saw this as a giant step forward for public health care and as a model for the rest of Australia. It chose to ignore criticism and rationalise the failure at Port Macquarie in NSW. Labour opposition parties were strongly opposed.

It is interesting that the government of the day were prepared to walk away from any risk associated with the project. They were presumably happy to leave the patients of the LaTrobe valley to bear the consequences of any economic failure. The labour government eventually took the hospital back in order to protect patients from AHC's failure.

Oct 1996 Different so OK

The NSW Health Minister, Dr Andrew Refshauge, said the first privately owned hospital set up to treat public patients in NSW, at Port Macquarie, cost up to 30 per cent more to run than equivalent public hospitals.

But the Victorian Health Minister, Mr Rob Knowles, said the Government's financing system for private operators would be entirely different.
Firm Wants City Hospitals Sunday Age October 20, 1996

Feb 1997 Comparing with Port Macquarie

If one were to be generous, perhaps all this (
Port Macquarie Privatisation) could be put down to teething problems in the early days of privatisation. Knowles says that the deal just struck for the La Trobe Hospital is very different.
Feeling your purse before your pulse, TheWeekend Australian , 1 Feb 1997

Feb 1997 Government ducks the risks

The market for privately funded hospital projects in Australia has undergone a "huge paradigm shift" with the public sector no longer required to participate in risk, according to investment bank BZW Australia.
Australian Hospital Care, the hospital's operator, bears all the operating and financial risks. "What the State wanted was, in certain default events, to be able to walk away at the end of the day and not be lumbered with a hospital it didn't want," Mr Andersen said.
Risk Shift In Hospitals Australian Financial Review February 18, 1997

July 1997 A model for others

Mr Knowles said both the Knox and Berwick hospital developments would be modelled on the Latrobe Regional Hospital project, the tender for which was won early last year by listed operator Australian Hospital Care
Victoria Seeks Cure In Private Australian Financial Review July 25, 1997



Opposition views

There was public opposition to the privatisation and concern at attempts to downgrade nearby public hospitals in order to support La Trobe. The opposition labour party strongly opposed the privatisation. Standard and Poor saw the " exclusive rights" to serve the region, granted by the government, as positive for the company.

There was considerable disquiet when the community boards of existing hospitals were fired, and AHC was contracted to run these hospitals while LaTrobe was built.

Oct 1996 Running pre-existing hspitals

La Trobe Hospital management has attacked a State Government proposal to sack the board and hand power to a private consortium 18 months ahead of schedule.

The hospital board's president, Ms Betty Collins, said yesterday that the hospital had previously been promised that there would be no change to management before a new hospital was opened in March or April 1998.

However, the Government now appeared to be "carefully considering" handing over power to one of three bidders competing to build the new hospital as soon as the successful tenderer was announced.

This would result in an immediate "total loss of community input" and could lead to a reduction in services, she said.
The State Opposition yesterday warned that the plan was a blueprint for the privatisation of metropolitan hospitals. Its health spokesman, Mr John Thwaites, said the La Trobe contract was likely to be awarded to Australian Hospital Care, which was partly foreign owned.

"Instead of the local communities having a say in their hospital, the decisions will be made by foreign shareholders interested in their own profits," he said.
Hospital Fears Hand-over Plan The Age October 4, 1996

Oct 1996 Managing Moe and Traralgon

AHC is also negotiating to manage the health services provided by the existing La Trobe Regional Hospital, including hospitals at Moe and Traralgon, from early next year until commissioning of the new hospital in April 1998.
Contractor Is Chosen For La Trobe Hospital The Age October 17, 1996

Oct 1996 Community opposition to LaTrobe

After their long campaign, the residents of Moe have lost the battle. The existing hospital will be closed, and the new private one will be built 20 kilometres away. It will be run by Australia's third-largest private hospital operator.
Public Patients, Private Profit Radio National October 20, 1996

Nov 1996 Sacking management boards

Parliament will this week debate amendments to the Health Services Act to allow the Health Minister, Mr Rob Knowles, to sack management boards and hire private operators for public hospitals.
The legislation was prompted by the Government's proposal to sack the La Trobe Regional Hospital board and hand power to Australian Hospital Care, the consortium earmarked to build a new La Trobe Valley facility.
Hospital Privatisation Denied The Age November 12, 1996

Jan 1997 Empty threats from the community

Australian Hospital Care was awarded the contract to develop the 257-bed La Trobe Regional Hospital about four kilometres from Traralgon. It faces community opposition to the plan.

