Most surgery center management agreements price their fee as a percentage of net collections — not gross charges, not gross collections, but net collections. That distinction matters more than physicians usually realize, and it's the first thing worth understanding before comparing any two offers.
Net collections, defined
Net collections is what actually hits the bank after contractual write-offs, patient discounts, charity write-offs, uncollectable accounts, and refunds are backed out. A management company's fee is calculated on that number, not on what was billed. This means the fee moves with your real revenue, not your gross charge sheet — which sounds fair on its face, but it also means you need to know exactly how "net collections" is defined in the agreement. Some agreements exclude certain revenue categories, such as out-of-network payments or workers' compensation reimbursement, from the calculation, but this is rare and can become a complex calculation that creates more tension than it resolves. Others don't exclude anything at all. That single definition can shift the effective fee by a meaningful margin.
What the percentage typically covers
A net-collections fee is usually meant to bundle several services into one number: staff hiring and payroll administration, supply chain and purchasing pricing, managed care contracting assistance, compliance oversight, accounting, accreditation and state survey preparation, and often marketing support in the form of website management. The percentage itself varies by management company size, your center's specialty mix, and case volume — smaller, boutique management companies and large national platforms don't price the same way, and neither should be assumed to be the better deal without seeing the actual terms.
Billing and collections is often assumed to be included in the management fee, but this is usually a separate service that both large and small management organizations charge for independently. Many of these bundled services also replace amounts you're already paying for the same function today, so it's worth understanding exactly how much you're currently spending on each of them and what the true incremental cost increase actually is once the management fee is layered on top.
Where the fee often doesn't reach
This is the part physicians miss most often. A net-collections fee rarely covers everything. Capital expenditures — new equipment, facility renovations — are usually billed separately as a facility expense. Employee benefits administration may or may not be included. Outside legal and litigation costs, along with malpractice and commercial liability insurance, almost never are. Before signing anything, get a specific list of what falls outside the percentage, in writing, not as a verbal assurance.
Minimums and step-downs
Some agreements include a minimum monthly fee regardless of collections — meaning in a slow month, you still pay the floor amount. Others use a tiered or step-down structure, where the percentage decreases as collections cross certain thresholds, rewarding higher-volume centers with a lower effective rate. Neither structure is inherently better; it depends on your center's collection consistency and growth trajectory.
Term length and renewal terms
Fee structures are usually locked in for the length of the management agreement, often three to five years, sometimes longer. Escalator clauses — automatic fee increases at renewal — are common enough that you should ask directly whether one exists and what triggers it.
The bottom line
A percentage-of-net-collections fee is straightforward on the surface but has enough structural variation underneath that two agreements quoting the "same" percentage can cost meaningfully different amounts in practice. The number on the term sheet is the start of the conversation, not the end of it.