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.

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This page examines LifeCare business practices and compares them with similar practices in the USA describing the consequences there. It is not claimed that the consequences of LifeCare's practices are or will be the same. The high risk of socially unacceptable consequences when these business strategies are employed is stressed.

 Australian section   

(Introducing US Healthcare practices into Australia)



This page was written in 2002 and an update section added in 2006

A separate web pages lists LifeCares story chronologically year by year



LifeCare is a company founded and largely managed by the multimillionaire Michael Boyd. Boyd made most of his fortune in pathology through the company Sonic Healthcare. Most of his money comes from Medicare and so from the taxpayers pocket. He is also a major investor and moving force in the company Foundation Healthcare. His other commercial interests include Silex systems (Uranium technology) and Quadrant Australia (satellites). Sonic Healthcare, LifeCare, Foundation and Sigma Pharmaceuticals have formed a cooperative alliance. LifeCare provides allied health services, related workplace services and dental services through a small number of dental practices in Foundation's medical centres.

LifeCare does not employ doctors. It provides health care through allied medical professionals and dentists. Doctors have been alerted by the US experience. They have been hostile to the introduction of commercial forces which might impinge on their right to serve their patients best interests. The battle about these issues with politicians and corporations, both eager to control their spending has been acrimonious.

The commercial consequences of introducing business practices which intrude into patient care and so antagonise doctors are revealed in Mayne Nickless' dramatically falling profit and share price in April 2002. Doctors are not admitting patients to Mayne hospitals. Both franchising, a Smedley policy and financial incentives linking patient care to profits are unacceptable for most doctors at the present time. These are among the market practices which have destroyed the ethics of health care and undermined the trust of patients in the USA. Doctors know this.

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The importance of LifeCare

LifeCare is important because it reveals what happens if and when health care corporations in Australia are given free reign - the sort of processes they would like to introduce with doctors. There are large profits to be made by controlling the way doctors investigate, prescribe and refer. Proponents of corporate medicine assert that Australia is different and that the sort of things which happen in the USA could not happen here. Their arguments are not convincing.

LifeCare is also important because it is working in close association with doctors in Foundation Healthcare's centres. It is only a matter of time before doctors in these centres feel cheated in comparison with their physiotherapy and dental professional colleagues who receive share options as incentives and benefit financially from franchises. This is what happened in US hospitals.

The good and the bad news

The bad news is that LifeCare has introduced many of the worst US market practices into Australian health care. They have been accepted by some sections of the allied health professions. This is a wedge in the door.

The good news is that there are not as yet allegations of fraud, overservicing or misuse of patients. They are not performing well and their share price is down to 11 cents. The M.D., Richard Bevan and Michael Boyd, two of the movers and shakers in developing policy both resigned during 2002. Instead of confronting the problem of commercial pressure on care, LifeCare is rushing ahead with its practices in order to turn the company round.

LifeCare has been listed on the share market for 2 years. It was over 20 years before the full extent of the problems in the US corporate system were exposed in a series of massive scandals.

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Concerns about LifeCare's business model


The important and distinguishing feature of LifeCare is that it is franchising health care, probably the first to actually do so in Australia.

LifeCare Health Ltd, headquartered in Sydney, is one of the world's biggest health-care franchises even without an overseas presence (so far). Young (head of a Melbourne-based franchise consultancy) predicts the company will be in New Zealand and Singapore by next year.
Australian Franchises Conquer The World:
Australian Financial Review October 3, 2001

LifeCare is the largest provider of private physiotherapy services in Australia. Its operations include owned practices, allied health contracting and the LifeCare franchise system.
LifeCare Prospectus Nov 1999

The sale of this practice is in line with the on-going strategy of the Company to acquired practices, add value through the introduction of the LifeCare systems and then on sell them as franchises.
Commencement of Services from FHS/Sale of LifeCare Practice, Australian Stock Exchange -- 6 July 2001

Comment:- Franchising is a very popular management technique because it creates a very strong incentive on the franchisee to be much more profitable - to see more patients or provide more treatment. Most if not all of the initial profit goes to the franchiser. Once this has been paid any additional profit goes to the franchisee. When this point has been reached it is very profitable for the franchisee. His income depends on how much additional work is done. He is now working for himself. There is intense pressure to reach the point where profit starts.

Franchising is the buzzword in US Corporate Healthcare. Big health and aged care companies have appointed franchising experts to their boards. Mayne's Peter Smedley has been a strong advocate of franchising in Australia. His spectacular success in turning around Colonial Mutual was based on a system of franchising. Press reports describe his changes at Mayne as attempts to introduce a franchising model.

