186. FN186. S.Y. Tan, Comment, The Medical Malpractice
Crisis: Will No-Fault Cure the Disease?, 9 U. HAW. L. REV. 241, 246 (1987).
187. FN187. Id.
188. FN188. Id. at 243.
189. FN189. Jeffery O'Connell, It's Time For No
Fault For All Kinds Of Injuries, 60 JAMA 1070 (1974); Tan, supra note 186,
at 246; see Clark C. Havighurst, "Medical Adversity Insurance"-Has Its
Time Come?, 1975 DUKE L.J. 1233.
190. FN190. Personal injuries are adjudicated in
an average of seven years. Only half of all malpractice cases are closed
within 18 months after they are opened, and 10% remain open over 6 and
a half years. Tan, supra note 186, at 243 n.13.
191. FN191. Estimates of the medical malpractice
tort system returns on the premium dollar range from 28 cents to 35 cents.
Henson Moore & Jeffery O'Connell, Foreclosing Medical Malpractice Claims
By Prompt Tender Of Economic Loss, 44 LA. L. REV. 1267, 1270 (1984) (28
cents); William B. Schwartz & Neil K. Komesar, Doctors, Damages and
Deterrence: An Economic View of Medical Malpractice, 298 NEW ENG. J. MED.
1282, 1282 (1978) (35 cents).
192. FN192. 271 Cal. Rptr. 876 (Ct. App. 1990).
193. FN193. Id. at 880.
194. FN194. Id. at 878.
195. FN195. Id. at 880 (emphasis added).
196. FN196. Id.
197. FN197. Id. at 881.
198. FN198. Id.
199. FN199. Id.
200. FN200. Id. at 877, 881.
201. FN201. Id. at 882.
202. FN202. Id.
203. FN203. Id.
204. FN204. When Mr. Wilson was informed that he
would "not be covered financially by his insurance company and that the
liability [for hospital costs] would then be his," he cried while talking
to an aunt. Id. Mr. Wilson's aunt said that the family did not have enough
money to pay for the cost of inpatient hospitalization and that Dr. Taff
told her "to come and get him." Id. Further, she testified that Dr. Taff
told Mr. Wilson's mother and father that Western Medical "terminated his
[the decedent's] stay" and that this was a "problem" that had occurred
on other occasions. Id.
205. FN205. Id.
206. FN206. Id. at 878.
207. FN207. 239 Cal. Rptr. 810 (Ct. App. 1986).
In Wickline, Ms. Wickline's physician requested an eight-day extension
of her stay in the hospital. Medi- Cal denied the request and authorized
an additional four days of hospital stay beyond the originally scheduled
discharge date. Complying with the limited extension authorized by Medi-Cal,
Ms. Wickline was discharged on January 21, 1977. At Ms. Wickline's discharge,
her leg did not appear in any danger. Ms. Wickline began to experience
pain and discoloration soon after arriving home. Nine days after the discharge,
she was admitted to the hospital for clotting in the right leg, no circulation
to that leg, and an infection at the graft site. After unsuccessful attempts
to treat Ms. Wickline's conditions, the doctors amputated her leg above
the knee. Id. at 814-17. The court in Wickline held that a person can recover
from a third-party payer only if medically inappropriate decisions result
from defects in design or implementation of cost containment mechanisms.
Id. at 819-20. Such defects are limited to requests for services that are
arbitrarily ignored, unreasonably disregarded, or unreasonably overridden.
Id. The court held that the state had not unreasonably overridden the physician's
decision to discharge Ms. Wickline because the physician had not pursued
every avenue of appeal and complied with the third-party payer's decision
without protest. Id. The physician could be held responsible for the injury
because he failed to protest the third-party payer's decision through all
possible steps. Id.
208. FN208. Wilson, 271 Cal. Rptr. at 885.
209. FN209. Id.
210. FN210. Id. at 883. The Medi-Cal standard for
determining whether to provide acute care was essentially the same as the
medical standard of care. Id. at 879.
211. FN211. See id. at 881-82.
212. FN212. Id. at 882.
213. FN213. Under the California Civil Code, "[e]very
one is responsible, not only for the result of his [or her] willful acts,
but also for an injury occasioned by another by his [or her] want of ordinary
care or skill." Wickline, 239 Cal. Rptr. at 810 (citing Rowland v. Christian,
443 P.2d 561 (Cal. 1968)). As rephrased by the Wickline court, "All persons
are required to use ordinary care to prevent others being injured as a
result of their conduct." Id. "In the absence of statutory provision [sic]
declaring an exception to the fundamental principle enunciated by section
1714 of the Civil Code, no such exception shall be made unless clearly
supported by public policy." Id. at 818. In Wilson, however, the Welfare
and Institutions Code and Title 22 of the California Administrative Code
constituted an exception to the usual standard of tort liability specified
in Civil Code s 1714. Wilson, 271 Cal. Rptr. at 878.
