Times are A’-Changing

Bob Dylan’s iconic, 1964 song about social change, aptly entitled “The Times They Are A-Changing,” gave a name to the profound upheaval that had defined the 1960s. In doing so, Dylan established an anthem for a period in which a new generation had emerged to challenge and change existing societal norms, priorities and practices. That very same generation of Baby Boomers is once again poised to act as the catalyst for changes to the Canadian healthcare system; such changes will likely be as profound as those about which Dylan sang more than 40 years ago.

One effect of the impending changes includes the necessity to expand available medical services and ensure time-effective delivery of those services. In the future, this might involve an increasing reliance on new, privately owned clinic models for the delivery of health services. These new models for health care delivery will require a fresh approach to risk management. Specifically, new methods of risk transfer will be required to handle the medical liability exposure entailed by an increase in health-practitioner-owned, multidisciplinary clinics.

BACKGROUND

As noted in a recent Report of the Standing Senate Committee of Canada, ¹ the Baby Boomer generation — generally defined to be those Canadians born between 1946 and 1966 — is likely to be the most influential age cohort with respect to future demographic change. The retirement of this generation will have significant labour market consequences.

Today, most Baby Boomers are of working age. Beginning in 2011, however, the Baby Boom generation will be reaching retirement age. Over the next two decades, successive cohorts of this generation will become aged 65 and older. By 2030, most of the Baby Boomers will have retired, the Chief Actuary of Canada notes. The implications to the healthcare system will be staggering. According to the same Standing Senate Committee, per capita public spending on healthcare for those aged 65 and over is estimated to be almost five times greater than spending on the rest of population.

The 1998 Report of the Auditor General of Canada outlined healthcare cost projections to 2031.The auditor’s medium-cost scenario would see spending increase from approximately 6.4% of Gross Domestic Product (“GDP”) in 1996 to 9% of GDP in 2031.The high-cost scenario, based on historical health care cost growth rates in Canada, would result in a doubling of spending on health care as a percentage of GDP over the same period, ultimately reaching 12.5% by 2031.

As Canada struggles to maintain its competitive position in the global economy by adhering to prudent fiscal practices, and as it honours the guiding principle of universal health care access that has formed the foundation of medicare in Canada, it is apparent some degree of privatization and for-profit delivery of health care services may be inevitable. This will be driven in part by consumer demand. Canadian baby boomers, for example, enjoy significant buying power and will generally be in a better economic position to access private medical services that might be available. Based on consumer demographic trends, baby boomers would likely want quicker and more effective medical treatment than the public system may be capable of presently providing. Indeed, it was reported in The New York Times two years ago that so called “private clinics” in Canada were opening at the rate of approximately one each week. ²

In light of the significant demographic changes and their anticipated impact on the Canadian health care system, three major government-sponsored commissions have formed to address future health care reform in Canada — The Mazankowski Report³, the Kirby Report⁴ and the Romanow Report⁵. Both the Mazankowski and Kirby reports maintain a degree of privatization of the Canadian health care system will be necessary in order for the system to modernize and address the changing needs of Canadians. The Romanow Report adheres to maintaining the present public model of notfor-profit delivery of health care services, suggesting nonetheless that opportunities exist for private sector involvement in non-core health services.

The Canada Health Act⁶ (the “Act”) allows the federal government to withhold federal transfer payments to any province that violates the principle of universal entitlement to insured health services. Regardless of whether and to what extent the Canadian federal government is prepared to amend the Act, it is clear a number of provincial governments are nonetheless prepared to promote and advance health care privatization through the establishment and maintenance of for-profit hospitals and clinics, surgery centers, diagnostic clinics and other specialized services such as administration, food cleaning, home care, retirement home, assisted living services and other health-related services. Notably, this is occurring with limited or no effective objection by the federal government; even the courts have recognized that governments cannot ban private health care unless they are able to guarantee the public system will meet patients’ needs without excessive wait times. ⁷ Although reports about the death of public health care in Canada are perhaps exaggerated, it is clear the system in its present form can no longer function effectively — particularly in light of the shifting demographics that will continue to stress existing resources.

