The Supreme Court of Illinois held in Petrovich v. Share Health Plan of Illinois, Inc., No. 85726, 1999 WL 773524 (Ill. Sept. 30, 1999) that a health maintenance organization (HMO) may be vicariously liable for the negligence of its independent contractor physicians under the doctrines of both apparent authority and implied authority.

Plaintiff Inga Petrovich received health care through an employer-selected HMO, Share Health Plan of Illinois (Share). Share required plan subscribers to select a primary care physician from a list of Share participants. Primary care physicians are responsible for plan members' overall care and could authorize referrals when necessary. Petrovich went to her primary care physician complaining of mouth, tongue, throat and face pain; she was subsequently referred to two other Share providers, a neurologist and an ear, nose and throat specialist. One of the referral physicians recommended that Petrovich undergo a magnetic resonance imaging test and a computed tomography scan. Petrovich alleged that Share denied her the tests. One year later, she was diagnosed with oral cancer.

Petrovich subsequently brought a malpractice action against her physicians for failing to diagnose her cancer adequately. She also named Share as a defendant, arguing that Share was vicariously liable for the physicians' negligence under agency principles. The circuit court granted Share summary judgment and the appellate court reversed.

The question of whether an HMO may be liable for malpractice was one of first impression in Illinois. The court noted, however, that the national trend has been to "hold HMOs accountable for medical malpractice under a variety of legal theories, including vicarious liability . . . ." Id. at *5. As a general rule, no vicarious liability exists for the actions of independent contractors. Nevertheless, liability might be imposed for the actions of independent contractors where an agency relationship is established under either the doctrine of apparent authority or the doctrine of implied authority.

The Supreme Court of Illinois set out a two-prong test to establish the apparent authority of an HMO. First, a plaintiff must prove that the HMO held itself out as the provider of health care. Liability will not attach if the plaintiff knew or should have known that the physician providing treatment was an independent contractor. Because Share referred to its participating physicians as "Share physicians" and "our staff" in its handbook, the court held that Petrovich had raised a question of fact as to whether Share held itself out as a provider of health care. Second, a plaintiff must prove that he or she justifiably relied on the representations of the HMO by demonstrating that he or she looked to the HMO to provide services, rather than to an individual physician. The court noted that Petrovich was literally compelled to look to Share for provision of health services, because Share contracted with her employer to become the sole provider of health care.

Vicarious liability can also be imposed under the doctrine of implied authority. Implied authority is "actual authority, circumstantially proved." The cardinal consideration for determining the existence of implied authority is whether the agent retained the right to control the manner of doing the work. Thus, the court held that "if an HMO effectively controls a physician's exercise of medical judgment, and that judgment is exercised negligently, the HMO cannot be allowed to claim that the physician is solely responsible for the harm that results." Id. at *16. The court pointed to a number of ways in which an HMO can control a physician. HMOs, like Share, often retain both the right to make decisions of medical necessity and the right to refuse to pay for treatment that it perceives as inappropriate or outside the scope of its policy. Additionally, HMOs may adopt cost-containment practices and then delegate enforcement of these practices to physicians.

This case, hailed by patients' rights advocates, clearly tells HMOs in Illinois that they are no longer insulated from liability resulting from their decisions. "HMO accountability is essential to counterbalance the HMO goal of cost-containment." Id. at *5.