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Welcome to Vegas Lawyer. This site is for people who were hurt in Nevada. Contact us for a free consultation. You may want to read the Las Vegas Personal Injury Law introduction on our home page. Also, you can get an overview of other claims like Wrongful Death, Auto Accidents, Slip & Fall, and Products Liability before you explore the Article below.

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  • Liability Exposure of Providers
  • Vicarious Liability of Network/MCOs


  • Vicarious Liability of Network/MCOs

    Network/MCOs have been exposed with increasing frequency to vicarious liability for the negligence of participating providers, as courts have expanded the application of traditional hospital liability theories to MCOs. Vicarious liability would allow patient-members to recover from a network/MCO directly for the negligent acts of participating providers. There are two different theories of vicarious liability: (1) the theory of respondeat superior; and (2) apparent/ostensible agency theory. Respondeat superior liability arises in the context of an agency relationship; it creates liability on the part of a network/MCO for the negligent acts of its provider-agent. Alternatively, apparent/ostensible agency liability is not based on the existence of an actual agency relationship; rather, under this theory, a network/MCO can be liable for the acts of providers if it has created the appearance of an actual agency relationship. While these theories have been advanced with varying success from State to State, these types of claims may enhance the likelihood of avoiding ERISA preemption because they are based on medical malpractice rather than on benefits determinations. As such, it is a distinct possibility that network/MCOs may experience increased liability exposure for these types of claims in the future.

    Respondeat Superior Liability

    In order for a network/MCO to be liable under the theory of respondeat superior, it is necessary for a plaintiff to establish that an actual agency (employer-employee) relationship existed between the negligent provider and the network/MCO and that the negligent act was performed in the course and scope of this relationship. In determining whether or not an agency relationship exists, courts will look at the degree of control the network/MCO exercised over the provider’s conduct. Some of the factors used to determine whether this "control test" is met include:

      The right of the network/MCO to control the provider’s work

      The method and form of provider compensation

      The skill required to perform the provider’s work

      Whether the provider uses his or her own or the network/MCO’s facilities and instrumentalities to render services

      The belief of the parties (the network/MCO and the provider) as to whether an agency relationship exists

    In general, courts might find vicarious liability under the doctrine of respondeat superior if a network/MCO retains the right to control professional activities of participating providers. For example, some network/MCOs reserve the right to hire and fire providers, set salaries, and dictate work schedules; such arrangements exhibit a high degree of control, one of the factors noted above. For example, in one case, sufficient control was demonstrated where an HMO medical director, who was also a physician, policed the provision of medical services by participating providers and established policy guidelines. In this case, the providers were employees of the HMO and were paid an annual salary. Also, the providers’ contracts specified that they could not contract with other MCOs without the HMO’s express consent. Another factor that may establish control is a capitated payment system. Additionally, if patients are treated by providers at network/MCO facilities rather than at the provider’s own office, the network/MCO also is more likely to be found to exert sufficient control over the provider to impute an agency relationship.

    Apparent/Ostensible Agency Liability

    Providers often are affiliated with network/MCOs as independent contractors rather than employees. In such cases, the law generally presumes that an agency relationship does not exist, subject to the control factor analysis explained above. However, network/MCOs can still be held liable for the negligent acts of independent contractor providers under the theory of apparent or ostensible agency. Liability under this theory is based on the actions of the network/MCO as to third parties; even though a network/MCO may not exercise actual control over a provider, it may present the appearance of an agency relationship to patient-members (as opposed to merely facilitating the provision of provider services). To the extent a patient-member reasonably and detrimentally relies upon that appearance, courts have held the network/MCO directly liable.

    Network/MCOs can create the appearance of an agency relationship in a number of ways. For example, many network/MCO promotional brochures provided to patient-members refer to "network" providers. Statements in network/MCO brochures promising that the health plan will provide "the best" care have been held to create the appearance of an agency relationship. Also problematic are statements that make reference to "an entire health care system," as courts have held such representations may create a reasonable belief on the part of patient-members that care is being provided by the network/MCO rather than individual providers. In one case, a State appellate court held that an MCO could be liable under a theory of ostensible agency where its member handbook stated that the HMO would provide "all of the enrollee’s health care needs" and would actively monitor the quality of that care. These statements in the handbook material, the court determined, made it reasonable for the enrollee to believe the HMO actually provided health care. Promotional materials indicating that the network/MCO credentials, screens, or evaluates its providers also may serve as the basis for liability. An ostensible agency relationship has also been found where an HMO restricted patient-members’ provider choices to a list of providers provided by the HMO.

    This information came from a
    SAMSHA online article.

    *** Any law, statute, regulation or other precedent is subject to change at any time ***

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