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Current Developments in the Commercial Divisions of the
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Posted: October 16, 2014

Second Department Affirms Decision Finding Fee Splitting Agreements Unlawful

On October 15, 2014, the Second Department issued a decision in South Shore Neurologic Associates, P.C. v. Mobile Health Management Services, Inc., 2014 NY Slip Op. 06963, declaring contracts void as unlawful fee-splitting arrangements in connection with medical services.

In South Shore Neurologic Associates, the Second Department affirmed a trial court’s confirmation of a referee report

recommending that the court award summary judgment declaring that the subject commercial relationship among certain parties constituted an unlawful fee-splitting arrangement, and properly denied the appellants’ motion to reject the report. South Shore established its prima facie entitlement to judgment as a matter of law declaring that the commercial relationship constituted an unlawful fee-splitting arrangement in violation of Education Law § 6530(19) and 8 NYCRR 29.1(b)(4) by submitting documents and deposition testimony showing that certain contracts were a pretext to justify the appellants’ receipt of one third of the profits of South Shore’s MRI practice . . . .

(Emphasis added). Some background not in the opinion: Education Law § 6530(19) prohibits fee splitting among medical professionals. Its prohibitions include:

any arrangement or agreement whereby the amount received in payment for furnishing space, facilities, equipment or personnel services used by a licensee constitutes a percentage of, or is otherwise dependent upon, the income or receipts of the licensee from such practice, except as otherwise provided by law with respect to a facility licensed pursuant to article twenty-eight of the public health law or article thirteen of the mental hygiene law . . . .

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