214. FN214. Wickline, 239 Cal. Rptr. at 819 (citation
215. FN215. Id. at 820.
216. FN216. Wilson, 271 Cal. Rptr. at 883.
217. FN217. Id. (citation omitted).
218. FN218. Id.
219. FN219. Id.
220. FN220. Id. at 879.
221. FN221. Id. at 878 (quoting Wickline, 239 Cal.
Rptr. at 810).
222. FN222. Id. at 884.
223. FN223. Id.
224. FN224. Id. (quoting Wickline, 239 Cal. Rptr.
225. FN225. Id.
226. FN226. Id. at 885.
227. FN227. Wilson Jury Finds Calif., Ala. Blues
Plans Not Liable for Plaintiff's Demise, MANAGED CARE L. OUTLOOK, Apr.
21, 1992, available in LEXIS, Nexis Library, CURRNWS File. The jury found
that Blue Cross, Blue Shield of Alabama, and Western Medical Review, Inc.
had not caused the plaintiff's wrongful death by refusing to pay for as
long a hospital stay as Mr. Wilson's doctor requested. Id.
228. FN228. Darling v. Charleston Community Memorial
Hosp., 211 N.E.2d 253, 258 (Ill. 1965) (holding that hospitals could be
found liable for the negligent selection and supervision of medical staff
members). Whether a physician is an employee or an independent contractor
depends on a number of factors including the degree of control, method
of payment, and the ownership and provision of instrumentalities used by
the physician. RESTATEMENT (SECOND) OF AGENCY s 220 (1958); David J. Oakley
& Eileen M. Kelley, HMO Liability for Malpractice of Member Physicians:
The Case of IPA Model HMOs, 23 TORT & INS. L.J. 624, 627-29 (1988);
Catherine Butler, Note, Preferred Provider Organization Liability for Physician
Malpractice, 11 AM. J.L. & MED. 345, 350-54 (1985).
229. FN229. Hinden & Elden, supra note 97,
230. FN230. See generally McDonald v. Massachusetts
Gen. Hosp., 120 Mass. 432, 436 (1876) (frequently cited case regarding
origin of hospital immunity in United States).
231. FN231. See generally Hinden & Elden, supra
note 97 at 26-27. But see Rhoda v. Aroostook Gen. Hosp., 226 A.2d 530 (Me.
1967) (holding that the nonliability rule of charitable immunity extends
to shelter a hospital corporate charity from liability for its own corporate
negligent acts, including the selection, training, and supervision or control
of its personnel or employees).
232. FN232. Fridena v. Evans, 622 P.2d 463 (Ariz.
1980) (finding that a hospital's duty includes an obligation to take reasonable
steps to monitor and to review the treatment being received by a patient);
Poor Sisters of St. Francis Seraph of the Perpetual Adoration, Inc. v.
Catron, 435 N.E.2d 305 (Ind. Ct. App. 1982) (holding that a hospital can
be held liable for negligence when a nurse or other hospital employee follows
a doctor's orders despite knowledge that the doctor's orders are not in
accordance with normal medical practice).
233. FN233. Jackson v. Power, 743 P.2d 1376 (Alaska
1987) (finding a duty by a hospital to ensure that physicians granted hospital
privileges are competent and to supervise medical treatment provided by
members of its medical staff); Insinga v. LaBella, 543 So. 2d 209 (Fla.
1989) (holding hospital liable for its negligent decision to grant staff
privileges); Joiner v. Mitchell County Hosp. Auth., 186 S.E.2d 307 (Ga.
Ct. App. 1971) (finding that a hospital may be held liable for negligent
selection of new staff physicians, but not when it selects authorized physicians
in good standing), aff'd, 189 S.E.2d 412 (Ga. 1972); Copithorne v. Framingham
Union Hosp., 520 N.E.2d 139 (Mass. 1988) (holding hospital liable for the
failure to withdraw staff privileges when it has received notice of the
misconduct of a staff physician); Blanton v. Moses H. Cone Memorial Hosp.,
Inc., 354 S.E.2d 455 (N.C. 1987) (holding that a hospital owes duty of
care to its patients to ascertain that a doctor is qualified to perform
an operation before granting him the privilege to do so); Corleto v. Shore
Memorial Hosp., 350 A.2d 534 (N.J. Super. Ct. Law Div. 1975) (holding a
hospital liable for negligent selection and retention of a staff physician
when the physician's incompetence was obvious); Johnson v. Misericordia
Community Hosp., 301 N.W.2d 156 (Wis. 1981) (holding hospital liable when
it failed to exercise reasonable care to determine whether physician was
qualified to receive privileges).
