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Bradford v. Jai Medical Systems Managed Care Organization, Inc.

Court of Appeals of Maryland

June 19, 2014


Argued: November 4, 2013.

Page 698

Certiorari to the Court of Special Appeals (Circuit Court for Baltimore City, Case No. 24-C-09-003115), Althea M. Handy, JUDGE.

ARGUED BY Brian J. Murphy of Baltimore, MD; Mark S. Cohen of Towson, MD) on brief FOR PETITIONER.

ARGUED BY David J. McManus, Jr. (Siobhan R. Keenan and Baxter, Baker, Sidle, Conn. & Jones, P.A. of Baltimore, MD) on brief FOR RESPONDENT.

ARGUED BEFORE Barbera, C.J., Harrell, Battaglia, Greene, Adkins, McDonald, Alan M. Wilner (Retired, specially assigned), JJ. Opinion by McDonald, J.


Page 699

[439 Md. 4] McDonald, J.

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 [439 Md. 5] 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.


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 [439 Md. 6] 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]

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

Page 700

-- 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]

[439 Md. 7] 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 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

Page 701

Mental Hygiene (" DHMH" ). See Maryland Code, Health-General Article (" HG" ), § 15-103(b)(16).[7] [439 Md. 8] 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 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 [439 Md. 9] 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 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,

Page 702

when she was enrolled in Jai MCO, she was told that she " cannot go where [the Jai MCO] card will ...

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