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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Behind the benign public face and good relations with staff is a hard headed business organisation. It has to be to survive. This page examines that hard edge.

Australian section

Ramsay's Hard Edge





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Paul Ramsay is a very successful businessman and that did not come from being kind and philanthropic. While his catholic private school background gives him a sense of decency and kindness he has displayed a ruthlessness and a willingness to play hard ball with the interests of others when his own are at stake. His good relations with staff and pursuit of services to the community have been very profitable for him. One wonders what would happen if there was a conflict between these and his financial interests.

He was well aware of problems in the corporate marketplace in the USA where patients have been misused and exploited. He was in the same psychiatric business and these were his very successful competitors. Staff were mobile and moved between companies bringing their financially successful practices with them. He must have known exactly what was happening in the industry.

He owned a managed care company and must have been aware of the growing tide of anger about this system and the popular pressure for a bill of rights to restrain its excesses.

In spite of this knowledge Paul Ramsay has advocated the introduction of the US system of medicine, and of managed care in particular, into Australia. This was in his interests but not in the interests of his fellow Australians. This is not to suggest that he was being malign but simply that his own interests, rather than the interests of Australians influenced his perception of these events in the USA.

If Paul Ramsay is a hard headed business man then his deputy Grier is more so. Grier’s public statements are more aggressive and one wonders if he will display the same depth of perception exhibited by Ramsay when Ramsay goes. Some of the company’s hard edged actions may well have come from Grier but Ramsay himself would have approved them. Three examples are given.


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Buyback in 1992

Ramsay learned the ruthless lessons of the marketplace the hard way and nearly went under. He displayed this trait in 1992 when he bought back the company he had listed on the stock market in 1987.

2004 Looking back to 1992

Ramsay privatised the company in 1992, paying less than one-third of the original issue price of 50¢ to repurchase stock. A group of small shareholders were bitter about being forced to sell their shares at what they believed were low valuations, just as business conditions were improving.
Old school and other ties Business Review Weekly October 28, 2004


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Hostile Takeover of Alpha Healthcare in 2001

Ramsay's hard headed strategy in its hostile takeover of Alpha Healthcare raised some eyebrows.

One of Paul Ramsay's more sordid deals was the hostile takeover of Alpha Healthcare by Ramsay Health Care. The US giant Sun Healthcare was the dominant shareholder in Alpha Healthcare and had lent it money for expansion. Alpha had a major setback when Victoria questioned Sun's probity and forced it out of the Mildura privatisation. Alpha had been struggling. It was selling off assets to remain viable. Sun Healthcare's sins had finally caught up with it in the USA and it entered Chapter 11 bankruptcy there and later in Australia.

Ramsay bought Alpha's debt from Sun's Australian liquidator and James Hardy at a fraction of its value and also Sun's Alpha shares. This was even though another company had offered Sun's liquidator more and been rejected. Ramsay also bought a large parcel of shares which James Hardy had been wanting to sell for some time.

Ramsay then offered Alpha's remaining shareholders the same low price for their shares. The shareholders considered Alpha to be worth much more. Ramsay held the debt to Sun Healthcare and could force the company into liquidation so scared off other buyers. Alpha shareholders had no choice but to sell at Ramsay's price.

They felt their vulnerability had been exploited. They considered their treatment anticompetitive and illegal and complained bitterly to ministers and to regulators. Four years later the matter is still grinding through regulatory bodies and the courts with little sign that authorities are willing to grasp the nettle and make decisions. Whatever the legal outcome this was a pretty ruthless business strategy and "not very nice" - not the sort of thing you would expect from the sort of socially conscious people who run hospitals.

This proved to be a very profitable and opportune purchase for Ramsay as the rapid recovery which Alpha's existing shareholders had anticipated made Alpha's hospitals very profitable.

The Alpha purchase is described in more detail on the Alpha web pages.

Apr. 2001 Alpha rejects Ramsay offer

It came as Alpha Healthcare's managing director Mark Compton said directors were unhappy with Alpha's offer, adding the company had held talks with other players in the healthcare sector.
Alpha directors last night said Ramsay's proposal was not sufficient because of Alpha's improving performance, the significant potential of the Westmead Private Hospital and the improving dynamics of the private healthcare industry.
Ramsay takeover target Alpha's shares hit two-year high AAP NEWSFEED April 10, 2001

Jun. 2001 Takeover succeeds

Ramsay, which is finalising its bitter takeover of smaller rival Alpha Healthcare, - - - - - - .
Ramsay's Prognosis Is Good Health Sydney Morning Herald June 12, 2001

Aug 2002 Very profitable

The integration of Alpha hospitals exceeding expectations and delivering significant synergy benefits and competitive advantage to Ramsay, particularly in the NSW private hospital sector.
Ramsay produces clinical display. Daily Telegraph August 28, 2002


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The Battle with NIB insurer

The insurers were tight fisted with the money which floated into their coffers as a result of the incentives offered to citizens after the 1998 election. They were reluctant to pass on the federal governments largesse.

