Can a Healthcare Provider be Held Liable for the Actions of an “Affiliate”?

Legal consequences abound at every corner in healthcare. Each month this blog discusses examples of what those consequences can be.

Healthcare providers may affiliate with third parties to perform various services. Not surprisingly, when such a third party commits what is alleged to be a wrongful act of some sort, such as a misdiagnosis or mistreatment, the injured individual might attempt to hold the healthcare provider responsible. How have courts addressed provider liability under these circumstances? Two recent decisions provide some answers.

In Yarbrough v. Northwestern Memorial Hospital, 2016 IL App (1st) 141585 (Aug. 19, 2016), parents of a premature baby brought suit against the defendant hospital and a related entity for malpractice. They alleged that the mother went to a clinic for pregnancy testing and, after a positive pregnancy test, workers at the clinic stated that, if she obtained prenatal care at the clinic, she would deliver and receive additional care at the defendant hospital. The mother alleged that, based on the hospital’s reputation and the information given to her by the clinic, she would receive treatment at the clinic from the hospital’s personnel. The parents also alleged that the clinic failed to identify and address a bicornuate uterus and shortened cervix that led to the plaintiffs’ suit against the hospital, alleging that the healthcare personnel at the clinic were its “apparent agents” such that the hospital should be held liable for the malpractice of the personnel. The plaintiffs argued that there were “close ties” between the hospital and the clinic as evidenced by, among other things, an agreement between the clinic and the hospital and a hospital website that held the clinic out as the hospital’s agent.

The hospital moved for summary judgment after discovery had been conducted. The trial court certified a question to the Illinois Appellate Court, asking whether a hospital could be “held vicariously liable under the doctrine of apparent authority *** for the acts of the employees of an unrelated, independent clinic that is not a party to the present litigation?” The appellate court answered, “Yes.”

The Illinois Appellate Court began its analysis by reference to Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511 (1993), which held that a hospital could be held liable for negligent medical treatment performed in the hospital by an independent-contractor physician. Gilbert established a three-part test to determine whether the doctrine of apparent authority could support the hospital’s liability. Essentially, apparent authority means that an entity can be held liable when it acts in a manner such that a reasonable person would conclude that a third person was an employee or agent of the entity.

The appellate court then applied the Gilbert factors to the question that had been certified to it. First, the court rejected the hospital’s argument that Gilbert did not apply because it was limited to conduct within the “four walls” of the hospital. Second, it held that Gilbert applied even though the clinic was not named as a defendant. Finally, reviewing the allegations made by the plaintiffs, the appellate court held the alleged “close ties” and the mother’s testimony were sufficient to defeat summary judgment and allow the case to proceed to trial.

What does all this mean for healthcare providers? First, understand that this is an Illinois decision not binding elsewhere. Indeed, the Illinois Supreme Court agreed to review the appellate court’s ruling and that ruling might be reversed by the Supreme Court. Second, although limited to Illinois, Yarbrough analyzed a common law doctrine (apparent authority) which is recognized across the Nation. Thus, unless a State supreme court has already ruled otherwise, Yarbrough might be persuasive for any court that faces a similar issue. Third, and perhaps most importantly, Yarbrough should raise flags for healthcare providers which reach out beyond their “four walls” and establish relationships with third parties for services.

This post began with reference to two decisions. Next month’s post will discuss the second.


**Editor’s note: The views expressed in this column are those of the author alone and should not be interpreted otherwise or as advice.

Ron Hedges, JD, is a former US Magistrate Judge in the District of New Jersey and is a writer, lecturer, and consultant on topics related to electronic information. He is a Senior Counsel with Dentons US LLC. 

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