MSO Management Fees: Fair Market Value, Fee-Splitting and Structures

An MSO management fee is what a physician-owned practice pays its management services organization for non-clinical services. How that fee is calculated decides whether the structure looks like a vendor relationship or like a non-physician taking a cut of medical fees. There are three basic methods: a flat fee, a cost-plus fee, and a percentage of collections. Flat and cost-plus fees, supported by a written fair market value (FMV) analysis, are the most defensible. Percentage fees are legal in some states and risky or prohibited in others under fee-splitting statutes, and they draw extra scrutiny under the federal Anti-Kickback Statute when federal health care program payments are involved. As of October 2026, the method is only half the question. The other half is what happens to the money left over.

This is general information, not legal advice. Confirm the current rules with a healthcare attorney licensed in each state where you operate.

Last reviewed October 2026. State rules change often; statute and case references are summaries, not quotations.

Key takeaways

The management fee should be paid for identifiable services at fair market value, using a method set in advance, and should not vary with referrals.
New York's professional misconduct rules in the Education Law generally treat fee-sharing with non-qualifying persons as misconduct and are understood to reach space, equipment, and personnel arrangements priced as a percentage of practice income. Confirm the current text with counsel.
Florida's medical practice act generally bars split-fee arrangements for patient referrals, and the Florida Board of Medicine has, according to published commentary, objected to percentage-of-revenue management fees that bore no relation to the cost of services.
The federal personal services and management contracts safe harbor generally requires, among other things, that the compensation methodology be set in advance, consistent with fair market value, and not tied to the volume or value of referrals.
A "sweep" that moves all residual practice cash to the MSO can turn a defensible flat fee into an effective profit share.

What are the main fee structures?

Structure	How it works	Main advantage	Main risk
Flat fee	Fixed periodic amount for a defined service scope, reset at set intervals	Easiest to defend as FMV; no link to revenue or referrals	Can drift from FMV if volume or scope changes and the fee is never reset
Cost-plus	MSO's documented costs of serving the PC plus a stated markup	Ties payment to real services; transparent	Cost allocation disputes; markup still needs FMV support
Percentage of collections	MSO receives a percentage of the PC's revenue	Aligns incentives; simple to administer	Treated as fee-splitting in some states; harder to fit a federal safe harbor
Per-unit (per visit or per patient)	Fee per encounter or enrolled patient	Scales with actual services	Can look volume-based; needs FMV support per unit
Hybrid	Fixed base plus cost pass-through or capped variable piece	Flexibility	Complexity makes the economics harder to explain to a regulator

No structure is safe in the abstract. A flat fee set far above the value of services is still a disguised profit share. A modest percentage fee for billing services is permitted in some states. The method has to match the state and the services.

What do fee-splitting statutes actually say?

Fee-splitting is a state-law concept. It generally bars a physician from sharing professional fees with someone who is not a licensed partner, employee, or professional associate, or from paying for patient referrals. Three large states show how differently the rule is written.

New York

New York's Education Law professional misconduct provisions generally treat permitting any person to share in the fees for professional services as misconduct, subject to listed exceptions such as partners, employees, associates in a professional firm or corporation, and certain other authorized professionals. The prohibition is understood to extend to arrangements where payment for space, facilities, equipment, or personnel services is a percentage of, or otherwise dependent on, the licensee's income from the practice. Confirm the current statutory text with counsel before relying on it.

That language is why New York is the clearest example of a state where a percentage-based management fee carries real license risk for the physician owner. Bills to permit percentage-based billing fees under conditions have been introduced in the legislature; as of October 2026, do not assume any has passed without checking. See our New York CPOM guide.

Florida

Florida's medical practice act generally makes it grounds for physician discipline to pay or receive commissions, kickbacks, or rebates, or to engage in split-fee arrangements, for patient referrals. Florida is not a strong CPOM state, but its Board of Medicine has addressed management fees through declaratory statements. A Florida Bar Journal history of those statements describes the Board objecting to percentage arrangements that bore no relation to the cost of the services provided, including arrangements where a management company was paid a percentage of a group's revenue, and treating marketing services paid on a percentage basis as a red flag. Confirm the current statute and Board positions with Florida counsel. Florida also has a Patient Brokering Act that reaches referral payments. See our Florida CPOM guide.

Texas

Texas frames the issue mainly as payment for patient solicitation. The Texas Occupations Code generally makes it an offense to knowingly offer or accept remuneration for securing or soliciting patients, and that prohibition reaches health care licensees broadly, not only physicians. A separate provision of the Medical Practice Act addresses physicians paying others to secure or solicit patients. Confirm the current text and penalties with Texas counsel. Texas is also a strong CPOM state, and the Texas Medical Association's CPOM white paper discusses cases in which a corporation's share of a physician's fees supported a finding of corporate practice. See our Texas CPOM guide.

The practical rule across states

Fee-splitting statutes differ in wording, but four facts raise the risk almost everywhere: a percentage of professional fees, payment that rises with referrals or patient volume, marketing paid on a per-patient basis, and a fee designed to leave the PC with nothing.

When do the Anti-Kickback Statute and Stark Law matter?

Anti-Kickback Statute

The federal Anti-Kickback Statute makes it a crime to knowingly and willfully offer, pay, solicit, or receive remuneration to induce or reward referrals of items or services payable by a federal health care program. If the PC bills Medicare, Medicaid, or another federal program, the management fee is remuneration flowing between parties who may influence referrals.

