Professional Services under Threat

Australia’s professional practitioners – from veterinarians, physiotherapists and engineers to doctors, lawyers, accountants and surveyors – are under threat.

The threat stems from the fact that professionals have become obvious – and often unjustified – targets when something goes wrong and the “victim” looks around for someone to blame.

In our increasingly litigious society, professionals are being seen as “easy targets” because they have reputations to protect, they are often covered by professional indemnity insurance and they are regarded as having deep pockets.

Professionals are being sued more frequently today than at any other time in our history – and there is an alarming escalation in the size of the judgments being awarded against them. Claims for alleged negligence by professionals have out-stripped the capacity of those professionals – and the insurance market – to cover them. In other words, even where litigation is successful, plaintiffs may well have trouble recovering the damages the Courts award.

The Nature of the Threat

The costs of defending claims, insuring against them and paying the ones that are successful are borne, eventually, by the whole community. This is because in the professions, as in all sections of commerce and industry, these business costs are unavoidably passed on to their clients and customers. However, there is another down-side. As more professionals realise the nature of the threat they face, they are tending to respond to this dilemma by:

  • giving their clients more cautious and/or defensive advice;
  • recommending more costly approaches;
  • taking legally proper action to ensure that they own very few assets;
  • carrying no or only a bare minimum of insurance; or
  • in some cases, notably obstetricians, withdrawing from the very type of work which the community needs them to do.


What can be Done?

Australia has been in the position before where claims have out-stripped the capacity of defendants and insurers to pay. This has happened with motor vehicle accidents, worker’s compensation and aviation accidents. In each of these areas, legislation has been introduced to limit the amounts which can be claimed. It is now time for governments to come to grips with the four factors which are at the heart of the problem facing professional practitioners. These factors are:

Unlimited Liability
To overcome the exposure of professionals to unlimited liability, the amount of damages that can be awarded must be capped. In return for capping, professionals would be obliged to undertake continuing education to maintain high standards, take out appropriate levels of professional indemnity insurance and adopt appropriate risk management, complaint handling and disciplinary procedures. The New South Wales Parliament has enacted legislation, the Professional Standards Act 1994, to this end.

Joint and Several Liability of Defendants
This legal principle can lead to the unjust situation where a professional who may be only 10% responsible for a plaintiff’s loss pays 100% of the damages. Professionals are frequently the main target in legal actions even where their involvement is minimal because their professional indemnity insurance is the most obvious source of assets. Legislation is needed to replace joint and several liability by proportionate liability, where the liability of defendants is apportioned according to their respective degrees of responsibility. This approach already exists in the USA and a joint Federal/NSW Government study has recommended that it should also apply in Australia. Model legislation to introduce proportionate liability has been prepared and should be implemented by governments as a matter of high priority.

Vicarious Liability for Co-Partners
This is a concept under which the partners in a professional practice are responsible for the acts or omissions of all other partners. To overcome this, the professions should be permitted to incorporate with limited liability. This would put them on the same footing as every other service provider. Preventing professionals from having this right is unjust and unjustifiable. The incorporation of professionals is permitted in the United Kingdom and in most States of the USA.

When does Professional Liability end?
Because of the difficulty of determining when a cause of action arises and the varying periods of limitation, both between States and between different statutes, it is often unclear when the professional liability of a professional for a particular act or omission ceases. In some instances the liability remains indefinitely. The interests, both of the community and of professionals, call for time limitations to be uniform, based on clearly ascertained dates, and of reasonable length.

Australia’s professional practitioners accept that they must bear appropriate liability for negligence. They also acknowledge that the community should have the right to recover reasonable damages where professionals are negligent. However, professional practitioners should not be asked – as they are now – to bear unlimited or disproportionate liability.

How can Reform be Achieved?
Achieving these reforms will require co-operation between the State and Federal Governments. Australia needs a national, co-operative scheme whereby the States adopt uniform legislation and there is complementary Federal legislation.

We can help bring about change by supporting current moves seeking the required legislation for a national scheme to achieve reasonable limitation of professional liability.

The Nture of the Threat

National Competition Policy and the Professions

Can the Professions survive under a National Competition Policy?

This is a timely and significant conference and one with which the Australian Council of Professions is very pleased to be associated.

