When ABC Medical Group (fictitious) was struggling to keep pace with growing patient demand, the four physicians in the practice decided to bring in another doctor to help out. Ultimately, instead of hiring an additional employee, they chose to use an independent contractor.

The patients were informed of the new physician’s arrival, and his name was added to the office door. He wore a name tag with the ABC logo, handed out ABC business cards, corresponded with patients on ABC letterhead and used ABC’s billing service. He was not, however, an ABC employee, and the physicians assumed his independent contractor status sufficiently shielded them from any vicarious liability should he be sued for malpractice.

The physicians were wrong. They failed to take into account the legal theory of ostensible agency, which focuses not on actual contracts between healthcare providers, but on patients’ reasonable expectations and beliefs based on healthcare providers’ conduct.

Given the apparent affiliation in this situation, a patient could reasonably believe that the independent physician was actually part of the ABC professional team and, based on that perception, agree to be seen and treated by him. A patient could then use the theory of ostensible agency to find the practice liable if the physician committed malpractice.

The actual relationship between the physician and ABC Medical Group is immaterial under ostensible agency. What matters is the patient’s perception of that relationship based on the physician and the group’s behavior. Despite the absence of an actual employer-employee arrangement, the group’s unintentional and seemingly harmless misrepresentations could add up to significant exposure.

Independent Contractor vs. Employee
Ostensible agency, then, is a form of implied relationship created by the participants’ actions rather than by written agreement. A prerequisite for proving ostensible agency is the legal concept of detrimental reliance, whereby the patient thinks the physician is part of a particular practice and therefore consents to treatment that he or she would not have agreed to otherwise.

Groups and solo doctors often have independent contractors on hand, yet their patients likely think they’re employees. If a patient consents to see an independent physician based on that assumption, the practice may be held liable for any harm that physician does to that patient.

Independent contractor status can be clearly established by meeting specific criteria. Technically, physicians are considered independent contractors if they perform or meet the following:

• Set their own work schedule and style.
• Use their own instruments/equipment.
• Have their own insurance coverage.
• Hire, supervise and pay their own assistants/staff.
• Are paid in lump sums rather than at regular intervals, and without taxable withholding.
• Are free to work for different practices.

Conversely, physicians exhibit employee status when they perform or meet the following:

• Comply with instructions concerning when, where and how their job should be done.
• Are covered under the practice’s medical malpractice insurance policy.
• Use assistants/staff hired and paid by the practice.
• Are paid at regular intervals (in other words, earn a salary).
• Work what amounts to full time at one practice.
• Use instruments and equipment that belong to the practice.

Limiting Risk
The distinction between employee and independent contractor may be clear to the physicians involved, but may not be evident to the patient. Physicians can, however, take concrete steps to help eliminate the impression that independent contractors are employees, thereby reducing ostensible agency exposure.

The following recommendations can help ensure that risk is effectively transferred from the practice to the independent contractor:

• Do not allow independent contractors to wear badges, name tags or shirts with the practice name and/or logo on them.
• Do not list the names of independent contractors on the office door.
• Do not share stationery or business cards.
• Do not share the same billing service.
• Do not announce the addition of an independent contractor to patients or otherwise advertise this in any way.
• Verify the independent contractor’s professional liability insurance on a regular basis.
• Do not share office staff.

Conclusion
Technically, a practice is not liable for harm done to a patient by an independent physician because the practice has no legal authority or control over how that physician executes his or her professional duties. The success of a malpractice suit, however, may not hinge on his or her actual working relationship.

When it comes to ostensible agency, what matters is the patient’s perception of the relationship between the practice and the independent physician and the reasonableness of that perception. If the patient has reason to think of the independent physician as part of the practice and therefore agrees to treatment, the practice could pay a price for the physician’s malpractice. Keeping things separate will help keep the true situation straight in patients’ minds and significantly lower the possibility of ostensible agency liability.