Beyond Private Equity: Why Some Physicians Are Choosing MSOs Instead
You don’t have to give up control to get help running your practice.
If you’re a physician who owns a private practice, you don’t need us to tell you about the challenges of managing day-to-day operations. You entered the field to help people, so your focus—and passion—is patient care. But as you know, your business responsibilities aren’t optional. Unless you somehow managed to attend business school while studying medicine, handling administrative and operational tasks may not come naturally.
While juggling patient needs and business demands, you may find private equity increasingly appealing. Private equity firms in the healthcare space offer more than just capital. They can support operational changes and help implement technologies like electronic health records (EHRs), telemedicine platforms, data analytics, and even AI tools.
But the tradeoffs of private equity partnerships can’t be ignored.
Why Private Equity May Not Align With Your Practice Goals
Private equity firms exist to generate returns for their investors. That means profit often takes precedence over patient care. As a result, the PE firm may cut staff, restrict services, increase prices, or order more procedures.
Physicians also risk losing autonomy in these arrangements. Private equity groups typically structure deals in one of three ways:
- Merging the practice into a larger business
- Taking a partial or full ownership stake in the practice
- Using a “platform-plus-add-on” model—buying a large practice, then folding smaller practices into it
No matter the structure, physicians usually give up some control—sometimes a lot of it.
If you’re hesitant about these tradeoffs but still need help running your business, you’re not out of options. There’s an alternative that keeps more control in your hands: a management services organization (MSO).
What Is an MSO—And Could It Work for Your Practice?
An MSO provides non-clinical business support to a healthcare practice. It allows physicians to focus on patients while delegating administrative responsibilities. Common MSO services include:
- Billing and bookkeeping
- Onboarding and human resources
- Scheduling
- Technology and EHR management
- Marketing
- Office management
An MSO is typically created as a separate entity. This structure can help with compliance in states that restrict who can own or operate a medical practice—a doctrine called the corporate practice of medicine (CPOM). Under CPOM laws, only appropriately licensed clinicians can own a medical practice. However, anyone can own an MSO, including physicians or outside business professionals.
How MSOs and Medical Practices Work Together
The practice and the MSO enter into a management services agreement (MSA). This contract establishes the relationship and outlines the responsibilities of each party. The licensed clinicians retain control over medical decisions, while the MSO handles operations.
Because the two entities are distinct, the MSA must be carefully structured to avoid violating state CPOM or federal laws like the Stark Law or Anti-Kickback Statute.
See our MSO Learning Resources page for more information about MSO formations and compensation arrangements.
Forming or partnering with an MSO isn’t a quick fix. It requires careful planning and compliance oversight. Still, for physicians who want business support without giving up ownership or decision-making power, MSOs can be a valuable alternative to private equity.
Get Legal Support
Are you considering selling to a private equity firm or partnering with an MSO? If you operate in one of the states where we have licensed attorneys, you can schedule a consultation to talk through your options.
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.