Recent Developments in Hospital Liability

By Kevin F. Dugan and Randolph J. Reis

The number of legal theories which have been asserted against hospitals in medical negligence cases has increased dramatically in recent years. This can be explained by the courts’ gradual recognition that restrictions on hospital liability are generally inappropriate in light of the dual role that the modern hospital plays as both a community medical center and a corporate enterprise. In response to this realization, certain common law theories of vicarious liability have been adapted to the hospital-physician-patient relationship.

In New Hampshire, the Supreme Court has not yet expressly ruled on any of these recent developments. This article, therefore, is intended to address the emerging trends in the area of hospital liability, and where possible, to give the New Hampshire law that is most relevant to the potential for future application of each theory in this state.

I. DIRECT LIABILITY:

A. INTRODUCTION:

In 1939, the New Hampshire Supreme Court expressly refused to follow the prevailing view at the time and held that a hospital was not shielded from liability by the doctrine of charitable immunity.¹ This holding cleared the way for the courts to apply to hospitals the familiar standards of negligence. Since that time, New Hampshire hospitals have faced suits alleging direct negligence on their part under a variety of circumstances.

It is beyond question that a hospital, as an entity, owes a duty of care to its patients which is independent of that owed by the physicians practicing within its walls.² In fact, in 1962, the New Hampshire Supreme Court articulated this duty as one requiring that the hospital possess the knowledge and exercise the care and skill of the ordinary hospital in the same or similar localities.³ The geographical element imposed by this standard has been disposed of by statute⁴ and now New Hampshire courts employ a “national standard.”⁵ The plaintiff is also statutorily required to prove by expert testimony the prevailing national standard of care at the time of the injury.⁶

There is no question that New Hampshire has a long tradition of allowing hospitals to be sued for their own negligence.⁷ However, there are many recently adopted theories of liability which have yet to be ruled upon by the New Hampshire Supreme Court in this context.

B. STRICT LIABILITY:

Plaintiffs’ attorneys in other states have attempted to bring strict liability claims against hospitals in a number of contexts with little apparent success.⁸ For example, a California appellate court held that the doctrine of strict liability did not apply to a defective needle furnished by the defendant hospital which broke off during a surgical procedure and became lodged in the plaintiff’s body.⁹

More recently, plaintiffs have tried to utilize strict liability theory in suits involving the transfer of blood containing the HIV virus. Once again, strict liability and, in fact, negligence actions, appear to be generally unsuccessful up to this point.¹⁰ In New Hampshire, the application of strict liability and implied warranty theories to actions arising out of blood transfusions has been statutorily prohibited.¹¹

C. COBRA:

Another emerging field of hospital liability has been in the area of transferring patients improperly.¹² This is due to the enactment of the Emergency Medical Treatment and Active Labor Act as part of the Consolidated Omnibus Reconciliation Act of 1986 (COBRA).¹³

Under this provision of COBRA, hospitals that have emergency departments and participate in the MediCare program must provide screening examinations for all patients and treatment to those patients with emergency medical conditions. This provision was enacted to combat the problem of “patient dumping” whereby those in need of medical attention were refused treatment because they did not have medical insurance.¹⁴

The New Hampshire Federal District Court has held that the COBRA provision establishes a statutory duty of care which may, under the correct circumstances, be the source of negligence per se.¹⁵ However, in that case, the court determined that the plaintiffs were unable to demonstrate that their situation was the one intended to be addressed by the Act. The court found that the Act’s legislative history revealed that Congress’ intent was to provide assurance that the patient’s financial resources would not be taken into account when emergency care was needed. According to the court, however, plaintiffs here do not allege that their financial condition or lack of health insurance contributed to Dr. Estabrook’s decision not to treat their son. The interest which Congress sought to protect by enacting 42 U.S.C. s 1395dd was not invaded by the defendant’s conduct as here alleged and, accordingly, plaintiffs’ negligence per se theory cannot be sustained.¹⁶

The Virginia Supreme Court has engaged in an extensive discussion of the treatment and transfer provisions of COBRA as they relate to a hospital’s liability for transferring a patient who was apparently in the midst of premature labor.¹⁷ Significant in the opinion, is the court’s dismissal of the hospital’s argument that the statute applies only where the patient arrived through the emergency room and had not been stabilized prior to the transfer:

Patient dumping is not limited to a refusal to provide emergency room treatment. [Citation omitted] It occurs, and is equally reprehensible, at any time a hospital determines that a patient’s condition may result in substantial medical costs and the hospital transfers the patient because it fears it will not be paid for those expenses. Dumping a patient in this manner is neither related to, nor dependent upon, the patient arriving through the emergency room and never being stabilized.¹⁸

It is interesting to note that the court chose not to address the hospital’s argument that the plaintiff must plead an economic motivation for the transfer since it was this issue that was found to be dispositive in the aforementioned New Hampshire Federal District Court case.¹⁹ The Virginia case, however, is significant for its detailed consideration of the COBRA requirements and for its collection of cases applying them.

