Kansas Management Services Agreement Guide: Why a Management Contract Carries Real Risk
Kansas courts treat contracts that give a business corporation a role in medicine as illegal and unenforceable, and the Board ties fee splitting with unlicensed entities to its discipline provision.
Key Highlights
- Kansas courts hold a general business corporation cannot practice medicine or contract with or employ physicians to do so, and such contracts are illegal and unenforceable.
- The Board's medical spa FAQ ties fee splitting with unlicensed individuals or entities to the discipline provision for fees not for services personally rendered.
- Any voting trust, proxy or voting agreement with a non-shareholder is void by statute.
- A 2021 federal decision dismissed a staffing corporation's contract claims as illegal and unenforceable.
How to Price the Management Fee
The discipline provision bars giving or receiving any fee, commission, rebate or other compensation for professional services not actually and personally rendered, other than through the legal functioning of lawful professional partnerships, corporations, LLCs or associations. We found no statute, rule, case or opinion on percentage-of-revenue MSO fees, so a percentage fee to an unlicensed management company is a risk area, and we use a fixed fee for defined administrative services.
What the Practice Must Keep
The management company is a pure administrative vendor with no ownership, no voting rights or proxies, and no role in any clinical, hiring or pricing decision. Because voting agreements with non-shareholders are void by statute, some friendly-practice control tools are unavailable, and the agreement avoids them.
Terms to Avoid
Avoid any term that gives the management company a role in medicine, ownership, proxies or voting trusts, pricing power over clinical fees and any arrangement that makes the contract itself the source of the practice's operation. In Clinical Colleagues v. Hutchinson Regional Medical Center (D. Kan. 2021), a federal court dismissed a staffing corporation's contract claims as illegal and unenforceable, a practical example of how a non-physician-owned entity can lose its contracts.
Term, Records and Departing Clinicians
Records are kept ten years and transferred on patient request. Non-competes are governed by common law, and we do not use them for employed clinicians.
Filings, Notices and Watch Items
The Board states that any business offering medical services can be owned only by a physician or co-owned by a physician with other specified licensed professionals, and that a person not licensed to practice medicine who opens such a business commits a felony. We found no Kansas transaction notice law, and counsel should review the agreement before signing.
Drafting Checklist
- Fee: fixed for defined administrative services.
- Ownership: none for the MSO.
- Voting: no proxies, voting trusts or voting agreements.
- Clinical role: none for the MSO.
- Records: kept ten years.
- Review: counsel reviews before signing.
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.
MedGrid MSO provides management services to independently owned practices; it does not practise medicine and does not direct clinical decisions. Requirements vary by state and by service, and change over time — nothing on this page is legal or medical advice. Talk to us or your own counsel before making a structural decision for your clinic.