FINES FAILURES nND ILLEGAL PRACTICES IN NORTH AMERICA

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Private Health CareDossier

FINESFAILURES nND

ILLEGALPRACTICES

INNORTH

AMERICAThe Implicationsfor Health Care

in Britain

NUPE/SCAT

FINE;S,rAlLURES AND ILLEGAL PRACTICES IN NORTH AMERICA

Private Health CareDossier

This report was compiled and written by DexterWhitfield of SCAT and 'Public Service Action'following a two week visit to Canada and theUSA funded by Toronto City Council, NUPE andPublic Service Action.

We would like to thank the Canadian Union ofPublic Employees (CUPE); the American Fed-eration of State, County and Municipal Em-ployees (AFSCME); the Service Employees In-ternational Union (SEIU);Ontario Public ServiceEmployees Union (OPSEU) and the New Demo-cratic Party research section, Toronto, for theirhelp and co-operation.

For regular reports on the activities of NorthAmerican and British companies involved in theprivatisation of public services see Public Ser-vice Action, the anti-privatisation newsletter forthe labour movement, published 10times a year.Details form SCAT Publications, 27 ClerkenwellClose, London EC 1.

Published jointly by:National Union of Public Employees (NUPE)Civic House,20 Grand Depot Road,London SE186SFTel. 01-854 2244andServices to Community Action and Trade Unions (SCAT)31 Clerkenwell Close,London ECI OATTel. 01-2533627

ISBN0-907334-26-1

Price to non-members £2.50February 1985

FINES, FAILURES AND ILLEGAL PRACTICES IN NORTH AMERICA 1

The Lessons for BritainThis dossier summarises reports and documents which we haveobtained from trade unions in North America. It provides verydamning evidence about the quality and cost of health care inprivate hospitals and nursing homes. We have produced the dossierbecause there are important lessons to be leamt about the consequ-ences of expanding private health care in Britain.

Private hospitals are growing in number andthere is rapid expansion of private nursingand residential homes for the elderly. Amer-ican multinationals like the Hospital Cor-poration of America, American Medical In-ternational, Humana, and National MedicalEnterprises already have a strong foothold inprivate health care in Britain. Other com-panies like AKAServices and ServiceMasterIndustries are seeking contracts in healthand social services. This report spells out theconsequences of further growth in privatehealth care.

Ownership of private nursing and residentialhomes in Britain is spread across a widerange of relatively small companies andbusi-ness. Many ofthese are what are called 'momand pop' operations in North America. But itis unlikely to stay that way for long. Theexperience fromAmerica and Canada showsclearly that a few large companies willquickly come to dominate the 'market'through aggressive takeover tactics.

These companies exploit public money paidin patients fees by local and Federal govern-ment in America and Canada. Without it theycould not expand orprofit so extensively. Thesame situation applies in Britain because theDHSSpays patients fees for those entitled tosocial security. These payments have recent-ly been increased substantially. Local au-thority homes receive no such payments.

There are increasing demands! from patientsorganisations, trade unions and political par-ties for an end to this exploitation. The Cana-dian Medical Association task force onhealth care last year called for all nursinghomes to be taken into the public sector.Mounting evidence and concern about 'ware-houses of death' where the elderly are ex-ploited until they die is putting increasingpressure on companies.

The Tories constantly claim that the privatesector gives better 'value for money'. Yet theevidence from major studies in North Amer-ica show that this cannot be backed up byfacts.

Community CareThe effects of imposing community care, alsocalled 'deinstitutionalisation' in North America,without coordinated and planned alternativecare, retraining, etc has been well documentedin North America. When community care isused to try to save money it has had devastatingconsequences for people in need of care. Againthe Tory government in Britain is attempting toimpose 'care in the community' by closing in-stitutions but providing little in the way ofalternative care. (Sources: Madness: An Indict-ment of the Mental Health Care System inOntar-io' John Marshall, Ontario Public Service Em-ployees Union, Toronto, 1982- results of a pub-lic inquiry carried out by a commission of doc-tors appointed by OPSEU. See also Ontario'sMental Health Breakdown, OPSEU, 1980 andSubmission to the RoyalCommission on the Eco-nomic Union and Development Prospects forCanada, OPSEU,November 1983.

The effects of cutsRapid growth of private health insurance inAmerica after 1945put additional pressure onpublic hospitals which county authorities hadowned and operated to provide health care forworking class people, particularly the elderly.The demand for private hospitals increased.The Medicare and Medicaid Acts of 1965accelerated the decline of public hospitals,many medically respected, because the Federalsystem of paying patients fees encouraged pri-vate hospitals at the expense ofpublic hospitals.The spiral of decline set in. The lack of invest-ment to improve public hospitals, the growth ofprivate hospitals, further cuts in spending due tofinancial crises in the 1970'sand 1980'scoupled

2 FINES, FAILURES AND ILLEGAL PRACTICES IN NORTH AMERICA

Business lobby against legislationAs the private health and social services indus-try has become more powerful they have ex-erted increasing pressure on government tominimise state legislation and inspections and toargue for self-regulation. This is despite theclear conclusion from the AFL-CIO study thatself-regulation was 'inadequate, unworkable,and unacceptable as a substitute for strict gov-ernment enforcement of standards'.

with the tax revolt has led to the present situa-tion. During the 1970'smany counties opted tohire private hospital mana~ment firms, ususal-lysubsidiarles of the large private hospital com-panies, to operate public hospitals and to 'cutcosts'. This rarely happened

The problem is not newThe evidence in this dossier focuses on the late1960'sand early 1970's.Fines, failures and illegalpractices in private health and social servicesare not a result of some temporary or transitionalproblem. They are inherent in the,system. Therewas mounting evidence twenty years ago. A USSenate Sub-committee on Long Term Care in1974 revealed poor treatment of patients, de-liberate physical injury, unsanitary conditions,mis-use of drugs, neglect of eye and dentaltreatment, profiteering and mis-appropriationand theft. The committee concluded that at least50 per cent of the nursing homes were so sub-standard as to be life-threatening. The sub-committee hearings also heard frequent testi-mony that running homes for profit acts as anincentive to keep beds occupied and runs coun-ter to the aims of returning people to the com-munity as soon as possible. An AFL-CIOinves-tigation (America's Nursing Homes: Profit in Hu-man Misery, 1977) also discovered that mostdeficiencies were concentrated in private nurs-ing homes.

In 1975an AFSCME report 'Out of Their Bedsand into the Streets' described the effects ofclosing state mental hospitals and forcing 'carein the community'. Modern Healthcare, Decem-ber 1975,stated: 'About 12years ago, the con-cept of 'deinstitutionalisation' was hailed as agrand vision for reforming the care of mentallyimpaired people, a welcome alternative to thewretched conditions found in many huge, over-crowded state mental hospitals. Since then, thevision has become a nightmare, and the veryword 'deinstitutionalisation' has been twistedinto a cruel euphemism for dumping hundredsof thousands of sick, dazed people into an un-prepared society'.

The US Senate Sub-committee reported that'there are few commodities on the market thatare more of a 'blind item' than nursing homecare'. A Federal Trade Commission investiga-tion by the Seattle Regional Office reported thatthe quantity and quality of information suppliedby nursing home owners impeded users deci-sion making and obscured accountability to us-ers and their families.

Relevant in BritainThe supporters of private health care and thecompanies will no doubt try to deny much of thisevidence or say that it is not relevant in Britain.This of course is nonesense. Subsidiaries ofmul-tinational companies in Britain, America, Cana-da or elsewhere follow the corporate startegyset out by the parent company. Centralisation ofdecision making within companies is increas-ing. Companies and their subsidiaries oftenhave a web of interlocking directorships, profitsare usually channelled back to the parent com-pany, assets are switched between parents andsubsidiaries frequently, and these firms usuallywin contracts by boasting about their corporateresources, assets and 'experience' from con-tracts around the world.

The evidence we document in this dossier isonly a sample. We have copies of all the reportsmentioned in the text. The evidence on fines andfailures covers only a handful ofAmerican statesor Canadian provinces. The companies have adistinct advantage because it takes substantialresources to regularly monitor all their activitiesacross 50 states in America each with separaterecords and legislation. These fines and failuresare only the tip of the iceberg. Many of the stateand provincial inspection schemes and controlson nursing homes are inadequate and often in-effective. There are increasing demands formuch tighter controls.

FINES, FAILURES AND ILLEGAL PRACTICES IN NORTH AMERICA 3.

Growth ofMultinationalPrivate Monopoly

Private health care is more extensive and is growing at a faster ratein North America than currently in Britain. Private hospitals andnursing home companies constantly refer to 'savings', 'improvedefficiency' and 'economies of scale'. The evidence from NorthAmerica proves exactly the opposite - and corporate profits con-tinue to soar. The private sector boasts about competition andincreased choice. But all the evidence points to the rapidly increas-ing power and domination by a handful ofmultinational companies.Private monopolies take control at the expense of patients andpublic money. In this section we look at how a few companies havesought to dominate health care in North America.