The true scope of COBRA’s effect on hospital liability is only beginning to emerge. A recent article in Lawyers Weekly USA analyzes the issue in exhaustive detail and finds that the case law and recently enacted regulations establish far greater application than merely in the area of patient transfer.²⁰

D. NEGLIGENT CREDENTIALING:

Hospitals have also been found negligent in their credentialing of physicians and granting of staff privileges. The Georgia Court of Appeals recently held that a hospital has a direct and independent responsibility to its patients to take reasonable steps to ensure that staff physicians using hospital facilities are qualified for privileges granted. [Citations omitted]. The hospital did owe a duty to plaintiffs’ decedent to act in good faith and with reasonable care to ensure that the surgeon was qualified to practice the procedure which he was granted privileges to perform.²¹

It is clear at this point that a hospital can be held liable not only for its independent negligence in failing to exercise care in the selection, credentialing, and retention of qualified physicians²², but also for its negligence in failing to exercise due care in the employment of qualified non-physician staff.²³

In New Hampshire, a cause of action based on negligent credentialing has been successful in several cases.²⁴

E. CORPORATE NEGLIGENCE:

As a final step in the discussion of direct hospital liability, it is necessary to address the theory of corporate negligence. The Supreme Court of Pennsylvania defined the theory in the following manner:

Corporate negligence is a doctrine under which the hospital is liable if it fails to uphold the proper standard of care owed the patient, which is to ensure the patient’s safety and well-being while at the hospital. This theory of liability creates a nondelegable duty which the hospital owes directly to a patient. Therefore, an injured party does not have to rely on and establish the negligence of a third party.²⁵

The court added that there are four general classes of duties which a hospital undertakes. These include 1) a duty to use reasonable care in the maintenance of safe and adequate facilities and equipment; 2) a duty to select and retain only competent physicians; 3) a duty to oversee all persons who practice medicine within its walls as to patient care; and 4) a duty to formulate, adopt and enforce adequate rules and policies to ensure quality care for the patients.²⁶ Taking notice of the fact that other jurisdictions had embraced the doctrine of corporate negligence in regard to hospital liability to the point that it is being called an “emerging trend,” the court adopted the theory and the four categories of duties it encompasses.²⁷

The Supreme Court of North Carolina employed the corporate negligence doctrine to find that the plaintiff had stated valid claims on a number of issues.²⁸ In particular, the court held that the hospital had a duty to ascertain that a doctor is qualified to perform an operation before granting him the privilege to do so.²⁹ It also found a duty based on the hospital’s failure to enforce the standards of the Joint Commission on the Accreditation of Hospitals which it had expressly adopted.³⁰ Additionally, the court held that the plaintiff would state a claim if she could prove that an agent of the hospital followed a physician’s order which was “so obviously negligent as to lead any reasonable person to anticipate that substantial injury would result to the patient by the execution of such order.”³¹ Furthermore, the hospital had a duty to monitor and supervise a doctor’s overall performance on an ongoing basis.³² Finally, the court found that the hospital would be liable for its failure to provide supervision or assistance to an unqualified surgeon if it actually knew that the surgeon was unqualified to perform the operation.³³

Although the doctrine of corporate liability is clearly the emerging trend, it has not been embraced universally. The Ohio Supreme Court has balked at what it feels is the progression toward strict liability that the doctrine represents.³⁴

II. VICARIOUS LIABILITY:

A. INTRODUCTION:

In New Hampshire, to date, the only theory of vicarious liability expressly adopted by the Supreme Court in the context of hospital liability has been respondeat superior.³⁵ However, several well established common law theories have been adapted to hospital law in state and federal courts throughout the country and the same rules would appear to obtain in New Hampshire.

B. APPARENT AGENCY/AGENCY BY ESTOPPEL:

For many years hospitals were able to avoid vicarious liability for the negligent acts of physicians who are affiliated with them by pointing to the fact that such physicians were independent contractors.³⁶ Beginning in the mid-1970s, however, and continuing on to the present, courts have applied the doctrine of apparent agency or agency by estoppel to hold hospitals vicariously liable for the negligence of independent contractor physicians.

