By Marlene Icenhower BSN, JD, CPHRM

On June 27, 2016, Elisa Magallanes de Valle (Magallanes) underwent a hysterectomy at a California hospital. Magallanes’ private physician, Dr. Rebecca Brock, performed the surgery. Dr. Brock was not a hospital employee.

Shortly after her discharge from the hospital, Magallanes returned to the emergency department (ED) in distress. Following an exploratory laparotomy, she was diagnosed with an injury to the colon resulting from the hysterectomy. Magallanes subsequently filed a negligence lawsuit against the hospital, Dr. Brock, and the doctor’s practice. She argued that the hospital should be held liable for Dr. Brock’s actions under a theory of ostensible agency.

Magallanes testified that she had assumed Dr. Brock had been employed by the hospital and that she had received no notice to the contrary. The hospital argued that because Magallanes knew or should have known that Dr. Brock was not a hospital employee, her claim that Dr. Brock was the hospital’s ostensible agent should fail. The court found that Magallanes had chosen the hospital because of her long-standing relationship with Dr. Brock and had signed a “Conditions of Admission” form upon admittance. The form specifically stated, “Physicians are not employees or agents of the hospital.” For those reasons, the court agreed with the hospital and granted summary judgment in its favor.

It is not uncommon for healthcare organizations to contract with staffing companies or physician practices to provide medical services. For example, emergency physicians, nurses, and hospitalists are often independent contractors employed by an entity other than the hospital in which they work. Independent contractor staffing is an option that offers reliable, qualified, and consistent staffing for hard-to-fill positions.

Another perceived advantage of independent contractor staffing is that it may shield the contracting organization from liability; in general, a person or organization cannot be held liable for the actions of independent contractors. There are, however, exceptions to this rule. The doctrine of “ostensible agency,” allows for the imposition of liability on a person/organization for the actions of its independent contractor when that person/organization intentionally or inadvertently causes someone to believe that the independent contractor is its agent or employee. For example, a hospital may be held liable for a non-employed physician’s negligence if the hospital intentionally or inadvertently led the patient to believe the physician was a hospital employee.

While using independent contractors may be necessary in some cases, problems can arise when the relationship between the parties is not clear to patients. Consider the following when using independent contractors to provide services in your organization: 
  • Know the law. In many states, ostensible agency is defined by statute; in others, it is defined by case law. It is important to know the law in your jurisdiction to ensure that your practices accurately reflect your relationship with independent contractors. When contracting with outside agencies for medical/nursing services, work with an attorney who can help you understand the law in your state and can help you draft and negotiate contracts to minimize liability.
  • Do your homework. Ensure that your contracting organizations have good policies and procedures in place for screening employees and evaluating competence. Ensure that all independent contractors have insurance coverage adequate for the practice setting and service level. Consult your insurance broker or agent to determine whether your insurance coverage is adequate.
  • Verify qualifications and competence. The processes of credentialing and privileging practitioners and verifying nursing competence by assessment are powerful tools that enhance patient safety. Ensure that all practitioners who provide patient care follow the same process whether or not they are employed by the organization.
  • Inform patients. Make patients aware of your organization’s relationship with independent contractors. In areas of the organization where independent contractors are used, post signage making it clear that the practitioners are not employed by the hospital. Work with an attorney to ensure that admission and pre-admission paperwork includes language advising patients that certain practitioners are not hospital employees. Make this notice available in different languages based on community demographics.
  • Identify independent contractors clearly. Independent contractors should be easily distinguishable from hospital employees. Require independent contractors to wear differently colored scrubs, uniforms, or lab coats. Identification badges should clearly identify the entity that employs the independent contractor and should not look the same as the badges worn by hospital employees. Encourage independent contractors to identify their employer when introducing themselves to patients.
  • Manage public perception. Be aware of how your organization both advertises services and portrays the relationship it has with independent contractors. Ensure the organization’s website does not lead the public to think independent contractors are hospital employees. Similarly, monitor social media postings and advertising campaigns to ensure an accurate public perception regarding the relationship with independent contractors. 
While Independent contractors can be a great way to provide medical services—especially regarding hard-to-fill locations or disciplines—they can also expose an organization to liability unless good policies and procedures are in place.

Copyrighted. No legal or medical advice intended. This post includes general risk management guidelines. Such materials are for informational purposes only and may not reflect the most current legal or medical developments. These informational materials are not intended, and must not be taken, as legal or medical advice on any particular set of facts or circumstances.