The title of the conference is challenging: the short answer to the question posed must be ‘yes’. The Australian Council of Professions has, over the years, been closely involved in the public processes, culminating in the Hilmer Report, which have addressed the position of the professions in the context of national competition policy. Generally, the Council has always accepted the Hilmer proposition that the Trade Practices Act should have universal coverage, including the professions — this position was acknowledged in the Hilmer Report itself. ACP Policy

In its submission to the Hilmer Inquiry, however, the ACP said that it endorses the principle of competition on the basis of merit for the provision of any specific service. In fact, the Council supports the removal of unnecessary barriers to competition, but the key word is ‘unnecessary’. We must not abandon those barriers which, whilst perhaps appearing to be anti-competitive, can be shown to be in the public interest. The ACP submission also said that “The public interest and the protection of consumers should be the paramount criteria in assessing the need for any change.” Uncertainty in the Professions

This remains the ACP’s basic policy stance but there is a pronounced degree of uncertainty existing within the professions about the evolving processes of implementation of the Hilmer recommendations in respect to professional practice.

This uncertainty is compounded by the fact that there are many players participating in the implementation processes:

    nine governments are the custodians of change and a multiplicity of semi-governmental authorities have a critical interest in outcomes;
    regulatory bureaucracies at Commonwealth, State and Territory levels come increasingly into focus and constitute one of the few growth areas in the public sector;
    peak business councils opine on the categorical imperatives driving competition reform while less prestigious business associations address the day-to-day realities;
    the Industry Commission in its latest manifestation as the Productivity Commission continues its work with extreme rationality of thought;
    while academia continues to find much to claim its attention in respect of both the theory and practice of bringing about a more competitive Australia.

ACCC

At the national level, the Australian Competition and Consumer Commission is of pre-eminent importance to the processes of implementation. Some professions have had a long association with the ACCC (and the antecedent Trade Practices Commission) in addressing the issue of compliance of their respective codes with the provisions of the Trade Practices Act. I must at this point commend Professor Fels, his fellow Commissioners and the ACCC staff for their efforts in establishing consultative mechanisms in which the professions can participate in pursuit of this vital dialogue. We welcome our membership of the ACCC’s Consultative Committee and the more recently established Small Business Advisory Group, as we do the ACCC’s co-sponsorship of this conference.

These avenues for consultation allow us to keep before the ACCC our views on the need, in the public interest, to measure the provision of professional services on grounds significantly broader than price. Our concern is that competition policy outcomes measured solely or predominantly in terms of price would undermine professional standards and the quality of professional services provided to the community. In that context, I was interested to learn from the evidence given recently by Professor Fels to the House of Representatives Standing Committee on Financial Institutions and Public Administration that the Commission is having another look at its approach to pricing arrangements in professional practice. Considering the enormous volume of business which the ACCC will have to review it is important that it does not waste its time over professional association matters which are conceivably anti-competitive but quite internal and have no effect at all on the public interest. Penalties

As the sponsors of this conference have pointed out, non-compliance by professional practitioners with the provisions of the Trade Practices Act could give rise to heavy penalties.

An underlying issue is whether the present penalty provisions in the Act, which were formulated in an earlier and different context, are appropriate when applied to the professions. I am pleased to note that the ACCC is aware of this issue and I can indicate our support for their activities which will hopefully lead to a review by the Government based on the recommendations of a report prepared by the Australian Law Reform Commission a couple of years ago.NCC

Also at the national level, the National Competition Council has its role to play but that role is not as clearly discernible as that of the ACCC, at least in respect of its impact on the professions. Apart from its designated functions, any work undertaken by the NCC must be agreed by a majority of Australian governments. In a comment on its work program last October, the NCC suggested that a matter that would benefit from examination would be “restrictions on the provision of various professional services”. The NCC does not currently have a work program identified by Australian governments but I understand from remarks made recently by a senior NCC official that, if the NCC were to receive a remit relating to the professions, it is likely that a public inquiry would be mounted. I would have thought that there has already been a surfeit of public inquiries into the issue of the professions and competition policy. Admittedly, this is no more than a straw in the wind at this stage but it is of potential concern given the processes already in place with the ACCC to which I have already referred.

