¹ Merriman, , Private Initiatives and Concerns in Health Care Cost Containment, 1 Health Lawyer 6, 11 (1983)Google Scholar; Irmen, , Preferred Provider Organizations: Legal Aspects, 40 J. Mo. B. 149 (1984)Google Scholar.

² Irmen, supra note 1, at 149-50; Smith & Lamade, Preferred Provider Plans BreakNew Legal Ground, Legal Times, Nov. 21, 1983, at 27, col. 1.

³ Demkovich, , 'PPO'—Three Letters that May Form One Answer To Runaway Health Costs, National Journal, June 4, 1983Google Scholar, at 1176; Paris, Shock: Terror: Invisible Hand Strikes California Doctors, Forbes, Nov. 7, 1983, at 39; see also Adelman, , PPA: Perfect Panacea for All?, American Medical News, May 25, 1984Google Scholar, at 4, col. 1.

⁴ Adelman, supra note 3, at 4, col. 1; Smith & Lamade, supra note 2, at 27, col. 1.

⁵ Irmen, supra note 1, at 149; Demkovich, supra note 3, at 1177; Smith & Lamade, supra note 2, at 31, col. 1.

⁶ Irmen, supra note 1, at 152-58; Smith & Lamade, supra note 2, at 31, col. 2. A discussion of insurance, tax, and securities issues is beyond the scope of this Note.

⁷ Paris, supra note 3, at 40; Adelman, supra note 3, at 4, col. 2; Hopkins, & Davis, , Restricted Choice—A Liability of Alternative Delivery Systems, 58 Fla. B.J. 145 (1984)Google Scholar.

⁸ PPOs were first described and named in 1981 by a Minnesota health care policy research firm. Smith & Lamade, supra note 2, at 27, col. 1 (citing L. Ellwein, Interoffice Memorandum (Feb. 16, 1981) (attached to InterStudy Report: An Introduction to Preferred Provider Organizations, February 1982)).

⁹ Smith & Lamade, supra note 2, at 27, col. 1.

¹⁰ Id.

¹¹ See infra text accompanying note 20.

¹² The term “alternative delivery system” is generally applied to health maintenance organizations (HMOs), PPOs, and similar organizations. An HMO is an integrated health care delivery system in which patients pay an enrollment fee in exchange for prepaid medical care. Patients must obtain care only from HMO physicians, who are often salaried employees of the organization. Patient charges are unrelated to utilization of services; the organization assumes the financial risk of overutilization. Luft, , Assessing the Evidence on HMO Performance, 58 Milbank Mem. Fund Q./Health & Society 501, 503 (1980)CrossRefGoogle ScholarPubMed.

¹³ Irmen, supra note 1, at 150; Hopkins & Davis, supra note 7, at 146; see also Demkovich, supra note 3, at 1176.

¹⁴ There are three common types of HMO: staff model, prepaid group practice (PGP), and independent practice association (IPA). Both staff and group models generally employ salaried physicians. IPAs, on the other hand, more closely resemble PPOs. Physicians are paid on a fee-for-service basis, generally with an agreed upon percentage withheld in a profit sharing plan. Wolinsky, , The Performance of Health Maintenance Organizations: An Analytic Review, 58 Milbank Mem. Fund Q./Health & Society 537, 546 (1980)CrossRefGoogle Scholar; see also Luft, supra note 12, at 504.

¹⁵ Smith & Lamade, supra note 2, at 27, col. 4; Demkovich, supra note 3, at 1176.

¹⁶ Irmen, supra note 1, at 150.

¹⁷ Hopkins & Davis, supra note 7, at 146; Smith & Lamade, supra note 2, at 27; Demkovich, supra note 3, at 1177.

¹⁸ Demkovich, supra note 3, at 1177. See Smith & Lamade, supra note 2, at 27 & 31, for a more detailed discussion of peer review procedures.

¹⁹ Wolinsky, supra note 14, at 547. The reduction in hospitalization usage by HMO physicians applies to both admission rates and lengths of stay. The physician's reimbursement remains unchanged regardless of whether a particular condition is treated on an inpatient or outpatient basis. In addition, the physician is not reimbursed for visits to hospitalized patients, as are many fee-for-service physicians. Id.

