Vicarious Liability Becoming More of a Threat

With all the legal risks that hospitals face, it used to be that risk managers could be confident, at least, that vicarious liability was a pretty weak threat. In most cases, hospitals were not held liable if the physician was independent and no hospital employees were involved. The hospital was off the hook.

That’s not necessarily the case anymore, says Angela M. Jones, JD, an attorney with the law firm of O’Neill McFadden & Willett in Schererville, IN. Case law in Indiana is similar to that in many other states, which indicates a distinct shift toward more vicarious liability for hospitals, she says. In Indiana, a 1999 Supreme Court decision in Sword v. NKC Hospitals adopted the theory of “apparent and ostensible agency” to find that a hospital may be vicariously liable for the acts of its independent contractors, Jones explains. The court argued that it was reasonable for the patient to assume that the physician was employed by the hospital, by relying on what it called the “totality of the circumstances,” including the actions/inactions of the hospital regarding an explanation of the hospital’s arrangements with the physicians.

The court said the hospital was obligated to give notice to the patient “that [the hospital] is not the provider of care and that the care is provided by a physician who is an independent contractor and not subject to the control and supervision of the hospital.”

That decision prompted Indiana hospitals, like many before them and many after, to implement boilerplate disclosures to all patient that their physicians may be independent contractors and the hospital wasn’t responsible for their actions. Problem solved, at least for a while. Now case law is leaning toward a higher bar of “meaningful notice,” Jones explains. That change means that simply giving patients notice about independent physicians isn’t enough. The hospital has to convey this message in a way that is meaningful to the patient and likely will result in actual understanding of the distinction.

Change Is Likely

Actual case law and expectations will vary from state to state, but Indiana tends to follow rather than establish new standards, Jones says, so other states are likely to be at least as far ahead in changing vicarious liability. States in which the old independent contractor assumptions still are valid likely will make the same changes in the near future, she says.

“Five years ago, the hospital could just keep its head down, knowing you’re in the case at least through the panel process, but after that, hospitals would be able to get out of the case,” Jones says. “That’s not the way it’s going anymore. It’s becoming easier and easier to keep the hospital in the lawsuit.”

Hospitals across the country may have brought this situation on themselves, at least partially, by using boilerplate disclosures that were so general and written in such legalese that they had little impact on the patient. It was just another form to be signed, and courts are now saying that the issue is too important to be addressed in that manner, Jones says.

She advises risk managers to conduct a thorough review of these forms and assess whether a court could find the language too vague. In most cases, the hospital would be well-advised to develop a more specific and clear disclosure, she says.

“It needs to be very specific, to the point where it names each physician who is an independent contractor,” Jones says. “We also may see hospitals require independent physicians to take responsibility for this by having their patient sign specific consent forms before they can provide care at the hospital.”

Emergency Care Excluded

In addition, Jones points out that the whole disclosure form argument goes out the window in the case of emergency care. Whether you end up with a signed document or not from an emergency patient, courts are unlikely to accept that the patient truly understood the distinction and consented to care by an independent contractor, she says.

Vicarious liability cases will center on this issue of whether patients received “meaningful notice,” and plaintiffs’ attorneys will seize on this argument to keep the hospital’s insurance policy in play, Jones says. She encourages hospitals to put the onus on physicians as a requirement for working at the hospital.

“A separate consent form for each physician is good practice because, in many cases, the doctor has been treating the patient for months and then brings them to your hospital,” Jones says. “You can require the consent form before they even enter the hospital. It’s set in stone. How can you say it was not meaningful notice at that point?”

SOURCE

• Angela M. Jones, JD, O’Neill McFadden & Willett, Schererville, IN. Email: [email protected].