GP's are already overworked and underpaid. Employers of GP's like Foundation will find that doctors, relieved of these stresses by becoming employees will attempt to spend more time with their patients in order to provide them with more discerning and better health care. They are less likely to order unnecessary investigations and give quick and unnecessary prescriptions. This is not profitable for their employer.

It is not difficult to predict that franchising will be seen as the way to address this problem and enforce fast and profitable medicine on doctors in the name of productivity. The precedent has been set and if it is successful LifeCare will be the model. It is only a question of time and the right political climate before corporations attempt to franchise doctors. There is no better way to get them to practice fast and dirty "Macmedicine" and that is where the money is in General Practice.

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A total of 875,000 options have been issued under the LifeCare Staff Incentive Option Scheme. The options have an exercise price of $0.15 and expire 30 April 2004.
Appendix 3B - Consideration for acq./Staff Incentive Scheme: Stock Exchange release (relating to the purchase of Physiotherapy and Pilates practices in Brisbane. The options exercise price was incorrectly stated in this release. It was 25 cents)

Not only does LifeCare buy practices using its shares but it makes the allocation of some of these shares conditional on the purchased practice meeting financial targets over periods of up to 18 months. In some instances the final price paid depends on reaching performance objectives within specified times.

The practices purchased are also given share options. These are shares they can acquire if and when their patient turn over and the services provided push profits and so the share prices up to the level specified. They get a big profit if the company does well.

This is illustrated by the purchase of "Physiotherapy and Pilates practices" in Brisbane in May 2001. Shares and options were used as part payment in line with the "LifeCare Staff Incentive Option Scheme" which "is fundamental to the Company's business mode".

Comment:- Incentivisation linked to economic performance has been at the root of over-servicing, the misuse of patients, and the defrauding of Medicare in the USA.

It is a standard and fully accepted modern business practice and is considered to be legitimate by the community, and the key to success by corporate managers. The medical profession has regarded such practices as a form of kickbacks which are damaging for patients and illegal in all countries. There is consequently an acute paradigm conflict for the health care professions. They are expected to participate in and identify with practices which are not congruent with their value systems. The spectrum of "closed minded" responses and "successful sociopathy" which I have described elsewhere will occur.

In the US these conflicting views about essentially similar practices have resulted in repeated revisions of the law in an attempt to define what are acceptable and desirable incentives in the marketplace and what are illegal kickbacks. A kickback is a kickback regardless of the wording used. Consequently even the lawyers in the USA are unable to unravel the contradictions in these laws.

What is clear from even a superficial examination of the US system is that "acceptable" incentives linked to profits have been as damaging for patients and the health system as the unethical arrangements earlier in the 20th century between doctors. These triggered the Stark laws prohibiting kickbacks. Representative Pete Stark has remained a vocal critic of the corporations and their practices.

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Treating the market rather than the patient

Early critics of market medicine such as Dave Lindorff (Marketplace Medicine) and Ron Williams (Remission Impossible) stressed that care for the patient would be replaced by care for the corporation. Clinical decisions would be made in distant boardrooms and not at the bedside.

When profits were falling by the end of the first quarter of 2001 LifeCare set out to identify "high margin revenue streams". They then implemented "higher margin revenue streams such as 'Learn to Swim' and 'Pilates' programmes".

Comment:- Tailoring treatment to meet the demand of the market for profit rather than the needs of the patient's has been one of the major problems in the USA. It occurred in psychiatry, in substance abuse and in rehabilitation - all areas peripheral to the more powerful and tightly controlled medical professional colleges. The scandal broke in 1991. The company National Medical Enterprise (NME) was the role model. It made a vast fortune by keeping patients in hospital for as long as insurers paid them. They were subjected to large amounts of costly but useless treatment while they were there. Going for a walk became therapy.

Vast sums were made by providing allied health care therapies and charging Medicare for this. Diagnoses were adjusted and treatment programs were designed to maximise profits even at the expense of care. As a consequence thousands, many of them children were kept in hospital for months. They were abused and misused. Market analysts heaped praise on management.

US Aged care chains which provided step down health services in their nursing homes made similar profits. They exploited the Medicare system by providing vast quantities of allied "therapies", paid for per item of care. Stepdown or subacute care became the buzzword in health care and even Australia's gullible Dr. Wooldridge became victim. He announced his plans to revolutionise our health system this way. The federal government bent over backwards to bring Sun Healthcare into Australia even though it was being investigated for fraud and the state where it was to operate in Australia had objected.