234. FN234. Joiner, 186 S.E.2d at 307; see also
Sewell v. United States, 629 F. Supp. 448 (W.D. La. 1986) (stating that
a hospital can be held liable for a physician's failure to consult a specialist
where the failure was below the appropriate standard of care); Ingram v.
Little Co. of Mary Hosp., 438 N.E.2d 1194 (Ill. App. Ct. 1982) (holding
that a hospital may be liable for a physician or an agent's misconduct
as well as a violation of its duty to review and supervise medical care)
235. FN235. Emory Univ. v. Porter, 120 S.E.2d 668
(Ga. Ct. App. 1961) (holding that a hospital could be held negligent for
failing to furnish adequate equipment); Hamil v. Bashline, 485 A.2d 1204
(Pa. 1982) (holding that a hospital is under a duty to adequately procure
and maintain equipment).
236. FN236. Arthur F. Southwick, The Hospital's
New Responsibility, 17 CLEV. MARSHALL L. REV. 146, 154 (1968); Jacqueline
Hanson Dee, Note, Torts- Corporate Negligence-Wisconsin Hospital Held to
Owe a Duty to Its Patients to Select Qualified Physicians, 65 MARQ. L.
REV. 139, 143 (1981).
237. FN237. 211 N.E.2d 253 (Ill. 1965). In Darling,
a plaintiff who broke his leg while playing in a college football game
was awarded $150,000 by a jury after his leg was amputated because of the
attending doctor's negligence. Id. at 255. The court rejected the historical
view of a hospital's limited duty. Id. at 257.
238. FN238. Id. (quoting Bing v. Thunig, 143 N.E.2d
3, 8 (N.Y. 1957)).
239. FN239. See Purcell v. Zimbelman, 500 P.2d
335, 340-41 (Ariz. Ct. App. 1972). In Purcell, Dr. Purcell, a private practitioner,
was selected by Mr. Zimbelman to perform an abdominal surgical procedure
for cancer. As a result of the doctor's negligence, Mr. Zimbelman lost
a kidney, lost sexual function, had a permanent colostomy, and had urinary
problems. Id. at 339-40. The hospital knew that Dr. Purcell's two prior
operations for abdominal cancer using the same procedure had resulted in
lawsuits, and that two other surgical procedures performed by Dr. Purcell
had also resulted in lawsuits. Id. at 343. Even though Dr. Purcell was
clearly an independent contractor and no evidence was presented indicating
that he may have been an actual or apparent agent of the hospital, the
hospital was ultimately responsible for the quality of care provided in
the institution. See id. at 341.
240. FN240. See Reed E. Hall, Hospital Committee
Proceedings and Reports: Their Legal Status, 1 AM. J.L. & MED. 245,
252 (1975) (describing the premise of corporate negligence as being that
the hospital, by virtue of its custody of the patient, owes a duty to exercise
care in the construction, maintenance, and operation of the hospital).
241. FN241. Harrell v. Total Health Care, Inc.,
No. WD 39809, 1989 WL 153066, at *4 (Mo. Ct. App. Apr. 25, 1989) (The corporate
negligence doctrine "is not a theory limited to claims against hospitals....
The duty of care to protect patients from foreseeable risk of harm, however,
finds a common ground" in both hospitals and IPA model HMOs.).
242. FN242. Benedict v. Saint Luke's Hosps., 365
N.W.2d 499, 504-05 (N.D. 1985) (holding that the hospital will not be liable
for negligent selection where the physician exercised the care and the
skill ordinarily possessed by other emergency room physicians).
243. FN243. See supra note 234 and accompanying
244. FN244. 781 S.W.2d 58 (Mo. 1989). In Harrell,
the plaintiff brought an action against a health service corporation alleging
damages resulting from alleged malpractice. The trial court entered summary
judgment for the health service corporation. Id. at 60. The Missouri Supreme
Court held that (1) a former statute that exempted health service corporations
from some forms of liability for injuries to patients applied to a patient's
action that alleged that the corporation was negligent in its selection
of the surgeon who treated the patient and (2) the statute was not unconstitutional.
