Chapter 7: Liability of Health Care Institutions

Question 1

What is the traditional common law rule regarding a hospital’s liability for the negligence of independent contractor physicians?
Options:
A) Hospitals are liable for all physicians practicing in their facilities
B) Hospitals are not liable for the negligence of independent contractor physicians
C) Hospitals are liable only if they did not check the physician’s credentials
D) Hospitals share liability equally with independent contractor physicians

Answer 1

B) Hospitals are not liable for the negligence of independent contractor physicians.

Question 2

The doctrine of respondeat superior in healthcare liability means:
Options:
A) A hospital is liable only for its own negligence
B) An employer is liable for torts committed by employees within the scope of employment
C) A physician is liable for the actions of all hospital staff
D) A patient is responsible for understanding all risks of treatment

Answer 2

B) An employer is liable for torts committed by employees within the scope of employment.

Question 3

In the landmark case Bing v. Thunig, what was the primary holding?
Options:
A) Hospitals are never liable for physician negligence
B) The distinction between administrative and medical acts performed by hospital staff was eliminated for purposes of liability
C) Nurses are always liable for their own negligence
D) Charitable immunity should be maintained for all hospitals

Answer 3

B) The distinction between administrative and medical acts performed by hospital staff was eliminated for purposes of liability.

Question 4

Which of the following statements best describes the “captain-of-the-ship” doctrine?
Options:
A) The hospital CEO is responsible for all medical errors
B) A surgeon, as “captain,” is liable for the negligence of all operating room personnel under their command
C) The chief of staff is responsible for all physician negligence
D) The most senior nurse in a unit is responsible for all care provided

Answer 4

B) A surgeon, as “captain,” is liable for the negligence of all operating room personnel under their command.

Question 5

Under the modern concept of corporate liability, hospitals have a duty to:
Options:
A) Pay for all patient injuries regardless of fault
B) Exercise reasonable care in the selection and retention of medical staff members
C) Ensure that no medical errors ever occur
D) Guarantee successful outcomes for all patients

Answer 5

B) Exercise reasonable care in the selection and retention of medical staff members.

Question 6

The erosion of the independent contractor defense for hospitals is primarily due to:
Options:
A) Changes in federal law requiring hospitals to employ all physicians
B) Patients often no longer select their own physicians and are increasingly cared for by hospital-based specialists
C) The decline in the number of physicians in private practice
D) Insurance companies requiring hospitals to assume liability

Answer 6

B) Patients often no longer select their own physicians and are increasingly cared for by hospital-based specialists.

Question 7

What is “apparent agency” or “agency by estoppel” in hospital liability?
Options:
A) When a hospital actually employs a physician
B) It occurs when a patient reasonably believes a physician is a hospital employee, even when the physician is actually an independent contractor
C) When a physician temporarily works at multiple hospitals
D) When a hospital administrator acts as a physician

Answer 7

B) It occurs when a patient reasonably believes a physician is a hospital employee, even when the physician is actually an independent contractor.

Question 8

Which of the following would NOT support a finding of apparent agency?
Options:
A) The hospital advertised the physician as part of its staff
B) The patient specifically selected the physician based on a prior relationship before coming to the hospital
C) The physician wore a hospital ID badge and uniform
D) The hospital billed for the physician’s services

Answer 8

B) The patient specifically selected the physician based on a prior relationship before coming to the hospital.

Question 9

What is the most significant limitation of ERISA preemption in managed care liability?
Options:
A) It only applies to government hospitals
B) Patients with employer-sponsored health plans generally cannot recover compensatory damages for injuries resulting from coverage decisions
C) It prevents hospitals from being sued for any reason
D) It only applies to physicians, not hospitals

Answer 9

B) Patients with employer-sponsored health plans generally cannot recover compensatory damages for injuries resulting from coverage decisions.