Competition: Growth of a private monopolyA 'new medical industrial complex' is develop-ing with major consequences for health carewarned Dr Arnold Reiman, editor of the influen-tial New England Journal of Medicine in 1980.Since then the top four multinational health com-panies have continued to expand at a rapidpace. Between 1979-83the number of hospitalbeds operated by the four biggest companiesalmost doubled to 90,100 beds. Four com-panies, Hospital Corporation of America(HCA),Humana, American Medical Interna-tional (AMI), and National Medical Enter-prises (NME) owned 75 per cent of privatehospital beds in 1983. They also operated 58per cent (20,572beds) of beds in hospitals oper-ated under management contracts. One com-pany dominates - HCAowns 3 times the num-ber of beds of the the next largest company,Humana.

Rapid expansionBetween 1975-80the four major companies hadan average annual growth rate in turnover ofbetween 19.0 per cent and 42.7 per cent.(Source: Investor Owned Hospital ManagementCompanies: Growth Strategies and Their Im-plications, Western Center for Health Planning,SanFransisco, 1983)Between 1977and 1982thenumber of privately owned hospitals grew byforty per cent. AMI president Walter Weismanpredicts that the five largest firms will acquirebetween 50 to 100 hospital annually over thenext fiveyears. The larger companies are grow-ing at a much faster rate than the rest of the

'industry'. (Source: Multi-Unit Providers,Modern Healthcare, May 15,1984)

Profits soarProfits have also soared. Combined profits ofthe top four companies increased by a mas-sive 344per cent between 1979-83.(Source: InUnity, Strength: Report to Healthcare Division,Service Employees International Union,Washington DC,May 1984.)

Increasing private controlPrivate companies now own or manage approx-imately fifteen per cent of all UShospital beds.By 1990it is expected to rise to 30 per cent.(Non-profit voluntary hospitals currently ownabout seventy per cent and public hospitalsaccount for the remaining fifteen per cent). In-dependently controlled hospitals are decreas-ing rapidly. Virtually all hospitals will be part ofchains by the end of the decade. Even the volun-tary hospitals, including those operated bychurches, are increasingly operated by man-agement organisations along business lines.

In Canada hospitals are mainly run by publicand voluntary bodies. However, the majorAmerican hospital firms have started towin con-tracts to manage public hospitals. Private hos-pitals are also expanding - there are now 17inOntario alone.

Big business nursing homesSeventy per cent of nursing home beds inAmerica are now privately owned (1983).


, and Essex County have recently sold publiclyowned homes to private companies.

Voluntary agencies owned 22per cent and pub-lic bodies the remaining 8 per cent. BeverleyEnterprises dominates the nursing homebusiness in the same way that RCA domi-nates the private hospital sector. HCA owns18per cent of Beverley and has a director onthe board. At the end of 1983Beverley owned783 nursing homes across America with 88,500beds. (Source: HCA, Form lO-K,Securities andExchange Commission file, Washington DC).The other major firms are Hillhaven, owned byNational Medical Enterprises with 35,000 beds;ARA Services with 32,000 beds followed byManor Care with 13,000beds.

The top five or ten private nursing home com-panies are expected to control 50%of all bedsby 1990.Beverley Enterprises is expected todominate with 30%of the 'market'. Most ofthisgrowth will be by takeovers of existing homesowned by other companies. Between 1976-82Beverley acquired 391 homes by taking over 16companies. In 1983 it acquired 192 homes(18,188beds) and plans to acquire at least 15,000beds and construct a further 2,500 annually be-tween 1984-87. Beverley already has nearmonopoly control in Michigan. In 1983it control-led 75% or more of beds in ten counties and halfor more of all beds in twelve counties in thetwenty four county state.

Canadian businessIn Canada 62% of all nursing home beds areprivately operated and 43 per cent of 'long termcare beds' in nursing and rest homes are inprivate homes. Ten companies own over 40 percent of Ontario's 29,000nursing home beds. Onecompany Crownx Inc owns 17 per cent of thebeds (through its Extendicare subsidiary whichwas originally part of Humana). Extendicare hasexpanded in a similar way to Beverley. In 1983itbought the rival .Cikent Corporation and Vil-lacentres Ltd. It also purchased Unicare Ser-vices Inc which had 62 nursing and health carecentres in the US.

Extendicare used its profiable nursing homeactivities (its profits soared 96 per cent to $32.7min 1983) to expand into life insurance, advertis-ing, oil and gas exploration and communicationstechnology. Other companies, for exampleTrizec Corporation, the large property firm,have diversified from othe,r sectors into nursinghomes. In 1983 'l'rizec bought up the CentralPark Lodges in Canada Ltd nursing home chain.(Source: NDP Research, Toronto, 1983/84).Somelocal authorities in Canada ego Cornwall County

Monopoly control: how it is doneThe major private health companies are ex-panding rapidly by buying up rival firms, diver-sifying into other growing parts of health ser-vices, and building and buying hospitals in othercountries.

• Acquiring rival companies: In 1978Humanadoubled in size when it acquird American Medi-corp for $304m. Three years later HCA paid$950m to acquire Hospital Affiliates Inter-national. In 1983American Medical Internation-al acquired the Lifemark Corporation - two-thirds of Lifemarks rapid growth - profits up 308per cent between 1979-81 had come from ac-quiring other hospitals.

• Acquiring public hospitals: Over fiftypublichospitals have been sold in recent years as wellas independently operated ones.

• Seeking contracts to manage public hospit-als: With more public hospitals facing cuts andfinancial crises over 100county authorities haveturned to private hospital management com-panies. HCA is very keen on such contracts. Amanagement contract allows the company tospend a couple of years deciding whether theyshould buy it or not and assessing the 'localhealth care growth potential'. The often-repeated pattern is for public hospitals to bemanaged in this way for a few years while theprivate hospital company builds a new replace-ment 'medical centre' - owned by the companyand usually in more affluent suburban surround-ings. Firms have recently moved away from ac-quiring urban and suburban surroudings andfocused more on buying up rural voluntary andpublic hospitals (Source: Investor-Owned Hos-pital Management Companies: GrowthStrategies and their Implications, Western Cen-ter for Health Planning, San Francisco, August1983).The rationale behind this is simple - com-panies can more rapidly gain monopoly controlof health facilities. (see example under AMI)

• Providing facilities for doctors to channelpatients to their hospitals: Most of the com-panies provide new facilities and special offersto doctors who are expected to turn to channeltheir patients into the company's hospital. Com-panies often offer free rent for a certain period,moving expenses, low interest loans, salaryguarantees and other inducements to doctors. /

• Anti-union activities: Much of the expansion

FINES, FAILURES AND ILLEGAL PRACTICES IN NORTH AMERICA 5ofprivate nospitalsand nusing home companieshas occured in the sunbelt states where tradeunion organisation is weak. However, havingbecome powerful companies, they are spread-ing their operations across the USand intoCana-da. Firms have also adopted specific anti-unionactivities (see later).

Monopoly through diversificationThe large companies not only dominate thegrowing number of private hospitals but theyare spreading their control throughout healthcare services.

RCA, the largest hospital chain, has 18 percent stake in the largest nursing home fll1l1.,Beverley Enterprises, which in turn has a50/50 partnership with UpJohn Health Ser-vices, North America's largest nursing andhome help agency.

The cradle-to-the-grave multinational is fastbecoming a reality. Youcan be born in an HCAhospital, have your tonsils, appendix and herniaoperated on, stay at an HCApsychiatric hospitalor alcoholic treatment centre, and die in a Ber-verley nursing home. There'll be a handsomeprofit with every move you make.

Other companies are also diversifying. NationalMedical Enterprises operates acute care hospit-als' nursing homes, psychiatric hospitals, hos-pices, nursing and home help agencies, medicalequipment supplies, hospital management firmsand emergency care centres.

Boomin home health careNursing and home help agencies are expandingrapidly as the cost of hospital and nursing homecare increases. In 1982about $2.5 billion wasspent on home health care and this is expectedto have trebled by 1986.Beverley, AMI, NMEand other companies now own rapidly expand-ing agencies. So too are drug companies likeAbbott Laboratories and American HospitalSupply Corporation.

Emergency care centres, outpatient surgicalcentre, cardiac rehabilitation centres and birth-ing centres are opening at an increasing rate.They offer health care at a cheaper rate thanhospitals, but again the major companies arebecoming increasingly dominant.

Overseas expansionAll the major American hospital firms have ex-panded their overseas operations in recentyears. HCA, which claims to be the world'slargest health care corporation, owns or man-

ages hospitals in Australia (eleven hospitals),Brazil (six),Britain (seven), Panama (one), SaudiArabia (four), India (two), Malaysia (one) andthe Virgin Islands (one), a total ofover 4300beds(at the end of 1983).AMI and NME also havesubstantial overseas health care operation parti-cularly in Britainand the Middle East.