A spokesman for the Public First Campaign opposing the deal, Mr Kevin Taylor, said the community believed it could enlist enough union help to prevent the plan going ahead. Locals would ask power industry unions to consider strike action, disrupting the state's power supply, if the Government proceeded with the plan, he said.
Hospital Closures Anger Valley The Age January 25, 1997

Dec 1997 Nurses unhappy

Nurses from both two campuses of the La Trobe Valley Regional Hospital voted on action after reports their new employer, Australian Hospital Care, would not retain conditions or resolve workload issues.
BANS TO HIT HOSPITALS. Herald-Sun December 10, 1997

Apr 1998 Exclusive rights and downgrading cmpetitors

Standard and Poor's awards the bonds an A-minus long-term credit rating on the basis of "exclusive rights to the provision of essential hospital and public health services" and the experience of the operator, Australian Hospital Care Pty Ltd. The group operates 12 Victorian hospitals, including Knox Private and Masada.
Medical staff at neighboring public hospitals in Sale and Maffra fear that the Government will downgrade their facilities in order to funnel resources to the private hospital.
"What concerns us is that they will cut funds, effectively downgrading us and making it difficult to attract medical specialists so that we are not a threat to Latrobe," a hospital source said.
Call For Secret Hospital Papers The Age April 7, 1998

May 1998 Other hospitals resist downgrading

Country doctors have accused the State Government of trying to downgrade the Sale, Maffra and Heyfield hospitals to benefit the privatised Latrobe Regional hospital.

The move would reduce medical services for people in the Sale region, the doctors say in an angry letter sent to the Health Minister, Mr Rob Knowles, this week.

"The medical staff of the Sale, Maffra and Heyfield hospitals are outraged following indications from the regional director of the department of human services that Sale sub-region will lose some specialised medical services and that funding formulations are to be recalculated to severely disadvantage our hospitals," the letter said.
The chairman of the staff group and Sale GP, Dr David Monash, said the new funding formula proposed for the region would benefit the privatised Latrobe hospital, which is due to be completed in August, at the expense of other hospitals, including Sale.
The Opposition health spokesman, Mr John Thwaites, said the government was reducing competition to benefit the private operator and that it should release the confidential contract with Australian Hospital Care if it had nothing to hide.
Doctors Fear Push To Privatisation The Age May 7, 1998

Oct 1999 Community opposition

Latrobe's partnership, between the Kennett government and AHC, was to have been the model for change at other state-run institutions, including the Austin and Mildura hospitals.

It was strongly opposed by the Moe, Morwell and Traralgon communities which saw the plan to merge three state-run institutions into a single entity as an unwelcome step towards American-style corporatised health care.

Sept 2000 Local hospital opposition

One of the leaders in the campaign against the hospital was Sale paediatrician Peter Goss. Dr Goss said yesterday there was not one example of a privatised public hospital in Australia or anywhere else in the world that was making money.

``When they took over the contract, it was never clear how they were going to make money. How were they going to improve profitability?'' he said.

``Usually these companies put in their tender, take over the hospitals, then they want their contracts renewed because they can't make any money and it ends up costing the public the same or more than it did in the first place. There isn't an example anywhere where it ends up being cheaper to the taxpayer.''

Dr Goss said the Kennett government had sought to remove the intensive-care and neo-natal care sections from the Sale Hospital and give LaTrobe a monopoly.

``They wanted it to be the specialist referral hospital for the whole of Gippsland, but the hospital at Sale is the referral hospital for half of Gippsland and we were able to make sure it stayed that way.