²⁰ Hopkins & Davis, supra note 7, at 145-46; Smith & Lamade, supra note 2, at 27, col. 3; Demkovich, supra note 3, at 1176. One exception is the exclusive provider organization, a less common type of PPO, which does not reimburse for any care received from an outside provider. Irmen, supra note 1, at 151.

²¹ Hopkins & Davis, supra note 7, at 146.

²² Smith & Lamade, supra note 2, at 27, col. 2; Irmen, supra note 1, a t 151; Demkovich, supra note 3, at 1176.

²³ Irmen, supra note 1, at 151; Smith & Lamade, supra note 2, at 32, col. 1.

²⁴ Irmen, supra note 1, at 151.

²⁵ D. Cowan, Preferred Provider Organizations : Planning, Structure, and Operation 67 (1984).

²⁶ Demkovich, supra note 3, at 1176.

²⁷ Carlova, At Last Fee-For-Service Has Something to Celebrate, Medical Economics, June 24, 1985, 176-79; see also S. Tibbitts & A. Manzano, Ppos : An Executive's Guide 266-76(1984); Cassidy, Will the PPO Movement Freeze You Out?, Medical Economics, April 18, 1983, 262-74.

²⁸ Paris, supra note 3, at 39.

²⁹ Id.; Demkovich, supra note 3, at 1176.

³⁰ Demkovich, supra note 3, at 1176-77.

³¹ Irmen, supra note 1, at 151. A “joint venture” is defined as a partnership or other arrangement between two parent corporations to carry out specific activities on behalf of the parent corporations. N. Lattin, Lattin on Corporations § 6a (1971).

³² Discussion of the antitrust issues affecting PPOs is beyond the scope of this Note. For a complete discussion of these issues see Batavia, Preferred Provider Organizations: Antitrust Aspects and Implications for the Hospital Industry, 10 Am. J.L. & Med. 169-88 (1984).

³³ Cassidy, supra note 27, at 267.

³⁴ Id.

³⁵ Smith & Lamade, supra note 2, at 31, col. 2; Irmen, supra note1, at 151.

³⁶ Irmen, supra note 1, at 151.

³⁷ D. Cowan, supra note 25, at 245.

³⁸ S. Tibbitts & A. Manzano, supra note 27, at 265-76.

³⁹ W. Keeton, Prosser and Keeton on Torts § 69 (5th ed. 1984).

⁴⁰ Id.

⁴¹ Restatement (Second) of Agency § 219 (1958).

⁴² Id. at § 250; see, e.g., Capon v. Divine Providence Hospital, 287 Pa. Super. 364, 367, 430 A.2d 647, 648 (1980) (“As a general rule, an employer is not liable for torts committed by an independent contractor in his employ.”).

⁴³ See infra text accompanying notes 62 & 63.

⁴⁴ Annot., 69 A.L.R.2d 305, 309 (1960); see also Stewart v. Midani, 525 F. Supp. 843, 848 (N.D. Ga. 1981) (“Undoubtedly, the difficulty with the control analysis is that, if applied routinely, it will always operate to release the employer [of a physician].”).

⁴⁵ 69 A.L.R.2d at 320; Restatement (Second) of Agency § 220 (1958).

⁴⁶ Stewart, 525 F. Supp. at 849 (right to control includes the right of the employer to dictate the hours of work, not simply the right to control medical treatment decisions).

⁴⁷ Restatement (Second) of Agency § 220 comment d (1958). According to the Restatement, a full-time cook remains a servant even though there is an understanding that the employer will exercise no control over the cooking. This example also relates to the custom of the industry and the skill of the worker discussed infra note 66 and accompanying text.

⁴⁸ 69 A.L.R.2d at 322.

⁴⁹ Rosane v. Senger, 112 Colo. 363, 366, 149 P.2d 372, 374 (1944).

⁵⁰ 69 A.L.R.2d at 317.

⁵¹ 2 N.Y.2d 656, 143 N.E.2d 3, 163 N.Y.S.2d 3 (1957); see also Beeck v. Tucson General Hospital, 18 Ariz. App. 165, 500 P.2d 1153 (Ariz. Ct. App. 1972); Klema v. St. Elizabeth's Hosp. of Youngstown, 170 Ohio St. 519, 527, 155 N.E.2d 765, 771 (1960).

