In a recent case, the Fort Worth Court of Appeals held that a physician recruitment agreement that provided a physician with an income guaranty, sign-on bonus and relocation reimbursement did not make the hospital liable for the malpractice liability of a physician under the doctrine of respondeat superior. A provider may be held liable under the doctrine of respondeat superior for the acts of its agent or employee, even though the provider did not commit a wrongful act itself, if the provider controls or had the right to control the details of the agent or employee's work.
The plaintiffs in this case alleged that the recruitment agreement evidenced the hospital's control over the physician with respect to the following obligations: (1) provide on-call emergency room coverage; (2) engage in the full-time practice of medicine in the community; (3) maintain complete and accurate medical records for patients seen at the hospital; (4) maintain active staff privileges at the hospital; (5) not enter into a similar recruitment arrangement with any other hospital; (6) provide a reasonable level of charity care; (7) negotiate with managed care providers with whom the hospital participates; (8) cooperate with the hospital's compliance efforts; and (9) provide information necessary for audits, tax filings and other financial and regulatory matters, including calculations under the income guaranty.
The court held that the provisions, rather than evidencing a right of control over the physician's practice, largely ensured that the recruited physician would have a financially viable practice in the hospital's service area and the money the hospital advanced the physician would be safeguarded through repayment or emergency room coverage. As to the compliance obligations, the court held that requiring one to comply with applicable law does not amount to a right of control. With respect to the physician's obligations to (1) negotiate with managed care providers with whom the hospital participates; (2) maintain active staff privileges at the hospital; and (3) provide on-call emergency room coverage, the court held that the provisions attempt to control an outcome, rather than the details of the physician's work, and consequently, do not provide a basis for respondeat superior liability. This is an important distinction for avoiding respondeat superior liability in many cases.
The plaintiffs also tried to show that the physician was an employee of the hospital because (1) the physician used hospital equipment instead of his own in surgery; (2) a hospital employee assigned operating rooms used by the physician and scheduled the physician's patients' surgical procedures; and (3) the hospital employed and assigned the nurses who assisted the physician in surgery. The court found that the foregoing acts did not show that the hospital controlled or had the right to control the details of the physician's work, as the physician was free to use his own tools and the patient was billed separately by the hospital for its services.
Undeterred, the plaintiffs finally tried to hold the hospital responsible for the physician's acts under the doctrine of ostensible agency as a result of the hospital's advertising campaign, the physician's badge and scrub suit and a donor's plaque in the emergency room area. Ostensible agency allows a hospital to be held responsible for its agent's conduct if the hospital's conduct caused a patient to reasonably believe that the physician was an employee of the hospital and the patient relied on the fact that the physician appeared to be the hospital's agent. The court held that the physician was not the hospital's agent in this case largely based upon evidentiary problems of the plaintiffs and the fact that the hospital's forms contained an express acknowledgement that the physicians providing care did not work for the hospital. Farlow v. Harris Methodist Fort Worth Hospital, No. 2-07-423-CV (Tex. Civ. App. May 7, 2009). Providers should assure that their forms contain an express acknowledgement that the physicians providing care do not work for the hospital, where applicable, to help avoid ostensible agency.