The Illinois Supreme Court recently filed its opinion in Vine Street Clinic v. Health Link, a case in which a physician partnership contended that a percentage fee arrangement between its physicians and a health care network violated the prohibition against fee splitting in the Illinois Medical Practice Act ("Act").  The arrangement in question required payment to the network of an administrative fee equal to 5% of the amount the physicians in the partnership charged for medical services provided to plan members.  The court held that Section 22(a)(14) of the Act prohibits arrangements whereby a physician divides with anyone outside the physician’s partnership, professional association or corporation a percentage of the fees earned for medical services.  The Court held that while non-physicians, such as practice managers or billing agents, can receive a fee for services rendered, they cannot receive a percentage of a physician’s revenue or its equivalent.  This opinion was in agreement with the March 5, 2002 opinion letter issued by Illinois Attorney General Ryan, which concluded that a 5% administrative fee paid by providers to non-physician managers violated the Act and was therefore void under Illinois law.

 

      The Court ruled that the Act did not prohibit the network from receiving a flat-fee for its administrative services based on the volume of claims processed for a physician during the prior year and the complexity of the claims submitted.  The Court reasoned that, since a higher volume of claims or a more complicated specialty would result in a higher volume of work for the network, a fee arrangement that took these factors into account would fairly compensate it for its administrative services.  In contrast, the Court noted that a flat-fee based on revenue volume would be impermissible. The Court’s ruling partially reversed that of the appellate court, which held that the flat-fee payment also violated the Act.