Court of Appeals Decision on Physician Fee Splitting Could Drastically Impact Physician-Hospital Management Agreements


Potential Criminal Liability and Treble Damages for Collections Services?

On November 24, 2009, the Tennessee Court of Appeals released an opinion that could impact a wide range of physician-hospital management services agreements. In Cookeville Regional Medical Center Authority v. Cardiac Anesthesia Services, PLLC, 2009 WL 4113586 (Tenn. Ct. App. Nov. 24, 2009), the Court held that a contract under which a medical practice agreed to bill and “aggressively collect” for in-hospital anesthesia services provided under an exclusive arrangement (remitting 80% of collections to the hospital and retaining 20% of gross collections) was illegal and unenforceable under Tennessee’s criminal statute prohibiting physician fee splitting. Tenn. Code Ann. §63-6-225. This statute makes it a Class B misdemeanor for a licensed physician to divide a professional fee with any other person without the knowledge and consent of the patient or payor. Moreover, Tennessee law creates a private right of action by the patient and/or payor (and the State), and authorizes recovery of up to three times the amount charged in damages. Tenn. Code Ann. §63-6-226.

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