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Physician Service Companies

Indemnification should also be requested from corporations with which the hospital contracts to provide physician services, such as the staffing of emergency rooms. These physician services agreements are very profitable, putting the hospital in a good position to require indemnification. This indemnification is especially important for third party physician groups because of the inability of the hospital to assess the qualifications of those physicians. The hospital is forced to delegate to the third party provider its duty to select medical staff members, but it cannot delegate its liability if this selection is improperly performed. This leads to the hospital being held liable for the results of decisions that it is unable to participate in. By requiring the physician services corporation to indemnify the hospital against any losses that result from the improper selection of emergency room physicians, the hospital shifts the financial risk of an improper decision to the party that actually made the decision. The benefit to the staffing company is that it is allowed to continue doing business with the hospital and it is protected from the hospital cooperating with the plaintiff.

If a hospital contracts directly with physicians to staff its emergency room, it is unlikely to be able to negotiate an effective indemnification agreement with physicians. The physicians will seldom have enough available assets to pay a substantial settlement, and the cost of additional insurance may be prohibitive. The same problem may arise if the hospital rilies on members of its medical staff to provide emergency room coverage. In these cases, the hospital's only course is to require that the physicians carry personal malpractice insurance. While this does not directly protect the hospital from losses, it does ensure that the physician will have an attorney to protect the physician's interests. A physician without any assets or insurance may agree to help the plaintiff make a case against the hospital in return for being let out of the lawsuit. The insurance will also provide assets for the hospital to reach if it decides to sue for common law indemnity for the physician's actions.


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