Question 10

In the context of hospital liability, what does “corporate negligence” refer to?
Options:
A) Financial mismanagement by hospital executives
B) The failure of the hospital to fulfill duties it owes directly to patients, such as providing safe facilities and competent staff
C) Negligence committed by the hospital’s corporate parent company
D) Violations of corporate bylaws

Answer 10

B) The failure of the hospital to fulfill duties it owes directly to patients, such as providing safe facilities and competent staff.

Question 11

Under the “borrowed servant” doctrine:
Options:
A) A hospital employee temporarily becomes the servant of another (e.g., a surgeon) who assumes liability for the employee’s negligence
B) A physician temporarily works at multiple hospitals
C) A hospital borrows equipment from another facility
D) A physician delegates duties to a nurse

Answer 11

A) A hospital employee temporarily becomes the servant of another (e.g., a surgeon) who assumes liability for the employee’s negligence.

Question 12

Which factor has NOT contributed to the erosion of physicians’ independent contractor status?
Options:
A) Increasing employment of physicians by hospitals
B) Greater use of hospital-based specialists
C) The decline in medical malpractice insurance premiums
D) Patients using emergency services more frequently

Answer 12

C) The decline in medical malpractice insurance premiums.

Question 13

In Darling v. Charleston Community Memorial Hospital, what significant principle was established?
Options:
A) Hospitals have no duty to supervise independent physicians
B) A hospital has a duty to review and supervise the medical care provided by its medical staff
C) Nurses cannot be held liable for following physician orders
D) Charitable immunity protects all hospitals

Answer 13

B) A hospital has a duty to review and supervise the medical care provided by its medical staff.

Question 14

According to the text, what was the purpose of the Employee Retirement Income Security Act of 1974 (ERISA)?
Options:
A) To protect employer-sponsored pension plans and employee benefit plans, including healthcare plans
B) To mandate that all employers provide health insurance
C) To regulate hospital operations
D) To establish standards for physician licensing

Answer 14

A) To protect employer-sponsored pension plans and employee benefit plans, including healthcare plans.

Question 15

In the cases of Wickline v. State and Wilson v. Blue Cross, what was the central issue?
Options:
A) Whether hospitals must provide emergency care
B) Whether health plans could be held liable for denying coverage for recommended medical care
C) Whether physicians could be held liable for following insurance guidelines
D) Whether patients could sue hospitals for negligent hiring

Answer 15

B) Whether health plans could be held liable for denying coverage for recommended medical care.

Question 16

Which of the following is a reason for the trend of increasing physician employment by hospitals?
Options:
A) Physician lifestyle preferences
B) Economic forces
C) ACA reforms and fraud law “safe harbors” for employees
D) All of the above

Answer 16

D) All of the above: physician lifestyle preferences, economic forces, ACA reforms, and fraud law “safe harbors” for employees.

Question 17

What does the term “charitable immunity” refer to?
Options:
A) The principle that charitable organizations were not held liable for the tortious actions of their agents
B) Tax exemptions for non-profit hospitals
C) Legal immunity for volunteer physicians
D) Protection from malpractice claims for free clinics

Answer 17

A) The principle that charitable organizations were not held liable for the tortious actions of their agents.

Question 18

According to contemporary legal principles, a hospital’s duty to supervise the quality of medical care:
Options:
A) Can be delegated to individual physicians
B) Cannot be delegated to the medical staff or any other group or individual
C) Applies only to employed physicians
D) Is limited to emergency departments

Answer 18

B) Cannot be delegated to the medical staff or any other group or individual.

Question 19

In the case of Aetna Health, Inc. v. Davila, what did the Supreme Court decide?
Options:
A) ERISA preempts state laws that allow patients to sue health plans for coverage decisions
B) Patients can always sue health plans for denying coverage
C) ERISA does not apply to healthcare decisions
D) Hospitals must provide care regardless of insurance coverage

Answer 19

A) ERISA preempts state laws that allow patients to sue health plans for coverage decisions.