Waste monopolyA similar pattern has developed in refuse col-lection and waste disposal in North America.Two multinational companies now dominate the'market'. Waste Management Inc and BrowningFerris Industries grew rapidly in the last fifteenyears buying up small and large competingfirms by aggressive, ruthless and sometimesillegal tactics.

Savings: the myth exposedA number of studies have shown that privatelyowned and operated hospitals are more costlythan public or non-profit hospitals.

• An investigation of 280hospitals in Californiaby Pattison and Katz (New England Journal ofMedicine, August 1983) showed that pricingand marketing stategies and not efficienciesand management know-how resulted in highprofits. Private hospitals charged 24 per centmore per admission than comparable voluntaryhospitals and 17per cent higher prices than onaverage. They ordered 10 per cent more labtests and administered 50 per cent more medi-cine than did other hospitals. Private hospitalscharged 38 per cent mo.re for ancillary medicalservices compared to non-profit hospitals.Claims that centralised management saves

Imoney were also shown to be false. Private hos-

, pital charges for 'fiscal services' and 'adminis-I trative services' (including head office costsI allocated to each hospital) were 37 per centI higher in private hospitals than voluntary ones.

I .A study by Lewin and others in 1981(Source:I 'Investor Owned and Non-Profits Differ in Eco-I nomic Performance, Hospitals, Vol 55 No 13,I 1981) compared 53 private hospitals with 53I non-profit hospitals in Florida, Texas and Cali-I fornia. The private hospitals had higher inpa-I tient charges, higher costs per patient day,I higher ancillary medical costs than non-I profit hospitals. Patient day charges per admis-I sion were 17per cent higher in private hospitalsI - an average $55a day more.

• AAother study by the Florida State HospitalCost Containment Board of 72 private and 82voluntary hospitals using 1980 and 1981 data


found that private hospitals costs were on aver-age 15per cent than voluntary hospitals.

• In 1982 Medicare paid out $300m to privatehospitals to cover their return on equity. It costs8 per cent more for Medicare patients in privatehospitals compared to voluntary ones. (Source:For Profit Hospitals and the Poor, Geri Dallek,National Health Law Program, October 1983).

• Canadian private hospitals also receive sub-stantial public funds. The 17private hospitals inOntario received $21.4m in 1982183 from theMinistry of Health. (Source: Privatisation ofHealth Care: The USand Ontario, NDP ResearchDept, Toronto, June 1984)

• Private hospitals increasingly rely on publicfunds. Medicare provided 43 per cent of HCA'sturnover in 1983 - up from 36 per cent in 1979(Source: HCA Form lO-K, Securities and Ex-change Commission, Washington DC, 1984).Sixty-six per cent of Beverley's turnover comesfrom Medicare and Medicaid. 'Beverley fre-quently boasts of bringing "efficiency" and"economies of scale" to nursing home care. Thecompany does not offer any hard evidence forthis assertion .... The higher-than-average admi-nistrative costs indicates an inefficient opera-tion, and, while some savings may be realizedthrough bulk buying of supplies, most of thecosts of patient services are staff and food -neither of which particularly lends itself to eco-nomies of scale ... public health dollars - whichmake up the majority of funds for long term care- buy less services for residents in Beverleyhomes than the same dollar spent in non-Beverley homes.' (Source: Beverley Enterprises

Patient Care Record, Beverley EmployeesCARE, Washington DC, 1983)

• AMI took over the management of Hawkes-bury General Hospital, Ontario, Canada in Janu-ary 1983.The deal gives AMI $300,000 annuallyfor twelve years plus half of any 'profits' over$750,000 a year. An anticipated $350,000 deficitwas turned into a projected $400,000surplus thefollowing year in a blaze of publicity. Whatactually happened had very little to do with AMI.The hospital's deficit was eliminated by a spe-cial government grant of $345,000. In addition,the hospital saved $85,000on interest payments,plus $140,000 from cuts in staffing (closing afloor in summer and not replacing staff off sick).More patients came from Quebec so the provin-cial government paid the hospital an additional$200,000. This makes a total of $425,000 andequal to the projected surplus. Three quarters ofthe finance to effect this change had come frompublic funds.

• Medical research is often a costly but essen-tial part of health services. Private hospitals'save' money by not doing research. In the studyof 280 hospitals in California reported by Patti-son and Katz (New England Journal of Medicine,August 1983) company run private hospitalsspent nothing on medical research (comparedto $17.68 per admission in voluntary hospitals).They also 'save' on education, spending a mere$1.45per admission compared to $7.92and $3.53per admission in public and voluntary hospitalsrespectively. Yet the combined financial andadministrative costs per admission were almost40 per higher in company run private hospitals.


A Chronicle of Finesand Failures

The quality of care for patients in private hospitals and nursinghomes is dominated by the constant motive to increase profits. Itscalled tender loving greed. There has been documented evidenceabout private hospitals carrying out unnecessary operations, refus-ing to admit poor patients and so on. In this section we reveal achronicle of fines and failures in North America by large healthcare companies, most of whom now operate in Britain.

HOSPITALCORPORATIONOFAMERICAByDecember 1983HCA owned or managed 391hospitals (56,144 beds) in America and over-seas. Turnover in 1983 was $3,917m, nearly afourfold increase since 1979. Profits, after tax,shot up 450 per cent in the same period. As wellas the 18per cent stake in Beverley EnterprisesHCA also has a share stake in the RepublicHealth Corporation (to which HCA sold 18 hos-pitals in 1983). In 1983 HCA set up the HCACapital Corporation to make investments in thehealth care industry. It now owns shares in Sci-entific Leasing (25 per cent) and other medicalequipment firms, a chain of outpatient surgicalcentres, and has a director on the board of eachcompany.

In October 1984HCA acquired 14hospitals fromthe Forum Group for $194m. The Wall StreetJournal (19 October 1984)reported that this waspart of HCA's 'ambitious three year plan to in-crease the number of hospitals it operates by atleast 50per cent to more than 600'.HCA owns sixrelatively small private hospitals in Britain and isbuilding a new 100bed private hospital in South-ampton. (Source: HCA Form lO-k,Securities andExchange Commission, Washington DC, 1984)HCA was launched in 1968 from a Nashvillehospital by two doctors and Jack Massey ofKentucky Fried Chicken (he bought KFC for$2m in 1964 and sold it for $250m seven yearslater) and Wendy Hamburgers fame.

Patients and government forced to paytakeover costsIn 1981HCA acquired Hospital Affiliates Inter-national Inc (54 hospitals, 18 nursing homes, 10medical office buildings and 42 subsidiaries)from the INA Corporation. INA received $425min cash and 5.39m HCA shares valued at $190m.

In addition HCA took responsibility for $270mlong term debt. HCA later sold all the acquirednursing homes to Beverley Enterprises for$11.5m plus 1.1mBeverley shares. It also resoldsome of the hospitals it acquired from HAl.

An investigation by the United States GeneralAccounting Office (GAO) initiated by Repre-sentative Willis D. Gradison showed that duringthe first year after the acquisition, the 54 ac-quired hospitals' costs increased by about$55.2mdue to increased depreciation and in-terest costs. The GAO examined HCA's corpo-rate records and received information from thefirm's officials.

The GAO then examined HCA's records for re-payments for treating Medicare and Medicaidpatients. The GAO allocated HCA's claimedcosts for depreciation, interest and office ex-penses to these two programmes for two (of the54) hospitals identified by HCA. GAO estimatedthat. for the year following the acquisition:

• The overall increas~ in costs due tochanges in these three items was about $1million at one hospital and $300,000 at theother.• The portion of these increases allocated byHCAto Medicare and Medicaid was $465,000at one hospital and $117,000at the other.• The per patient day increase in Medicarecosts shown in HCA's cost reports as a resultof these changes was about $26 and $21 re-spectively. The increases in Medicaid costswere about $31 and $27respectively.

The GAO report also reported that: 'HCA be-lieves that substantial savings will be realisedthrough management improvements it institutedat the acquired hospitals, and it estimated thesesavings in a report to the Department of Justice


before the acquisition. That report cited suchitems as lower supply costs through increasedvolume of purchases and decreased data pro-cessing costs through better contracting. GAOcould not evaluate these claimed savings be-cause, among other reasons, the report lackedthe necessary details.

According to HCA officials, they could not quan-tify the savings at the time of GAO's fieldworkfor a number of reasons, and quantification inthe future would be extremely difficult.' The re-port concluded that the Department of Healthand Human Services were considering theGAO's findings and its request to clarify Medi-care repayment policies. (Source: GeneralAccounting OfficeIHRD-84-1O, December 22,1983.Released January 1984).

