Q: I practice in a pretty rural area and I have been considering opening a satellite office about 25 miles away where I would have a salaried NP, whom I know and think is good, who would take care of the routine work and contact me about the cases that require my input. This would be based on standards that I will set up so that I’m not dependent on her opinion of what is important enough to tell me about. She will be an independent contractor through her own LLC for tax and liability purposes.  She will have her own malpractice insurance. We will also exchange mutual “hold harmless” letters. How does this sound as a set-up?

A: It sounds like it will turn out as many DIY projects do: not nearly as planned.

To start with, you are actually setting up the standards under which she will practice and, specifically, the guidelines that she is supposed to follow as far as involving you.  This guts out the essential characteristic of an independent contractor: that they control their own work.

This has two important consequences. That she may bill you as an independent contractor is not dispositive for the IRS for tax purposes if she is actually functioning as an employee. Further, a plaintiff in a malpractice case would be able to “pierce the veil” of the relationship and hold you vicariously responsible for the NP’s acts and omissions just as if she was hired directly as an employee.

You can’t contract your way out of the latter point with “hold harmless” letters because any malpractice liability is to the patient, not to each other. However, what such a letter will do is cut off her liability to your practice for her mistakes.  True, you will also not be liable to her for your mistakes, but since it is your practice that she simply works for that protection is largely meaningless.  In other words, what looks equal and bilateral really only works to your detriment.

The insurance issue could also be a problem. Do you know her coverage limits and the A.M. Best rating of her company? If she is inadequately covered then you are going to be the “deep pocket”.  Frankly, the practice will be sued irrespective of how the coverage is separated, so you may want to consider instead adding her to your practice’s policy, naming her separately with her own limits of liability.

A mid-level whom you trust acting as a practice extender in a medically underserved area is good for patients and good for the business of your practice but the ad hoc way that you are approaching this is fraught with problems.  Now is the time to sit down with an attorney who does medical practice set-ups to get this established in a proper order.