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Understanding MSO in Healthcare: A Beginner’s Guide

In the realm of healthcare, Management Services Organizations (MSOs) represent a pivotal element in shaping modern healthcare delivery. These entities provide crucial support services to healthcare providers, optimizing operations, enhancing financial performance, and elevating patient care quality. As healthcare continues to evolve, MSOs have emerged not only as facilitators of administrative efficiency but also as architects of advanced clinical outcomes. In this article we are going to unravel the complexities and strategic functionalities of MSOs, presenting a detailed exploration intended for fellow experts who navigate this dynamic field.

In-Depth Analysis of MSO Structures

Complex organizational models.

The architecture of an MSO significantly influences its operational agility and strategic outcomes. Across the globe, MSOs have adopted varied organizational frameworks, each tailored to the regulatory and business environments of their respective healthcare systems. In the United States, MSOs often operate under structures that maximize financial and operational flexibility while adhering to stringent healthcare regulations. In contrast, European models might integrate more directly with public health systems, emphasizing cost control and universal care coordination.

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Advanced legal structures and implications.

The legal underpinnings of MSOs are as varied as their operational models. Typically structured as LLCs, partnerships, or corporations, each legal framework offers distinct advantages and challenges. For instance, the choice between an LLC and a corporation affects everything from tax obligations to the complexity of governance. Moreover, these structures must navigate a labyrinth of healthcare regulations, including HIPAA in the U.S., which dictates stringent compliance measures regarding patient information handling and privacy.

Financial Dynamics and Sustainability

Sophisticated financial operations.

Financial management within MSOs is nuanced, requiring a deep understanding of healthcare economics. Effective MSOs implement sophisticated financial strategies such as risk-sharing models, where costs and benefits are shared among providers, and the MSO itself. This can lead to more predictable revenue streams and aligned incentives for cost containment and quality care. Moreover, the adoption of advanced financial analytics helps MSOs forecast and strategically manage financial risks.

Economic Impact Analysis

The sustainability of an MSO is not solely measured by its financial performance but also by its long-term impact on the healthcare ecosystem. A successful MSO contributes to the system’s overall health by improving service delivery efficiency, reducing unnecessary expenditures, and enhancing patient care outcomes. Analyzing the economic impact involves not just looking at the balance sheets but also understanding how the MSO’s activities affect healthcare accessibility and patient satisfaction.

Technological Integration and Innovation

Cutting-edge technology use in msos.

Technology plays a central role in the modern MSO. From electronic health records (EHR) to telehealth platforms and beyond, technological integration helps streamline operations and improve patient outcomes. Moreover, innovative MSOs are increasingly leveraging artificial intelligence to enhance decision-making and operational efficiency. These technologies not only improve the speed and accuracy of medical and administrative tasks but also introduce new capabilities, such as predictive analytics for patient care.

Data Management and Analytical Modeling

Data is a cornerstone of effective MSO management. Robust data management systems enable MSOs to harness large volumes of health data to improve care delivery. Through sophisticated analytical models, MSOs can identify trends, predict outcomes, and make informed decisions that align with their strategic goals. Furthermore, with the advent of machine learning, these models have become increasingly adept at handling complex, multi-variable scenarios in real time, providing MSOs with unprecedented analytical power.

Regulatory Compliance and Legal Issues

Navigating regulatory environments.

The healthcare sector is among the most heavily regulated industries. MSOs must ensure compliance with an array of federal and state laws, which can vary significantly by jurisdiction. In the U.S., this might involve navigating through the complexities of the Affordable Care Act (ACA) or adapting to the evolving landscape of Medicaid and Medicare regulations. Compliance is not merely bureaucratic but a strategic element that can significantly influence an MSO’s operational effectiveness and reputation.

Legal Challenges and Solutions

Legal challenges in healthcare are not static; they evolve as the sector changes. MSOs often find themselves at the forefront of legal issues, from antitrust concerns to the legalities of cross-border data flows in international operations. Developing proactive legal strategies and maintaining flexible legal operations are crucial for MSOs to adapt to new laws and regulations effectively.

Clinical Excellence and Patient Outcomes

Improving clinical outcomes through msos.

At their core, MSOs aim to enhance the quality of care provided by healthcare entities. By implementing standardized clinical protocols and facilitating seamless communication among providers, MSOs help create environments where clinical outcomes can thrive. Moreover, through the continuous monitoring and assessment of performance metrics, MSOs ensure that clinical practices not only adhere to high standards but also evolve with new medical findings and technologies.

Human Resources and Operational Management

Talent management and organizational culture.

The success of an MSO is profoundly influenced by its human capital. Effective talent management goes beyond mere recruitment; it encompasses strategic hiring, comprehensive training programs, and robust retention strategies. Equally important is fostering a positive organizational culture that encourages collaboration, innovation, and continuous learning among staff. This cultural framework helps ensure that employees are not only proficient in their roles but are also engaged and motivated to contribute to the MSO’s overarching goals.

Operational Excellence

Operational excellence in MSOs is achieved through meticulous management of daily activities and strategic long-term planning. Efficient workflows, clear communication channels, and state-of-the-art management information systems are integral to maintaining high performance. Furthermore, operational audits and performance evaluations help identify inefficiencies and areas for improvement, ensuring that the MSO remains agile and responsive to the changing healthcare landscape.

Strategic Growth and Market Adaptation

Expansion strategies.

Growth strategies in the MSO sector often involve geographical expansion, diversification of service offerings, or both. Expanding into new markets requires a nuanced understanding of local healthcare regulations, market demands, and cultural factors. Similarly, diversifying services involves assessing existing capabilities and market needs, followed by strategic planning and execution. Successful MSOs often use a phased approach, starting with pilot projects that allow them to test strategies and refine them based on outcomes.

Adapting to Market Changes

The ability of MSOs to adapt to market changes is crucial for their long-term sustainability. This adaptability involves staying abreast of industry trends, regulatory shifts, and technological advancements. It also requires a proactive approach to strategic planning, involving scenario planning and contingency strategies that enable the MSO to pivot quickly in response to unexpected changes in the healthcare environment.

Future Trends and Predictions

Forecasting the evolution of msos.

