Canonical source: docs/claude/rcm-fee-legality-research.md. This page is generated by docs/scripts/sync-handbook.mjs. Edit the source file in the repo; changes appear here on the next build.
RCM %-of-Collections Fee — Legality Research (deep-research, 2026-07-11)
100-agent adversarially-verified research run (wf_16f603b4-16d). Every finding below survived 3-vote refutation attempts; confidence and votes noted. Primary sources first. Not legal advice — this maps published law/guidance to narrow any counsel engagement.
Summary
Percentage-of-collections RCM fees are legal in most of the US and are openly charged at national scale (Athenahealth disclosed 2-8% of collections in SEC filings), but they are effectively prohibited in New York, where fee-splitting rules (8 NYCRR 29.1(b)(4), Educ. Law §6530(19)/§6531, Medicaid reg 18 NYCRR 360-7.5(c)) have been interpreted — and enforced by the NY MFCU in 2017 — to bar providers from paying billing vendors a percentage of receipts; repeated bills to legalize it (e.g. S2640) have died in committee. Federally, the Anti-Kickback Statute treats percentage billing fees as a facts-and-circumstances risk area, not a per-se violation (OIG AO 98-4; 1998 Compliance Program Guidance for Third-Party Billing Companies), while separate Medicare/Medicaid reassignment rules (42 CFR 424.73/447.10) flatly bar percentage compensation for any agent that actually receives program payments — which is why compliant RCM vendors ensure payer funds flow only to provider-controlled accounts. The industry-standard compliance structure is therefore: percentage fee nationally, a flat/per-claim carve-out for New York (Athenahealth's own disclosed approach), provider-controlled lockbox for all payer remittances, no marketing-tied compensation, and provider retention of coding/fee authority. A published-guidance approach gets you ~90% of the way for a mostly-commercial-payer clientele, but a limited counsel review is genuinely hard to avoid on three points: the full 50-state fee-splitting map beyond NY/CA/IL (secondary surveys proved unreliable in verification), post-2020 AKS safe-harbor contract drafting if any clients bill Medicare, and any bundling of the RCM fee with marketing/patient-acquisition features of the platform.
Findings
1. [HIGH]
New York effectively prohibits percentage-of-collections compensation for medical billing/RCM services. The textual basis is 8 NYCRR 29.1(b)(4) (Board of Regents fee-splitting rule: payment for 'space, facilities, equipment or personnel services' may not be 'a percentage of, or otherwise dependent upon, the income or receipts of the licensee'), mirrored for physicians in NY Educ. Law §6530(19), reinforced by §6531 (fee division = misconduct) and, for Medicaid, 18 NYCRR 360-7.5(c) (billing-agent compensation must be cost-based, not percentage-based, not collection-dependent). Permitted fee-sharers under 29.1(b)(4) are only partners, employees, same-profession associates/subcontractors, and supervised trainees — an RCM vendor fits none. NYSED/OMIG and NY health-law practice uniformly read these rules as barring percentage billing-vendor fees for all payers, and the NY Medicaid Fraud Control Unit enforced this position against percentage billing arrangements in 2017 (fines up to $10,000 per specification under PHL §230-a).
Evidence: Primary rule text verified live on op.nysed.gov: the prohibition 'shall include any arrangement or agreement whereby the amount received in payment for furnishing space, facilities, equipment or personnel services used by a professional licensee constitutes a percentage of, or is otherwise dependent upon, the income or receipts of the licensee from such practice.' 18 NYCRR 360-7.5(c) verified: billing-agent compensation must be 'unrelated, directly or indirectly, to the dollar amounts billed and collected' and 'not dependent on actual collection of payments.' 2017 MFCU enforcement corroborated by three independent contemporaneous law-firm accounts. Merges claims 0, 2, 3, 18, 20.