There is also a question mark over the role of the NCC in the legislative review processes, with particular reference to the determination of public interest.

When looking at the roles of the two regulatory bodies following on the Competition Principles Agreement endorsed by governments some two years ago, a question remains:

“Do the processes of the NCC and ACCC overlap and, if so, what are the likely consequences for the professions?”

CPA

Under the Competition Principles Agreement, Australian governments are committed to reviewing by the turn of the century some 1,800 pieces of legislation (including subordinate legislation) to identify and assess ‘anti-competitive’ provisions — there is a lot riding on the outcome of this review process:

    State and Territory governments will receive significant financial rewards if, in the opinion of the NCC, they undertake their reviews in an appropriate way;
    what constitutes ‘appropriateness’, however, is arguable and inevitably raises the issue of public interest;
    there is inherent difficulty in factoring public interest into a proper cost/benefit analysis but to rely simply on economic efficiency criteria (which seems to be the stance of the Industry Commission) would be to initiate, by default, a major de-regulation exercise on an extremely suspect basis;
    already there is evidence that at least one State has devised a methodology in which an objective base has been clearly established to ascertain economic outcomes, whilst only a minimal and subjective base has been established to ascertain the public benefit outcomes;
    with different authorities in nine jurisdictions each doing their own thing, the professions are particularly concerned that an ill-founded outcome in one jurisdiction could, in effect, prejudice a profession nationally — this would occur through the operation of the mutual recognition regime which requires that individuals able to practise in one jurisdiction are automatically able to practise in any other;
    on the evidence to date, we are concerned about the divergence in approach among the different jurisdictions, the form, substance and effect of ‘national reviews’ that can be set in train by any of the parties, and the lack of terms of reference and consultation in some cases.

Uncertainty in Government

I mentioned earlier that the professions are suffering from a great deal of uncertainty. It is obvious that all nine governments are also suffering from this uncertainty. It follows that the ACP, its constituent bodies and the 200,000 plus professional practitioners they represent will be looking to governments to pay due heed to the legislative review process with a view to enhancing the level of consultation and, in so doing, to assist in bringing about a necessary degree of consistency among jurisdictions.
Professionalism

All of which brings me back to where I started: in answer to the question, – ‘Can the professions survive under competition policy?’, I gave the answer, “yes”. There is, however, a more important question to which I don’t know the answer. That question is ‘Can “professionalism” survive under competition policy?’. I believe that the great majority of the members of the professions strive to practise in a professional manner. The Australian community looks for and is entitled to demand the highest professional service. I would claim that the level of professionalism we enjoy is a national asset which, while not lending itself to quantitative measurement, is a critical component in the processes necessary to preserve social cohesion. Professionalism is difficult to define and yet it is the essential difference between the professions on the one hand and business and commerce on the other. History with your indulgence I would like to recall the history of theof the development of the professions which provides an important perspective on their functions in society.

The early meaning of the word “profession” was a declaration or promise or vow made by a person entering a religious order. By the late middle ages, its meaning had changed to identify that class of persons who professed knowledge of some department of learning or science and used that professed knowledge in application to the affairs of others.

In particular, it came to refer to the three learned professions of those days – divinity, law and medicine and also to the military profession.

With the development of that “professionalism”, associations of such persons formed together for the purposes of controlling the conduct and standard of behaviour of those persons professing to provide and providing those services. As society became more complex, the numbers of such professions and associations increased.

The elevated position of professionals in the community did not occur by accident. It was because of the function of individual professionals in banding together and agreeing amongst themselves to adopt high standards of entry and to observe high standards of performance that the community came to respect and trust persons providing those services.

Self regulation and autonomy were an integral part of the development of those standards and it was in the interest of the members of the professions that those standards be maintained. From the point of view of the community it helped to ensure the quality of the services being provided.

The public interest in maintaining the highest standards in the provision of professional services and in the behaviour of those professionals was given effect to by statutes empowering professional associations, or in some cases licensing boards consisting mainly of the professionals, to set criteria for entry, to control conduct of members and, where appropriate, to exclude from professional practice those whose standards fall below acceptable levels.

