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Holding Hospitals Liable for the Negligence of Their Non-Employee Physicians

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A. INTRODUCTION

In this modern and very competitive age of medicine, many hospitals are launching aggressive marketing and advertising campaigns in a quest to obtain market recognition and garner public trust and patronage. Many of these advertising campaigns feature physician endorsement of the hospital or, conversely, hospital endorsement of certain physicians and include all forms of media, ranging from bill-boards and television ads to print ads in small local newspapers. Either way, the message in these advertising campaigns is unmistakably clear: “Choose our Hospital-We provide excellent care;” the obvious implication being that the “We” refers not only to hospital staff and providers of nursing care, but to the physicians that practice at the hospital as well.

In many instances, the physicians appearing in these ads and practicing medicine at these hospitals have actually been recruited by the hospital to move to the city where the hospital is located, open a private practice within the city and, of course, bring business and patients to the hospital facility for medical treatment and procedures. In turn, the hospital grants the physician privileges to practice medicine in the subject hospital and agrees to pay the physician an annual salary as well as, in some instances, a “recruiting” or “signing” bonus for becoming part of that hospital’s “team.” While the vast majority of these “recruited” physicians and/or ” hospital team-members” are paid by the hospital as independent contractors rather than as employees, that subtle but significant legal distinction is generally not disclosed to the unsuspecting patient who believes, when she goes to the hospital for treatment, that the physicians provided to treat her are employed by the hospital.

So what, then, is a patient to do when she goes to the hospital for treatment, is provided by the hospital with one or more of its recruited-but non-employee-physicians, and is seriously injured through the negligent acts and/or omissions of those physicians? Since these physicians are not “employees” of the hospital, the hospital’s vicarious liability for their negligence is not assumed. However, in certain circumstances, a hospital may be held liable for the negligence of its non-employee physicians under a theory of apparent authority. Although still an issue of first impression in Utah, the theory of apparent authority has gained wide-spread acceptance throughout the country, as a significant number of jurisdictions have whole-heartedly accepted the apparent authority doctrine as a means of allowing a patient to hold the hospital responsible for the negligence of its non-employee physicians.

B. THE CASE LAW

Numerous jurisdictions have dealt with the apparent-agency doctrine and its application to a hospital, and “the near-unanimous rule is that the independent contractor status of a particular treating physician is not a bar to the hospital’s liability for malpractice.”1 In coming to this conclusion, the majority of courts have applied the “apparent-authority doctrine,” which is found in the Restatement (Second) of Torts § 429 (1965) and provides as follows:

One who employs an independent contractor to perform services for another which are accepted in the reasonable belief that the services are being rendered by the employer or by his servants, is subject to liability for physical harm caused by the negligence of the contractor in supplying such services, to the same extent as though the employer were supplying them himself or by his servants.2

In applying this doctrine to hold that a hospital can be held liable for the negligence of its independent contractor physicians, the court in Sharsmith v. Hill, 764 P.2d 667 (Wyo. 1988), recognized that hospitals are “corporate entities capable of acting only through human beings whose services the hospital engages” and that hospitals derive financial profit by “holding themselves out to the public as offering and rendering quality health care services.” 3

Similar to the apparent-authority doctrine set forth in the Restatement provision quoted above, other courts have adopted the “agency-by-estoppel doctrine” as a means to hold hospitals accountable for the negligence of their non-employee physicians. This doctrine is found in the Restatement (Second) of Agency § 267 (1957) and provides as follows:

One who represents that another is his servant or other agent and thereby causes a third person justifiably to rely upon the care or skill of such apparent agent is subject to liability to the third person for harm caused by the lack of care or skill of the one appearing to be a servant or other agent as if he were such.

