Shapira v. United Medical Service, Inc.

• Decision Date: 11 February 1965
• Citation: 205 N.E.2d 293,257 N.Y.S.2d 150,15 N.Y.2d 200
• Parties: , 205 N.E.2d 293 Daniel SHAPIRA, Appellant, v. UNITED MEDICAL SERVICE, INC., Respondent. John I. SANDSON, Appellant, v. UNITED MEDICAL SERVICE, INC., Respondent. I. Herbert SCHEINBERG, Appellant, v. UNITED MEDICAL SERVICE, INC., Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 150

257 N.Y.S.2d 150

15 N.Y.2d 200, 205 N.E.2d 293

Daniel SHAPIRA, Appellant, v. UNITED MEDICAL SERVICE, INC., Respondent.

John I. SANDSON, Appellant, v. UNITED MEDICAL SERVICE, INC., Respondent.

I. Herbert SCHEINBERG, Appellant, v. UNITED MEDICAL SERVICE, INC., Respondent.

Court of Appeals of New York.

Feb. 11, 1965.

Emanuel Dannett, Joseph D. McGoldrick, Bernard Buchholz and Eugene Mittelman, New York City, for appellants.

Richard T. Davis and William C. Woodson, New York City, for respondent.

Gustave Simons, New York City, for Southern New York Medical Education and Research Foundation, amicus curiae.

BURKE, Judge.

These are three test actions brought to recover benefits claimed to be payable under the provisions of contracts issued by the respondent, a nonprofit medical indemnity corporation, for physicians' services rendered to United Medical Service subscribers (Messrs. Tobias and Schmier and Miss Sinnette) in wards of a New York City Municipal Hospital.

Each appellant asserts that he rendered medical care to the patient subscribers involved herein and out of this treatment there arose the respondent's obligation under its service contracts to reimburse him for his care.

The respondent's principal contention in defense of these claims is that it is only obligated to pay benefits where a subscriber has incurred liability to his doctor for a professional fee. If the patient need not pay the practitioner for the care that he receives, the respondent asserts that it need not pay.

The Appellate Division unanimously affirmed judgments of the Supreme Court, New York County, dismissing the complaints after a single nonjury trial of three cases. The three actions were tried together by order of the trial court on stipulation of the parties. The trial court made 134 findings of fact and 18 conclusions of law which the Appellate Division affirmed. We perceive no evidence sufficient to warrant a different determination.

The appellants are licensed physicians on the visiting staff of the Bronx Municipal Hospital Center, a large medical center and hospital owned and operated by the City of New York. Pursuant to an agreement between the city and Yeshiva University, the Bronx Municipal Hospital Center visiting staff is drawn entirely from the faculty of the university's Albert Einstein College of Medicine and this faculty is responsible for the professional care of all of the patients in the hospital center. Physicians are full-time professors of the college faculty. They receive a salary from the university for all services performed on its behalf.

The Bronx Municipal Hospital Center is used by the faculty of the medical school for teaching purposes. Students from the medical school are assigned to the wards of the hospital center as 'clinical clerks'. The students are provided with alcoves on the wards equipped with 10 to 12 desks for study purposes. The students accompany the appellants and other professors from the medical school as they make their rounds on the wards. It is the teaching policy at the hospital center to have the interns and residents perform as many of the services rendered to a patient as possible. The visiting physicians and surgeons from the faculty of the medical school act in a supervisory and teaching capacity.

A patient is admitted to the hospital center either through the emergency room or one of the out-patient clinics, after being examined there by an intern or resident. If emergency treatment is in order it is administered by the intern or resident. The intern or resident admits the patient to the hospital and assigns the patient to one of the wards in accordance with a system of rotating new admissions among the wards so that no ward receives more than its fair share of new patients. There are 40 beds on a ward. A resident and two interns are assigned to each ward virtually full time. Upon the arrival of a patient on the ward, responsibility for the care of the patient is assigned to one of the interns. 'Definitive treatment', when called for, is given by the intern. The intern is supervised by the resident assigned to the ward. The resident and interns on the ward are in turn supervised by a chief resident. The chief residents are physicians with three previous years of clinical experience. Visiting physicians from the faculty of the medical school are assigned to tours of duty on a particular medical ward, usually a month at a time, in accordance with a schedule prepared annually by the head of the department of medicine of the medical school. Similarly, visiting surgeons from the faculty are regularly assigned to the hospital center's surgical service.

