Further consequences of a dominant for-profit marketplace

Impact on not-for-profit sector and society

Understandably, the not for profits have become increasingly anxious about their survival in the aggressively competitive market where large hungry predators that see them as targets have been introduced. With economists, accountants, business graduates and bankers increasingly deciding how care is to be provided to the elderly they have a steep learning curve if they are to compete in the game of making profits.

ACSA, the body representing nor-for-profits, organised a forum in Victoria on 30th October 2015.  It was all about markets, business, selling their services, and managing their finances. The speakers were mostly accountants, business advisors and marketing companies talking about brands and about how to sell beds to prospective residents. One wonders what the consequences of shifting the whole focus away from care and to competitive market processes will be. The list of contributors and Powerpoint slides of the papers can be downloaded here.

There was another meeting “Securing our place in the future” organised by ACSA, Aged and Community Services NSW & ACT in Sydney on 10 November 2015. It was about "market survival" and it is likely that similar sessions have and are being run across the country.

How real this is for them becomes clear when we see that some of the giants from the big international banks are moving into this wonderfully attractive market by building aged care companies. Their colleagues still running the banks are there to give advice and some are even putting their private funds into the aged care businesses. Will conflicts of interest arise?

The impact: What impact are people who have been trained and who have spent their lives competing in the financial industry going to have on care? How much insight do they have into the consequences of their actions and how receptive are they to those in the industry who do know?

We have heard suggestions that some of those from the not-for-profit sector, who are concerned about mission and care are considered to be “mastodons”.  Are these financial experts suited to provide care, will they listen to those who have been called mastodons and are they a potential threat to the care that senior Australians are getting? 

I have long argued that in this marketplace an adverse form of Social Darwinism operates driving out the most suitable and replacing them with the least suitable.  It can sometimes be worse than this. Those who are suitable can be changed so that they too become a threat to care.

Impact of consolidation on society

The centralised corporate model and particularly consolidation of the market has an impact on society particularly in smaller communities. It introduces a top down model where organisation, management and control are taken over centrally and driven by decisions in board rooms.

This results in a loss of local expertise, local knowledge, local interest and local involvement. Relationships become far more instrumental. This erodes social capital and undermines civil society. This centralised managerialist style of operation has to be set against the benefits of having operations management locally, particularly when dealing with humanitarian services and vulnerable sectors.

This is not only a for-profit problem, as any organisation that seeks to run its services by centralising management and decision making is likely to have a similar effect. Large mutual organisations like INTFPCompanyB or Australian Unity run their businesses in a strongly market focused way, as do some not-for-profits and governments.

Its structure is similar to INTFPCompanyB and its responsibility is to serve its members, but it is sometimes difficult to find out who they are.  Some of these mutuals operate in the same aggressively competitive way but because they don't have shareholders they focus on growth and expansion.

As part of privatisation policy, Australian Unity bought all of the state run home care services from the NSW government.  It is 'ramping up' its further expansion.

The proposed Community Aged Care Hub. A social system where central organisations focus on empowering local people and then supporting them might be less efficient and not welcomed in an aggressively competitive market. But in a more sensible market system it might be possible to increase local expertise and involvement and we should be able to attain a much better service. People would be more motivated and engaged. All this without the downside that I have described on these pages or the costs of bureaucracy, centralised inefficiency and the endless consultants who get paid for telling us what their employer wants us to know.

The proposed Community Aged Care Hub is intended to foster a locally structured system in human service industries. These companies would need to empower their local staff so that they can work well within the context of the local hubs.  What we might lose in financial capital might be more than compensated for by the gain in social capital.

Potential impact from wider economic policy

On the aged: Psychologists Karl Nunkoosing and Mark Haydon-Laurelut in their paper The Relational Basis of Empowerment (about disability care) stress the importance of the nature of interaction and involvement with those around us and in the community for the quality of all our lives.

These authors argue that these relationships are pivotal for the quality of life of marginalised groups like the disabled or aged, and that a failure of the caring environment to actively build empowering relationships is a major cause of failure to provide services that make life worth living.

