Pressures in this competitive marketplace are very strong. People or society have been exploited whenever they are vulnerable or the system provides opportunities. Aged care is not unique and it must be considered within the context of other sectors that hold a position of trust in our communities. The for-profit sector is at greatest risk because pressures are stronger and they are not restrained by the ethical restraints of their past. We need to watch for it in aged care
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Issues relating to the way for-profit providers operate
Background
The banks as an example: The banks are the most trusted of all institutions in our society. We go to them for advice and trust them with our life’s savings. Yet they have been leaders in global fraud and when one does something then the others join in. Once one does it then others must follow to remain competitive.
In 2004, I used Citigroup as an example tracking its many frauds back to the beginning of the 1990s and pointing out that others had joined in all of these scams. The incidence of fraud by big banks has increased steadily as market competitive pressures were ramped up by governments. To illustrate how rapidly this was increasing, ABC 24 news (21 May 2015) reported that big global banks have paid $40 billion in fines since 2011.
The latest frauds: On this website I have drawn attention to the recent financial advice frauds by the banks. Now on 21 May 2015, it has been revealed that 6 of the worlds largest and most trusted banks have been fined a total of $5.8 billion because these big banks had formed cartels in which they manipulated foreign exchange rates in order to boost their profits at the expense of their smaller competitors. Whenever we bought something in the shops the amount we paid was being distorted by their manipulation of international trading prices.
Particularly interesting is that these huge fines had no impact on these banks share prices. The market now considers fraud to be part of a successful business. Customers go on using the banks and these blips are simply the cost of doing business.
The National Bank of Australia probably participated in the cartel. Their foreign exchange fraud was exposed in 2014. Its chairman and chief executive resigned and 8 managers and traders were dismissed.
Lessons for aged care: Aged care is the most vulnerable sector in the market and it is not our wealth, but our lives that are at risk. For this reason, aged care was once protected from the full pressures of the market. It is disingenuous for our businessmen to claim they they are somehow different to those in other countries and that they will actually put the elderly’s interests ahead of their own. It is clear that in the USA and the UK, they have not done so. Our genetic heritage has generated fewer saints than most other countries.
It is essential therefore, that the activity of the market in decrepitude be closely monitored and that any practices and conduct that might potentially harm our senior citizens be given as much publicity as possible and that those groups that fail to do so be excluded from the market. The government is currently reducing our very limited oversight and accountability further and is planning to contract it out to the market.
A study of the international literature supports the assertion that pressures for profit impact care.
The evidence
As part of his doctoral research, Dr Richard Baldwin did an extensive analysis of the evidence relating to the competitive market in aged care. He stresses the need for greater scrutiny because of the evidence indicating the potential negative impact of strong competition on the quality of care. His own studies revealed that not-for-profits performance in failing to care for residents was considerably better than for-profits in keeping with international research.
As Australia moves towards a deregulated aged care market, one based on greater competition, international and local research suggests that we need to closely monitor the impacts on quality. But the lack of good data in Australia will compound the challenge,
- - studies in 2004 and 2009 found evidence showing that as competition increased, quality overall decreased.
- - - published last year from England suggested that competition had a negative impact on quality.
The reduced prices in turn pushed down quality to the minimum standard mandated by governments,
Bob Davidson in 2012 argued that there may be significant gains in quality and efficiency if governments limited the number of organisations that were funded to provide services in a particular market
Source: Unfolding changes warrant greater scrutiny by Richard Baldwin Australian Ageing Agenda newsletter May-June 2015 p20
What can we do? An organised and well structured customer base that directly monitors services and outcomes would be the best way to do this. They would steer prospective residents away from any group they considered would pose a risk.
Until that happens, members of the community need to highlight any behaviour or allegation that might be concerning and I make no apology for doing that. We also need to look at why the system is at such high risk and see how best we can protect it. This website is an attempt to open debate on how to do this.
How far will corporations go in the pursuit of profits?
The concept of culturopathy: On the Culturopathy: A for-profit example web page in the Cultural perspectives section I will explain more fully what I mean by a culturopathy. On that page, I give as an example, a company that I have studied closely. Market analysts, the company and its staff became wildly enthusiastic about business practices that were unconscionable and harmed those the company believed it was serving. Staff simply did not see what was happening and became wildly enthusiastic. They believed in what they were doing and almost anything was thought to be legitimate and desirable if it was for the benefit of the company. Staff boasted of their success in exploiting the vulnerable.