The future of MSOs will likely be shaped by several key factors: technological advancements, changes in healthcare policy, and evolving patient needs. Predictive analytics and other data-driven technologies will play a significant role in enhancing the operational efficiency of MSOs. Policy changes, such as those related to healthcare funding or privacy regulations, will require MSOs to continuously adapt their compliance strategies and operational models.

Innovative Practices on the Horizon

As the healthcare industry continues to evolve, MSOs are expected to be at the forefront of innovation. This might include more integrated care models, the use of advanced biotechnologies, and the adoption of holistic patient care practices that leverage both medical and social determinants of health. These innovations will require MSOs to not only be operationally adept but also forward-thinking, capable of envisioning and implementing new ways of enhancing healthcare delivery.

Final Thoughts

MSOs play a pivotal role in shaping healthcare delivery, offering a blend of administrative efficiency, financial acumen, and clinical excellence. The dialogue around MSOs is ever-evolving, and staying informed is critical. I encourage my fellow professionals to engage with these concepts actively, challenge them, and contribute to the ongoing discourse. Through such collaborative efforts, we can ensure that MSOs not only meet the current demands of healthcare but also adapt to future challenges, ultimately leading to better patient outcomes and more robust healthcare systems.

As we continue to support healthcare professionals in achieving their career goals and enhancing their clinical capabilities, we invite you to explore how Collaborating Docs can assist your MSO in harnessing the full potential of your healthcare workforce. Visit our website or contact us directly to learn more about how we can facilitate essential partnerships that not only meet the needs of today’s healthcare challenges but also pave the way for a more efficient and effective healthcare system.

Join us at Collaborating Docs, where your growth is our mission. Let’s collaborate to build a healthier future together.

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How an Healthcare MSO Can Help Your Private Practice

• October 5, 2020

An MSO Helps healthcare providers struggling to grow their practice

Many private practices are struggling to thrive today due to the ever-changing regulations, decline in reimbursement, and the ongoing increases in expenses. 

Like many private practices, Revive Healthcare has a loyal customer base, and sees a lot of potential for growth in their private practice. 

They’ve been offering quality health, wellness, and rehabilitation services for nearly ten years.  The owner, Michael is an Occupational Therapist who has built his reputation on quality outcomes and an unforgettable patient experience. 

However, in recent years, Michael can’t keep up with the overhead needed to run the day to day operations let alone expand the practice, and the business lacks the tools needed to efficiently facilitate growth. 

In addition, the practice is having a hard time with cash flow due to their inconsistency in billing and revenue cycle workflow . 

As cash flow has slowed and expenses have increased the healthcare practice has lost its ability to effectively communicate with patients and the wheels are starting to fall off the vehicle so to speak. 

Michael has gotten so stuck in his business that he forgot how to work on his business. 

In addition, he is suffering from working harder rather than smarter because he is not able to gain objective perspective and forgot what a night off or a weekend feels like in the past two years. 

Does this sound all too familiar? 

If you’re a private practice owner like Michael, and want to maintain autonomy in your business while pushing for more growth, an MSO ( Management Service Organization ) may be the solution you are seeking to optimize efficiency, find the right people, increase revenue , and reach new patients .

what does mso stand for?

An MSO stands for a Management Service Organization . 

What is a Healthcare MSO (Management Service Organization)?

Healthcare MSOS allow private practices to outsource many administrative and operations-related services while streamlining expenses. Sharing resources with other practices often will increase stability and add value to your business. 

A healthcare MSO model can provide effective operational assistance including tools and support for comprehensive analytics, billing, payroll, recruiting, and marketing. 

Many Private Practices including but not limited to Occupational Therapy, Physical Therapy, and Speech Therapy can optimize efficiency costs while focusing on increasing revenue all the while remaining independent. 

If you’re considering joining a healthcare MSO for your practice, you and your staff will be able to focus more on providing exceptional healthcare services to patients while removing some of the day to day business stressors that are holding most private practice owners from reaching their fullest potential. 

A healthcare MSO is built on the notion that private practice owners should master their strengths and outsource their weaknesses to reach their optimum level of success and scalability.

What does MSO stand for in healthcare?

There are two main types of healthcare MSO organizations. 

The first MSO model will acquire the assets of the practice, then lease it all back to the healthcare provider. This MSO model works well for small private practices who are under a lot of stress and feel that running the business is affecting the quality of care they’re able to provide to patients. 

When a healthcare Management Service Organization purchases the assets of your practice, including the physical space, the equipment, and all supplies, you can focus on your patients and leave all the management to someone else. 

The healthcare management services agreement guarantees that you’ll continue to practice in the same office, with the same staff and the same resources, but you won’t have to worry about any administrative tasks. 

In recent years, many larger healthcare organizations and private equity firms have partnered to utilize this approach for acquisitions of smaller practices. 

The second type of healthcare MSO provides business services and advice to medical practices, enabling them to remain autonomous. 

The MSO healthcare business plan will provide business services such as administrative assistance and operational support for billing, payroll, and marketing.

The MSO will also ensure your practice is in compliance with all state and federal regulations, and that you hold up-to-date credentials. 

Your private practice will remain independent from the MSO, and you’ll have access to all the services you need to maintain and grow your practice. 

Our MSO business plan

At Wellness Works Management Partners, we operate under the second healthcare MSO model, providing instrumental support to private practices while enabling them to remain fully in control of their own practice. 

Although we operate under the second MSO model, we are also unique because we consider ourselves a deconstructed MSO , which provides more flexibility to customize and accommodate every private practice’s individual needs. 

Our specialties fall into four main categories to help you access the business services you need, and these are: efficiency, people, revenue , and done for you marketing system .

A Deconstructed MSO for Healthcare providers

Wellness Works Management Partners works with private practices that are interested in reaching optimum growth through efficiency, effectiveness, and strategy. 

One of our core competencies is supporting private practices with unique specialties inclusive of but not limited to Occupational Therapy, Physical Therapy, and Speech Therapy. 

Rather than offering traditional MSO services, we’ve developed a  Deconstructed MSO model  to give you all the flexibility your practice needs. This new healthcare MSO model gives you complete control over the services you want to access. 

While traditional MSOs work with a one-size-fits-all model, our deconstructed MSO can be tailored to match your unique needs and focuses on the areas where your practice could use the most help. 

We believe one size doesn’t fit all practices, and you should be able to choose which of our four main specialties you’d like to implement in order to streamline your business and scale up your practice.