Verification vote: 3-0 on rule text and interpretation (claims 0, 2, 3, 18); 2-1 on the enforcement-history/penalty details (claim 20), whose verifier nonetheless confirmed every cited statute
Sources: https://www.op.nysed.gov/title8/rules-board-regents/part-29/1 · https://www.nysenate.gov/legislation/laws/EDN/6531 · https://www.law.cornell.edu/regulations/new-york/18-NYCRR-360-7.5 · https://www.lilesparker.com/2022/07/29/changes-in-federal-state-law-and-billing-contracts/ · https://www.manatt.com/insights/newsletters/health-highlights/examining-fee-splitting-statutes-in-the-context-of
2. [HIGH]
The NY rules regulate the licensed provider, not the billing vendor: 8 NYCRR 29.1 applies to persons licensed under Title VIII of the Education Law, and §6531/§6530 are licensee-discipline statutes whose text never mentions billing agents or percentage compensation — so the NY-licensed provider is the party who commits professional misconduct by agreeing to a percentage fee, and application to RCM vendors is by interpretation. The vendor is not consequence-free, however: NY courts have declined to enforce illegal percentage fee-splitting contracts, and the Medicaid billing-agent regulation (18 NYCRR 360-7.5(c)) restricts the agent's compensation directly. Practical consequence for a platform: a percentage RCM fee in NY puts every NY-licensed client at disciplinary risk and makes the platform's own fee contractually unenforceable.
Evidence: 29.1(a) verified: rules apply 'to any profession licensed, certified or registered pursuant to title VIII of the Education Law'; the violation is framed as the licensee 'permitting any person to share in the fees.' §6531 text verified as a revocation/suspension provision reaching physicians/PAs, with no mention of billing agents or percentage structures. Verifiers noted for physicians the operative mirror provision is §6530(19) enforced by OPMC. Merges claims 1 and 4.
Verification vote: 3-0 (both merged claims unanimous)
Sources: https://www.op.nysed.gov/title8/rules-board-regents/part-29/1 · https://www.nysenate.gov/legislation/laws/EDN/6531
3. [HIGH]
The NY prohibition is confirmed as current law by its own legislative history: bills to expressly legalize percentage-based billing/practice-management vendor fees (2015 S4736, 2017 S2247/A193, 2019 S2640, 2021 S2640 — amending PHL §2811, Educ. Law §6509-a, and §6530(19)) have been repeatedly introduced and have never passed; the 2021 bill died in the Senate Health Committee. S2640's own three-condition structure (vendor doesn't set fees; all collections flow directly to a provider-controlled account; vendor makes no referrals and compensation isn't referral-linked) is the template NY legislators considered a 'safe' percentage arrangement — useful as a design benchmark even though it was never enacted.
Evidence: Bill text and action history verified on nysenate.gov: sponsor memo states percentage vendor compensation is 'currently prohibited under New York's fee-splitting laws'; action history shows only 'referred to health' (Jan 2021, Jan 2022) with no vote or passage; current §6509-a text (last amended 2014) contains no vendor exception. Merges claims 5, 6, 7.
Verification vote: 3-0 (all three merged claims unanimous)
Sources: https://www.nysenate.gov/legislation/bills/2021/S2640
4. [HIGH]
Under the federal Anti-Kickback Statute, percentage-of-collections billing compensation is a recognized risk area but is NOT per se illegal. In Advisory Opinion 98-4 (Apr. 15, 1998), OIG concluded a management contract paying cost-plus-percentage-of-net-revenues (including billing services) 'may constitute prohibited remuneration' under SSA §1128B(b) and declined to bless it, stating its 'longstanding concern that percentage billing arrangements may increase the risk of upcoding and similar abusive billing practices.' The 1998 OIG Compliance Program Guidance for Third-Party Medical Billing Companies (63 FR 70138) lists 'billing company incentives that violate the anti-kickback statute' among particularly problematic risk areas and notes percentage arrangements 'may implicate' the AKS especially where the billing company also provides marketing services — but treats percentage fees as a risk to manage, not a prohibition. Failing a safe harbor does not make an arrangement illegal; AKS liability turns on intent, evaluated case-by-case. Note: a companion claim that percentage compensation 'categorically fails' the personal-services safe harbor was REFUTED in verification — the 2020 safe-harbor amendment replaced 'aggregate compensation set in advance' with 'methodology set in advance,' materially changing that analysis.
