3 Reasons to Establish a Management Services Organization (MSO) [Video]

MSOs can play an important role in running a compliant, efficient independent healthcare practice. Learn the most common reasons that our clients set up MSOs.

[Video Transcript]

So you want to start an MSO, or a management services organization. Why would you want to do that? I’m Erin Jackson with Jackson LLP Healthcare Lawyers. I’ll discuss the top three reasons that clients come to us to establish an MSO.

First, one of the biggest reasons is that you are unlicensed or you’re a non-physician, and you live in a state or want to operate in a state that has corporate practice of medicine (CPOM) or fee-splitting prohibitions. This means that a person who is not a physician cannot practice medicine. And that includes owning and running a medical practice.

By establishing an MSO, that allows you to participate in the management of a practice, while steering clear of the actual practice of medicine. This requires additional contracts to implement and will require a medical director, but it’s a great way to get your foot in the door and participate in the industry you want to work in without running afoul of the laws.

The second reason you may want to establish an MSO is because you want to scale or you want to expand your practice. Now, sometimes if you have established a practice or business and you are hoping to eventually sell to private equity, an MSO model could be more appealing to them. I say could because it really depends on the specifics of where you’re operating, and what you’re doing. There are, of course, no guarantees on what PE may be interested in. But sometimes, this is more attractive to investors.

Three: efficiencies. Let’s say you’re a physician, and you want to focus on the practice of medicine. You aren’t interested in the day-to-day, mundane tasks of management. Billing, HR stuff — all of that can be left to a management organization. If this is you, you may be looking to establish an MSO relationship, but actually fill the shoes of the physician and look for someone else to be doing your management.

These are just a few of the long list of reasons why someone may establish an MSO, which is usually wrapped up and described by the MSA, or the management service agreement between the medical practice and the management organization. But if you are operating in any of the states in which our attorneys are licensed, we’re able to help you navigate this process and get your business or practice either expanded or up and running. So feel free to reach out.