As a Deconstructed MSO (DMSO), we offer our clients nine main benefits:

There are many areas to manage in any medical practice. Benefits, human resource issues, and payroll alone take significant time and effort to operate correctly. 

Coding, compliance, and revenue cycle management can consume much of a manager’s time and effort. Ensuring that you receive the best supply pricing and services on top of all these usual day-to-day activities can be too much. That’s where healthcare MSOs come in. 

• Increased control
• Costs savings (billing, shared staff, and facility, etc.)
• Increased revenue
• Increased quality care
• Strategic workforce planning
• Optimize technology
• Enhanced marketing
• Compliance and best practices
• Succession planning conduciveness

Revenue Cycle Management

At Wellness Work s Management Partners, we’re committed to increasing your revenue with comprehensive analysis and review of management practices to find out exactly where you can automate systems, cut costs, and increase revenue. These include:

Medical Billing for Healthcare Providers

Implementing a management system that includes medical coding and billing, the collections process , and patient financial policies will make it easy to understand your revenue cycle.

Financial Analysis

Before you can increase your revenue, you need to understand the financial state of your practice. A comprehensive financial analysis will include an implementation of data analytics inclusive of profit and loss statements, cash flow analytics, productivity analytics, and the development of a strategic financial plan with advice from your healthcare MSO.

Competitive Analysis

Internal provider competitive analytics and internal clinical analytics will determine your competitive viability compared to other practices. We’ll then perform cost comparisons and strategic competitor analytics to get a full picture of where you can increase revenue.

Payor Mix Analytics for Healthcare Providers

Find out exactly where your revenue is coming from with contract analysis, contract negotiation metrics, and internal provider payor analytics.

Outsourced Financial Functions

Many financial functions can be outsourced rather than handled in house, and verification of benefits, patient collections, medical billing, payment posting, and authorizations can all be outsourced to free up time and revenue.

Healthcare Marketing & Local SEO

Are you ready to grow your practice? You can reach new patients with the help of a healthcare MSO. Healthcare Management Partners can provide marketing tools, redesign your website, and increase patient growth . 

Our MSO services include:

Google My Business Set Up and Optimization

Google My Business(GMB) has arguably become one of the most essential marketing tools for local business owners in the last five years. Healthcare providers like doctors, therapists, and other medical practitioners can use Google My Business to claim and manage their practice’s info.

Local SEO Marketing For Healthcare Providers

Did you know that search results differ based on the location of the searcher? We use scientific methods based on years of testing to outsmart Googles search algorithms and rank your site above your competitors in your surrounding areas.

We Attract More Traffic and The Ideal Traffic to Your Site

Your practice doesn’t need more traffic. It needs targeted traffic that converts into long-term patients. We use a systematic approach to filtering buyers to your website, who are eager to purchase your services.

We Book New Patients Every Month

Booking new patients is great, but we don't stop there. Far from it, in fact! Our Patient Growth System is designed to set your practice up for long term success by creating a marketing infrastructure built to scale.

Reputation Management for Private Practice

A healthcare MSO will assist with generation and oversight of positive reviews on Yelp, Google, Indeed, Glassdoor, etc. to increase patient growth .

Private Practice Operational Efficiency

Streamlining Your Operations

Maintaining a practice takes efficiency, and we streamline your workflow with technology solutions, training, and new organizational techniques to help you work smarter and increase growth potential. 

Find out where your systems are inefficient and get the programs and automation you need to run smoothly. A Healthcare MSO will assist with:

Workflow Analysis & Solutions

There’s always room for improvement in workflow, but it can be hard to identify areas that should be streamlined. Workflow analysis and process mapping will highlight bottlenecks, and present solutions to optimize both front and back-office workflow.

Business Accountability Dashboard

The right business dashboard will give you a clear picture of your business at any moment, with real-time metrics, project management support, productivity reports, and KPIs. You'll see at a glance which areas lack efficiency.

Clinical Accountability Program

Easily track data such as patient engagement, patient outcome tracking, and clinical metrics to ensure your practice is providing the highest standard of care.

Technology Automation

Automating your operations with solutions for EMR, phone systems, email automation, and billing will free up valuable staff time, as well as reduce errors in records or billing.

Remote Function Automation

Help your staff stay on track by automating the systems they use every day. A virtual assistant can take over specific tasks, insurance eligibility can be determined automatically, and appointment scheduling and reminders can be handled remotely.

Empowering Your Workforce

Your practice thrives because of your team. Our healthcare Management Service Organization will help you find the right staff, as well as providing your team with the best training and resources to be successful. We’ll provide:

The Secrets to Recruitment & Onboarding

A healthcare MSO will make recruitment easy with detailed job postings and a smooth job interview process. Take the stress out of onboard orientation and accountability onboarding, and standardize training for all staff.

Human Resources Compliance

Update your employee handbooks, employee hiring paperwork, job descriptions, and policies & procedures binder to make sure they’re in compliance with your needs as well as with government regulations. Ensure all HIPAA Training, Safety Training, OSHA Training, and Liability Insurance Audits are regularly scheduled and performed.

Compensation & Benefits

Streamline your payroll and HR systems, ensure payroll implementation, and perform benefits analysis and workforce financial analysis to make your team even more successful.

Organizational Leadership

Get advice on succession planning, job function training programs, reorganization initiatives, organizational values initiatives, and even remote management. Be a great leader and inspire confidence in your staff.

Employee Engagement & Empowerment

Increase employee engagement with employee gamification implementation, employee engagement campaigns, HR employee analytics and empowerment campaigns to motivate staff to do their best work and support a positive workplace environment.

Healthcare MSO Arrangements and the Anti-Kickback Statute

Before choosing a healthcare MSO, make sure it complies with federal laws. Research the Stark Law and the Anti-Kickback Statute , which dictate the kind of relationship that’s acceptable between healthcare Management Service Organizations and private practices. 

The statute is in place to protect patients and federal health insurers from fraud and ensure that healthcare providers are making all their decisions based on the health and wellbeing of the patient, and not for any remuneration. 

The Anti-Kickback Statute holds private practices accountable, protects patient records, and ensures the best quality care, with no tests or treatments ordered for a kickback or financial gain.

Wellness Works Management Partners is dedicated to working in full compliance with the Anti-Kickback Statute and will help you run a practice where patient care comes first. 