Representative Gradison issued a statement inwhich he said: 'This report by the GeneralAccounting Office confirms that hospital mer-gers increase the cost of Medicare and Medi-caid. At this time, I am requesting that the HealthSubcommittee of the Ways and Means Commit-tee hold hearings on the conclusions of andimplications made by the GAO report. I am alsoconsidering introducing legislation limitingreimbursement to original costs.' HCA 'believesthat the final resolution' """'will not have a mate-rial effect upon the Company's financial positionor results of operations'. (Source: HCA FormlO-K, March 1984, Securities and ExchangeCommission, Washington DC)

Prior to the takeover by HCA, Hospital AffiliatesInternational (HAl) had a $183,000 managementcontract with New York City's Health and Hos-pital Corporation which oversees the city's re-commendations which critics said would havedrastically reduced services for lower incomeresidents in the city. John Holloman, head of theHealth and Hospital Corporation was very critic-al of the HAl report. 'The results were propos-als that would have served the interests ofexpediency, but not the patients, the workers,or the community. Among their proposalswere that staff should be cut back to danger-ously low levels, that the social services de-partment be largely dismantled, and thatemergencies be handled on a much moreselective and smaller scale"." (HAl) tried toplug us into a formuia that would have che-ated the poor people of this city out of decenthealth care'. (Source: Passing the Buck: TheContracting Out of Public Services, AFSCME,Washington, DC, 1983)

Poor Patients Discriminated

• A study of six HCA hospitals by the GeorgiaState Health Planning and Development Agencyin 1979showed that five out of six HCAhospit-als served less than half of the Medicaid pa-tients they could be expected to serve. Col-iseum Park Hospital served only 2% of its 'fairshare' of Medicaid patients while West PacesFerry Hospital served just 18%.Not only did theHCA hospitals fail to serve Medicaid and ethnicminority patients but they also failed to providecharity care. Five hospitals reported no charitycare during the survey month, and the sixthprovided only 1.4%in charity care. (Source: For-Profit Hospitals and the Poor, Geri Dallek,National Health Law Program, October 1983.

• Four out of five HCA hospitals in Nashville,"Tennessee (HCA's corporate headquarters) re-ported providing no charity care during 1980.Ahospital's bad debts are often used as one mea-sure of charity care. In 1981 the five NashvilleHCA hospitals provided a total of $1.8m baddebts compared to $30m in charity care and baddebts provided by the city's eight voluntary hos-pitals (which are not known to their service tothe poor). HCA's 'flagship' hospital, Parkview,served only 330 Medicaid patients in 1980- just2% of total patients. (Source: For-Profit Hospitalsand the Poor, Geri Dallek, National Health LawProgram, October 1983.

• The HCA managed George W. Hubbard Hos-pital in Nashville, Tennessee was accused ofcharging patients $26 at the front desk beforethey were admitted. Various organisations de-clared the policy as 'insensitive, anti-culturaland probably illegal'. (Source: Passing theBucks - The Contracting Out of Public Services,AFSCME, Washington DC, 1983).

• 'HCA makes no bones about the fact that itwants dollars and not promises from patients """Say an uninsured person with empty pocketsshows up with a gall bladder that needs remov-ing. HCA will check to see if the person qualifiesfor Medicare or Medicaid and will help him signup. If he doesn't qualify, it will recommend abank loan (though not arrange one). If that doesnot work, it will point the way to the nearestvoluntary hospital and wish the patient luck.'(Source: Operating for Profit at Hospital Cor-poration, N.R. Kleinfield, New York Times, 29May 1983)

)

)

• HCA failed in· its bid to buy the McLeanpsychiatric hospital from the Massachusetts


General Hospital, one of America's noted hos-pitals and part of the Harvard Medical SchooL(HCA already owned or managed 24psychiatrichospitals). Despite a reported bid of between$40-$60m, a promise to rehabilitate the hospitalat a cost of $35m, to underwrite faculty costs andcontinue teaching and research functions,McLeans professional staff were overwhel-mingly opposed. The Harvard Medical Schoolsurveyed 17 HCA hospitals and declared that'the operation of hospitals, and particularlyteaching hospitals, should not be influenced bythe motivation of profit'. (Source: Investor Own-ed Health Care Chains in America: Their Impacton Communities and Workers, AFSCME FileReport)

BEVERLEY ENTERPRISESIn 1979Beverley had 25,000 nursing home bedsand $5.9m profits. By 1983it had 88,500beds and$35.4m profits. In 1982the firm had a 46 per centrate of return on equity - 4 times the 1982medianrate of the Fortune 500, 2 to 4 times the rateachieved by major oil companies and more thantwice the average rate of return of the privatenursing home industry. It now dominates otherprivate nursing home companies. HCA has a 18per cent share stake in Beverley which is alsoexpanding into home health care and nursingand home help agencies.

Profits and Deficiencies in Michigan

• Michigan Department of Public Health nurs-ing home inspections in 1982reveals inadequatespending on care. A disproportionate 23% ofBeverley's home fall in the 'worse' groupingof homes.

• Nearly two-thirds ofBeverley homes aver-aged nearly four staffing deficiencies perhome in 1981and 1982.

• Beverley acquired the Provincial House chain(26 nursing homes) in 1982. Staff performancedeficiencies included insufficient staff tomeet nursing standards, unreported acci-dents to patients, inadequate care, impropermedication.

tr

• The Provincial House takeover cost Michi-gan taxpayers (via the Medicaid budget) anadditional $2.3m in interest payments alonein 1981/82- an increase of $3.33 per patientday for Beverley loans to finance the takeov-er. None of this money went for patient services.During the same period Michigan Medicaid cuthearing aids, fluoride treatment and prescrip-tion benefits to 'save' an estimated $2.5m.

• Inspectors found two or more food diet andservice deficiencies in 75% of Beverleyhomes in 1981 and 82% of homes in 1982.Deficiencies increased in Provincial Homesunder Beverley Management.

• Beverley's profits per patient day in Michiganare nearly 30% above the average for all Michi-gan nursing homes. High profits came fromcutting patients services costs below Medi-caid limits.

• Beverley also has high administrative costs(15.5% of total costs) which are rising rapidly-up 26% in 1982 alone. Head office costsaccounted for 72% of the total overhead costincreases 1981-82.The firm uses the categoryof administrative costs to increase the flowoffunds from individual homes to the corporateheadquarters.

(In 1979 a US General Accounting Office studyconcluded, after close analysis of audits ofactual head office costs that firms generallyovercharge states, taking advantage of thestate's inability or failure to audit and share in-formation with each other.)

• Using patients care performance developedin California and applied in Washington, Bever-ley's performance was abysmal. With an aver-age 2.31 deficiencies per home this was fivetimes worse than church and non-profithomes and a third above the state-wide aver-age. (Source: Beverley Enterprises in Michigan:A Case Study of Corporate Takeover of HealthCare Resources. Sept 1983. Prepared by TheFood and Beverage Trades Department, AFL-CIO for Beverley Employees CARE - Coopera-tive Action and Reform Effort)

• Arkansas state authorities suspended Bever-ley's operating licence for six months after aman died of scalding at the firm's GeriatricNUJSingCentre in Blutheville. Beverley wascharged with negligence including inadequatesupervision and assistance when bathing pa-tients, and failing to promptly investigate the


matter. The firm settled out of court with thepatient's family for a reported substantial sum.(Source: Beverley Enterprises in Michigan)

• In Florida a Beverley home in St Petersburgwas given a six month probation by the PinellasCounty Court (Criminal Division) for denying apatient's 'right to receive adequate andappropriate health care and protective and sup-port services'. Beverley homes in Floridawere recently fined $15,115 for continuedstaffing deficiencies. The state ordered amoratorium on admission to four Beverleyhomes in 1982.(Source: Beverley Enterprises inMichigan and AFCSMEFile report)

• Beverley recently paid $188,500 to settlefive wrongful death suits in Michigan, Flor-ida and Georgia. (Source AFSCMEFile Report)

• Beverley nursing homes in California re-ceived 173 major patient care deficiencies infive years up to 1982including 26 deficiencieswhich posed an imminent danger of death orinjury. (Source: AFCSMEFile Report)

Trail ofNeglectAnother study covering California, Texas, Flor-ida and Arkansas where more than half of Be-verley's homes were located in 1980/82revealedthe following:

• Beverley spent between eight per cent and14.2per cent less on patient care (includingnursing, food, domestic and cleaning ser-vices) in Texas, Florida and Arkansas thanthe average for all homes in these states. Yetin all three states the firm allocated significantlymore money to administrative fees, facilitycharges and profits than the statewide average.

• Shortstaffing: State inspectors found an aver-age of 3.1 deficiences in 88 per cent of Bever-ley's homes in Arkansas in 1981.In Texas halfthe homes had average deficiencies of 1.6and inCalifornia 47 per cent of homes had an averagedeficiency of 2.5 in the same year. Deficienciesfor using untrained staff were even moreextensive.

• FoodDeficiencies: Inspectors reports on Be-verley homes in Arkansas, Texas and Californiain 1980and 1981revealed widespread deficien-cies. For example 63 per cent of the homes inCalifornia had an average 3.4 deficiences in1981. Deficiencies included cockroaches inkitchens, patients not receiving proper diets,inadequate food etc.

