In the Hospital's contractual agreement with a radiology group there was a clause which required that the group indemnify the hospital if it paid out any settlement or judgment claims based on any negligence committed by a physician member. The hospital was sued by a patient who argued that two head CT scans failed to report a hematoma which allegedly caused the patient's death. The patient was never informed that the radiology group were independent contractors and not employed by the hospital.

A summary judgment in favor of the hospital regarding applicable standards of care was entered in its favor but not the claim of vicarious liability which resulted in a settlement of $187,000. When the hospital sought to collect these monies from the group based on the indemnification clause, the group rejected the claim arguing that it was not submitted within the two year statute of limitations provision in the Indiana Medical Malpractice Act (MMA). The hospital argued that the longer statute of limitations for contract was applicable.

On appeal from the trial court's decision to dismiss the case on technical reasons, the Court of Appeals agreed that the two year requirement under the MMA applied not only in the case of injured patients but when the claim was based on a "contract or tort" allegation and that the term "claimants" was not limited to patients. And though the court noted that the malpractice suit was filed with only two weeks remaining on the statute of limitations thereby not giving the hospital enough time to truly evaluation the patient's claim, it faulted the hospital for not protecting itself against a vicarious liability/apparent agent claim when it failed to notify the patient of the radiology group's status as an independent contractor.

Lessons Learned - Physician Groups as Independent Contractors

1. To avoid or limit possible liability exposure resulting from the negligence of independent hospital-based physician groups, such as radiology, anesthesia, and pathology under contract, it is critical that both the hospital and the group inform patients of the groups independent status and that the group further advise patients that they are solely liable for their acts of negligence and not the hospital.

2. Courts which have examined this liability theory have required that this distinction be provided through one or more of the following methods which should be included in the contractual agreement between the hospital and the group.

a. Verbally

b. Specific language set forth in the patient's signed informed consent form

c. Signage and use of different name tags or outerwear which identifies the group's name and not the hospital.