95.980             Use of Percentage-of-Fee Based Compensation Arrangements:

The Medical Society reaffirms its support for the underlying principle that a physician’s dedication to providing competent medical service for his or her patient is paramount.  Moreover, we also support the opinion that the physician’s control over clinical decision-making must remain unencumbered and independent from non-clinical influence.  The Medical Society recognizes that the continuation of the corporate practice of medicine doctrine’s prohibition against an unlicensed person or entity’s influence in the practice of medicine is necessary to uphold these principles and to protect against potential abuses and fraudulent activity.  Physicians must remain knowledgeable of and in control of the business aspects of their practice and should not relinquish such authority to non-physician business entities.  In our opinion, the following “business” decisions and activities involving control over the physician’s individual practice of medicine should be made by a physician and not by a non-physician or entity:

  • ownership and control of a patient’s medical records, including determining the contents thereof;
  • selection (hiring/firing as it relates to clinical competency or proficiency) of professional, physician extender and allied health staff;
  • set the parameters under which the physician will enter into contractual relationships with third party payors
  • decisions regarding coding and billing procedures for patient care services; and
  • approval of the selection of medical equipment.

Moreover, the following health care decisions should be made by a physician only and would constitute the unlicensed practice of medicine if performed by an unlicensed person:

  • determining what diagnostic tests are appropriate for a particular condition;
  • determining the need for referrals to or consultation with another physician/specialist; responsibility for the ultimate over-all care of the patient including treatment options available to the patient; and
  • determining how much attention to devote to address a patient’s needs.

As a result of the foregoing, the Medical Society supports the continuation of the corporate practice of medicine doctrine.

Additional information on this position is on file at MSSNY Headquarters, Office of the Executive Vice-President, ext. 397, E-mail:  [email protected].  This information addresses the following topics:

1) Use of credit cards to pay medical bills (percentage commission to bank or credit card company).

2) Use of collection agencies for a percentage of the medical fee collected.

3) Use of a practice management company on a percentage-of-fee basis, under any circumstances, including practice enhancement or marketing of the practice.

4) Use of a practice management company on a percentage-of-fee basis for non-clinical services where no patient referral or practice enhancement is involved, compared with use of “fair market value” as the basis for determining charges and maintaining the same restrictions.

5) Use of a billing service on a percentage-of- fee basis, compared to charges based on “fair market value,” with periodic negotiation of the charges. What would be the effect of not permitting certain activities, such as referral of patients by the billing company to the practice?

6) Leasing/renting space, services or equipment to a physician (by another physician, for example) on a percentage-of-fee basis without restriction, compared to a situation where cost of the lease/rent is based on fair market value and there are restrictions, such as not allowing cross-referrals between the landlord and tenant physicians.

7) Sale of a practice for a percentage of future income by the widow(er) of a physician, or by him or herself, without restriction, compared to a sale where the seller severs all connections with the practice, including referrals.

8) Accepting or paying a fee for a patient referral to or from any source.

9) Receiving payment in return for ordering lab tests, prescription drugs, medical appliances etc.  (Council 3/18/99; Reaffirmed HOD 2014)