Texas Supreme Court Holds Unique Employment Structure Limits Liability For Physicians

In Renaissance Medical Foundation v. Lugo (No. 23-0607), the Texas Supreme Court held that the legislature modified traditional, common-law vicarious liability for certain health care entities that employ physicians. The Court pronounced that non-profit health organizations (NPHOs) certified as such by the Texas Medical Board may employ physicians, but they "may not interfere with, control, or otherwise direct a physician's professional judgment" in violation of Section 162.0021 of the Texas Occupations Code (Code) and other long-standing civil and criminal prohibitions on interfering with physicians' independent, professional judgment.

The Court explained that making an NPHO vicariously liable¹ "for employee conduct it is statutorily prohibited from controlling would be inconsistent with" the principle that control of the employee's work justifies vicarious liability. The majority opinion explained that this "unique" employment structure in Section 162 of the