All remunerations are based on market value, not on the volume of business transacted between the healthcare MSO and your private practice. This ensures compliance with the Anti-Kickback Statute and gives you peace of mind knowing your practice is providing exceptional care to patients.

Be Thorough When Choosing a Healthcare MSO Business Partner

When looking for solutions to make your private practice more successful, consider what kind of MSO solution is the best for your practice. 

While healthcare MSO’s can provide the resources and support you need, it’s critical that you fully understand the agreement.  Before you sign, review other MSO contract samples, and ensure you’re making the best decision for your healthcare practice and your patients.

"Our Deconstructed MSO,” explains President Brandon Seigel, “Is an opportunity for any size practice to find solutions that fit their budget – we offer value and partner with organizations to help them scale through support within the four areas.”

Our deconstructed healthcare Management Service Organization allows you to pick and choose the services you need, and scale up only when you’re ready.  It won’t force you to sign up for services you aren’t prepared to implement, and you can add services as your practice expands. 

For example, you may start with a coaching package to take a look at the inefficiencies in your business, move into a revenue cycle management program to revive your cash flow, before investing in patient growth .  If you have staffing issues, start with recruitment and leadership training.

Revive Healthcare found Wellness Works Management Partners at the end of 2017.  After an initial consultation, Michael quickly found that Wellness Works Management Partners could not only reduce several operational expenses that he was experiencing but optimize efficiency and bring quality growth in all areas of the organization. 

After two years of working with Wellness Works Management Partners, Michael has hit his stride as a clinician and private practice owner. Michael has grown to multiple locations and is finally able to enjoy more time off while fulfilling his goal of building a scalable and patient-oriented private practice

The Private Practice Survival Guide Book

As you consider your MSO solutions, pick up a copy of The Private Practice Survival Guide , where Brandon Seigel highlights the challenges of running a successful practice. 

He discusses the fundamental strategies you need to meet your goals, and show you how to develop a solid business foundation.

Wellness Works Management Partners   has over 15 years’ experience in healthcare management, and a marketing branch with over 12 years experience building, designing and implementing winning  patient growth campaigns . 

Our new deconstructed MSO solution will give you full autonomy in your practice. Through coaching, consulting, strategic plan implementation, and management programs, we’ll provide instrumental support and resources in the areas where you need it the most. 

Whether you want to focus on efficiency, people, revenue , or  patient growth , we have a solution that will fit your needs.

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How to effectively engage customers through online marketing, 6 digital marketing methods that still work wonders, secret to patient retention, your 2021 healthcare marketing strategy guide, 6 strategies for improving your practice’s online presence, the secret to effective ownership succession planning, how to put patients at ease with a well-designed waiting room, check out our blog.

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• Management Services Organizations (MSOs)

In the healthcare industry, Management Services Organizations (MSOs) are becoming ubiquitous. They are used for a variety of purposes, and can take many forms. The attorneys at Frier Levitt have formed MSOs throughout the country, and have counseled dozens and dozens of clients on how to utilize an MSO to fulfill their business goals.

What is an MSO?

An MSO is a company that provides non-clinical services to medical practices, ambulatory care facilities or other healthcare providers. Services provided by an MSO may include some or all of the following:

• Billing and Collection
• Accounts Payable
• Overall Revenue Cycle Management
• Payer Negotiations and Credentialing
• Employment of Non-Clinical Staff
• IT Services
• C-Suite Administrative Services
• Human Resources
• Space Rental
• Equipment Rental
• Drug and DME Supply Chain Services

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MSOs are primarily utilized as a vehicle by which non-physicians can legally own an entity that supplies administrative support to a medical practice’s operations. They can also provide an additional revenue stream for physicians who are winding down and/or retiring from clinical practice.

• Provide certain specified practice management and administrative support services to medical practices, including, but not limited to: billing/collection, provision of EHR, payer credentialing, employment and supervision of non-clinical staff, HR, operational services.
• May be owned by physicians, non-physicians, or both.
• May purchase the tangible assets of the practice (e.g., space, equipment, etc.) and lease the assets back to the practice.
• May develop group purchasing, malpractice discounts, data aggregation opportunities, and help the practice to achieve economies of scale not otherwise available to a solo, small, or even medium-sized practice.
• Alleviate the administrative burdens of operating a medical practice, allowing clinicians to focus on patient care.

Why form an MSO?

MSOs are formed for a variety of reasons, but in most cases, their function is to transfer one or more of the non-clinical, business functions of a medical practice or facility to a business entity that may legally be owned by non-licensees (i.e. non-physicians). In most states, medical practices may be owned only by licensed physicians or other licensed healthcare providers. This severely limits the number of potential investors in a medical practice, and, consequently, limits the financial value of the practice. To the contrary, an MSO that provides exclusively non-clinical services to practices may be owned by non-licensees, including private equity or venture capital investors, hospitals or family members of the physician owners of a practice.

This flexibility in the ownership potential of MSOs make them popular in a variety of contexts, including:

• To create value in a company that may be owned by outside investors or non-physicians associated with the practice
• As an asset protection vehicle in order to reduce the overall exposure of a medical practice to malpractice liability
• As an estate planning tool
• To consolidate the non-clinical functions of multiple practices in order to achieve economies of scale
• To consolidate non-clinical functions of a large group practice in preparation for a private equity sale
• To create a “captive practice” or “friendly physician” model in states with strict corporate practice of medicine laws.

How is an MSO formed?

An MSO may be formed as either a limited liability company or general business corporation. The decision of what type of entity to use is typically guided by both legal and accounting considerations. An MSO entity may be formed in states outside of the state in which the medical practice operates. For example, many MSOs are formed as Delaware LLCs or corporations due to Delaware’s pro-business laws.

Once the MSO is formed, ownership documents must be established which govern the rights and obligations of the MSO’s investors. Additionally, the MSO will enter into a management services agreement (MSA) with one or more medical practices or facilities which will form the basis of the business relationship (including the management fee) between the MSO and the practices (discussed below). If the MSO will be assuming responsibility for non-clinical employees, space equipment or IT services, those items and services will need to be transferred from the practice to the MSO. Leases may be assigned to the MSO and assets of the practice may be contributed or sold to the MSO in a number of forms.