Question 20

Under current legal standards, what is the status of the “captain-of-the-ship” doctrine?
Options:
A) It remains fully intact and regularly applied
B) It has been significantly eroded as courts recognize that multiple healthcare professionals have independent duties
C) It has been replaced by the corporate negligence doctrine
D) It applies only in emergency situations

Answer 20

B) It has been significantly eroded as courts recognize that multiple healthcare professionals have independent duties.

Question 21

Which of the following would be the LEAST likely basis for establishing hospital liability for a physician’s negligence?
Options:
A) The physician was employed by the hospital
B) The physician appeared to patients to be a hospital employee
C) The hospital advertised itself as a center of excellence in the physician’s specialty
D) The hospital knew the physician was incompetent but granted privileges anyway

Answer 21

C) The hospital advertised itself as a center of excellence in the physician’s specialty.

Question 22

In the case of Thompson v. Sun City Community Hospital, what was the court’s key finding?
Options:
A) Hospitals have no duty to emergency patients
B) Transferring a patient with a medical emergency for financial reasons was a breach of the hospital’s duty
C) Only physicians, not hospitals, have a duty to emergency patients
D) Hospitals must accept all transfer patients

Answer 22

B) Transferring a patient with a medical emergency for financial reasons was a breach of the hospital’s duty.

Question 23

Which statement best describes the current legal status of charitable immunity for hospitals?
Options:
A) It has been virtually eliminated in all states
B) It remains a strong defense for non-profit hospitals
C) It applies only to religious hospitals
D) It protects hospitals from liability for emergency care

Answer 23

A) It has been virtually eliminated in all states.

Question 24

What is the “benefit rule” in tort cases?
Options:
A) The rule that plaintiffs must prove they received no benefit from treatment
B) Damages must be reduced by the value of any benefit the tortfeasor bestowed on the plaintiff
C) The principle that patients benefit from all proper medical care
D) A rule allowing physicians to benefit from limited liability

Answer 24

B) Damages must be reduced by the value of any benefit the tortfeasor bestowed on the plaintiff.

Question 25

What does the court mean in Bing v. Thunig when it states that "the conception that the hospital does not undertake to treat the patient...no longer reflects the fact"? Options: A) Hospitals only provide facilities for physicians B) Hospitals are now complex institutions that provide comprehensive care, not merely facilities for independent physicians C) Hospitals should not be involved in direct patient care D) Hospitals should only employ physicians, not contract with them

Answer 25

B) Hospitals are now complex institutions that provide comprehensive care, not merely facilities for independent physicians.

Question 26

What was the significance of the Fjerstad v. Knutson case regarding hospital liability? Options: A) A hospital can be liable for failing to have proper staffing policies and procedures, even if individual staff were not negligent B) Hospitals are never liable for physician negligence C) Hospitals are only liable for emergency care D) Only the hospital CEO can be held liable for policy failures

Answer 26

A) A hospital can be liable for failing to have proper staffing policies and procedures, even if individual staff were not negligent.

Question 27

According to the text, what is meant by the term "tangled ERISA regime"? Options: A) Complex hospital billing procedures B) The complex and often unjust system that prevents patients in employer-sponsored health plans from recovering damages for improper denial of care C) The relationship between Medicare and private insurance D) The confusing network of providers in managed care plans

Answer 27

B) The complex and often unjust system that prevents patients in employer-sponsored health plans from recovering damages for improper denial of care.

Question 28

Which of the following statements about Joint Employer status is MOST accurate? Options: A) It applies only to government hospitals B) It occurs when two or more entities share control over a worker's employment, potentially creating shared liability C) It means a physician works at multiple hospitals D) It refers to the joint liability of spouses for medical bills

Answer 28

B) It occurs when two or more entities share control over a worker's employment, potentially creating shared liability.

Question 29

In what way does the Gobeille v. Liberty Mutual Ins. Co. case relate to ERISA? Options: A) It limited ERISA's application to hospital employees B) It reinforced ERISA's preemption power by ruling that states cannot require ERISA plans to report data to state healthcare databases C) It established that ERISA does not apply to health plans D) It allowed patients to sue ERISA plans in state court

Answer 29

B) It reinforced ERISA's preemption power by ruling that states cannot require ERISA plans to report data to state healthcare databases.

