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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Corporate Practices

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Entry to Privatisation
Privatisation Background
Australian states
Gen. Pract. Corporatisation
Pathology & Radiology

General Practice/Pathology:-
Sonic&Co . . Foundation
Lifecare . . . Endeavour
Primary . . Revesco&related
Gribbles Group

Hospital Companies

Affinity Health
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1886-1994 - - - refs
Collusion - - - - refs
1995-2000 - - - refs
Clippings 1998
Conflicts&Scan scam
2000-2001 - - - refs
Smedley - - - - refs
Health Story

Affinity Hlth & Citigroup
2004-2005 Break up
Mayne Diagnostics
Restrict Mayne

This web page briefly tells the story of Mayne's radiology, diagnostic laboratory and general practice businesses which generally underperformed competitors.

Australian section     

Mayne Diagnostics and General Practice


Diagnostic group

General Practice


Diagnostic group

Mayne's diagnostic group was part of Dr Barry Catchlove's grand plane to provide every facet of health care. Mayne steadily bought up laboratory and radiolpgy businesses until it was one of the dominant diagnostic groups in Australia. While Mayne's diagnostics division was more profitable than the rather suspect Gribbles Pathology, it never matched the profitability of competitors Sonic Healthcare or Primary Health care. Analysts and financiers wanted Mayne to sell or spin off the diagnostics group in the hope that new more focused management would improve the situation.

The story of Mayn's growth in Diagnostics is summarised in Jobson's 2004 yearbook.

Jan 2004 The diagnostics story

In 1996, Mayne Nickless acquired the second largest pathology provider in New South Wales, Hampson Pathology, for an undisclosed amount; - - - -
In 1998, Health Care of Australia (HCoA) entered the radiology market through the acquisition of Sydney Imaging Group and established its own medical imaging practice at the new Joondalup Health Campus, in Perth.
Also during 1998, Mayne Nickless established Mayne Nickless Diagnostic Services as a new division under separate management structure to HCoA; in NSW acquired Macquarie Pathology, Dr Colin Laverty and Associates and NSW X-Ray, which had 12 locations in Sydney - - - -
In 1999, the Company purchased Melbourne Diagnostic Imaging Group; HCoA increased its equity in PT Putramas Muliasantosa from 40% to 60%; - - - - -
During 2000, Mayne Nickless Diagnostic Services acquired a number of diagnostic imaging businesses in Victoria, NSW and Queensland; in Victoria, interests in two regional pathology practices were acquired to complement Dorevitch Pathology in the Melbourne central business district and metropolitan areas; - - - - -
In January 2001 the company changed its name to Mayne Group Limited.
- - - - MNDS is Australia's second largest provider of pathology and diagnostic imaging services.
Mayne Group Limited. Jobson's Year Book January 5. 2004

Feb 2004 Not a great performer

However, the consistency of the diagnostics business and a stronger five-month contribution from the since-sold hospitals portfolio helped Mayne post an overall net profit of $48.7 million for the six months to December 31, well up on the write-down-affected $57.7 million loss it recorded in the previous corresponding half. The consumer products business also returned to profit after the recall of products made by Pan Pharmaceuticals .
Pathology and radiology revenue grew through acquisition and organic growth, but both businesses experienced margin declines mainly due to head office cost reallocation.
Mayne Stumbles Over Generics February 26, 2004

Apr 2004 Underperforms competitors

In pathology and radiology, Mayne continues to underperform its competitors, with margins well below industry best practice. In pathology, for example, Mayne's operating margin is 13%, well short of market leader Sonic Healthcare's 18%-plus. Mayne says its troubled New South Wales pathology business is doing better, but analysts say it is still only just breaking even.