Although there are scattered earlier cases from other jurisdictions recognizing the application of apparent agency to the hospital-doctor relationship³⁷, the genesis of the theory as it relates to hospital liability can be traced back to a 1957 case decided by the New York Court of Appeals.³⁸ In that landmark case, the court found that a hospital could be liable under respondeat superior for the negligence of its employees including physicians. In coming to this conclusion, the court made the following, often-quoted, observation:

The conception that the hospital does not undertake to treat the patient, does not undertake to act through its doctors and nurses, but undertakes instead simply to procure them to act upon their own responsibility, no longer reflects the fact. Present-day hospitals, as their manner of operation plainly demonstrates, do far more than furnish facilities for treatment. They regularly employ on a salary basis a large staff of physicians, nurses and internes, as well as administrative and manual workers, and they charge patients for medical care and treatment, collecting for such services, if necessary, by legal action. Certainly the person who avails himself of ‘hospital facilities’ expects that the hospital will attempt to cure him, not that its nurses or other employees will act upon their own responsibility.³⁹

Although this case presented an important step in the progression toward the apparent agency theory, it still applied only to actual employees of the hospital. The next necessary step was taken by a Delaware court in 1973.⁴⁰

In the Delaware case, a young child was negligently treated at the emergency room of a private hospital and the hospital, claiming that the emergency room physicians were independent contractors, argued that it was not vicariously liable for their negligence. The court began its analysis by quoting the precise passage from the earlier New York Court of Appeals case which is set forth above. It then added:

While the New York Court was undoubtedly speaking directly of a situation involving medical personnel who were clearly employees of the hospital, nevertheless, the rationale of the Court would apply equally to independent contractors performing medical services ordinarily performed by the hospital. This is particularly pertinent in situations where there has been a holding-out or a representation that medical treatment is to be performed or administered in the hospital by medical personnel employed therein.⁴¹

By 1985, when the Kentucky Supreme Court adopted apparent agency as a means of establishing hospital liability, the theory had already gained unanimous support from those jurisdictions that had considered the issue.⁴²

The most recent, comprehensive discussion of the theory of apparent agency or agency by estoppel in regard to hospital liability was authored by the Ohio Supreme Court.⁴³ Discussing the requirements of pleading such liability, the court stated as follows:

Without exception, and irrespective of whether Section 267 of the Restatement of Agency 2d or Section 429 of the Restatement of Torts 2d is utilized, the cases applying this kind of liability do not require an express representation to the patient that the treating physician is an employee of the hospital or direct testimony as to reliance. Rather, the element of representation is satisfied when the hospital holds itself out to the public as a provider of medical services, and the element of reliance is satisfied if the patient looks to the hospital, rather than a specific physician, to provide her with medical care.⁴⁴

The court found this to be justified in light of the present day realities relative to the modern hospital and the current health care system in general:

As an industry, hospitals spend enormous amounts of money advertising in an effort to compete with each other for the health care dollar, thereby inducing the public to rely on them in their time of medical need. The public, in looking to the hospital to provide such care, is unaware of and unconcerned with the technical complexities and nuances surrounding the contractual and employment arrangements between the hospital and the various medical personnel operating therein. Indeed, often the very nature of a medical emergency precludes choice. Public policy dictates that the public has every right to assume and expect that the hospital is the medical provider it purports to be.⁴⁵

As a result, the court held that [a] hospital may be held liable under the doctrine of agency by estoppel for the negligence of independent medical practitioners practicing in the hospital if it holds itself out to the public as a provider of medical services and in the absence of notice or knowledge to the contrary, the patient looks to the hospital, as opposed to the individual practitioner, to provide competent medical care.⁴⁶

The court then addressed the issue of adequate notice to a patient which would relieve a hospital of such liability and stressed that “such notice, to be effective, must come at a meaningful time.”⁴⁷ In a footnote, the court took issue with the suggestion that a hospital could avoid liability by posting signs in its emergency room regarding the legal relationship of the persons rendering medical assistance. Quoting from a Wisconsin Law Review Note, the court dismissed the argument raised by the dissent in the leading Wisconsin apparent agency case:

The plaintiff’s reliance upon the hospital’s competence has been demonstrated by her walking (or being wheeled) into the emergency room. Simply informing her that some doctors and staff have a different technical relationship with the hospital than the one she expected does not lessen the reasonableness of her reliance upon the hospital. Even if the patient understood the difference between an employee and an independent-contractor relationship, informing her of the nature of the relationship after she arrives is too late. The purpose of any notice requirement is to impart knowledge sufficient to enable the plaintiff to exercise an informed choice. The signs suggested by the dissent are too little, too late.⁴⁸

It is interesting to note, as the court mentions, that the courts have frequently used the terms apparent authority, ostensible agency, and agency by estoppel interchangeably and have cited to either section 267 of the Restatement 2d of Agency⁴⁹, section 429 of the Restatement 2d of Torts⁵⁰, both⁵¹, or neither⁵², to support their holdings. Only rarely has a court attempted to differentiate between these bases of liability.⁵³

Notwithstanding these minor variations, it is clear at this point that the courts have recognized the realities of the modern hospital as a full service health care provider. Prior to the recent adoption of the apparent agency theory by the Illinois Supreme Court⁵⁴, one district of the state court of appeals took the opportunity to criticize one of its sister district’s decisions which refused to recognize the theory⁵⁵:

