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  • Writer's pictureAshley Geary, Esq.

Avoiding Liability for Contracted and Lessee Physicians

As private equity firms and health systems continue to purchase practices, independent physician practices look for ways to affiliate with one another and expand the services that they provide to patients. For example, general ophthalmologists may lease space to or contract with retina specialists; dermatologists may lease space or contract with a physician to perform Mohs procedures; and multi-specialty groups may lease space to or contract with additional specialists. In those instances, the general ophthalmologist, dermatologist and multi-specialty group want patients to view the contracted and lessee physicians as being a part of their practices. However, if the practice is successful in this goal, they may be opening themselves up to liability for the physicians’ actions.

Across the country, courts have imposed liability on hospitals for the malpractice of non-employed physicians performing services within the hospital. In such instances, the courts looked at whether the physician had “apparent authority” to act on behalf of the hospital. If the hospital was found to have acted in a manner that would cause a reasonable patient to believe that the physician was acting on behalf of the hospital, and the patient relied on that belief when obtaining the physician’s services, the court held the hospital liable for the actions of the physician. In making this determination, the courts looked at factors such as: (1) whether the hospital advertised the physician as being affiliated with the hospital; (2) whether patient registration and consent forms were on the hospital’s letterhead; (3) who was responsible for scheduling the physician’s visits/work hours; (4) whether the patient had a prior, ongoing relationship with the physician; and (5) whether the patient was provided notice of the independent contractor relationship through signage, verbal communications, and/or a written consent form.

Given the increased possibility of injury from hospital procedures, malpractice actions are more often brought against hospitals than independent physician practices. However, in the event that a patient is injured by a physician that is an independent contractor of, or leasing space from, your practice, he/she will likely sue both the physician individually, as well as the practice. In such case, the courts would likely apply the same “apparent authority” test to the relationship between your practice and the physician. Accordingly, it is important to ensure that your practice implements safeguards to avoid responsibility for the non-employed physicians’ actions. Safeguards that you may consider include:

  • Limit advertising of the physician's services. - Be cautious when including the contracted or lessee physicians on your practice’s website. While it is safest to avoid listing the physicians on the site altogether, we understand that the entire purpose of contracting with and leasing to these physicians is to offer your patients their services. Accordingly, when advertising those physicians’ services, avoid using phrases such as “our team of specialists” or “we offer [specialty] services”. Also, include an express, conspicuous statement that the physicians are not employed by the practice and the practice is not responsible for their actions or omissions.

  • Avoid using practice letterhead. - Patient consent and registration forms for the non-employed physicians’ services should be on the letterhead of the individual physician or the practice that employs him/her. To the extent necessary (e.g., the patient is a patient of the practice but may require the services of a contracted specialist), include a disclaimer similar to that included on the website. Make sure the disclaimer is conspicuously placed, is not in small or hard-to-read print, and is easily understandable by the patient.

  • Post signage. - Place conspicuous signage in the office stating that the physicians are not employed by the practice. For example, the front door may include those physicians under a separate practice name which employs them.

  • Distinguish their appearance. - Consider distinguishing the appearance of your employed physicians from independent contractors and lessee physicians. This may include different scrubs, lab coats or name badges.

In the event that you are found liable for a contracted or lessee physician’s actions (either because these safeguards were not implemented or the court nevertheless found that the physician was acting on the practice’s behalf), it is important that you have in place protections to avoid suffering a negative financial impact. Accordingly, it remains important that you have a written contract with your contracted and lessee physicians which: (1) requires the physician to maintain sufficient malpractice insurance; (2) requires the physician to indemnify the practice for the physician’s actions and omissions; and (3) clearly states that the relationship between the practice and physician is one of independent contractors or lessor and lessee. By doing so, your practice will have the contractual protection to avoid significant losses.

If you are concerned about the way in which your practice advertises your contracted or lessee physicians’ services, contact our firm at (610) 296-1800. We would be happy to assist in implementing the necessary safeguards to protect your practice.

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