• Drug Deficiencies: 94 per cent of Beverleyhomes in Arkansas had average deficiencies of2.5 in 1981. In all three states deficiencies in-creased between 1980-81. Deficiencies in-cluded patients not getting prescribed drugs,excessive doses sometimes given, inadequate,medical records.

• Fines: Between 1980-82Beverley was fineda total of$62,296by state and local regulatorybodies in Florida. These fines are for recurringdeficiencies and because of the difficulties inobtaining the information it understates the totalnumber of fines.

Beverley was fined $162,725in California fordeficiencies in 1980-81.In the three years priorto this period they were fined nearly a hundredthousand dollars for deficiencies.

Texas does not administer fines but has a three-tier enforcement system. If a deficiency is notcorrected, a compliance letter is sent. If it stillpersists, the authorities can withhold publicmoney due to the home and if this fails to re-medy deficiencies, the state can decertify thehome (forcing it to close) although this is rarelyused. In 1981the state issued 54 complianceletters to Beverley homes, recommendedwithholding payments on 16 occasions, andrecommended decertification eleven times.

There were at least 23civil law suits filed againstthe company in 1980-82 for wrongful deaths,injuries sustained in Beverley homes, poor care,and medical malpractice. (Source: Beverley En-terprises Patient Care Record, prepared by TheFood and Beverage Trades Dept, AFL-CIO,forBeverley Employees CARE (Co-operative Ac-tion and Reform Effort),Washington DC, 1983)


AKA SERVICESARA owns the third largest chain of privatenursing homes in North America. It has exten-sive catering contracts (including vendingmachines) in schools, colleges, hospitals andother public buildings. It ranks second to Ser-viceMaster in hospital ancillary services con-tracts and also has contracts for school bustransportation, vehicle maintenance, textile ren-tal and laundry work and recently extended intochild care acquiring Child Care Systems andNational Child Care Centers. Its transport divi-sion is a major distributor of books and maga-zines. It subsidiary, V.S. Services has over 140contracts in Canada in hospitals and homes forthe elderly.

Turnover in 1983was $3 billion mainly from itsUS activities. It has a subsidiary, ARA ServicesLtd, based in Reading which had £49.6m turnov-er in 198213.The firm has contracts with a num-ber of Crown Courts, Westminster City Council,British Gas, two police colleges and severalother authorities. It is poised to get a Wand-sworth Council catering contract for theborough's homes for the elderly. It is also seek-ing NHScleaning contracts.

• AKA has admitted making questionableand sometimes illegal payments totalling$393,000to politicians and other persons inthe USA and abroad between 1970-76. Thecompany also revealed to the USGovernment'sSecurities and Exchange Commission that it hadreceived $504,000 in questionable and some-times illegal rebates in the same six year period.The SEC launched a 33 month investigation intothe company concerning the accuracy of thecompany's report which ended in 1982withoutrecommending further action.(Source: Passing the Bucks, AFSCME, Washing-ton DC, 1983)

• In 1981 some former ARA employees ac-cused AKA and some other firms of pricefixing and collusion in tendering for schoolbus contracts. A 21 month investigation by theJustice Department ended in 1982 'becausethere was insufficient evidence to proceed'(Source: Wall Street Journal, 21 April 1982).

• The firm was fined $300,000 and $80,000and twice ordered to sell-off several sub-sidiaries by the Federal Trade Commission inthe 1970'sfor price-fixing and violating a banagreed with the Commission several yearsearlier.(Source: Passing the Bucks, AFSCME, Washing-ton DC, 1983)• ARA employed an ex-FBI agent, PeterO'Neill, as its director of security in the 1970'sand assigned him to investigate possible linksbetween the company and organised crime. Af-ter he was dismissed by the company in 1977O'Neill filed a $2m law suit against AKAclaim-ing that he had been fired because he hadfound evidence of organised crime infiltra-tion into the company. AKAreached a settle-ment before the trial paying O'Neill $167,000and $83,000legal costs. Documents disclosedby O'Neill and law enforcement agenciesclaimed that ARA's subsidiary vending machinecompanies, Paramount, Sileo and Araven oper-ating in New Jersey, New York and Detroit, hadlinks with organised crime. Associates ofknown crime bosses were employed as con-sultants and business managers by AKA.O'Neill also claimed that 'approximately $lmfrom of ARA's money or assets were mis-appropriated'. ARA has denied all these claims.(Source: New York Times, 4 December 1979;Passing the Bucks, AFCSME, Washington DC1983)ARA's nursing homes have been heavily fined inrecent years .

• California: fined $20,000and four homes puton probation for 18months after state author-ities tried to close down the homes claimingthat they did not meet the basic needs ofpatients.

• Texas: $6,000fine in 1979for deficiencies inone AKA home in which conditions created'an immediate threat to the health and safetyof the residents'.

• Texas: AKA centre for retarded childrende-certified after public health officials hadtwice found major deficiencies in 1981.ARAimmediately closed the centre .

• Colorado: an ARA subsidiary, Geriatric Inc,was forced to give up operating a home in Den-ver after an elderly patient died. The State attor-ney said that ARA's operation of the homeshowed 'the most severe disregard of patientcare of any case to my knowledge'.


• Colorado: ARA have been involved in a longlegal battle over the state's attempts to close itsnursing home in Durango, also operated byGeriatrics Inc. The state's health department hasconcluded that Geriatric's violation of minimalstandards was 'intentional, deliberate and wil-ful'. (Source: Passing the Bucks, AFSCME , 1983)

• ARA's school bus contracts have also run intodifficulties. In 1978 AKA paid the MilwaukeeSchool Board $225,000 following a law suitwhich charged the company with a nationalconspiracy in bidding for bus contracts. Au-thorities in Nebraska, Tennessee and Hawaiihave also investigated the companies activities.(Source: Passing the Bucks, AFSCME, 1983)

• ARA won a five year vehicle maintenance andrepair contract for the 1600 vehicles operatedby Prince George's County, Maryland in late1974. Within a year the fire brigade voted torefuse to allow their equipment to be servicedby ARA because they claimed the repairs wereof a poor quality. The County cancelled the con-tract in 1976. They employed direct labour (42mechanics - 6 fewer than ARA) and saved$300,000 compared to ARA's contract. The Pres-ident of the County federation of Police Officersstated; 'The way we look at it, anything would bebetter now than ARA. We would prefer to go to asystem, any system, where we could get ourvehicles repaired properly' (Source: Govern-ment for Sale, John D. Hanrahan, AFSCME,Washington DC, 1977)

SERVICEMASTERINDUSTRIESServiceMaster is the largest hospital ancillaryservices contractor in North America andclaims to have about 75 per cent of all suchcontracts. The firm operates management onlycontracts - the hospital employs the workerswho are supervised by Service Master and usethe company's cleaning equipment and sup-plies. It started out as a carpet cleaning franch-ise and now has nearly 3000 franchises. Ser-viceMaster also provide laundry management,building maintenance, medical equipmentmaintenance and has recently extended opera-tions into cleaning schools and other public faci-lities. '

The company is overtly religious - its annualreport is scattered with religious references.The company takes its name from 'Serving theMaster' and promise to 'honour God in all we do'.Turnover is now over $700m and profits haveincreased constantly at more than 25 per centannually for the past decade. The company isnow seeking NHS contracts through a Britishbased subsidiary.

• A ServiceMaster management cleaning con-tract for Coney Island Hospital, operated byNew York's Health and Hospital Corporation,was cancelled in late 1981 following a series ofproblems. ServiceMaster were to work withmanagement to develop more effective clean-ing methods but extended this to direct supervi-sion of cleaners. Promised training failed to takeplace. After numerous demonstrations byAFSCME Local 420 the contract was terminated.'We simply decided that the work can be donemore effectively and efficiently without the ser-vices of this company' said Robert Bradbury,Executive Director of the hospital. (Source: Pub-lic Employee Press, AFSCME, October 1981)

• In 1981 the University Hospital at the Universi-ty of Michigan decided not to renew its threeyear management cleaning contract with Ser-viceMaster and re-establish its own in-housemanagement. One of the stated reasons forsacking ServiceMaster was a survey carried outearlier by the University in which a large major-ity of the hospital's staff strongly disapproved ofthe company's management audits negative im-pact on services in the hospital. (Source: Letterto all employees from Senior Associate HospitalDirector, University Hospital and MichiganAFSCME News, November 1981)

• ServiceMaster were forced by the Commis-sion on Human Relations, City of Pittsburgh topay $14,768 compensation to a cleaner em-ployed by the Childrens Hospital in Pittsburgh.ServiceMaster had earlier cut staff by a third,altered job responsibilities and harassed thosecleaners who fought against the company's tac-tics. One cleaner was fired after ServiceMasterhad submitted critical reports. (Source: Findingsof the Commission on Human Relations, Countzv Service Master Industries Inc, March 1980)

• Only half of ServiceMaster's hospital con-tracts are renewed. About 20 per cent of Amer-ican hospitals have contracted out the manage-ment of domestic and cleaning services. 'Astudy of ServiceMaster contracts may allow thecompany to deliver a reduced level of service at


a far higher unit cost of labour.' (Source: Reportto Healthcare Division, SEIU, Washington DC,1984)

AMERICAN MEDICALINTEI\NATIONALAMI is the third largest private hospital com-pany operating in America with 14,272 beds in104hospitals at the end of 1983.Its rapid growth- turnover more than doubled since 1980- wasachieved by acquiring other competing firms,eg Hyatt Medical Enterprises ($69m), Brook-wood Health Services ($156m) and Raleigh Hillchain of 24 alcoholic treatment centres ($87m).More recently AMI acquired the 32 hospitalLifemark Corporation. Turnover is expected toexceed $2 billion in 1983/84. AMI has also ex-panded into outpatient surgical centres, homecare services and hospital design.