Unsuspecting, Mr. Heubner wanders into the Galesburg Cottage Hospital with an injured wrist and is directed to the x-ray room. A doctor misreads the x-ray! Now Mr. Heubner is told that he cannot sue the hospital because there is a secret contract between it and the Galesburg Radiology Associates which maintains the x-ray department. When he sues Galesburg Radiology Associates, he is told he cannot recover against it because it has obtained a temporary doctor from a company called International Placement & Recruiting (a sort of rent-a-doc). He doesn’t join International Placement because they are just an employment agency. Based on Heubner, a patient in an emergency room should probably ask more questions than he gives answers. The burden of cutting through the legal maze is unreasonable and Heubner [and its parent cases] do not respond to the realities of a modern health care delivery system.⁵⁶

This passage serves to point out the absurdities which the apparent agency or agency by estoppel theory is intended to prevent. The universal adoption of this theory of vicarious liability on the part of a hospital for the negligence of its independent contractor staff physicians provides an excellent example of the flexibility of the law in adjusting to modern realities and the willingness of the courts to adapt to such societal changes.

Furthermore, the realities of the hospital visit must be taken into account. It is simply not realistic to expect patients seeking hospital treatment to understand that there might be secret contracts between the hospital and the physicians who work therein. As a result, the doctrine of apparent authority/agency by estoppel has been used to hold a hospital liable for the negligent acts of anesthesiologists⁵⁷, emergency room physicians⁵⁸, surgeons⁵⁹, and radiologists.⁶⁰ This reflects the reality that a hospital patient’s “non-selection of his physician is often the rule, rather than the exception.”⁶¹ Furthermore, as the Ohio Supreme Court has stated, notifying the patient of the legal and technical relationships between the physician and the hospital after they have entered the emergency room cannot seriously be considered sufficient to give them a choice in the matter of their treatment.

The New Hampshire Supreme Court has not yet been faced with the issue of whether the theories of apparent agencies or agency by estoppel apply in the context of hospital liability. As a result, New Hampshire is one of the few jurisdictions that has not expressly adopted either theory of hospital liability.⁶²

Neither has the Court had the opportunity to pass on section 267 of the Restatement of Agency or section 429 of the Restatement of Torts, the two authorities most often quoted in support of the application of apparent agency or agency by estoppel. However, the Court has recognized the theory of apparent authority in regard to whether an individual’s acts are binding on a purported principal. Like some of the courts mentioned above, the New Hampshire Supreme Court appears to have formulated a hybrid of apparent agency and agency by estoppel. In a 1984 case, the Court stated that the doctrine of apparent authority “rests on the general principle of estoppel by which one who has given a false appearance to a situation is barred from denying the falsity.”⁶³

It would appear that this language would provide a sufficient basis for the New Hampshire Supreme Court to join the rest of the jurisdictions that have been faced with the issue and apply the apparent agency/agency by estoppel doctrine in the context of the hospital-doctor relationship in light of the compelling arguments raised in the numerous cases applying the theory.

C. NON-DELEGABLE DUTIES:

Although the theory has not yet been addressed by New Hampshire courts in the context of hospital liability, the Alaska Supreme Court has applied the doctrine of non-delegable duty to hold a hospital liable for the negligence of its independent contractor physicians. For many of the same reasons courts have cited in adopting apparent agency or agency by estoppel theories of vicarious liability, the Alaska court held that

a general acute care hospital’s duty to provide physicians for emergency room care is non-delegable. Thus, a hospital . . . may not shield itself from liability by claiming that it is not responsible for the results of negligently performed health care when the law imposes a duty on the hospital to provide that health care.⁶⁴

By way of explanation, the court echoed the statements of many other courts regarding the realities of the present system:

We are persuaded that the circumstances under which emergency room care is provided in a modern hospital mandates the rule we adopt today. Not only is this rule consonant with the public perception of the hospital as a multifaceted health care facility responsible for the quality of medical care and treatment rendered, it also treats tort liability in the medical arena in a manner that is consistent with the commercialization of American medicine. Finally, we simply cannot fathom why liability should depend upon the technical employment status of the emergency room physician who treats the patient. It is the hospital’s duty to provide the physician, which it may do through any means at its disposal. The means employed, however, will not change the fact that the hospital will be responsible for the care rendered by physicians it has a duty to provide.⁶⁵

As a legal matter, the court found the hospital’s duty to be non-delegable by analogizing the hospital to a common carrier. In a previous case, the court had held that a common carrier has such an important responsibility for the safety of its passengers that its duty to protect them cannot be transferred to another.⁶⁶ In making this connection, the court made the following observation:

We have little trouble concluding that patients, such as Jackson, receiving treatment at a hospital emergency room are as deserving of protection as the airline passengers in Sweat. Likewise, the importance to the community of a hospital’s duty to provide emergency room physicians rivals the importance of the common-carriers’ duty for the safety of its passengers. We also find a close parallel between the regulatory scheme of airlines and hospitals. Undoubtedly, the operation of a hospital is one of the most regulated activities in this state.⁶⁷