⁵² Bing, 2 N.Y.2d at 667, 143 N.E.2d at 9, 163 N.Y.S.2d at 12; see also Morwin v. Albany Hospital, 7 A.D.2d 582, 185 N.Y.S.2d 85, modified, 8 A.D.2d 911, 187 N.Y.S.2d 1006 (N.Y. App. Div. 1959).

⁵³ Demkovich, supra note 3, at 1177.

⁵⁴ Smith & Lamade, supra note 2, at 27, col. 2; Paris, supra note 3, at 29.

⁵⁵ Demkovich, supra note 3, at 1177; Smith & Lamade, supra note 2, at 31, col. 1.

⁵⁶ 52 A.D.2d 450, 384 N.Y.S.2d 527 (N.Y. App. Div. 1976).

⁵⁷ Id. at 452, 384 N.Y.S.2d at 529.

⁵⁸ Id. at 453, 384 N.Y.S.2d at 529. An alternative holding was based on the ostensible agency theory, discussed infra at text accompanying notes 78-102.

⁵⁹ S. Pegalis & H. Wachsman, 1 American Law of Medical Malpractic E § 3.28 (1980).

⁶⁰ Id.

⁶¹ Overstreet v. Doctors Hospital, 142 Ga. App. 895,—, 237 S.E.2d 213, 215 (Ga. Ct. App. 1977) (hospital had no right to control specific medical techniques utilized and only limited control over the quality of care); see also Vanaman v. Milford Memorial Hospital, 262 A.2d 263, 266 (Del. Super. Ct.), rev'd, 272 A.2d 718 (Del. 1970) (“The mere fact that the medical staff is an organized body with membership qualifications, privileges, and duties approved by the governing board of the hospital does not make such members servants of the Hospital ….”).

⁶² Restatement (Second) of Agency § 220 (1958); see also Stewart, 525 F. Supp. at 849 (listing eight factors frequently considered in determining whether a physician is an employee of a hospital: 1) the right to direct the work step-by-step, 2) whether the contract is to perform a service or accomplish a task, 3) the right to control the time of work, 4) the right to inspect the work, 5) the provision of equipment, 6) the right to terminate the contract, 7) the skill of the worker, and 8) the method of payment).

⁶³ “Instrumentalities” of work include the equipment and supplies used by the worker as well as the worksite itself. Restatement (Second) of Agency § 220 (1958).

⁶⁴ See generally id. See also Stewart, 525 F. Supp. at 849; Moor e v. Chesapeak e & O. Ry. Co., 493 F. Supp. 1252, 1261 (S.D.W. Va. 1980), aff'd, 649 F.2d 1004 (4th Cir. 1981) (court discusses custom or “distinct occupation” factor and “skill factor” involved in operating cafeteria); Smith v. California Dept. of Employment, 62 Cal. App. 3d 306, 132 Cal. Rptr. 874 (1976) (telephone solicitors were employees because of lack of special training, education, or experience).

⁶⁵ See supra text accompanying notes 45-61.

⁶⁶ An unskilled laborer, even if employed for a single job, is customarily regarded as a servant. A skilled craftsman is generally regarded as an independent contractor. Specific industry custom may override this presumption. For example, a skilled craftsman regularly employed by a manufacturer is customarily regarded as a servant. Restatement (Second) of Agency § 220 (1958).

⁶⁷ Binford, , Malpractice and the Prepaid Health Care Organization, 3 Whittie R L. Rev. 337, 344 (1981)Google Scholar; 69 A.L.R.2d at 321.

⁶⁸ See, e.g., Banks v. St. Mary's Hospital and Medical Center, 558 F. Supp. 1334, 1338 (D. Colo. 1983) (a hospital cannot be held vicariously liable for the acts of a licensed physician because it is “powerless to command or forbid any act by them in the practice of their profession.”); Rodriguez v. City and County of Denver, — Colo. —, 702 P.2d 1349, 1350 (Colo. Ct. App. 1984) (hospital had no power of control over residents' professional conduct despite fact that residents were unlicensed and employees of the hospital).