Question 30

Which of the following would likely NOT be considered evidence of a hospital's corporate negligence? Options: A) Failing to check a physician's references before granting privileges B) Not having a crash cart available for emergencies C) Allowing a physician to perform a procedure with a known complication rate similar to the national average D) Not having policies for reporting unusual occurrences

Answer 30

C) Allowing a physician to perform a procedure with a known complication rate similar to the national average.

Question 31

What principle underlies the movement away from the charitable immunity doctrine for hospitals? Options: A) Hospitals evolved from charitable institutions to complex businesses with insurance coverage and paid staff B) Patients demanded more legal accountability C) Courts became more hostile to hospitals D) Most hospitals became for-profit entities

Answer 31

A) Hospitals evolved from charitable institutions to complex businesses with insurance coverage and paid staff.

Question 32

With respect to equipment in a hospital, a key duty of reasonable care includes: Options: A) Purchasing only the newest models B) Regular inspection of equipment before use and proper maintenance C) Having equipment identical to other hospitals in the area D) Allowing only physicians to operate equipment

Answer 32

B) Regular inspection of equipment before use and proper maintenance.

Question 33

Which of the following best describes the modern trend in hospital liability for physicians' acts? Options: A) Hospitals are never liable for independent physicians B) The distinction between vicarious liability and corporate negligence has blurred, creating broader hospital liability C) Only the physician, never the hospital, is liable for medical errors D) Hospitals are only liable for employed physicians

Answer 33

B) The distinction between vicarious liability and corporate negligence has blurred, creating broader hospital liability.

Question 34

In Wilson N. Jones Memorial Hospital v. Davis, what was the basis for the hospital's liability? Options: A) Failure to check references and investigate the background of an employee who later injured a patient B) Performing an unnecessary surgery C) Not having enough staff on duty D) Violation of EMTALA

Answer 34

A) Failure to check references and investigate the background of an employee who later injured a patient.

Question 35

According to the text, what happens when a hospital violates its own rules and this violation causes a patient injury? Options: A) The violation is automatically considered malpractice B) The violation serves as strong evidence of negligence, though it's not automatically negligence per se C) The hospital can always claim it didn't know about the rule D) Only the individual who violated the rule can be held liable

Answer 35

B) The violation serves as strong evidence of negligence, though it's not automatically negligence per se.

Question 36

How do hospital bylaws, rules, and Joint Commission standards function in hospital liability cases? Options: A) They are admissible as evidence and may establish the standard of care B) They are irrelevant to legal proceedings C) They only apply to government hospitals D) They can only be used to defend hospitals, not to establish liability

Answer 36

A) They are admissible as evidence and may establish the standard of care.

Question 37

The concept of ERISA preemption creates what peculiar situation in healthcare liability? Options: A) Only physicians, not hospitals, can be sued for malpractice B) Patients with individual insurance policies may recover damages that patients with employer-sponsored plans cannot C) Only federal courts can hear healthcare cases D) Hospitals are immune from all liability

Answer 37

B) Patients with individual insurance policies may recover damages that patients with employer-sponsored plans cannot.

Question 38

Under what circumstances might a hospital be liable for a patient's injury caused by a defective medical device? Options: A) Only if the hospital manufactured the device B) If the hospital failed to properly inspect or maintain the device, or failed to warn the patient of known risks C) Only if the device was recalled by the FDA D) The hospital is never liable for defective devices

Answer 38

B) If the hospital failed to properly inspect or maintain the device, or failed to warn the patient of known risks.

Question 39

Apply the IRAC method to analyze hospital liability in a situation where a patient is injured by a surgeon who was granted privileges despite having multiple malpractice cases at previous hospitals, information the credentialing committee failed to discover.