The extent of the problem was revealed in 1998 when a capitation system was introduced for paying therapies in the USA. Giving more therapy was no longer profitable. Demand vanished almost overnight and many thousands of therapists were fired. Sun Healthcare which until recently operated in Australia fired 1000 therapists then entered bankruptcy. Without the income generated by these extra therapies it could no longer service its large borrowing's.

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Doing "research" into therapy with a primary business focus

Allied with this is a curious release to the market by the company in May 2001. It has entered into what it claims is a world first agreement with a development company to trial a new form of treatment for a polyglot of conditions. The treatment is called Cellbionics, a version of pulse electromagnetic field therapy (PEMFT) optimised by a commercial group using smartcard technology. It is a form of electromagnetic therapy which the patient can give at home for a range of conditions.

Comment:- One is always suspicious of marketed therapies for multiple unrelated conditions particularly when it has as claimed been around for 30 years and still needs to be trialed. I looked up PEMFT in the Cochrane database. A review in Jan 2002 of its use in osteoarthritis found only a small number of reliable articles. It concluded that there was evidence of some usefulness in osteoarthritis of the knee only but further studies were needed. LifeCare claimed that it was "effective therapy".

The problem is that although the study refers to "potential therapeutic" benefits there is no suggestion of any sort of controlled study. This it claims is being done elsewhere. This sort of therapy is notorious for its placebo effect. Any other sort of study is certain to give deceptive positive results and make the therapists enthusiastic about it.

It is much more likely that the other aspects of the study - "commercial benefits", determining "the positioning and effectiveness of CellGen in the clinic" and evaluating its "commercial acceptance" are what it is really all about.

This is a form of treatment which seems to be of marginal benefit. By running a "clinical trial" they are introducing it to their physiotherapists. They are assessing its commercial potential rather than its effectiveness for patients. Drug companies have successfully used the strategy of funding studies in hospitals as a means of getting doctors into the habit of prescribing their more expensive drugs. This is a potentially profitable market exercise and patient's care is likely to be affected by it. This is a perfectly normal market activity, but it is not appropriate in health care.

Introducing a business culture into the health care workplace

LifeCare in some of its material to the market talks of "implementation of the systems and culture". It is clear that they are trying to encourage and develop a business culture. There is no doubt that this is a profitable thing to do. The problem is that a corporate business culture is generally incompatible with a health care culture. This has been a problem in the USA.

Comment:- Several US companies but particularly NME paid particular attention to inculcating a business culture which put profit before care. It called this an "intake culture". NME's subsidiaries ran scare campaigns, marketed aggressively and then paid bounty hunters sent into the community thousands of dollars for each head on a bed. All employees were expected to participate in increasing admissions and length of stay. Incentives were used to encourage this.

Vast numbers of people were admitted to hospital for prolonged periods when they did not need to be there. A large number of unsavoury and disturbing practices were enthusiastically adopted. The company's internal documents attested to the nature of the practices. The $1 billion dollars paid in fines and settlements attest to the extent of the practices. Vast profits were made and market analysts were ecstatic. They praised the company for introducing these practices.

The market chose not to consider the obvious causes of what happened. Columbia/HCA soon developed a particularly aggressive business culture which exploded in another scandal in 1997. The executives of aged care chains surrounded themselves with wildly enthusiastic managers. In the ivory towers at corporate headquarters they were quite impervious to what was actually happening in their nursing homes. The scandal unfolded in the last 2 years of the 20th century. In 2002 NME (now renamed Tenet Healthcare) re-offended but this time in cardiology. Hundreds of patients with normal hearts, many of whom had come for screening, were subjected to major surgery.

As is well illustrated by LifeCare, Australian business has also chosen to turn a blind eye to these events.

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Insight into potential problems

The only excuse for not being aware of the adverse impact of these practices is that the directors are one eyed and have not looked. The information is readily available.

Comment:- I am worried about the election of an R Walker as a director of LifeCare in November 2000. This is a WA company and it seems very likely that this was the same Ray Walker who was a director of medical insurer HBF in the 1980's. He was active in bringing National Medical enterprises into Australia to run Australian Medical Enterprises (AME) in 1991. He became a director of AME in 1991.

