Fadely v. Encompass
FILED 6-28-2022 (2022)
Rule of Law:
Under the Adult Protective Services Act (APSA), an "enterprise" providing care to a vulnerable adult can be held liable for abuse or neglect, even if individual members of that enterprise are exempt from civil liability for damages.
Facts:
- In March 2016, 73-year-old Terrell Fadely underwent her sixth back surgery, a spinal fusion performed by Dr. Michael Chang at HonorHealth Scottsdale Hospital.
- After a week of recovery at HonorHealth, Fadely was discharged with full strength and able to walk with a walker.
- Fadely was then transported to Encompass Health Valley of the Sun Rehabilitation Hospital for in-patient recovery, having chosen it due to location and previous positive experiences.
- Since Fadely did not choose a specific doctor, Encompass designated Dr. Christopher Barnes, who had medical staff privileges and leased space at the hospital, as her primary attending physician.
- A few days into her stay at Encompass, Fadely complained of "sharp" and "throbbing" back pain and displayed "significant" neurological decline.
- Dr. Atul Patel, Dr. Barnes's on-call replacement, examined Fadely, noted symptoms "consistent with a spinal cord injury" and precipitous neurological decline, but did not perform a neurological exam or order a spine x-ray.
- Two days later, Dr. Barnes finally examined Fadely, whose mind had further declined, and who had developed a pressure ulcer and urinary tract infection, but he also did not perform a neurological exam or order a spine x-ray.
- Fadely's surgeon's physician's assistant (PA) subsequently examined her, feared a spinal cord compression, and had her rushed back to HonorHealth, where she was diagnosed with spinal compression, but surgical intervention by Dr. Chang came too late, resulting in Fadely never walking again and requiring long-term care.
Procedural Posture:
- Terrell Fadely sued Encompass Health Valley of the Sun Rehabilitation Hospital in the Maricopa County Superior Court (trial court) in 2017, alleging abuse and neglect under the Adult Protective Services Act.
- Fadely initially included a negligence claim but later dropped it, and she never sued the individual physicians.
- After a 12-day bench trial, the superior court ruled in favor of Fadely, finding Drs. Barnes and Patel abused or neglected her under APSA, and held Encompass liable for their actions based on theories of either (1) apparent agency or (2) their being part of Encompass's "enterprise" for providing care.
- Encompass filed several unsuccessful post-trial motions challenging the judgment.
- Encompass Health Valley of the Sun Rehabilitation Hospital (appellant) appealed the superior court's judgment to the Arizona Court of Appeals, Division One, with Terrell P. Fadely as the appellee.
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Issue:
Does an "enterprise" composed of a rehabilitation hospital and non-employee physicians, who are individually exempt from civil liability under APSA, constitute an "enterprise that has been employed to provide care" to a vulnerable adult, thereby making the hospital liable for abuse or neglect committed by the physicians? Did the superior court err in finding that non-employee physicians were "apparent agents" of the hospital when the patient signed a consent form disclaiming such agency?
Opinions:
Majority - Presiding Judge David D. Weinzweig
Regarding the "enterprise" issue, yes, an "enterprise" under APSA can include a hospital and non-employee physicians, even if the individual physicians are exempt from direct civil liability, making the hospital liable for abuse or neglect committed by the physicians as part of that enterprise. The court found that APSA's plain language defines an "enterprise" broadly as "any group of persons associated in fact although not a legal entity" involved in caring for a vulnerable adult (A.R.S. § 46-455(Q)). Here, Encompass, Dr. Barnes, and Dr. Patel formed such an "enterprise" because they worked as a "continuing unit" with a common purpose of treating Fadely, and a formal or informal framework existed between them to achieve this. The court reasoned that Encompass cannot "care for patients without human beings," and the doctors complied with Encompass’s policies. While the legislature amended APSA to exempt most individual physicians from civil liability, it did not exempt an "enterprise" or hospitals from such liability, and the court refused to rewrite the statute to include such an exemption, consistent with the broad construction of APSA to protect vulnerable adults. Regarding the apparent agency issue, no, the superior court erred in finding that Drs. Barnes and Patel were apparent agents of Encompass. The court explained that apparent agency requires (1) a principal to intentionally or inadvertently lead a party to believe an agency exists, and (2) the party to justifiably rely on those representations. Encompass did not make such representations; instead, Fadely signed a "Consent to Treat and Conditions of Admission" form that clearly advised her that independent practitioners, not controlled by the hospital, would provide medical services and bill separately. This form explicitly distinguished between hospital employees and independent practitioners, thus negating both the representation of agency and any justifiable reliance by Fadely. Regarding other issues, the court affirmed the exclusion of Encompass’s nonparty-at-fault expert witness, Dr. Bolhack, finding no abuse of discretion as he lacked comparable training and experience to Dr. Medina, as required by A.R.S. § 12-2604. However, the court reversed the admission of medical bills from Select Specialty Hospital, finding that Plaintiff failed to establish a causal connection between Encompass’s conduct and all of Select’s treatments, necessitating a recalculation of damages. Finally, the court affirmed the award of post-judgment interest on a Rule 68 sanction of prejudgment interest, as the amount was precisely calculable upon judgment entry.
Analysis:
This case significantly clarifies the scope of "enterprise" liability under Arizona's Adult Protective Services Act, holding that a hospital can be held liable for the actions of independent contractor physicians if they form an "enterprise" to provide care, even if those physicians are individually exempt from civil damages. This broad interpretation strengthens protections for vulnerable adults by closing a potential loophole for institutional liability. Concurrently, the decision reinforces the strict requirements for establishing apparent agency in a hospital setting, emphasizing that clear contractual disclaimers can negate such claims, and underscores the necessity of proving causation for all claimed medical damages.