⁶⁹ See, e.g., Beeck v. Tucson Genera l Hospital, 18 Ariz. App. 165, 500 P.2d 1153 (Ariz. Ct. App. 1972); Klema v. St. Elizabeth's Hosp. of Youngstown, 170 Ohio St. 519, 527, 155 N.E.2d 765, 771 (1960); Moeller v. Hauser, 237 Minn. 368, 54 N.W.2d 639 (1952); Rice v. California Lutheran Hospital, 27 Cal. 2d 296, 163 P.2d 860 (1945).

⁷⁰ See generally 69 A.L.R.2 d at 325.

⁷¹ Ginzberg, Brann, Hiestand, & Ostow, , The Expanding Physician Supply and Health Policy: The Clouded Outlook, 59 Milbank Mem. Fund. Q./Health & Society 508, 513 (1981)CrossRefGoogle ScholarPubMed.

⁷² See Restatement (Second) of Agency § 220 (1958); see also Suhor v. Medina, 421 So. 2d 271, 273 (La. Ct. App. 1982) (physician paid a monthly salary is an employee of defendant hospital).

⁷³ Restatement (Second) of Agency § 220 comment k; see also Vanskike v. ACF Indus-tries, Inc., 665 F.2d 188, 199 (8th Cir. 1981),cert, denied, 455 U.S. 1000 (1982) (railroad worker held to be employee based, in part, on the railroad's provision of tools and hardhat); cf. Associated Independent Owner-Operators, Inc. v. N.L.R.B., 407 F.2d 1383, 1385-86 (9th Cir. 1969) (fact that operators owned their own trucks and grading machinery supporting finding of independent contractor relationship).

⁷⁴ Irving v. Doctors Hosp. of Lake Worth, Inc., 415 So. 2d 55, 56 (Fla. Dist. Ct. App. 1982) (hospital furnished all support personnel, supplies, and medicines); Suhor v. Medina, 421 So. 2d 271, 273 (La. Ct. App. 1982) (hospital furnishes all physical facilities, equipment, supplies and support personnel); Mehlman v. Powell, 281 Md. 269, 274, 378 A.2d 1121, 1124 (1977) (hospital provided premises for emergency room); cf. Beeck, 18 Ariz. App. 165, 500 P.2d 1153 (Ariz. Ct. App. 1972) (hospital provided facilities, administrative services and other instrumentalities to radiologist).

⁷⁵ Meyer, , Group Prepaid Health Plan Liability When A Physician Provider Malpractices, 6 N.M.L. Rev. 79, 90 (1975)Google Scholar.

⁷⁶ See infra text accompanying notes 98-102.

⁷⁷ An additional exception to the general rule of no liability for the negligence of an independen t contractor relies exclusively on the terms of the contract an d primarily affects provider-based PPOs. I n Jenkins v. Charleston General Hospital an d Training School, 90 W. Va. 230, 110 S.E. 560 (1822), the defendant hospital ha d contracted with a fuel company to provide medical care and surgical treatment for its employees. The defendant was reimbursed through a fund provided by employee contributions. The plaintiff was treated under the contract and was injured through the negligence of an independent contractor radiologist. Id. at 231, 110 S.E. at 561. The court refused to recognize an independent contractor defense, stating, “Farming out work to be done under a contract never relieves from the obligation of the contract. A man cannot avoid his contract by devolving performance thereof upon a stranger.” Id. at 232, 110 S.E. at 562. The similarity between the arrangement in Jenkins and that of provider-based PPOs contracting with self-insured employers is striking. In both situations a health care provider or group of providers agrees to provide all necessary medical care to an employee group at a predetermined rate. In this situation, a PPO is likely to incur contractual liability despite the absence of tort liability through an actual or apparent agency. See also Irving v. Doctors Hospital of Lake Worth, Inc., 415 So. 2d 55, 61 (Fla. Dist. Ct. App. 1982).

⁷⁸ Restatement (Second) of Agency § 267 (1958).

⁷⁹ Id.