In Clark v. Southview Hosp. and Family Health Ctr., 628 N.E.2d 46 (Ohio 1994), the court found that the defendant hospital could be held liable for the negligence of its emergency-room physicians. In coming to this conclusion, the court expanded its holding in an earlier case in which it adopted the agency-by-estoppel Restatement provision. In deciding to extend the application of the provision to the hospital context, the court recognized that other jurisdictions have applied the doctrine as a means to hold hospitals accountable for the negligence of their non-employee physicians with “virtual unanimity.”4

Regardless of whether the courts adopted the “apparent-authority” doctrine or the “agency-by-estoppel” doctrine, they have generally required and/or focused their inquiry upon the same two elements, to wit: “(1) Conduct by the hospital that would cause a reasonable person to believe that the physician was an agent of the hospital, and (2) Reliance on that apparent agency relationship by the plaintiff.”5 With respect to the first element, it is usually satisfied when “the hospital holds itself out to the public as a provider of medical services . . . .”6 (Emphasis added). As one court so aptly stated, “[i]n order to prove this element, it is not necessary to show an express representation by the hospital. . . . Instead, a hospital is generally deemed to have held itself out as the provider of care, unless it gave the patient contrary notice.”7 The second element is satisfied when a patient looks to the hospital, instead of a specific physician, to provide her with medical care.8 (Emphasis added). This element is easily satisfied in the emergency-room setting because the patient does not pick her physician; rather, the treating emergency-room physician is already there. In other settings, “many courts presume reliance, absent evidence that the plaintiff knew or should have known the physician was not an agent of the hospital.”9

1. THE EMERGENCY ROOM SETTING.

The doctrines of apparent-authority and agency-by-estoppel are particularly applicable in the emergency room setting. “[T]he application of ostensible agency [is] particularly compelling when a patient seeks services from an emergency room.”10 In Torrence v. Kusminsky, 408 S.E.2d 684 (W. Va. 1991), the plaintiff was admitted to the defendant hospital’s emergency room complaining of abdominal pain. The emergency room physicians failed to properly diagnose and treat her, and the plaintiff sued. In holding the hospital liable for the conduct of the E.R. physician, the court adopted a per se rule of liability for the emergency room setting, stating:

where a hospital makes emergency room treatment available to serve the public as an integral part of its facilities, the hospital is estopped to deny that the physicians and other medical personnel on duty providing treatments are its agents. Regardless of any contractual arrangements with so-called independent contractors, the hospital is liable to the injured patient for acts of malpractice committed in its emergency room, so long as the requisite proximate cause and damages are present.11

Similarly, in Smith v. Baptist Memorial Hosp. System12, the court held that “[s]ound public policy demands that when an institution calls itself a ‘full service hospital’ and includes an emergency room as part of its facilities, that institution makes a special statement to the public when it opens its emergency room to provide emergency care for people.”13

2. BEYOND THE E.R. SETTING.

The case law is clear that the doctrine of apparent authority is not restricted in application to emergency room physicians.14 The critical question is whether the plaintiff, at the time of her admission to the hospital, was looking to the hospital for treatment of her physical ailments, or merely viewed the hospital as the situs where her physician would treat her for her problems. As articulated by one court, “a relevant factor . . . [is] whether the hospital provided the plaintiff with [the treating physician] or whether the plaintiff and the treating physician had a patient-physician relationship independent of the hospital setting.”15 (Emphasis added.) By furnishing the attending physician, the hospital is in effect holding him out as its own and calling upon the patient to accept his services based on its own reputation rather than the physician’s.16 The cases are legion wherein the courts have applied the doctrine of apparent authority to impose liability upon the hospital for the acts of its non-employee physicians in a variety of specialties outside of the emergency room including, without limitation, radiology, anesthesiology, surgery, internal medicine, pathology, psychology and gynecology to name a few.17

3. OTHER FACTORS.

In deciding whether to hold hospitals liable for the negligence of their non-employee physicians under the apparent authority doctrine, courts have considered additional factors, as well, including (1) whether the hospital has actively engaged in advertising its medical services and/or touting the qualifications, availability and/or affiliation of the subject physician(s) with the hospital; (2) whether the forms signed by the patient during the treatment provided by the physician are printed on the hospital’s letterhead; (3) whether the hospital sets the schedule, hours or rotation of the physician; (4) whether the physician is “on-call” with the hospital; (5) whether the patient has a prior or on-going treatment history with the physician; (6) whether the hospital has attempted to notify the patient of the physician’s independent-contractor status through signage displayed in the hospital, verbal communication and/or a consent form; (7) whether the physician uses the hospital’s staff, facilities and/or supplies; and (8) testimony from the plaintiff regarding her understanding and perception of the physician’s status with the hospital.18

