Apparent Agency Does Not Extend Beyond the Four Walls of a Hospital: Yarbrough v. Northwestern Memorial Hospital Reversed

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January 5, 2018
Justin DeLuca
SmithAmundsen Health Care Alert 

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In a sharply divided opinion, the Illinois Supreme Court reversed the holding of the Illinois First District Appellate Court that a hospital can be vicariously liable under the doctrine of apparent authority (a/k/a apparent agency) for the acts of the employees of an unrelated, independent clinic that was not party to the litigation. Yarbrough v. Northwestern Memorial Hospital, 2017 IL 121367. This Supreme Court decision marks the first time in 25 years that the Supreme Court has limited the application of the doctrine of apparent authority/agency announced in Gilbert v. Sycamore Hospital.

In Yarbrough, the plaintiff sought to impose liability on Northwestern Memorial Hospital for care and treatment provided by employees and agents of Erie Family Health Center. Erie is a federally qualified health center that compromised several clinics in the Chicago area. While Erie was originally founded as a project between Northwestern and Erie Neighborhood House and Northwestern continued to provide financial, technological, and strategic support, Erie is an independent clinic and employees of Erie are deemed federal employees. The Illinois Supreme Court reconfirmed that the doctrine of apparent authority under Gilbert is as viable and applicable today, as it was when decided 25 years ago. With the recent trend of hospital consolidations and mergers to improve finances, modern health care is all about attracting more patients to the institution. A plaintiff may still pursue claims of apparent authority against a hospital arising out of treatment at an outside facility that is owned or operated by the hospital.

However, in Yarbrough, the factual situation was significantly different and required a reversal of the appellate court’s ruling. The court, observed that Erie was neither owned nor operated by Northwestern Memorial Hospital. While Erie received some financial assistance from Northwestern, it is a federally qualified health center that relied on federal grants and Medicaid assistance to provide care to underserved communities. Further, Erie did not utilize the Northwestern name nor did it use any Northwestern related branding, trademark, and/or colors. The court also rejected the argument that apparent authority applies solely because an Erie physician has privileges at the hospital. The court held Gilbert must not be read to imply that granting a physician hospital privileges creates an apparent authority/agency relationship. The court therefore refused to broadly impose vicarious liability under the doctrine of apparent agency on a hospital for the care given by employees of an unrelated, independently owned and operated clinic.

This decision serves as a reminder to health care providers of the ways to avoid liability under apparent authority. First, hospitals should review their consent forms, as used in all areas of the hospital, to be sure the form actually advises the patient that a specific physician is not an actual agent and/or employee of the hospital. Second, hospitals should avoid lending their logo, advertising, or branding to another facility. Third, when leasing premises to independent health care providers, hospitals should consider posting signs disclaiming any agency or corporate relationship. By following these recommendations, hospitals and other health care providers may limit a plaintiff’s theory of recovery under the doctrine of apparent authority.