> ## Documentation Index
> Fetch the complete documentation index at: https://dso.getlemma.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Fee-splitting rules, explained

> How state dental fee-splitting, referral, and management-compensation rules affect DSO fees, including five jurisdictions with express formula restrictions.

**Fee-splitting** is a state-law category covering specified divisions of professional fees, referral-conditioned payments, or compensation dependent on practice revenue. The wording, exceptions, regulated person, and remedy differ by jurisdiction. It is distinct from corporate practice of dentistry (CPOD), although the same management fee can implicate both.

## The rule in one sentence

Many dental rules prohibit a dentist from dividing professional fees with an unlicensed person, subject to state-specific text and exceptions; other rules target only referrals or particular support formulas.

## Why it exists

Three rationales, which overlap with but are not identical to CPOD's:

1. **Referral incentives.** If a non-licensee's income rises with the volume of services, they have an incentive to generate services, including unnecessary ones.
2. **Professional independence.** A party with a direct claim on professional fees has leverage over how those fees are generated.
3. **Patient trust.** The patient believes they are paying for professional judgment, not for a revenue share flowing to an unseen third party.

The middle concern overlaps with CPOD from a different direction. CPOD asks who controls the practice, while fee-splitting asks who receives the money and on what basis. The same arrangement can raise both issues. The New York Attorney General's Aspen Dental investigation, for example, advanced control and fee-splitting theories based on the same facts.<sup>1</sup>

## The problem for DSO structures

A management fee moves money from a dental practice to a support company. The analysis asks what services were actually provided, how compensation was calculated, whether payment is tied to professional revenue or referrals, who controls the practice, and what the specific state rule excludes or permits. Calling the payment "support services" or "fair market value" does not answer those separate questions.

## Express dental formula restrictions

At least five jurisdictions supply especially concrete drafting instructions, but they do not use identical legal mechanisms:

| State              | Provision                            | What it says                                                                                                                                                                                                                                                                                                                                                                    |
| ------------------ | ------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Nevada**         | NRS 631.215(2)(i)                    | Providing support goods or services to a dental practice is outside the definition of practicing dentistry **only if** the provider does not take "payments based on a percentage or share of revenues or profits of the dental practice" (and exercises no control over clinical practice)<sup>2</sup>                                                                         |
| **New Jersey**     | N.J.A.C. 13:30-8.13                  | A dentist may not participate in any arrangement where remuneration for "space, professional services, facilities, equipment, personnel, marketing or management services" is "a fixed percentage of, or otherwise dependent upon, the income or receipts derived from the practice of dentistry" (bona fide profit-sharing plans and collection agencies excepted)<sup>3</sup> |
| **New York**       | 8 NYCRR 29.1(b)(4)                   | Unprofessional conduct includes sharing professional fees with non-licensees, expressly extended to "any arrangement or agreement whereby the amount received in payment for furnishing space, facilities, equipment or personnel services … constitutes a percentage of or is otherwise dependent upon the income or receipts of the licensee"<sup>4</sup>                     |
| **North Carolina** | 21 NCAC 16X .0101(c)                 | A management arrangement may not compensate the management company "based on a formula that foreseeably rises or falls with profitability, gross or net revenues" (cost-savings adjustments and pass-through collection arrangements excepted)<sup>5</sup>                                                                                                                      |
| **Maryland**       | Md. Code, Health Occ. § 4-103(E)(14) | Compensation for enumerated permitted support services must be a predetermined fixed fee or other predetermined fixed compensation; the amount may be based on revenues or profits from a prior period of at least 12 months<sup>6</sup>                                                                                                                                        |

Read the Nevada provision carefully: a revenue-linked payment fails one condition of the statutory exclusion for support goods and services. That does not mean every fixed or cost-plus formula is automatically lawful; the no-clinical-control condition and the rest of chapter 631 still apply.

## The enforcement record

The Aspen Dental settlements provide detailed, party-specific examples of how two attorneys general applied ownership, control, and fee-splitting theories:

* **New York, 2015.** The Attorney General's Assurance of Discontinuance made findings concerning "a pre-set percentage of each dental office's monthly gross profit," account control, and clinical pressure; it imposed a \$\$450,000 payment, monitoring, and restrictions on sharing in professional fees.<sup>1</sup>
* **California, 2026.** The Attorney General's settlement requires the settling company to end specified revenue-based service fees and compensation structures and negotiate fees annually in writing with practice owners.<sup>7</sup>

The OCA-era cases illustrate a separate contract-law risk: fee terms were among the interlocking control provisions considered when agreements were held void, and the later restitution result turned on the governing-law and claim posture in that litigation.<sup>8</sup> See [DSO case law](/reference/legal/dso-case-law).

## The referral strain of the doctrine

A second, older strain bans splitting fees **with whoever brings the patient**, whatever the split is called:

* **Hawaii:** HRS § 448-17(b)(5) makes dividing fees "with any person for bringing or referring a patient" a ground for license suspension or revocation.<sup>9</sup>
* **Georgia:** Board of Dentistry Rule 150-8-.02 states, "A dentist shall not give rebates or split fees with a referral source."<sup>10</sup>

These provisions make per-patient marketing, referral-service, and volume-linked arrangements distinct issues from a general management fee. When federal health care program business is involved, the same facts may also implicate the federal **Anti-Kickback Statute**, 42 U.S.C. § 1320a-7b(b), subject to its intent element and applicable safe harbors.<sup>11</sup> Analyze state dental law separately from federal fraud-and-abuse law. See [Stark, AKS, and why comp design is constrained](/concepts/compliance/stark-and-anti-kickback).