AMI owns the Harley Street Clinic, and the Prin-cess Grace Hospital ~n London in addition toothers in Canterbury, Manchester, Glasgow andBirmingham. AMI acquired Sloane IndependentHospitals in a £9m deal last year bringing theirtotal number of private hospitals in Britain to 9.The company has introduced a credit cardscheme for patients. It was at the centre of the'kidneys for sale' scandal last year. AMI alsooperates hospitals in the Middle East. (Details inPublic Service Action No 10,page 5)

.36,000 people in Texas who have health insur-ance were told that they will no longer be co-vered for non-emergency medical services attwo AMI hospitals in Houston after May 1982.AMI to cut over-utilization costs at the WestburyHospital and the Docters Hospital after a reviewof the hospital's laboratory and radiologycharges and diagnostic procedures.

• A Federal Trade Commission judge foundAMI guilty of price fixing in SanLuis Obispo,California. AMI purchased its main rival hospit-al, French Hospital, to add to the two it alreadyowned in the area. AMI made uniform hospitalcharges at all three hospitals. AMI increased itsshare of the hospital 'market' to 87.2 per cent ofinpatient days. The judge rules that AMI was

attempting 'to monopolise the market' andordered the firm to sell the French Hospital andto seek FTC approval for all hospital acquisi-tions in thirteen states for the next decade. AMIis appealing the ruling. (Source: For Profit Hos-pitals and the Poor, Geri Dallek, National HealthLaw Program, October 1983)

• AMI tookover the York General Hospital fromthe York County authorities in Rock Hill, SouthCarolina in December 1980. It then built a newreplacement medical centre. In the meantimeinpatient charges at York rose 35 per cent in1982under AMI controL A chest x-ray doubledin price to $36. The average charge per admis-sion for supplies jumped 133 per cent in twoyears compared with only a 31per cent increasein other nearby hospitals. Medicare bills in-creased $111,000 in 1982 under AMI (Source:Wall Street Journal 28Jan 1983).

HUMANABy the end of 1983Humana owned 89 hospitalswith 17,704beds with a turnover exceeding $2.3billion. In the five years to 1982Humana had anaverage growth in profits of 39 per cent annual-ly, much higher than the 26 per cent average forits major competitors. It started business in 1961as the Extendicare nursing home chain but thesewere eventually sold-off. In 1978 Humana ac-quired American Medicorp, then the secondlargest hospital company. But Humana has alsosold many hospitals usually because they werenot profitable enough. Most of the firm's hospit-als are located in the sunbelt states eg Florida,Texas, California. It considers hospitals in thenorth eastern states to be 'overregulated'.Humana owns the 270 bed Wellington Hospitalin StJohns Wood, London.

-~-

• Parents were told that their new-bornbabies would be kept at Humana's LakeCumberland Hospital, Somerset, Kentucky,until they had paid their bills. Some patientswere told they had to pay over $1,000 beforethey would be released from the hospital.Others had to sign documents for loans. In 1982the local office of the Appalachian Research and

14 FINES, FAILURES AND ILLEGAL PRACTICES IN NORTH AMERICA7

Defense Fund of Kentucky received 100 com-plaints from people who had been harassed byHumana for unpaid bills. Following a 9 monthinvestigation by the Consumer Protection Divi-sion of the Kentucky Attorney General's Office,Humana agreed in June 1983to sign a voluntaryagreement lodged with the Franklin CircuitCourt, not to violate the state's consumer protec-tion laws and agreed to stop its debt collectionpractices.

Somerset had sold its public hospital to Humanain 1973who later replaced it with the new pri-vate Lake Cumberland hospital. It was reportedin 1983that Humana were demanding pregnantwomen pay a $1,200deposit before they wereadmitted, forcing many poor women to travelover 100miles to obtain hospital delivery care.The hospital's policy was to treat all emergencypatients but poor patients were transferred tovoluntary hospitals as soon as their conditionstabilized. (Source: For Profit Hospitals and thePoor, Geri Dallek, National Health LawProgram,October, 1983)

FINES AND FAILURESINCANADAThe Toronto-based Concerned Friends ofOntario Citizens in Care Facilities (founded in1980and has 300members) produced an exten-sive report on nursing home care in Ontario inSeptember 1982. This called for the gradualphasing out of all profit-making nursing homesand the development of alternative systems ofcare. 'In fact, no free market conditions applyand so all the old arguments put forward byprivate owners in favour of private enterprisefallby the wayside.' Drawing on detailed reportsfrom their membership the organisation alsocalled for far stricter inspections, licencing andcontrols on nursing homes, a Bill of Rights forresidents, public control ofmonitoring the quali-ty of care, access to information and increasedpenalties for deficiencies. (Source: ConsumerConcerns and Recommendations Related toNursing Home Care in Ontario, ConcernedFriends of Ontario Citizens in Care Facilities,Toronto, 1982)

• Between August and October 1983 Con-cerned Friends documented 143 complaintsfrom relatives in 26 privately-owned homes inthe Toronto area. (Source: The Citizen, Toronto,13January 1984)

• The Ontario Ministry of Health received 385complaints about conditions in private nursinghomes between April 1982and March 1983.Be-tween March and October 1983there were afurther 213 complaints. (Source: The Citizen,Toronto, 13January 1984)

• Fifteen homes operated by five companies inOntario had 460 separate violations of the Nurs-ing Home Act regulations when visited by in-spectors in 1983.Extendicare Ltd - four homes inspected - 127deficienciesCiKent Corp (now part of Extendicare) - threehomes inspected - 89deficienciesCarewell Corporation - three homes/81deficienciesCanadian Nursing Homes - four homes/151deficiencies

I Central Park Lodges - one home/12I deficiencies.I The deficiencies included cockroach infesta-I tion, poor food and inadequate care.

I • Details of major deficiencies in private nurs-I ing homes were spelt out in a speech in 1983inI the Legislative Assembly ofOntario by BobRae,I leader of the Ontario New Democratic Party. HeI cited many specific reports from relatives of

Ithose in care. (Source: Nursing Homes in Ontar-io, Hansard OfficialReport of Debates, 25 April

I 1983)

III

• The Canadian Medical Association (equiva-lent to the BMAin Britain) set up a national taskforce on the allocation of health care resourcesin Canada. The task force held a series of publichearings and received numerous written re-ports from a wide range of organisations acrossCanada. Its report, published in 1984, recom-mended 'that all jurisdictions move as quick-ly as possible towards the elimination of"care for profit" institutions and establishnon-profit facilities. The invaluable contribu-tions of many charitable and service orga-nisations, in establishing accomodation forsenior citizens, is acknowledged .... However,the vast bulk of the accommodation should bean integral part of a publicly financed andoperated program. In this way, both the suf-ficiency and the quality of accommodation


for Canada's elderly will be better guaran-teed.' Source: Health: A Need for Redirection,Task Force on the Allocation of Health CareResources, Canadian Medical Association,1984).An investigation by the Social Planning Coun-cil of Metropolitan Toronto (Caring for Profit:The Commercialisation of Human Services inOntario, October 1984)called for an immediatemoratorium on funding and awarding furthercommercial operations in social and health ser-vices. The Council also called for a comprehen-sive investigation of all commercial social andhealth services, the true scale of public subsidyto be revealed, the immediate introduction andenforcement of clear and measurable standardsof the quality of services and the full publicdisclosure of inspection reports. Over 90 percent of Ontario's 332 nursing homes, a third ofresidential accommodation for children, half the70,000licenced day care spaces, and most ofthe450 residential homes for the elderly are runcommercially.