Answer 39

Issue: Is the hospital liable under corporate negligence for failing to properly credential the surgeon? Rule: Under the doctrine of corporate liability, hospitals have a direct duty to patients to exercise reasonable care in the selection and retention of medical staff, as established in cases like Darling v. Charleston Community Memorial Hospital and Johnson v. Misericordia Community Hospital. Analysis: The hospital failed to discover readily available information about the surgeon's history of malpractice claims, which demonstrates a failure to exercise reasonable care in the credentialing process. This failure to properly vet the surgeon represents a breach of the hospital's direct duty to patients. The injury was a foreseeable consequence of granting privileges to an incompetent physician, establishing causation. The patient's injury resulted from this negligent credentialing. Conclusion: The hospital would likely be held liable under the corporate negligence doctrine for the patient's injuries, as it breached its duty to properly investigate the surgeon's qualifications and history before granting privileges.

Question 40

Compare and contrast the legal theories of apparent agency and corporate liability as they apply to hospital liability for non-employed physicians.

Answer 40

Apparent agency: Based on hospital creating impression physician is its agent * Corporate liability: Based on hospital's direct duty to patients regardless of agency relationship * Apparent agency: Examines hospital-physician-patient relationship and patient's perception * Corporate liability: Examines whether hospital fulfilled institutional responsibilities * Both theories have eroded independent contractor defense * Apparent agency requires patient's reasonable belief; corporate liability does not * Both reflect evolution of hospitals from "workshops" to comprehensive care providers

Question 41

Explain how ERISA preemption affects patients' ability to recover damages from managed care organizations, including the "tangled ERISA regime" referred to by Justice Ginsburg.

Answer 41

* ERISA preempts state laws that allow patients to sue MCOs for coverage decisions * Limits remedies to contractual damages and equitable relief (no pain/suffering damages) * Creates two-tiered system: different remedies based solely on insurance source * Patients with identical injuries receive different legal treatment * Justice Ginsburg called for congressional reform of this "tangled regime" * Gobeille further strengthened ERISA preemption regarding data reporting * Creates unjust results when coverage decisions cause serious harm * Congress has failed to address this inequity despite judicial calls for reform

Question 42

Discuss how the evolution of hospital care has affected the legal doctrines of hospital liability from charitable immunity to the present.

Answer 42

* Early hospitals: Protected by charitable immunity; seen as almshouses * Evolution: Hospitals became complex healthcare systems with insurance coverage * Bing v. Thunig: Eliminated administrative vs. medical acts distinction * "Captain-of-the-ship" doctrine declined as courts recognized independent functions * Corporate liability emerged (Darling): Established direct hospital duties to patients * Apparent agency expanded liability for independent contractors * Modern hospital liability: Comprehensive responsibilities including credentialing, equipment, policies, quality oversight * Liability now reflects hospital's central role in healthcare delivery * Shift from immunity to accountability parallels hospital transformation

Question 43

Analyze the evolution and current status of the independent contractor defense for hospitals in medical malpractice cases.

Answer 43

* Traditional rule: Hospitals not liable for independent contractor physicians * Defense eroded by: physician employment trends; reduced patient role in physician selection; growth of hospital-based specialties * Courts countered through: apparent agency doctrine and corporate liability doctrine * Key cases: Vanaman and Schagrin recognized hospital liability even for non-employed physicians * ACA accelerated hospital-physician integration through ACOs * Defense remains technically viable but has limited practical effectiveness * Courts now view hospitals as integrated systems with comprehensive patient responsibilities * Public perception: Patients see physicians as part of hospital, not independent entities

Question 44

Discuss the tension between cost containment and quality of care in managed care organizations, referencing key legal cases.

Answer 44

* Wickline: Third-party payers can be liable for defective cost containment, but physicians have primary responsibility * Wilson: Utilization review decisions can be "substantial factor" in patient harm * ERISA preemption: Limits recovery for patients in employer-sponsored plans (Davila) * Creates two-tiered system based on insurance source despite identical injuries * Justice Ginsburg called for congressional reform of "tangled ERISA regime" * Courts recognize potential harm from improper cost containment but constrained by ERISA * Unresolved tension: Balancing economic efficiency against patient welfare * Managed care liability remains limited despite recognition of potential harms

Question 45

Explain how hospital rules, standards, and policies impact liability in malpractice litigation.