How is an MSA structured?

A management agreement (MSA) is a contract between an MSO and a medical practice or other healthcare business that governs the business relationship between the parties. The MSA should carefully detail all of the services to be provided by the MSO, as well as the services that are specifically excluded (e.g., clinical services). It is important that the parties distinguish between the clinical functions of the practice and the non-clinical functions of the MSO.

Additionally, it is important to remember that, at its essence, and MSO is merely a vendor of service for the practice. In most states, the practice must remain separate and independent, particularly with respect to clinical services.

Nevertheless, it is often the goal of the parties to confer to the MSO sufficient authority to operate the practice and generate a management fee that enables the MSO to generate returns to its investors. This may prompt the parties to establish a very robust MSA with strict requirements for the practice and a long-term commitment of five year or longer.

The basic framework of a typical MSA would include:

• Term and Termination Provisions
• Restrictive Covenants
• Indemnification Provisions
• A security interest whereby the MSO has a lien on the practice’s accounts receivable, where permitted
• A detailed list of management services
• A fee schedule for management services

The Private Equity Perspective

Private equity investors seeking to generate revenue in the highly regulated healthcare space need a vehicle that does not run afoul of the prohibition on non-physician ownership of a medical practice. Through the MSO model, the private equity firm can acquire the practice’s hard assets, lease them back to the practice, and provide back-office functions, in exchange for a management fee.

Practices that have already established a successful MSO model are even more attractive to private equity investors because the infrastructure and reporting are already in place. This facilitates due diligence and may abbreviate the timeline for consummating a transaction.

Regulatory Issues

There are a variety of Federal and State regulations that must be considered when exploring the feasibility of a proposed MSO model. Investors are well-advised to seek counsel familiar with the applicable laws, which include, but are not limited to:

The Corporate Practice of Medicine

The “corporate practice of medicine” (“CPOM”) prohibition aims to ensure that profit interests do not interfere in the exercise of a licensee’s clinical judgment. The fundamental principle underlying the prohibition is that lay people are more susceptible to being motivated by profits than licensed physicians, who are highly regulated. For this reason, professional entities comprised entirely of physician owners do not violate the CPOM prohibition. In a strong CPOM state, the MSO may not employ a physician or other clinical personnel; in a weak CPOM state, the MSO may be permitted to employ a physician, provided that the MSO does not interfere with the physician’s clinical decision-making.

When non-licensees are found to exercise control over the practice of medicine, consequences may include:

• Discipline for the unauthorized practice of medicine, violation of fee-splitting laws, and/or self-referral prohibitions
• Challenges by payors of the practice’s structure, potentially such that all claims submitted by the practice are considered false claims, leading to significant clawbacks

Fee-Splitting

In addition to CPOM prohibitions, many states prohibit physicians from splitting the fees generated from their medical services with others. Like the CPOM prohibition, the principle underlying fee-splitting prohibitions is: profit-driven decisions must not supersede the best interests of the patient.

The Stark Law

The Federal Physician Self-Referral Law, commonly referred to as the Stark Law, prohibits physicians from referring patients to receive designated health services (DHS) that are payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. Financial relationships include both ownership/investment interests and compensation arrangements.

The Federal Anti-Kickback Statute (“AKS”)

The AKS imposes criminal penalties against individuals or entities that knowingly and willfully offer, pay, solicit, or receive any remuneration either (A) “in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program” (which include Medicare and Medicaid), or (B) “in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal healthcare program.” Remuneration is defined broadly to include the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. Violation of the Anti-Kickback Statute is a felony, and conviction may result in a fine of up to $25,000 per occurrence, and up to five years in prison, as well as exclusion from participation in government reimbursed programs.

Structuring the MSO Arrangement to Avoid Regulatory Pitfalls

A carelessly structured MSO arrangement has the potential to result in a variety of very expensive consequences to the parties, ranging from licensing board discipline to payor allegations of false claims and significant clawbacks. Experienced healthcare counsel will enable the MSO investors to determine, among other things:

• The ownership composition of the MSO
• If non-licensees will be involved, the state’s stance on the CPOM doctrine
• A comprehensive list of services the MSO will provide and a corresponding management fee that is consistent with fair market value and is also commercially reasonable
• Whether additional state requirements apply
• Appropriate management services agreements, leases/license agreements, Business Associate Agreement, etc.

 How Frier Levitt Can Help

Management services organizations (mso) insights.

Healthcare Insights: Exploring Captive or “Friendly” Practices with Daniel B. Frier, Esq. April 23, 2021

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Management Services Organizations (MSO) | Articles

Management Services Organizations (MSO): More Relevant Now Than Ever Before Webinar Replay October 9, 2020

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Breaking Down MSOs in Healthcare: What They Are and How They Can Benefit Your Practice

• June 12, 2023

As a healthcare provider, caring for patients is your main priority.  Unfortunately, a long list of non-clinical duties on top of your role as a physician can quickly lead to burnout and diminished capacity. While administrative responsibilities aren’t going away any time soon, there is one solution to reserving your time and attention for patients in need — working with an MSO. 

What is an MSO in healthcare?

MSO stands for Management Services Organization. An MSO offers a variety of management and administrative services to hospitals, clinics, and other types of medical practices. Not only can MSOs manage your practice’s backend responsibilities, but their high aggregated volume also means MSO members have access to significantly discounted services and supplies thanks to  preferred pricing . 

Leaning on the support of an MSO to handle non-clinical obligations means allowing the physicians in your practice to focus on what they do best— caring for patients. 

Ways an MSO Can Benefit Your Practice

Administrative support. .

Between billing, medical coding, managing claims, and tracking revenue, administrative responsibilities are an important part of running a well-functioning healthcare business. As time-consuming as administrative duties are, they’re an integral part of any practice’s success. 

An MSO in healthcare can oversee each of these administrative tasks and more. As a result, the MSO you partner with can help to not only reduce administrative burdens, but also streamline operations, standardize services, and improve efficiency within your organization. Examples of  additional administrative services an MSO may offer  include:

• Credentialing
• Utilization Management
• Call Centers
• Network Development and Management

Compliance and Regulatory Support

Regulations and compliance requirements continue to grow within the healthcare industry. MSOs can help hospitals, clinics, and healthcare providers with the regulatory compliance oversight and management necessary to follow industry standards, maintain appropriate documentation, and adhere to legal and ethical guidelines. 

