ICSGlobal sues Medicare

update Electronic health transaction company ICSGlobal has filed a lawsuit against Medicare Australia, accusing the Federal Government agency of anti-competitive behaviour over the development of its e-health transaction network ECLIPSE.

ASX-listed ICSGlobal said it had invested some $20 million and the better part of eight years into the development of an online exchange network dubbed THELMA, which connects private insurers, banks and healthcare providers to manage the settling of healthcare-related transactions.

The company claims to have made this investment under the assumption that the Federal Government had no interest in facilitating such electronic exchange itself.

But in 2004, the Federal Government announced the release of ECLIPSE, its own system for managing such transactions. The initial modules of the system went live in July 2004.

ICSGlobal subsidiary THELMA today confirmed it had now filed an application and statement of claim in the Federal Court alleging that Medicare contravened the Trade Practices Act by launching a service that competed with its business.

Tim Murray, CEO of ICSGlobal, said the company spent a full year in the 1999/2000 time-frame scoping the market for a medical transaction exchange network after private hospital customers informed him of a need for such a solution.

"We knew we were about to invest a substantial amount of money," he said. "Twice we went and saw both HIC [Medicare Australia's predecessor] and the Minister for Health [at that stage Dr Michael Wooldridge] in 2000 and in 2001. And we asked them: 'Do you have plans to address this problem in the private sector?'

"They both said no, on both occasions. They both said, in fact, congratulations, it is fantastic to see the private sector stepping in to do this."

THELMA went live in 2001. In 2002, HIC called for requests for tender for a system Murray claimed was "basically another THELMA." But the CEO derided this tender as "a sham".

"You can tell if a tender is a sham when they ask that all the intellectual property of the system has to be assigned to HIC, that the solution proposed has to be free of charge, and under the full control of the HIC. What private sector business could do that?" he asked.

"So sure, people responded to the tender, but they all said you can't have our intellectual property and we have to charge something. HIC then calls them invalid tenders."

Murray claimed HIC only put out the request for tender to convince the Federal Government of a need to build its own system. He claimed HIC approached the newly appointed health minister, Kay Patterson, following the tender asking for in excess of $50 million to build ECLIPSE.

"Once they closed the tender process, they [HIC] could then go to the Government and claim that there is nothing in Australia that can meet HIC's requirements," Murray said. "They could say, hand on heart, that because nothing like this exists, they will have to build it themselves."

Asked if ICSGlobal had any documented evidence that HIC/Medicare made any promise not to develop such a system back in 2000, Murray said his proof was limited to "minutes of meetings".

But Medicare/HIC's actions only became illegal, Murray alleged, by virtue of its offering the same service as an existing private sector company at zero cost. ICSGlobal interpreted this practice as being in breach of the Trade Practices Act.

If Medicare Australia charged a commercial fee that reflected the true cost of providing e-health services to the private health sector, he said, they'd be competing on a level playing field with THELMA, and the better solution would win.

"We would welcome the competition," he said. "But you can't have taxpayers' money being used to set up cartels to provide free products and services simply to kill off the private sector."

Murray claimed ICSGlobal's business "is still growing" in Australia, despite the conflict. But he claimed the development of ECLIPSE has forced his company to take most of its business offshore.

"You reach a point where you are trying to compete with a free product," he said. "Large chunks of the private health sector are saying, we like your system, but there's a free system coming so we'll wait for that."

Waiting, he said, was what the sector was becoming used to from Medicare. Murray accused Medicare of spending over a billion dollars on failed technology projects and said that the hospital claims module of ECLIPSE was running five years late.

"It's in Medicare's interests, to protect their position of power, to make sure the health industry stays inefficient," he argued. "Medicare is an empire for processing paper. History has proven they will aggressively target anything that threatens that."

A spokesperson for Medicare Australia told ZDNet.com.au it "intends to vigorously defend these proceedings."

The case will go before the Federal Court on 4 September.