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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Markets & aging
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Nursing Homes
1985 to 1998
1998 to 2001
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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
The web pages describes the situation that existed under a federal labour government and the radical changes made after the election of the market focussed coalition government in 1996. It documents the community's rejection of what they saw as the most offensive parts of those policies. The government adopted a watered down system but did not abandon its policies and ultimate objectives.

 Australian section   

From socialist Labour to free market Coalition
Doug Moran - Judi Moylan - Warwick Smith
1985 to 1998



Before 1996

Prior to the election of the conservative coalition government in 1996 the nursing home industry was tightly regulated by the commonwealth government. The required number and the qualifications of nursing staff was linked to the number and debility of the residents. This was monitored to ensure enough staff were available to provide care. There were commercial operators and the system was chronically underfunded. It needed a lot of attention.

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Appeal about Commonwealth Power

Commercial operators found the regulations oppressive. They restricted profitability. They lost an appeal to the high court against these regulations in 1987. They had close links to the coalition government who had promised them they would deregulate the industry and allow market forces to work their "self-regulatory magic".

Mar 1987 Commonwealth power upheld in court

The High Court yesterday unanimously upheld the power of the Commonwealth Government to totally regulate private nursing homes through its provision of sickness and hospital benefits. The decision emphasises the extent to which the Commonwealth's constitutional power to make various social benefits payments allows it to regulate private industries otherwise beyond its constitutional reach.

In yesterday's case the High Court was told that as a matter of practical reality the Commonwealth had assumed control of the entire nursing home industry, including the number of premises, the number of beds, the selection of patients, the number of nurses and the wages paid to them, the quality and nature of the services provided, the gross fees that might be charged and the book-keeping arrangements.

All this had been done under a constitutional power which allowed the Commonwealth to make laws with respect to "the provision of...sickness and hospital benefits".
The Court said the plaintiffs had complained that the "principal vice" of the legislation was that instead of making a payment to the person in need, and then regulating the use made of it, the law made a payment to the person by whom nursing home care was provided, and attached such far reaching conditions to that payment as to create a nursing home industry which fitted a mould prescribed by the Commonwealth.

Such a law, it was alleged, moved far beyond the kind of law that could properly be characterised as a law with respect to the provision of the benefit.

The Court said this argument could not be accepted.
"It may be that the degree and nature of the controls imposed on proprietors seriously affect their freedom to run their business as they wish".
Commonwealth Power Upheld On Nursing Homes Regulation Australian Financial Review March 11, 1987

Mar 1987 Industry found this shattering

Later, the Private Geriatric Hospitals Association, which backed the appeal before the court, described the decision as "shattering", and predicted that some nursing homes would go out of business.
TIGHT LAW ON AGED HOMES UPHELD Sydney Morning Herald March 11, 1987

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Appeal about payments

There was also a dispute between the federal government and private medical insurers because residents who would be in nursing homes in the larger cities found themselves as long term patients in country hospitals. This meant that private insurers or state government paid for care. In nursing homes the commonwealth paid. Once again the commonwealth won the dispute.

Dec 1998 A labour government ensures private insurers pay

The funds argued that the 30 or 40 bush hospitals in question were in fact often de facto nursing homes, in which case, the patients should have been eligible for Commonwealth nursing home benefits rather than the hospital benefits provided by the funds.

According to the executive director of the Manchester Unity fund in Victoria, Mr Murray Campbell - whose fund did not cease paying benefits - it was quite clear that if the same elderly patients had been living in Melbourne rather than country towns, they would have been in nursing homes and therefore a Commonwealth responsibility.

That was because the Commonwealth pays benefits for nursing home patients but not for private hospital patients such as those in the country community hospitals.
The Federal Minister for Health, Dr Neal Blewett, responded quickly to the Victorian funds' threats, describing them as "callous and unacceptable" and adding that the Commonwealth had legal powers which it would use if necessary

Use them it did early last month, when it introduced the Community Services and Health Legislation Amendment Bill.

The bill ensures that nursing home-type patients who are accommodated in hospitals are entitled to receive benefits if they are privately insured.
'GREYING AUSTRALIA' WORRIES INDUSTRY Sydney Morning Herald December 1, 1988

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Power with coalition governments in states - labour federally

During the early 1990s coalition governments held power in the states and labour in the federal parliament. This situation was reversed in the mid 1990s. The Kennett coalition government in Victoria was particularly market focussed during this period. The subsequent labour government reversed this extremism.