In those instances where the hospital has obtained the signature of the patient on a consent form attempting to notify the patient of the independent-contractor status of the physician, do not assume that such a form automatically defeats the patient’s apparent authority claim against the hospital. The circumstances under which the consent form was provided to the patient, as well as the conditions under which the patient’s signature was obtained, must be reviewed to determine if the notice is sufficient and/or valid. For example, in Sword v. NKC Hospitals, Inc., 714 N.E.2d 142 (Ind. 1999), the plaintiff signed such a consent form but was still allowed to pursue her apparent authority claims against the hospital for the negligence of an anesthesiologist provided by the hospital to administer an epidural to the patient. The court allowed the patient’s apparent authority claim against the hospital to go forward, in spite of the consent form’s notification provision to the patient of the anesthesiologist’s independent contractor status. In holding in favor of the plaintiff, the court found that such a form was not sufficient to put plaintiff on notice of the physician’s independent contractor status because the consent form was given to her to review and sign right before she went into labor. Accordingly, when such a form exists, it is crucial to study the circumstances under which the form was presented to the patient and how and when the patient’s signature was obtained in determining both the sufficiency and the validity of the notice.

C. PUBLIC POLICY CONSIDERATIONS

Public policy strongly favors holding hospitals liable for the negligence of their non-employee physicians when an apparent-agency relationship has been created. As previously discussed, we are living in a day and age when hospitals aggressively compete for business utilizing advertising campaigns in order to persuade the public that it ought to place its health and well-being, as well as its health-care dollars, in the hands of that particular hospital. Hospitals have become providers of a myriad of medical services and have physicians on staff and/or on-call in most specialties. Indeed, many hospitals are directly involved in the selection, recruitment and payment of these physicians. Yet, hospitals attempt to escape liability for the physicians’ negligence by engaging and paying them as independent contractors instead of as employees. A hospital’s recruitment and endorsement of many of these physicians is for the specific purpose of bringing the hospital business by creating the perception that the hospital is well-staffed and has capable physicians on the hospital’s medical “team.” When the public is left to conclude from the hospital’s actions that the physician belongs to the hospital and/or is one of the hospital’s agents and/or employees, and relies on that message, public policy requires that the hospital be held accountable for the actions of those physicians as if they were employed by the facility.

On a more basic level, (recruiting and advertising aside) when a patient presents to the hospital for treatment and receives medical care from a physician that is chosen and provided to her by the hospital, she should be allowed to reasonably conclude from this that the physician is an agent and/or employee of the hospital, unless she is otherwise notified and the notice provided is both legally sufficient and valid. Any person receiving medical care from a physician that is provided by the hospital could reasonably conclude that the physician is an agent and/or employee of the hospital and that the hospital is responsible for the quality of care that is provided. When a hospital’s conduct leads a patient to believe that the physicians practicing at the hospital are employed by the hospital, the hospital should not be allowed to escape responsibility for the quality of medical care provided within its own walls by the very physicians it has placed there to provide care to its patients. Such a result is unfair to patients and allows the hospital to capitalize on a fiction of its own making (“these physicians are our employees”) while denying patients the right to hold the hospital responsible for the very perception its actions created. Clearly, public policy requires that hospitals be held liable for the negligence of their non-employee physicians when an apparent authority relationship exists.

FOOTNOTES:

