Pennsylvania Management Services Agreement Guide: Avoiding the Partnership Terms in the OCA Cases
Pennsylvania's main management agreement risk is that profit-sharing and control terms turn it into a de facto partnership with the manager, as two federal cases applying Pennsylvania law held.
Key Highlights
- Two federal decisions applying Pennsylvania law held an orthodontic management agreement created a de facto partnership with the manager and was unenforceable.
- The problem terms were MSO control of revenue and bank accounts, an equipment leaseback, a fee tied to net operating margin, a 25-year term, mutual non-competes and managed-care contracting power.
- We found no Pennsylvania physician fee-splitting statute, so the percentage-fee risk operates through the partnership analysis.
- The 2025 Fair Contracting for Health Care Practitioners Act caps health care non-competes at one year.
How to Price the Management Fee
We found no Pennsylvania physician fee-splitting statute or Board rule, and the Board's unprofessional conduct rule has no fee-splitting item. The risk operates through the partnership analysis, because secondary sources say sharing gross returns alone does not create a partnership but profit sharing is prima facie evidence of one. We use a fixed, fair-market fee that does not depend on the practice's profit or margin.
What the Practice Must Keep
The practice keeps its bank accounts, its clinical decisions, its managed-care contracting and the licensed delegation decisions the Board's delegation rule requires, which include consistency with accepted medical practice, known delegatee competence, patient notice and no objection, and physician responsibility and availability in proportion to risk.
Terms to Avoid
The two federal decisions, Apollon v. OCA (2008) and OCA v. Hodges (2009), are not binding on Pennsylvania courts and we read them through secondary sources. The terms that led to de facto partnership findings were MSO control of revenue and bank accounts, an equipment leaseback, a fee of practice revenue less a share of net operating margin, a 25-year term, mutual non-competes, a minimum opening hours requirement and MSO managed-care contracting power. Our template avoids each of them.
Term, Records and Departing Clinicians
The Fair Contracting for Health Care Practitioners Act, effective January 1, 2025, covers physicians, nurse practitioners, nurse anesthetists and physician assistants, makes non-competes longer than one year unenforceable and any non-compete unenforceable on involuntary termination, carves out sale-of-business and equity deals, grandfathers earlier covenants and adds patient notice on departure, per law-firm summaries. Our template does not use non-competes for employed clinicians, and a short term and a clean exit protect the arrangement.
Filings, Notices and Watch Items
No transaction notice law is in force. House Bill 1460 passed the House in 2025, was reported by a Senate committee in June 2026 and was pending on the Senate floor in October, and as we read the printer's number text it is facility-centric. House Bill 2115 would require 120 days' notice to the Attorney General and was in committee. Neither is law. The Osteopathic Board requires corporate documents to be reviewed before filing.
Drafting Checklist
- Fee: fixed and fair market, not tied to profit or margin.
- Bank accounts: controlled by the practice.
- Term: modest, with a clean exit.
- Equipment: no leaseback that locks the practice in.
- Payer contracting: handled by the practice.
- Non-competes: none for employed clinicians, and none between the MSO and practice.
- Watch: House Bills 1460 and 2115.
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.