It is an unfortunate development that the word “profession” has over the last two or three centuries come to have several meanings apart from the ones I have just mentioned. It can now be used to describe any calling or occupation by which a person habitually earns his or her living and, as we all know, that covers a multitude of things which have nothing to do with learning.

It is, I believe, a more fortunate change that has brought about the inclusion of a number of other occupations into the ranks of the professions as we define them through their adopting the high standards and ideals of professionalism.
Definition

Within the ACP, a profession is defined as:

    a disciplined group of individuals who adhere to high ethical standards and uphold themselves to, and are accepted by, the public as possessing special knowledge and skills in a widely recognised, organised body of learning derived from education and training at a high level, and who are prepared to exercise this knowledge and these skills in the interest of others; and
    inherent in this definition is the concept that the responsibility for the welfare, health and safety of the community shall take precedence over other considerations.

Effect of CPA

The application of pure competition principles to the professions may very well take away the professional commitment to the welfare of the client and the community, and replace it with a commitment to business principles and profit.

A great difficulty with the provision of services is that the members of the community are generally not in a position to assess the quality of the service, or for that matter, the qualifications of the providers. Professional services are often extremely complex and the assessments are often made according to the provider’s manner, presentation, advertising claims and prices without an awareness of their knowledge, skill and judgement.

Provision of a licensing or regulation process provides some degree of protection for members of the public. Deregulation removes it and must be introduced only after very careful assessment and consultation with all stakeholders.

These problems also exist at government level. I am aware that in the engineering profession there is a great concern that governments’ outsourcing policies have led to a situation where government departments no longer have the expertise to make good or informed decisions when awarding government contracts.

Both government and individuals must rely on the professionalism of our members and that professionalism must be encouraged. I don’t believe that competition policy is doing this.

I was pleased to note that the NCC in its publication “Considering the Public Interest under the National Competition Policy” states that subclause 1(3) of the Competition Principles Agreement is “not about maximising competition per se, but about using competition to improve the community’s living standards….”, and it further states that it recognises the public benefit to include….”improvements in the quality and safety of goods and services….”. I hope that the many authorities involved will recognise this.

Professional people respond well to the trust placed in them by the community to provide quality and safety in their service. To do this they must be able to charge a commensurate fee. If, however, they are forced to compete, especially in regard to price, quality and safety will be diminished. That trust and the response to that trust will also be diminished. Professional standards involve many criteria apart from price.

The provision of services is quite different to the provision of goods. The quality of a service can readily be changed to match the price and this is not in the public interest. I believe Michael Peck, who will be speaking after me, will be illustrating this in his address in regard to the construction industry. He will be showing how the consultants’ fees have been reduced dramatically but their incomes have not declined proportionately. In other words, services and standards are being adjusted to meet the market.

In my own case I can speak with some personal knowledge of my practice of dentistry. Virtually every service which I provide to my patients on a daily basis could be done by me in half the time if I chose, but, need I say, it would not be in the public interest. Post operative complications would increase only marginally but long term failure (with accompanying increase in permanent damage and costs) would increase markedly. By that time my patient would in most cases have no idea whether it was my work which was at fault.

Under pressure of price competition, it is relatively easy to manipulate (falsify) item numbers so that the cost to the patient is minimised through increased health fund rebates. As I currently work, I need do none of these dubious practices and in fact there are many occasions where patients request treatment which may or may not be expensive and I persuade them not to have it where I believe it to be inappropriate. There is no price competition or profit motive involved in this type of service, there is “professionalism” and the freedom to charge what the service is worth. I believe this is in the public interest. Thank goodness I am not answerable to an outside owner of my practice.

There are hundreds of thousands of professionals in this country who are providing this kind of service. The cynics among us in government and in the community will not believe this statement and will point to the small minority of so-called professionals who are only profit motivated. The introduction of a third party into the provider-client relationship such as we see with Medicare, bulk billing and the health funds unfortunately tends to encourage profit-motivated unprofessional behaviour. We all regret that this exists and I believe that the importance of service to the community and ethical behaviour should be emphasised continually in all undergraduate courses and by all professional organisations.Professional Associations.