245. FN245. Harrell v. Total Health Care, Inc.,
No. WD 39809, 1989 WL 153066, at *5 (Mo. Ct. App. Apr. 25, 1989).
246. FN246. Id.
247. FN247. Id. at *5-*6.
248. FN248. Ferguson v. Gonyaw, 236 N.W.2d 543,
550 (Mich. Ct. App. 1975) (finding that the plaintiff failed to prove that
staff privileges would have been denied if the hospital had used reasonable
care in evaluating the physician).
249. FN249. See, e.g., Rule v. Lutheran Hosps.
& Homes Soc'y, 835 F.2d 1250 (8th Cir. 1987) (applying Neb. law); Tucson
Medical Ctr., Inc. v. Misevch, 545 P.2d 958 (Ariz. 1976); Elam v. College
Park Hosp., 183 Cal. Rptr. 156 (Ct. App. 1982); Kitto v. Gilbert, 570 P.2d
544 (Colo. Ct. App. 1977); Register v. Wilmington Medical Ctr., Inc., 377
A.2d 8 (Del. 1977); Insinga v. La Bella, 543 So. 2d 209 (Fla. 1989); Joiner
v. Mitchell County Hosp. Auth., 186 S.E.2d 307 (Ga. Ct. App. 1971), aff'd,
189 S.E.2d 412 (Ga. 1972); Blanton v. Moses H. Cone Memorial Hosp., Inc.,
354 S.E.2d 455 (N.C. 1987); Corleto v. Shore Memorial Hosp., 350 A.2d 534
(N.J. Super. Ct. Law Div. 1975); Lewis v. Columbus Hosp., 151 N.Y.S.2d
391 (App. Div. 1956); Park North Gen. Hosp. v. Hickman, 703 S.W.2d 262
(Tex. Ct. App. 1985); Pedroza v. Bryant, 101 Wash. 2d 226, 233, 677 P.2d
166, 170 (1984); Sharsmith v. Hill, 764 P.2d 667 (Wyo. 1988).
250. FN250. Under the doctrine of professional
skills, courts held that because of a physician's professional skills,
a physician was considered an independent contractor for whose acts a hospital
could not be held liable. See Schloendorff v. Society of N.Y. Hosp., 105
N.E. 92, 92-93 (N.Y. 1914), overruled by Bing v. Thunig, 143 N.E.2d 3 (N.Y.
1957). The New York Court of Appeals overturned the old rule of nonliability,
noting that "[t]he rule of nonliability is out of tune with the life about
us, at variance with modern day needs and with concepts of justice and
fair dealing. It should be discarded." Bing v. Thunig, 143 N.E.2d 3, 9
(N.Y. 1957). Other courts began to reject this doctrine as they began to
recognize hospitals as highly-integrated systems for the delivery of health
care. See Ybarra v. Spangard, 154 P.2d 687, 691 (Cal. 1944) (finding that
hospitals operate under highly-integrated systems of medical health care);
Moore v. Board of Trustees, 495 P.2d 605, 608 (Nev.) (holding that hospitals
are highly integrated community health centers whose sole purpose is to
make available the highest possible quality care to patients), cert. denied,
409 U.S. 879 (1972).
251. FN251. Historically, hospitals maintained
as charitable institutions could not be liable for the negligence of their
physicians and nurses in the treatment of patients. See, e.g., Schloendorff,
105 N.E. at 92-93 (finding no liability though the patient made some payment
to help defray the cost of board); Gartman v. City of McAllen, 107 S.W.2d
879, 880 (Tex. Comm'n App. 1937, opinion adopted by the Texas Supreme Court)
(holding that city hospitals operating solely for public benefit could
not be held liable). However, later courts have uniformly rejected the
doctrine. See, e.g., Flagiello v. Pennsylvania Hosp., 208 A.2d 193, 208
(Pa. 1965) (holding that the negligence of a charitable hospital's employees
must be treated the same as the negligence of any other employer's employee);
Pierce v. Yakima Valley Memorial Hosp. Ass'n, 43 Wash. 2d 162, 174, 260
P.2d 765, 771-75 (1953) (finding charitable hospital liable if its negligence
is the proximate cause of injury); Adkins v. St. Francis Hosp., 143 S.E.2d
154, 163 (W. Va. 1965) (abolishing charitable immunity doctrine, thereby
making hospitals liable for negligent acts committed there).
252. FN252. Schloendorff, 105 N.E. at 94 ("The
true ground for the [hospital's] exemption from liability is that the relation
between a hospital and its physicians is not that of a master and servant.