A case in Australia: There is an Australian 2013 court case involving three of our biggest corporations including the subsidiary of a major bank. It goes to their integrity. They displayed a willingness to do whatever it takes to advance their objectives regardless of the consequences for others. Notable was the enthusiasm of the staff who had successfully persuaded residents and their families to do something which was not in their best interests.
I believe this is a red flag case which illustrates just how far the pressures in the market will drive people - and that they are able to persuade themselves that this is legitimate.
The companies were intent on furthering their own interests to make money and in doing so, all of their obligations and responsibilities were overlooked.
The court action against FPCompanyL Group, FPCompanyK (XXXX Bank’s Aged Care business) and FPCompanyG was taken by a company Fenridge Pty Ltd in 2013. It is a saga of breach of contract, deceit, deception, legal intimidation and the exploitation of the vulnerable in order to gain a financial advantage.
The problems for Fenridge were compounded by government departmental bungling. The case shows why good care and the interests of residents come under such strong pressure in the corporate marketplace. The story, the evidence and the judges findings are recorded in the court documents. This is summarised below.
The story: Fenridge was a company operated by a married couple both of whom were doctors. It owned 'Preston & Districts Nursing Home' which at the time in 2007 was leased to FPCompanyK and operated by FPCompanyL Group. The lease was due to expire in early 2008 and Fenridge was given to understand that FPCompanyK would probably renew the lease.
During the discussions, the doctors made it very clear that if FPCompanyK elected not to renew the lease then they intended to take over the management of the facility itself and continue to operate it. Arrangements would have to be made with the department for transfer of licenses and an orderly transfer of the business arranged.
During 2007, FPCompanyK merged with FPCompanyG Healthcare under the name of FPCompanyG. FPCompanyG took over the management from FPCompanyL and then actively participated in the deception.
The lease required that FPCompanyG-K maintain the facilities in good condition, maintain full accreditation and advise any accreditation failures or other problems. They were required to hand over the nursing home business in good condition so that Fenridge could manage it itself or contract another operator. It is clear that the doctors expected a good standard of care to be maintained.
Instead, care was allowed to deteriorate and the facility failed multiple accreditation standards in 2007 and had its accreditation period reduced. There was an adverse press report and a neighbour reported that “FPCompanyK staff could be heard abusing patients, and that FPCompanyK was generally behaving as a ‘bad corporate citizen’”. Although the doctors were in discussion about the renewal of the lease, they were not informed and only learned of the problems when they were in communication with the department and made inquiries.
In the meantime, FPCompanyG-K had decided not to renew the lease but they did not inform the doctors who kept making inquiries. Other FPCompanyG nursing homes had empty beds and FPCompanyG decided to breach the terms of the agreement and transfer these residents to their other nursing homes, then close the facility before handing it back. The doctors were allowed to go on holiday without being informed and FPCompanyG then proceeded to urgently close the facility. They pressured the residents, who did not want the home to close, to agree to be transferred and rushed the closure. The staff rosters were altered so that the closure of the nursing home would not be delayed by termination notices to staff.
When the doctors arrived back they learned what was happening from staff who were protesting the closure. They were invited to come to a protest meeting. The doctors intended to inform staff and residents of their right to continue to operate under the lease and that they intended to exert their rights to continue doing so.
FPCompanyG staff refused to allow them to enter the building to attend the meeting. This was followed by threatening lawyers letters forbidding them from entering the building or communicating with staff. Staff were given inaccurate information about the lease and instructed to treat the doctors as trespassers.
The pressures on residents were maintained and staff boasted of their success in persuading patients to leave. The home was successfully closed in late 2007 before the doctors could do anything about it.
Damages had not been fully assessed at the time of writing with only one item, Fenrige’s lost opportunity to run the home, being assessed at nearly $4 million. Some of the judges conclusions are in the quote below. A link to the lengthy court documents which tell the full story is given.
104 There is documentary evidence of staff congratulating themselves on achieving this result (urgent closure).- -(FPCompanyG-K) - had treated changes to staff rosters as 'an emergency'; so as to justify giving staff only seven days’ notice and not the fourteen days’ notice required by the applicable industrial Award: ‘we will run the argument that this is an emergency’. No emergency was involved. This was simply FPCompanyG acting with undue haste to prefer its own commercial interests over those of residents and staff.
110 (the claim that) - - it was necessary for FPCompanyG and FPCompanyK to commence residents about six months prior to the end of the lease, so as to ensure that the interests of residents were paramount was ‘not preferred’ or ‘not best practice’(as claimed), because the driving factor in the suggested course of action appeared to be FPCompanyG-K’s interests in the early closure of the nursing home, and this did not treat the interests of residents as paramount – as the Aged Care Act requires.
