Provided by: Jennifer Kirschenbaum, Esq.
August 6, 2024
Question:
Hi Jennifer,
I was told I can open my practice with an MD and form management company so that way the doctor can be paid. A few of my friends are set up this way. What do you think?
Thanks,
H
Answer:
Management arrangements are used for a variety of reasons; sometimes as a way around corporate practice of medicine prohibitions, which are laws dictating that doctors can only own a medical practice with other doctors (prohibiting corporate or non licensed person owners). The catch when using a management arrangement is that the services the management company is being paid for must be legitimate, and must be paid at fair market value. It’s pretty easy to tell when a management company is set up as a sham for fee splitting. There are easy “tells”. One I can think of is when a mid-level is taking the lions' share of monies and sharing a nominal percentage back to a higher licensee, presumably to keep them in business. Another situation I see is when a management company is set up with an individual poised to share referrals to a particular practitioner. The extra corporate layer of the management company will not save you if the purpose of the set up is a sham shell. Now, management arrangements are definitely a widely used and legitimate constructs when the manager is a standalone company that is offering legitimate services, which can be support services for the medical entity owned by the practitioner. Many of our north east corporate managed practices are set up exactly this way - with a management company company that may be owned by non-physicians or physicians, either, with the management company rendering services to a medical practice owned by physicians. Properly charging and collecting the management fee for management services is critical. My best advice is for you to plan to have the infrastructure from day one at the management company to properly charge for services at fair market value. If the medical practice is just a flow through to split monies at the management company level between practitioners and non practitioners, you are likely not set up correctly, or should not be set up as a management company.
Happy to answer questions how to properly structure and whether the management company is right for your arrangement. The second part of the management company conversation is how we properly align your key people; licensed providers and otherwise.
Hi Jennifer,
I was told I can open my practice with an MD and form management company so that way the doctor can be paid. A few of my friends are set up this way. What do you think?
Thanks,
H
Answer:
Management arrangements are used for a variety of reasons; sometimes as a way around corporate practice of medicine prohibitions, which are laws dictating that doctors can only own a medical practice with other doctors (prohibiting corporate or non licensed person owners). The catch when using a management arrangement is that the services the management company is being paid for must be legitimate, and must be paid at fair market value. It’s pretty easy to tell when a management company is set up as a sham for fee splitting. There are easy “tells”. One I can think of is when a mid-level is taking the lions' share of monies and sharing a nominal percentage back to a higher licensee, presumably to keep them in business. Another situation I see is when a management company is set up with an individual poised to share referrals to a particular practitioner. The extra corporate layer of the management company will not save you if the purpose of the set up is a sham shell. Now, management arrangements are definitely a widely used and legitimate constructs when the manager is a standalone company that is offering legitimate services, which can be support services for the medical entity owned by the practitioner. Many of our north east corporate managed practices are set up exactly this way - with a management company company that may be owned by non-physicians or physicians, either, with the management company rendering services to a medical practice owned by physicians. Properly charging and collecting the management fee for management services is critical. My best advice is for you to plan to have the infrastructure from day one at the management company to properly charge for services at fair market value. If the medical practice is just a flow through to split monies at the management company level between practitioners and non practitioners, you are likely not set up correctly, or should not be set up as a management company.
Happy to answer questions how to properly structure and whether the management company is right for your arrangement. The second part of the management company conversation is how we properly align your key people; licensed providers and otherwise.
