Wilhelmina Bradford v. Jai Medical Systems Managed Care Organization, Inc.
No. 30, September Term 2013




Vicarious Liability - Apparent Agency - Managed Care Organizations and Network
Physicians. Under the doctrine of apparent agency, an entity may be found vicariously liable
for the negligence of its apparent agent if (1) the entity makes representations that create the
appearance of an employment or agency relationship; (2) the plaintiff believes that an
employment or agency relationship exists and relies on that belief to the plaintiff’s detriment;
and (3) the plaintiff’s belief is reasonable under the circumstances. An independent-
contractor physician who participates in the network of a managed care organization
(“MCO”) may be found to be the apparent agent of the MCO, if those three conditions are
satisfied. In the case before the Court, there was insufficient evidence to hold the MCO
vicariously liable for the negligence of a physician in its network because the MCO’s
representations concerning its relationship with the physician did not create an appearance
of an agency relationship and the plaintiff’s subjective belief that the physician worked for
the MCO was not reasonable under the circumstances.
Circuit Court for Baltimore City
Case No. 24-C-09-003115
Argued: November 4, 2013
                                      IN THE COURT OF APPEALS
                                             OF MARYLAND

                                                  No. 30

                                          September Term, 2013


                                          W ILHELMINA B RADFORD

                                                     v.

                                   J AI M EDICAL S YSTEMS M ANAGED C ARE
                                             O RGANIZATION, INC.




                                                  Barbera, C.J.
                                                  Harrell
                                                  Battaglia
                                                  Greene
                                                  Adkins
                                                  McDonald
                                                  Wilner, Alan M. (Retired,
                                                  specially assigned),

                                                           JJ.


                                         Opinion by McDonald, J.


                                            Filed: June 19, 2014
       The relation of appearance and reality is a fundamental question of western

philosophy.1 This case concerns the legal question of appearance and liability.

       There is no dispute as to the reality of this case. Petitioner Wilhelmina Bradford

suffered a significant injury to her foot resulting in its partial amputation because of the

negligence of Dr. Steven Bennett, a podiatrist whom she had chosen for her treatment. She

was able to see Dr. Bennett because he participated as a specialty care provider in the

network of Respondent Jai Medical Systems Managed Care Organization, Inc. (“Jai MCO”),

an entity that contracts with physicians, hospitals, pharmacies, and other providers to provide

health care services to individuals and families enrolled in the State Medicaid program. Dr.

Bennett was not an employee or agent of Jai MCO.

       Ms. Bradford seeks to hold Jai MCO liable for Dr. Bennett’s negligence on a theory

of apparent agency – essentially, that Jai MCO created the appearance that Dr. Bennett was

its employee and that she reasonably relied on that appearance.

       A jury found in Ms. Bradford’s favor. The Court of Special Appeals reversed that

verdict on the basis that the evidence was insufficient to support it. We have reviewed the

record and agree with the intermediate appellate court that, even if Ms. Bradford subjectively

believed that Dr. Bennett worked for Jai MCO, that belief was not reasonable under the

circumstances.




       1
           Bertrand Russell, The Problems of Philosophy, Chapter 1 (1912).
                                         Background

       Managed Care Organizations

       Under a traditional “fee-for-service” health insurance plan, a patient pays a periodic

premium to the insurance company. The patient obtains services from the health care

provider of the patient’s choice. The insurance company pays all or part of the provider’s

fee for those services. Although this model allows a patient the freedom to choose a desired

provider, it does not encourage efficient use of the health care system as the cost of services

may have little impact on patient demand for them and a provider’s compensation depends

on the quantity, not necessarily the quality, of those services.2

       The effort to control escalating health care costs during the 1970s led to the creation

of managed care organizations (“MCOs”), a phrase that encompasses a variety of

organizations designed to provide health care benefits while containing costs.3 An MCO’s

cost containment policies, and the amount of control the MCO exercises over its members’

health care decisions, may vary according to the type and structure of the MCO. There are

many different types of MCOs, the most common being health maintenance organizations

(“HMOs”) and preferred provider organizations (“PPOs”).4



       2
        A. C. Enthoven, The History and Principles of Managed Competition, Health Affairs
(Supp. 1993) at 24, 25.
       3
           P. R. Kongstvedt, Essentials of Managed Health Care 7 (6 th ed. 2013).
       4
        D. J. Bearden & B. J. Maedgen, Emerging Theories of Liability in the Managed
Health Care Industry, 47 Baylor L. Rev. 285, 288 (1995).

                                               2
       An HMO typically contains costs by paying a provider a fixed prepaid amount for

each member – sometimes referred to as a “capitation” payment – regardless of the services

rendered by the provider. It may restrict members to a defined list of providers – sometimes

called a “network” – from which the members may seek care financed by the HMO. It may

require members to select a primary care provider from that network for basic care, and

require that members obtain a referral from that physician for other services such as

hospitalization and consultation with specialists.      The HMO’s relationship with the

physicians who serve its members can take a variety of contractual forms, including direct

employment.5

       5
           A contemporary treatise categorizes HMOs in four basic models:

       •     Independent Practice Association Model – The HMO contracts with
             an association of physicians to provide health care services to its
             members. The HMO does not contract with the association’s
             physicians directly. The HMO pays the association capitation
             payments and fees for certain services. The physicians are
             independent private practitioners and not employees of either the
             HMO or the association.