``I think one of the reasons they are losing money is that they planned to be the referral hospital for the whole of Gippsland and did not succeed. The government should get rid of AHC and take over the hospital for the community. It should be run for the community not the shareholders of AHC.''
Hospital Company Quit Bid The Age September 9. 2000



Secrecy and Accountability

The entire negotiating and contracting process was done behind closed doors under the blanket of "commercial in confidence". There was consequently no community input and no informed debate. The labour oppositions sought information under freedom of information and successfully took this all the way to the appeal court. The court ruled that the documents should be released.

Information came out in dribs and drabs. Until the court ordered the documents released, the public was totally unaware that the funds to build the hospital came from a Sydney car dealer. He was in a position to have considerable influence and even appoint a new contractor to operate the hospital. It is unclear whether he and his operations underwent any sort of probity assessment.

Apr 1998 Commercial confidentiality

The Government has previously refused to release contract details on the basis of commercial confidentiality. But some details have come to light in a confidential report by credit ratings agency Standard & Poor's into $40 million of annuity bonds issued by the private operator to fund the building and operational costs of the new hospital.
Call For Secret Hospital Papers The Age April 7, 1998

Nov 1998 Cnfidentiality

If our governments have unpalatable truths to hide, or there's a bit of dodgy accounting going on, or you don't want the buck to stop with you, then the best ruse in town is a "commercial in confidence" clause.

It's become so serious a problem, even Auditors-General talk of threats not only to "the public interest", but to democracy itself
Under the contract, Australian Hospital Care will run the hospital and provide services to public patients for 20 years. The company also gets a virtual monopoly, since the contract states that no other public hospital can be built in the Latrobe Valley for the life of the contract.

The government admits that the running costs of the hospital won't be any lower than in the public system. However it claims that where it will make substantial savings is on the capital cost of building the hospital.
Shrinking Democracy Radio National November 1, 1998

Jan 1999 Judge orders release of contract

The Victorian Government has been ordered to release the privatisation contract for a hospital in eastern Victoria under the Freedom of Information (FoI) laws which Premier Jeff Kennett has threatened to abolish.
VIC - New FoI clash as govt told to reveal hospital contract. Australian Associated Press January 17, 1999

Jan 1999 Unconvincing government argument

In the latest decision, a tribunal senior member, Ms Noreen Megay, who made the order in the Coulston case, said she was totally unconvinced by the Government's argument that future hospital privatisations would be adversely affected if the La Trobe contract was released.
State Told To Release Hospital Contract The Age January 18, 1999

Jan 1999 AHC's concerns dismissed

Ms Megay also dismissed concern by contractor Australian Hospital Care Ltd that the documents sought by Opposition health spokesman John Thwaites contained trade secrets and, if made public, would damage the company's competitive position.
"There was no evidence before the tribunal that anyone would be, or had been deterred from doing business with the State of Victoria simply because the terms upon which it would do such business would be publicly known," Ms Megay said.

"Indeed, competitive pressures can only serve to benefit the State, ensuring that not only does it get service delivery at the best possible price, the services are delivered to optimum quality standards."
Names row takes on new twist. The Australian January 18, 1999

Feb 1999 Government appeals

The Victorian government will appeal against a tribunal order to release the contract for the privatised La Trobe Regional Hospital in eastern Victoria.

The Victorian Civil and Administrative Tribunal ruled last month that the 25-year contract with Australian Hospital Care be released after a Freedom of Information application by the state opposition.

The government had until today to release the contract or appeal.

A spokeswoman for Health Minister Rob Knowles said it would take the fight to the Supreme Court.

The government believed releasing the contract would damage Victoria's reputation as a place to do business, and jeopardise future hospital privatisations, she said.

Contracts for the Mildura, Austin, Berwick and Knox hospitals are still to be decide
VIC: Govt to appeal release of hospital contract, AAP NEWSFEED February 5, 1999

Feb 1999 A delaying tactic

A Supreme Court appeal against the release of contracts for the privatised Latrobe Hospital was a delaying tactic by the government to avoid scrutiny at the next election, the state opposition said today.
VIC - Govt challenges court order to release contract. Australian Associated Press February 8, 1999

June 1999 Revelations of secret owner when FOI documents released

Sydney car yard king Mr Nick Politis is the secret owner of Victoria's first privatised public hospital, the LaTrobe Regional Hospital in Morwell.

