The Canadian Medical Protective Association

by
André Duranceau, MD, FACS, FRCSC, Montreal, PQ

The Canadian Medical Protective Association (CMPA) is a Canada-wide medical mutual defense organization for physicians. It was established in 1901 and obtained a Dominion Charter in 1913 by a special act of the Canadian Parliament. The objectives were and remain today:

1. To support, maintain, and protect the honor, character, and interests of its members;
2. To encourage honorable practice of the medical profession;
3. To give advice and assistance to and defend and assist in the defense of members of the association in cases where proceedings of any kind are unjustly brought or threatened against them; and,
4. To promote and support all measures likely to improve the practice of medicine.

The CMPA is not an insurance company. It is a medical mutual defense organization owned and administered by its 56,517 members. In its present-day form the CMPA retains a functioning philosophy unchanged from its 1913 incorporation goals, which is to offer legal assistance in the event of medicolegal difficulties arising from clinical practice. The CMPA is a not-for-profit organization and espouses the principle that cases considered defensible will always be defended rather than settled even though it would be more cost-effective to settle.

As a medical mutual defense organization the CMPA does not impose limits on the number of lawsuits for which it will provide assistance to a member, nor does it establish a maximum limit on damages. If damages are awarded in a court decision, or if a file is considered indefensible and settled, costs are paid in full from the association's reserve for claims (see Figure 1).

Services to members

Advice. Advice given in response to telephone enquiries represents over 40 percent of all new files opened in a given year. At present, calls are answered by 19 full-time physicians employed by the association. They are the front line, the personal link with each of the association's members. They are ready to discuss and give advice on a wide range of practice-related problems faced by the members in their practices. This is considered an essential physician-to-physician interface between members and the association. Since 1990 there has been an increase of over 55 percent in the use of this service.

Licensing body matters (college complaints). In just seven years there has been a sevenfold increase in demands to supply advice and legal counsel for matters related to licensing bodies. In Canada, each province has its own professional licensing agency. In addition to licensing physicians, the colleges are self-disciplinary bodies whose purpose is to protect the interests of patients. When difficulties arise from practice and progress to discipline proceedings at the licensing body level, the CMPA offers legal assistance in order to ensure fairness in the process that takes place. While the association pays for the legal costs of these proceedings, it does not pay for fines or other costs resulting from the colleges' investigations and findings.

Hospital privileges. The CMPA provides legal counsel when physicians have their practice privileges in hospitals threatened or reduced as a result of allegations of improper care. Over the recent decade this area of activity has increased by 130 percent. We do not support judicial reviews of hospital decisions, provided that we are convinced that due process has been followed.

Billing matters. In Canada, virtually all payments for medical services are provided through a government paying agency. When the CMPA started a decade ago to offer legal support for billing matters in one of the Canadian provinces, over 90 percent of the members in this region of the country took advantage of the new service. All Canadian regions now benefit from this aid. This activity represents a fairly small proportion of the association's work.

Inquests. Coroner investigations or other fatality inquiries have required the regular participation of our physician members. Inquests have grown in sophistication, complexity, and length. For example, the recent Krever Inquiry on blood and blood by-products has resulted in significant costs. The association assists its members in preparing for and attending these inquests.

Legal actions. Legal actions being commenced against Canadian physicians increased from 906 new cases in 1985 to 1,415 new cases in 1996, an increase of 55 percent over a period of 10 years.

Evolution of a File

Twelve thousand new files are opened every year in the offices of the association, as of January 1997. The first contact of any member calling to discuss a potential problem is always a physician colleague. Nineteen full-time doctors, either specialists or family practitioners, are working with the medical secretariat of the association. They provide direct interaction and assistance to members reporting new matters.

At this first contact the 12,000 new files are immediately categorized. Over 8,200 of these files will be managed and dealt with by the medical staff. These matters are usually: (a) patient-related advice; (b) responses to be given to a patient's complaint; or (c) matters concerning medicolegal ramifications of the doctor's work.

After the first contact, an additional 3,800 files will require the help of legal counsel. Specific instructions are given to members requesting assistance and to the lawyers who will be providing the assistance. Authorization to obtain legal assistance must always be sanctioned by the medical secretariat. Support and encouragement to our members as well as supervision of the file remains the responsibility of the medical secretariat. Matters placed in the hands of legal counsel include: (a) discipline hearings at a hospital or provincial licensing body level; (b) threats to a physician's hospital privileges; (c) inquests by a coroner or medical examiner; (d) investigation by human rights commissions; (e) potential criminal charges against a physician relating to professional work with patients; (f) legal threats or legal actions; and, (g) billing matters.