Financial Management

Providers who lean on the financial management support of an MSO often achieve improved financial reporting and analysis, smarter budgeting, billing consolidation, and reduced overhead costs. These benefits and more can optimize revenue and lead to more informed financial decision-making. 

Technology and IT Support

Support from MSOs doesn’t stop at administrative tasks and management. In fact, many MSOs offer IT and technology assistance. Solutions may include an electronic health record (EHR) system, improved data security, health information system management, and communication/information sharing and streamlining. 

Human Resources and Staffing

Helping employees feel safe and satisfied within their roles is an essential responsibility of managing any organization— and can shape the overall culture of your healthcare facility. MSOs can take the burden of personnel management out of the hands of providers and handle human resources functions such as:

• Recruitment 
• Staff Training 

Network Development and Contracting 

MSOs can help with duties in network developing and contracting with other companies. Most MSOs have previously established networks of healthcare providers and can assist medical practices in expanding referral networks, contracting insurance companies, and negotiating reimbursement rates.

Practice Growth and Marketing

Depending on the MSO, some may offer marketing services aimed at developing and advertising your health system’s brand, boosting online presence, and other communication strategies to market services, providers, and other aspects of your practice that may attract new patients

Different Types of MSOs in Healthcare

There are two basic types of MSOs. 

The first provides some or all the services listed above, allowing practices to remain independent of the MSO. The second type of MSO purchases assets and leases them back to healthcare providers. In this type of structure, physicians continue seeing patients as normal but under the condition of relinquishing ownership of administrative duties or tangible assets such as office spaces. 

Before signing any agreement with an MSO, it’s important to fully understand the terms of the contract. Carefully consider any limitations, expectations, and termination protocols if you choose to end the agreement in the future. 

An MSO Can Benefit Your Healthcare Practice— and Patients, Too

Outsourcing administrative and management duties to an MSO means physicians in your practice can focus on what they do best— caring for patients. These entities specialize in managing non-clinical responsibilities of healthcare establishments, improving efficiency and streamlining services. 

As you choose the MSO that’s right for you, research those that align with your practice’s unique needs, goals, and philosophies. Finding the right MSO for your practice can help providers concentrate on patient care, improving patient satisfaction and outcomes in the long run. 

Learn More About PACT

PACT, a partner of Hartford HealthCare was established as Physicians Alliance of Connecticut (PACT) in 2013 to rebuild and preserve private medical practice in Connecticut. We are a multi-specialty physician group in which every member has a voice, and each division is given as much autonomy as allowed by law. 

In 2020 we began operating under the Hartford HealthCare umbrella as an independent medical practice. This partnership, which maintains our values and approach, strengthens our resources and geographic reach. The results of our approach can be seen in financial benefits, increased efficiency and time savings, and ultimately an improved work/life balance.

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Understanding Management Services Organizations (MSOs)

While MSOs can provide resources and administrative support for practices, it is critical to understand different contract provisions.

We all know that there is a lot to manage in any medical practice. Human resource issues, payroll, and benefits alone take significant time and effort to manage properly, coding compliance and revenue cycle management consumes much of a manager's time and effort, and making sure that you are receiving best pricing for supplies and services on top of all the usual day-to-day activities can simply be too much.

That's where MSOs come in. These are entities designed to help you with the administrative, or non-medical, work involved in running a practice. These organizations may be owned by non-healthcare provider investors, by hospitals, by groups of physicians, be a joint venture between a hospital and physicians, or even owned by health plans.

1. What they do

Here's a list of some of the areas in which an MSO can assist practices:

• Operational issues

• Financial management

• Human resources and personnel management

• Staff education and training

• Coding, billing and collection services

• Providing and managing office space

• Discounts and provision of EHRs and medical equipment

• Regulatory compliance oversight and management

• Credentialing and contract management

• Savings with group purchasing

• Risk management

2. The benefits to practices

The primary advantage to joining an MSO is to have access to management services and to ensure best (lowest) pricing on supplies and services. MSOs aggregate volume and as such, obtain economies of scale that allows them to obtain preferred pricing on everything from medical supplies to healthcare insurance. Many provide billing services allowing practices to outsource that altogether, and some offer significantly discounted EHRs where all members utilize the same vendor or platform.

3. Different MSO structures

There are two types of MSOs: those that provide business services to practices, allowing them to remain quite independent of the MSO, and those that own (buy) the tangible assets of practices and manage them directly. In the latter example, the MSO owns the equipment, supplies, and office space and leases it all back to the physicians. That is, the physicians continue to practice in their existing office space and own their medical records, keep their existing insurance plan contracts, staff, and so on, but no longer own the administrative expense and burden of managing those assets. This restricts autonomy somewhat and while it does not go as far as the physician becoming an employee, it does make it much more difficult for a physician to terminate an agreement with an MSO. However, if you want to practice medicine without the headaches involved in administration, then this may be the model for you.

MSOs are evolving to tackle the growing demands of a value-based marketplace. With many insurers now tying reimbursement to quality and outcomes, tracking performance and being able to meet clinical measures and metrics is becoming as burdensome as any other administrative work within a practice, and so MSOs are stepping in to offer solutions. Some will even go as far as developing clinical guidelines and standards of care, providing care coordination services, and fully integrating members clinically in order to take advantage of upside bonuses and shared savings from insurers.

4. Cautionary measures

While MSOs can provide the resources and support that you might need, it is critical that you fully understand the agreement that you are signing. The MSO should clearly spell out exactly what services are being purchased and the terms under which you are contracting. Make sure you understand any limitations associated with each service offering, such as the MSO billing and collecting from insurance companies but not managing patient collections, for example; and most critically, understand under what terms you may terminate the agreement including the amount of notice that needs to be given, how to buy back your assets (if you sold them), how to take your billing operation back in-house and so forth.

If you are joining an MSO that will purchase your assets, it is essential that the fee charged by the MSO is commercially reasonable and at fair market value. This is necessary in order to comply with safe harbors around Anti-Kickback, Stark, or Corporate Practice of Medicine statutes. Before agreeing to any price, get a fair market value opinion from an accountant or healthcare consultant that specializes in such transactions.