       •     Direct Contract Model – The HMO contracts directly with
             independent physicians or medical groups to provide physician
             services to their members. The HMO does the credentialing and pays
             physicians capitation payments and fees for certain services.

       •     Group Model – The HMO contracts with a multi-specialty medical
             group practice to provide all physician services to its members. The
             physicians in the group practice are employed by the group practice
             and not by the HMO. The HMO may pay the group all-inclusive
             capitation payments or reimburse it on a cost basis.

                                                                               (continued...)

                                              3
       A PPO typically contains costs by negotiating lower fees with certain hospitals and

physicians in the PPO’s network, which are considered “preferred” providers. A member of

the PPO pays a smaller fee – known as a co-payment – when the member sees a preferred

provider instead of an “out-of-network” provider. Unlike an HMO, the PPO may not require

its members to obtain authorization from a primary care physician to access care from other

providers. Unlike most HMOs, the PPO may also provide coverage for “out-of network”

providers, but charge a higher co-payment or deductible.

       There are, of course, other variations. A common theme, however, is that an MCO

exerts greater influence over its members’ health care decisions – often dictating from whom

and how its members receive medical services – than does a traditional fee-for-service health

insurance plan.

       Jai Medical Systems Managed Care Organization

       Jai MCO is an MCO similar in structure and operation to an HMO. It was formed in

1996 by Hollis Seunarine, M.D., in response to changes in Maryland law that required

Medicaid patients be enrolled in MCOs.6 See Chapter 500, Laws of Maryland 1995; see
       5
           (...continued)
       •       Staff Model – The HMO employs the physicians, who are typically
               paid on a salary basis and who may receive bonuses and other forms
               of incentives.

P. R. Kongstvedt, Essentials of Managed Health Care 32-33 (6th ed. 2013).
       6
           The Medicaid law defines an MCO as:

                (1) A certified health maintenance organization that is
                                                                               (continued...)

                                              4
generally Roberts v. Total Health Care, Inc., 349 Md. 499, 523-24, 709 A.2d 142 (1998).

Under that program, also known as HealthChoice, Medicaid recipients are enrolled in an

MCO through the Maryland Department of Health and Mental Hygiene (“DHMH”). See

Maryland Code, Health-General Article (“HG”), §15-103(b)(16).7 Jai MCO is offered as one

of the MCOs available to Medicaid recipients.

       Jai MCO does not employ its own health care providers; rather, it enters into contracts

with physician groups, pharmacies, hospitals, and others to participate in its network and to

provide health care services to its members. The health care providers that participate in its

network are not precluded from belonging to other networks. Under Jai MCO’s plan, a

member selects a primary care provider – a physician who attends to most of the member’s
       6
           (...continued)
                 authorized to receive medical assistance prepaid capitation
                 payments; or

                (2)    A corporation that:

                      (i) Is a managed care system that is authorized to receive
                medical assistance prepaid capitation payments;

                       (ii) Enrolls only program recipients or individuals or
                families served under the Maryland Children’s Health Program;
                and

                       (iii) Is subject to the [surplus and other financial
                requirements of the Medicaid law].

HG §15-101(e).
       7
         State law establishes the Medicaid program in accordance with federal law and
regulates the services provided to program recipients by MCOs. The State Medicaid program
is codified at HG §15-101 et seq.

                                               5
health care needs – from Jai MCO’s network. If the member needs specialty care, the

member accesses those services by obtaining a referral from the primary care provider to one

of the more than 3,000 specialists in the Baltimore metropolitan area who participate in Jai

MCO’s network. The network also includes various hospitals, pharmacies, and medical

laboratories. Jai MCO operates under the name “Jai Medical Systems.” 8

       Among the physicians who participate in Jai MCO’s network are those employed by

a professional association that was also created by Dr. Seunarine and that is formally known

as Hollis Seunarine, M.D., P.A. (“Seunarine P.A.”). Seunarine P.A. employs primary care

physicians, internists, and pediatricians who work at its four medical centers in Baltimore

City. Three of those centers are named “Jai Medical Center” and one of them is called the

“Eutaw Medical Center.”

       Dr. Seunarine named both the MCO and the professional association’s medical centers

after his son, Jai Seunarine, who works for both entities. Jai MCO’s administrative offices

are located in the professional association’s Jai Medical Center on York Road in Baltimore

City. The management and administrative staff of Jai MCO and Seunarine P.A. also overlap.

For example, Dr. Seunarine is both the executive medical director of Jai MCO and is a

primary care provider employed by Seunarine P.A. with an office address listed at one of the

Jai Medical Centers. His son, Jai Seunarine, is the chief executive officer of Jai MCO and



      8
          Jai MCO was initially organized under the name “Jai Medical Systems, Inc.” The
corporation changed its name to “Jai Medical Systems Managed Care Organization, Inc.,”
but it is still commonly referred to and advertised under the name “Jai Medical Systems.”

                                             6
the administrator of Seunarine P.A. Thus, although they are separate legal entities, Jai MCO

and Seunarine P.A. are closely related and operate under very similar names.

       Ms. Bradford Joins Jai MCO

       At the time of the events in 2008 that led to this litigation, Ms. Bradford was a 54-

year-old widow with an eighth-grade education and the mother of two adult children.