In 1996, 1,415 of the 12,000 open files were new legal actions. These files are immediately placed in the hands of legal counsel but continue to be monitored with detailed supervision and analysis by the medical staff of the secretariat. When the file is sufficiently complete following the exchange of documents, the examination for discovery, the accumulation of expert opinions, and the evaluation of pre-trial discussions, the file may be presented to the case review committee where it is discussed in detail by a number of experienced independent consulting physicians. The following categorization and disposition decisions are made:

• If, following in-depth analysis, the file is considered defensible, authorization is given to counsel to proceed and defend our member at all costs;
• If some elements of the file are considered doubtful, these facts are weighed against assessment of potential damages and the strategy for defense is planned and developed; and,
• When considered indefensible, an assessment of damages is completed and settlement negotiations are authorized.

Globally, legal actions concluded by consent dismissal in 60 to 70 percent of all files. Between 20 and 30 percent of all cases need to be settled when there is complete lack of peer support, while approximately 10 percent of the cases go to trial. Court judgments are rendered in favor of our members in two-thirds of all cases that go to trial.

In the final step of the association's handling of a closed file, a detailed analysis of the file is completed with coding of salient information. This allows annual assessment and actuarial evaluations of the different membership categories. These data are also available to our members for their use in developing risk management programs. This information is provided through our education department.

Fees and Funding

The disbursements for damages, legal expenses, expert opinions, and administrative costs is $188 million (Canadian) for the year 1996. The operating capital comes from the annual fees collected from members and from the reserve fund that has been accrued since 1983 (Figure 2).

Until the early 1980s the CMPA financed itself by functioning on a claims-made basis, a funding policy that followed a "pay as you go" principle. Membership fees for the year were set at a level sufficient to cover its cash expenditure for the current year. Although a few may offer insurance on an occurrence basis, claims-made coverage is prevalent in insurance companies offering yearly professional liability insurance. For many decades stable trends in professional liability permitted the CMPA to retain this policy.

In the mid-1970s, a significant increase in the frequency and cost of claims was observed. This rapid escalation led to the suggestion by actuaries that a safer funding policy should be adopted. Since 1983 funding of the CMPA is based on an occurrence protection and is governed by a fully funded approach. This means that coverage for members extends to all the cases where liability may be incurred but not yet reported. In a given year of professional work, thousands of diagnoses, treatments, and operations are performed. For one reported liability file, 50 more may become apparent in the following 10 years. This is the incurred but not yet reported liability.

This is the aspect of liability that was of concern to our actuaries in the early 1980s. To the association it was illogical and irresponsible to continue the pay-as-you-go basis when major costs could be predicted actuarially from emerging experience in Canadian medical liability. Accordingly, three major changes were accepted at that time by members of the CMPA.

1. Financing of our mutual organization was changed from claims-made to an occurrence basis, so that membership fees for each year would need to take into consideration the costs of medicolegal difficulties arising from care given in that year even though the legal action may not commence for some years. The protection would be available whether or not our member was still in practice or whether he or she were alive or deceased when the action was commenced or concluded.
2. Predicting increased long-term costs entailed the creation of a major indemnity fund to cover these costs. This reserve, sometimes represented by Canadian politicians as a luxury fund for doctors, is, in fact, the protection fund for patients who have suffered from professional malpractice. These funds are also set aside to provide the defense of our members when any kind of proceedings are brought against them. During the 15 years between 1983 and 1997, this reserve fund was gradually increased to cover all previously incurred liability that was expected but still unreported. The reserve was adjusted on estimates of claims with their frequency and severity as they emerged from our experience. Inflation indexation and membership accrual were considered. After 15 years of efforts, a full funding status has been reached by the CMPA: that is, for one dollar of estimated damage in the future, we have one dollar in reserve to cover it. The CMPA reserve fund is now at $1.4 billion, a reserve of approximately $25,000 per member. This can be compared to the experience of American mutual and insurance companies, as shown in Figure 3.
   
   
3. The association moved from a uniform fee to a differential fee structure based on the risk associated with each type of practice. Sixty-two types of work are subdivided into 10 risk groups. Each type of work is actuarially assessed annually for frequency and severity of claims prior to determining the membership fees for the following year. High-risk specialties have shown an increasing disparity over the last decade, as shown in Figure 4.
   
   

Controlling Costs

The CMPA is a not-for-profit organization. Any excess in fees collected or any positive results registered against damages in a given year is going to be reflected in the reduced membership fee for the following year. In a similar way, any increase in expenses is based on the true costs calculated from the actuarial assessments and any increases will be reflected in the fees for the following year. The system is self-adjusting.

Liabilities have three major components: damages, legal expenses including expert costs, and administrative expenses (see Figure 2). Damages have risen steadily over the recent decade and the severity of opened and closed files has shown a steady increase over time. In a similar way, the number of new files added to the already open cases results in significant increased legal costs. Administrative expenses are related to the fixed costs of the overhead structure and of membership-related activities.

Significant efforts continue to be made to reduce costs related to damages. These efforts can be summarized in the following three sections.