The hospital does not undertake to act through them but merely to procure
them to act upon their own responsibility.").
253. FN253. See supra part IV.B.
254. FN254. A basic principle of tort law is that
employers are not liable for the negligence of an independent contractor.
RESTATEMENT (SECOND) OF TORTS s 409 (1965).
255. FN255. See, e.g., Arthur v. St. Peters Hosp.,
405 A.2d 443 (N.J. Super. Ct. Law Div. 1979); Capan v. Divine Providence
Hosp., 430 A.2d 647 (Pa. Super. Ct. 1980); Brownsville Medical Ctr. v.
Garcia, 704 S.W.2d 68 (Tx. Ct. App. 1985); Adamski v. Tacoma Gen. Hosp.,
20 Wash. App. 98, 579 P.2d 970 (1978). But see Johnson v. St. Bernard Hosp.,
399 N.E.2d 198 (Ill. App. Ct. 1979); Reynolds v. Swigert, 697 P.2d 504
(N.M. Ct. App. 1984).
256. FN256. Albain v. Flower Hosp., 553 N.E.2d
1038, 1044 (Ohio 1990).
257. FN257. Id.
258. FN258. Darling v. Charleston Community Memorial
Hosp., 211 N.E.2d 253, 257 (Ill. 1965); Arthur, 405 A.2d at 446; Albain,
553 N.E.2d at 1044; Capan, 430 A.2d at 643-49; Adamski, 20 Wash. App. at
111, 579 P.2d at 977. But see Greene v. Rogers, 498 N.E.2d 867 (Ill. App.
Ct. 1986). The Greene court specifically refused to apply apparent agency
to a hospital and emergency room doctor relationship. "The absence of the
power to control the decision making of the emergency room physicians demands
that the independent relationship between the hospital and emergency room
physician be recognized." Id. at 871.
259. FN259. See, e.g., Schleier v. Kaiser Found.
Health Plan, Inc., 876 F.2d 174, 177-78 (D.C. Cir. 1989) (holding an HMO
vicariously liable for the negligence of a consulting physician); Sloan
v. Metro. Health Council, Inc., 516 N.E.2d 1104, 1109 (Ind. Ct. App. 1987)
(holding that HMOs can be liable for the conduct of employee physicians
under the doctrine of respondeat superior). But see Williams v. Good Health
Plus, Inc., 743 S.W.2d 373 (Tex. Ct. App. 1987) (holding an HMO not liable
for physicians found to be independent contractors).
260. FN260. Mitts v. H.I.P., 478 N.Y.S.2d 910,
911 (App. Div. 1984) (rejecting the theory of respondeat superior and finding
in favor of a staff model HMO in a medical malpractice suit on the grounds
that the HMO "does not treat or render medical service or care to anyone").
But c.f. Schleier, 876 F.2d at 174 (holding an HMO responsible for the
acts and omission of a consulting physician who had no contractual relationship
to the HMO).
261. FN261. Courts have used various labels to
hold hospitals vicariously liable: "ostensible" or "apparent" agency, or
"agency by estoppel." Although the terms are often used interchangeably,
they are not theoretically identical. The ostensible or apparent agency
theory is based on s 429 of the Restatement (Second) of Torts, which provides
One who employs an independent contractor to perform services for another
which are accepted in the reasonable belief that the services are being
rendered by the employer or by his servants, is subject to liability for
physical harm caused by the negligence of the contractor in supplying such
services, to the same extent as though the employer were supplying them
himself or by his servants.
RESTATEMENT (SECOND) OF TORTS s 429 (1965). In contrast, agency by estoppel
is based on s 267 of the Restatement (Second) of Agency, which provides
One who represents that another is his servant or other agent and thereby
causes a third person justifiably to rely upon the care or skill of such
apparent agent is subject to liability to the third person for harm caused
by the lack of care or skill of the one appearing to be a servant or other
agent as if he were such.
RESTATEMENT (SECOND) OF AGENCY s 267 (1958). Thus, s 429 of the Restatement
(Second) of Torts requires that the employer hold out the independent contractor
as its own employee, and that the injured person reasonably believe that
the services are being rendered by the employer or its agents. In contrast,
s 267 of the Restatement (Second) of Agency requires actual reliance on
the representations of the employer by the injured person. Some jurisdictions
cite s 267, others cite s 429, and still others cite both.
262. FN262. Earlene P. Weiner, Note, Managed Health
Care: HMO Corporate Liability, Independent Contractors, and the Ostensible
Agency Doctrine, 15 J. CORP. L. 535, 538 (1990).
