Archive July 2016 XVII, No. 7

Legal Update: Manage Your Facility's Vicarious Liability Risk

You could be liable for the negligence of your independent contractors.

Keith Roberts, JD

BIO

anesthesia provider HANDS ON In medical malpractice litigation, courts have frequently found surgical facilities liable for anesthesia providers and other contract employees.

Apparent Agency

Apparent agency applies when a hospital, by its actions, has held out a particular physician as its agent and/or employee and a patient has accepted treatment from that physician in the reasonable belief that it is being rendered on behalf of the hospital.

As you probably know, under the legal doctrine known as vicarious liability, a surgical facility can find itself in the crosshairs of a medical malpractice lawsuit due to the actions or inactions of the employees it has hired to its staff. That means that a doctor, for example, may not be the only defendant in a negligent lawsuit — a hospital or surgical center that retained the doctor on its staff may be as well. But you may not be aware that vicarious liability extends your legal responsibility to the damages caused by non-employee patient care subcontractors as well. Read on to find out how to manage your facility's vicarious liability risk.

It's not uncommon in the outpatient surgery arena for service providers to be engaged as subcontractors (that is, governed by a 1099 tax status) rather than employees (W-2 tax status). Surgical facilities can be exposed to liability by contract employees in many positions: anesthesia providers, per-diem nurses, physician assistants and physicians themselves.

Even such outsourced, external services as instrument reprocessing, surgical equipment rental and technical consulting, and pre-owned equipment dealers can put facilities in the hot seat. It's important for you to understand that the business models of contract employees or outsourced services do not insulate your facility from liability.

Facilities have in the past escaped liability for the acts or omissions of independent contractors on site. Because the contractors were not directly employed by the facility, they argued, the facility was shielded from responsibility for their actions. The legal tide has turned, however, and a number of court rulings have since established a precedent that holds facilities liable for contractors' as well as employees' acts (see "Court: Hospital Liable for Contracted Anesthesiologist").

As a result, a surgical facility may be subject to vicarious liability if an "apparent agency" relationship exists between the facility and the contracted entity. That is to say, if a patient reasonably believes that a subcontractor is acting on the facility's orders and under its direct control, wholly representing the facility, she could conceivably file a medical malpractice lawsuit seeking damages from the facility.

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