In 1st impression case, IN justices extend independent physician liability to nonhospitals

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The Indiana Supreme Court issued a reversal in a case of first impression Thursday, finding that independent physician liability extends to nonhospital facilities that provide patients with health care.

Justices previously heard oral arguments in Harold Arrendale v. American Imaging & MRI, LLC a/k/a Marion Open MRI, et al., 21S-CT-370, on the question of whether the same liability hospitals hold for independent contractor physicians can be extended to nonhospital facilities.

That question stemmed from a case filed by Harold Arrendale, whose primary care physician sent him to Marion Open MRI for scans of his spine in April 2013. Marion Open MRI’s contracted radiologist, Dr. Alexander Boutselis, read Arrendale’s images and missed diagnosis of a fistula, prompting Arrendale to sue.

The Allen Superior Court granted summary judgment to Marion Open MRI, a nonhospital facility, because it found that the ruling in Sword v. NKC Hospitals, Inc., 714 N.E.2d 142 (Ind. 1999), applied only to a hospital’s liability for its contract employees.

But a panel of the Court of Appeals of Indiana reinstated the case, pointing to the “highly persuasive” decision in Webster v. Center for Diagnostic Imaging, Inc., 1:16-cv-02677-JMS-DML, 2017 WL 3839377 (S. D. Ind. Aug. 31, 2017). Webster found no meaningful difference between a hospital and a diagnostic imaging center under Sword.

After granting the petition to transfer, Supreme Court justices concluded that summary judgment for Marion Open MRI was incorrect. The court reversed and remanded in a Thursday decision, holding that Sword and Section 429 of the Restatement (Second) of Torts’ apparent agency principles apply to nonhospital medical entities that provide patients with health care.

The high court noted that Sword changed the framework of hospital liability through apparent agency by preventing hospitals from insulating themselves from potential liability by using independent contractor physicians while suggesting to the public that their physicians are employed by the hospital.

Siding with Arrendale, the justices concluded there is no meaningful difference between a patient in a hospital or a patient of a diagnostic imaging center regarding the provider’s manifestations and the patient’s reliance. The court pointed to the increased reliance from patients on nonhospital medical entities to meet society’s health care needs.

Given the shift in health care consumption, the high court found that Sword’s Section 429 analysis was applicable to nonhospital diagnostic imaging centers like Marion Open MRI.

“As a growing number of patients depend on non-hospital providers for their health care, this gap in our common law allows for non-hospital medical entities to purport to offer a unified health care operation, yet still escape potential Restatement Section 429 liability by using independent-contractor physicians,” Justice Steven David wrote. “We find it problematic that non-hospital medical entities like Marion Open MRI can purport to provide a unified operation and urge potential patients to ‘[s]ave $$ on your next MRI!’, while insulating themselves from prospective liability by having independent contractor radiologists read and interpret patient images.”

Justices also noted that being subject to the Medical Malpractice Act is voluntary, and a health care provider that fails to qualify under the act is subject to liability without regard to the act and its protections.

In applying Sword to nonhospital medical facilities, the high court noted that it was persuaded, like the COA, by many of the Indiana Southern District Court’s observations in Webster.

Finally, the court concluded that genuine issues of material fact exist as to whether Boutselis was an apparent agent for Marion Open MRI.

“As a matter of first impression, we hold that a non-hospital medical entity, including a diagnostic imaging center like Marion Open MRI, may be held liable for the negligent acts of its apparent agents, and expressly apply Sword’s apparent agency rules to such entities,” David concluded. “We therefore reverse summary judgment in Marion Open MRI’s favor and remand for further proceedings consistent with this opinion.”

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