Eligible for benefits under the State Medicaid program, she had been a member of Jai MCO

since 1997. As a member, she received various materials, including a member handbook and

a provider directory that lists providers in the Jai MCO network, including approximately

4,000 primary care providers, specialists, hospitals, and pharmacies. According to Ms.

Bradford, she reviewed the member handbook and the provider directory when she first

enrolled in Jai MCO in 1997, and received an updated provider directory periodically.9

According to Ms. Bradford, when she was enrolled in Jai MCO, she was told that she

“cannot go where [the Jai MCO] card will not be accepted.”

       The member handbook is based on a template developed by DHMH that incorporates

information that the MCO is required by regulation to provide to its members. See COMAR

10.09.66.02. Among other things, the member handbook sets forth general information such

as member rights and responsibilities, provides a notice of the MCO’s privacy practices

concerning disclosure of medical information, lists the basic benefits provided to members

      9
        A copy of the member handbook for 2007-08 and of the provider directory for 2009-
10 appear in the record in this case. Neither party appears to assert that there were any
material differences in the member handbook and provider directory available to Ms.
Bradford when she joined Jai MCO or at the time of the treatment that resulted in this case.

                                             7
enrolled through the Medicaid program, identifies other services available through the State

of Maryland, and lists services not offered by either Jai MCO or the State (e.g., cosmetic

surgery, non-prescription drugs).10 A chapter on providers describes generally primary care

providers, specialty care providers, hospital providers, and pharmacy providers, and explains

how a member may access services from those providers.11 The handbook also details how
       10
            For example, the “Welcome” page states:

                Your health care is very important to us. As a member of Jai
                Medical Systems, you will receive quality preventative care,
                which means you will get regular screenings and check-ups to
                try to prevent unnecessary illnesses. Your care will be managed
                and arranged by your own Primary Care Provider, whose goal is
                to help you stay healthy ....
       11
            With respect to primary care providers, the handbook states:

                Your Primary Care Provider

                As a member of Jai Medical Systems, you will choose your
                primary care provider (PCP). If you do not choose a PCP, we
                will choose one for you. Your PCP will manage your health
                care and either provide or arrange for all of the care that you
                need. When you need specialty care, except for self-referral
                services, your PCP will provide you with the necessary referral
                to see a specialist. You and your PCP will work together as a
                team. Please get to know your PCP and make him/her aware of
                any health care problems or concerns that you have. This way,
                your PCP will get to know your complete medical history ….

A passage concerning specialists and services provided outside the Jai MCO network states:

                What are Self-Referral Services?

                You will go to your PCP for most of your health care, or your
                PCP will send you to a specialist who belongs to Jai Medical
                                                                                  (continued...)

                                               8
a member may file a complaint with Jai MCO or the State and how to transfer to another

MCO.

       The provider directory contains four pages listing approximately 80 primary care

providers. Some, but not all, of the primary care providers worked out of Jai Medical

Centers. The only “primary care centers” listed in the directory are the four operated by

Seunarine P.A.12 The following pages of the provider directory listed almost 4,000 specialty

care providers and other “businesses and services” within the Jai MCO network, including

most Baltimore area hospitals. None of the specialty care providers included in the directory

was listed as practicing at a Jai Medical Center. For example, a large proportion of the

specialty providers included in the directory were listed as practicing at Johns Hopkins

Hospital. The directory also listed providers of related services that also participated in the

Jai MCO network including, for example, Giant, Rite Aid, and Walmart pharmacies, among

many others.

       Among the 38 specialists in podiatry listed in the Jai MCO network was Dr. Steven

Bennett, who began participating in the Jai MCO network in February 2006. The directory
       11
            (...continued)
                  Systems. For some types of services, you can choose a health
                  care provider who is not part of Jai Medical Systems, and Jai
                  Medical Systems will still pay for the service. These are called
                  “self-referral services.” Jai Medical Systems will also pay for
                  any related lab work and medicine received at the same site that
                  you receive the self-referral visit ....
       12
         Even though Jai MCO has contracted with health care providers that practice at a
wide range of hospitals and medical centers, the Jai MCO provider directory lists only the
medical centers owned by Seunarine, P.A. as “Primary Care Medical Centers.”

                                                9
listed an address for him on Pennsylvania Avenue in Baltimore City, where he operated a

private office called Penn North Foot Care.13 Like other physicians who participate in the

Jai MCO network, Dr. Bennett signed a standard form contract with Jai MCO. That contract

specified that “[n]one of the provisions of this Agreement is intended to create ... any

relationship between [Jai MCO] and [Dr. Bennett] other than that of independent entities

contracting with each other .... Neither party, nor any of their respective employees, shall be

construed to be the agent, employer, employee, partner, co-venturer, or representative of the

other.” Dr. Bennett participated in at least one other MCO, according to a sign in his office.

       In accordance with the design of a managed care organization, Ms. Bradford was

assigned to a primary care provider in the Jai MCO network. For more than a decade, her

primary care provider was Dr. Peter Chiang. Dr. Chiang was employed by Seunarine P.A.

and saw Ms. Bradford at the Eutaw Medical Center.

