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

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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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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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