MANAGING MEDICAL LIABILITY

For Canadian physicians, who have been at the proverbial centre of the storm about the future of the Canadian health care system, risk management has historically been a function of being a member of the Canadian Medical Protective Association (CMPA). Founded in 1901 and incorporated by Act of Parliament in 1913, the CMPA is funded and operated as a not-for-profit corporation that functions as a mutual defence organization. It provides indemnification to its members without limit to the cost or damages that may ultimately be awarded to a claimant.

The CMPA’s promise of vigorous legal defence is not unqualified. There must be “good expert support to do so” and the promise of indemnification is also subject to change based on CMPA policy directives. For example, the CMPA indicated as of Jan. 1, 2004 that it would no longer cover claims made against its physician-members by non-residents of Canada for anything that may have gone wrong during elective or non-urgent care. Furthermore, if a clinic is physician-owned — a common means by which health care services are provided under a “private” type model⁸ — the clinic is not necessarily eligible for assistance from the CMPA, particularly where the clinic’s liability is vicarious and arises from the acts or omissions of other health care professionals.

Thus, the increasing number of multidisciplinary clinics owned by health practitioners and physicians — which some have suggested are the harbinger of a form of two-tier health care in Canada — present a number of risk management challenges. Various health care professionals involved in providing services might not be employees of the clinic; they might in fact be serving a number of different clinics as independent contractors. They would thus not be subject to mandatory insurance requirements, depending upon the exact health specialty involved. If the health care professional is an employee of the clinic, the liability of the clinic will be vicarious. In other words, if the employee is found to have been negligent and acting in the course and scope of his or her employment, the clinic is automatically liable for damages awarded against the employee, even if it was not negligent in its own right.

If the employee’s conduct is intentional in nature, such as the sexual assault of a patient, vicarious liability may nonetheless be imposed even if the employee cannot be said to have been acting in the course and scope of his or her employment at the time of the intentional act. This would be the case under present case law if the employer’s enterprise and its empowerment of employee materially increased the risk of the intentional act occurring. ⁹ The clinic might also be liable in its own right for breaching duties owed to a patient such as failing to select or train staff adequately, failing to review staff performance on a regular basis, failing to have appropriate policies and procedures in place, failing to adequately supervise staff or failing to provide adequate staffing, resources or equipment.

The limitations on the indemnification available from the CMPA to physicians — particularly with respect to the vicarious liability exposure of the physician-owned clinic, and the desire of health care service providers in the for-profit sector not to limit their market to Canadian residents only — will necessitate a fresh approach to risk management. Specifically, any risk transfer solution must address both the vicarious and the direct medical liability exposure created by providing a multi-disciplinary approach to patient care (including patients who may not be Canadian residents).

As delivery models for health care services in Canada continue to evolve, so too will the movement towards privatization. Regardless of the ultimate fate of private health care in Canada, and how the debate over the potential compromise of fundamental Canadian values is ultimately resolved, it is clear risk management will continue to be an important consideration for those providing health care services to an aging and affluent population.

1 The Demographic Time Bomb: Mitigating the Effects of Demographic Change in Canada: Report of the Standing Senate Committee on Banking, Trade and Commerce, June 2006.

2 Krauss, Clifford. Canada’s Private Clinics Surge As Public System Falters, The New York Times 28 February, 2006: international/americas/28canada.html

3 The Report of the Alberta Premier’s Advisory Council on Health, chaired by former Deputy Prime Minister, Don Mazankowksi, published 2001.

4 The Recommendations of the Standing Senate Committee on Social Affairs, Science and Technology, chaired by Senator Michael Kirby, published 2002.

5 The Report of the Commission on the Future of Health Care in Canada, chaired by former Saskatchewan Premier Roy Romanow, published in 2002.

6 R. S., 1985, c. C-6, as amended.

7 See Chaoulli v. Quebec(Attorney General) 2005 SCC 35, [2005] 1 S. C. R. 791.

8 Typically, a clinic will charge a patient an annual set fee for medical services which will include the provision of non-insured health services outside of the parameters of the Canada Health Act, such as nutritional, massage, physiotherapy and fitness services.

9 See Weingerl v. Seo, (2005),256 D. L. R. (4th) 1 (Ont. C. A.).

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A risk transfer solution must address both the vicarious and the direct medical liability exposure created by providing a multi-disciplinary approach to patient care.