I mentioned earlier that professional associations formed together in the late middle ages for the purposes of controlling the conduct and standards of their members. Their priorities were quite different to the merchant guilds. Today, professional associations still work to promote high standards among their members and, through this and various other ways in their areas of expertise, to promote the welfare of the community as a whole. There is still a tradition or a requirement among members of these associations to share all knowledge, research and new techniques. This is quite different to commerce and business where new ideas are kept secret or patented in order to maximise profits. This sharing for the benefit of all is also part of our professionalism. Professionalism may be at risk under competition policy. It is a valuable community asset and, if it is lost, then that will not be in the public interest.

Dr John Southwick
President – Australian Council of Professions

Dealing with Risk

This publication is an attempt to spell out some of the difficulties flowing from the prevailing social attitudes towards risk acceptance and the effect the difficulties have on professional practice. It is primarily directed to practising professionals, and is intended to encourage and assist them to develop a broad community discussion about one of the most critical issues of our time. That is the yawning gap between the expectations which communities have of systems and the abilities of those systems to deliver.

The puplication is based on the theme that the task of managing expectations is central to the achievement of improvement in the risk acceptance environment, and it draws to the attention of professionals the pressing need they have to understand that societies and technologists construct their attitudes to risk acceptance differently; they march to different drummers, and neither seems to hear the other’s drums.

It is also apparent that the difficulties related to risk acceptance with which modem societies are grappling affect almost all those who provide services in an attempt to satisfy community demands. In a very real sense, identified by Arthur Koestler in the mid-fifties, humans are struggling to reconcile the power available to them with their value systems – which Koestler refers to as spiritual insight, awareness, charity and related values. The issues are global, and humans the world over are trying to come to terms with them.

What we need is a calm and reasoned debate which faces the issues squarely. It should be a debate conducted in the broadest possible terms and with a minimum of random noise.

The Australian Council of Professions hopes that its member associations and their members will join it in an attempt to stimulate such a debate; this publication is a potential catalyst. You, as an individual professional, can use it to assist the process.

Central to it must be the realisation that no action can be absolutely safe and nothing can be absolutely certain, least of all the future; and that efforts to improve safety cost money, cost time, cost people and even (if robots are the way to safety) cost jobs.

There is a common core to the liability issues. This publication seeks to identify that core, and make it available as a reference and support for discussions set in areas of specialisation. Thus such discussions may be properly seen as particular cases of a general proposition, and avoid the dilemmas associated with charges of special pleading.

The document had its genesis in publications of The Institution of Engineers (Engineers Australia) who I thank for permission to adapt the document to serve a more general purpose. In doing so, I gratefully acknowledge the research and authorship contribution of Dr. Peter Miller.

The pamphlet suggests a framework within which professional practitioners should consider risk, and examines a number of areas of special interest:

  • The Issues which are important to the ability of practitioners to deal with risk are canvassed. The dominant issue is the need to understand the gap between the expectation which demanders have of providers and the ability of providers to deliver. It is important to found our actions in Codes of Ethics, but there are difficulties in a complex society with the concept of the common good. This flows from the nature of the arrangements under which the professions practise. Practitioners will need to take part in much wider discussions than they have in the past, and be prepared to enter the wider debate about policies for societies.
  • The Social Construction of Risk is a new field of study which examines the way societies at large consider risk. It is clear that individual and collective decisions about the acceptance of risk consider both objective and subjective inputs, and in most cases the subjective dominates. It is important that practitioners should not only become familiar with the way societies and individuals construct concepts of risk, but also enter into the activity directly and influence the outcomes.
  • The Technological Construction of Risk traces the way professional practitioners consider risk and construct risk models. As part of this process the concepts of technology and design are examined and the pervasiveness of the concepts discussed.
    Although the technological construction of risk appears to be objective, and is usually interpreted by society in that way, its objectivity is flawed by the inherent inadequacy of technological models; and some practitioners who elevate their models to infallibility seem to lack confidence in the subjective power of experience and judgement, when they should realise that both are inherent and dominant in professional practice and should be used with pride.


