Jai Medical Systems Managed Care Organization, Inc. v. Bradford
2012 Md. App. LEXIS 151, 209 Md. App. 68, 57 A.3d 1068 (2012)
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Rule of Law:
A managed care organization (MCO) is not vicariously liable for the medical malpractice of an independent contractor physician under an apparent agency theory merely because the MCO lists the physician in its provider directory and the patient is required to use in-network providers.
Facts:
- Wilhelmina Bradford, a Medicaid recipient, enrolled in JAI Medical Systems Managed Care Organization, Inc. (“JAI”), an MCO.
- JAI provided Bradford with a Member Handbook and a Provider Directory listing approximately 4,000 in-network providers from which she had to choose.
- Bradford's plan required her to select a Primary Care Physician (PCP) from the network and obtain referrals for specialists.
- Suffering from foot pain, Bradford specifically requested a referral from her PCP to Dr. Steven W. Bennett, a podiatrist, based on a recommendation from another patient in a waiting room.
- Dr. Bennett was an independent contractor who was part of JAI's network and whose office, like the PCP's office, displayed signs indicating acceptance of multiple insurance plans.
- Dr. Bennett performed bunion surgery on Bradford's right foot.
- Due to Dr. Bennett's conceded negligence in post-operative care, Bradford developed gangrene, which resulted in the amputation of her toes and part of her right foot.
Procedural Posture:
- Wilhelmina Bradford filed a complaint in the Circuit Court for Baltimore City against Dr. Bennett and a hospital for negligence.
- Bradford amended her complaint, adding JAI Medical Systems Managed Care Organization, Inc. ("JAI") as a defendant and alleging JAI was vicariously liable for Dr. Bennett's actions.
- JAI filed a motion for summary judgment asserting it was not Dr. Bennett's employer or principal, which the trial court denied.
- During trial, JAI moved for judgment as a matter of law at the close of the plaintiff's case, on which the court deferred ruling.
- At the close of all evidence, JAI renewed its motion for judgment, which the trial court denied.
- A jury found Dr. Bennett was the apparent agent of JAI and awarded Bradford $3,064,000 in damages.
- JAI filed post-trial motions for Judgment Notwithstanding the Verdict (JNOV) and a new trial, both of which the trial court denied, though it did grant a motion for remittitur, reducing the judgment.
- JAI (appellant) appealed the final judgment to the Court of Special Appeals of Maryland.
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Issue:
Does a managed care organization (MCO) create an apparent agency relationship with a physician in its provider network, making it vicariously liable for the physician's negligence, by listing the physician in its provider directory and requiring referrals for specialty care?
Opinions:
Majority - Wright, J.
No, a managed care organization (MCO) does not create an apparent agency relationship with an in-network physician simply by including them in a directory and managing referrals. To establish apparent agency, a plaintiff must satisfy a three-part test: (1) that the principal made representations leading the plaintiff to believe the tortfeasor was its agent; (2) that this belief was objectively reasonable; and (3) that the plaintiff relied on this belief. Here, the court found Bradford failed all three parts. First, JAI made no representations that Dr. Bennett was its agent; its handbook and directory were required by state law and merely identified it as an insurance provider. Second, it is not objectively reasonable for a patient to believe an MCO employs every doctor in its network; the court held it is 'common knowledge' that MCOs are insurers, not direct providers of care, and a directory is just a list of who accepts the insurance. Third, Bradford did not rely on any representation from JAI; she chose Dr. Bennett based on another patient's recommendation before confirming he was in-network.
Analysis:
This decision significantly insulates managed care organizations from vicarious liability for the malpractice of their in-network physicians. By establishing that the typical MCO structure—providing directories and requiring referrals—does not create apparent agency, the court reinforces the legal distinction between financing care and providing it. The ruling differentiates MCOs from hospitals, which are more frequently held liable, by highlighting the patient's active role in selecting an independent physician and invoking 'common knowledge' about the function of health insurance. This precedent makes it substantially more difficult for plaintiffs to hold MCOs accountable for the quality of care delivered by their contracted providers.
