Illinois Management Services Agreement Guide: The Statutory Ban on Percentage Management Fees

How to Price the Management Fee

Section 22.2 of the Medical Practice Act, as summarized in FindLaw's copy current as of January 1, 2025, generally bars sharing a professional fee for a referral, allows revenue sharing inside an entity organized under the Medical Corporation, Professional Service Corporation, Professional Association or LLC Acts where every owner is licensed, and bars a licensee, apart from payments to owners or licensees, from paying a percentage of fees, revenues or profits for marketing or management, preferred-provider listings, network participation, fee negotiation or patient incentive programs. We did not see the current legislature text for the percentage language, so counsel should confirm it. In Vine Street Clinic v. HealthLink (Ill. 2006), as described in a 2008 law-firm article, a percentage-based fee for administrative services was void under the earlier statute. The practical rule is a flat or fixed fair-market management fee.

What the Practice Must Keep

The practice keeps control of its fees and its bank account. A billing or collection vendor may be paid a percentage or flat fee only if it is a fair-market arrangement, the licensee controls the fees and payments go directly to the licensee or into an account under the licensee's sole control or a trust account. Medical services are performed by a physician or delegated by one who is appropriately trained and supervised, per the IDFPR memo.

Terms to Avoid

Avoid any percentage of fees, revenues or profits paid for management or marketing, a marketing fee tied to patient volume, network or preferred-provider listing fees paid as a percentage, patient incentive programs paid as a percentage, and any billing arrangement under which payments go to the vendor first. Violations are unlawful practices under the Consumer Fraud Act, except for licensed hospitals and affiliates.

Term, Records and Departing Clinicians

Illinois voids non-competes only for certain mental health services, and we found no confirmed ban on physician non-competes, though broader bills were pending. The practice keeps records and patient communications.

Filings, Notices and Watch Items

The Illinois Antitrust Act has required 30 days' notice to the Attorney General of covered health care transactions since 2024, with fines of $500 a day. A 2026 act effective January 1, 2027 broadens covered transactions from between to involving health care entities and covers private equity ownership held directly or indirectly, including through MSOs. A single-physician practice with a small MSO and no private equity investor probably falls below any threshold, which we could not confirm. A 2026 act amended the medical patient rights act on billing notices, and we could not confirm a change to section 22.2.

Drafting Checklist

• Fee: flat fair-market amount for defined administrative services.
• Marketing: not paid as a percentage of fees, revenues or profits.
• Billing vendor: fair-market fee, licensee controls fees, payments go to the licensee's account.
• Network listings: no percentage payments for listings or negotiation.
• Delegation: by a trained, supervising physician.
• Transaction notice: confirm thresholds from 2027 if outside capital is involved.

How We Draft It

Patients pay the physician-owned practice, the practice pays the management company a fixed monthly fee under the agreement, and the management company pays MedGrid a fixed monthly retainer for consulting. The management company never practices medicine, and the agreement never moves a clinical decision to it. Our template follows the same flat-fee design in every state, with the state-specific limits below layered on top.

Disclaimer

This article is general educational information, not legal advice. Management agreement rules change and differ by state, and this summary draws on our published state guide, parts of which rest on secondary sources, so have health care counsel in the state review any agreement before you sign.