Evidence: Both primary PDFs fetched and read verbatim by verifiers: AO 98-4 conclusion, the upcoding-concern passage (p.6), 'Failure to comply with a safe harbor provision does not make an arrangement per se illegal' (p.4), and Compliance Guidance footnote 40 all confirmed word-for-word. AO 98-4's adverse outcome rested heavily on bundled marketing/referral-network elements, not billing alone. Merges claims 8, 9, 10, 11, 15, 16, 17.
Verification vote: 3-0 (all seven merged claims unanimous); the categorical safe-harbor-failure claims were refuted 0-3
Sources: https://oig.hhs.gov/documents/advisory-opinions/379/AO-98-04.pdf · https://oig.hhs.gov/documents/compliance-guidance/805/thirdparty.pdf · https://oig.hhs.gov/compliance/advisory-opinions/98-04/
5. [HIGH]
Separate from the AKS, Medicare and Medicaid anti-reassignment rules flatly bar percentage compensation for billing agents that RECEIVE program payments: 42 CFR 424.73(b)(3)/424.80(b)(5) (Medicare) require agent compensation 'not related in any way to the dollar amounts billed or collected' and 'not dependent upon the actual collection of payment'; 42 CFR 447.10(f) (Medicaid) is parallel ('not related on a percentage or other basis'). Per CMS Claims Processing Manual Ch.1 §30.2.4(B), these conditions do NOT apply if the agent merely prepares bills and never receives/negotiates payments, and §30.2.5 requires the remittance account be in the provider's name with only the provider able to issue instructions. This is the operative constraint for a platform with Medicare-billing clients: a percentage fee is compatible with Medicare only if payer funds flow exclusively to provider-controlled accounts and the platform never takes receipt — the standard lockbox structure major RCM vendors use.
Evidence: Verifier independently confirmed the current CFR text on law.cornell.edu and downloaded the CMS Claims Processing Manual: 'The conditions specified in subsection A do not apply if the agent merely prepares bills for the provider and does not receive and negotiate the checks payable to the provider/supplier.' Claim 14, unanimous.
Verification vote: 3-0
Sources: https://www.law.cornell.edu/cfr/text/42/424.73 · https://www.law.cornell.edu/cfr/text/42/447.10 · https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c01.pdf · https://www.sec.gov/Archives/edgar/data/0001131096/000095013507004644/b65346a2sv1za.htm
6. [HIGH]
The dominant industry precedent: Athenahealth's SEC filings (2007 S-1 through FY2017 10-K) disclose a percentage-of-total-collections model 'typically 2% to 8%' at national scale (10,500+ providers, 32 states at IPO), and simultaneously disclose that 'in some states, including New York,' fee-splitting laws 'have been interpreted to prevent business service providers from charging their physician clients on the basis of a percentage of collections or charges,' handled by 'var[ying] our charge structure in some states' — i.e., state-specific flat/alternative pricing carve-outs rather than exiting those states or excluding claim types. This is the concrete, decade-long-disclosed compliance pattern the founder's platform can mirror.
Evidence: Both quotes verified verbatim in the S-1/A on EDGAR; the identical fee-splitting risk-factor language confirmed word-for-word in the FY2017 10-K, showing a sustained disclosure, not a one-off. Business-services (percentage) fees were ~90-93% of Athenahealth revenue 2004-2007. Merges claims 12 and 13.
Verification vote: 3-0 (both merged claims unanimous)
Sources: https://www.sec.gov/Archives/edgar/data/0001131096/000095013507004644/b65346a2sv1za.htm · https://www.sec.gov/Archives/edgar/data/0001131096/000113109618000022/athn-20171231x10k.htm
7. [HIGH]
Some states expressly AUTHORIZE percentage-based billing compensation by statute, with conditions: California Bus. & Prof. Code §650(b) permits percentage-of-gross-revenue compensation if 'commensurate with the value of the services furnished' (fair market value); Illinois 225 ILCS 60/22.2(d) is broader, permitting a fair-market-value fee 'based upon a percentage of professional service fees billed or collected,' conditioned on the licensee controlling fee amounts and collections flowing directly to the licensee's own account (or a trust account via a licensed collection agency). The state landscape is thus tri-modal: express-permit-with-conditions (CA, IL), effectively-prohibited (NY), and everything in between — meaning the compliance question is genuinely state-by-state, not a single national rule.