       Ms. Bradford Seeks Treatment for a Painful Bunion

       In 2008, Ms. Bradford began to experience foot pain as a result of a bunion on her

right foot. On July 7, 2008, she went to the Eutaw Medical Center to get a referral from Dr.

Chiang for a podiatrist.     During the appointment, Ms. Bradford requested a referral

specifically for Dr. Bennett. Apparently, the planned appointment did not occur and she later

asked for and obtained a second referral for Dr. Bennett, this time from Dr. Kevin Carr,

another primary care provider at the Eutaw Medical Center.



       13
            Dr. Bennett did not work for Seunarine P.A.

                                              10
       Neither of the physicians who complied with her request for a referral to Dr. Bennett

told her that Dr. Bennett was Jai MCO’s employee; her primary care physician, Dr. Chiang,

simply informed her that “[Dr. Bennett] takes Jai Medical Assistance.” According to Ms.

Bradford, she nonetheless believed that Dr. Bennett worked for Jai MCO because she had

previously seen him at the Eutaw Medical Center, although she admitted that there were no

signs regarding Dr. Bennett at that location.14 All of Ms. Bradford’s visits to Dr. Bennett

were at his private clinic on Pennsylvania Avenue.

       Ms. Bradford first met Dr. Bennett on July 17, 2008, at his private office. Dr. Bennett

examined her foot and recommended surgery to remove the bunion. On July 30, 2008, Dr.

Bennett performed the operation at Bon Secours Hospital. Ms. Bradford was discharged

from the hospital on the same day.

       On August 5, 2008, Ms. Bradford returned to Dr. Bennett’s office for her first follow-

up visit. During the visit, Dr. Bennett conducted a cursory examination of her foot, partially

unwrapping the bandage, and instructed her to come back for another follow-up visit. On

August 12, 2008, during Ms. Bradford’s next visit to Dr. Bennett’s office, a nurse unwrapped

the bandage on Ms. Bradford’s foot and discovered that Ms. Bradford had developed

gangrene.



       14
          Her primary care physician, Dr. Chiang, who worked at the Eutaw Medical Center
and had given Ms. Bradford a referral for Dr. Bennett, testified that he had never seen Dr.
Bennett at that location. Jai MCO conceded that Dr. Bennett had been provided free office
space at one of its other medical centers as an accommodation to patients with limited
mobility.

                                             11
       Dr. Bennett sent Ms. Bradford to Bon Secours Hospital, where she remained for three

days while she underwent various tests. Ms. Bradford was then transported to Mercy

Medical Center, where doctors amputated a portion of her foot and performed a bypass on

her right leg. She was discharged on August 26, 2008. Ms. Bradford must now live with

permanent injuries – a partially amputated foot and a scar that runs from her right thigh to

her ankle as a result of the bypass.

       The Lawsuit

       On May 8, 2009, Ms. Bradford filed this action in the Circuit Court for Baltimore City

against Dr. Bennett and Bon Secours Hospital.15 Ms. Bradford’s complaint alleged, among

other things, that Dr. Bennett’s negligent operation on her right foot and his failure to

perform timely and adequate post-operation physical examinations led to her injuries and

resulting damages.16 The complaint also alleged that the defendants failed to obtain her

informed consent to operate by failing to inform Ms. Bradford that she suffered from a

circulatory condition that obstructs blood flow to the legs and that would likely place her at



       15
          Ms. Bradford named two Bon Secours entities in her complaint. During the trial,
the trial judge dismissed Bon Secours Baltimore Health Corporation after the parties
stipulated that Bon Secours Hospital of Baltimore, Inc. was the appropriate defendant in the
case.
       16
          According to Ms. Bradford’s complaint, Dr. Bennett was negligent in failing to
perform an adequate pre-surgical examination, which would have disclosed that she suffers
from a circulatory problem that exacerbated the risks from surgery, especially in conjunction
with the pneumatic ankle tourniquet that Dr. Bennett used. The complaint also alleged that
the duration of the use of the tourniquet during the operation was contrary to accepted
medical practice.

                                             12
material risk of significant injury from the operation. Ms. Bradford subsequently amended

her complaint to add Jai MCO 17 and Seunarine P.A. as defendants.

        Dr. Bennett failed to respond to Ms. Bradford’s complaint. The Circuit Court entered

an order of default against Dr. Bennett on July 15, 2010, and a default judgment on

November 10, 2010. Assessment of damages was to be determined at trial.

        The remaining defendants each filed motions for summary judgment prior to trial. Jai

MCO’s motion asserted that it was a health insurer that did not employ Dr. Bennett – or any

physicians. The Circuit Court denied the summary judgment motions and the case proceeded

to trial.

        The Trial

        The trial took place from February 22 to February 24, 2011. At the close of Ms.

Bradford’s evidence, the defendants moved for judgment, incorporating arguments made in

their motions for summary judgment. The trial judge reserved ruling on those motions, and

the defense presented its case. At the close of all the evidence, the defendants renewed their

motions for judgment. The trial judge granted Bon Secours’ motion for judgment, but denied

the motions of Jai MCO and Seunarine P.A.

        As a result of the default judgment, the liability of Dr. Bennett was not at issue at the

trial. At the conclusion of the trial, the jury was asked to determine only the amount of



        17
         Ms. Bradford sued Jai MCO under both its original name – Jai Medical Systems,
Inc. – and its current name – Jai Medical Systems Managed Care Organization, Inc. See
footnote 8 above.

