Liability of Hospitals

In general, the rules of agency law hold principals responsible for the negligent acts of their agents. Principals provide their agents with authority to act on their behalf, and agents owe certain duties to their principals in exchange. Agency relationships arise in many contexts, but the most common example in personal injury cases is the employer-employee relationship. Under the doctrine of respondeat superior (in Latin, “let the master answer”), the employer is legally responsible for the harm caused by their employee so long as the employee was acting within the scope of their employment.

As an example, assume that a neurosurgeon is negligent during a procedure to remove a brain tumor, leaving the patient with a permanent impairment she would not have suffered otherwise. If the neurosurgeon is a hospital employee, under respondeat superior, the hospital (principal) would be considered vicariously liable for the acts of the neurosurgeon (agent), and the patient is free to sue both the surgeon and the hospital in any resulting lawsuit.

But what happens if the neurosurgeon is not an employee of the hospital? We commonly see non-employee physicians working in hospitals in two scenarios. First, in New Hampshire specifically, it is common for hospitals not to directly employ any radiologists, anesthesiologists, surgeons, infectious disease specialists, etc. Instead, these physicians will often practice in specialty groups and the groups enter into contracts with the hospitals that grant them privileges to provide services at the hospital.

A second scenario in which physicians, nurses, and medical techs work at a hospital but are not employees is one that preexisted the pandemic but became far more common as a result of the pandemic. These health care providers are called locum tenens providers. They work for the hospitals on a temporary basis, sometimes far from their homes. The medical industry has relied on such independent contractor providers to address staffing shortages and/or provide more expansive medical services to a patient population. In fact, a survey published in 2022 by AMN Healthcare found that 88% of healthcare facilities used locum tenens providers at some point during the last year.¹ Anesthesiologists, hospitalists, and primary care physicians are among the most utilized specialties working in a locum tenens capacity. Id. With the current physician shortage expected to grow in the next decade, it will become more and more likely for patients to encounter a locum tenens physician as part of their care. Id.

Establishing vicarious liability can present a challenge to plaintiffs when bringing a lawsuit for medical negligence. This is because, as a general rule, employers are not liable for the acts of independent contractors. Using the example above, if the neurosurgeon was working as an independent contractor in a locum tenens capacity the plaintiff could proceed against and recover from the neurosurgeon’s insurance policy, but would be unable to establish liability against the hospital where the neurosurgeon was working. For the seriously injured patient, that could prove devastating by limiting her recovery to the neurosurgeon’s insurance policy limits. Ultimately, hiring independent contractors like locum tenens physicians gives healthcare facilities the added benefit of insulating themselves from liability for employee or agency negligence.

However, New Hampshire law states that the existence or absence of an agency relationship does not turn solely upon the parties’ belief that they have or have not created one. Dent v. Exeter Hosp., Inc., 155 N.H. 787, 792 (2007). In other words, just because the hypothetical neurosurgeon and the hospital claim that the former is an independent contractor, that does not mean the hospital is automatically released from liability. A plaintiff can still pursue a claim against the hospital under the theories of actual or apparent agency.

When determining whether an actual agency relationship exists, a court will examine three factual elements: 1) authorization from the principal, 2) the agent’s consent to act, and 3) the understanding that the principal is to exert some control over the agent’s actions. Id. at 792. If the neurosurgeon and the hospital execute a written independent contractor agreement, the first two prongs of the test would customarily be satisfied. Control, on the other hand, requires a showing that the principal “manifes[t] some continuous prescription of what the agent shall or shall not do.” Dent, 155 N.H. at 792 (quoting Herman v. Monadnock PR-24 Training Council, 147 N.H. 754, 758-59 (2002)). Such a finding is dependent on the facts of each case, but the court takes into account whether decisions regarding the diagnosis and treatment of patients remain exclusively with the physician, or if the hospital dictates those decisions. Dent, 155 N.H. at 792. Using our example, the plaintiff could succeed on the theory of actual authority if the neurosurgeon and hospital executed an independent contractor agreement, yet the hospital retained exclusive control of patient care decisions. In reality, that scenario is unlikely, therefore, a claim of apparent agency may be advisable.

Apparent authority exists where the principal conducts itself in a manner that would cause a third party to reasonably believe that the agent is authorized to act on behalf of the principal. Id. In other words, a court may rule that an apparent agency relationship exists if the principal makes representations that would cause a reasonable person (i.e., the average patient) to infer that the agent has authority to act on the principal’s behalf. For hospitals in particular, whether or not the prospective patient is given a disclaimer form informing him or her that the provider is an independent contractor carries significant weight. Seymour, et al. v. Gill, et al., 07-C-0037 (Carroll Super. Ct. Aug. 8, 2008).² Other factors include representations made by the principal through its advertising, website, or signage, especially if the principal uses language promoting the idea that the principal and agent are working together as a team. Boynton, 154 N.H. at 595. A judge may also consider whether a hospital stands to benefit financially from the relationship. Capecelatro v. Knapp, 2017 N.H. Super. LEXIS 15, *14 (Rockingham Super. Ct. June 27, 2017). Ultimately, it’s up to the judge to decide whether or not apparent agency exits between a hospital and health care provider.

¹ https://www.amnhealthcare.com/amn-insights/physician/surveys/survey-2022-locum-tenens-staffing-trends/
² See also Boynton v. Figueroa, 154 N.H. 592 (2006); Ural v. Levy, 2003 U.S. Dist. LEXIS 11122 (D.N.H. June 30, 2003)