Is Percentage-Based Medical Billing Legal? State Fee-Splitting Rules

Percentage-based medical billing is not governed by one nationwide yes-or-no rule. You need to identify the profession, the states connected to the care, the services the billing company provides, and the compensation formula. A rule about referral commissions is not automatically a ban on paying a company to perform billing work.

What is fee splitting, and how is it different from paying a biller?

In this context, fee splitting concerns how professional fees are shared and how third parties are compensated. State rules differ in whether they focus on referrals, revenue sharing, professional control, or exceptions for actual services. The question is whether the proposed arrangement satisfies the rule that governs your practice.

A biller performing administrative work, a marketing company supplying patients, and another clinician treating patients are different relationships. Bundling them into one contract can change the analysis. Identify each service before deciding whether a pricing model is permitted.

Which states should a therapist ask about first?

New York is an important starting point because its professional-conduct rule expressly addresses compensation linked to practice income or receipts. North Carolina’s Medical Board also takes a restrictive position on percentage revenue sharing with nonlicensees. That board’s jurisdiction must be distinguished from other mental-health licensing boards.

Illinois and California illustrate why a prohibition headline is not enough: their statutes contain provisions relevant to payment for actual services. Florida, Tennessee, and Minnesota add different referral, consent, or profession-specific questions. These are priority research states for this series, not an exhaustive list of states with fee-splitting rules or a map approving every unlisted state.

Can I use a list of “percentage billing banned” states?

Use such a list as a prompt for review, not as the conclusion. Some lists mix physician rules with rules for psychologists, social workers, counselors, and marriage and family therapists. Others repeat old court outcomes without checking later statutory exceptions. A list can therefore be wrong in either direction.

For a multistate practice, record the clinician’s license, clinician location, patient location, contracting entity, payer or program, and actual service scope. A mailing address alone is not a complete description of where care is furnished or which rules may apply.

Does per-claim pricing automatically solve the legal issue?

No. A fixed fee for defined administrative work avoids using a percentage formula, but the agreement still needs review for its real services and payment purpose. Renaming a revenue share a claim fee does not resolve the issue if the amount is recalculated to track clinical receipts.

Keep referral compensation, clinical control, fair payment for work, and payer requirements separate. A fee structure that works under one state rule does not independently settle federal program requirements or a payer contract. Ask counsel to assess the actual arrangement rather than selecting a label.

How does Bomi handle restricted-state services?

Our current standard agreement names New York and covers other services subject to laws prohibiting the percentage fee. For those services, it uses $6 per original claim first submitted instead of the percentage base fee. The claim fee is earned at submission regardless of payment, and follow-up or repeat submissions on the same underlying claim do not add another claim fee.

The agreement treats New York restrictions as applicable when the rendering professional or patient is physically in New York at the time of care, or the service is otherwise subject to those restrictions. That is Bomi’s contractual treatment; it should not be presented as a universal statement of every state’s choice-of-law rules.

What should I send to a healthcare attorney?

Bring the proposed agreement, the licenses and service locations, a list of administrative and marketing services, the fee formula, a sample invoice, and the path by which payer money reaches the practice. Ask for a conclusion about that specific structure and identify the records needed to support it.

This series explains pricing and highlights primary-law questions. It is educational information, not a legal opinion for a particular practice. State sources were checked October 23, 2026.

Frequently Asked Questions

Is percentage billing illegal in every state with a fee-splitting law?

No. Prohibitions and exceptions differ, and rules may apply to different professions. Review the actual state rule and agreement.

Does Bomi use per-claim pricing in every state discussed here?

No. These state guides explain distinct legal questions. Bomi’s restricted-state clause applies to New York services and other services for which applicable law prohibits the percentage base fee.

Sources and scope

New York: Regents Rule 29.1(b)(4)

North Carolina Medical Board: fee splitting

Illinois: Medical Practice Act §22.2

California: Business and Professions Code §650

See Bomi’s current pricing or talk through your practice’s billing needs.