                                               13
damages, and whether Jai MCO and Seunarine P.A. were also liable under the theory that Dr.

Bennett was the apparent agent of either or both of those entities.

       The jury awarded $64,000 for economic damages and medical expenses, and

$3,000,000 for non-economic damages. The jury further found that Jai MCO, but not

Seunarine P.A., was liable under the theory of apparent agency. The Circuit Court granted

a motion for remittitur based on the statutory cap on non-economic damages that reduced the

total damages to $714,000.         The court denied Jai MCO’s motion for judgment

notwithstanding the verdict and for a new trial. Jai MCO appealed.

       The Appeal

       The Court of Special Appeals reversed, holding that the Circuit Court should have

granted Jai MCO’s motion for judgment notwithstanding the verdict. 209 Md. App. 68, 57

A.3d 1068 (2012). Ms. Bradford filed a petition for a writ of certiorari in this Court, which

we granted to determine whether an MCO may be held liable for the negligence of a

physician in its network under the theory of apparent agency and, if so, whether there was

sufficient evidence to support the jury verdict in this case.

                                         Discussion

       Ms. Bradford concedes that Dr. Bennett was not an employee of Jai MCO and that no

actual agency relationship existed between Dr. Bennett and Jai MCO. She nevertheless

argues that Jai MCO could be found liable for Dr. Bennett’s negligence under the theory of

apparent agency.



                                              14
Standard of Review

       In reviewing a trial court’s denial of a motion for judgment notwithstanding the

verdict, an appellate court considers whether there is “any evidence adduced, however slight

... from which reasonable jurors, applying the appropriate standard of proof, could find in

favor of the plaintiff on the claims presented.” Exxon Mobil Corp. v. Albright, 433 Md. 303,

333, 71 A.3d 30 (2013) (citations omitted). In doing so, the court considers “the evidence

and the reasonable inferences to be drawn from it in the light most favorable to the non-

moving party.” Id. Whether a particular theory of liability may apply and the appropriate

standard of proof under that theory are necessarily legal questions on which the reviewing

court is not required to accord any deference to the trial court.

       In this case, the trial court’s judgment was based on the jury’s conclusion that Dr.

Bennett was the apparent agent of Jai MCO. The existence of an agency relationship is

ordinarily a question of fact for the jury. But a theory of apparent agency also depends on

whether a plaintiff’s subjective belief that an agency relationship existed was justifiable or

reasonable – in this case, whether a physician in an MCO’s network may be the MCO’s

apparent agent. A threshold legal question is whether the theory of apparent agency can

apply in this context. If so, a second legal question is whether, applying the deferential

standard of review described above, the facts of this case allow application of that theory to

uphold the judgment.




                                              15
Whether an MCO may be vicariously liable for the negligence of a network physician
under a theory of apparent agency

       As a general rule, one who engages an independent contractor is not vicariously liable

for the negligence of the contractor. Rowley v. Mayor & City Council of Baltimore, 305 Md.

456, 461-62, 505 A.2d 494 (1986). There are a number of exceptions to this general

principle. Id. Pertinent to this case, there may be vicarious liability under the theory of

apparent agency. See Restatement (Second) of Agency §267, Illustration 4. Apparent

agency is an equitable doctrine, whereby a principal is held responsible for the acts of another

because the principal, by its words or conduct, has represented that an agency relationship

existed between the apparent principal and its apparent agent.

       This Court has applied the theory of apparent agency to uphold a judgment against a

hospital for the negligence of an independent-contractor physician with whom it contracted

to staff the hospital’s emergency room. In Mehlman v. Powell, 281 Md. 269, 378 A.2d 1121

(1977), the patient, who was suffering shortness of breath and other discomfort, went to the

emergency room of a hospital, where he was treated by a physician who, with other

physicians, had contracted to operate the emergency room as independent contractors. The

physician misread the patient’s electrocardiogram and, as a result, failed to realize that the

patient was in imminent danger of heart failure due to a pulmonary embolism. 281 Md. at

271. The patient was sent home and died two days later due to the pulmonary embolism. His

survivors sued both the doctor and the hospital for medical malpractice and obtained a

judgment against them.

                                              16
       On appeal, the hospital argued that it was entitled to a directed verdict because the

emergency room was operated by an independent contractor. Mehlman, 281 Md. at 272.

To determine whether the hospital could be held liable for the malpractice of an independent-

contractor physician, the Court applied the concept of apparent agency as described in

Restatement (Second) of Agency §267, which states:

              One who represents that another is his servant or other agent and
              thereby causes a third person justifiably to rely upon the care or
              skill of such apparent agent is subject to liability to the third
              person for harm caused by the lack of care or skill of the one
              appearing to be a servant or other agent as if he were such.

281 Md. at 273.18 The Court concluded that the hospital could be found liable on the facts

of the case before it. The physical proximity of the emergency room to the hospital and the

absence of any signs indicating that the emergency room was not part of the hospital were

sufficient to constitute a representation by the hospital that it employed the negligent

physician. The Court held that a jury could conclude that a patient’s belief that the physician

was an employee of the hospital was reasonable: “all ordinary expectations would be that

the Hospital emergency room, physically a part of the Hospital, was in fact an integral part

of the institution. It is not to be expected, and nothing put [the decedent] on notice, that the

various procedures and departments of a complex, modern hospital … are in fact franchised

out to various independent contractors.” Id. at 274.



