Appeals Court Supports MICRA in Partnership Case
[Posted 02/05/04]

The First District Court of Appeal in San Francisco recently affirmed that MICRA protections cover physician partnerships in some circumstances.

In its decision, the court ruled that a partnership composed strictly of physicians and formed for the practice of medicine is entitled to legal protection under California’s Medical Injury Compensation Reform Act (MICRA), if the partnership is sued as a result of the conduct of its employee physicians.

In this case, Lathrop v. Healthcare Partners, the patient sued Healthcare Partners and several licensed physician employees for negligent failure to diagnose and treat her breast cancer. A San Francisco Superior Court jury found Healthcare Partners partially at fault and ordered it to pay $400,000 for economic losses and $2.1 million for noneconomic losses.

Healthcare Partners requested the court reduce the judgment, in accordance with MICRA’s $250,000 cap on noneconomic damages, but the Superior Court judge denied the motion. The judge ruled that Healthcare Partners is not a “health care provider,” but rather a “managed-care entity,” and as such is not entitled to MICRA’s protections. Healthcare Partners appealed.

CMA filed an amicus brief with the appellate court, which pointed out that California law has long recognized that lawfully organized physician groups are “health care providers.” The brief argued that the trial court undermined MICRA and ignored the Legislature’s clear demarcation between the liability faced by health plans and the liability faced by health care providers. The brief also noted that identical issues were recently decided in favor of a medical group by a state Court of Appeal in San Diego in Palmer v. Superior Court (2002). In that case, the appellate court ruled that California law does consider medical groups to be health care providers.

In a multipart ruling, the appellate court initially agreed with the trial court, finding that Healthcare Partners is not a health care provider and on that level did not qualify for MICRA protections. The court also found no direct negligence by the physician partnership. The appeals court went on to rule that the partnership, as an employer sued for the negligence of its physician employees, is entitled to MICRA protections. “Exempting vicariously liable defendants from the $250,000 damages cap would undermine the legislative goal of replacing unpredictable jury awards with an across-the-board limit,” wrote Judge Linda Gemello in the ruling. “Plaintiffs would need only to sue the entity employing the negligent physician to circumvent the MICRA cap.”

Contact: CMA’s legal information line, 415/882-5144 or legalinfo@cmanet.org.