Based on our clients' experience, the MSOs that work best are typically the ones that are well-established, have plenty of experience in a particular specialty, and have physician-led governance to keep the physicians' best interests at heart.

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Health Care Regulatory Primer: Management Service Organizations

Chapman Insights A health care management services organization (MSO), also known as a medical management company, provides non‑clinical, administrative support services to physician group practices and other health care providers. One of the primary purposes of a MSO is to relieve licensed health care providers of non-medical business functions so they can focus on the clinical aspects of their medical practices. To that end, MSOs have become increasingly common as health care reform continues to complicate the billing and reimbursement process and link payment to patient experience and the quality of care. Additionally, MSOs are used to navigate state “corporate practice of medicine” (CPOM) laws prohibiting non-physician-owned business entities from practicing medicine or employing licensed health care providers. In order to avoid regulatory pitfalls, however, contractual MSO arrangements need to be structured carefully to ensure that the MSO does not exert undue control over the health care practice in contravention of CPOM principles.

The following health care regulatory primer: (1) provides a brief overview of the corporate practice of medicine doctrine and its application; (2) describes the MSO business model and how a contractual MSO relationship can be used to comply with the CPOM; and (3) discusses regulatory pitfalls to avoid in MSO relationships.

The Corporate Practice of Medicine

In its simplest terms, the CPOM prohibits corporations from practicing medicine or employing a physician to provide professional medical services. Public policy considerations underlying the CPOM include concerns that the corporate employment or control of a licensed professional: (1) commercializes and debases licensed professions; (2) undermines the physician-patient relationship and the physician’s exercise of independent medical judgment; and (3) allows unlicensed corporate entities to practice medicine without being subject to professional standards or regulations. 1 Accordingly, the main objective of the CPOM is to shield physicians from outside influence or control—particularly from non-physician-owned corporate entities which might subordinate patient care and treatment decisions to the maximization of profits and the reduction of costs.

The CPOM is state specific and often comprised of a mix of statute, administrative regulation, case law, and state attorney general opinions. Although the doctrine is applied in a majority of states, 2 19 states have no CPOM restrictions. 3 Of the 19 states that have not explicitly adopted the CPOM doctrine, some utilize fee-splitting laws that create similar issues or state medical board opinions that echo the CPOM. Depending on the jurisdiction, corporate practice prohibitions may also extend to other licensed health care professionals such as dentists, psychologists, physical therapists, or social workers. It should be noted that certain states without CPOM restrictions may have corporate practice laws relating to other professions. For example, while Florida has no CPOM, it does restrict the corporate practice of dentistry. 4

The CPOM and a state’s willingness to enforce it varies greatly among jurisdictions. In states with “strong” CPOM prohibitions—such as California, New York and Texas—physicians (or other licensed health professionals) can only provide medical services through a professional corporation owned by professionals that are licensed in that state. Therefore, in these “strong states,” non-professional corporations cannot hire physicians without meeting a specific exception set forth in the CPOM laws. On the contrary, while a “weak” CPOM state may generally prohibit non-physicians from practicing medicine, or prevent unlicensed professionals from intruding into other aspects of the medical practice, it generally will not prohibit non-professional corporations or laypersons from employing physicians if the licensed physicians maintain actual control over the practice of medicine.

Even in the most restrictive of CPOM states, there are exceptions to the rule. For example, some states permit certain entities such as hospitals or medical schools to employ physicians. In addition, almost all states permit physicians to practice medicine through partnerships, professional corporations (PCs), or professional service limited liability companies (PLLCs) comprised exclusively of physicians and certain other licensed professionals, and share fees and profits among themselves.

The CPOM presents a significant concern to physician business ventures as failure to comply with a state’s CPOM laws can result in:

• Physician licensure action or revocation.
• Civil (and in extreme cases, criminal) liability for non‑physician business partners (e.g., a MSO) for engaging in medical practice without a license.
• Voiding of an underlying business arrangement (e.g. a management services agreement) for illegality.
• Commercial or government insurers (e.g., Medicare and Medicaid) seeking to recoup reimbursement payments due to illegality of the underlying business structure. 

MSO Business Model and the CPOM

In order to comply with a state’s CPOM laws restricting a non‑professional entity from owning or operating a physician practice, lay entities seeking a business relationship with a physician practice often use what is known as the “friendly PC” MSO model. When properly operationalized, this model allows the MSO to maintain control over the administrative and management side of the medical practice without infringing on the professional judgment of the physicians. Additionally, MSO’s can bring economies of scale, operational efficiencies, and professional management and compliance experience into physician practices, thereby improving the quality of care and patient experience, while reducing overhead costs.

The “Friendly PC” MSO Model . Under the friendly PC model, a PC, PLLC or other state-approved legal entity with 100% physician ownership, employs the licensed health care professionals and then contracts with a MSO to provide management services to the PC in exchange for a fee. The MSO’s services, and compensation for such services, are set forth in a long-term management services agreement (MSA). The MSO may purchase the non-clinical assets of a medical practice (e.g. office space or equipment) for cash and possibly MSO equity. MSOs typically incur all costs associated with the medical practice, with the exception of physician compensation, benefits and malpractice costs.

Typically, the PC is kept “friendly” or aligned with the MSO through the use of a stock transfer restriction agreement between the friendly physician and the MSO. The stock transfer restriction agreement will allow the MSO to designate or approve any future owner of PC stock.

MSO Services. MSO support services are often comprehensive, including areas such as:

• Financial management, budgeting and accounting
• Human resources and non-clinical personnel management
• Staff training and education
• Coding, billing and collection services
• Providing and managing office space
• Regulatory compliance oversight and management
• Credentialing and contract management
• Vendor management and group purchasing
• Marketing 5

As discussed in the next section of this brief, MSO services should be carefully selected to ensure that the medical practice maintains control over the practice of medicine in accordance with CPOM principles.

MSO Compensation . MSOs can be compensated for their services in a number of ways. Common MSO fee arrangements include (1) fixed fee arrangements, (2) cost, plus a reasonable profit margin, formulas, or (3) formulas based on practice group revenues. Because fee structures may implicate state fee-splitting and other laws, the fee structure should be examined by counsel for regulatory risk. For example, compensation based on a percentage of physician revenues generally constitutes prohibited fee-splitting under New York law. 6 Permissible compensation structures are discussed in more detail below.