⁸⁰ Mduba v. Benedictine, 52 A.D.2d 450, 384 N.Y.S.2d 527 (N.Y. App. Div. 1976); Adamski v. Tacoma, 20 Wash. App. 98, 579 P.2d 970 (Wash. Ct. App. 1978); see also Seneris v. Haas, 45 Cal. 2d 811, 291 P.2d 915 (1955) (anesthesiologist); Stanhope v. Los Angeles College of Chiropractic, 54 Cal. App. 2d 141, 128 P.2d 705 (Cal. Dist. Ct. App. 1942) (chiropractor); Williams v. St. Claire Medical Center, 657 S.W.2d 590 (Ky. Ct. App. 1983) (anesthesiologist).

⁸¹ Themins v. Emmanuel Lutheran Charity Board, 54 Or. App. 901, 908, 637 P.2d 155, 159 (Or. Ct. App. 1981) (orthopedic surgeon in emergency room performs inherent function of hospital); Adamski, 20 Wash. App. at 108, 579 P.2d at 977 (emergency room physician is “an integral part of the total hospital function or enterprise.”).

⁸² Smith v. St. Francis Hosp., 676 P.2d 279, 282 (Okla. Ct. App. 1983) (in absence of pre-existing patient-physician relationship and resulting reliance on institution for medical care, hospital may not deny responsibility for acts of independent contractor emergency room physician); Vanaman v. Milford Mem. Hosp., 262 A.2d 263, rev'd, 272 A.2d 718 (Del. Super. Ct. 1970); Holland v.Eugene Hosp., 127 Or. 156, 270 P. 784 (1928). See infra text accompanying notes 90-97.

⁸³ Capan v. Divine Providence Hospital, 287 Pa. Super. 364, 368-69, 430 A.2d 647, 649 (Pa. Super. Ct. 1980) (jury could reasonably have found that the defendant hospital “held out” the physician as an employee by providing his services on an “on call” basis for dealing with emergencies occurring within the hospital).

⁸⁴ Adamski, 20 Wash. App. at 112, 579 P.2d at 977; Beeck, 18 Ariz. App. at 170, 500 P.2d at 1158; see also Capan, 287 Pa. Super, at 368, 430 A.2d at 649; Bing v. Thunig, 2 N.Y.2d 656, 666, 143 N.E.2d 3, 8, 163 N.Y.S.2d 3, 11 (1957).

⁸⁵ Capan, 287 Pa. Super, at 368-69, 430 A.2d at 649 (Patient relies on the institution for care and cannot be expected to “inquire of each person who treated him whether he is an employee of the hospital or an independent contractor.”).

⁸⁶ Bing, 2 N.Y.2d at 666, 143 N.E.2d at 8, 163 N.Y.S.2d at 11.

⁸⁷ An exhaustive search revealed no reported case that even alleged that a physician was an ostensible agent of an insurer.

⁸⁸ These restrictions may also violate some state insurance laws. Irmen, supra note 1, at 154.See, e.g., Mo. Ann. Stat. § 375.936(11)(b) (Vernon Supp. 1986), which defines as “unfair discrimination” the making or permitting any unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or rates charged for any policy or contract of accident or health insurance or in the benefits payable thereunder, or in any of the terms or conditions of such contract, or in any other manner whatever, including any unfair discrimination by not permitting the insured full freedom of choice in the selection of any duly licensed physician ….

⁸⁹ Hopkins & Davis, supra note 7, at 146.

⁹⁰ 676 P.2d 279 (Okla. Ct. App. 1983).

⁹¹ Id. at 282; see also Beeck, 18 Ariz. App. at 170, 500 P.2d at 1158; Adamski, 20 Wash. App. at 111-12, 579 P.2d at 977.

⁹² See supra text accompanying notes 20 & 21.

⁹³ 127 Or. 256, 270 P. 784 (1928).

⁹⁴ Id. at 257, 270 P. at 785-86.

⁹⁵ 262 A.2d 263, rev'd, 272 A.2d 718 (Del. Super. Ct. 1970).

⁹⁶ 272 A.2d at 722.

⁹⁷ See supra text accompanying notes 86 & 87.

⁹⁸ Brawn v. Moore, 247 F.2d 711, 720 (3d Cir. 1971) (release form authorizing sanitorium to administer electroshock therapy permits inference that the institution “held out” that physicians administering treatments were employees).

⁹⁹ Id. at 721 (sanitorium billed for “professional fees”); Howard v. Park, 37 Mich. App. 496, 498, 195 N.W.2d 39, 41 (1972) (patient was billed on hospital stationery with physician's name on it).