Tort reform initiatives. Tort reform initiatives have been started in Canada, as in the United States, especially following the Prichard Report's observation that the significant growth in liability claims between 1971 and 1988 against health care providers in Canada was comparable to that experience in the United States during the same period. This report recommended to maintain but reform tort action against health care providers, to increase the responsibility of health care institutions, and to develop an alternative no-fault compensation regime. General non-pecuniary damages have been capped in Canada since 1980. Most medical malpractice actions are tried by a judge sitting without a jury. Contingency arrangements have only a limited impact because of the CMPA's adherence on the principle of strong defense. Structured annuity arrangements for settlements and court awards are frequently used.

Case file management. With the increase in the number of actions commenced and the increase in complexities of file assessment and trials, the average duration of malpractice actions going to trial has increased from 43 to 55 months over the last 10 years. More actions are being commenced than are being resolved in each year and the association, at present, has over 4,500 open civil litigation files. Furthermore, a higher demand for the other services has been recorded. For these reasons the amount of legal costs has more than doubled since 1990, amounting to $61 million in 1996, three-quarters of which relates to malpractice actions.

Although the association does not limit the amount of coverage for legal representation, during recent years a closer scrutiny for follow-up of open files and acceleration of the legal process has been stimulated in order to limit legal costs. Physicians in Canada are being imposed rigid professional fees by their provincial governments with a ceiling system that does not give any margin for costs indexation. A more aggressive stance to control the cost of legal services has been one of the major recommendations of a recent independent review of the association's activities. The inability to adjust income to reflect costs has prompted this recommendation.

Despite this, the first goal of the CMPA remains the vigorous defense of unmeritorious claims. No lawsuit will be settled for reasons of economic expediency. This attitude does not stop our organization from pursuing alternative dispute resolutions in more cases as a means of expediting claims and reducing expenses.

Education system for membership. The single largest cost in the CMPA's annual expenses are damages paid on behalf of members for claims made as a result of substandard professional work. This amounted to over $101 million in 1996. A major effort was undertaken by the association during the last decade to improve the communication and transmission of more information to its members. This was done through the education department using the association's database. Information from our files was collected, analyzed, and disseminated to our membership with the specific goals to: (1) improve care and services; (2) analyze and identify liability problems and share these with medical and specialty groups; and, over time, (3) lessen the liability problems for our members and eventually reduce costs.

These efforts have resulted in improved communication with our membership. However, the long-term effects of educational activities and risk identification, and their results on rates and outcome of litigation, remains to be documented.

In many respects the legal institutions and mechanisms that deal with malpractice cases in Canada resemble those in the United States (Coyte et al, 1991). However, they differ in four ways:

1. The limitation period in Canada generally begins when the patient discovers that something is wrong. While most provinces previously allowed a period of one to two years to file suit after discovery, the limitation period is now nearer six years across the country.
2. The Supreme Court of Canada in 1978 established rules governing compensation for general damages. The 1978 cap was set at $100,000 to be indexed to inflation, so that in 1997 it now stands at approximately $250,000. Punitive damages are rarely awarded by Canadian courts.
3. In Canada, malpractice cases are more frequently decided by a judge alone, with judgments usually more conservative than those by U.S. juries, regardless of the legal merits of the case.
4. The contingency fee system is not widely used in Canada, and the British Cost Rule discourages the initiation of the frivolous lawsuit by transmitting the cost of the lawsuit to the unsuccessful party.

Despite these differences, total costs for professional liability protection have risen steadily over the last decade. The imposition of restricted professional fees by provincial governments in recent years and the establishment of rigid ceilings on physician revenue have considerably reduced the capacity of physicians to adapt to the real costs of medical liability and to the overall costs of practice.

Provincial associations and federations that theoretically act as unions for the Canadian physicians have not succeeded in achieving any significant increase in fees for services over the recent past. This situation will likely represent the most challenging problem for the CMPA in the coming years. The Canadian Medical Protective Association, although not working for profit, is administered as a private enterprise and functions on reality. The lack of adaptability of the Canadian health care system to this reality in costs may result in the greatest threat for its survival over the coming years.

Appreciation is expressed to Dr. W.B. Beilby and Dr. Stuart Lee for their constructive criticism toward the writing of this text.

Bibliography

Coyte PC, Dewees DH, Trebilcock MJ: Medical malpractice—The Canadian experience. N Engl J Med, 324:89-93, 1991.

Dubin CL: An Independent Review of the Canadian Medical Protective Association. Ottawa, Canada, 1997.

Prichard JS: Liability and Compensation in Health Care. Toronto, ON: University of Toronto Press, 1990.

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Dr. Duranceau is professor of surgery, University of Montreal, thoracic surgery division, Hotel-Dieu de Montreal (PQ).
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Bulletin of the American College of Surgeons
Vol.83, No.3, March 1998

Professional Liability

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