       18
         As the Court in Mehlman noted, a previous decision had endorsed §267 as an
accurate statement of the doctrine of apparent agency under Maryland law. See B.P. Oil
Corp. v. Mabe, 279 Md. 632, 643, 370 A.2d 554 (1977).

                                              17
       In subsequent cases, appellate courts in Maryland have relied on the discussion of

apparent agency in Mehlman to assess the potential liability of hospitals for the negligence

of independent-contractor physicians. See, e.g., Debbas v. Nelson, 389 Md. 364, 385-86, 885

A.2d 802 (2005) (whether hospital was vicariously liable for negligence of physicians under

theory of apparent authority was question for jury to resolve due to dispute of material facts);

Hunt v. Mercy Medical Center, 121 Md. App. 516, 547-48, 710 A.2d 362 (1998) (same); cf.

Hetrick v. Weimer, 67 Md. App. 522, 532-35, 508 A.2d 522 (1986) (affirming the trial

court’s grant of motion for directed verdict on the basis that there was insufficient evidence

to allow the jury to consider the hospital’s liability under the theory of apparent agency).

       As applied by Maryland courts, the doctrine of apparent agency can be expressed in

three elements:

              1.      Did the apparent principal create, or acquiesce in, the
                      appearance that an agency relationship existed?

              2.      Did the plaintiff believe that an agency relationship
                      existed and rely on that belief in seeking the services of
                      the apparent agent?

              3.      Were the plaintiff’s belief and reliance reasonable?

See Chevron U.S.A., Inc. v. Lesch, 319 Md. 25, 34-35, 570 A.2d 840 (1990); see also Klein

v. Weiss, 284 Md. 36, 61, 395 A.2d 126 (1978) (“Apparent authority results from certain acts

or manifestations by the alleged principal to a third party leading the third party to believe

that an agent had authority to act.”); Parker v. Junior Press Printing Services, Inc., 266 Md.

721, 727-28, 296 A.2d 377 (1972) (“Succinctly stated, apparent authority to do an act is

                                              18
created as to a third person by written or spoken words or any other conduct of the principal

which, reasonably interpreted, causes the third person to believe that the principal consents

to have the act done on his behalf by the person purporting to act for him.”).

       As is evident, the doctrine of apparent agency has both subjective and objective

elements: a plaintiff must show that the plaintiff subjectively believed that an employment

or agency relationship existed between the apparent principal and the apparent agent, and that

the plaintiff relied on that belief in seeking medical care from the apparent agent. But the

plaintiff must also show that the apparent principal created or contributed to the appearance

of the agency relationship and that the plaintiff’s subjective belief was “justifiable” or

“reasonable” under the circumstances – an objective test. See Reserve Ins. Co. v. Duckett,

240 Md. 591, 600-1, 214 A.2d 754 (1965) (“It must be reasonable for the third person

dealing with the alleged agent to believe that the agent has authority to act.”); Chevron, 319

Md. at 35 (explaining that, in order to recover under the theory of apparent agency, the

plaintiffs must show that their belief “was objectively reasonable under all of the

circumstances”); Progressive Cas. Ins. Co. v. Ehrhardt, 69 Md. App. 431, 440-41, 518 A.2d

151 (1986) (“Under this doctrine [of apparent agency], the crucial factor is reasonable

reliance by a third party on the principal’s conduct.”).




                                              19
       As outlined above, MCOs come in many flavors. Some are HMOs that may actually

employ the physicians who serve their members.19 Even if an MCO does not itself employ

physicians, it is conceivable that – like the hospital in Mehlman – it may identify a physician

who serves its members in a way that leads a member to believe, reasonably albeit

incorrectly, that the physician is an employee of the MCO. Thus, in our view, there is no

reason to preclude application of the theory of apparent agency in the context of an MCO and

a network physician.20

Whether Jai MCO may be found vicariously liable in this case

       The question in this case is whether a jury could reasonably conclude that the criteria

of the Restatement §267 for apparent agency were satisfied – that Jai MCO made

representations that suggested that Dr. Bennett was its agent, that Ms. Bradford subjectively

believed that Dr. Bennett was Jai MCO’s agent and relied on that belief in seeking services

from him, and that her belief was reasonable under the circumstances. One of these criteria

is subjective, the other are two objective. We begin with the subjective element.



       19
         In a case against a physician of such an MCO, a plaintiff presumably would not rely
on a theory of apparent agency as the physician would be an actual agent of the MCO.
       20
         Courts in several other jurisdictions have held that an MCO may be held liable for
the negligence of an independent-contractor physician under the theory of apparent agency,
sometimes referred to as ostensible agency or agency by estoppel. See Petrovich v. Share
Health Plan of Illinois, Inc., 719 N.E.2d 756, 766 (Ill. 1999) (HMO may be liable for
network physician malpractice if it “holds itself out as the provider of health care” and a
member justifiably relies on that representation); Ramos v. Preferred Medical Plan, Inc., 842
So.2d 1006, 1008 (Fl. App. 2003) (same); Boyd v. Albert Einstein Medical Center, 547 A.2d
1229, 1231-32, 1234 (Pa. Super. 1988) (same).

