Am I in Control? A Physician’s Guide to Management Services Arrangements

Forming a management services arrangement can relieve licensed practice owners of many day-to-day operational headaches. But how much control of the practice will you have to give up?

A smilingfemale doctor speaking to a man and woman in business attire.

You’re a physician who owns a private practice. A business approaches you and offers to provide your practice’s administrative, billing, and supply management services — what’s called a management services arrangement. The offer is fair, and you would love to be able to focus more on treating patients and growing your practice. At the same time, you’re proud of the business you’ve built and want to have some control over its operation. Before you accept the terms of the management services agreement, what do you need to know?

What is a Management Services Agreement?

A management services agreement (MSA) is a complex contract establishing a business relationship between a medical practice owned by a licensed professional and a non-professional business entity (the manager). The MSA typically outlines which functions the manager will oversee and which the medical practice will manage. It is worth noting, however, that MSAs are not specific to medical practices and span virtually every healthcare setting. 

For a more in-depth discussion of MSAs, please read our article,  “Management Services Agreements in Healthcare.”

What will I manage under the MSA?

One of the primary purposes of an MSA is to delegate management responsibilities between the manager and the practice. The arrangement aims to relieve the practice owner of the stress of running an office in a way that maintains regulatory compliance. Thus, the extent of the split is typically driven by the parties, subject to state law limitations. 

In some states, the split can be straightforward. The manager can contract to be responsible for all non-professional responsibilities for the practice, like managing billing services, receptionist services, administrative services, as well as office maintenance and staffing needs. Meanwhile, the practice oversees all the professional responsibilities, like providing patient care and delegating work to healthcare professionals as necessary according to relevant healthcare laws.

In other states, however, the split must adhere to additional regulatory prohibitions. For example, some states prevent the manager from touching the practice’s finances or having any say in professional decisions made by the physician and the practice generally. In these states, the physician must retain the responsibility of managing the practice’s finances. This prohibition is recognized in the healthcare industry as the Corporate Practice of Medicine (CPOM) doctrine, and it can bring significant legal consequences if not navigated correctly.

Under the CPOM doctrine, non-professional business entities and non-professionals (i.e., those without professional licenses) are prohibited from hiring physicians to render professional medical services. The doctrine seeks to prevent non-physicians from influencing and interfering with a physician’s independent medical judgment. The result is that the practice retains complete control of any fees paid for professional services. 

See the video: The Corporate Practice of Medicine in Illinois

How much control can I have over the operation of my practice?

Management services agreements are contracts; thus, many responsibilities can be negotiated. However, as a physician, you can expect to retain control of all healthcare decisions for your patients, including choosing treatment methods and delegating medical tasks to others as allowed by state law. State laws outline the limitations of non-professionals to influence these actions, and many states expressly prohibit non-professionals from dictating how physicians and other licensed professionals perform these responsibilities.

The other responsibilities are a matter for discussion between the manager and the practice. Many licensed professionals are eager to move all functions the state allows to the manager. Others want to retain control over some of the non-medical functions within the practice. The MSA’s terms will dictate the physician’s degree of control over such functions. Thus, crafting an MSA that anticipates all potential areas of confusion or dispute is essential.

Get Legal Help

Negotiating your needs can be a difficult task to handle alone, especially if the other party has legal counsel. Moreover, MSAs are complex contracts requiring review by an attorney familiar with such agreements. 

The experienced negotiators at Jackson LLP can help you reach common ground, secure the control you desire, navigate your state’s CPOM restrictions, and give you peace of mind. If you operate in one of the states where we practice, set up a free consultation call to discuss how we may assist you.

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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