Apr 2000 A new labour government exposes past Kennett deals

Ms Pike also released documents detailing how the majority of the private nursing homes had gone to the Moran Healthcare Group. The group is owned by one of Australia's richest families and is headed by Mr Doug Moran, who Ms Pike told Parliament yesterday had been a long-time Liberal Party member up to 1998.
As part of that deal, Ms Pike said, the Moran group received top-up funding of $1 million a year for 10 years.

The documents also revealed the Moran group was short-listed to take on a further 400 beds, which would have given it another $1 million top-up funding each year.
Secret Deals Sink Nursing Home Sell-off Australian Financial Review April 5, 2000

State inspection teams monitored care in nursing homes. The Kennett coalition government in Victoria had encouraged entrepreneurs into their nursing home marketplace. They dismantled their oversight processes handing control to the federal government. The situation in Victoria went from bad to worse.

Feb 2000 Kennett had surrendered state oversight of nursing homes in 1995

In Victoria, the Kennett Government surrendered responsibility for nursing homes to the Federal Government in 1995. That decision is now being reversed by the Bracks Government. While it is said in the industry that most of the ``problem'' nursing homes are in the Melbourne area presumably because of the State Government's 1975 (?? 1995) withdrawal from monitoring the homes there have also been allegations against hostels in other States.
Standards For Nursing Homes Sydney Morning Herald February 28, 2000

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The Coalition gains power in 1996

Doug Moran (see description on Moran web pages) claims that he was largely responsible for the government’s user pays corporate friendly deregulated aged care and nursing home policy.

Government policy was to rely on market forces rather than regulation and to promote corporate involvement and consolidation. Regulations requiring minimum staffing levels were removed completely. User fees were increased. Residents were required to pay bonds when they entered a nursing home - to the extent that ownership of patient’s homes were threatened. Government oversight was abandoned in favour of market friendly accreditation. This was benign and market friendly. The whole process was handed over to the industry to run - the fox guarding the hen house. They were consulted before any changes were implimented and they seem to have been given a veto.

Nursing numbers and qualifications were left to the providers and so subject to commercial market pressures. Nursing salaries are the largest cost of nursing home care and the first casualty of cost cutting. Other regulatory restrictions were abolished.

Probity no longer featured as a prerequisite for a nursing home licence. As a consequence people with criminal records continued to hold licences, directors from failed companies were allowed to found new companies, and companies whose nursing homes had serious problems were given licenses when they bought further homes.

Over the next 10 years each new aged care minister struggled with the impossible task of turning a humanitarian service into a competitive marketplace. Each failed in the face of a succession of scandals relating to care. It is difficult to dispute the arguments that these were very largely the consequence of market forces and government policy. The sector has had a revolving door of ministers.

The new policy alarmed the community and in particular the elderly who were not prepared to sell treasured family homes to pay nursng home bonds, or to pay large additional fees for services which they considered the community which they had served and paid taxes to support should provide.

In 1997 the electorate responded angrily to the proposed regulations. They resisted the large costs the elderly were required to bear, particularly the threat of having to sell their homes to meet nursing home costs. Government politicians who saw their majorities sliding exerted pressure which resulted in modifications in the system of payment but did not change policy. This back down evoked an angry response from Doug Moran who called those who could not afford to pay bludgers. He deserted the party in protest.

These modifications impacted on the potential profitability of the sector and there was a loss of market enthusiasm. The potential for large profits in the sector lay with extra fees and large bonds. These would not come from governments anxious to keep taxes low.

These restrictions on profitability have irked the industry and under pressure from them government has moved to increase extra fees and reimpose bonds. They have succeeded to some extent and bonds are still paid by residents of low care hostel facilities but not by the residents of the more numerous and costly hgh care beds in nursing homes.

In 2006 the industry is still lobbying a sympathetic government to impose bonds and further deregulate payments in the industry. The many failures in the system have had a political impact and government has not yet plucked up the courage to do so.

Only DCA seriously entered the sector in 1998. Instead the market hedged its bets. The bankers formed trusts to own the bricks and mortar but leased them to unlisted private operators who could be replaced if they went under. These property investments were consequently shielded from the instability in the sector and the risk of losing government support at an election. Bankers still controlled the operators and could impose their requirements on those who operated the homes for them.

Instead of seeing the immediate backlash by voters in 1997 as their rejection of the policy, the situation was perceived as a badly handled political one resolved by replacing the minister who was seen to have handled public relations poorly. Judi Moylan was replaced by Warwick Smith.

