WHO IS AN OSTENSIBLE AGENT ?

Written by:  Gerryanne A. Cauler, R.N.

In Medical Malpractice suits, it is typical for every party who had contact with a Plaintiff to be named in the suit. In the case of independently contracted physicians and hospitals, is it always appropriate for the hospital to face liability? The answer to that question depends on many factors.

The Pennsylvania Courts have consistently held that "as a general rule, an employer is not liable for tort committed by an independent contractor in its employ." Capan v. Divine Providence Hosp., 287 Pa. Super. 364, 367, 430 A.2d 647, 648 (1980), quoting, McDonough v. US Steel Corp., 228 Pa. Super. 268, 324 (1974). However, the courts have recognized an exception to the general rule, defined in Section 429 of the Restatement (Second) of Tort. Section 429 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 his servants is subject to liability for physical harm caused by the negligence of the contractor in supplying services, to the same extent as if the employer were supplying them himself or by his servants.

Capan, 287 Pa. Super. at 452, 430 A.2d at 648. The Pennsylvania courts interpreting Section 429 of Torts follow the "ostensible agency theory", first adopted by the Pennsylvania Superior Court in Capan. The Capan court explained there are two factors contributing to the acceptance of the theory of ostensible agency between an independently contracted physician and a hospital. First, "the changing role of the hospital in this society creates a likelihood that patients will look to the institution rather than the individual physician for care, and second, some hospitals hold out their independent contractor positions as their employees." Capan 287 Pa. Super at 368, 430 A.2d at 649. Under this interpretation, a physician who is an independent contractor can be considered an ostensible agent of a hospital if (1) the patient looks to the hospital for care; and (2) the hospital holds the doctor out as its employee. Simmons v. St. Claire Hosp., 332 Pa. Super. 444, 452, 481 A.2d 870, 874 (1984).

The first prong of the ostensible agency theory requires that the patient look to the hospital for care and not the individual physician. In Stip v. Kim, 874 F. Supp. 663 (E.D. Pa. 1995) (applying Pennsylvania law) the court noted that, ostensible agency is typically found in the emergency room setting, because in that situation, the patient goes to the emergency room for treatment by the hospital and not for care by a specific physician. In Pancoast v. Northeastern Hosp., 24 Phila. 26, (Phila. City Reporter, 1992) the court found that a finding of ostensible agency theory could be proven by evidence other than the plaintiff decedent’s testimony. In Pancoast, the ostensible agency relationship was proven by the proximity of the hospital to the decedent’s home, the fact that decedent sought emergency room services, and the lack of evidence that the decedent was informed of the independent contractor status of the physicians.

However, outside of the emergency room setting, the Pennsylvania Superior Court has only made a single finding of ostensible agency. In Goldberg v. Isdaner, 780 A.2d 654, 660 (Pa. Super. 2001) the Superior Court found that an independently contracted obstetrician was an ostensible agent of the co-defendant hospital. The factors the court considered were the location of the physician’s office in the hospital; consent forms which indicated the physician’s affiliation with the hospital; a hospital brochure that identified the physician as a hospital team member; and the statement by the plaintiff that she was not informed of the contractor status of the physician. The court held that this combination of factors created a reasonable belief by the plaintiff that the physician was a hospital agent.

From these Pennsylvania cases, it is evident when a patient enters a hospital through the emergency room or the hospital portrays the physician as hospital team member, the physician caring for the patient will likely to be found an ostensible agent, unless the patient is clearly informed of the contractor status of the physician. This can be accomplished by a clearly worded and clearly explained Patient Consent for Treatment Agreement. However, hospitals will have to weigh the potential consequences of this disclaimer upon the confidence of the patient in the hospital to provide adequate care.

The second prong of the ostensible agency doctrine requires the analysis of the professional relationship between the independently contracted physician and the hospital. A hospital can be judged to have "held out" an independently contracted physician as their employee when, "the hospital acts or omits to act in some way which leads the patient to reasonably believe they are being treated by the hospital or one of its employees." Capan, 287 Pa. Super. at 370, 430 A.2d at 649. However, in Stip v. Kim, 874 F. Supp. 663 (E.D. Pa. 1995), applying Pennsylvania law, the court specifically noted that a hospital’s failure to deny an employer/employee relationship with a physician did not rise to the level of holding him out as its agent.