Although James continues to say the pathology and radiology businesses are not for sale, there are frequent reports of private-equity and investment banking groups eyeing off the businesses.
Mayne's Vitamin Deficiency Business Review Weekly April 22, 2004

It is suggested that the problem for Mayne is that , unlike its competitors it did not develop a business relationship with its radiologists and pathologists which aligned their financial interests with those of the company - and they may have been envious of their colleagures working for competitors where they were better rewarded. When contracts expired there was nothing to hold them except loayalty and this had not been encouraged.

Apr 2002 Doctors incomes not linked to company

In view of some of the poor relationships that exist between medical staff and management, retaining senior doctors is going to be important in Mayne's pathology and radiology divisions in the next few years. Unlike at MIA and Sonic, which have acquired their individual practices mostly through a mixture of cash and equity, Mayne's doctors do not have substantial equity positions. Most work on contract, and many contracts are due for renewal over the next year or two. Good radiologists can produce turnover of $2 million a year. If they are not tied to an organisation, they would be highly sought-after professionals.
Medicine Man Business Review Weekly April 4, 2002

Dec 2002 GPs referring elsewhere

Problems began to arise as MAY's top management tried to introduce a financial services model to the integrated healthcare activities of the group. They overlooked one major factor. MAY had not one but two customers for their facilities whether private hospitals, pathology or diagnostic imaging. Firstly, the patients and secondly, the service providers. MAY got some of the service providers offside. - - - - - - - General practitioners began referring patients to competitors' pathology and diagnostic imaging facilities. The eventual result was margin contraction, which hit the earnings of the hospitals, pathology and diagnostic imaging operations.
MAYNE GROUP LIMITED (MAY) $3.09 - Health Care Your Money Weekly December 5, 2002

The new Symbion Health became more focussed on pathology under the now popular Robert Cooke. He was an advocate of joint ventures and had succeeded in getting Mayne's clinicians back on side after Smedley. Its success was one of the factors which analysts felt contributed to the crash of Healthscope in January 2006.

Jan 2006 Symbion performs

"Pathology has performed admirably for Mayne, and Symbion sees pathology as a big growth platform not only here but potentially offshore as well." (Cooke)

Mr Cooke said Symbion's pathology business, which contributes 49 per cent of the company's bottom line, was meeting expectations in a sector with potential for growth. "Pathology is a great business," he said.
Don't get pathological, investors told Australian Financial Review January 19, 2006



General Practice

General practice is doctor intensive and consequently not profitable in itself. The money comes from the general practitioners referrals to diagnostic services and their prescription of drugs. The object of owning general practices is to secure these referrals. Most of the major diagnostic groups carry general practices.

Mayne's intentuion in entering general practice was no different to its competitors - referrals - but it does not seemed to have linked those ongoing referrals to the corporate mission and kept putting these doctors off side. Another interesting factor revealed in the following report is that if you increase the number of pathology and radiology requests from your practice then you will get more for it when a corporate comes shopping. Your practice will be more profitable if you overservice.

May 2002 Mayne wants GP referrals but gets it wrong

In the pathology and radiology markets, as in its hospitals, Mayne's key customers are doctors. A prime-time advertising campaign aimed at consumers, showing Mayne pathology centres as friendly and care-oriented, has deeply irritated many doctors, the real buyers of pathology services.
* But integrated health-care companies such as Mayne want medical centres and general practices because they produce a stream of lucrative referrals for hospital treatments, as well as for pathology and radiology services.

* Doctors say Mayne has been aggressive in buying high-referring general practices, offering well over the industry standard price of 1-1.5 times annual revenue.

For some practices, Mayne has been offering more than 2.5 times the practice's annual revenue.
Mayne Seeks Cure Business Review Weekly May 2, 2002

Mayne has always been low key about its growth in general practice. Their general practice division has not been profitable, although it did make a small profit in 2004. Mayne, one report claims, accumulated about 100 general practices, but most report only 50. Mayne's doctors became alarmed about their future when Mayne started to break up. The nature of Mayne's relationship with doctors is not known but the tax office had concerns about unpaid payrole tax and has taken action. Whether this has implications for the whole sector, as Mayne claims, rather than Mayne's specific practices, remains to be seen.

