On Going Requirements to Maintain Staff Privileges Do Not Make the Independent Physician an Actual Agent of the Hospital

Aug 30, 2016

Saurbier

Laster v Henry Ford Health System, et al.  324739 Mich App 2016 (August 23, 2016; For Publication)

The Court of Appeals ruled that although a hospital exerted control over independent physicians in the form of ongoing obligations in order main staff privileges, such as comprehensive on-call requirements, this does not constitute the type of control necessary to make the physician an actual agent of the hospital.  (Note that this Opinion did not address ostensible agency, in which the physician allegedly appears to be an agent by the Hospital’s actions or representation to the patient. The Court noted the patient signed a “contract” – the Consent Form – acknowledging the physician was not an employee.)

This matter involved an independent surgeon, Dr. Lim, who had staff privileges at multiple hospitals, including Henry Ford Hospital – Macomb.  He was not paid by Henry Ford Hospital or any other hospital, and billed separately for services.  There were multiple requirements by the Hospital with which he was obligated to comply in order to maintain staff privileges, such as an “extensive” on-call agreement.

Under common law agency principles the determination of whether a person is actually an agent/employee or an independent contractor depends on the degree of control the principal has over the job and the way the person does that job.  An independent contractor, generally, is one who is hired to do a job, but is not told how to do it.  The contractor selects the tools and methods.  In an agency situation, the principal provides the tools and tells the contractor how to use them to complete the job, thus controlling the method.

Plaintiff claimed that the degree of control by the Hospital, including extensive obligations independent physicians had to fulfill to maintain staff privileges, such as a comprehensive “on-call” requirement, constituted sufficient control over the physician to possible constitute an agency relationship.  The trial court held that this raised a question of fact as to whether the physician was an actual agent, and denied the Hospital’s motion for summary disposition.

The Court of Appeals disagreed, holding that the type of control exerted by the Hospital did not create an actual agency.  “[I]t is clear that not just any type of ‘control’ will suffice to transform an independent contractor into an employee or agent; rather, the ‘control’; must relate to the method of work being done.” The Court held that the Hospital did not have the right to supervise the physician, or have input into the physician’s treatment of patients.  It had no control over the method of his work.  Dr. Lim could generally select his own patients, and was not required to use the hospital’s administration for billing.  He was not paid by the Hospital.

In regard to the on-call requirements, while the policy required minimum response times, minimum admission levels, and required at least one office visit after discharge, this did not constitute control over methods of treatment or diagnosis.  The requirements for a hospital to maintain “some logistical and quality-assurance measures does not rise to the level of ‘control over the method of Dr. Lim’s work.”

Analysis:  This was an attempt to create an employment relationship out of which to impose liability on Hospitals for independent physicians’ actions. It was not a Grewe agency case in which the question was whether the hospital made it look like the doctor was its employee.  The plaintiff’s tactic was clever, as the plaintiff avoided the “Grewe” type of issues, and looked to the contract and between the hospital and the physician, leaving the plaintiff patient’s reasonable belief entirely out of the equation.