Answer 45

* Hospital rules, Joint Commission standards, and regulations admissible as evidence of standard of care * Darling: Established that such standards can be used by juries to evaluate care * Violation of hospital's own policies provides strong evidence of negligence * Examples: Burks (bedrail policy violation) and Pederson (physician supervision requirement) * Standards must be realistic, workable, and consistently enforced * Regular review and updates necessary * Staff must be trained on policies * Documentation demonstrates compliance * Fjerstad: Hospitals liable for policy failures even when individual staff not negligent * Policies establish minimum expected standards of institutional performance

Question 46

What legal issues are raised by the employment of physicians by hospitals, and how has this trend affected traditional hospital-physician relationships?

Answer 46

* Corporate practice of medicine doctrine historically limited employment * Increased liability under respondeat superior for employed physicians * Blurring of traditional independent contractor distinctions * Employment creates direct control over physician practices and protocols * Affects medical staff bylaws and governance structures * May create dual loyalties for physicians (patient vs. employer) * Impacts physician autonomy in clinical decision-making * Creates questions about termination rights and continuation of staff privileges * ACOs accelerate integration and shared accountability models * Traditional "three-legged stool" model transforming into more integrated structure

Question 47

Explain the legal implications of the Norton v. Argonaut Insurance Co. case for medication administration in hospitals.

Answer 47

* Established joint liability of hospital, physician, and nurse for medication errors * Demonstrated shared responsibility in preventing medication administration errors * Hospital must maintain clear procedures for medication orders * Physicians must write clear, unambiguous medication orders * Nurses must question unclear or potentially dangerous orders * Proper communication between providers essential to patient safety * Documentation of medication orders must be clear and complete * Hospital policies regarding medication administration are legally significant * Staff training on medication safety is essential * Case illustrates chain of errors that could have been interrupted at multiple points

Question 48

What is the significance of the Johnson v. Misericordia Community Hospital case for hospital liability?

Answer 48

* Established hospital's duty to exercise due care in selecting medical staff * Hospital liable for negligent credentialing despite physician's independent contractor status * Required hospitals to verify application information and check references * Established that credentialing negligence exposes patients to "foreseeable risk" * Determined hospitals cannot rely solely on applications without verification * Required hospitals to follow their own bylaws regarding credentialing * Recognized hospital's duty to protect patients from incompetent physicians * Emphasized credentialing as non-delegable corporate responsibility * Court specified minimum credentialing steps hospitals should take * Firmly established corporate liability for negligent credentialing

Question 49

How do managed care utilization review decisions influence patient care, and what legal protections exist for patients?

Answer 49

Utilization review decisions can deny or limit necessary treatment * Different standards for prospective vs. retrospective review decisions * Wilson case: Utilization decisions can be substantial factor in patient harm * ERISA preemption severely limits remedies for patients in employer-sponsored plans * State TRAP laws attempt to regulate decisions but often preempted * Patients with individual insurance have greater legal protections * "Undue burden" standard applies but remains vague * Medical necessity determinations often controlled by insurers rather than physicians * Physician advocacy remains important safeguard for patients * Limited statutory protections for emergency care under EMTALA

Question 50

How has the judicial interpretation of ERISA preemption evolved, and what are its implications for patients?

Answer 50

* Initially narrow interpretation of preemption allowed some state remedies * Davila case: Broad interpretation preempting virtually all state claims * Gobeille: Further expanded preemption to include state data reporting requirements * Creates inequitable situation where remedy depends on insurance source * Justice Ginsburg's "tangled ERISA regime" critique recognized fundamental unfairness * Limited to contractual damages rather than compensatory damages * Leaves significant accountability gap in managed care oversight * State efforts to regulate continue to face preemption challenges * Congressional action needed but politically difficult * Leaves patients with employer-sponsored plans with limited recourse