Evidence: Verifier fetched Cal. B&P §650(b) from the official legislature site and 225 ILCS 60/22.2 (current through Jan 1, 2025) and confirmed both statutory texts, including the IL 'billed or collected' language and its control/direct-deposit conditions. Note the IL Medical Practice Act carries a periodic sunset (currently 1/1/2027, historically extended). Claim 19, unanimous despite secondary-source origin because primary statutes were independently verified.
Verification vote: 3-0
Sources: https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=650&lawCode=BPC · https://codes.findlaw.com/il/chapter-225-professions-and-occupations/il-st-sect-225-60-22-2/ · https://www.manatt.com/insights/newsletters/health-highlights/examining-fee-splitting-statutes-in-the-context-of
8. [MEDIUM]
Bottom line on counsel: a published-guidance approach is defensible for the core structure — percentage fee for commercial-payer claims nationally, NY carved out to flat/per-claim pricing, all payer remittances to provider-controlled accounts, provider retains coding/fee authority, no referral- or marketing-linked compensation, RCM fee contractually severable from the SaaS subscription. Every element of that design is directly supported by primary sources and the Athenahealth precedent. However, three gray areas resist self-service research: (1) the full 50-state map — this research verified only NY (prohibited), CA and IL (conditionally permitted), and the one secondary claim about FL/TN case law was REFUTED 0-3, demonstrating that state-survey blog/newsletter content is unreliable; (2) if any client bills Medicare, drafting the RCM agreement against the post-2020 personal-services safe harbor ('methodology set in advance') plus the reassignment lockbox rules is contract-drafting work where OIG guidance doesn't map mechanically; (3) if the platform also provides marketing/patient-acquisition features (the Growth Suite), OIG's specific warning that percentage arrangements 'may implicate the anti-kickback statute' for billing companies providing marketing services applies directly. A limited flat-fee counsel review scoped to those three items (state survey + template contract + AKS marketing interaction) is the defensible middle path — cheaper than a full engagement, but genuinely hard to skip for items 1 and 3.
Evidence: Synthesis finding: the structural elements are each backed by 3-0-verified primary sources above, but the 'is counsel avoidable' judgment is inference, and the refutation of both the FL/TN survey claim and the categorical safe-harbor claims shows exactly where self-service research broke down in this very exercise. Medium confidence assigned because this is analysis, not a verified fact.
Verification vote: n/a (synthesis of verified findings; the two refuted claim families directly inform the gray-area boundaries)
Sources: https://oig.hhs.gov/documents/compliance-guidance/805/thirdparty.pdf · https://www.sec.gov/Archives/edgar/data/0001131096/000095013507004644/b65346a2sv1za.htm · https://www.manatt.com/insights/newsletters/health-highlights/examining-fee-splitting-statutes-in-the-context-of
Post-run addendum: Florida (targeted check, 2026-07-11)
Florida is a yellow state, not green: (1) §817.505 (Patient Brokering Act) criminalizes any split-fee arrangement tied to referrals/patronage (third-degree felony); (2) the FL Board of Medicine's declaratory- statement line (see Florida Bar Journal history) held a percentage-of-collections management fee violated the §458.331(1)(i) fee-splitting prohibition where the fee compensated practice-enhancement/referral value. Pure billing-only % fees are widespread in FL but sit in interpretive gray — the safe structure is the same as the federal one: fee strictly for billing services, severed from ANY marketing/growth/patient-acquisition features (directly relevant: Ready Practice sells Growth Suite features — keep the RCM fee contractually separate), no referral linkage, collections to provider-controlled accounts. FL is a named launch state → this is the concrete item for the scoped counsel review. Sources: leg.state.fl.us §817.505 · floridabar.org fee-splitting declaratory-statement history · lilesparker.com third-party billing update.