It seems to the community that practitioners command models which are both objective and absolutely predictive, but in reality the ability of individual technological models to predict outcomes is very limited. The models, however, are very useful to assist the formation of judgements:

  • When practitioners try to explain risk in technological terms, such as “the risk associated with this medical procedure is 1 in 14,000” or “the annual probability of a failure is 1 in 1000” or “this land will be flooded by a 1 in 100 year flood“, few people understand and become more confused. Practitioners must rethink their approach to risk acceptance, and the paper examines how to begin that process.
  • The Human-Technology Interface is where most accidents occur. Many in the community who have to deal with post-accident trauma believe that professional practitioners have not been sufficiently interested in this interface, particularly in the physical, physiological and psychological implications; and such people are beginning to see this lack of interest by practitioners as negligent. A mismanaged conveyance or a mistaken diagnosis is an accident as potentially devastating as a building collapse or a mechanical failure, as is a faulty audit or an erroneous survey. The issue is pervasive to all professions. Practitioners must address this question, and some suggestions are canvassed.
  • Professional practitioners need to change their image in some respects because their present image does not properly convey the uncertainties which attend upon their work.
  • We need to understand the technological method properly, and there are many signs which indicate that we have seconded judgement and are giving primacy to mathematical and other models, despite their limitations.
  • We need to understand perceptions of risk particularly the enormous range of risks which societies accept, or appear to accept, and the role which standards play in this process.
  • We need to understand the legal process, particularly that it is a technological system which is also fallible.
  • We need to manage expectations, because the gap between the expectations people have of systems and the ability of those systems to deliver is unrealistic and misunderstanding of the gap is already counterproductive.
    Managing expectations can be a process by which we might improve understandings of the acceptance of risk; not only the expectations which the community has of practitioners, but also the expectations which surround the practice and organisation of the professions themselves. The current trend to criminalise behaviour surrounding accidents and procurement adds a new imperative. A structure for attempting this process is suggested, by way of a six-point plan.

Professional Self-Regulation

The Australian Council of Professions endorses the proposal by the NSW Government that the limitations of liability on time and money provided under the legislation be available to the defendants of an action in which the “Professional of Record” in the matter is listed on an approved register.

The NSW Government has defined a “Professional of Record” as the professional who authorised the documents or actions related to the matter in contention in an action within the ambit of the legislation. The Australian Council of Professions endorses the incorporation of this definition in the legislative framework, in which an “Approved Register” is defined as one in which membership is voluntary and is limited to professionals who:

  • have defined minimum qualifications in both tertiary education and experience such that the holders can operate as professionals independently within their field of competence;
  • adhere to a Code of Ethics (the NSW Government’s special requirements for risk management and continuing professional development are an inherent part of ethical practice required by the Code); and
  • are covered by professional indemnity insurance, either directly or indirectly, to the level required by the legislation.


An “Approved Register” is also defined as one which provides for:

  • eligibility competently assessed using established processes against well-defined criteria for tertiary education standards, professional experience and continuing professional development;
  • access by the public to a register of current members and ability to lodge complaints;
  • disciplinary action for breaches of the Code of Ethics;
  • the right of appeal by professionals judged ineligible for entry to the scheme or judged liable for disciplinary action;
  • access to a mediator or arbitrator, nominated by the President of the Professional Association, to assist in the resolution of disputes; and
  • a scheme to be run by a “Registration Board” administered by the Professional Association and able to draw on the full range of Professional Association experience and expertise.


The Australian Council of Professions further proposes that the following aspects be included in the processes and documentation for a register to be submitted for approval under any legislation:

  • the definition of standards of qualification (both academic and experience) for admission to the register;
  • processes for accreditation of educational programs (both Australian and overseas) which satisfy the academic qualification requirement;
  • processes for assessment of applicants’ conformance to the qualification requirement;
  • a process for appeal by applicants who have been judged ineligible for entry to the register;
  • a definition of standards to be achieved in continuing professional development;
  • processes for assessing conformance of persons on the register to the professional development standards (quality and quantity factors);
  • a defined Code of Ethics;
  • defined requirements for professional indemnity insurance;
  • a process for issuing of annual practising certificates on payment of the annual fee;
  • disciplinary processes for breaches of conditions of register;
  • a process for appeal by persons subject to disciplinary actions;
  • processes for mediation and arbitration in disputes; and
  • administrative processes and fee structures for the register.


The Australian Council of Professions expects that, as a result of this practice, registration by the Professions would supersede other registration procedures so that costs on the individual professional would largely be offset.