The safe harbor for personal services and management contracts protects arrangements that meet all of its conditions, which include a signed writing covering the services, a minimum term, a compensation methodology set in advance, compensation consistent with fair market value, and compensation not determined in a manner that takes into account the volume or value of referrals or other federal program business. OIG rulemaking has reportedly shifted the requirement from aggregate compensation set in advance to the methodology set in advance; confirm the current regulatory text and its effective date with counsel.

The OIG's skepticism of percentage fees is long-standing. In an earlier advisory opinion, it reviewed a practice management arrangement reportedly paid partly as a percentage of the practice's net revenue, including revenue from business the manager helped generate through marketing. As summarized, the OIG concluded the arrangement did not fit the safe harbor because compensation was not set in advance, and that percentage compensation for marketing could implicate the statute. Review the opinion itself before relying on it. Falling outside a safe harbor is not itself a violation; it means the arrangement is judged on its facts and intent.

Cash-pay telehealth brands that never bill federal programs may sit outside the federal statute. They do not sit outside state law. Several states have all-payer anti-kickback or patient-solicitation statutes; Texas's patient solicitation law is one example.

Stark Law

The physician self-referral law generally bars a physician from referring Medicare patients for designated health services to an entity with which the physician or an immediate family member has a financial relationship, unless an exception applies. It matters in a PC-MSO structure when the physician owner also has an ownership or compensation relationship with the MSO or an affiliated lab, imaging, or pharmacy entity that bills Medicare. Map every physician's financial ties across entities before you add ancillary services.

What is a fair market value opinion, and when do you need one?

A fair market value opinion is a written analysis, usually by an independent valuation firm, concluding that the fee is within the range unrelated parties would agree to for the same services. Valuators typically consider a cost approach (what it costs to provide the services), a market approach (what comparable vendors charge), and sometimes an income approach. A separate question is commercial reasonableness: whether the arrangement makes business sense for the PC even without referrals.

Get an opinion when you set the fee, when the service scope changes materially, when volume changes enough that a flat fee may no longer track value, and before any transaction where the MSA will be diligenced. Keep evidence the services were actually delivered. An FMV opinion on services the MSO never performs is not a defense.

What is a sweep arrangement, and why does it draw scrutiny?

In many PC-MSO structures, the PC's collections land in a PC-owned account and then move ("sweep") to an MSO-controlled account, often daily. The MSO pays PC expenses, including clinician compensation, from that account and keeps its fee.

Sweeps are an ordinary cash-management tool. The risk comes from what they reveal about the economics. If every dollar left after expenses ends up with the MSO, the stated flat fee is irrelevant: the MSO is receiving the practice's profit. Regulators and courts look at that substance. Oregon's SB 951 also prohibits an MSO from holding final authority over billing and collection policy, which affects how much control the MSO can have over the accounts in Oregon. See our Oregon CPOM guide for detail.

Practical safeguards:

The PC owns its operating account and its physician signs on it.
The MSA fee is calculated separately from the sweep mechanics.
The PC retains working capital and can make its own distributions.
Any loan to the PC carries commercial terms rather than serving as a permanent profit conduit.

How should a telehealth brand choose a fee model?

If your structure...	Lean toward
Serves patients in New York or other states with percentage-fee restrictions	Flat or cost-plus, with FMV support
Bills federal health care programs	A methodology that fits the federal management contracts safe harbor, set in advance, not referral-based
Is cash-pay only in states without percentage restrictions	Any method with FMV support, still checked against state anti-solicitation laws
Pays the MSO for marketing	Flat fee for marketing services, never per patient acquired
Uses a cash sweep	Flat or cost-plus fee calculated independently of the sweep, with PC-retained earnings

For the contract terms that implement the fee, see our management services agreement guide. For how the two entities fit together, see the friendly PC-MSO model explainer. For state-by-state CPOM classifications, start with the 50-state corporate practice of medicine guide.

Frequently asked questions

Can an MSO charge a percentage of practice revenue?

In some states, yes. In others, including New York, percentage arrangements tied to practice income can be professional misconduct for the physician, and Florida's Board of Medicine has reportedly objected to percentage management fees that bore no relation to the cost of services. Where federal program payments are involved, a percentage fee is also generally harder to fit within the management contracts safe harbor.

What is fee-splitting in healthcare?

Fee-splitting is a physician sharing professional fees with someone who is not an authorized partner, employee, or associate, or paying for patient referrals. Each state defines it differently, usually in its medical practice act or professional misconduct rules.

Does the Anti-Kickback Statute apply to cash-pay telehealth?

The federal statute applies to items and services payable by federal health care programs, so a purely cash-pay business may fall outside it. State laws can still apply regardless of payer, such as Texas's prohibition on paid patient solicitation.

What makes a management fee fair market value?

A fee is fair market value when it falls within the range that unrelated parties would agree to for the same services, without regard to referrals. It is usually supported by a written opinion from an independent valuation firm that looks at the cost of the services and what comparable vendors charge.

Is a cash sweep from the PC to the MSO legal?

Sweeps are a common cash-management tool and are not unlawful by themselves. The risk arises when the sweep moves all residual profit to the MSO, which can make a stated flat fee function as a profit share and support a fee-splitting or corporate practice argument.

How often should a flat management fee be reviewed?

Review it whenever the scope of services or patient volume changes materially, and on a regular schedule set in the agreement. A flat fee that once matched fair market value can drift above or below it as the practice grows.

Sources

Get the fee and the structure right from day one

MyOrbitHealth runs on a flat platform fee scoped at onboarding, with no revenue share, 0% medication markup, and month-to-month terms, on an MSO / friendly-PC structure where licensed providers make every clinical decision. If you are building your own structure, MyOrbitHealth offers PC-MSO formation and physician PC owner services. Book a call to talk through your fee model.