It is commonplace today that hospitals do not employ physicians. Instead the physician is considered an independent contractor. This relationship may muddy the waters when trying to hold a hospital to account under vicarious liability.
There exists an exception to the general rule that a hospital incurs no liability for the negligence of independent contractors but only for those who provide care within the traditional employment relationship.
The doctrine of ostensible agency or apparent authority has been the predominant theory upon which to base an action for vicarious liability against a hospital for the negligence of independent contractors.
As stated in the Restatement (Second) of Torts § 429, “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 contract or in supplying such services, to the same extent as though the employer were supplying them himself or by his servants.”
A general articulation of the apparent agency rule in the hospital context can be found in a 1996 Nevada Supreme Court decision, Schlotfeldt v. Charter Hospital of Las Vegas, 910 P.2d 271 (Nev.1996), which notes that to substantiate an ostensible agency claim, one must find that: (1)the patient entrusted herself to the hospital, (2) the hospital selected the doctor, (3) the patient reasonably believed the doctor was an agent of the hospital, and (4) the patient had no notice of the doctor’s independent contractor status.
The court also noted that whether a patient can demonstrate these factors remains a question for the jury. Some states have followed the notion that it is the principal’s actions (such as a hospital in relation to an independent physician) that are examined: “The existence of an ostensible agency thus is determined by the principal’s actions, rather than the acts of the agent.“ See Wilkins v. Marshalltown Medical and Surgical Center, 758 N.W.2d 232 (Iowa 2008) citing Waukon Auto Supply v. Farmers & Merchants Sav. Bank, 440 N.W.2d 844, 847 (Iowa 1989).
Other states have adopted a slightly different test. In Illinois, the state Supreme Court in Gilbert v. Sycamore Mun. Hosp., 22 N.E.2d 788, 794 (Ill.1993), adopted the following three-part test for apparent agency:
(1) the hospital, or its agent, acted in a manner that would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or agent of the hospital;
(2) where the acts of the agent create the appearance of authority, the plaintiff must also prove that the hospital had knowledge of and acquiesced in them; and
(3) the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence.
One way for a hospital to clearly avoid the ‘apparent agency’ finding for vicarious liability is through written notice to patients. The North Carolina Supreme Court in Diggs “A hospital may avoid liability by providing meaningful notice to a patient that care is being provided by an independent contractor.”
This notion was followed in Peter v. Vullo, 758 S.E.2d 431 (N.C.Ct.App.2014), where the facts suggested that the plaintiff patient was provided meaningful notice from the hospital defendants that the anesthesiologists may be independent contractors via an express disclaimer.
However, a general notice by a hospital that some of the providers giving care at its institution may be an independent contractor may not be sufficient. In Indiana, a Court of Appeals in Helms v. Rudicel, 986 N.E.2d 302 (Ind.Ct.App.2013) held that forms noting that a provider may possibly be an independent contractor were not sufficient to avoid a potential claim based on apparent agency. Or care in the Emergency Department context is such that “Many courts have even concluded that prior notice may not be sufficient to avoid liability in an emergency room context, where an injured patient in need of immediate medical care cannot be expected to understand or act upon that information.” Mejia v. Community Hospital of San Bernardino, 99 Cal. App. 4th 1448 (Cal.2002)
Very often, hospitals do not employ physicians. Instead the physician is considered an independent contractor. This relationship may muddy the waters when trying to hold a hospital to account under vicarious liability.
Previous decisions concerning hospital liability did not address potential liability for negligence of the professional staff who generally receive no economic compensation from the hospital. In the clinical care realm, private, non-employed physicians act as independent contractors who provide clinical care to patients at the hospital and are compensated via a direct billing of the patient. These independent professionals include the staff physicians who are not paid by the hospital but instead exchange their services for “staff privileges”, i.e., the ability to admit patients to the hospital and provide care for them within the hospital. Staff physicians may also include physicians or other professionals who practice in certain specialties such as emergency medicine, anesthesia, radiology, or pathology and do so under a contract with the hospital to provide such services. These professionals are considered independent contractors; a hospital generally has no liability for the negligence of independent contractors.
The critical factor in determining
whether an individual is an independent contractor is the institution’s “right
to control” their conduct and activity. Restatement (Agency) Second
§ 2. A hospital does not generally retain a right to control the manner in
which independent contractors practice their profession but can only to
terminate the award of staff privileges or in some cases a contract that allows
them to utilize the hospital’s facilities. See Pendley v. Southern Regional
Health System, Inc., 704 S.E.2d 198 (Ga.2010). In determining whether there
is a “right of control” in order to classify a care provider as an independent
contractor, some jurisdictions will consider other factors besides the economic
relationship. For example, some will inquire about whether an agency
relationship was intended, whether there is independent ownership, whether the
service involves a distinct occupation, and whether special skill is needed to
perform the work. See Menzie v. Windham Community Memorial Hospital, 774
F.Supp. 91 260 (D.Conn.1991). In the Kentucky matter of Taylor v. Jewish
Hosp. & St. Mary’s Healthcare, Inc., 26 F.Supp.3d 642 (W.D.Ky.2014),
the court suggested that the hiring and termination of physicians, as well as
its indirect control over the details of their work via the incentive
compensation package could be sufficient to determine that they were not
independent contractors. The Restatement also considers such factors as whether
the worker supplies the tools and instrumentalities needed, the length of time
of the employment, and whether the particular occupation is typically done by a
specialist without supervision. Restatement (Agency) 2d § 220.
Joseph Grillo, M.D. Medical-Legal Consulting https://www.drjfgconsulting.com