In a case in which the Texas Medical Association and Texas Hospital Association have taken opposing positions, the Texas Supreme Court has before it a petition for review of a Corpus Christi Court of Appeals decision holding that a nonprofit health organization that employs physicians may be held vicariously liable for the physician’s negligence.
Renaissance Medical Foundation v. Rebecca Lugo, Individually and as Next Friend of XXXXX XXXXX, a Minor (No. 13-22-00374-CV; June 15, 2023) arose from injuries to Plaintiff’s minor daughter allegedly caused by physician negligence during brain surgery. Plaintiff sued the physician and the physician’s employer, RMF. RMF is a nonprofit “health organization corporation” (NPHOs) certified under § 160.001(b), Texas Occupations Code, for the purpose of employing physicians to practice in affiliated hospitals. In 2011, the Texas Legislature recognized NPHOs and provided that employment agreements must reserve to physicians the “sole authority to engage in the practice of medicine.” RMF moved for summary judgment, asserting that it could be vicariously liable for the employee-physician’s negligence because it had no control the manner in which the physician provided medical care. The trial court denied the motion but approved an accelerated permissive appeal, which the court of appeals accepted.
In an opinion by Justice Contreras, the court of appeals affirmed. Noting that well-settled Texas law holds that “imposing [vicarious] liability is that the . . . employer has the right to control the means and methods of the . . . employee’s work” and that “the right to control must extend to the specific activity from which the injury arose,” the court proceeded to apply SCOTX’s test for “right to control” set out in Limestone Prods. Distrib., Inc. v. McNamara, 71 S.W.3d 308, 312 (Tex. 2002). In Limestone, SCOTX held that “[w]e measure the right to control by considering: (1) the independent nature of the worker’s business; (2) the worker’s obligation to furnish necessary tools, supplies, and materials to perform the job; (3) the worker’s right to control the progress of the work except about final results; (4) the time for which the worker is employed; and (5) the method of payment, whether by unit of time or by the job.”
Acknowledging that “there is no suggestion or evidence that RMF exercised actual control of [the physician’s] performance when he operated on [Plaintiff’s] daughter, . . . we review the parties’ employment agreement to determine whether there is an ‘explicit contractual assignment’ of the right to control so as to render [the physician] an employee of RMF for purposes of vicarious liability” [citing Shell Oil Co. v. Khan, 138 S.W.3d 288, 292 (Tex. 2004)]. RMF argued that contract language providing “that at all times Physician shall retain the right to exercise Physician’s independent medical judgment in providing the Medical Services to patients” indicated “the parties’ ‘intent to follow’ the ‘general rule’ that ‘physicians are considered “independent contractors”’” (citations omitted). Plaintiffs countered that the contract likewise restricts the manner in which the physician performs medical services, controls work hours and practice sites, provides detailed reporting requirements, requires compliance with company bylaws, policies, and procedures, and other terms of “employment.” Significantly, the agreement also provides that RMF’s malpractice policy does not apply to a physician’s outside activities “as they are outside the scope of Physician’s employment with the [RMF].”
The court relied heavily on Murk v. Scheele, 120 S.W.3d 865 (Tex. 2003), in which SCOTX held that a neurosurgeon employed by a public teaching hospital was an “employee” for purposes of the Texas Tort Claims Act, even though the physician exercised independent judgment in treating patients. As SCOTX put it, “[w]hile the nature of his practice as a physician required him to make many medical decisions using his own professional judgment, the necessity for that judgment did not, by itself, vitiate [the hospital]’s right to control the details of his practice.” In a more recent case, Marino v. Lenoir, 526 S.W.3d 403 (Tex. 2017), SCOTX again held that a physician employed by a nonprofit foundation that administered the residency program under contract with the UT Health Science Center at Houston was an employee of the hospital for Tort Claims Act purposes because the details of the physician’s work “were in fact supervised and assigned by UTHSCH personnel . . . rather than the personnel of the Foundation.” Likening the TTCA definition of “employee” to that of the common law, the court concluded that RMF controlled the details of the neurosurgeon’s practice and thus constituted his employer for vicarious liability purposes. The question then became whether the neurosurgeon acted in the course and scope of his employment when the alleged negligence occurred, which the court answered in the affirmative.
As noted above, TMA and THA have filed amicus briefs on both sides of the issue. Among other things, TMA’s brief worries that physicians will be marooned on a liability island if their employers cannot be sued on a respondeat superior theory. THA’s brief contends that when the Legislature recognized NPHOs in 2011 and added the independent judgment language to the statute, it intended to exclude them from vicarious liability based on the physician’s exercise of that judgment in treating patients. Given that the NPHO model has proliferated and now employs thousands of physicians treating patients in hospitals across the state, the stakes in the lawsuit could hardly be higher.
