New York is one of the strictest corporate practice of medicine states in the country, and it has a feature most others do not: a percentage-based management fee is not merely risky here. It is unlawful fee splitting.
That single rule invalidates the compensation structure in a large share of MSO agreements written for other states and imported into New York.
Who may own the practice
Under New York Education Law Article 131, only a physician licensed to practise medicine in New York may own the entity that performs medical treatment. A professional service corporation practising medicine must be owned by licensed professionals.
A registered nurse cannot own it. An esthetician cannot own it. A lay investor cannot own it. Neither can a holding company, a private equity fund, or your existing spa LLC.
This is a harder line than most operators expect, and it is considerably harder than Florida, where non-physician ownership is broadly permitted.
The fee-splitting rule that catches everyone
New York prohibits fee splitting between a professional entity and a non-licensee. Compliance publishers ground this in Education Law § 6530(18) and (19) and 8 NYCRR § 29.1(b)(4).
The practical consequence for an MSO arrangement:
| Fee structure | New York |
|---|---|
| Percentage of medical revenue | Unlawful fee splitting |
| Fee that varies with patient volume | Tied to volume or value of business — problematic |
| Fee that rises with treatments performed | Same problem, different wording |
| Fixed fee, fair market value, set in writing in advance | The defensible structure |
The financial terms between the professional entity and the MSO cannot be based on the volume or value of business. They must be fixed, reasonable in light of the services the MSO actually provides, and agreed in writing before services are rendered.
That last detail matters. Papering the arrangement after the fact does not cure it.
Why so many New York structures are wrong
The standard MSO template circulating in the aesthetics industry was largely written for markets where percentage-of-revenue management fees are common. Operators expanding into New York, or buying a template online, inherit a compensation clause that New York does not permit.
It is not usually a case of anyone deciding to cut corners. It is a case of using a document that was correct somewhere else.
What the PC and the MSO each control
The structural division is the same as in other strict-CPOM states, and New York expects it to be real:
- The professional corporation employs or contracts the clinicians, holds the patient records, owns the protocols, and makes every clinical decision — who is treated, with what, and who is turned away.
- The MSO provides premises, equipment, non-clinical staff, marketing, billing support, and technology.
- Clinical judgment stays inside the PC. A non-licensed entity may not command or profit directly from medical acts.
Oversight in New York
Physician conduct in New York is overseen by the Office of Professional Medical Conduct. A physician who lends their name to a practice they do not actually supervise is exposed personally, and that exposure does not depend on whether a patient was harmed.
This is worth saying plainly to prospective medical directors: in New York the physician carries risk that the operator cannot absorb for them.
Where New York operations go wrong
- Percentage-based management fee. The most common defect, imported from another state’s template.
- RN or investor ownership of the treating entity. Sometimes structured innocently, still impermissible.
- A nominee physician with no involvement. Ownership on paper, no supervision in practice.
- MSO holding the clinical records. Records custody belongs with the PC.
- Fee set or revised after services began. The agreement should precede the work.
- Marketing that speaks as the practice. “Our physicians” from the entity that is not the practice.
How MDside works in New York
MDside holds New York licensure and operates the clinical side directly: the professional corporation, the physician of record, the licensed provider team, the protocols, and the evaluation and prescribing workflow — with a management fee structured the way New York requires rather than the way the industry template does.
See what is included, or read the PC-MSO structure in general terms.
Frequently asked questions
Can a non-physician own a med spa in New York?
Not the entity practising medicine. A non-physician may own an MSO that provides administrative services to a physician-owned professional corporation, on fixed fair-market-value terms.
Can an MSO take a percentage of revenue in New York?
No. New York treats fee splitting between a professional entity and a non-licensee as prohibited. Management fees should be fixed and reflect fair market value for services actually provided.
Can a nurse practitioner or RN own a New York med spa?
Ownership of an entity practising medicine is restricted to appropriately licensed professionals under Article 131. Nursing licensure does not confer authority to own a medical practice — confirm your specific facts with New York counsel.
Does the fee-splitting rule apply to marketing and billing fees too?
Any payment flowing from the professional entity to a non-licensee is subject to the same analysis. Breaking a percentage into separate marketing, billing, and technology line items does not change the substance if the total still moves with clinical revenue.
What if my agreement was drafted for another state?
Have it reviewed before you operate under it. The compensation clause in particular frequently does not survive New York’s fee-splitting rules.
General information about New York corporate practice of medicine, not legal advice. Confirm your structure and your management fee with healthcare counsel licensed in New York.