.There were 174 'unnatural' deaths in privatenursing and residential homes in Ontario in 1983according to the Chief Coroner of Ontario. Incontrast there were 47 similar deaths in charit-able and local authority homes yet there are thesame number of residents in private homes as incharitable and public homes. Many of the ver-dicts of coroners' inquests into deaths in privatehomes expressed concern about inadequatestaffing and staff training. (Source: Caring forProfitSocial Planning Council, Toronto, October1984)

.A new practice has started where privatenursing home operaters are encouraging pa-tients 'requiring too much care' to hire 'privatenurses' from agencies to supplement the careprovided in the home. At least six agencies inToronto report that they frequently send privatenurses to nursing homes where residents areforced to pay the extra charges. (Source: Caringfor Profit, Social Planning Council, Toronto,October 1984)

CrownxIncNow has over 100nursing homes both inCanadaand the US. It has also bought up competingfirms egoCiKent Corporation and Villacentres inCanada and Unicare inAmerica. Its Extendicarehealth care division is also expanding into hos-pital management with two contracts in Sas-katchewan, a 20 year partnership with the

Queensway General Hospital, and another inEtobicke. Crownx now includes the Crown LifeInsurance Company, Para-Med Health Services(nursing and home help agency), a network ofclinical labs, and other subsidiaries are active inoil and gas exploration, advertising, and dataprocessing. Crownx profits rose 96 per cent in1983to $32.7m

ANTI-UNION ACTIVITIESMost of the large private health companies h,avea long record of anti-union activities. HCA em-ployed 71,000workers at the end of 1983yet notone of the company's hospitals had a contractwith a trade union. In both America and Canadatrade unions can only represent workers fornegotiating purposes after there has been amajority vote for union recognition by the work-force. This system allows companies to hireunion-busting firms and employ all sorts of tac-tics to harass and intimidate workers not to votefor the union. (see the article on Pritchard Ser-vices Group activities at the end of the dossier).

Where companies like HCA have bought hos-pitals from public or voluntary bodies whichalready have trade union recognition they willinvariably propose massive cuts in workingconditions, try to force the union out on strike,and then attempt to organise to get the uniondecertified. In the 10 years between 1973-83HCA reported collective bargaining agree-ments or negotiations in progress in only 710ca-tions. None of these lasted more than five years.

The Beverley Employees CARE (CooperativeAction and Reform Effort) did however suc-ceed. Jointly organised by the Service Em-ployees International Unionand the United Foodand Commercial Workers Union the campaigncarried out detailed investigation of Beverley'sactivities and conditions in their homes. Theytook up the concerns of patients and their fami-lies and launched a media campaign against thefirm. Eventually, Beverley reached agreementwith the unions in late 1983.The unions wouldstop their media campaign and Beverley wouldnot hinder trade union organisation in its homes.Since then the SEIUand the UFCW successfullyorganised a number of homes.


Workers pay for 'savings'Private hospitals employ fewer workers per pa-tient, 2.5 compared to 3 workers per patient inpublic and voluntary hospitals.

• Average hourly wage increases between1979/80 and 1982183were consistently lowerthan hospital cost increases. In 1983 wagesaccounted for 49 per cent of hospital budgetscompared to 62per cent in 1965.(Source: Reportto Healthcare Division, SEIU, Washington DC,1984)

• In 1983workers in nursing homes were paidon average 60 per cent less than hospital work-ers. Again average hourly wage increases lag-ged well behind the annual average nursinghome cost increase in recent years. (Source:Report to Healthcare Division, SEIU,Washing-ton DC, 1984)

• Agency staff are the worst paid of all healthworkers usually getting only the very minimumrates. However, agency staff cost hospitals sub-stantially more than direct labour. Hospitals inOhio surveyed by the Ohio Department of

Health showed that agency staff from privatefirms were 30 per cent higher than the totallabour costs (wages and benefits) of equivalentstaff nurses. Another survey in 1981,carried outnationally by the University ofMaryland showedthat hospitals paid between 29 and 62 per centmore per shift for contracting out nursing ser-vices. They also spent an average 43 per centmore for one eight hour shift by a general dutyagency nurse than they did for a similar shift bya permenent staff nurse with one yearsexperience.• Contracting out has now spread to privatehospitals and nursing homes. At least 7 largenursing homes in Ontario have recently sackedover 300unionised workers. These homes thenhire non-union agency workers to make sub-stantial cuts in wages. The agencies are ownedby the multinational companies operating thehomes and hospitals. For example Crownx ownthe Extendicare nursing home chain and Para-Med Health Services agency in Canada.(Source: The Business of Health, Privatisation ofHealth Care in Canada, Canadian Union of Pub-lic Employees, 1984)

CASHING IN ON CAREA NUPE/SCAT Publication£3.50from NUPEor SCATDetails the terrible consequences of the Gov-ernment's policies in social services showingthe effects of cuts, privatisation and the Toriesversion of 'care in the community' for women,the elderly, and public service workers. 32pages of facts, analysis and information showinghow the crisis in caring is getting worse. Arguesthat there is an alternative and has many ideasfor action both in trade unions and the widerlabour movement.

A detailed ACTION KIT will be publishedshortly which will include methods of monitor-ing the threat of further cuts and privatisationand comprehensive campaigning materials.


The British ConnectionBritish multinational firms are increasingly active in private healthcare in North America as well as in Britain. These activities couldhave major implications for public services in this country.

British multinational companies like Grand Met-ropolitan and Pritchard Services Group, heavilyengaged in privatisation in Britain, are also ex-panding similar activities in North America.These firms are clearly gaining experience, andprofits, from the more extensive privatisationwhich has taken place in North America with aview to importing them into Britain if or when theopportunity arises. Recent takeovers included:

• Grand Metropolitan: controls ChildrensWorld Inc, the second largest creche chain in iNorth America with over 100centres. Daily fees '\ Istart at over $30. \1• Grand Metropolitan: owns Quality Care Inc, a 1nursing and home help agency operating across Ithe US. 1

In August 1984Grandmet acquired Quality Care IInc for £110m. Quality Care is one ofthe largest 1

home nursing agencies in North America. It pro-vides nurses, care assistants and home helps topatients at home on a temporary or permanentbasis. It also provides agency staff to hospitalsand nursing homes from 162offices in 42 states.Quality Care also provided escort services forhandicapped children travelling on schoolbuses in New York City. This terminated in July1984 'because this activity declined in import-ance to Quality Care'. In fact the contract ran intomajor problems. Half way through the contractwith the New York City Board of Education thefirm subcontracted half of the work to a numberof bus companies who later demanded that theterms of the contract be re-negotiated. QualityCare refused and cancelled their contracts.

• Pritchard Services Group: owns KimberleyServices Inc, a nursing and home help agencyoperating from 71 offices in America.

• Pritchard Services Group: owns Omaha Sur-gical Center Inc and has a 45 per cent stake inAmbicare Inc. Both firms provide private outpa-tient surgery.

• Pritchard Services Group: recent acquisitionof Food Concepts Inc and Automatic CateringInc have helped to expand its Crothalls'subsidi-

ary gain more hospital cleaning, catering andlaundry contracts in America and Canada.

Pritchards 1983 annual report stated: 'we seehome health care in the USA as particularlyattractive. It is clearly a future possibility that theexpertise we are developing will have profit-able applications elsewhere in the world'.Pritchard's remains the largest hospital cleaningcontractor in Britain.

Grand Metropolitan owns and manages privatehospitals in Britain. Its Bath Clinic recentlyagreed a £50,000 deal to undertake ear, noseand throat operations for 120NHSpatients. Thisso called cut price deal will still cost the BathDisrrict Health Authority 10per cent more than ifthey had been carried out at the Royal UnitedHospital in Bath.

Other companies like the Hawley Group arealso increasingly active in contract cleaning inNorth American public services. Both Pritch-ards and Hawley specifically concentrate in thesunbelt states to avoid regions which have stron-ger trade union organisation. The following twopages contain an account of Pritchard ServicesGroup anti-union activities reported in PublicServices Action No 12. Details of the HawleyGroups activities can be found in Cleaning Up?,a6 page broadsheet, 40p from SCATPublications.

Nati0nal Medical Enterprises now operates pri-vate 'hospitals in Britain, In January 1985 it ac-quired the British hospital assets of UnitedMedical Enterprises from the London andNorthern Group for £9.95m. United Medical waspreviously part of the National Enterprise Board.NME will now operate the private AlexandraHospital, Maidstone, a new hospital in Halifax(opening July 1985),two hospital sites in Bristoland Cheshire, and management contracts in twoLondon hospitals. UME is reported to be con-sidering using the proceeds of the sale to moveinto providing private homes for the elderly.

4 Public Service Action No 12

This is the story of a r.uthless campaign by Pritchard Services Group totry to prevent workers having trade union representation on the firm'sAtlantic International Airport cleaning contract. At the end of a longa bitter dispute in which Pritchard's paid thousands of pounds to union-busting firms, the workers won. The Service Employees InternationalUnion (SEIU) recently negotiated a collective agreement.