Mr Politis' City Ford showroom straddles an entire block, just down from Kings Cross. He is known as the rugby-mad dealer who made his way up the managerial ladder to become the biggest Ford salesman in the country.
The Age has found that a company specifically formed to own the hospital - La Trobe Regional Hospital - is operated through a series of related companies by Mr Politis and his associates. It is believed that Australian Hospital Care sub-leases the hospital from LaTrobe Regional Hospital, which has a 99-year Crown lease on the site.

As the main shareholder in LaTrobe Regional Hospital, Mr Politis could have a considerable say in the running of the 256-bed hospital. He declined to be interviewed.

Documents seen by The Age show that his company can appoint a temporary new operator should Australian Hospital Care default on its contractual obligations.
``People in Victoria would be pretty surprised to learn that a Sydney car dealer has a key role in operating a Victorian public hospital,'' Mr Thwaites said. ``If something goes wrong, the future of the hospital and health care in the LaTrobe Valley shouldn't be left up to a car dealer who is unaccountable, unelected and untried.''
``A financier's task is to look at providing the most cost-efficient basis for finance,'' Mr Bryce said. ``Part of that process was to have the company that actually owned the hospital as an independent company, which is off balance sheet to Australian Hospital Care. That company has to have an owner and the owner is someone that the financiers sourced.''
Under a 20-year ``build-own-operate'' contract with the Department of Human Services, LaTrobe Regional Hospital has exclusive rights to provide public hospital services in the LaTrobe Valley. At the end of the 20-year contract, the hospital remains with its private operators, unlike some government projects which revert back to public ownership, such as City Link.
Car Yard King Behind Hospital The Age June 1, 1999

June 1999 Justifications

Australian Hospital Care (AHC) won the hospital tender, but documents released under Freedom of Information show $2 million-plus fortnightly payments from the government to another company, Latrobe Regional Hospital Pty Ltd.

Share records show it is owned by WFM Health, in turn owned by WFM Motors, with Sydney car dealer Nick Politis listed as a director of both.
"What arrangements they've made is a matter for them; our contract is with a company that has been through a very intense probity audit process - they went through with flying colours," he (Mr Knowles Min Health) said.
VIC - Hospital putting psych patients in local hotel - ALP - 2. Australian Associated Press June 15, 1999



Sloppy Administration

Comments made in Queensland suggest that AHC was soon out of its depth and was running existing hospitals in the LaTrobe region at a loss - long before they were replaced by the new Latrobe public hospital.

This perception of administrative ineptitude and a failure to grasp basic issues of propriety was reinforced when confidential and emotionally laden items from the subsequently closed hospitals were later auctioned off.

Oct 1997 Queensland debates LaTrobe

On Tuesday(in Queensland), Mrs Sheldon praised the new Latrobe Regional Hospital in Victoria which, the Opposition said, was still being built.
AHC was given management of the existing Latrobe hospital while the new one was being built and, in the 12 months to June 1997, had turned a $1.2 million operating surplus into a $1.6 million deficit, Ms Edmond (opposition shadow health minister) said.
Sheldon faces more Labor hospital jibes COURIER-MAIL October 30, 1997

Apr 1999 Icons auctioned off

The Sunday Herald Sun said she (shopper) was distressed when a sacred box and holy water used to give the last rites to dying patients also went under the gavel.
VIC - Patient records for sale at auction - report. Australian Associated Press April 24, 1999

Apr 1999 Religious icons, morge records, patient and staff details at auction

A MOE doctor is disgusted that a newly privatised hospital auctioned a crucifix donated in the name of a dead patient.

The crucifix was among icons sold by Australian Hospital Care at the closed Moe campus of Latrobe Regional Hospital this week.
Dermatologist Dr Tanja Bohl, who went to the auction to buy trolleys and linen skips, said she was horrified when she saw the religious items in the old hospital at which she once worked.
But Dr Bohl's distress turned to anger when she realised a table she bought at the auction contained confidential morgue records, including the names of dead and details of jewellery taken from their bodies.