                                              20
       Ms. Bradford’s Subjective Belief

       Ms. Bradford testified that she believed that Dr. Bennett was an employee of Jai MCO

for two reasons – first, she had previously seen him at Eutaw Medical Center, one of the

medical centers operated by Seunarine P.A., and second, she believed that Jai MCO

employed the physicians, including Dr. Bennett, who accepted her Jai MCO card – i.e., who

were in Jai MCO’s network. Although Jai MCO introduced evidence suggesting that her

sighting of Dr. Bennett at the Eutaw Medical Center was inaccurate, a jury could accept her

version and reasonably conclude that Ms. Bradford believed that Dr. Bennett was an

employee of Jai MCO and relied on that belief in seeking treatment. Thus, she presented

sufficient evidence to satisfy the subjective element of apparent agency under the

Restatement §267. Linking that belief to representations made or adopted by Jai MCO,

however, is another matter.

       Jai MCO’s Representations Concerning its Relationship with Dr. Bennett

       The only representations by Jai MCO concerning its relationship with Dr. Bennett that

appear in the record are the listing of Dr. Bennett in the provider directory, the referral forms

that permitted Ms. Bradford to see Dr. Bennett through Jai MCO under the Medicaid

program, and some general passages concerning providers in the member handbook.

       As indicated above, the provider directory lists nearly 4,000 specialty providers, many

associated with Johns Hopkins Hospital and other institutions throughout the Baltimore

metropolitan area, as part of Jai MCO’s network and also lists various hospitals, pharmacies,



                                               21
and other entities as participating in Jai MCO’s network. It does not identify any of these

providers as an agent or employee of Jai MCO.

       The referral forms simply document the specific referrals Ms. Bradford requested for

Dr. Bennett and contain general instructions for specialists about how to bill Jai MCO for

services provided to its members. These forms hardly suggest that a specialist is an

employee of the MCO, do not specifically identify Dr. Bennett as an agent or employee of

Jai MCO and, in any event, were created after Ms. Bradford asked for a referral to him.

       The passages highlighted by Ms. Bradford’s counsel in the member handbook 21 are

general in nature, say nothing about Dr. Bennett or any other specific provider, and do not

assert an employment or agency relationship between Jai MCO and network providers. Ms.

Bradford’s counsel focuses on a passage in the member handbook about referrals that

mentions specialists who “belong” to Jai MCO’s network.22 Of course, one may “belong”

to many entities or institutions without being an employee or agent of any.

       The Reasonableness of Ms. Bradford’s Belief

       Finally, we turn to the question whether Ms. Bradford’s belief that Dr. Bennett

worked for Jai MCO could be found to be justifiable or reasonable. We conclude that a jury

could not reasonably make such a finding.




      21
           See footnotes 10-11 above.
      22
       This particular language was taken verbatim from the template produced by DHMH
for MCOs in the Medicaid program. See pp. 7-8 above.

                                            22
       The member handbook, provider directory, and referral forms, considered individually

or collectively, do not provide a basis for inferring that Dr. Bennett was the agent of Jai

MCO. The provider directory itself effectively relieves any reader of the notion that all

network participants are employees of Jai MCO.          The list of network participants

encompasses nearly 4,000 providers listed at various private addresses and at hospitals such

as Maryland General Hospital, Bayview Medical Center, and Johns Hopkins Hospital. The

sheer number of physicians, the range of hospitals, medical centers and private offices, and

the inclusion of entities such as Walmart, Giant Food, and Rite Aid on the list of network

providers would preclude any reasonable belief of agency based on those documents. In any

event, there is no evidence that Ms. Bradford relied on those documents in concluding that

Dr. Bennett was employed by Jai MCO.

       Nor could Ms. Bradford’s one-time sighting of Dr. Bennett at Eutaw Medical Center,

one of several medical centers operated by Seunarine P.A., justify a belief that Dr. Bennett

was an employee of Jai MCO. Even if the sighting is considered in light of possible

confusion about the meaning of statements in the member handbook – for example, that Jai

MCO provides “health care benefits” and that members will be referred only to specialists

who “belong” to Jai MCO – it provides no basis for concluding that Dr. Bennett was an

employee of Jai MCO.

       Finally, the circumstances of Dr. Bennett’s treatment of Ms. Bradford – which did not

involve representations by Jai MCO – did not suggest that the MCO had an agency



                                            23
relationship with the podiatrist. The initial examination of Ms. Bradford’s foot and the post-

surgery follow-up visits took place at Dr. Bennett’s private office at Penn North Foot Care.23

The surgery was performed at Bon Secours Hospital, which is not part of Jai MCO’s

network. These circumstances contrast with those in Mehlman where the physical proximity

of the emergency room to the hospital and the lack of any signs indicating that the emergency

room was separate from the hospital created an “expectation” that the emergency room was

part of the hospital and that the emergency room physicians were hospital employees.

       Summary

       Regardless of whether Ms. Bradford subjectively believed that Dr. Bennett was an

employee of Jai MCO and relied on that belief in seeking medical care from Dr. Bennett, we

hold that there was insufficient evidence to create a question for the jury because Ms.