112 There are other contemporaneous emails between Ms Lxxxx and Mr Axxxx to similar import. I find that they were acting to prefer FPCompanyG’s commercial interests to the interests of the residents, in breach of the User Rights Principles.
116 By 19 October 2007, following the exercise of ‘powers of persuasion’ over residents, FPCompanyK was able to re-locate all of the residents in the nursing home and to close the nursing home business by 1:00 pm on that day. This was viewed by FPCompanyG-K staff as a most successful outcome, with Ms Lxxxxx concluding her email on 18 October 2007, in anticipation of closure the next day, as one deserving of celebration:
- - (Email) - - Thanks to Cxxxx’s wonderful powers of persuasion, we have agreement from the relatives of the ‘last’ resident that he will transfer- - - Well done everyone – thank you! Celebrations are in order!!!
121 In the meantime, the Department had lost Fenridge’s application for allocated places in the 2007 ACAR round.
390 First, that FPCompanyK breached the continuous business obligation and the implied terms, and that FPCompanyG wrongfully induced those breaches. FPCompanyK and FPCompanyG are jointly and severally liable to Fenridge for damages - -
392 Second, that FPCompanyK engaged in misleading conduct. - -
393 Third, that FPCompanyG’s conduct is sufficiently reprehensible to justify an award of exemplary damages.- -
Source: Fenridge Pty Ltd v FPCompanyK (Preston) Pty Ltd & Ors [2013] VSC 464 (30 August 2013) [AustLII] - Supreme Court of Victoria
Insights into marketplace strategies
Making money from low income retirees: Providing accommodation for less wealthy seniors is a worthwhile and useful project. FPCompanyS group is a property company with a very impressive website with photos and videos promoting its prospects. It owns, rents and manages retirement facilities. It lets them to relatively low income pensioners focussing on “affordable monitored rental accommodation”. Although it offers some safety and assistance services, it does not offer any aged care or health care. Its strategies promising profits are described in the remainder of the the quoted article below.
We see this market as a market that will benefit from consolidation from larger operators, who are able to operate at a lower cost. We continue to see ourselves growing strongly
Source: FPCompanyS Group growing with aged care demand - Finance News Network, 27 Apr 2015
That business model rang a bell. I wrote a web page last updated in 2008 about a company called Village Life. This was a company servicing this same group of seniors in a similar way. It was founded in 1998 and then floated with great fanfare and profit expectations. The model did not work and it came horribly unstuck. Many lost money and there were press reports about what happened to the renters who were caught up in this. The company was heavily criticised at the time.
A company, SVC Group had played a major part in the Village Life debacle. It bought, owned and operated Village Life. In 2009 there was continued publicity about its management of Village life (See , Aged care investors brace for impact 19 Jan 2009, Village venture stings backers 21 Jan 2009, and Elderly may be forced to leave 21 Oct 2009)
The really interesting part of this is that in 2010 SVC Group adopted a strategy used by many to escape their past. Intelligent Investor web site had an article (accessed August 2015) reporting that SVC changed its name to FPCompanyS Group Holdings Limited in October 2010.
Hopefully FPCompanyS, the same SVC, has a better business model now and the promises on its impressive web page are real, truly represent what less wealthy seniors will get and is more than a scheme to make its founder wealthy. Its share price has been rising steadily at least since 2012 and if they sell at the right time they will make a killing. That may be very tempting if management is the first to see signs that the model is not working again.
Are staffing changes in preparation for IPOs contributing to deaths?
Many of us are worried that the pressures to list on the share market are a risk to life and compromise good care. There is increasing evidence that this might be so. Allegations have now been made about the company FPCompanyD by the nurses' unions blaming them for a death.
Although the facts are still in dispute it illustrates the sort of thing that does happen when pressures in what I have called a culturopathy, cause people and organisations to ignore or explain away the consequences of their actions. I will use this to illustrate the problem and the sort of thing that can occur.
Who is FPCompanyD: On its impressive web site FPCompanyD claims to be “the largest family owned residential aged care service provider in Victoria” and to be “Providing peace of mind for residents, families and friends”.
But it is alleged by the nurses to be planning to list on the share market and what they claim about this is not something that generates peace of mind. Like FPCompany Newname C Healthcare (previously FPCompanyA), FPCompanyD is a for-profit with a close relationship with Alzheimer’s Australia in Victoria.