Warwick Smith illustrates the lack of intellectual depth in this government. He embraced the idea of a civil society and promoted it publicly. He seemed unaware that a civil society was the very opposite of the set of beliefs his party was promoting and that the two were incompatible. The idea was soon abandoned. He was a stop gap minister and did little for the sector as the market took over.

Under continuous pressure from the marketplace, the government has increased its marketisation of aged care over subsequent years. It has steadily increased the amount paid by users.

Oct 1997 Public backlash alarms coalition party members

The Federal Government has had to reconsider aspects of its user-pays nursing home scheme following a feisty debate in the Coalition party room.

Speaking yesterday before his departure for Britain, the Prime Minister, Mr John Howard, promised to take "on board" requests to fine-tune the policy.

The scheme, first outlined in the 1996 Budget, introduces new uncapped accommodation entry bonds, daily fees and tough income and assets tests in order to save $500 million after four years.

Coalition backbenchers yesterday said there was no doubt that the policy was costing the Government votes and had resulted in high levels of fear and uncertainty among the elderly.
Most of all, the MPs called for clearer information on why the Government was introducing the new system. Some MPs, including Mr Wilson Tuckey, swapped ideas on how to sell the new scheme better.
The handling of the issue has already prompted a change of minister. Mr Howard replaced the former Minister for Family Services, Mrs Judi Moylan, with Mr Warwick Smith.
PM Pledge To Calm Nursing Home Revolt In Party Room Australian Financial Review October 22, 1997

Oct 1997 The government out of touch and deaf to argument and advice

The Federal Government developed its nursing home policy in isolation from the reality of old people's lives - and now it is paying the price, say industry analysts.

Obsessed with bottom-line considerations, it ignored the trauma and emotion involved in a person's decision to enter a nursing home. It compounded that error with attacks on two Australian icons - the family home and the age pension.

"A policy that looked reasonable on paper just didn't add up politically," said Mr John Barber, a social policy analyst of the consultancy Ageing Agendas. "The sums were fine but the Government failed to assess the social impact."
As the Government flounders in a crisis over its aged care reforms, many observers are saying, "I told you so."

They say the Government ignored basic political lessons in its attempt to introduce user pays principles to nursing homes. It attempted to make radical and complex changes to social policy, and it did so too quickly.
The coup de grace came last month when the Liberal Party's own constituency - self-funded retirees - were asked to supply details of their assets and income going back five years to the Department of Social Security to be assessed for increased daily nursing home fees.

For many it was their first contact with the department. They rebelled, particularly when it was clear the extra fee was to offset Government cuts to nursing care funding, not to improve the level of care. Backbenchers became alarmed.
It not only introduced accommodation bonds, and means-tested daily fees for the first time, but melded nursing homes and hostels through a new resident classification system, ended government monitoring of standards, introduced an industry-controlled accreditation system, and new prudential arrangements.

The policy began as a few surprising lines in the August 1996 Budget. But it had its genesis in the offices of Dr Michael Wooldridge, when he was the Opposition spokesman on the aged and community services. He was advised by Mr Bob Woods, who had been a consultant to the Doug Moran nursing home empire.
A Government flushed with electoral victory believed it could satisfy its backers in the nursing home industry and the free market ideologues in its own party by adopting the user-pays system that already operated in the hostel sector.

It would get people to sell their homes and pay an accommodation bond in order to enter a nursing home. Governments would no longer finance capital improvement - old people would.

As well, old people would pay a bigger share of the cost of daily nursing home care through the introduction of means-tested fees. The Government in turn would cut its spending on aged care by a massive $600 million over four years.

"The Government thought it was a lay-down miseAEre," said Mr Francis Sullivan, executive director of the Australian Catholic Health Care Association. "They didn't realise the impact was on people - people at the end stage of their lives."

For a start it was deaf to constant warnings from the Australian Pensioners and Superannuants' Federation that nursing home residents were different from hostel residents.
But the cold logic of user pays failed to take into account the people affected by the policy. The rich "bludgers", as Mr Doug Moran called them, could avoid selling their home. But pensioners could not.
Nursing Homes: The Policy That Grew Into A Monster Sydney Morning Herald October 23, 1997

Feb 2000 Staffing levels and skills left entirely to the market

Ms Sellers (secretary of nursing union) said changes to laws in June 1998 meant there was no longer a legal requirement to employ registered nurses in aged care homes.
Nurses complained repeatedly about scabies nursing home. Australian Associated Press February 25, 2000

Mar 2000 No accounting for how taxpayers money is spent

Under the Howard Government's new funding system, proprietors no longer have to account for the Federal funds they receive. Previously they had to dedicate a certain proportion of their funds for patient care. They made their profit from separate funds meant for laundry and administration, and non-patient care matters.