A battle with insurers was slowly building and corporate hospital groups were testing the water to see the resolve of the insurers. Australian Hospital Care had leverage on the Gold Coast. In late 2000 it took on MBF and won. In 2001 Mayne took on the small insurer, NIB.

It was Ramsay’s turn in September 2002. Ramsay challenged NIB by demanding a large increase which NIB refused to consider. Ramsay promptly canceled contracts with NIB for all of its hospitals and insisted that NIB patients pay the full fees up front and then claim what they could get back from NIB. It refused to negotiate further. Patients were the meat in the sandwich. They were used to pressure the insurer into submission.

There is little information as to what the resolution of this entailed but it seems that Ramsay got its way.

These three small episodes, in all of which the corporate providers prevailed, set the stage for the much bigger and bruising confrontation between Healthscope and the powerful BUPA in 2003. On that occasion the latter showed more stamina. Healthscope came off second best but patients, the health system, BUPA and Healthscope were all damaged by the experience. Hopefully the lessons will be learned and a more sensible way of resolving these unsavoury consequences of competition policy will be found.

Sept. 2002 Refers to 2001 dispute with Mayne

Late last year NIB had a dispute over pricing with Mayne Health which at one stage led to the corporate giant cancelling its contract arrangements before an agreement was reached.

Mr Grier denied that Ramsay's decision to terminate the contracts was a negotiating tactic.
Hospitals `turn away' fund clients The Sydney Morning Herald September 26, 2002

Sept. 2002 Dispute with NIB

NIB members will pay full up-front fees or be turned away from Lake Macquarie Private Hospital from October 22 after owner Ramsay Health Care group axed its contract with the fund.
Mr Graham said Ramsay Health had demanded `unreasonable' fee increases of more than four times the consumer price index but the fund still wanted to negotiate with the group, which made a $31.1million net profit last year.

`The Ramsay group is using its size and strength to impose excessive demands on NIB,' Mr Graham said. `There have been five attempts to negotiate with them and they will not budge on the fees.'

The situation for members was `a mess' and it was too early to assess the impact on premiums, he said.
He appealed to the Ramsay group to return to negotiations with a `more reasonable offer'.
Patients pay as Ramsay lops NIB The Newcastle Herald September 26, 2002

Sept. 2002 Ramsay plays it tough

He said NIB suggested an independent mediator sort out the issue, but it was rejected.
Illawarra Private cuts NIB. Illawarra Mercury September 28, 2002

Oct. 2002 Ombudsman called in

NSW PRIVATE Health Insurance Ombudsman Norman Branson has called a meeting between NIB and Ramsay Health Care but it is unlikely to break their deadlock.
He (Grier) warned he did not expect any change in the frosty relations between Ramsay and the health fund.
Ombudsman in health row The Newcastle Herald October 1, 2002

Oct 2002 A partial reprieve for patients

NIB members appear to have been spared full up-front fee payments at Lake Macquarie Private Hospital after a meeting between the health fund, Ramsay Health Care and Private Health Insurance Ombudsman Norman Branson in Sydney yesterday.
Mr Branson said the groups had agreed to resume negotiations - - -
If an agreement was impossible, the NIB members would pay a gap, rather than full fee.
NIB wins reprieve in fees wrangle. The Newcastle Herald October 9, 2002

Oct. 2002 Using leverage

In taking on NIB, Ramsay has indicated it is prepared to use its leverage as an operator of quality hospitals to extract what it sees as reasonable increases from funds.
Right Prescription For A Healthy Company Business Review Weekly (Australia) October 24, 2002

Oct 2002 resolution

NIB members are covered once again at Lake Macquarie Private Hospital following the renewal of contracts between the two organisations.
Private hospital fee dispute settled The Newcastle Herald October 25, 2002

Sept. 2003 Used as example by Healthscope

Dr Coglin (Healthscope) said his resolve (in Healthscope’s dispute with BUPA) was strengthened by two recent cases of hospitals winning insurer contract disputes -- Ramsay Health Care versus NIB at Newcastle in 2002, and Australian Health Care versus MBF Health on the Gold Coast in 2000.
Hospitals healthy despite row The Australian September 18, 2003

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Web Page History
This page created August 2005
Michael Wynne