It provides “specialised dementia care at nine of its 10 homes” and became a sponsor of Alzheimer's Australia Victoria in July 2014. It is providing Alzheimer's Victoria $120,000 (largest of any provider) funding over 2 years. Alzheimers Victoria will also ”continue to advise FPCompanyD on dementia-friendly design and best practice care in their existing and future homes, and provide specialist dementia care training for FPCompanyD’s staff”.
Previous problems: FPCompanyD already has a history of a problem in one of its homes. In this case, understaffing and deskilling were at least partly to blame. On Black Saturday in 2009 FPCompanyD’s Nxxx Manor nursing home ignored repeated warnings about a heat wave and that "staff on duty tomorrow do extra rounds to monitor residents ... and if you think that extra staffing resources are needed then let me know.”. Instead FPCompanyD “introduced a trial reduction of staff levels” with “just two personal care assistants on duty” on that day.
An unsupervised resident with dementia walked into a closed courtyard through an unlocked door that didn't allow her to get back inside. It was 46`C and there was no cover. She soon cooked and died. It took the nurses 3 hours to notice she was missing.
An article Nursing home to blame on heat exposure death of Jxxx Axxxx on Black Saturday in the Herald Sun - 2 Aug 2012 tells the story. It is now behind a paywall. The coroners recommendations and the response of government departments to this are here.
Latest allegations:
A somewhat similar case was reported on 8 May 2015. This time the unions have been very outspoken about who was responsible and its not the staff who were fired that they are targeting.
The story: An immobile elderly cancer sufferer was somehow left for up to 6 hours lying against a heater and was “melted to death”. The circumstances are confusing so it is not clear what happened and the coroner is investigating. Once again, the staff responsible have been sacked and while the company has refused to comment, it is likely that staff will be blamed for not following protocol. This is what happens when there is no time to do so.
The nursing union have clearly been as worried as we are about cost cutting and deskilling by companies preparing to list on the share market. The unions very critical comments are reported in the press. That they have gone in so strongly suggests that FPCompanyD have been cutting trained staff, that there are insufficient staff and that they do not have the training so simply cannot cope. Regular rounds to check on residents are likely to be omitted.
The coroner will investigate the death of an elderly woman who was allegedly severely burnt by a bedroom heater at a Melbourne nursing home.
- - - Dxxx Exxxx, said Ms Lxxx was found with severe burns that went as deep as her bones. - - - did die in horrific circumstances.
Mr Exxxx said 60 to 100 staff had been made redundant in recent times. - - was concerned Ms Lxxx's death was linked to understaffing and loss of experience
"FPCompanyD's business plans are to float the organisation in the near future," he said. "So they are stripping back on staff costs, fattening the pig if you like, before market and it's not just restricted to FPCompanyD. Increasingly we are seeing more cowboys like FPCompanyD putting profits before people."
Source: Elderly nursing home resident died of burns in 'horrific circumstances', coroner to investigate - ABC News, 8 May 2015
- - -died on April 14 after her arm and thigh were severely burned at Homewood nursing home in Hallam
One of the home’s staff members has been sacked amid “allegations of serious misconduct”
It is the latest in a string of concerning aged care incidents, prompting fears from the Health Workers Union that industry “cowboys” were putting lives at risk.
Documents seen by the Herald Sun suggest staff may have failed to check cancer sufferer Mrs Lxxx for more than six hours, until she was found lying near a heater.
A source with details on her injuries said she was found “melted like a marshmallow”.
Health Workers Union secretary Dxxxx Axxxx said “run off their feet” staff battled as aged care homes slashed jobs.
“The cold reality is that her death was entirely avoidable,” Ms xxxx said. “At FPCompanyD, it’s all about Tender Loving Cash, not Tender Loving Care.”
Source: Nursing home probe after woman ‘melted to death’ by a heater - Herald Sun, 8 May 2015
The coroner will hopefully get to the bottom of this. Meanwhile, the union will undoubtedly be criticised for self-interest, exaggeration and bias. This will be used to discount their claims. In my examination of health and aged care multinationals and large corporations in the USA, I have looked at vast amounts of information, some supplied by unions, and heard their allegations. I also received some documentation from them. The information they collect and use is usually based on fact.
In practice, information is there for those who look or who are sensitised by their own interests or experiences. Self interest is certainly a strong incentive to look for it and use it.
If we are not interested or our energies are focussed elsewhere, we see it but don’t do anything about it. In my view the unions are well aware of what is happening and have selected this case to speak out about it because it so accurately illustrates a problem that affecrts them and those they care for.
