New York Management Services Agreement Guide: Why a Fixed Fee Is the Only Safe Design

How to Price the Management Fee

The Education Law and the Board of Regents rule bar sharing professional fees with anyone other than a partner, employee, associate, subcontractor, consultant or trainee, and the prohibition also covers payments for space, facilities, equipment or personnel services that are a percentage of, or dependent on, the licensee's income. A percentage-of-revenue management fee is therefore high risk. In Advanced Dental of Ardsley v. Brown (2d Dep't 2024), an asset purchase agreement paying a percentage of practice revenue was an unenforceable fee-splitting arrangement, a dental case under the same Education Law framework. We use a fixed, fair-market fee for defined services, and any lease, equipment or staffing charge is a fixed amount that does not move with the practice's income.

What the Practice Must Keep

The Appellate Division in the Carothers no-fault case approved thirteen non-exhaustive control factors, including arm's-length dealing, bank-account control, hiring and firing, shared space, corporate formalities and the professional shareholder's role. The practice therefore keeps its own bank account, makes its own clinical hiring and firing decisions, controls its advertising and treatment decisions and observes its corporate formalities, and reports, diagnoses and prescriptions are signed by the practitioner in responsible charge.

Terms to Avoid

Avoid any percentage of revenue, collections or profit, any space, equipment or personnel charge that rises and falls with the practice's income, MSO signing authority over the practice's bank account, MSO power to hire or fire clinicians, and MSO control of clinical advertising or treatment decisions. The March 2026 NaphCare assurance imposed $875,000 and a five-year contracting bar after the Attorney General found an Alabama company controlled a New York practice and practiced medicine unlicensed, and a 2015 Aspen Dental assurance involved percentage payments of 45 to 50% of gross profits and undue control.

Term, Records and Departing Clinicians

We found no current statutory ban on non-competes in New York. A bill that passed the Senate in June 2026 would cover health professionals regardless of income and was in the Assembly Labor Committee, so drafting for it now avoids rework. Records and clinician transition terms stay with the practice.

Filings, Notices and Watch Items

Public Health Law Article 45-A requires health care entities, including MSOs and physician practices, to give the Department of Health notice at least 30 days before closing a material transaction, with formation of an MSO counting and a de minimis exemption below $25 million of added in-state gross revenue. An expansion proposal was not enacted in the FY2027 budget for the second year, according to a law-firm alert we saw only in summary. Senate Bill 8442 on physician ownership and transfer of control is in committee. The practice entity itself needs a State Education Department certificate of authority before filing.

Drafting Checklist

• Fee: fixed and fair-market, never a percentage.
• Space and equipment: fixed charges not tied to the practice's income.
• Bank account: held by the practice and controlled by the physician.
• Clinical hiring: made by the practice.
• Advertising: approved by the physician.
• Signing: reports, diagnoses and prescriptions signed by the practitioner in responsible charge.
• Notice: check Article 45-A when the MSO is formed.
• Non-competes: none for employed clinicians.

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.