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Who is the Medical Provider? Who is the Medical Provider?

Who is the Medical Provider?

The U.S. Court of Appeals for the Seventh Circuit recently affirmed a decision of the U.S. District Court for the Southern District of Indiana on a case where a jury returned a verdict of $15 million in favor of the plaintiffs and against an imaging facility. Webster v. CDI Indiana, LLC, No. 18-3080, 2019 WL 943171 (7th Cir. Feb. 27, 2019). The facility had argued the plaintiffs could not hold the facility liable, because the facility did not employ the medical provider who failed to identify a mass on a CT scan. The District Court and the Seventh Circuit rejected this position and applied Indiana’s apparent agency law. Any company that a patient may reasonably perceive as holding itself out as a provider of medical services should be aware of this decision and take steps to address this issue.
In Webster v. CDI, the plaintiff had a CT scan performed at CDI, Indiana, LLC ("CDI"), a diagnostic imaging facility. The radiologist who performed the CT scan was an independent contractor of Medical Scanning Consultants ("MSC"). CDI had entered into a service agreement with MSC in which MSC agreed to provide independent contractor radiologists at CDI’s Carmel, Indiana facility. The radiologist missed a cancer mass in interpreting the CT scan, so the diagnosis was delayed for over a year, and the plaintiff’s cancer metastasized. Since CDI had not registered with the Indiana Department of Insurance as a "qualified health care provider" under the Indiana Medical Malpractice Act (the "Act"), the cap on liability under the Act for medical malpractice actions did not apply to CDI. The plaintiff filed claims against the radiologist and MSC, pursuant to the Act; however, the plaintiff sued CDI separately under an exception to the Act’s applicability with regards to unqualified health care providers. Ind. Code § 34-18-3-1.
CDI defended the action by alleging the plaintiffs could not hold CDI liable, because CDI did not directly employ or contract with the radiologist; rather, the radiologist was an independent contractor of MSC. Relying on Indiana’s apparent agency law, in Sword v. NKC Hosp., Inc. 714 N.E.2d 142, 152 (Ind. 1999), the district court rejected CDI’s summary judgment argument, and the case proceeded to trial. In Sword, the Indiana Supreme Court held that a hospital "could be held liable for the alleged negligence of its independent contractor physician" in adopting apparent agency under Restatement (Second) of Torts Section 429. Sword, 714 N.E. 2d 152. The apparent agency standard focuses "on the reasonableness of the patient’s belief that the hospital or its employees were rendering health care." Id.

In Webster, the district court concluded that a reasonable, prudent patient could conclude "from representations made by a medical center that the doctors and health care professionals that service patients within the center’s facilities are agents or servants of the center." Webster v. Ctr. for Diagnostic Imaging, Inc., No. 1:16-cv-02677-JMS-DML, 207 WL 3839377, at *8 (S.D. Ind. Aug. 31, 2017). The Seventh Circuit agreed:

Accepting CDI’s contrary argument would mean that health care facilities could easily evade liability by using independent contractor professional organizations to employ physicians. Put differently, a medical center cannot hold itself out to the public as offering health care services—and profit from providing those health care services—yet escape liability by creating a complex corporate arrangement of interrelated companies.

Webster, No. 18-3080, 2019 WL 943171, at *3. Sword and Webster demonstrate that the relevant inquiry is not on the contractual employment relationship between the various entities. Rather, under the apparent agency doctrine, the focus is on the "medical center’s manifestations and the patient’s reliance." Id. at *2. As the Seventh Circuit noted, "CDI’s argument that Dr. Walker was an independent contractor hired by MSC, therefore, is of no moment unless Courtney was aware of any such contractual relationship." Id. at *3.

These cases demonstrate that transparency and patient awareness are key. At the Webster trial, the patient testified she had no knowledge and was never provided information about the contractual relationships between MSC, CDI and the radiologist. In order to reduce the risk that a facility (or other entity) will be determined to be liable under an apparent agency theory, a facility which is not providing health care, but which advertises or markets itself , or otherwise appears to be a health care facility, should make it abundantly clear via signage and robust communications with patients, including specific patient consents, that clinical personnel encountered while the patient is visiting the facility are not employed by the facility, nor are their clinical activities subject to the facility's control. In addition, each such facility should at least evaluate whether they can qualify under Indiana's Medical Malpractice Act or obtain other additional insurance coverage to address potential liability in apparent agency cases.

For more information, contact a member of our Health Care Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.
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