Issue 2 - February 2005

How do you limit liability for a contract PT?
By Jack J. Lynch

I am thinking about expanding into an integrated practice by adding a contract physical therapist. What type of liability exposure do I incur and how do I protect myself?

The concept of a contract physical therapist connotes a physical therapist who is an independent contractor and not an employee of the doctor or professional corporation.

As an independent contractor, the physical therapist does not have income taxes or social security taxes withheld nor does he or she receive the customary employee benefits of medical insurance and vacation/sick time. Many chiropractors consider hiring a contract individual as a way to limit liability exposure for any alleged negligence by the physical therapist.

While laws vary from state to state, an individual doctor or a professional corporation can be liable for the acts or omissions of a contract physical therapist under the legal theory of apparent agency.

Apparent agency is created when a reasonable patient would conclude that the contract physical therapist is an employee or agent of the doctor or professional corporation; the doctor or professional corporation is aware of the acts of the agent and acquiesces in them; and the patient acts in reliance upon the conduct of the doctor or professional corporation and the alleged agent.

Although the facts in a particular case must be assessed to determine if a contract individual is an apparent agent, some facts generally support the application of the apparent agency theory.

For example: A judge or jury will have a basis for concluding that the contract individual is an apparent agent if:

• The physical therapist performs services in the office of the doctor of professional corporation;

• The doctor or professional corporation bills for the services of the physical therapist;

• The doctor or professional corporation supervises the work of the physical therapist; or

• The doctor or professional corporation provides equipment, supplies or other support personnel for the physical therapist.

If the contract physical therapist is truly an independent contractor, issues relating to the Stark self-referral laws come into play if the doctor is receiving fees from referrals to the physical therapist.

Physical therapy services are “designated health services” that are subject to the Stark self-referral laws when a doctor has a financial relationship with a physical therapy provider. State scope of practice laws must also be considered in entering into a relationship with a physical therapist.

One important reason to have a physical therapist on staff is to provide better care for a patient. This involves coordination of care and communication between the chiropractor and the physical therapist. In order to provide this service, consider hiring the physical therapist as an employee of your professional corporation.

However, before you enter into any arrangement with a contract physical therapist, consult with a practice-management consultant and have an attorney in your own state review the arrangement.

Liability exposure is an issue when you hire a contract employee. Reduce this exposure by making sure the physical therapist carries an insurance policy and also by making certain your policy covers liability claims arising out of acts of an independent contractor. This will not prevent claims from being brought against you or your professional corporation but will avoid the situation when you or your professional corporation is the only defendant with insurance.