Management service organizations can raise red flags with investigators as they are often used by non-professionals as a means to improperly operate and control a medical practice. A management company or administrative services company providing only administrative services to a medical practice is permissible. However, due to the State Farm Mut. Auto Ins. Co. v Mellela, 4 NY3d 313  decision and increasing scrutiny, many management company operators engaging in improper practices, have created a negative reputation for an otherwise legitimate service, which in different formats is used by hospitals.
A management company and medical practice run the risk of getting into trouble if the management company does not charge flat fees for services rendered at fair market value. Based upon professional responsibility, a medical professional could potentially be exposed to sanctions, penalties and loss of license if the arrangement is a disguised fee splitting or kickback scheme. These allegations are often raised by an insurance company or government investigator if a management company and a medical practice have a set of contract fees which continually change.