Toolkit · Business

The Professional Entity, Management Services Agreement, and Fee-Splitting Toolkit

42 U.S.C. § 1320

Type
Toolkit
Jurisdiction
National
Date
2025-09-14
Topic
Business

Working instruments for professional practice structuring and health care compliance. The analysis set includes a state-and-profession memorandum outline and a clinical control attestation. The contracting set includes a management agreement adversarial review sheet, a fee-splitting analysis, and a fair market value file index. The compliance set includes a financial relationship inventory, a medical director time record, and an exclusion screening log. The transaction set includes a diligence request list and a purchase agreement risk allocation sheet. The response set includes a self-disclosure decision tree. A physician offer evaluation sheet and an authority quick reference complete it.

The Professional Entity, Management Services Agreement, and Fee-Splitting Toolkit

Business > Professional Practices and Corporate Practice of Medicine | Published 14 September 2025 - Updated 27 January 2026 | UpLaw - uplaw.us

How this toolkit is built

Twelve instruments. Bracketed text is for completion.

Three rules organize the set: the analysis is state-and-profession specific; the compensation formula carries most of the risk; and conduct beats recitals every time.

Tool 1 — State and Profession Memorandum Outline

Jurisdiction: [ ] Profession: [ ] Prepared: [ ] By: [ ]

1. Practice act. Citation: [ ]. Definition of the practice: [quote]. Any express authorization for employment by an entity: [ ]. 2. Professional entity statute. Available forms: [ ]. Ownership eligibility: [ ]. Cross-professional ownership: [ ]. Disqualification consequences: [ ]. Board registration required: ☐ yes ☐ no. 3. Corporate practice doctrine. Recognized? ☐ yes ☐ no ☐ unsettled. Source: ☐ statute ☐ case law ☐ board rule ☐ AG opinion. Scope: [ ]. Exemptions (hospital, health system, HMO, licensed clinic, academic): [ ]. 4. Board authority. Rules: [ ]. Declaratory rulings or position statements on management arrangements: [ ]. 5. Attorney general opinions. [ ] 6. Case law. Cases voiding or enforcing management or employment agreements: [ ]. Fee splitting cases: [ ]. 7. Fee splitting. Citation: [ ]. Does it prohibit percentage arrangements? ☐ yes ☐ no ☐ unclear. Exceptions: [ ]. 8. Restrictive covenants. Permitted for this profession? ☐ yes ☐ no ☐ limited: [ ]. 9. Patient records. Ownership: [ ]. Retention: [ ]. Notification on transfer or closure: [ ]. 10. Telehealth. Licensure requirement: [ ]. Does the analysis change for out-of-state patients? [ ] 11. Payer overlay. Medicaid managed care and commercial contract provisions on ownership, control, and reassignment: [ ] 12. Conclusion. The proposed structure is ☐ permissible ☐ permissible with modifications: [ ] ☐ not permissible.

📌 Write it so a regulator could read it. Structures documented this way survive scrutiny.

Tool 2 — Management Agreement Adversarial Review Sheet

Read in this order.

# Provision § Finding Risk
1 Termination — who, notice, cause [ ] Company may terminate w/o cause? ☐ Practice may? ☐ ☐ high
2 Fee formula [ ] ☐ % of revenue ☐ flat ☐ cost-plus — computed as %: [ ]% ☐ high
3 Share transfer / succession [ ] Company may compel transfer? ☐ yes → nominee ☐ high
4 Definition of services [ ] Touches protocols/formulary/templates/panel size/productivity? ☐ ☐ high
5 Clinical personnel [ ] Who hires, evaluates, disciplines, terminates in practice: [ ] ☐
6 Records [ ] Owner: [ ] Custodian: [ ] On termination: [ ] ☐
7 Covenants [ ] Duration [ ] Geography [ ] Buyout [ ] Patient notice permitted? ☐ ☐
8 Security interest / guarantee [ ] Personal guarantee by shareholder? ☐ yes ☐ high
9 Term and renewal [ ] [ ] years + [ ] renewals ☐
10 Amendment [ ] Unilateral? ☐ yes ☐
11 Assignment [ ] On sale of the management company: [ ] ☐
12 Fee setting for professional services [ ] Who sets: [ ] ☐

The test applied to each clause: if enforced exactly as written, who makes clinical decisions? Answer: [ ]

