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Do you own a mental health practice? Explore how Management Services Organizations (MSOs) can help you provide comprehensive, multidisciplinary patient care and allow you to focus on your clinical services.
Effective mental healthcare often involves multiple techniques or specialties, sometimes requiring collaboration among providers to achieve the best patient outcomes. As a licensed mental health professional, you may work with other providers to provide comprehensive care.
Practice owners may consider hiring multidisciplinary mental health professionals to offer a broader range of services. It sounds like a convenient, effective solution for providers and patients alike. However, state regulations don’t always make it easy.
State Restrictions on Professional Entities
Many mental health practices create a business entity, such as a corporation or limited liability company, to take advantage of these structures’ legal benefits and protections. If you take this route, your state may require you, as a licensed provider, to establish a professional corporation (PC) or professional limited liability company (PLLC).
In some states, however, the restrictions on professional entities create obstacles to multidisciplinary practice. For example, New York only allows PCs and PLLCs to practice the profession in which the owner of the company is licensed. In most instances, this means that the PLLC can only provide services in one profession.
While New York permits business entities to practice multiple professions if each profession has a licensed owner, this allowance does not extend to clinical social work, mental health counseling, psychoanalysis, creative arts therapy, marriage and family therapy, or applied behavior analysis. Regulators aim to ensure that patients understand the distinct scopes of each licensure when choosing their healthcare providers.
Some states, such as Texas and Illinois, make certain exceptions allowing differently licensed practitioners to co-own and provide services together. However, psychiatrists often face restrictions. Why? Psychiatrists are medical doctors, and their employment can trigger CPOM (Corporate Practice of Medicine) issues.
CPOM laws generally prevent physicians from being hired by businesses that aren’t owned by physicians. These laws primarily aim to stop unlicensed owners, such as private equity firms, from controlling medical practices. However, CPOM can also restrict mental health practitioners from expanding into psychiatry, medication management, or medical assessment. If you want to bring a psychiatrist into your practice, CPOM may limit your ability to hire them as an employee or contractor.
See our related video, “The Corporate Practice of Medicine in Illinois”
MSOs in Multidisciplinary Practice
Management Services Organizations (MSOs) are business entities established to manage the non-clinical aspects of a healthcare practice, such as billing, IT, human resources, real estate, and other administrative functions. While unlicensed individuals often create MSOs to break into the healthcare space, licensed professionals can also use MSOs to ensure compliance in their business operations.
How MSOs Work
An MSO is typically set up as a general stock corporation or limited liability company. Because the MSO does not provide clinical services, the requirement to be a “professional” entity doesn’t apply, and ownership is not restricted by licensure.
In turn, the licensed professionals who intend to deliver clinical services set up professional entities, such as PLLCs. These professional entities deliver the care. The differently licensed professionals practice under their own entities, and the MSO provides non-clinical management services to the professional practice. This relationship is legally established through a complex contract called a management services agreement (MSA).
See our related article, “Management Services Agreements (MSAs): What Healthcare Professionals Should Understand.”
Let’s look at an example. If a social worker wanted to partner with a psychiatrist to run a business, the social worker could start an MSO. The social worker and psychiatrist would each set up their own PLLCs to provide social work and psychiatric services, and the MSO would conduct the non-clinical operations for both.
Benefits and Challenges of MSOs
As we’ve discussed, MSOs can help multidisciplinary practices function compliantly, facilitating comprehensive care while also ensuring each provider practices within its own scope. Moreover, anyone, licensed or unlicensed, can own and operate an MSO. Thus, you can delegate non-clinical tasks more easily and focus on patient care.
However, using the MSO model can be tricky. Depending on your state’s laws, it may affect the way a practice distributes revenue. Some states have increased scrutiny of MSOs and are imposing more stringent requirements on them.
Get Legal Support
To determine if an MSO can help you expand your services within your state’s legal framework, speak with an experienced healthcare attorney about your practice goals. If you are in one of the states where we have licensed attorneys, learn if our MSO/MSA services are right for you. Schedule a complimentary phone consultation with one of Jackson LLP’s healthcare attorneys.
This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader. It should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.
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