Importantly, Pennsylvania Courts have not extended the finding of ostensible agency beyond the emergency room to physicians who participate in hospital based practices. There are no cases that have found an ostensible agency relationship between hospitals and pathologists, or hospitals and anesthesiologists. In the case of radiologists, the courts have found that when a patient is referred to an outpatient center solely for radiology services, the finding of an ostensible agency relationship can be appropriate. The Courts’ analysis mirrors the finding of the ostensible agency relationship in the emergency room setting. In Fulton v. Schwartz, 22 Pa. D.&C.4th 206 (1994), the plaintiff, who had been referred to an out-patient radiology center, solely for the purpose of a mammogram, was successful in proving the existence of an ostensible agency relationship between the radiologist and the out-patient radiology center. The court explained that, "Dr. Edelstein read the mammogram and issued a report solely as a result of Sarah Ellen Fulton’s visit to Schwartz Park." Fulton, 22 Pa. D.&C.4th at 209. The court further explained that, Ms. Fulton was not referred to Dr. Edelstein, but to the Schwartz Park Center and in this circumstance she clearly looked at the Center as the provider of her care.

Persuasively, two separate Pennsylvania courts have not extended liability to hospitals related to the services of contracted radiologists. In Mazzarino v. Kushner, 36 Pa. D.&C.4th 517 (CCP York Cty. 1996), the court refused to find an ostensible agency relationship between a radiologist and a hospital where the radiologist allegedly misread a post-surgical x-ray. An independent radiology group had contracted with the hospital to provide all in-patient radiology services for the hospital. The contract also required the hospital to provide a free on-site office to the radiology group. In finding there was no ostensible agency, the court specifically explained that the fact that "the hospital provided free office space in the hospital and referred all the x-ray interpretation needs to Dr. Kushner’s group, is alone insufficient to raise a question as to the employment relationship to the hospital because the evidence does not demonstrate hospital control over the manner of Dr. Kushner’s work." Mazzarino, 36 Pa. D.&C.4th at 531.

Although the issue of ostensible agency may go to the jury if there are facts in dispute, if there are no material facts at issue, the court may enter summary judgment dismissing the hospital from litigation. In both Capan and Simmons, determinations of ostensible agency were ruled to require submission to the jury for determination of the existence of the ostensible agency relationship. When Capan went to trial, the trial judge refused to give the jury an instruction that would have allowed the finding of ostensible agency, thus removing from the jury the ability to make a factual finding that such a relationship existed. On appeal, the Superior Court determined that the trial court’s action was improper, because given the facts of that case, the jury could reasonably determine an ostensible agency relationship was present. Capan, 287 Pa. Super. at 370, 430 A.2d at 648. Importantly, however, in Capan, the plaintiff entered the hospital through the emergency room and the jury therefore could have concluded that the plaintiff relied upon the hospital rather than the care of a personal physician.

In Simmons, a plaintiff decedent committed suicide while he was an in-patient in the defendant hospital’s psychiatric unit. An independently contracted physician, who was the Chairman of the Psychiatry Department of the defendant hospital, admitted the plaintiff to the hospital from the emergency room. Further, the emergency room staff recommended this physician to the plaintiff decedent. Also, as the Chairman of the Psychiatry Department, the defendant physician was responsible for the administration of the department regarding medical staff membership and patient care. At trial, the court found that the defendant as a matter of law could not be the ostensible agent of the hospital. On appeal, the Superior Court reversed the trial court and found that the issue of ostensible agency should have been submitted to the jury because there was evidence in the record to support same. The Superior Court explained:

Based upon the principles enunciated by our court in Capan, … we find that the jury could have concluded that the decedent looked to the hospital for care and that the hospital held out the doctor as its employee.

