New Liability Infects Hospitals That Catch Marketing Fever

"Brain Surgery - Specials This Week: Only $2,000!"

Unbelievable? Surprising?

To remain competitive in the growing health care market, hospitals advertise their services. Perhaps this particular type of hucksterism is far-fetched, but it is apparent with the advancements in the health care industry, a new consumerism has dawned.

Hospital advertising budgets have taken a quantum leap since the early 1980s, when marketing of health care first came in vogue.

It is estimated that hospitals in the United States spent $1.81 billion on advertising and marketing in 1993.

But the expanding of health care services has been coupled with a steady expansion of hospital liability, resting, in part, sometimes on misleading advertising pitches made to the public.

A new theory of liability in this area is taking hold in Illinois: apparent or ostensible agency.

In the case of Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511, 622 N.E. 2d 788 (1993), the Supreme Court dealt with this issue.

There, the emergency room was considered a hospital function even though it was staffed by physicians considered to be independent contractors. Patients were not informed that their doctors were not employees.

Using apparent agency principles, the court held liability attached to the hospital for the negligent treatment of an emergency patient. The plaintiff must show:

1) the hospital or its agent held itself out in a manner that would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or agent of the hospital;

2) the hospital had knowledge of the acquiesced in those actions;

3) plaintiff acted in justifiable reliance upon the conduct of the hospital or its agent. Advertising played a direct role in the court's decision:

"Hospitals increasingly hold themselves out to the public in expensivee advertising campaigns as offering and rendering quality health services. One need only pick up a daily newspaper to see full and half page advertisements extolling the medical virtues of an individual hospital and the quality health care that the hospital is prepared to deliver in any number of medical areas. Modern hospitals have spent billions of dollars marketing themselves nurturing the image with the consuming public that they are full-care modern health facilities. All of these expenditures have but one purpose: to persuade those in need of medical services to obtain those services at a specific hospital. In essence, hospitals have become big business, competing with each other for health care dollars." Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d at 520, quoting, Kashishian v. Port, 167 Wis. 2d 24, 38, 481 N.W. 2d 277, 282 (1992).

An Illinois appellate court recently concurred in this thinking. Grutzius v. Franciscan Sisters Health Care, 251 Ill. App. 3d 897, 623 N.E. 2d 853 (3d Dist. 1993). There, the court found "the business and marketing practices of modern hospitals" are realities of modern-day health care that must be factored in when determining liability.

These cases move toward a general trend in establishing hospital liability. No longer are these institutions immune from lawsuits, hiding under antiquated notions of charitable or governmental immunity.

Rather, it has to do, in part, with the public's perception of a hospital curing all ills through its expansive facilities and control of activities there. But is also is due, in part, to the changing modern health care scheme that includes marketing and advertising of its "wares." Running a hospital now is like running a big business. And when hospital officials boast about its expertise in a particular area or present itself as an institution to fulfill all health care needs, then it should be held to that standard.

This is the case even in the fact of independent contractor physicians, as Gilbert v. Sycamore Municipal Hospital demonstrates.

Other courts around the country have utilized this and other theories such as agency by estoppel, respondeat superior, corporate negligence or non-delegable duty.

Perhaps the solution is to invoke "enterprise liability" - the notion that a hospital will be liable for all torts occurring as part of the hospital enterprise. Other courts have done so very cautiously. Alden v. Providence Hospital, 382 F.2d 163, 166 (D.C. Cir. 1967); Adamski v. Tacoma General Hospital, 20 Wash. App. 98, 579 P.2d 970, 977 & n. 5 (1978).

Public policy demands that a hospital not exculpate itself for professional negligence that occurs within its walls. This concept should be construed to include misleading messages in its marketing scheme that is strictly designed to entice patients.

These novel liability principles may provide powerful incentives to hospitals to insure higher quality health care.