263. FN263. See generally Grewe v. Mt. Clemens
Gen. Hosp., 273 N.W.2d 429, 433- 34 (Mich. 1978); Albain v. Flower Hosp.,
553 N.E.2d 1038, 1048-49 (Ohio 1990); Capan v. Divine Providence Hosp.,
430 A.2d 647, 648 (Pa. Super. Ct. 1980) (citing RESTATEMENT (SECOND) OF
TORTS s 429 (1965)); Brownsville Medical Ctr. v. Garcia, 704 S.W.2d 68,
74 (Tex. Ct. App. 1985).
264. FN264. See Grewe, 273 N.W.2d at 433.
265. FN265. A "holding out" occurs "when the hospital
acts or omits to act in some way which leads the patient to a reasonable
belief he is being treated by the hospital by one of its employees." Adamski
v. Tacoma Gen. Hosp., 20 Wash. App. 98, 115, 579 P.2d 970, 979 (1978).
266. FN266. Howard v. Park, 195 N.W.2d 39, 40 (Mich.
Ct. App. 1972); Capan, 430 A.2d at 649; Adamski, 20 Wash. App. at 115,
579 P.2d at 978-79; see also Brown v. Moore, 247 F.2d 711, 719-20 (3d Cir.
1957) (applying liability under respondeat superior when a holding out
267. FN267. See generally Joanne Stern et al.,
Health Maintenance Organizations: Development, Growth and Expansion, 8
WHITTIER L. REV. 377 (1986) (presenting a panel discussion of the reasons
behind the surge of HMOs in California).
268. FN268. Ossario, supra note 3, at 198.
269. FN269. Id. ("Just the fact that there are
so many new HMOs and the fact that they are expanding so rapidly creates
270. FN270. See, e.g., McClellan v. Health Maintenance
Org., 604 A.2d 1053, 1058 (Pa. Super. Ct. 1992) (holding that an HMO's
advertisements that it carefully screened its primary care physicians subjected
the HMO to the ostensible agency doctrine).
271. FN271. 547 A.2d 1229 (Pa. Super. Ct. 1988).
272. FN272. 743 S.W.2d 373 (Tex. Ct. App. 1987).
273. FN273. Boyd, 547 A.2d at 1230. At the time
of Mrs. Boyd's death, she and her husband were participants in the Health
Maintenance Organization of Pennsylvania (HMO of PA), a managed care product.
The third-party payer limited Mrs. Boyd's choice of physician to the names
provided in a directory. In June 1982, Mrs. Boyd saw Dr. Rosenthal, whom
she selected from the directory. Dr. Rosenthal referred Mrs. Boyd to Dr.
Erwin Cohen, a participating HMO of PA surgeon as required by the subscription
agreement. Dr. Cohen performed a biopsy of Mrs. Boyd's breast tissue on
July 6, 1982. During the surgery, he perforated Mrs. Boyd's chest wall
with the biopsy needle. Mrs. Boyd was discharged, but continued to have
complaints for weeks afterward. On August 19, Mrs. Boyd awoke with chest
pain. Dr. Rosenthal examined Mrs. Boyd and diagnosed Tietz's Syndrome.
Tietz's Syndrome is an inflammatory condition affecting the costochondral
cartilage in women between 30 and 50 years old. He set up a subsequent
appointment for tests to be done at his office. Following a series of tests
in his office, Dr. Rosenthal sent Mrs. Boyd home. Her symptoms persisted
and worsened. That same afternoon, Mr. Boyd discovered Mrs. Boyd dead in
their bathroom from a heart attack. Id. at 1229-30.
In his lawsuit, Mr. Boyd contended that Mrs. Boyd exhibited symptoms
of cardiac distress and that Dr. Rosenthal should have sent her to the
hospital rather than negligently ordering the tests on Mrs. Boyd at his
office. Id. at 1230 n.5. The reasons the test occurred at Dr. Rosenthal's
office were disputed. The HMO maintained that the tests were done at Dr.
Rosenthal's office because Mrs. Boyd would have been more comfortable.
Mr. Boyd maintained that they were done at the office because the HMO required
them to be done there to keep medical fees within the HMO. Id. at 1230
n.4. Mr. Boyd contended that the safer practice would have been to perform
the tests at the hospital where the results would have been more quickly
available and that this negligent treatment caused Mrs. Boyd's death. Mr.