The visiting physicians make regular rounds on their assigned wards accompanied by groups of interns, residents, medical students, nurses social workers, etc. Since there are 40 beds the visiting physician obviously cannot divide his time among the patients on the ward. At the end of a visiting physician's assignment to a ward, which usually lasts a month, a new visiting physician is assigned to make rounds on the ward. The visiting physicians and surgeons are, in turn, supervised by the directors of the particular departments or services of the hospital in which they are serving. The director of a particular department or service at the hospital center is also the head of that department at the medical school. These directors are also visiting physicians. These directors are, in turn, subject to the supervision of the medical superintendent of the hospital center and the medical board of the hospital center. The medical superintendent and medical board are, of course, subject to the supervision of the Commissioner of Hospitals. The head of the service becomes the attending physician in effect on the entry of a patient.

At the Bronx Municipal Hospital Center the patient has no choice of physicians. The fact that a particular patient comes in contact with any particular physician or surgeon is entirely the result of which ward the patient is assigned to and which physicians or surgeons happen to be assigned to that ward.

The trial court found that the following statement of fact and policy, which the medical board of the Bronx Municipal Hospital Center submitted to the Internal Revenue Service, reflects the situation at the hospital center:

'It is the customary procedure that a patient may be treated by several physicians who are on service at that time, and during the patient's course of hospitalization may then be treated by another group of physicians whose time it has come to rotate their services on the particular medical or surgical specialty. Thus, it becomes almost an impossibility for one physician to be entitled to any of the monies, and hence it becomes a matter of administrative expediency to bill in the name of either the Director of the Service or his designated representative or representatives. * * *'

'There is absolutely no personal relationship of physician and patient since the patient does not voluntarily have the choice of the physician, and in most cases, does not know nor has he ever heard of the physician, but simply becomes a patient of the particular physician by reason of chance.'

The ruling of the Commissioner of Internal Revenue reads in part as follows:

'On the basis of your statement that 'by virtue of resolution of the Medical Board herein annexed, none of the funds received for such services rendered by a member of the Medical Staff may be retained by any physician or surgeon for his own use or benefit,' it is assumed that every member of the Medical Staff who is entitled to charge for services rendered to patients at the Hospital Centre is required to comply with the terms of the resolution as a condition of his membership.

'Under these circumstances, it is our opinion that members of the Medical Staff supply professional care to the patients at the Hospital Centre as agents of the Hospital Centre. Accordingly, it is held that the amounts paid for such services and deposited to the account of the Medical Board Fund shall not be included in the gross income of the various members of the Medical Staff who perform the services.'

Appellants have not reported such moneys as income in their Federal and State income tax returns. Thus, appellants did not treat these moneys as having belonged to them at any time, nor did they take any charitable deduction in their tax returns with respect to these moneys.

The medical board of the Bronx Municipal Hospital Center is an official body, and, subject to the supervisory jurisdiction of the Commissioner of Hospitals, it is the governing body of the hospital center.

Acting through its medical board, the hospital center established the fund as the 'Medical Board Fund of the Bronx Municipal Hospital Center'.

The medical board fund is not a separate legal entity. It is controlled and administered by the medical board.

When dealing with insurers other than United Medical Service it was the practice for medical board personnel to bill for the services of all visiting physicians on a billhead entitled 'Medical Board Fund Bronx Municipal Hospital Center'.

Respondent, United Medical Service, is a nonprofit medical indemnity corporation and is authorized under section 250 of the Insurance Law, Consol.Laws, c. 28, to furnish 'medical expense indemnity' insurance as 'reimbursement for medical care provided through duly licensed physicians'. The respondent has 'service contracts' with subscribers in the New York metropolitan area. These contracts provide, among other things, for surgical and in-hospital medical care rendered by duly licensed practitioners. The contracts involved in these actions so provided and, with the exception of the amount of the benefits, these contracts were in all relevant respects identical.

Since the United Medical Service contracts provide benefits only where a subscriber has incurred liability to a...