Whiteboards on sale still recorded patient details and a bag of employee records was found among goods bought by Dr Bohl.
PATIENT FILES GO AT AUCTION. Sunday Herald Sun April 25, 1999




LaTrobe fails to meet financial expectations

AHC had been contracted to run the hospitals which were to be replaced by LaTrobe until that hospital opened. If the labour opposition in Queensland is to be believed AHC rapidly turned an $1.2 million operating surplus into a $1.6 million deficit.

AHC held high hopes of profitability from the LaTrobe hospital and this is reflected in their statements to the market. These expectations were soon dashed as huge losses were sustained.

Mar 1999 Positive predictions

"The revised outlook reflects the successful operational commencement of the New Latrobe Regional Hospital (LRH), with strong volume demand and the immediate realisation of efficiencies by the operator, Australian Hospital Care (Latrobe) Pty Ltd," S&P said.
S&P affirms Latrobe hospital CPI bonds a rating. Australian Associated Press March 29, 1999

Sept 1999 Less than expected

The company said contributions were less than expected from the new Latrobe Regional Hospital in Victoria, which opened last September as Australia's first fully integrated privately owned public hospital.
Hospital Group Feels Squeeze Australian Financial Review September 10, 1999

Sept 1999 Justifications sound false

The key Latrobe regional hospital performed below budget due to "higher costs in meeting an unexpectedly high level of demand for its services". One would have thought that that is what the hospital was set up to do - to respond to patient demand.
UPDATES - AUST. HOSPITAL CARE (AHX) $0.69. Your Money Weekly September 16, 1999

Oct 1999 Why LaTrobe is losing money

Chairman of the hospital's medical staff Peter Burke said AHC submitted the lowest bid when it tendered for the project.

"They severely underestimated the patient load provision for services with their tender," Mr Burke said.

Oct 1999 Blaming government

Australian Hospital Care Ltd has warned that its first-half results will be significantly hurt by losses brought about by inadequate government funding of the Latrobe regional hospital in Melbourne.
Govt Blamed For Hospital Shortfall Australian Financial Review October 26, 1999

Mar 2000 Big losses

Australian Hospital Care Ltd (AHCL) has suffered a 73 per cent fall in first half profit, with losses by its Latrobe Regional Hospital in cutting into its bottom line.
Latrobe hospital drags down AHCL's interim profit. Australian Associated Press March 9, 2000

Sept 2000 Bigger losses

Group EBITDA fell by 33.7 % to $24.7 million, largely due to reductions in contributions at Latrobe Regional Hospital of $7.5 million and $3 million at Hobart/St Helens.

The company recorded a loss of $79.45 million after tax and abnormals.
"Our biggest problem remains Latrobe Regional Hospital and, to a lesser extent, the Hobart Private Hospital co-location, and these two facilities have significantly impacted on our overall result.
Australian Hospital Care Limited (AHX.AX) Media Statement/Preliminary Final Report. Australian Stock Exchange Company Announcements September 7, 2000



Consequences for services

The hospital tried to contain the huge losses at LaTrobe by reducing services so that patients had to wait. Reports suggest that care was compromised but AHC strongly denied any suggestion that care was compromised. Some reports did support AHC's position but the sources seem to be less credible. One report concerning a patient transferred from Monash Medical Centre suggests inadequate levels of nursing staff and nursing skills over the Christmas period. Hospitals may under-staff during quiet periods in order to reduce costs.

AHC went cap in hand to government asking for more money on a number of occasions. Its justifications and explanations are interesting when you realise that they costed and bid for the contract in a competitive auction of patient care.

AHC failed to understand that funding of public hospitals had been marginal for years. Administrators had already been pressured to stretch resources to the limits. AHC thought that improving services and increasing staff could be accomplished by increased efficiency and still be profitable.

When things fell apart they chose to believe that they had provided better care but that government had not funded public hospitals properly. That certainly was true but they had knowingly bid for the contract and cannot excuse themselves this way.