Structuring MSO Relationships to Avoid Regulatory Pitfalls

Although the friendly PC MSO model clears the initial CPOM non-physician-ownership hurdle, MSAs must be carefully structured to ensure that the MSO does not exercise undue control over the PC or become too deeply entangled in the PC’s affairs in contravention of state CPOM principles.

In general, permissible MSO relationships will:

• Clearly delineate between the medical and non-medical aspects of a health care practice. The MSO only should be engaged to handle the non-medical aspects of the practice. Physicians should maintain ultimate responsibility over patient care;
• Ensure that compensation is consistent with fair market value, bears a reasonable relationship to the cost of the MSO services provided, and does not trigger any state laws forbidding certain compensation arrangements (e.g. percentage of revenue arrangements); and
• Properly operationalize a written MSA.

MSO Services and Controls . The CPOM is a complex doctrine that often turns on a court’s fact-specific analysis. Accordingly, there is no set rule as to when a given arrangement may be deemed to constitute the CPOM. The focus in any regulatory investigation likely will be on the level of control the MSO exercises over the operation of the medical practice and the professional judgment of licensed health care professionals. When the MSO exerts a high degree control, the arrangement may be found to be a sham intended to disguise the de facto practice of medicine by an unlicensed entity.

MSO controls that may indicate an intrusion into clinical practice in violation of the CPOM include:

• Determining which diagnostic tests are appropriate for a particular condition.
• Determining the need for referrals to or consultation with another physician or specialist.
• Determining how many patients a physician must see in a given time period or how many hours a physician must work.
• Incentivizing and otherwise pressuring staff to increase services or sales.
• Implementing revenue-oriented patient scheduling systems.

States with strong CPOM doctrines may also be suspicious of MSOs that have a high level of control over certain business aspects of a medical practice as well as control over all clinical decisions. For example, the Medical Board of California has stated that the following business decisions should be left to physicians:

• Selection, oversight, and termination of clinical personnel.
• Selections of medical equipment and supplies.
• Setting the parameters under which the PC will enter into contractual relationships with third-party payors.
• Decisions regarding coding and billing procedures. 7

The Medical Board of California acknowledges that these types of decisions and activities can be made by a physician who consults with the MSO, but not by the MSO alone. 8

Additionally, a high level of MSO-control over a medical practice’s finances can trigger regulatory scrutiny. For example, in 2015 the New York Attorney General took issue with a dental practice management company, that among other clinical and business controls, “exercised undue control over the clinic’s finances by controlling substantially all of the dental practices’ bank accounts through a single consolidated account to which the clinic owners themselves did not have access.” 9

MSO Compensation . As discussed above, MSOs may be compensated by medical practices in a variety of ways, including by a periodic flat fee or a formula based on a percentage of a practice’s revenue. When choosing a compensation arrangement, PCs and MSOs must carefully consider anti-kickback and state fee-splitting laws. First, compensation should bear a reasonable relationship to the cost of the management services provided and be consistent with fair market value. Otherwise, the compensation could be viewed as an unlawful payment for a patient referral in violation of federal or state anti-kickback statutes. Additionally, fee‑splitting laws may prohibit or disfavor compensation based on a percentage of patient revenue. For example, New York expressly prohibits percentage of patient revenue compensation arrangements. 10 Other states, such as Florida, prohibit percentage of patient revenue based compensation in certain circumstances, such as where the MSO generates patient referrals. 11 In certain states, however, a percentage of patient revenue fee may be expressly permissible. For example, California law specifically recognizes the permissibility of physicians (including PC’s) paying unlicensed persons percentages of gross revenue for services, provided that the payment is reasonably commensurate with the value of the services and not simply a payment for patient referrals. 12

MSOs are very useful entities that can benefit both medical practices and MSO owners alike. Due to complex and state‑specific CPOM regulations, however, the MSA needs to be carefully drafted. This primer is only intended to convey the basics of MSOs, the CPOM and corollary state fee-splitting laws. There are many other aspects of MSO relationships that should be considered that are not covered here, such as the federal Anti-Kickback statute and the federal Stark Law.

• See, e.g., Barton v. Codington Country, 2 N.W. 2d 337, 343 (S.D. 1942); Garcia v. Texas State Bd. of Med. Exam’rs, 348 F. Supp. 435, 437 (W.D. Tex. 1974); and State v. Boren, 219 P.2d 566, 568-69 (Wash. 1950).
• The following states have some form of the corporate practice of medicine: (1) Arizona, (2) Arkansas, (3) California, (4) Colorado, (5) Georgia, (6) Illinois, (7) Indiana, (8) Iowa, (9) Kansas, (10) Kentucky, (11) Louisiana, (12) Maryland, (13) Massachusetts, (14) Michigan, (15) Minnesota, (16) Montana, (17) Nevada, (18) New Jersey, (19) New York, (20) North Carolina, (21) North Dakota, (22) Ohio, (23) Oregon, (24) Pennsylvania, (25) South Carolina, (26) South Dakota, (27) Tennessee, (28) Texas, (29) Washington, (30) West Virginia, and (31) Wisconsin.
• The following states have no statutory prohibition against the corporate practice of medicine: (1) Alabama, (2) Alaska, (3) Connecticut, (4) Delaware, (5) Florida, (6) Hawaii, (7) Idaho, (8) Maine, (9) Mississippi, (10) Missouri, (11) Nebraska, (12) New Hampshire, (13) New Mexico, (14) Oklahoma, (15) Rhode Island, (16) Utah, (17) Vermont, (18) Virginia, (19) Wyoming. 
• See Admin. Code. Ann. R. 64B5-17.013.
• MSOs that provide marketing services or otherwise generate business on behalf of a medical practice can implicate state fee-splitting laws or kickback laws. Accordingly, any marketing relationships should be analyzed by legal counsel.
• See 8 NYCRR § 29.1(b)(4).
• See Medical Board of California’s Corporate Practice of Medicine guide.
• Id . See Aspen Dental Management settlement announcement available at: https://ag.ny.gov/press-release/ag-schneiderman-announces-settlement-aspen-dental-management-bars-company-making
• See e.g., Gold, Vann & White, P.A. v. Friedenstab, 831 So. 2d 692 (Fla. Dist. Ct. App. 2002).
• See Bus. & Prof. Code § 650(b).

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