Publications: Amendment of Medical Practice Act Removes Ban on Percentage-Based Billing Contracts

A recent amendment to the Illinois Medical Practice Act of 1987 (the “Act”) revises the prohibition on physician fee splitting to allow physicians to pay billing or collection service providers based upon a percentage of the professional service fees billed or collected. The amended provision allows Illinois physicians who pay fair market value to entities for billing, administrative preparation or collection services to pay for such services on a percentage-fee basis, by a flat fee or by another arrangement that may directly or indirectly divide the physician’s professional fees. The payment is limited to compensation for the administrative preparation of the physician’s claims (billing) or the collection of the physician’s fees for professional services. The physician or his or her practice must control the amount of the professional service fees that are charged or collected. Finally, all amounts collected must be (i) paid to the physician or his or her practice, (ii) deposited into an account in the name of and under the control of the physician or practice or (iii) deposited into a collection agency trust account.

The amendment also clarifies that the fee splitting prohibition does not prohibit a physician from granting a security interest in his or her or the practice’s accounts receivable or fees for bona fide advances made to the physician or practice. Under such circumstances, the physician must retain control and responsibility for the collection of the accounts receivable and fees.

Prior to the recent amendment, the Act generally prohibited physicians from dividing fees received for their professional services with others, such as billing companies or practice management service providers, thus precluding a fairly industry-standard approach of charging for billing or other administrative services through a percentage of billings or collections approach. It contained exceptions for physicians practicing together in a corporate entity, partnerships or joint ventures of physicians and the concurrent rendering of professional services by two or more physicians.

However, the fee splitting prohibition was tightened up some to expressly prohibit dividing, sharing or splitting a professional service fee, or paying a percentage of a professional service fee, revenue or profit to anyone for (i) marketing or managing the physician’s practice, (ii) including the physician or practice on a “preferred provider” list, (iii) allowing the physician to participate in a network of providers, (iv) negotiating fees, charges, terms of service or payment terms on behalf of the physician or (v) including the physician in a program through which patients are provided with an incentive to use the physician’s services.

These revisions to the Act took effect August 24, 2009. The text of Public Act 096-0608 can be found here.