Oct 1999 AHC's claims and justifications

From an operational and community perspective, Latrobe has been an outstanding success with the modem facilities, increased medical staff, a highly efficient Accident & Emergency, theatres that are amongst the most efficient in the public system, good relationships with unions and staff, strong community support and extremely high customer satisfaction.

However, as with all Victorian Public Hospitals the level of funding provided to deliver the services is inadequate and causes concern. We have been, and continue to be, in negotiations with the Department of Human Services.
Australian Hospital Care Limited(AHX.AX)Chairman`s Address to Shareholders. Australian Stock Exchange Company Announcements October 25, 1999

Oct 1999 Problems in care and services?

VICTORIA'S first privatised public hospital is failing to cope with health needs in the Latrobe Valley, according to local doctors.

Bed shortages and surgical waiting lists are expected to grow because services are being cut at Traralgon's Latrobe Regional Hospital to get it out of the red.

Opened a year ago by the publicly listed Australian Hospital Care, the hospital risks a $2.6 million budget shortfall unless cutbacks occur.

But local surgeons claim the company failed to understand the needs of the community when it submitted its tender to build and operate the new hospital.

The complaints contrast with the picture AHC chairman Lawrie Willett put to this week's annual meeting.

"From an operational and community perspective, Latrobe has been an outstanding success," he told shareholders.

He said the company had good relations with unions, staff and the hospital had the community's strong support.
Latrobe's chief executive officer, Stuart Rowley, blamed the situation on an unexpected demand for hospital services. He said that if this level of activity continued, the hospital would run out of funding before the end of the financial year.
Leaked documents reveal bed shortages and cancelled surgery lists at the hospital have been a regular source of complaint from doctors.

After one surgeon found his week's list of elective cases cancelled and an emergency case refused admission, he told AHC management: "I have had more cancellations in the last 11 months than I have had in the previous five years at the old hospital."

A leaked copy of his blistering July 11 letter adds: "It seems that the shortage of beds is having a major impact on the delivery of proper surgical care in the Latrobe Valley."

Several medical registrars similarly complained about the administration of intravenous drugs, poor communication between departments and an apparent lack of staff professionalism.

"The purpose of this sensitive letter is not to implicate certain staff, but to highlight difficulties we have encountered which can be rectified," the registrars said.

Nov 1999 Government says major problems

But he (Thwaites new min for health) attacked the former Government for privatising health services in the first place, saying there were ``major problems'' with the La Trobe Regional Hospital, the first and so far only privately owned and operated public hospital in the state.
Mr Thwaites said he had asked for a full briefing on the La Trobe hospital, which is facing a $2.6million budget blow-out.
Legal Row Delays New Hospital The Age November 11, 1999

Nov 1999 AHC has its supporters

LAST YEAR it was the most divisive issue in the valley - the privatisation of the local public hospital. Letter after letter came in to the Latrobe Valley Express in the lead-up to the opening of the new La Trobe Regional Hospital in July last year. That was partly because two branches of the hospital, in Moe and Traralgon, were to be replaced with one new building on the road between Traralgon and Morwell. Moe residents were particularly angered.

Now the letters to the editor column has gone quiet. ``It's a wonderful hospital, a terrific facility, and I think people appreciate that,'' says the newspaper's editor, Lynne Smith. ``When people are treated there, they don't notice a huge difference apart from a modern, new facility.''
The hospital's occupational therapy manager, Annabelle Bishop, isn't sure how much increased efficiency, patient satisfaction and staff morale is due to privatisation and how much to the new hospital building. Staff, in particular, disliked the old hospital in Traralgon, an ageing, three-storey, concrete-and-cream-brick edifice with unreliable plumbing.
Her (Bishop) fears failed to eventuate. ``I was against privatisation and still am against it, but, as it is, I'm pleased we got the company we got,''she says of the hospital's owners, Australian Hospital Care Ltd. Bishop believes the company focuses on patients' needs and values quality treatment.
The company argues that it is a victim of its own success in delivering services: record numbers of patients are going to the hospital, many more than the hospital is funded to treat under casemix.
Everybody's Happy - Except The Shareholders The Age November 20, 1999