In 1993 I repeatedly asked Ray Walker to address and investigate allegations made by a doctor of unethical dealings in patient admissions by US co-directors and the senior NME manager of AME. I supplied him with large numbers of documents about NME in the USA. Walker supported NME and its staff. He was a director of AME when it tried to silence me by threatening and then commencing defamation actions. The American company, National Medical Enterprises was fined hundreds of millions for similar practices in the USA and was eventually forced out of Australia in 1995. If this is the same Ray Walker then he is well aware of the role the practices adopted by LifeCare played in the USA.

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LifeCare's business

- - - - - - for Boyd who, until he bought the Sonic parcel was a Perth accountant and partner in the family physiotherapy business, Lifecare.
Under $100 Million (part 1) Business Review Weekly May 28, 1999

LifeCare was a successful private company founded by Denis Boyd, Michael Boyd's father. LifeCare had four owners including multimillionaire Michael Boyd, his father, and Richard Bevan its M.D. In 1999 it ran 24 company owned and franchised physiotherapy centres in Perth. They claimed this as 1.5% of the physiotherapy market and wanted to grow to 20%. They also had their eye on sports medicine, occupational health, dental services and podiatry.

LifeCare floated 50% of the company on the market in December 1999 in order to build a "franchise network involving physiotherapists, sports medicine and podiatry" across Australia. During the succeeding 2 years it dabbled in dentistry, in occupational health, and in medical computer software. Lifecare entered Victoria, NSW and Queensland. It moved its headquarters from Perth to Sydney.

Like Foundation Healthcare they used their shares in part payment when they purchased practices. They joined in an alliance with Foundation, Sonic and Sigma in order to provide services in Foundation Medical Centres.

Their profits did not live up to their predictions and by the middle of 2001 LifeCare was making a loss. Their shares fell to 7 cents and then recovered to 13 cents by the end of the year. They have redeemed capital by selling off property and leasing it back, by selling practices back to the physiotherapist and then franchising them, and by cutting costs. They have sold those dental practices not located in Foundation's medical centres. They promise to squeeze more profit by increased franchising and concentrating on more profitable services. Arguably clinical decisions about health care are being made in boardrooms rather than by clinicians. In April 2002 the share price is still only 11 cents.

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Stop Press (24 June 2002)

Foundation and Lifecare are to merge. Neither is doing well.

Perth health industry entrepreneur Michael Boyd has moved to tidy up the ownership structure of two of his listed companies, proposing a merger of general practitioner consolidator Foundation HealthCare and physiotherapy player LifeCare Health. The merger values LifeCare at 10cents a share, compared with its 12cents close on Friday.
Health merger proposal, Australian Financial Review May 11, 2002

Update January 2006

Foundation Healthcare merged into LifeCare in June 2002 and in November 2002 it renamed itself Independent Practitioners Network (IPN). In December 2002 Sonic increased its holding in IPN and in return IPN gave Sonic pathology and radiology rights in the medical clinics. Lifecare (now IPN) continued to run advertorials on various physiotherapy topics under the LifeCare brand.

EVERYONE knows exercise is essential for good health but the very best of intentions can be led astray
That's where Lifecare Physiotherapy Bankstown steps in. The centre runs group exercise classes four times a week ideal for people of all ages, those recovering from injury or anyone looking to maintain good health.
Get motivated, get fit Canterbury Express August 26, 2003

THERE'S no doubt that the Men's Well-being Group at Life Care Therapy Services, Marden, is good for the men who attend.

They get exercise classes, activities, education and discussion sessions. They get occupational therapy, podiatry and physiotherapy as required. They learn about medication, nutrition, osteoporosis, home safety, falls prevention and how to cope with the heat. They get board games, carpet bowls, bocce, cooking, music, even dancing.
Men's day out is good for all Advertiser, The (Adelaide) February 13, 2004

A SPRAINED ankle is one of the most common sporting injuries, according to Lifecare Bankstown's Jim Liakos.
Physiotherapist Jim Liakos treats sprained ankles regularly at Lifecare Bankstown. Therapy involves reducing swelling and pain, restoring normal movement and building up strength around the joint to prevent continuing problems. Spotlight on injury Express February 17, 2004 

Sonic and IPN were now closely intertwined. The subsequent IPN story is told on the Foundation Healthcare and Sonic Healthcare web pages. The reverse takeover and change of name is described on the Foundation page.

After a checkered history IPN became a wholly owned subsidiary of Sonic Healthcare in 2005.

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Click Here for a chronological account of LifeCare's history and a list of references.

Web Page History
This page created June 2002 by
Michael Wynne
Updated and reformatted January 2006