HANDS ON In medical malpractice litigation, courts have frequently found surgical facilities liable for anesthesia providers and other contract employees.

As you probably know, under the legal doctrine known as vicarious liability, a surgical facility can find itself in the crosshairs of a medical malpractice lawsuit due to the actions or inactions of the employees it has hired to its staff. That means that a doctor, for example, may not be the only defendant in a negligent lawsuit — a hospital or surgical center that retained the doctor on its staff may be as well. But you may not be aware that vicarious liability extends your legal responsibility to the damages caused by non-employee patient care subcontractors as well. Read on to find out how to manage your facility's vicarious liability risk.

It's not uncommon in the outpatient surgery arena for service providers to be engaged as subcontractors (that is, governed by a 1099 tax status) rather than employees (W-2 tax status). Surgical facilities can be exposed to liability by contract employees in many positions: anesthesia providers, per-diem nurses, physician assistants and physicians themselves.

Even such outsourced, external services as instrument reprocessing, surgical equipment rental and technical consulting, and pre-owned equipment dealers can put facilities in the hot seat. It's important for you to understand that the business models of contract employees or outsourced services do not insulate your facility from liability.

Facilities have in the past escaped liability for the acts or omissions of independent contractors on site. Because the contractors were not directly employed by the facility, they argued, the facility was shielded from responsibility for their actions. The legal tide has turned, however, and a number of court rulings have since established a precedent that holds facilities liable for contractors' as well as employees' acts (see "Court: Hospital Liable for Contracted Anesthesiologist").

As a result, a surgical facility may be subject to vicarious liability if an "apparent agency" relationship exists between the facility and the contracted entity. That is to say, if a patient reasonably believes that a subcontractor is acting on the facility's orders and under its direct control, wholly representing the facility, she could conceivably file a medical malpractice lawsuit seeking damages from the facility.

What is apparent agency?
In order to establish apparent agency, and thereby to assert a claim for vicarious liability from a surgical facility, a medical malpractice lawsuit must demonstrate the following 3 factors.

• What was communicated. The facility's communications with the patient created an impression that the independent contractor had the ability to act on the facility's behalf. For example: staff employees refer to a subcontractor in a manner that leads the patient to conclude that the subcontractor is also a staff member.
• What was understood. The patient, relying on the facility's communications or actions, concluded that the subcontractor had the authority to act on the facility's behalf. In other words, a patient's observing of a subcontractor's actions in and of itself would not be sufficient grounds to establish apparent agency.
• What was accepted. The patient accepted the services that the subcontractor rendered based on what he or she believed to be an agency relationship between the subcontractor and the facility, and not just based on the contracted provider's skill level. Put another way: the patient believes that the facility is providing a staff member to attend to his or her needs, not that he or she is accepting the services of an independent contractor.

Pitfalls and protection
What makes vicarious liability particularly troublesome in the context of outpatient surgical facilities is that it is generally a facility, and not the patients themselves, that selects the providers of ancillary services for a case. Additionally, in light of the criteria set forth by recent court rulings on the subject, it becomes apparent that few facilities would be able to escape vicarious liability in a lawsuit that's based on the apparent authority of a subcontractor. While these factors somewhat limit your ability to eliminate your facility's risk, here are 3 steps you can take to minimize it.

• Let patients know who's who. Most importantly, make sure you notify patients that individuals who are not acting as a direct agent of your facility will provide certain perioperative services.
• Notify patients via forms and signage. Amend your patient admission forms and post signs at intake to emphasize the independence of all non-employee personnel, since delivering this information after treatment has begun or when the patient has been medicated or is in pain may be considered inappropriate notification in court.