They point to the importance of close links between residents and the communities. Empowering relationships that give meaning to lives extend beyond the carers and the walls of the nursing homes into the community. They point out that a market thinks of those it serves as financial investments and this does not foster empowering relationships.  The hub in contrast institutionalises what these authors want.

On society: There is a broader more indirect impact on the frail aged from government economic policies. Eva Cox argues that the current focus on economy at the expense of society is leading to damage to social stability and cohesion.

Relationships bind society and build social capital. They break up with society when it becomes unstable and loses cohesion. The most vulnerable are the first to suffer - the aged among them.

Cox could easily be referring to the benefits of our proposed hub for the community as a whole in building trust and relationships between members.  They will be getting together in supporting and organising aged care so creating collective good will and stability.

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An example from the UK

I will start by quoting a pro-market expert speaker from the UK, who is chief executive of Care England.  He spoke at a meeting in Sydney.  Care England is the leading representative body for independent care services in England.  Like our LASA (Leading Age Services Australia) body, it represents both for-profit and not-for-profit private nursing homes.  We need to realise where he is coming from.  This is how big companies see it and how LASA is reinforcing its position.

Like LASA and our government, he is pushing for a market system - advocating the more expensive and the less efficient free market option.  As the many examples outside health care illustrates, it is the government funded unregulated free market system in vulnerable sectors that is most often exploited and has failed so abysmally.  This is what I am criticising.

There is also a strong body of opinion in the UK criticising the privatisation of public services and claiming it is inferior and ultimately costs more. The speaker in the quote below probably is right when he claims there is underfunding.  On the page Private Equity I examined reports that suggested that the financialising and indebtedness that resulted from the competitive market were as much if not more of a problem than underfunding. We do know that the companies are not making enough profit to keep the market happy, that the care given falls far short of what is required, and big companies are threatening to vacate the sector. It's the real reasons behind this that we don't know enough about. The speaker makes several valid points and uses them to make his arguments.

Much of what he says is reasonable, but there is another facet to the risk here - an elephant in the room.  All countries have economic downturns, and politicians in their wisdom will target almost anything to make savings and avoid raising taxes.  When this happens, government and not-for-profit operators with an ethic of care struggle on, run at a loss and offer time voluntarily.

Critics of markets and providers all agree that home care is in crisis and that government policies and practices are the problem.  But they disagree about what to do about it.  The one view is driven by self-interest and the other by a desire to bypass the government bureaucracy and take it locally and involve the community.

For-profits, particularly market listed companies and private equity have a primary responsibility to their shareholders and not the residents.  They close up shop and walk away if that is going to be less costly than hanging in there and hoping things will change. That is exactly what the major players referred to here have decided to do.  If they can't get out then the focus is on limiting losses rather than stretching what they have for maximum benefit.  So the consequences of the financial pressures is much worse than it would be if market listed corporations in particular were excluded from it.

As indicated on the private equity page, the vast amounts of debt built up as the marketplace game has played out on the grand stage of the United Kingdom’s stock exchanges has left the companies involved and the residents in their nursing homes at high risk. In order to be forewarned about who might collapse or decide to cut their losses and run, authorities have set up a process for registering and monitoring companies that are large enough to pose a serious risk if they fail.

• Market oversight of adult social care Quality Care Commission, March 2016

Analysts are predicting another major collapse and government will be left holding the baby.

In home care too:  ITV in the UK "surveyed 500 providers of home care,- - -  308 of those providers - - - delivering state purchased home care to approx. 59,000 people every week".

Selling in the UK: INTFPCompanyB care homes in the UK and Scotland have copped a lot of flack recently. Its UK profits are down 10%. It seem to have decided to abandon aged care in the UK. It has "hired KPMG to sell its domiciliary care division" and sold it in February 2016.  The press claims that it has appointed someone to auction off 200 of its 290 care homes.  In Australia it is the larget private nursing home owner. A purchase of 10 homes in 2012 left it with with 60 homes containing 5,616 beds and it may have bought more. It seems to be following the money and the pot of gold provided by the Abbott government in its budgets instead of addressing the desperate needs of those at home. 