It is the regulatory scheme that the court emphasized in finding the non-delegable duty. The comprehensive nature of state regulations, which the court pointed out were expressly intended to “promote safe and adequate treatment,” as well as the statutory definition of hospital as “an institution devoted primarily to providing diagnosis, treatment or care to individuals,” were specifically found to manifest the legislature’s recognition that it is the hospital as an institution which bears the ultimate responsibility for complying with the mandates of the law. It is the hospital that is required to ensure compliance with the regulations and thus, relevant to the instant case, it is the hospital that bears the final accountability for the provision of physicians for emergency room care.⁶⁸

The Alaska case clearly provides the most detailed discussion of the non-delegable duty theory as it relates to the hospital-independent contractor doctor relationship. Several years earlier, however, a division of the Washington Court of Appeals, analyzing the general issue of hospital liability, found that a Delaware court had “fasten[ed] on a non-delegable duty to the public which was assumed by the hospital when it, although not required by law to do so, elected to staff and maintain emergency room services as part of its total hospital enterprise.”⁶⁹

In a footnote, the Washington court reviewed the extensive state rules and regulations applicable to hospital emergency services in that state, much like the Alaska court did, and came to the conclusion that “[i]t could thus be argued that Washington state has imposed upon hospitals a duty to provide emergency care services to the public and that they cannot shift the responsibility by contract.”⁷⁰ Unfortunately, the non-delegable duty concept was neither developed nor argued at trial nor was it argued on appeal, so the court refused to address the merits of the issue.

The New Hampshire Supreme Court has acknowledged the non-delegable duty theory in several contexts.⁷¹ In one early case, the Court found that a duty imposed by law cannot be delegated to an independent contractor to escape liability.⁷² In that case, the Court held that “where the duty sought to be enforced is one imposed by law upon the defendant, he cannot escape liability by showing that he employed another, over whom he had no control, to perform it for him.”⁷³

The Alaska court used similar reasoning and relied on the fact that state regulations imposed duties upon the hospital to support its conclusion that the delegation of these duties could not alter the hospital’s liability for their breach.

In light of the New Hampshire Supreme Court’s statement that one upon whom a duty imposed by law has devolved cannot escape liability for the breach of that duty by delegating its performance to an independent contractor, it is reasonable to expect that a hospital would be held liable for the negligence of its independent contractor physicians which constitute a breach of some statutory or regulatory duty. Such legally imposed duties may be found in the statutory “Patients’ Bill of Rights”⁷⁴ and in the state administrative rules governing the operation of hospitals.⁷⁵

New Hampshire has formally adopted section 413 of the Restatement (Second) of Torts⁷⁶ and the rule that “one who undertakes an inherently dangerous activity has a non-delegable duty to protect third parties against injury resulting from that activity.”⁷⁷ This rule has been applied in the hospital context.

The New Hampshire Federal District Court, in a diversity suit, recently applied section 413 to find that a hospital was not entitled to dismissal of a count alleging that a procedure in which a high speed drill was used to perform spinal surgery on the plaintiff at the hospital had resulted in injury to her.⁷⁸

Senior Judge Devine held that the plaintiff had alleged a valid duty under New Hampshire law in regard to the requirements of section 413 of the Restatement. Furthermore, he found that the question whether an activity is inherently dangerous is one to be determined by the trier of fact.⁷⁹

D. RESPONDEAT SUPERIOR:

Hospitals in New Hampshire have been subject to vicarious liability for the negligence of their employees under the theory of respondeat superior since 1939.⁸⁰ The New Hampshire Supreme Court applied the doctrine to hold the hospital liable for the negligence of a laboratory technician who was found to be an employee of the hospital. But, the Court also found that the theory was not applicable to the physician who treated the plaintiff at the hospital.

The law at that time was dominated by a 1914 New York Court of Appeals case holding that respondeat superior was not to be applied to doctors or nurses even if they were employees of a hospital.⁸¹ These particular employees were to be regarded as independent contractors due to their level of skill and the lack of control exerted by their employers.

It was not until 1957 that the New York court, citing the realities of the modern hospital, overturned its previous decision and held that, regardless of the actor’s professional status, the issue was whether the negligent actor was an employee of the hospital and, if so, whether he or she was acting within the scope of his or her employment at the time.⁸²

It is now generally accepted that a hospital will be vicariously liable under the theory of respondeat superior for the negligence of its professional employees. However, as is clear from the foregoing, it is not always easy to determine who is an employee and who is an independent contractor.