Boyd maintained that HMO of PA should be liable for the negligence of its
participating physicians because those physicians acted as ostensible agents
for the HMO. Id. at 1231
274. FN274. Id.
275. FN275. Id.
276. FN276. Id.
277. FN277. Id. at 1234.
278. FN278. Id. at 1231.
279. FN279. Id. at 1232.
280. FN280. Id.
281. FN281. Id. at 1234-35.
282. FN282. Id. at 1235.
283. FN283. Id.
284. FN284. Id. at 1232 n.6 (noting that in a document
entitled "Why Offer HMO- PA?," HMO of PA represented to employers that
it "[a]ssumes responsibility for quality and accessibility" of health care).
285. FN285. Id. at 1235.
286. FN286. Id. at 1233; see supra notes 64-67
and accompanying text.
287. FN287. Boyd, 547 A.2d at 1235.
288. FN288. Id.
289. FN289. Id.
290. FN290. 743 S.W.2d 373 (Tex. Ct. App. 1987).
291. FN291. Id. at 374. The Williamses provided
the following statement of each act or failure to act:
Failure to listen to patient complaints and failure to diagnose and
properly treat nail staph infections and systemic [l]upus [erythematosus],
refusal of treatment. Failure to order the usual and customary lab work
for a person taking the medications prescribed to monitor well[-]being
of patient and to decrease chance of side effects. Mismanagement of ca[r]e
of the nail to the point that correct management of systemic lupus was
impossible due to the fact steroids could not be given appropriately.
Id. at 374-75. HealthAmerica Corporation (HealthAmerica) was the legal
successor to Good Health Plus, Inc. Southwest Medical Group (Southwest)
was the physician group that gave medical services to Mrs. Williams. The
medical services agreement between HealthAmerica and Southwest stated that
"under this agreement, physicians 'shall be totally responsible for all
medical advice to and medical treatment of members and for performance
of medical services within the service area."' Id. at 376. HealthAmerica
did not select the physicians who treated Mrs. Williams, and HealthAmerica
did not have the right to direct or control "the work or practice of medicine"
of the physicians who treated Mrs. Williams. Id. at 377. Neither HealthAmerica
nor Good Health Plus employed, paid, or supervised any physicians. In Mrs.
Williams's medical records, many progress notes were written on forms provided
by Southwest and bore the professional association mark, "Southwest Medical
Group, P.A." Id. at 378. Finally, when Mrs. Williams sought care from the
"Southwest Medical Group, P.A.," she signed a Consent to Procedure form
that contained the following language: "I hereby authorize [the Southwest
Group physician] and whomever he may designate as his assistants, to perform
upon myself the following procedure ...." Id.
292. FN292. TEX. REV. CIV. STAT. ANN. art. 4495b,
ss 1.01-5.10 (West Supp. 1994).
293. FN293. Williams, 743 S.W.2d at 375. The provision
provided as follows:
[I]t shall be unlawful for any individual, partnership, trust, association,
or corporation by the use of any letters, words, or terms as an affix on
stationery or on advertisements, or in any other manner, to indicate that
the individual, partnership, trust, association, or corporation is entitled
to practice medicine if the individual or entity is not licensed to do
Id. (quoting TEX. REV. CIV. STAT. ANN. art. 4495b, s 3.07(e) (West Supp.
Under the corporate practice of medicine doctrine, a lay corporation
cannot "employ a doctor, charge for the doctor's services, pay the doctor
a salary, and then keep the profit that is left over." Anthony Hunter Schiff,
Provider Discounts, 9 WHITTIER L. REV. 249, 250 (1987). A professional
corporation owned by a physician is the only type of corporate entity that
can practice medicine and retain profits. Id. However, a corporation can
provide health services to employees if it does not charge for the services.
Id. The corporate practice of medicine rule generally prohibits corporate
entities from employing physicians. The most significant exception to the
rule is health maintenance organizations. See Cynthia M. Combe & Neil
Krugman, Design and Pricing of the PPO and EPO Products, in MANAGED HEALTH
CARE: LEGAL AND OPERATIONAL ISSUES FACING PROVIDERS, INSURERS, AND EMPLOYERS,
at 114-16 (PLI Commercial Law and Practice Course Handbook Series No. 393,
1986), available in WESTLAW, TP-All File (discussing the prohibitions against
the corporate practice of medicine). This prohibition is based on legal
and policy considerations. Legally, statutory licensure requirements for
physicians include certain age, educational, and moral character requirements
that are "incapable of being met by an artificial [entity] such as a corporation."