## The three fee structures, ranked by exposure

| Structure                     | How it works                             | Fee-splitting exposure                                                                                                                                              |
| ----------------------------- | ---------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Flat fee**                  | Fixed monthly amount, periodically reset | Usually reduces direct revenue-dependency risk; amount, services, referrals, and control still matter                                                               |
| **Cost-plus**                 | DSO's actual costs plus a stated markup  | Ties the base to documented cost, but allocation, markup, services, and state text still require support                                                            |
| **Percentage of collections** | A stated percentage of practice revenue  | Highest formula risk; expressly restricted in NV, NJ, NY, and NC, while Maryland's permitted-support pathway uses a different predetermined-fixed-compensation rule |

Variable fees can align support-company economics with practice growth, while also increasing formula-specific regulatory risk. That tension belongs in both the legal review and the financial model. See [Where the profit lives](/concepts/finance/where-the-profit-lives).

Flat and cost-plus designs often reduce one category of risk, but there is no nationally safe formula. Percentage fees may be permitted under some state texts and prohibited or outside a statutory pathway under others. A multistate group therefore needs a current state-by-state fee map and documents that match actual services and payment behavior.

**A multistate group cannot assume one fee formula has the same effect everywhere.** A percentage-of-collections MSA may be permitted, restricted, or outside a statutory pathway depending on the state and facts. A base MSA with state-specific fee riders is one way to preserve a common operating framework without erasing those differences. See [Evolve the fee structure](/guides/agreements/evolve-the-fee-structure) and the [state table](/reference/legal/dso-laws-by-state).

## What makes a fee defensible

Regardless of structure, the same factors improve the analysis:

**Fair market value support.** Where relevant, document what an unrelated party would charge for comparable services. FMV evidence does not override an express formula, ownership, referral, or control prohibition. See [Set the management fee](/guides/agreements/set-the-management-fee).

**Commercial reasonableness.** The services are real, needed, and actually delivered. Charging for services that are not provided weakens the business and legal basis under any formula.

**Documented services.** The MSA specifies what is provided, and the DSO can evidence it: staffing, systems, deliverables, service levels.

**Formula fit.** Test every variable component against the state's exact revenue-dependency and referral language. North Carolina, for example, states specified cost-savings and pass-through collection exceptions; Maryland permits a particular prior-period basis for predetermined fixed compensation.<sup>5</sup><sup>6</sup>

**Actually paid.** A fee that accrues forever and is never paid in cash is evidence it was never a real price for real services, and it is a specific diligence red flag.

**Retroactively repricing past periods to increase DSO earnings before a fundraise is the classic diligence red flag.** It converts a fee question into a credibility question, and buyers price credibility.

## Sources

1. NY AG, [settlement with Aspen Dental Management](https://ag.ny.gov/press-release/2015/ag-schneiderman-announces-settlement-aspen-dental-management-bars-company-making) (June 18, 2015) ("pre-set percentage of each dental office's monthly gross profit").
2. NRS 631.215(2)(i), [official Legislature chapter and section anchor](https://www.leg.state.nv.us/NRS/NRS-631.html#NRS631Sec215). Re-lettered from (2)(h) by the 2023 amendments.
3. N.J.A.C. 13:30-8.13 ("Permissible business structures, prohibition on referral fees and fee splitting"), [official New Jersey Board of Dentistry rules](https://www.njconsumeraffairs.gov/regulations/Chapter-30-New-Jersey-Board-of-Dentistry.pdf).
4. 8 NYCRR 29.1(b)(4), applicable to dentistry via 8 NYCRR 29.5, through NYSED's Rules of the Board of Regents, Part 29.
5. 21 NCAC 16X .0101 (Management Arrangements Rule, eff. April 1, 2001). [Board PDF](http://ncdentalboard.org/PDF/21%20ncac%2016x%20.0101.pdf).
6. Md. Code, Health Occ. § 4-103(E)(14), [official statute](https://mgaleg.maryland.gov/mgawebsite/Laws/StatuteText?article=gho\&section=4-103).
7. California AG, [settlement with Aspen Dental over corporate practice](https://oag.ca.gov/news/press-releases/attorney-general-bonta-announces-settlement-aspen-dental-over-corporate-practice) (May 7, 2026).
8. *In re OCA, Inc.*, 552 F.3d 413 (5th Cir. 2008), [official opinion PDF](https://www.ca5.uscourts.gov/opinions/pub/07/07-30430-CV0.wpd.pdf); *Packard v. OCA, Inc.*, 624 F.3d 726 (5th Cir. 2010), [official opinion PDF](https://www.ca5.uscourts.gov/opinions/pub/09/09-41004-CV0.wpd.pdf).
9. HRS § 448-17(b)(5). [Official DCCA compilation (PDF)](https://files.hawaii.gov/dcca/pvl/pvl/hrs/hrs_pvl_448.pdf).
10. Ga. Bd. of Dentistry Rule 150-8-.02. [Rules chapter 150-8](https://rules.sos.ga.gov/gac/150-8).
11. 42 U.S.C. § 1320a-7b(b) (Anti-Kickback Statute). [OIG overview](https://oig.hhs.gov/compliance/physician-education/fraud-abuse-laws/); safe harbors at [42 C.F.R. § 1001.952](https://www.ecfr.gov/current/title-42/chapter-V/subchapter-B/part-1001/subpart-C/section-1001.952).