In 1972, a panel of the Arizona Court of Appeals, citing to the New York case and quoting an earlier California Supreme Court opinion⁸³, stated that “a nurse or physician may be the servant of a hospital, thus requiring the application of the doctrine of respondeat superior even though they are performing professional acts.”⁸⁴

The court listed several factors in coming to the conclusion that the physician-radiologist was an employee of the hospital. In particular, the court relied on the fact that 1) the doctor was co-chairman of the hospital’s x-ray department; 2) his contract with the hospital made him an employee of the hospital; 3) working hours, vacation time, billing and employment of technicians were all controlled by the hospital; 4) “it is well known that hospitals undertake control of the highly technical service with which they deal through overseeing boards and supervisors and peer group mechanisms of various types”; 5) the hospital had the right to control the standards of performance of this particular radiologist; 6) the radiologist was employed for an extended period of time (five years); and 7) all facilities and instrumentalities were provided by the hospital together with all administrative services for the radiology department.⁸⁵

Significantly, the court refused to give any weight to the consent form signed by the plaintiff as a condition of admission to the hospital which recited that all doctors, including the radiologist, who perform services at the hospital are independent contractors and not employees or agents of the hospital. The court found this document to be ineffective because its mere recitation that the radiologist was an independent contractor did not make him one where the facts indicated an employer-employee relationship.⁸⁶

An intermediate appellate court in New York came to the same conclusion in regard to a physician who was in charge of the emergency room at the defendant hospital.⁸⁷ In that case, the court found as follows:

While conducting the operations of the Emergency Room, the doctor was to do so in accordance with the rules and regulations of the defendant hospital’s governing board. Thus, under contract, the doctor was not only bound to achieve a certain result, i.e., direct and supervise the Emergency Room, but was controlled by the defendant hospital as to the means or manner of achieving this result. Since the hospital controlled the manner in which the doctor operated the Emergency Room, Dr. Bitash was not an independent contractor but an employee of defendant hospital.⁸⁸

More recently, the North Carolina Court of Appeals held that it was a question of fact whether an emergency room doctor was an employee of the defendant hospital.⁸⁹ After scrutinizing the physician’s contract with the hospital, the court, touching on many of the same factors as did the Arizona court above, held that “[t]here is abundant evidence in defendant Cain’s contract to show that defendant hospital exercised significant control over defendant Cain’s method of performing his duties.”⁹⁰

It is clear that the courts which have had to determine whether a physician is an employee of a hospital have focused on the hospital’s right to control the details of the physician’s work. In New Hampshire, however, this factor has been significantly downplayed in regard to the general issue of employee vs. independent contractor.

In fact, the New Hampshire Supreme Court has said that “generally the control factor has been overemphasized in judicial reasoning [citation omitted] and we are usually concerned with whether on all the facts the community would consider the person an employee.”⁹¹ Toward this end, the Court has adopted the factors set forth in section 220 of the Restatement 2d of Agency as relevant items to consider in a “totality of the circumstances” test⁹², which is normally to be applied by the jury.⁹³

The respondeat superior liability of a hospital for the negligence of a physician in this state, therefore, would turn on the application of the totality of the circumstances test to the facts of the particular case, with the ultimate question being whether on all the facts the community would consider the person an employee.⁹⁴

The role of respondeat superior as it applies to nurses presents its own series of significant issues. As an initial matter, it is clear that a nurse who is an employee of a hospital will subject the hospital to vicarious liability for his or her negligent acts committed in the scope of his or her duties as an employee of the hospital.⁹⁵

The problematic issue arises where the nurse’s negligence is committed while he or she is assisting a physician during surgery. In such a case, the hospital is likely to argue that the nurse was the borrowed servant of the physician at the time that the negligent acts occurred and that it is, therefore, not liable.⁹⁶

The Georgia Supreme Court has analyzed this issue in a comprehensive manner.⁹⁷ It has devised a two-part test for determining whether a hospital is liable for a nurse’s negligent acts in the operating room:

First, the hospital which seeks to escape liability must show that it has yielded control of its employees who are assisting in a surgical procedure. Next, the hospital must show that the employees whose negligence the hospital seeks to impute to the surgeon are under the ‘immediate supervision’ of the surgeon.⁹⁸

Moreover, the court reiterated the application of the distinction between administrative tasks and medical tasks⁹⁹:

The borrowed servant rule [is] applicable only in regard to tasks involving professional skill and judgment. There is no transfer of liability for the negligence of an employee in the performance of clerical or administrative tasks not requiring the exercise of medical judgment even though these tasks are related to the treatment of the patient. We find that the fact that the negligence occurs in an operating room does not relieve the hospital of liability for the administrative or clerical acts of its employees.¹⁰⁰

Applying these rules to the factual situation of the case at hand, the court held that the hospital was liable for the failure of the nurse to account for a surgical instrument which was left in the patient’s stomach. The court found that “the counting of sponges, instruments and other items which could be left in the patient during an operation is generally considered an administrative act rather than an act requiring the exercise of professional skill or judgment.”¹⁰¹

The borrowed servant issue in New Hampshire is determined by the same “totality of the circumstances” test referred to above.¹⁰² The same Restatement section 220 factors are utilized, in essence, to determine which party was the employer of the subject at the relevant time. Its application to a nurse in an operating room would obviously depend upon the particular facts of the case.

