July 14, 2011


Hi Jennifer,

I have just been reading a very hot topic regarding billing companies charging their clients a percentage of collections received. Is it illegal in the state of New York to do this (fee-splitting) or does it just pertain to a Medicaid regulation?

Thank you,



This is one of those questions where the "industry standard" vastly deviates from New York State law. By industry standard, percentage of fees collected by billers or billing companies makes the most logical sense, as billers will be motivated to put in the harder work to collect some of the harder to collect claims. Paying per claim per submission would likely garner fewer collections without further incentive. However, the law on this issue is pretty clear - under NYS Education Law s. 6530(19), the prohibition against fee-splitting, no person is permitted to share in the fees for professional services other than "a partner, employee, associate in a professional firm or corporation, professional subcontractor or consultant authorized to practice medicine, or a legally authorized trainee practicing under the supervision of a licensee. This prohibition shall include any arrangement or agreement whereby the amount received in payment for furnishing space, facilities, equipment or personnel services used by a licensee constitutes a percentage of, or is otherwise dependent upon, the income or receipts of the licensee from such practice..."

Further, in April of 1997, Henry Greenberg, the then acting General Counsel to the New York State Department of Health opined that:

“[The NYS DOH maintains] that any compensation arrangement which is based upon a percentage of physicians’ gross revenues or profits, or net revenues or profits, of their practice or a discrete portion thereof, constitutes illegal fee-splitting unless expressly authorized by statute. The compensation of a person or company based upon a percentage of the total fees billing and/or collected clearly constitutes such an illegal arrangement when the billing company is providing billing services for all or a portion of a physician’s practice. The only percentage compensation arrangement which this office recognizes as being outside the scope of the fee-splitting prohibition is the traditional percentage compensation arrangements entered into between physicians and collection, agencies attempting to collect past due bills which would otherwise be uncollectable. In such cases the actual fee paid would have a remote connection, if any at all, to the revenues or profits generated by the practice or any discrete portion of the practice. Thus, the percentage fees paid to such agencies would not give the agencies an interest in the revenues of the physician’s practice, create the appearance of an ownership interest in a non-licensee, serve as a basis for a non-licensee to attempt to influence the internal workings of the practice, or establish any other ill the statute was intended to prevent. The same cannot be said of percentage compensation arrangements between billing companies and physicians when the billing company is performing billing services for all or a specific part of a physician’s practice. Further, nothing in the statute permits the characterization of such arrangements as anything but an illegal fee-splitting arrangement.”

The distinction created between the billing process v. the collection processes and work rendered for the collection process is an important one to point out given the above comments by Attorney Greenberg. By rule of thumb, the collection process would not begin until such time as the claim had been exhausted through the submission and appeals process, as well as exercising attempts to collect any outstanding amounts under the "good faith" requirements. When the claim is considered completely exhausted is when it would be turned over to collections. So, for those of you out there thinking you can mask a percentage for claims in the standard billing process, be advised same would not likely pass muster.

Another kicker with this topic is while the State's position - through law and agency comment is pretty clear, the majority of billing arrangements remain on a percentage basis. So, if you decide to continue working with a biller on a percentage basis, be advised that you may be doing so at your own risk.



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