Proprietors hated this time-consuming system of accounting for nursing care expenditure, and successfully lobbied the Howard Government to give them a pot of money to be spent as they saw fit. They wanted to be judged on outcomes alone. Does the nursing home look good and is it safe? Are the patients happy and well? Then it doesn't matter much how the home achieved that result, and how much was actually spent on patient care.

Nurses claim this system has allowed the less scrupulous to cut expenditure on patient care, to use unqualified staff, and to cut corners wherever possible. ``The system has gone downhill; residents are more `high care', staff is less qualified, and there is no dedicated funding for patient care,'' says Iliffe.
Golden Oldies Sydney Morning Herald March 2, 2000

Aug 2004 Looking back at what happened in 1997

Remember 1997? Judi Moylan was minister and it was her job to oversee a massive overhaul of Australia's aged-care system. That was the year the government tried in vain to convince Australians they should pay an accommodation bond (raised by selling the family home) to secure a bed in a nursing home. As an idea, it was political suicide and it was eventually dumped.
For the love of Alice The Bulletin August 17, 2004

A damning analysis of the changes by John Braithwaite was published in the British Medical Journal (BMJ)in 2001. By this time the failures were only too apparent. Braithwaite made the point that Australia had gone much further than the USA in the deregulation and privatisation of nursing homes. He also quoted evidence to show that as in the USA, for profit Australian Nursing homes provided inferior care when contrasted with not for profit. The multinationals he refers to are probably
Sun Healthcare and Omega Worldwide, a US aged care property trust. He explodes the myth of the informed nursing home customer.

Aug 2001 An article in the prestigeous international BMJ spells it out

In the United States, as the Reagan administration cut back on welfare it came under enormous pressure from the healthcare industry to deregulate nursing homes by dismantling inspection in favour of implementing accreditation schemes administered by the Joint Commission on Accreditation of Healthcare Organizations. Accreditation would have replaced public inspection with a form of privatised peer review or self regulation. As tempted as the Reagan administration was by deregulation, public outcry ultimately persuaded them that it would be a mistake.
The current Australian government, led by Prime Minister John Howard, is the only example of a simultaneous attempt to cut welfare, encourage rapid growth of private care by large corporate organisations, and deregulate nursing homes.

In 2000, 55% of the new beds in nursing homes that were funded by the government were in the private sector compared with 27% historically. About 12% of the new funding for beds went to one provider, the Health Care Group which is owned by Doug Moran, a prominent member of John Howard's Liberal Party. The result has been a disaster both politically and in terms of policy.

In the lead up to the 1996 election the Liberal Party promised the politically active nursing home industry that it would seek to make the provision of care in nursing homes more competitive and also increase the industry's income by introducing means testing and new admission fees.
Privatisation and quality

The government's neoliberal policies certainly have given impetus to multinational companies that run nursing homes to expand into the Australian market. These companies provide a more institutional, less homelike, form of care than the care provided by the nurses who own smaller homes and the homes run by churches and charities that are subsidised by the state. The multinational companies tend to have superior risk management systems and better formal quality assurance programmes however.

Jenkins and Braithwaite used multiple regression to analyse the quality of care as assessed by the 31 outcomes standards in force in 1999 in 410 Australian nursing homes. Their survey had good validity and reliability, as measured by independent ratings made by two simultaneous inspections of the same homes.

They found that the quality of care was significantly lower in profit making nursing homes than in nonprofit nursing homes. One reason was that in profit making homes there was significantly greater pressure on directors of nursing to reach financial goals by cutting corners on quality. Data from the United States support the finding that profit making nursing homes have lower care standards.
Neoliberalism and rationality

As a model for improving the quality of care in nursing homes, relying on fees and consumer choice is naive. Residents are too sick to vote with their feet.

There are even more fundamental reasons why depending on the rationality of the market will never work well for quality of care. Sensible policy for providing nursing home care requires a larger welfare state, a larger regulatory state, and encouragement of public, nonprofit providers. Australia's recent experience shows that to head in the opposite direction is medically, economically, and politically irrational.
The challenge of regulating care for older people in Australia by
John Braithwaite BMJ 2001;323:443-6 ---- 25 AUGUST 2001

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More information

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 Sept 2006 by
Michael Wynne