It claims on its website to be there to serve its members.  Who are the members? Are they Brits or Australians?  Residents and their families in the UK selected their own INTFPCompanyB to look after them.  INTFPCompanyB is a global company with a massive income and also without shareholders to whom they are responsible.  They are in a position to support those in their own country who have placed their trust in the company.  Instead they seem to be deserting the sinking ship as soon as the weather gets rough.  What does this say about their sense of social responsibility.

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This is not theoretical - UK, USA and Australia

The UK

A report from Open Democracy is very critical pf proposed changes to the UK National Health System (NHS). The report draws a parallel with what happened in aged and disability care puting the blame for their failure on to "competitive markets"  The criticism was based on a report by Centre for Health and Public Interest.

The USA

The comment about  Lindorff's  book in this review  is interesting because corporatisation of health care in the USA was marketed as offering more choice, but in fact had the very opposite effect.  The choices available were dictated by the big corporations and insurers who gained control of the doctors and dictated how they should provide care.  Some are already complaining about this in Consumer Directed Care in Australia, but it is too early to see if this will happen.

Dave Lindorff in his book also describes a situation where government was unable to act against multiple aged care providers because they would have closed up shop and state governments would have had to take over. The states had vacated the sector years before and no longer had the resources to do so. 

Again at the end of the 1990's there had been extensive rorting and when this was blocked the aged care providers profits plummeted and they could not service the large loans they had raised in order to compete and grow.  To keep them viable they got off with token fraud settlements.

Australia

In Australia in 1993, a US company called NME (renamed Tenet Healthcare soon after) had purchased Markalinga, an Australian company in financial difficulty.  Markalinga owned several private hospitals in Sydney.  Sources in the USA had supplied information about NME's conduct and I had supplied some more. A probity review had been initiated in NSW. 

When I met with the NSW Health Department they told me that if NME failed the probity review, existing licences to operate would have to be withdrawn and they would have to organise to provide care for current and future patients from the closed hospitals across the rest of the system.  They had assessed the situation and were prepared to do it. 

They considered that the company lacked probity and advised that the licenses to operate be withdrawn.  Instead the government brought in a supreme court judge who had recently retired because he was at risk of improper influence.  He granted licenses. 

A probity review in Victoria made up their own minds and prevented the company from operating in that state on probity grounds.  In Western Australia, the company owned some major hospitals.  Their health department did not have the power to withdraw licenses but asked the state government to pass legislation so that they could do so.  State government refused. The federal government eventually took action, blocking further investment and so forcing the company to sell up and go back to the USA.

At the time, this company owned only 4 or 5 smaller hospitals in NSW and they were making their first foray into Victoria. We can ask what would have happened if this company had a far larger stake, had for instance purchased Australia's current Ramsay Healthcare.  The consequences of withdrawing licences and forcing closure of large numbers of hospitals across the country would have been unmanageable.

A more recent example: One of the problems about a market in misfortune when contrasted with not-for-profit and government services, is that it is driven by potential profitability and not the needs of the community. Potential profitability depends on multiple extraneous factors including the actions of government, the state of the market and general confidence. 

We live in an unstable and unsettled world where countries rise and fall.  What will the consequences be if a company that owns most of our nursing homes gets into trouble elsewhere?  What happens to residents and community services when a foreign owner's country is in trouble, or when the company gets into trouble with some other business it runs and badly needs to make large savings across all of its other businesses to survive. 

The market has winners and losers and big companies, particularly private equity have big ups and downs. What will happen to the residents?  What will the unsuspecting seniors who were tempted into these homes by glossy marketing think?

Below is an example where the paralysis in our Australian political system is creating market uncertainty.  This is discouraging the market from investing in needed nursing homes - but Jxxxxd is making a good point about alternatives too.  That suggestion would not have come from the for-profit sector because, while it would be cheaper, it would be less profitable.  The difference in approach is illustrated. 

The point I am making though, is that not-for-profits driven by a humanitarian mission, instead of taking their money and running, will rise to the occasion and do the best they can.

The proposed Community Aged Care Hub: The proposed hub won’t be able to stop for-profit providers taking their money and heading for the hills. But it will have an accurate grasp on what is happening and have all the figures. It can warn of problems. It will be in a position to rally the community and increase pressure on government to provide more funds or make the sector sustainable in other ways.

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