¹⁰⁰ Lundberg v. Bay View Hospital, 175 Ohio 133, 134, 191 N.E.2d 121, 122 (1963) (pathology reports appeared under both physician and hospital names).

¹⁰¹ Stanhope v. Los Angeles College of Chiropractic, 54 Cal. App. 2d. 141, 128 P.2d 705, 708 (Cal. Dist. Ct. App. 1942) (technician in charge of x-ray laboratory was ostensible agent of chiropractic college because laboratory was located in college building and nothing indicated that the laboratory was not an integral part of the college).

¹⁰² Seneris, 45 Cal. 2d at 831, 291 P.2d at 932; Williams, 657 S.W.2d at 595; Capan, 287 Pa. Super, at 370, 430 A.2d at 649; Adamski, 20 Wash. App. at 115, 579 P.2d at 979. But see Beech, 18 Ariz. App. at 831, 500 P.2d at 1159 (medical release form stating that staff physicians are independent contractors does not resolve question of fact regarding employment status).

¹⁰³ Note, Corporate Negligence—Wisconsin Hospital Held to Owe a Duty To Its Patients To Select Qualified Physicians, 65 Marq. L. Rev. 139, 143 (1981); Southwick, The Hospital's New Responsibility, 17 Clev.-Mar. L. Rev. 146, 152 (1968).

¹⁰⁴ Irmen, supra note 1, at 156.

¹⁰⁵ 50 Ill. App. 2d 253, 200 N.E.2d 149 (Ill. App. Ct. 1964), aff'd, 33 Ill. 2d 326, 211 N.E.2d 253 (1965), cert, denied, 383 U.S. 946 (1966).

¹⁰⁶ Id. at 299, 200 N.E.2d at 177.

¹⁰⁷ Id. at 332, 200 N.E.2d at 188.

¹⁰⁸ M at 314, 331, 200 N.E.2d at 179, 188.

¹⁰⁹ Id. at 328, 200 N.E.2d at 188.

¹¹⁰ No. 228566 (Cal. Super. Ct. Sacramento, Nov. 27, 1973), rev'd on other grounds, 60 Cal. App. 3d 728, 131 Cal. Rptr. 717 (Cal. Ct. App. 1976), rev'd, 20 Cal. 3d 500, 573 P.2d 458, 143 Cal. Rptr. 240 (1978).

¹¹¹ Binford, supra note 67, at 349 (citing Gonzales, No. 228566 (Cal. Super. Ct. Sacramento, Nov. 27, 1973).

¹¹² Id. at 349.

¹¹³ 18 Ariz. App. 75, 500 P.2d 335 (Ariz. Ct. App. 1972).

¹¹⁴ Id. at 80, 500 P.2d at 340.

¹¹⁵ Id. at 81, 500 P.2d at 340.

¹¹⁶ Id. at 81, 500 P.2d at 341; Binford, supra note 67, at 349.

¹¹⁷ Purcell v. Zimbelman, 18 Ariz. App. 75, 85, 500 P.2d 335, 343 (Ariz. Ct. App. 1972); Binford, supra note 67, at 345.

¹¹⁸ Meyer, supra note 75, at 85; Binford, supra note 67, at 345; Annot., 51 A.L.R.3d 981, 983 (1973).

¹¹⁹ 64 Mich. App. 685, 236 N.W.2d 543 (Mich. Ct. App. 1975).

¹²⁰ Id. at 692, 236 N.W.2d at 550.

¹²¹ 51 A.L.R.3d at 983.

¹²² Lewis v. Columbus Hospital, 1 A.D.2d 444, 151 N.Y.S.2d 391, 394 (N.Y. App. Div. 1956); cf. Benedict v. St. Luke's Hospitals, 365 N.W.2d 499, 505 (N.D. 1985) (hospital will not be liable for negligent selection where the physician exercised the care and skill ordinarily possessed by other emergency room physicians).

¹²³ Meyer, supra note 75, at 85; Binford, supra note 67, at 345; 51 A.L.R.3d at 984.

¹²⁴ 51 A.L.R.3d at 984.

¹²⁵ Johnson v. Misericordia Community Hospital, 99 Wis. 2d 708, 716, 301 N.W.2d 156, 165 (1981).