  1. Martell v. St. Charles Hospital, 523 N.Y.S.2d 342, 350 (N.Y. Sup. Ct. 1987). See, also, Sharsmith v. Hill, 764 P.2d 667 (Wyo. 1988); Clark v. Southview Hosp. and Family Health Ctr., 628 N.E.2d 46 (Ohio 1994);Kashishian v. Port, 481 N.W.2d 277 (Wis. 1992); Torrence v. Kusminsky, 408 S.E.2d 684 (W. Va. 1991); Pamperin v. Trinity Mem. Hosp., 423 N.W.2d 848 (Wis. 1988); Richmond City Hosp. Auth. v. Brown, 361 S.E.2d 164 (Ga. 1987); Irving v. Doctors Hospital of Lake Worth, Inc., 415 So.2d 55 (Fla. Ct. App. 1982), petition for review denied, 422 So.2d 842; Paintsville Hospital Co. v. Rose, 683 S.W.2d 255 (Supreme Ct. Ky. 1985), etc.
  2. In determining issues of agency law in other contexts, Utah courts have routinely turned to the Restatement for guidance and have historically recognized the legal principles espoused therein. See: Luddington v. Bodenvest, Ltd., 855 P.2d 204 (Utah 1993).
  3. Sharsmith, 764 P.2d at 672 (citation omitted)
  4. Clark, 628 N.E.2d at 52.
  5. Meija v. Community Hospital of San Bernardino, 99 Cal. App. 4th 1448, 1453 (2002).
  6. Clark, supra, 628 N.E.2d at 53.
  7. Meija, 99 Cal. App. 4th at 1454 (citations omitted).
  8. Clark, 628 N.E.2d at 53.
  9. Meija, 99 Cal. App. 4th at 1454 (citations omitted).
  10. Torrence v. Kusminsky, 408 S.E.2d 684, 692 (W. Va. 1991)
  11. Id.
  12. 12720 S.W.2d 618, 625 (Tex. Ct. App. 1986) rev’d on other grounds, 925 S.W.2d 503 (Texas 1997).
  13. Citations omitted.
  14. Kashishian v. Port, 167 Wis.2d 24, 481 N.W.2d 277 (1992).
  15. Laderer v. St. Rita’s Medical Center, 702 N.E.2d 476, 481 (Ohio Ct. App. 1997)(anesthesiologist); (citing Grewe v. Mt. Clemens General Hospital, 273 N.W.2d 429, 433 (Mich. 1978) (internist and orthopedic surgeon/resident).
  16. Brown v. Coastal Emergency Services, Inc., 181 Ga. App. 893, 898 (1987)
  17. See: Guadagnoli v. Seaview Radiology, 712 N.Y.S.2d 812 (N.Y.S. 2000) (radiology); Arthur v. St. Peters Hosp., 405 A.2d 443 (N.J. Super. 1979) (radiology); Gunther v. Staten Island Hospital, 640 N.Y.S.2d (N.Y. App. 1996); Stanhope v. Los Angeles College of Chiropractic, 128 P.2d 705 (Cal. App. 2nd Dist. 1942) (finding liability against the facility for the negligence of a radiologist/x-ray technician);Sword v. NKC Hospitals, Inc., 714 N.E.2d 142 (Ind. 1999) (anesthesiologist); Sharsmith v. Hill, 764 P.2d 667 (Wyo. 1988) (pathologist); Dahan v. UHS of Bethesda, Inc., 692 N.E.2d 1303 (Ill. App. 1998) (diabetes clinic);Hunt v. Mercy Medical Center, 710 A.2d 362 (Md. App. 1998) (pathologist); Grewe v. Mt. Clemens General Hospital, 273 N.W.2d 429 (Mich. 1978) (internist); Simmons v. St. Clair Memorial Hosp., 481 A.2d 870 (Pa. Super. 1984) (psychiatrist); Soltis v. State of New York, 568 N.Y.S.2d 470 (N.Y. App. Div. 1991) (physician’s assistant examining prisoner on behalf of state); Howard v. Park, 195 N.W.2d 39 (Mich. App. 1972) (physician removing cast at another physician’s clinic); Malanowski v. Jabamoni, 688 N.E.2d 732 (Ill. App. 1997) (gynecologist at outpatient clinic); Quintal v. Laurel Grove Hosp., 397 P.2d 161 (Cal. 1964) (anesthesiologist). Seneris v. Haas, 291 P.2d 915 (Cal. 1955) (anesthesiologist).
  18. Meija v. Community Hospital of San Bernardino, 99 Cal.App.4th 1448 (Cal. App. 2002); Butler v. Domin, 15 P.3d 1189 (Mont. 2000); Sword v. NKC Hospitals, Inc., 714 N.E.2d 142 (Ind. 1999); Clark v. Southview Hospital & Family Health Center, 628 N.E.2d 46 (Ohio 1994); Kashishian v. Port, 481 N.W.2d 277 (Wis. 1992); Torrence v. Kusminsky, 408 S.E.2d 684 (W.Va. 1991); Sharsmith v. Hill, 764 P.2d 667 (Wyo. 1988); Paintsville Hospital Co. v. Rose, 683 S.W.2d 255 (KY 1985); and Hardy v. Brantley, M.D., 471 So.2d 358 (Miss. 1985).
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