Tool 3 — Fee Splitting and Fair Market Value Analysis

Arrangement: [ ] Counterparty: [ ] Effective: [ ]

1. Is the counterparty licensed in this profession? ☐ yes ☐ no 2. Does the state prohibit sharing professional fees with unlicensed persons? ☐ yes — citation: [ ] ☐ no 3. How is compensation computed? ☐ % of collections ☐ % of revenue ☐ flat ☐ cost-plus ☐ hourly ☐ per unit 4. If percentage — is there an exception covering this arrangement? [ ] 5. Recommended restructuring: ☐ flat fee $[ ]/mo ☐ cost-plus [ ]% ☐ hourly $[ ]

Fair market value support ☐ Independent valuation obtained — by [ ] on [ ] — refresh due [ ] ☐ Methodology: ☐ cost ☐ market ☐ income — reason: [ ] ☐ Comparable data source and geography: [ ] ☐ Referral value expressly excluded from the analysis ☐ ☐ Commercial reasonableness: would this arrangement make sense with zero referrals between the parties? ☐ yes — why: [ ] ☐ Compensation set in advance for the term ☐ ☐ Compensation does not vary with the volume or value of referrals ☐ ☐ Written agreement, signed, term ≥ one year ☐

⚠️ A valuation obtained after the fact and priced to justify the deal is worse than none.

Tool 4 — Financial Relationship Inventory

The single most valuable compliance artifact. Most organizations cannot produce it.

# Counterparty Referral source? Type Term Compensation FMV support Exception / safe harbor Services documented? Reviewed
1 [ ] ☐ [lease] [ ] $[ ] ☐ [date] [space rental] ☐ [ ]
2 [ ] ☐ [directorship] [ ] $[ ] ☐ [date] [personal services] ☐ hours? [ ]
3 [ ] ☐ [call coverage] [ ] $[ ] ☐ [ ] ☐ [ ]
4 [ ] ☐ [equipment] [ ] $[ ] ☐ [ ] ☐ [ ]
5 [ ] ☐ [marketing] [ ] $[ ] ☐ [ ] ☐ [ ]

Tests applied to each row: ☐ 42 U.S.C. § 1320a-7b — was any purpose to induce or reward referrals? ☐ 42 U.S.C. § 1395nn and 42 C.F.R. Part 411 — does an exception fit? ☐ Penalties if not: 42 U.S.C. § 1320a-7a, 42 C.F.R. Part 1003 ☐ Exclusion exposure: 42 U.S.C. § 1320a-7, 42 C.F.R. Part 1001, 42 C.F.R. Part 1002 ☐ False Claims multiplication: 31 U.S.C. § 3729, 31 U.S.C. § 3730

Review cadence: ☐ quarterly ☐ annually · Owner: [ ] · Last complete review: [ ]

Tool 5 — Medical Director Time Record

Director: [ ] Facility: [ ] Agreement dated: [ ] Term: [ ] Compensation: $[ ]/[period] Contracted hours: [ ] per month FMV valuation: by [ ] on [ ]

Date Hours Activity (specific) Deliverable or output Signature
[ ] [ ] [committee meeting / protocol review / staff education / quality review] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]

Month total: [ ] hours vs. [ ] contracted Annual certification: I certify that the services described were actually performed. Director: ______ Date: [ ] Facility review: services were needed and were received. Reviewer: ______ Date: [ ]

⚠️ The archetypal failure: an agreement reciting ten hours per month, paid monthly, with no time records. The absence of records means the services cannot be shown to have been provided — which converts a defensible arrangement into an indefensible one under 42 U.S.C. § 1395nn and 42 U.S.C. § 1320a-7b.

Tool 6 — Exclusion Screening Log

Screen at onboarding and monthly thereafter. Exclusion under 42 U.S.C. § 1320a-7 is existential; implementing rules at 42 C.F.R. Part 1001 and 42 C.F.R. Part 1002.

Name Role NPI / license Date screened Sources checked Result Next due
[ ] ☐ owner ☐ employee ☐ contractor ☐ vendor [ ] [ ] ☐ federal ☐ state ☐ debarment ☐ clear ☐ hit [ ]

On a hit: ☐ suspend immediately ☐ quantify claims submitted during the exclusion period ☐ compute the overpayment ☐ evaluate self-disclosure ☐ document the decision Program owner: [ ] Last full population screen: [ ] Vendors included? ☐ yes

Tool 7 — Clinical Control Attestation

Complete annually. Signed by the senior clinical officer of the professional entity.

