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Paying a percentage to your biller - UPDATE!

May 29, 2013


For years I have been answering the same question for many of you the same way.  The question - may I pay my billing company a percentage?  The answer - it is industry standard to do so, but NYC Department of Health's legal department says doing so may constitute an illegal fee split.  Thanks to a recent decision in the Queens County Supreme Court, which I was made aware of by Faculty Practice Services President, Barry Reiter (thank you, Barry!), a New York judge has opined that paying a billing company a percentage is NOT a fee split!  The decision - ACTIVE PROCESSING, INC., v. DAVID N. GUNTHER & ASSOCIATES, PA, d/b/a WESTSIDE PODIATRY, originated out of a breach of contract claim, whereby Westside contracted for Active Processing to perform billing and collection work at an 8% fee. The defendant requested the court grant summary judgment that the contract itself was invalid because it violated NY's fee splitting laws.  The court opined as follows:

"the case at bar does not involve the sharing of fees contemplated by the statute and regulation. This case does not involve, for example, a professional's payment of a commission on fees realized from patients procured by an unlicensed person. ( See, Okereke v. State of New York, supra.) None of the "red flags" such as patient referrals, medical procedures and testing, rental arrangements, and employer-employee relationships have been raised in this case. Upon review of Education Law s 6509-a, there is no legislative intent which prohibits a professional from paying any expenses from the fees he earned. The court does not interpret the statute so broadly as to absolutely forbid the payment of independent contractors on a commission basis. The statutory purposes behind Education Law s 6509-a, which was enacted in response to abuses at so-called "Medicaid mills" (see, Deutsch v. Health Ins. Plan o/Greater New York, 573 F.Supp. 1443), would not be served by applying the statute to the case at bar. The Legislature primarily intended to prohibit abuses at Medicaid supported facilities in this state. (See, Deutsch v. Health Ins. Plan of Greater New York, supra.) The defendant's practice is located in Texas, and none of the papers submitted on this motion give any indication of Medicaid abuse. Other types of abuses that Education Law s 6509 would prevent are likewise, not involved in the case at bar. The defendant did not show that its professional judgment was influenced by the plaintiff (see, Odrich v. Trustees of Columbia University in City o/New York, 193 Misc2d 120, affd, 308 AD2d 405), and the defendant did not show that application of the statute here is necessary to deter professional misconduct. Finally, the court notes that in Convenient Medical Care Pc. v. Medical Business Associates Inc. (291 AD2d 617), a medical billing company which entered into a contract with a professional medical corporation whereby the former would receive a monthly processing fee equivalent to 6.4% of all gross charges billed to the latter's patients was awarded summary judgment on its breach of contract claim. The case is silent about Education Law s 6509-a."

What does this mean?  Does this mean there is nothing left to worry about if you are in a percentage relationship?  Well, I can't go that far.  There are still opinions out there by the DOH stating percentage relationships with billing companies does constitute fee splitting.  You also could have a different judge with a different ruling.  But, the good news is the above opinion is now out there to protect percentage relationships and to provide guidance. 
Have a question or comment for Jennifer?
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