¹²⁶ Id. at 724, 301 N.W.2d at 174; Darlingv. Charleston Community Hosp., 33 Ill. 2d 326, 330, 211 N.E.2d 253, 257 (1965).

¹²⁷ Misericordia, 99 Wis. 2d at 721, 301 N.W.2d at 171.

¹²⁸ Darling, 33 Ill. 2d at 332, 211 N.E.2d at 257.

¹²⁹ Cf. Williams v. St. Claire Medical Center, 657 S.W.2d 590 (Ky. Ct. App. 1983) (bylaws provide evidence of the responsibility for patient care assumed by the hospital).

¹³⁰ Hospital corporate negligence includes a duty to “'supervise' the attending physician in certain circumstances, to require the attending physician to seek consultation in problem cases, and to remove him from a case in extreme situations ….” Southwick, supra note 103, at 146. See also Darling, 50 Ill. App. 2d at 289, 200 N.E.2d at 168 (Hospital was aware that patient suffered from complications, but did not take action to correct the problem.).

¹³¹ Fiorentino v. Wenger, 19 N.Y.2d 407, 408, 227 N.E.2d 296, 297 (N.Y. 1967) (“[A] hospital may be held liable in tort for permitting its facilities to be used by an unlicensed person or by a licensed person committing an act of malpractice with the knowledge of the hospital or under such circumstances putting it on notice of such wrongful act.”) (emphasis added).

¹³² 101 Wash. 2d 226, 677 P.2d 166 (Wash. 1984).

¹³³ 101 Wash. 2d at 237, 677 P.2d at 172.

¹³⁴ Id.

¹³⁵ Southwick, supra note 103, at 146.

¹³⁶ Id. at 159.

¹³⁷ Id. at 146.

¹³⁸ Note, Hospital Corporate Liability: An Effective Solution to Controlling Private Physician Incompetence?, 32 Rutger S L. Rev. 342, 376 (1979).

¹³⁹ Id. at 376-77.

¹⁴⁰ Id. at 377.

¹⁴¹ See supra text accompanying notes 117-124 and 131.

¹⁴² See supra text accompanying notes 138-140.

¹⁴³ S. Tibbitts & A. Manzano, supra note 27, at 140.

¹⁴⁴ Demkovich, supra note 3, at 1177.

¹⁴⁵ Id.

¹⁴⁶ Merriman, supra note 1, at 10; see also Larson, , Do PPOs Practice Quality Medicine?, 25 Physician's Mgmt. 296 (Feb. 1985)Google ScholarPubMed.

¹⁴⁷ Smith & Lamade, supra note 2, at 27, col. 1. A detailed, comprehensive utilization review program, which includes preadmission review of all elective admissions; concurrent review of length of stay, level of service, and ancillary service utilization; and retrospective review of emergency room and other outpatient services, is recommended and discussed in D. Cowan, supra note 25, at 169-73.

¹⁴⁸ Smith & Lamade, supra note 2, at 31, col. 1.

¹⁴⁹ Irmen, supra note 1, at 157; Lemkin & Rich, PPOs: Utilization Review, in Attorneys & Physicians Examine Preferred Provider Organizations 49, 57 (1984) ; see, e.g., Slaughte v. Friedman, 32 Cal. 3d 149, 649 P.2d 886, 888 (Cal. 1982) (dental insurance plan committed libel by informing patients that oral surgeon overcharged and did unnecessary work.).

¹⁵⁰ The concept of negligent selection and supervision of physicians is discussed supra at text accompanying notes 103-140.

¹⁵¹ Demkovich, supra note 3, at 1177.

¹⁵² Id.

¹⁵³ S. Tibbitts & A. Manzano, supra note 27, at 140.

¹⁵⁴ No. NWC60672 (Cal. Civ. 1982) (no written opinion issued); see Lemkin & Rich, Hospital Sponsored PPOs: A Practical Guide to Structural and Organizational Options, Healthcare Fin. Mgmt. 81, 84, note m (Dec. 1983) (hereinafter cited as Hospital-sponsored PPOs); S. Tibbitts & A. Manzano, supra note 27, at 142; Irmen, supra note 1, at 156.

