Put simply, if the physician appears to be an employee of the hospital, the courts are beginning to hold that the hospital may be held responsible for the physician's actions. A court may find that this liability arises from an implied employment or agency relationship between the hospital and the physician, or the court may find that the hospital has breached its general duty to monitor the competence of the physicians on its medical staff. The proper mechanism to deal with the liability depends upon the type of relationship between the physician and the hospital. Even if the court finds that the physician was actually an employee of the hospital for liability purposes, this does not alter the contract between the hospital and the physician. The hospital may be liable to the patient, but it still may be able to use its contract with the physician to protect itself from having to pay an adverse settlement. This strategy is called indemnification.
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