The unions know what is happening at the coal face because their members work there and suffer the consequences. In the majority of examples of exposures and whistle blowing, it is someone's experience or interest that has caused them to speak out about what has happened.
Luxury homes
When profit is the prime focus then all effort is directed to creating an impressive facility that will attract the wealthy and in offering them extra services that they have to pay for. The extra services provision and the governments focus on “choice” is an opportunity to advertise luxury and choices to entice the wealthy into your nursing homes. Once they are there all too often the focus can be on extra services rather that the basics of good staffing and good care. This is the way the industry sees it.
FPCompanyJ: - - facilities are being designed as ‘exclusive clubs’ rather than care homes. Residents at these facilities will have more luxurious accommodation and access to a vast array of extra services, such as gourmet specially prepared meals
INRFPCompanyB: - - has acquired Aged Care businesses offering extra services with quality facilities and excellent standards of care
Operators can now charge additional fees to residents for hotel-type services such as alcohol with meals, gourmet menu options, luxury accommodation options and on-site services such as hairdressers etc. These changes are helping to incentivise investment in the sector due to the number of new opportunities to generate income.
Source: Growing with Age: Dealtracker for the Aged Care Sector Grant Thornton March 2015
The number of luxury facilities that tempt the wealthy to pay big is steadily growing.
A Herald Sun analysis of data so far provided to the Federal Government’s myagedcare.gov.au site shows there are now six aged care centres in Melbourne asking for maximum refundable accommodation deposits of $1 million or more.
Source: Golden oldies pay $1m bonds for aged care at lavish centres Herald Sun 27 June 2014
Private Equity FPCompanyJ is opening the Sydney home below amd then another four similar premiere homes across the country
The home offers events arranged by their concierges, extras like manicures, pedicures and facial treatments as part of its beauty package and rooms are equipped with wide-screen HDTVs and 90 Foxtel channels.
There are 107 rooms across five “neighbourhoods” at Greenwood, with some 36sq m suites. Every room is connected to the outdoors through “vast floor-to-ceiling windows” and the suites have private or shared terraces and courtyards.
Source: Luxury aged care home opens in Normanhurst, Greenwood offers valet service and concierge Daily Telegraph News Local 6 April 2016
I have already described several examples in health and aged care from the USA where treatment was more important than the need for it and where the unprofitable elderly were neglected and the profitable pursued energetically.
There are concerns in the USA about luxury facilities that do not measure up to the promise.
Promises of “decadent” hot baths on demand, putting greens and gurgling waterfalls to calm the mind: These luxurious touches rarely conjure images of a stay in a nursing home.
And it is clear that many of the homes are not up to the challenge of providing the intensive medical care that rehabilitation requires. Many are often short on nurses and aides and do not have doctors on staff.
Source: In Race for Medicare Dollars, Nursing Home Care May Lag The New York Times 14 April 2015
There are anecdotes suggesting that the same might be happening in Australia. Some advisers are cautioning prospective residents and their families not to be taken in by impressive facilities and impressive sales pitches but to look at staffing and care carefully.
There is no requirement that these tasks be done thoughtfully; most staff are just too busy. Competent, honest and caring staff – managers, registered nurses, personal care attendants, as well as kitchen, reception and activities staff – are much more important than a nicely appointed bedroom or a lounge room with a coffee machine and grand piano.
Source: The aged care gravy train The Age 9 Jan 2016
A blog on the website of an outspoken not-for profit is not too impressed with this move to attract the wealthy and warns of what may happen if good care is not provided
You can have all the chandeliers, menu choices and silver service you like. However, they mean nothing if skin integrity issues abound, medication management is hit and miss or wound management issues are constantly ignored. If a provider is not equipped to support people whose dementia is advanced, it doesn’t matter what their marketing materials say: the mud is going to hit the fan at some stage.
Source: A competitive care environment: what is quality? HXXXXXXcare 9 Feb 2015
Unfortunately we don’t collect data in Australia, so we cannot be sure that it is happening here but comments like those below are not reassuring.
The service is definitely not "premium" because the "efficiencies" have been gained by being constantly short of essential items such as catheters and continence pads, by serving boring, repetitive, low quality food and by never having sufficient staff.
Source: Response to Second aged care provider prepares to float on ASX - Australian Ageing Agenda (24 Sep 2014)
In the facility my mother resides in, residents would benefit from the employment of more registered nurses and more training for carers. The lovely private dining rooms (never used) and many elaborate flower arrangements are of little benefit to residents who are immobile and cannot leave their rooms.
Source: Letter to The Age, 9 Oct 2014