Oct 2002 Big losses

Gribbles' medical centres lost $500,000 on revenue of $15 million; and Mayne's medical centres lost $3.4 million on revenue of $32.8 million.
A sick business. Business Review Weekly 3 October 2002

Aug 2003 Losses and reasons

Mayne is trying to find a buyer for its 50 lossmaking medical centres, while IPN just slashed its profit forecast - - - - - .
A Mayne spokesman said the company's 50 medical centres, estimated by analysts to be worth about $20 million, reported a $2 million loss for the six months to December.

Industry insiders say the medical centres, along with Mayne's private hospitals, have been on the market for months. But a Mayne spokesman denied this and said the company expects to bring the business back to breakeven in the full year.

Analysts say Mayne has failed to generate expected synergies, especially by referring patients from its medical centres to its private hospitals. And diversification into wholesale dental supply and radiology has only complicated management and raised costs.
Doctor, Doctor The Business Is Sick Australian Financial Review August 9, 2003

Jun 2004 General Practice not a viable business

The bitter experience of closing shop convinced him that general practice is not a viable business. For proof, he says, look no further than the decisions of GP conglomerates such as Mayne (Health), Foundation and Endeavour (Healthcare) to scale back their operations "all these companies are jumping out".
General Practice In Critical Condition The Sydney Morning Herald June 3, 2004

Aug 2004 In the black for the first time - 50 centres

Mayne Group's 50 medical centres achieved their first positive earnings contribution to overall profits in the first six months of 2004, results show.
Corporate new boys bullish Australian Doctor August 9, 2004

Nov 2004 100 centres?

Primary's two larger competitors are Mayne Health, which operates more than 100 centres, and Foundation Healthcare -- part of the listed Independent Practitioner Network, majority-owned by Sonic HealthCare, which has 69 centres.
Rash of medical centres going for the doctor with grey power The Australian November 25, 2004

Apr 2004 GPs alarmed

THE future of more than 400 GPs contracted to Mayne Group's medical centres is up in the air as speculation grows that the company will be split up and sold.

The share price of Mayne has plummeted this year after its revenues fell 38% in the last six months of 2004.
Mayne threat Australian Doctor April 29, 2005

Nov 2005 Tax problems

SHAREHOLDERS in Mayne Group's proposed Symbion Health spin-off could be exposed to a $1million claim by the NSW Office of State Revenue over unpaid payroll tax.
It is believed the claim covers payments made by general practitioners over a four-year period up to June 30 this year.
Corporatised medicine is growing and Mayne is just one of a number of public companies offering services to doctors.

In the memorandum Mayne said corporate providers typically do not employ the doctors that consult in their premises, but offer back and front office support in the form of administrative, finance and nursing services.

"The medical centre operator is typically paid based on a percentage of the revenue the doctors' bill to their patients," Mayne said.
Tax man makes a house call on MayneDaily Telegraph November 14, 2005

Nov 2005 Tax problems

And then there was the announcement slipped to the market late on Friday night, in which Mayne said it was "preparing to defend a claim by the NSW Office of State Revenue that payments relating to general practitioners who operate their practices within Mayne's medical centre sites in NSW are subject to payroll tax.
Punters ignore bad news on Mayne The Sydney Morning Herald November 15, 2005

Nov 2005 Tax problems

The NSW Office of State Revenue has told Mayne it will have to pay payroll tax for GPs operating out of 13 Mayne medical centres in the state.
Since 1986 payroll tax had been imposed on payments to contractors who worked solely or mainly for one employer for long periods, she (OSR spokeswoman Therese Briggs) said.
Mayne ordered to pay payroll tax for contractors Australian Financial Review November 15, 2005


Web Page History
This page created Nov 2005 by
Michael Wynne
more extracts added Jan 2006