We cover Pritchard's activities in detail because it could happenhere in Britain sooner than you think. This is not a far-fetched ideanor an exaggeration. Pritchard's North American subsidiaries arewholly owned by the parent group based in London. Some American.union-busting firms have links in London. The Hospital Corporationof America which operates six private hospitals in Britain has usedthem to try to prevent hospital workers organising in America. ThatcherGovernment legislation has ended the closed shop and attempts toforce unions to ballot members before strike action and the politicallevy. The government would clearly like to crush the trade union move-ment to such an extent that workers would be forced to ballot even fortrade union representation and negotiation with an employer. Thiswould effectively end national bargaining which would fulfil anothergovernment aim.

Pritchard's dirty fightIn December 1981 the SE IU fi led aninitial petition for union recognitionwith the National Labour RelationsBoard. Section 7 of the National LabourRelations Act guarantees the right toworkers to organise a union and tobargain collectively with their employ-er. The Act lays down specific proced-u res and regulations. An election wasset for 22 January 1982 with SEIU(Local 579) and the Textile Processorsunion (Local 218).

Immediately Pritchard's learnt ofthe union organising drive at AtlantaAirport, one of the busiest in theworld, they hired a union busting 'indep-endent labour consultant' Gerry Wood-ward from Affiliated Business Resources

. Inc (ABR) of Jacksonville, Florida.According to reports filed with the USDepartment of Labour, Pritchard's paidWoodward and ABR over £49,000 infees in 1982 plus £760 for printinganti-union posters and leaflets. Theyalso paid thousands of dollars to thenotorious anti-union law firm, Fordand Harrison, to deal with legal aspectsand delaying tactics. Pritchard's havecleaning contracts at about ten otherUS airports.

Pritchard sent letters to all employeeswarning that the fi rm may lose its con-tract with the Atlanta Airport TerminalCorporation. They blamed union activityfor the firms poor performance and itsfines for failing to implement the con-tract satisfactori Iy. They also accusedworkers of 'stealing from the airlines'.The letter also referred to the AirTraffic Controllers strike in whichReagan systematically destroyed theunion. The firm raised doubts aboutwhether the planned wage increase in

March would be paid if the union won.Pritchard's also started mandatory

weekly meetings for all workers on eachshift to spell out why they didn't wanta union. They tried to claim that theunions were only after the workers'money and would impose fines, init-iation fees and assessments. WhenPritchard's managers couldn't answerall the questions they abo Iished thethe large meetings in favour of a seriesof meetings with 3-4 workers.

Special meetings were held forsupervisors who were told what theycould or couldn't say to the workers.Supervisors were told to divide theareas of work into pro- and anti-union

groups. They did favours foranti-uniooemployees and tried to solicit lists ofunion supporters.

Woodward produced anti-union leaf-lets and posters. An anti-union cross-word puzzle contest was even launchedwith 15 prizes of ten dollars for correctentries!

NowinThe election on 22 January resulted inSEIU 90 votes, Textile Processorsunion 26 and Pritchard's 94. Since nogroup had a majority, a run-off electionbetween the SEIU and Pritchard's wasset for 5 March.

The anti·union tactics became moreaggressive. Workers were threatened withdismissal if they talked about the unionat work. Pritchard's constantly tried totrash the union and the way it wasrun and financed in workplace meet-ings. The company made several videosusing workers at their place of work ask-ing questions about the union. Theemployee asking the 'best' questionwas given a £100 prize. Various schemes

Union meeting discussing problems of working for Crothalls at Long Island Jewish'Hospital, New York

Pritchard's hired union buster JerryWoodward of Affiliated Business.Resources.

and rumours were used to pit anti-union against pro-union workers whilstPritchard's tried a 'give us anoth.erchance' approach dh the undecided.Throughout February and March thecompany continued anti-union work-place meetings, contests with cash prizesand had anti-union posters and leafletsin all rest rooms and offices, all in directviolation of N R LB procedures.

The company then changed thepay day of the pro-union second shiftfrom Friday (the voting day) to theThursday. They also spread the rumourthat the SEIU was way ahead hopingthat some union supporters would notbother to come in and vote. The elect-ion result was SE IU 90, Pritchard's 95.

However the SEIU filed major object-ions to Pritchard's illegal activities andthe N L RB ordered another election.Pritchard's appealed to NLRB head-quarters in Washington, but this wasdismissed. Pritchard's were reprimandedfor using the threat of losing the con-tract, mass sackings, stopping the plann-ed wage increase and threatening cutsin benefits to try to coerce the workersto vote against the union.

Another election was set for Decem-ber 1982 which the SEIU won 103-101out of 252 eligible workers and despitethe continuing activities of Pritchard'sand ABR. Two votes were challengedby Pritchard's and they immediatelyfiled frivolous charges against the unionto further delay the start of contractnegotiations. In November 1983 theN L RB held another hearing to resolvePritchard's objections. A month laterthe Board threw out most of theseobjections. Pritchard's then spent Xmastrying to think up new objections tothe election and the NLRB hearing.Three days later the SEIU became thesole collective bargaining representat-

Public Service Action No 12 5

ive for all full time cleaners, equipmentand supply maintenance workers em-ployed by Pritchard's at the airport.

The SEIU negotiated a lump sumsettlement for back wages for onecleaner who was suspended indefinitelyfor putting union literature on a com-pany bulletin board. Another pro-union worker was reinstated and paidback wages. The N LRB forced Prit-chard's to post a notice to employeesfor 60 days publicly stating that theywould not threaten or harass workersor prevent them exercising their rightsas union members.

Contract eventually signedPSA talked to Susan Eaton of SE IULocal 579 who told us that Pritchardshad recently signed a 2 year contractwith the union, The firm had alsolost the cleaning of one concourse toanother contractor but many of the 35workers displaced were taken on by thenew, but non unionised firm. Pritchardswere scared that they might lose the rest.

Their anti-union tactics continue.They have al ready cut hours and switch-ed some full time workers to on-callstatus thus taking them outside thescope of the contract. They also refuseto recognise shop stewards and haveintroduced a points attendance system.

SE IU has never had such a hardtime as with Pritchard's who are suppor-ted by some of the anti-union airlineswho also want to cut their costs atany price. It is rumoured that DeltaAirlines has helped Pritchards financeits anti-union activities.

The SEIU is now carefully monitor-ing the contract. They intend to seekmajor improvements in wages a'ndconditions when it comes up for renewalin 1Q86.

Pritchard's lose MinneapoliscontractPritchard's anti-union activities havecontributed to them losing contracts.PSA talked to Bob Welby of SE IULocal 26 in Minneapolis where Pritch-ard's have just lost the cleaning andmaintenance contract for two largePrudential Insurance buildings. Work-ers at one building were represented bythe SEIU but Pritchard's continuedto pay below union rates.

Prudential criticised Pritchard's poorperformance - they regularly hiredteenagers to the 70-strong workforce.Despite Pritchard's anti-union activities,an election for union representationin the second building was won by theSE IU in February 1984, Pritchard'srefused to reach agreement and whenthe 3-year contract came up for renewalin the autumn th is year, Pritchard's werethrown out. Prudential got the newcompany to start a day earlier becausettiey were afraid to leave Pritchard'sresponsible for the building on Hallow-een night, 31 October. Pritchard'sRegional Director was heard to say thatthey would 'not stay here now'.

Further details: Local 579, Service EmployeesInternational Union, 161 Spring Street,Atlanta, Georgia 30303, USA,

AtlantaInternationalAirportWorkers

More illegal activities in CanadaMeanwhile in Canada, Pritchard's hospit-al services subsidiary, Crothall ServicesLtd, recently illegally assisted twocleaners who tried to stop the CanadianUnion of Public Employees (CUPE) re-presenting them for collective bargaining,

The rules for unions to win the rightto present workers in bargaining withemployees are similar to those inAmerica. The two workers had to proveto an Ontario Labour Relations Boardhearing that a majority of workers wereagainst the union representation.

CUPE represented eight full timeCrothall cleaners at Ongwanada Hospit-al in Kingston, Ontario. The hearing washeld in Toronto. Crothall's gave thetwo workers two days off, paid themreturn train fair to Toronto, and hoteland meal expenses. Crothall's manager,James Cooper, travelled with theworkers, stayed at the same hotel andthey all had dinner together. (Thestriking Crothall's cleaners at BarkingHospital will no doubt be very surpris-ed at this display of generosity by thecompany.) In January this year theLabour Relations Board dismissed thecase because of Crothall's flagrantintervention.

In March 1984 CUPE reachedcollective agreement with Crothall'scovering both full and part time workersat the hospital. Unusually, the contractaslo states that if Crothall's gain morecontracts in Kingston, Ontario, theywill automatically be represented byCUPE. The contract includes wages of£5.00-£5.60 an hou r for 37'12 hourweek (overtime at time and a half),two weeks paid holidays plus 11 statut-ory holidays and all health insuranceplus three quarters of the costs of lifeinsurance, sick pay and disability paidby CrothaWs.

Now's yoar cbance tolIy the anion way-with

SEIULocal 579AFL-elO