Jan 2000 Cutting beds

The hospital, Victoria's first privatisation, disappointed last year, and the group has begun to cut beds to offset what it claims is inadequate government funding.
The Prognosis For Health-care Stocks, Australian Financial Review 5 January 2000


The following case is interesting because the implication from the surgeon's comments is that the patient died as a result of improper care of his tracheostomy tube. The thrust of the article is the criticism by the surgeon that the patient should not have been transferred from the public Monash cardiac facility which was under bed pressure to a small peripheral hospital. The patient was not well enough and the surgeon had forbidden it.

That said a hospital with 256 beds and an ICU like the LaTrobe should be perfectly able to care for a tracheostomy safely. There is insufficient information given to form an opinion as to what happened at LaTrobe and I have not included the denials, explanations and claims made by the hospital.

Oct 2000 Were there staff problems?

John Alvarez, who left Monash late last year after almost four years as a consultant cardiothoracic surgeon, said pressure on beds resulted in some heart surgery patients being discharged too soon.

One patient, Michele Monacella, had died a week after being transferred to a La Trobe Valley hospital. Mr Alvarez said other deaths had occurred in similar circumstances.
But Mr Alvarez said Mr Monacella, 76, was discharged and transferred to La Trobe Regional Hospital, despite Mr Alvarez's instructions that the patient was not to be moved.
``Sending him to a small, peripheral hospital over Christmas-New Year's - I was dead against it,'' Mr Alvarez told Insight.
He was put in a general ward, where Donato Monacella says she had to show a nurse how to clean the tracheostomy tube.

``I had to show one of the nurses ... she said, `I've never done this before','' Donato Monacella said.

A La Trobe Regional Hospital spokesman said Mr Monacella was admitted with multiple and complex medical problems and that the care he received was ``entirely appropriate and of the highest quality''.
Mr Alvarez said he believed the onus was on Monash to ensure patients were transferred to units with staff experienced in caring for tracheostomy patients. `
Mr Alvarez said he could not understand why Mr Monacella had not been returned to Monash once his condition began to deteriorate.
Any assertion that La Trobe Valley Hospital was not equipped to cope with this kind of patient transfer is incorrect. The hospital has an intensive care unit and was well equipped to cope with a post-operative cardiac patient with a tracheostomy tube. Unfortunately, the patient died at La Trobe Valley Hospital seven days later. (Claim by hospital spokesperson)
Death Was `avoidable': Surgeon Sunday Age October 15, 2000



Resolving the mess

In 1999 AHC was faced with a new hostile labour government. Labour had strongly opposed the privatisation and attacked the LaTrobe contract. AHC attempted to renegotiate the contract but the government refused to meet their demands.

In desperation the company commenced a lawsuit against the Victorian government claiming that it was being treated unfairly. The government had not fulfilled its obligations under the contract. AHC sued for $10 million and to increase payments by $8 million a year.

The judge insisted on further negotiation. After the new Managing Director of AHC offered to give back the hospital the government relented. Mr Thwaites, the new minister indicated that he was doing so in order to maintain the quality of the services to the community but that it would cost tax payers more.

Oct 1999 Renegotiating funding.

Australian Hospital Care has approached the Government to partly renegotiate funding for the newly opened La Trobe hospital. The group's chief executive, Dr Mark Bryce, said: The former Government underfunded public hospitals across the state. The funding has been cut too far and has to be restored to provide a decent level of service.''
Health Boom On Hold The Age (Melbourne) October 20, 1999 

Feb 2000 AHC goes to court

Australian Hospital Care Limited, through its wholly owned subsidiary Australian Hospital Care (Latrobe) Pty Limited, has today issued proceedings in the Supreme Court of Victoria against the State of Victoria seeking in excess of $10 million in damages and interest for contract breaches relating to the New Latrobe Regional Hospital Agreement.
Australian Hospital Care Limited(AHX.AX)Issue of Statement of Claim against Victorian Government. Australian Stock Exchange Company Announcements February 22, 2000