E. JOINT VENTURE:

The concept of a joint venture has not been applied to the relationship between a hospital and a physician or physician group in New Hampshire. However, given the right facts, New Hampshire joint venture law would appear to sustain such a claim.

The Federal District Court for the District of New Hampshire recently engaged in a detailed discussion of the basic issues involved in determining whether a business arrangement is or is not a joint venture.¹⁰³ In that case, then Chief Judge Devine was faced with determining whether a lender and borrower were actually engaged in a joint venture, as opposed to a strict debtor-creditor relationship. In New Hampshire, the rules governing a joint venture are the same as those governing partnerships. The only difference is that a joint venture involves a single venture while a partnership involves a general business relationship.¹⁰⁴

In determining whether parties are involved in a joint venture the key factor is the intent of the parties.¹⁰⁵ Such intent may be expressly stated, either in writing or orally, or it may be inferred from the parties’ actions.¹⁰⁶ Chief Judge Devine found that the issue of intent is generally a question of fact¹⁰⁷, “however, when a contract establishing the parties’ relationship is clear and unambiguous, intent is determined solely from the contract, . . . and may be resolved by the court as a question of law.”¹⁰⁸

Addressing the particular elements necessary to find a joint venture, the court cited a 1944 New Hampshire Supreme Court case for the proposition that “a right of mutual control over the subject-matter of a joint venture is essential.”¹⁰⁹ Furthermore, “evidence regarding the sharing of profits is not enough to establish the essential elements” of a joint venture.¹¹⁰ Finally, the court gave effect to a written agreement between the alleged joint venturers which recited that the parties’ relationship was strictly a debtor-creditor relationship and that the lender was not to be treated as a partner or a co-venturer with the borrower. Although the court was free to ignore such an express contractual provision if the actual intent of the parties was clearly different, Chief Judge Devine found that the plaintiff had failed to establish such a difference.¹¹¹

What can be inferred from the court’s comprehensive review of New Hampshire joint venture law is that, in determining whether a hospital and a physician (or physician group) have entered into such a relationship, the actual intent of the parties is key. An express contractual disclaimer will not be given effect if the facts of the relationship establish the elements of mutual control and shared rights to profits and shared responsibility for losses.

In 1987, a district of the Florida Court of Appeals, essentially applying the same rules detailed above, held that a hospital could be vicariously liable for the negligence of an anesthesiologist on the grounds that the hospital and the anesthesiology group had entered into a joint venture.¹¹² The court began by setting forth the elements of a joint venture as 1) a community of interest in performance of a common purpose; 2) joint control or right of control; 3) a joint proprietary interest; 4) a right to share in profits; and 5) a duty to share in losses.¹¹³

Addressing the facts of that case, the court made the following observations:

Here there was evidence of a common purpose, where each party needed the other, as in any partnership in which each partner brings to the enterprise capital, skills, labor, licensing, resources, or knowledge not possessed by the other. In this arrangement, there was evidence of shared control, which was split or divided by mutual agreement between the defendants. Each had control over some aspect of providing anesthesiology services; neither had exclusive control.¹¹⁴

Furthermore, the court found that the hospital and anesthesiology group had a joint interest in the financial benefits and profits generated by the combination of their resources and services. Profits and losses were shared on a pro rata basis, with one party having to bear the cost of facilities, equipment and supplies, and the other the cost of services.¹¹⁵

The court next disposed of the hospital’s contention that the legal concept of a joint venture is not sustainable in a hospital-physician context:

No legal or policy reason exists preventing a hospital from entering into a joint venture agreement with a provider of medical services. The fact that the physicians have an obligation to maintain control over their medical judgment does not prevent them from entering into a joint venture contract which recognizes their professional and ethical obligations to their patients, any more than it would prevent a physician or nurse from becoming a hospital employee while still retaining his or her professional responsibility.¹¹⁶

The court appeared to be particularly focused on the fact that the hospital and the anesthesiology group had agreed upon a percentage split of the fees generated by the group. It rejected the argument that the hospital was merely being paid for the billing services it provided in light of the fact that this percentage agreement preceded the billing services agreement.¹¹⁷

As a final matter, the court made the following statement:

The hospital’s argument that countervailing policy considerations weigh against applying a joint venture concept to this type of arrangement overlooks the right of a party to enter into any contract or agreement permitted by law. Having voluntarily done so, the hospital must now share in the legal consequences.¹¹⁸