Id. at 114. Policy considerations include a concern that corporations may
control medical decision making to "an unacceptable degree and interfere
with the quality of patient care," and that treatment decisions may be
"based upon economic considerations, such as shareholder interests, rather
than upon patient need." Id. at 114-15; see also CAL. BUS. & PROF.
CODE s 2400 (West 1990) (stating that "[c]orporations and other artificial
legal entities shall have no professional rights, privileges or powers").
294. FN294. See infra notes 295-298 and accompanying
295. FN295. TEX. INS. CODE ANN. ss 20A.02-20A.36
296. FN296. Williams, 743 S.W.2d at 375 (quoting
TEX. INS. CODE ANN. s 20A.29 (West 1981)).
297. FN297. Id. (quoting TEX. INS. CODE ANN. s
20A.06(a)(3) (West 1981) (alteration in original)).
298. FN298. Id.
299. FN299. Id. at 379.
300. FN300. Id. at 378.
301. FN301. Id.
302. FN302. It is unclear, however, from the facts
of Williams whether Mrs. Williams selected Southwest's doctors or was required
to use them. Part of the problem with Williams may be in how the plaintiff's
attorney formed the case.
303. FN303. Id. at 375-76.
304. FN304. Id. at 378.
305. FN305. Id. at 379.
306. FN306. See Gnessin, supra note 132, at 410
(advising managed care organizations to inform and to disclose to the patient
the exact relationship between the health care provider and the HMO as
an effective defense against ostensible agency).
307. FN307. Boyd v. Albert Einstein Medical Ctr.,
547 A.2d 1229, 1235 (Pa. Super. Ct. 1988).
308. FN308. See id. (indicating that Mrs. Boyd
had no choice as to which specialist to use).
309. FN309. "A hospital would not be held liable
for the negligence of a doctor (whether on staff or not) if the patient
was aware of the actual relationship between the doctor and the hospital."
Stewart v. Midani, 525 F. Supp. 843, 853 (N.D. Ga. 1981); see also Hannola
v. City of Lakewood, 426 N.E.2d 1187, 1190 (Ohio Ct. App. 1980) (holding
that public advertisements disclaiming agency may serve to insulate the
310. FN310. A court could find that even where
an individual knew that the managed care organization (MCO) physicians
were independent contractors, and not MCO employees, an individual requiring
care lacks a meaningful choice because of the financial restraints placed
on individuals who opt out of the MCO plan. Under those restraints the
court might find ostensible agency despite the knowledge of the individual.
See Martell v. St. Charles Hosp., 523 N.Y.S.2d 342, 351 (Sup. Ct. 1987)
(holding that even where a patient has the knowledge of emergency room
physicians' status as independent contractors, the hospital can be held
liable under ostensible agency theory).
311. FN311. See Pamela S. Bouey & Maureen E.
Corcoran, Managed Care Diversification and New Products, in MANAGED HEALTH
CARE 1988: LEGAL AND OPERATIONAL ISSUES, at 9, 13 (PLI Commercial Law and
Practice Course Handbook Series No. 471, 1988), available in WESTLAW, TP-All
File (stating that most states exempt HMOs from prohibitions regarding
the practice of medicine by lay corporations). But see ILL. REV. STAT.
ch. 215, para. 165/26 (1993) (HMOs cannot be found liable for the malpractice
of member physicians); Brown v. Michael Reese Health Plan, Inc., 502 N.E.2d
433 (Ill. App. Ct. 1986) (holding that a statute exempting voluntary health
service plans from liability was a reasonable exercise of state power and
a justifiable method of pursuing cost control).
312. FN312. Cf. Schleier v. Kaiser Found. Health
Plan, 876 F.2d 174, 177 (D.C. Cir. 1989) (holding an HMO liable for the
negligence of an independent contractor where sufficient evidence of a
master-servant relationship existed).
313. FN313. The diverse organizational structures
make the application of traditional malpractice theories more difficult.
See generally Gregory G. Binford, Malpractice and the Prepaid Health Care
Organization, 3 WHITTIER L. REV. 337 (1981); Monahan & Willis, supra
note 79, at 353; Oakley & Kelley, supra note 228, at 624.
314. FN314. See Ossario, supra note 3, at 197-98
(distinguishing IPA for-profit HMOs from nonprofit group staff models of
the past decade by noting the difference in management controls and financial
incentive arrangements). In Boyd, the defendant HMO was an independent
practice association model HMO. Boyd v. Albert Einstein Medical Ctr., 547
A.2d 1229, 1232-33 (Pa. Super. Ct. 1988).