Feb 2000 AHC claims Government breached obligations

The company claimed the Government breached its contractual obligations by failing to pay appropriately for improved or expanded mental health, Aboriginal women's health and suicide prevention services.
Hospital Sues State For $10m The Age February 23, 2000

Feb 2000 Negotiaring unsuccessfully

AHC managing director Dr Mark Bryce said yesterday the company was negotiating the issue for a couple of years with the Kennett and Bracks governments.
Hospital Plans To Sue Bracks Australian Financial Review February 23, 2000

Feb 2000 Seeks increased funding

The Supreme Court writ seeks about $A8.3 million more in government funding per year for the remaining 18 years of the contract.
Privatised hospital seeks $150m. The Australian February 28, 2000

Mar 2000 AHC wants negotiation

The health company which mounted a $10 million law suit against the Victorian state government over a hospital contract today urged Premier Steve Bracks to negotiate a settlement of the wrangle.
Vic - Private hospital company seeks talks with government. Australian Associated Press March 10, 2000

Sept 2000 AHC offers to give hospital back

The Kennett government's showpiece of health care privatisation, the LaTrobe Regional Hospital, has been offered back to the State Government, with the company running it sinking dramatically into the red.

The 256-bed hospital near Morwell was opened in July, 1998, amid much controversy and last year lost its operator, Australian Hospital Care Ltd, $6.2million.
Hospital Company Quit Bid The Age September 9. 2000

Oct 2000 Government agrees

Australian Hospital Care Limited (AHCL: AHX) today announced that the operation of the Latrobe Regional Hospital would be transferred back to the Victorian State Government on 31st October 2000. The in principle agreement is subject to due diligence and final documentation.
Australian Hospital Care Limited (AHX.AX) Transfer of Latrobe Hospital to Government. Australian Stock Exchange Company Announcements October 23, 2000

Oct 2000 Sensible lessons from the failed privatisation

The failure of Victoria's first privatised public hospital underscored a need to open privatisation contracts for scrutiny, the federal opposition said today.
Federal opposition health spokeswoman Jenny Macklin said the reverting of the hospital to state government hands today evidenced the failure of privatising public hospitals.
"The whole approach of privatising public hospitals just hasn't worked," she told reporters here today.
"The private operator entered this contract on the basis that they could make significant savings and cuts to a normal public hospital and proved they can't," Mr Thwaites told reporters in Melbourne today.

"If the operator kept on losing money at that hospital, there was no guarantee that quality services could be maintained."
Vic govt to resume control of Latrobe hospital from listed AHC. Australian Associated Press October 23, 2000

Oct 2000 All a mistake

Mr Thwaites said new services in mental health and radiotherapy at the hospital had been put on hold because of the company's financial problems.
"This whole affair has been a mistake by the Kennett government," Mr Thwaites said.

The government will also take over AHCL's $12.6 million stake in the actual hospital building, for the bargain price of $6.6 million, with the remaining interest owned by financiers reverting to public ownership in 15 years.
Vic privatised hospital, Latrobe, to revert to public ownership. Australian Associated Press October 23, 2000

Oct 2000 AHC admits its failure

Mr Thwaites said the government would have to spend more to run the hospital, opened in 1998, than was paid to Australian Health Care, but that was because the level of government funding under the contract had been inadequate.
He (AHC chief executive Michael Stanford) said the company had written off its $17 million investment in the hospital and would not consider a similar venture in Australia. The contract was unviable and we are scarred by the experience.''
Hospital Returns To Public Control The Age (Melbourne) October 24, 2000

Oct 2000 Mediation was court ordered

We commenced litigation against the Victorian Government in January 2000 regarding the Latrobe Regional Hospital contract as we did not believe we were being paid appropriately as per the contract. - - - - - As part of this process, AHCL and the Government were required to engage in court ordered mediation.
AUSTRALIAN HOSPITAL CARE LIMITED: Chairman's Address To Shareholders, Australian Stock Exchange Company Announcements 26 October 2000



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This page created February 2992
Rewritten June 2005 by
Michael Wynne

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