More recently, the First Circuit, in a case applying Puerto Rico law, held, without further analysis, that it was clear that “granting staff privileges coupled with a joint sharing in profits, left the hospital fully responsible” for the negligence of a staff pathologist.¹¹⁹

F. ENTERPRISE LIABILITY:

In the previously mentioned Alaska case¹²⁰, the plaintiff attempted to convince the court to adopt an enterprise liability theory based on that court’s earlier pronouncement that vicarious liability is proper where an enterprise impacts society and the negligent act occurs during an activity performed for the benefit of the enterprise.¹²¹ The court, however, refused to find that its earlier case stood for such a broad proposition, instead determining that the enterprise theory is merely a part of the theory of respondeat superior. It is to be applied only in the context of an established employer-employee relationship, where “the enterprise of the employer would have benefited by the context of the act of the employee but for the unfortunate injury.”¹²² Accordingly, the plaintiff must prove the existence of the traditional master-servant relationship before invoking this theory, thus rendering it useless in the context of the independent contractor physician situation.

The court did acknowledge that at least two other courts have appeared to implicitly indicate a willingness to recognize the enterprise liability theory in the hospital context.¹²³ Moreover, the court recognized that some commentators have suggested the imposition of enterprise liability for any tort committed as part of the hospital enterprise.¹²⁴ However, it found that, to date, no court had explicitly embraced the concept, nor was it yet the law in Alaska.¹²⁵

III. CONCLUSION:

It is clear from the foregoing that, no matter what theory they choose to employ, the courts are increasingly willing to hold hospitals liable for injuries suffered within their walls. In support of this, the courts frequently point to the modern realities of the present-day hospital-patient relationship and the significant commercialization of the health care industry in general.

In this regard, the words of the Wisconsin Supreme Court are particularly significant:

Modern hospitals have spent billions of dollars marketing themselves, nurturing the image with the consuming public that they are full-care modern health facilities. All of these expenditures have but one purpose: to persuade those in need of medical services to obtain those services at a specific hospital. In essence, hospitals have become big business, competing with each other for health care dollars. As the role of the modern hospital has evolved (much of it self induced), so too has the law with respect to the hospital’s responsibility and liability towards those it successfully beckons.¹²⁶

The most eloquent and compelling explanation for imposing liability on hospitals, however, was written by the Arizona Court of Appeals in 1972:

Having undertaken one of mankind’s most critically important and delicate fields of endeavor, concomitantly therewith the hospital must assume the grave responsibility of pursuing this calling with appropriate care. The care and service dispensed through this high trust, however technical, complex and esoteric its character may be, must meet standards of responsibility commensurate with the undertaking to preserve and protect the health, and indeed, the very lives of those placed in the hospital’s keeping.¹²⁷

Endnotes

1. Welch v. Frisbie Memorial Hospital, 90 N.H. 337 (1939).
2. See Emerick v. Raleigh Hills Hospital, 184 Cal.Rptr. 92, 95 (Cal.App. 1982)(“As a general rule of law, a private hospital owes its patients a duty of protection and must exercise such reasonable care towards a patient as his or her known condition may require.”).
3. Carrigan v. Sacred Heart Hospital, 104 N.H. 73, 74 (1962).
4. New Hampshire Revised Statutes Annotated [hereinafter R.S.A.] 507-E:2 (Supp. 1993) and R.S.A. 508:13 (Supp. 1993).
5. 8 Richard McNamara, New Hampshire Practice, Personal Injury, section 194 (1988).
6. R.S.A. 507-E:2, I(a) (Supp. 1993).
7. See Wheeler v. Monadnock Community Hospital, 103 N.H. 306 (1961);
   Carrigan, supra note 3;
   Blastos v. Elliott Community Hospital, 105 N.H. 391 (1964);
   Bricker v. Sceva Speare Memorial Hospital, 339 F.Supp. 234 (D.N.H. 1972); and
   Noyes v. Moyer, 829 F.Supp. 9 (D.N.H. 1993).
8. See Annotation, Physicians; Hospitals – Strict Liability, 54 A.L.R.3d 258, section 2(a), (1974 and Supp. 1994).
9. Silverhart v. Mount Zion Hospital, 98 Cal.Rptr. 187, 54 A.L.R.3d 250 (Cal.App. 1971).
10. See Annotation, supra note 8, at section 4, 6 (Supp. 1993); and
    Annotation, Blood Transfusion Liability, 24 A.L.R.4th 508, section 6.5 (Supp. 1993).
11. R.S.A. 507:8-b (Supp. 1993).
    But see Branch v. Willis Knighton Medical Center, 636 So.2d 211 (La. 1994) (Hospital blood bank may be held liable under strict liability theory for selling contaminated blood notwithstanding blood shield statute which cannot be applied retroactively).
12. See Alden v. Providence Hospital, 382 F.2d 163 (D.C.Cir. 1966)(Directed)