Tennessee Management Services Agreement Guide: Pricing Services Reasonably Related to Value

How to Price the Management Fee

Section 63-6-225 permits paying an independent contractor that provides goods or services a percentage of fees if the percentage is reasonably related to the value of those goods or services, and prohibits payments for referrals. Our reading is that a fair-market fee tied to services is supportable and a blunt percentage of all profit is exposed. In Cookeville, a contract sending 80% of collections to a hospital was an unlawful fee split because the split bore no relationship to the services. We use a fixed fee for defined services.

What the Practice Must Keep

The Board rule says a physician may not sign any arrangement giving the entity more control than an employing entity may exercise over diagnosis, treatment and referral, and the Board can serve a notice of violation with a 60-day cure period before certifying to the Attorney General for dissolution. The practice keeps clinical decisions.

Terms to Avoid

Avoid a percentage that is not tied to the value of services, any payment for referrals, entity control over diagnosis, treatment or referral and a medical spa that fails to register. A mostly cosmetic physician-owned practice should assume it must register.

Term, Records and Departing Clinicians

Records must be kept ten years, transferred to a physician or entity held to the same confidentiality standard on a sale or closure, with patients seen in the prior 36 months notified within 30 days. Physician non-competes are permitted within limits of a signed writing, two years or less and a county or ten-mile radius, and a 2026 general law adds a $70,000 earnings floor whose interaction we could not confirm. We do not use them for employed clinicians.

Filings, Notices and Watch Items

We found no Tennessee transaction notice law. The medical spa registry requires renewal every 12 months and posting of the director's name and board certification status.

Drafting Checklist

• Fee: fixed or reasonably related to the value of services.
• Referrals: no payments for referrals.
• Control: no entity control beyond what an employing entity may exercise.
• Registry: register if mostly cosmetic.
• Records: ten years, with patient notice on a sale.
• 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.