• Illinois Supreme Court Holds Hospital Not Liable Under the Doctrine of Apparent Agency
  • May 4, 2018 | Author: Richard Hunsaker
  • Law Firm: Heyl, Royster, Voelker & Allen Professional Corporation - Edwardsville Office
  • In its recent ruling in the case of Yarbrough v. Northwestern Memorial Hospital, 2017 IL 121367, the Illinois Supreme Court reversed the holding of the Illinois First District Appellate Court that a hospital could be found liable under the doctrine of apparent agency for the negligence of an independent family practice clinic that was not sued by the plaintiffs. Yarbrough involved a case in which the first district held that Northwestern Memorial Hospital could be found vicariously liable for negligence ascribed to an un-sued party, Erie Family Health Center. Erie Family Health Center is a Federally Qualified Health Center that relies upon federal grants and Medicaid cost reimbursement. It does not require medical insurance. Instead, its purpose is to serve populations with limited access to health care.


    The plaintiff (Yarbrough) alleged that Erie Family Health Center employees were the actual or apparent agents of Northwestern Memorial Hospital. Yarbrough had asked an unnamed staff person at Erie where she would deliver her baby. She was informed that she would have her ultrasounds done at Northwestern Medicine Prentice Women’s Hospital and would probably deliver her baby at Northwestern Memorial Hospital. During this same visit, Yarbrough received informational materials regarding tours of the hospital’s birthing/delivery area, having the installation of an infant car seat inspected at Northwestern Memorial Hospital, and attending birthing classes at Northwestern Memorial Hospital. Based upon this information, Yarbrough believed that Erie and Northwestern Memorial Hospital were one-and-the-same entity, particularly because she was told that she would give birth at the hospital.
    On an interlocutory appeal, the first district found that a hospital could be held liable for the conduct of employees affiliated with an unrelated, independent clinic that is not a party to the action against the hospital (see Like Elvis, Has Apparent Agency Left the Building?).
    The first district rejected Northwestern’s argument that a prior case, Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511 (1993), was inapplicable in this case because the alleged negligent conduct did not occur at the hospital. The appellate court held that nothing in the Gilbert decision limits a plaintiff from recovering against a hospital “merely because the negligent conduct of the physician did not occur in the emergency room or some other area within the four walls of the hospital.” Yarbrough v. Northwestern Memorial Hospital, 2016 IL App (1st) 141585, ¶ 40 (quoting Malanowski v. Jabamoni, 293 Ill. App. 3d 720, 727 (1st Dist. 1997)). The appellate court also held that a plaintiff is not required to name the individual physician or his or her employer as a defendant in order to hold the hospital vicariously liable as the principal.
    Supreme Court Analysis
    The Illinois Supreme Court reversed the first district, noting that the plaintiff sought treatment at Erie Family Health Center, but was seeking to impose liability on Northwestern Memorial Hospital. The court observed that Erie is neither owned nor operated by Northwestern. While Erie Family Health receives some charitable financial and technical assistance from Northwestern, Erie Family Health is a Federally Qualified Health Center that relies heavily on federal grants and Medicaid reimbursement to provide underserved communities with primary and preventative care regardless of an individual’s ability to pay. Erie’s employees are considered federal employees, and suits against Erie or its employees can only be maintained under the Federal Torts Claim Act. Erie does not utilize the Northwestern name. There is no Northwestern-related branding or the use of Northwestern’s trademark purple color by Erie Family Health. As such, the Supreme Court found the first district’s reliance on the Malanowski decision to be misplaced, noting that unlike Malanowski, the care outside of the hospital did not occur at a hospital affiliated clinic or practice.
    In reversing the first district, the Illinois Supreme Court reiterated that the doctrine of implied agency remains viable and applicable to modern health care scenarios where there has been consolidation of practices and clinics under a hospital or system name in order to achieve cost savings. The court stated that in order to establish liability under the doctrine of apparent authority, a plaintiff must show that: “(1) the hospital, or its agent, acted in a manner that would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or agent of the hospital; (2) where the acts of the agent create the appearance of authority, the plaintiff must also prove that the hospital had knowledge of and acquiesced in them; and (3) the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence.” Yarbrough, 2017 IL 121367, ¶ 69.
    Justice Theis delivered the judgment of the court, with opinion. Chief Justice Karmeier and Justices Thomas and Garman concurred in the judgment and opinion. The decision was accompanied by dissent, joined by two justices.
    While the Illinois Supreme Court’s holding is a positive development for hospitals and large practice groups, it is clear that the court continues to adhere to the Gilbert analysis. Gilbert generally makes a hospital responsible for the professionals working in the hospital where no notice has been given to patients that the professionals from whom care is provided are independent and unaffiliated. Moreover, the court considered what it termed the “realities of modern hospital care.” In particular, a hospital will be considered the apparent principle of an independent caregiver where the hospital holds itself at as a provider of care and undertakes no effort to inform the patient that the care in question was provided by “independent contractors.” The court noted specifically that the “realities” recognized in the Gilbert decision are “even more true today.” Notably, the court observed that hospitals have consolidated to improve their finances and also entered into “rebranding initiatives” which allow practice groups to use hospital logos while technically retaining their individual names.
    It was very significant to the Illinois Supreme Court that the facility where the care was given was not owned by the hospital and did not display the hospital logo or branding symbol. With these factors in mind, it is very important to consider the following:
    1. Is the doctor who is alleged to be an apparent agent part of a practice group which is affiliated with the hospital? For example, is the practice group which employs the physician owned by a corporate entity related to the hospital?
    2. Does the practice group market itself as a physician group affiliated with the hospital?
    3. Does the hospital list the physician on its website?
    4. Has the hospital followed the dictates of Gilbert?

    a. Has the patient been notified that physicians working in the hospital and providing care are not employees of the hospital and are independent contractors?

    b. Has the hospital taken steps to overcome the presumption that those who provide care at the hospital are not agents or employees of the hospital?

    c. There should be notifications contained in consents to be signed by the patient, signs posted throughout the hospital and conspicuous language contained on websites that physicians are not agents of the hospital but independent providers of care.
    The Yarbrough decision is important because the outcome rests upon principles of fundamental fairness. In Yarbrough, Northwestern Memorial Hospital was clearly targeted for care provided at a remote and independent facility. However, the Illinois Supreme Court made it clear that it will continue to adhere to the principles articulated in the Gilbert decision and, where appropriate, look to the “realities of modern medicine” which include consolidation of practices under the ownership of or alignment with a particular hospital or group. Gilbert was issued twenty five years ago. A close analysis of Yarbrough reveals that the Supreme Court is sensitive to the fact that physicians have clearly become more aligned with large hospital organizations or practice groups closely affiliated with preferred networks which are promoted and marketed to the public. It is important to understand and evaluate business relationships and marketing initiatives when establishing policies designed to insulate a hospital from the acts of a physician or provider who seems to qualify as an independent contractor. Aggressive marketing and consolidation efforts on the business side of the equation will likely make it easier to convince a court to allow a claim of apparent agency.