Simmons, 332 Pa. Super. at 452, 481 A.2d at 874. Although the courts in Capan and Simmons held that the issue of ostensible agency should have gone to the jury, if there is no genuine issue of material fact, then it is appropriate for the court to decide this issue as a matter of law.

Although Summary Judgment may not always be appropriate it may be in certain cases. In Stip, the court entered summary judgment in favor of the defendant hospital based upon the lack of an ostensible agency relationship where there is no presentation of material fact that required presentation to the jury. "We find that Stip has not presented us with evidence that creates a genuine issue of material fact on this claim. She presents evidence that she looked to the hospital for care, but she does not present any evidence that the hospital held out Dr. Kim as its agent." Stip, 874 F. Supp. at 665. The plaintiff in Stip entered the hospital to have a breast reduction surgery by Dr. Kim. She presented evidence that it was her belief that Dr. Kim was an employee of the hospital. She offered no other evidence regarding the relationship of Dr. Kim to the hospital. The court held that the evidence must be presented to meet both prongs of the standard in order to support a finding of ostensible agency. Because plaintiff failed to offer evidence to meet both prongs, summary judgment was proper.

Thus, under this standard, it is proper for the court to grant summary judgment when there is a lack of material evidence that establishes ostensible agency relationship exists under both prongs of the ostensible agency theory. This is the state of the law as it applies to hospitals and contracted physicians for all incidents of that occur prior to March 20, 2002. However, the passage of the MCARE Act and the Parker v. Freilich, Pa. 2002 Pa. Super. 188 (2001) decision have brought new changes to the ostensible agent theory.

Pennsylvania Bill 1802, the MCARE Act, has created a new standard for the determination of ostensible agency. Section 516, Ostensible Agency, states:

A hospital may only be found vicariously liable for the acts of another healthcare provider when (1) a reasonably prudent person would be justified in the belief that the care in question is being rendered by the hospital or its agents, or (2) the care in question was advertised or otherwise represented to the patient as care being rendered by the hospital or its agents.

The first standard is unchanged from the tests established in Capan. However, the second prong now includes advertising by the hospitals as evidence of an ostensible agency relationship. More importantly, the standard is no longer conjunctive requiring that both prongs be met before a finding of ostensible agency. It is a disjunctive standard that can be met by providing adequate evidence under either prong. Additionally, the Act does offer some guidance as to the evidentiary burden to prove a relationship of ostensible agency. The Act states that , evidence that a physician holds staff privileges is insufficient to establish ostensible agency. This new standard will apply to all actions that accrue after March 20, 2002.

A further extension of the laws of ostensible agency occurred in the opinion of Parker v. Freilich, Pa. 2002 Pa. Super. 188 (2001). The Superior Court extended the finding of ostensible agency to a physician for the actions of an independently contracted nurse anesthetist. In Freilich, physician was placed in the same position as a hospital under the ostensible agency theory and the same two prongs of the test were applied. Ostensible agency is found (1) whether the patient looks to the institution, rather than the individual physician for care, and (2) whether the hospital holds out the physician as its employee. Appellant, Mary Parker, entered into a physician/patient relationship with Howard S. Freilich in 1997. Dr. Freilich recommended the patient to undergo a sigmoidoscopy for evaluation of a polyp. He stated that his office facilities were equivalent to those of a hospital and the procedure could be safely performed there.

Dr. Freilich engaged the services of a registered nurse anesthetist to assist him with the performance of this procedure. The nurse anesthetist performed a separate assessment of the patient and required the patient to fill out forms that bore the letterhead of Anesthesia Associates. However, the plaintiff was never directly informed of the contractor status of the nurse. When the plaintiff filed suit, Dr. Freilich was not alleged to be directly negligent in this case. The only alleged injury was attributed to the negligence of the nurse anesthetist as the complained of injury related to only the actions of the nurse anesthetist. This was a case of first impression for the Commonwealth. In finding that the nurse anesthetist was the ostensible agent of the physician, the court explained:

When you are faced with an issue of Ostensible Agency, it is critical to seek legal counsel early in the litigation process. It may seem an insurmountable issue; however, under current Pennsylvania law, there is no need for an independent physician to be deemed an ostensible agent