Bradford’s reliance was not justifiable given the actual representations made by Jai MCO

concerning its relationship with Dr. Bennett and the other circumstances of this case. We

therefore affirm the holding of the Court of Special Appeals that reversed the Circuit Court’s

denial of Jai MCO’s motion for judgment notwithstanding the verdict.



       23
          Had Dr. Bennett maintained his office and treated Ms. Bradford at one of the Jai
Medical Centers, our conclusion might well be different. As indicated earlier, Jai MCO
operates and advertises itself under the name “Jai Medical Systems” and has its
administrative office with overlapping staff at a “Jai Medical Center” operated by Seunarine
P.A. While Jai MCO and Seunarine P.A. are distinct legal entities, their common
management and location and use of very similar names could appear to indicate an agency
relationship between the MCO and the physicians of the professional association, perhaps
as strong as the apparent agency relationship between the hospital and emergency room staff
in Mehlman.

                                              24
       We differ from the intermediate appellate court in a key respect. The Court of Special

Appeals relied in part on a “common knowledge” test in concluding that Ms. Bradford’s

belief that Dr. Bennett was an employee of Jai MCO was not objectively reasonable.24 The

court identified two “commonly known” facts: (1) MCOs are the “equivalent of insurance

providers” and (2) MCOs are not providers of medical services. 209 Md. App. at 81.

Because that “common knowledge” contradicted Ms. Bradford’s belief, the court concluded

that her belief was unreasonable.

       We hesitate to rely on a “common knowledge” theory in this case for several reasons.

While MCOs are similar to traditional fee-for-service insurers in that they finance health care

services, they are quite diverse and can differ from traditional insurers in several ways,

including their relationship with the physicians who serve their members. Indeed, some

MCOs – staff-model HMOs – hire salaried physicians to provide health care to their

       24
          This Court developed the “common knowledge” test to assess a claim of apparent
agency in the context of the franchisor’s liability for the negligence of its franchisee. In B.P.
Oil Corp. v. Mabe, 279 Md. 632, 634, 370 A.2d 554 (1977), the plaintiff sought to hold an
oil company (the franchisor) liable for an injury the plaintiff suffered as a result of the
negligence of an employee of a service station (the franchisee). In that case, the service
station employee put gasoline rather than water in the radiator of the plaintiff’s vehicle,
resulting in an explosion. The Court held that the plaintiff’s belief that the station was owned
and controlled by the oil company was not justifiable despite the fact that the oil company’s
insignia appeared on the service station’s sign and gas pumps because “[i]t is a matter of
common knowledge that these trademark signs are displayed throughout the country by
independent dealers.” 279 Md. at 646. See also Chevron, 319 Md. at 36-38 (holding that the
franchisor oil company was not liable for the negligence of the franchisee service station
because it is “common knowledge” that signs and emblems displayed by independent
gasoline dealers represent “no more than notice to the motorist that a given company’s
products are being marketed at the station” and that major oil companies accept credit card
purchases of virtually anything sold by a service station).

                                               25
members. It is true that Jai MCO is not a staff-model HMO, but that is a distinct proposition

from the notion that it is “common knowledge” that MCOs do not employ physicians.

Finally, we observe that, when a court makes reference to “common knowledge” in this

context, it is essentially taking judicial notice of decisive facts without supporting its

conclusion in the evidentiary record or by reference to any authoritative source.25 Cf.

Maryland Rule 5-201(b) (facts subject to judicial notice). We should do so only when the

“common knowledge” is so well accepted that there is no possibility that a person of ordinary

intelligence and education would come to a different conclusion. In this regard, it is not clear

that the details of health care finance are “common knowledge” even to well educated

members of our society.26

                                         Conclusion

       What happened to Ms. Bradford – the botched operation and the resulting partial

amputation of her foot and scarring of her leg – is tragic. The question in this case was

whether the MCO that financed that operation on her behalf should be held liable for the
       25
         The application of the “common knowledge” test in the franchisor-franchisee
context has been criticized on the ground that courts use it to decide cases on the basis of
“common knowledge” that is not supported by evidence or subject to adversary testing. R.
Emerson, Franchisors’ Liability When Franchisees Are Apparent Agents: An Empirical and
Policy Analysis of “Common Knowledge” About Franchising, 20 Hofstra L. Rev. 609, 646-
51 (1992).
       26
          Recent studies suggest that health care finance is not a matter of common
knowledge. See G. Loewenstein, et al., Consumers’ Misunderstanding of Health Insurance,
32 Journal of Health Economics 850-62 (June 2013); B. Japsen, Americans Don’t
Understand Insurance, Let Alone Obamacare, Research Shows, Forbes (Aug. 10, 2013)
http://www.forbes.com/sites/brucejapsen/2013/08/10/americans-don’t-understand-insurance-
let-alone-obamacare-study-shows/.

                                              26
negligence of the physician who performed it. Ms. Bradford attempted to establish such

liability under a theory of apparent agency. But even if she subjectively believed that Dr.

Bennett was an employee of Jai MCO and relied on that belief in seeking medical care from

Dr. Bennett, that belief was not objectively reasonable under the facts of this case. There

was insufficient evidence for a jury to conclude that Dr. Bennett was the apparent agent of

Jai MCO.




                                                 J UDGMENT OF THE C OURT OF S PECIAL
                                                 A PPEALS A FFIRMED. C OSTS TO BE P AID
                                                 BY P ETITIONER.




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