Key Takeaway
Court finds fee-splitting arrangement violated Education Law, showing how contractual obligations can be challenged beyond no-fault insurance contexts.
In New York’s complex legal landscape, disputes over contractual arrangements often extend far beyond their apparent scope. Fee-splitting arrangements between healthcare providers have become a particular area of scrutiny, especially when parties seek to avoid contractual obligations. The intersection of professional regulations and commercial relationships creates unique challenges that courts must navigate carefully.
The South Shore Neurologic case demonstrates how allegations of improper fee arrangements can surface in various contexts, not just traditional no-fault insurance disputes. This principle has broader implications for healthcare providers who structure their business relationships, particularly when those arrangements might be challenged as pretextual. Understanding these dynamics is crucial for practitioners dealing with Mallela defenses and related challenges.
Jason Tenenbaum’s Analysis:
South Shore Neurologic Assoc., P.C. v Mobile Health Mgt. Servs., Inc., 2014 NY Slip Op 06963 (2d Dept. 2014)
Self-referrals and fee splitting can garner attention whenever any payor wishes to avoid a contractual or quasi-contractual obligation. It transcends no-fault. This one looks interesting:
“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 ”
The net effect of this fee sharing arrangement was left undecided according to the Appellate Division.
Key Takeaway
This case illustrates how fee-splitting allegations can emerge as defenses across various commercial disputes, not just no-fault insurance cases. Courts will examine the substance of arrangements rather than their formal structure, particularly when contracts appear pretextual. The decision reinforces that regulatory violations can impact contractual enforcement even when the ultimate consequences remain unresolved.