For the period [ ] to [ ], I attest that within [Practice]:

☐ 1. Decisions regarding diagnosis and treatment for individual patients were made by the treating clinician. ☐ 2. Referral decisions were made by the treating clinician based on clinical judgment and patient preference. ☐ 3. No non-licensed person directed, overrode, or conditioned any clinical decision. ☐ 4. Patient acceptance and discharge decisions were made by clinicians. ☐ 5. Hiring, evaluation, discipline, and termination of clinical personnel were determined by [clinical leadership body]. ☐ 6. Coding and documentation content were determined by clinicians, with coding review by [ ]. ☐ 7. No clinician-facing metric measured revenue per patient or procedures per visit. ☐ 8. No clinician was disciplined or terminated for declining to follow a non-clinical directive. ☐ 9. Patient records are owned by the professional entity and are accessible to clinicians. ☐ 10. Exceptions or concerns during the period: [ ]

Signed: ______________ Title: ____________ Date: [ ]

📌 This document is either strong evidence or a serious problem, depending on whether it is true. Do not sign it as a formality.

Tool 8 — Practice Diligence Request List

☐ Formation documents, bylaws or operating agreements, and amendments for every entity ☐ Share ledger, certificates, and every transfer or succession agreement ☐ Board registrations and licensing board correspondence ☐ Minutes and written consents for five years — or acknowledgment that none exist ☐ Management services agreement, amendments, exhibits, and schedules ☐ Valuations supporting the management fee, with effective dates ☐ Every clinician employment and contractor agreement ☐ Every agreement with a potential referral source: leases, equipment, directorships, call coverage, consulting, marketing ☐ Valuations, scopes of work, and time records for each ☐ Licensure verification and disciplinary history for every clinician ☐ Exclusion screening results with dates ☐ Payer contracts and provider enrollment records, with assignment and change-of-ownership provisions flagged ☐ Billing policies, coding guidelines, and prior audit reports ☐ Overpayment identification and refund records for six years ☐ Government inquiries, audits, subpoenas, civil investigative demands (31 U.S.C. § 3733), and self-disclosures ☐ Corporate integrity agreements or settlement obligations ☐ Malpractice claims history, policies, and tail quotes ☐ Patient record retention policy and custody arrangements ☐ Compliance program: code, training records, hotline logs, audit calendar, investigation files ☐ Restrictive covenants and any enforcement history ☐ Any state health care transaction notice or review filings

📌 Minutes and time records are the two items most often missing, and their absence tells a reviewer most of what it needs to know.

Tool 9 — Purchase Agreement Risk Allocation Sheet

Risk identified Quantified Allocation Mechanism Cap Survival
Historical coding exposure $[ ] ☐ seller ☐ shared ☐ buyer ☐ indemnity ☐ escrow ☐ price adjustment $[ ] [ ]
Referral-source arrangement defect $[ ] [ ] [ ] $[ ] [ ]
Exclusion-period claims $[ ] [ ] [ ] $[ ] [ ]
Malpractice tail $[ ] [ ] ☐ seller purchases ☐ price credit — —
Payer re-enrollment revenue gap $[ ] [ ] ☐ holdback ☐ earnout adjustment $[ ] [ ]
Restrictive covenant unenforceability $[ ] [ ] ☐ new covenants at closing — [ ]
Records custody and transfer $[ ] [ ] ☐ covenant ☐ transition services — [ ]

Special indemnity for health care regulatory matters? ☐ yes — cap $[ ], survival [ ], basket ☐ none Escrow: $[ ] for [ ] months · Representations: billing compliance ☐ exclusion ☐ licensure ☐ referral arrangements ☐ Pre-closing covenant to correct identified arrangements? ☐ yes — deadline [ ]

⚠️ A problem found in diligence is fixable before closing and catastrophic after. Price it or fix it; do not close and hope.