¹⁵⁵ Irmen, supra note 1, at 156.

¹⁵⁶ S. Tibbitts & A. Manzano, supra note 27, at 142.

¹⁵⁷ Id. at 142-43.

¹⁵⁸ “To date, a physician's financial situation has not been incorporated into the standard to which a physician is held. This may be due, in part, to the fact that in the past, physicians have not had to render treatment to patients without the opportunity for reimbursement.” Comment, , California Negotiated Health Care: Implications for Malpractice Liability, 21 S.D.L. Rev. 455, 464 (1984)Google Scholar.

¹⁵⁹ Merriman, supra note 1, at 10.

¹⁶⁰ At the initial developmental stages, PPO sponsors should investigate the advantages and disadvantages of various organizational forms (i.e. incorporation, partnership, joint venture). These structural decisions may affect financing, tax-exempt status, and operating costs and flexibility, as well as organizational liability. A complete discussion of these issues is beyond the scope of this Note. For a detailed analysis of structural issues pertaining to hospital sponsored PPOs see Hospital-sponsored PPOs, supra note 154. See generally D. Cowan, supra note 25, at 95-100.

¹⁶¹ In some jurisdictions, disclaimers included in contracts may be insufficient to prevent a finding of actual or apparent agency. See, e.g., Beeck v. Tucson General Hospital, 18 Ariz. App. 165, 500 P.2d 1153 (1972) (holding that medical release form stating that staff physicians are independent contractors does not resolve the question of fact regarding employment status.). See generally Annot., 6 A.L.R.3d 704 (1966).

¹⁶² Schwartz, , A Medical Maverick's Alternative to Preferred Provider Organizations, Private Practice 35-37 (Feb. 1983)Google Scholar. Comprehensive Health Associates, P.A. (CHAPA) a Baltimore based PPO, screens physicians on their malpractice history, credentials, and references. CHAPA's director, Alvin Ankrum, noted that a PPO “would be flirting with disaster if it offered contracts to just any physician.” Larson, supra note 146, at 297-98.

¹⁶³ S. Tibbitts & A. Manzano, supra note 27, at 140.

¹⁶⁴ Id. at 141.

¹⁶⁵ Hospital-sponsored PPOs, supra note 154, at 84.

¹⁶⁶ S. Tibbitts & A. Manzano, supra note 27, at 140. Binford, supra note 67, at 356, presents a sample “Contingent Malpractice Coverage” insurance policy for a pre-paid group practice HMO. A similar policy would provide protection to a PPO for negligent selection or supervision of providers or for negligent utilization review. It would not cover vicarious liability arising from the actual or apparent agency of a negligent physician. Id. at 353. The policy also excludes liability assumed under an indemnity agreement. Id. at 354.

¹⁶⁷ All sample PPO-provider contracts found in the literature contain either unilateral or reciprocal indemnity clauses. Specific organizations represented include Blue Cross of California (reciprocal indemnity) and Universal Health Network, Inc. (hospital indemnifies PPO). S. Tibbitts & A. Manzano, supra note 27, Appendices B-D; S. Vian, Ppos: The State of the Art, Appendix C (1983); see also Binford, supra note 67, at 352 (recommending indemnification clauses in provider agreements for prepaid group practice HMOs.) But see D. Cowan, supra note 25, at 146, arguing that indemnity clauses are unnecessary and should be omitted from provider agreements.

¹⁶⁸ S. Tibbitts & A. Manzano, supra note 27, at 110, 139-40.

¹⁶⁹ Lemkin & Rich, supra note 149, at 54-55.

¹⁷⁰ Medical associations in California currently monitor and evaluate PPO contracts. One San Francisco physician stated, “[W]e've been very successful in getting objectionable language out of contracts, such as hold-harmless clauses that absolve PPOs of any liability regarding the treatment of patients.” Carlova, supra note 24, at 180. S. Tibbitts & A. Manzano, supra note 27, at 143. See also Blacker, & Mickelson, , Negotiating Contracts with PPOs, Hosp. Fin. Mgmt. 48-51 (Sept. 1983)Google Scholar, which recommends that hospitals contracting with PPOs obtain an indemnification agreement against liability for negligent utilization review.

¹⁷¹ Adelman, supra note 3, at 4.