South Dakota Management Services Agreement Guide: The Statutory Safe Harbor's Three Conditions
South Dakota's safe harbor protects an arrangement that does not supplant the physician's judgment, create profit from the practice itself or last more than three years, and allows facility, equipment and administrative charges.
Key Highlights
- SDCL 36-4-8.1 protects an arrangement that does not supplant, diminish or regulate the physician's independent judgment, does not create profit to the corporation from the practice of medicine itself and does not last more than three years before annual renewal.
- Charges reasonably associated with the services, such as facility, equipment or administrative charges, are allowed.
- The fee-splitting statute bars splitting fees or giving any person consideration for furnishing a patient.
- Whether the three-year limit governs MSO service agreements is unverified.
How to Price the Management Fee
SDCL 36-4-8.1 bars corporate profit from the practice of medicine itself while allowing additional charges reasonably associated with the services such as facility, equipment or administrative charges. Applying that to a practice and MSO fee is our inference: a fee priced to the MSO's services is consistent with the statute and one that shares the physician's professional fees is not. The discipline statute also bars splitting fees or giving any person consideration for furnishing a patient. We use a fixed fee for facilities, equipment and administration.
What the Practice Must Keep
The practice keeps independent judgment and holds its Board certificate of registration, and no unlicensed person has any part in its ownership or control. The agreement does not supplant, diminish or regulate the physician's judgment.
Terms to Avoid
Avoid a fee that shares the physician's professional fees, any charge greater than the physician would reasonably charge as an independent practitioner, any term that regulates the physician's judgment and any payment for furnishing a patient. We could not verify whether the three-year-then-annual structure governs MSO agreements, so we draft to it.
Term, Records and Departing Clinicians
A statute makes provisions restricting a healthcare practitioner from practicing after employment ends or a relationship dissolves voidable for contracts on or after July 1, 2023, with exceptions for a sale of a practice or interest and patient non-solicitation within general limits. We do not use non-competes for employed clinicians.
Filings, Notices and Watch Items
We found no South Dakota transaction notice law. A physician assistant with at least 6,000 hours may practice without a collaborative agreement under a 2025 law.
Drafting Checklist
- Fee: fixed, for facilities, equipment and administration.
- Judgment: not supplanted, diminished or regulated.
- Profit: none from the practice of medicine itself.
- Term: three years, then annual renewal.
- Certificate: practice holds its Board certificate.
- 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.
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.