Tool 10 — Self-Disclosure Decision Tree

1. Is the conduct stopped? ☐ yes ☐ no → stop it now and document the decision 2. Is a document hold in place? ☐ yes 3. What is the conduct, precisely? [ ] 4. What is the exposure theory? ☐ Anti-kickback — 42 U.S.C. § 1320a-7b ☐ Self-referral — 42 U.S.C. § 1395nn ☐ Billing / coding — overpayment only ☐ False Claims — 31 U.S.C. § 3729 ☐ Criminal — 18 U.S.C. § 1347, 18 U.S.C. § 1035, 18 U.S.C. § 669 ☐ Exclusion exposure — 42 U.S.C. § 1320a-7 5. Quantified overpayment: $[ ] over [period] — methodology: [ ] 6. Refund deadline calendared? ☐ yes — date [ ] ⚠️ knowing retention is independently actionable 7. Is there an internal record acknowledging the risk before the conduct? ☐ yes → weighs heavily after United States ex rel. Schutte v. SuperValu Inc. 8. Which disclosure route fits? ☐ overpayment refund only ☐ program-integrity self-disclosure ☐ Department disclosure ☐ none 9. Licensing board reporting obligation? ☐ yes — deadline [ ] 10. Insurer notice? ☐ yes — policy [ ], deadline [ ] 11. Structural remediation (the formula, the metric, the missing documentation): [ ] 12. Decision: ☐ disclose ☐ refund only ☐ monitor — approved by [ ] on [ ]

Tool 11 — Physician Offer Evaluation Sheet

For the professional considering an arrangement. Complete before signing anything.

☐ Own counsel retained? ☐ yes — name [ ] ⚠️ the transaction lawyer represents the company ☐ What do I control after closing? clinical decisions [ ] · staffing [ ] · scheduling [ ] · records [ ] · my compensation [ ] ☐ Share transfer: can the company compel transfer of my shares? ☐ yes → my ownership is nominal ☐ Compensation modeled in a bad year: $[ ] · in a good year: $[ ] · fixed floor: $[ ] ☐ Restrictive covenant: duration [ ] · geography [ ] · survives termination without cause? ☐ yes ☐ no · buyout $[ ] ☐ Patient notification on departure: permitted? ☐ required? ☐ ☐ Records: owner [ ] · custodian [ ] · my access after termination [ ] ☐ Malpractice tail: who pays $[ ] ☐ Personal guarantee requested? ☐ yes — amount $[ ] ⚠️ ☐ If the company is sold, do I have a consent right? ☐ yes ☐ no ☐ Compliance program shown? ☐ yes · last billing audit shown? ☐ yes ☐ Who decides how many patients I see per day? [ ] ☐ Am I evaluated on revenue per patient? ☐ yes ⚠️ ☐ Termination: company without cause on [ ] days · me without cause on [ ] days

Tool 12 — Authority Quick Reference

Fraud and abuse ☐ Anti-kickback: 42 U.S.C. § 1320a-7b ☐ Self-referral: 42 U.S.C. § 1395nn · 42 C.F.R. Part 411 ☐ Civil monetary penalties: 42 U.S.C. § 1320a-7a · 42 C.F.R. Part 1003 ☐ Exclusion: 42 U.S.C. § 1320a-7 · 42 C.F.R. Part 1001 · 42 C.F.R. Part 1002 ☐ Fraud and abuse control: 42 U.S.C. § 1320a-7c · Data reporting: 42 U.S.C. § 1320a-7e ☐ Medicaid: 42 U.S.C. § 1396a · 42 C.F.R. Part 455 · Medicare Advantage: 42 C.F.R. Part 422 ☐ Criminal: 18 U.S.C. § 1347 · 18 U.S.C. § 1035 · 18 U.S.C. § 669

False Claims Act ☐ 31 U.S.C. § 3729 · 31 U.S.C. § 3730 · 31 U.S.C. § 3731 · 31 U.S.C. § 3733 ☐ Scienter: United States ex rel. Schutte v. SuperValu Inc.

Antitrust and immunity ☐ 15 U.S.C. § 1 · 15 U.S.C. § 2 · 15 U.S.C. § 13 · 15 U.S.C. § 18 · 15 U.S.C. § 45 · 15 U.S.C. § 15 · 15 U.S.C. § 26 ☐ Goldfarb v. Virginia State Bar · FTC v. Superior Court Trial Lawyers Ass'n · Jefferson Parish Hosp. Dist. No. 2 v. Hyde · California Retail Liquor Dealers Ass'n v. Midcal Aluminum

Tax ☐ Exempt organizations: 26 U.S.C. § 501

📌 The three rules again: the analysis is state-and-profession specific; the compensation formula carries most of the risk; and conduct beats recitals every time.

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