As healthcare providers look to streamline operations and improve efficiency, Management Service Organizations (“MSOs”) have become increasingly vital in helping medical practices, dental offices, and other healthcare entities manage non-clinical functions. MSOs typically provide administrative support, including billing, non-clinical human resources, IT management, and compliance services. These partnerships enable healthcare providers to focus on delivering quality patient care while MSOs handle the back-office tasks.
However, entering into an MSO agreement is a significant decision that requires careful legal consideration. At Sauchik & Giyaur, we specialize in healthcare law, with extensive experience advising clients on MSO agreements. This post aims to give healthcare providers a general overview of what to consider when negotiating an MSO agreement.
What is an MSO Agreement?
An MSO agreement is a contract between a healthcare provider (such as a physician practice) and an MSO. The MSO provides non-clinical services such as management, billing, non-clinical human resources, compliance, and office administration, allowing a healthcare practice to focus solely on patient care. By entering into this agreement, healthcare providers can streamline operations, reduce overhead, and enhance efficiency without sacrificing quality.
That said, MSO agreements are more than just administrative contract – they often carry substantial legal and regulatory implications. Ensuring that your MSO agreement is structured correctly is critical for your practice’s success and legal compliance.
Key Considerations in MSO Agreements
1. Compliance with Healthcare Regulations Healthcare is one of the most heavily regulated industries, and MSO agreements must comply with numerous federal and state laws, including the Stark Law, Anti-Kickback Statute, and other regulatory guidelines. MSOs must not provide services in a way that would violate these laws, particularly when they involve relationships between healthcare providers and third-party vendors.
Pro Tip: Always consult with legal counsel to ensure that the MSO agreement is structured to avoid conflicts of interest and potential regulatory violations.
2. Ownership and Control One of the central issues in any MSO agreement is determining who controls the business operations. While an MSO can offer significant operational support, healthcare providers must always maintain clinical autonomy. The agreement must clearly define the scope of services, ensuring that the MSO does not infringe upon the practice’s medical decision-making.
Pro Tip: Ensure that the agreement specifies that clinical decisions remain under the control of the healthcare providers and that MSOs only handle non-clinical functions.
3. Fee Structure and Compensation The financial terms of an MSO agreement are critical. The fee arrangement should
reflect fair market value and should be structured in a way that aligns with both parties’ interests. For example, the MSO might be compensated on a flat fee, percentage of revenue, or another model. It is essential to carefully negotiate this provision to avoid potential legal risks.
Pro Tip: Work with a healthcare law expert to establish a fair and transparent fee structure that avoids any potential for abuse under fraud, waste and abuse laws.
4. Termination and Exit Strategy MSO agreements often last for a set period, but healthcare practices should plan for the possibility of termination or acquisition by private equity investors. It is important to outline clear terms for contract termination, including any notice periods and exit strategies. These provisions protect both parties and provide clarity if either party wishes to end the relationship or modify the terms.
Pro Tip: Ensure that the contract includes adequate safeguards for data protection, patient confidentiality, and transition planning in the event of termination. Further, being that a successful MSO model in a practice is particularly attractive to private equity investors, it is crucial that the agreement is structured in a way that would allow for the acquisition of the practice in the future.
5. Liability and Risk Management MSOs often provide services that carry legal risks, including billing, compliance, and human resources. It is essential that the MSO agreement clearly delineates liability, particularly regarding errors in services provided by the MSO. Any misstep in these areas can lead to significant exposure for the healthcare provider.
Pro Tip: Consider including indemnity clauses and releases that protect the healthcare provider from liability for the MSO’s mistakes or negligence.
Why Choose Sauchik & Giyaur for Your MSO Needs?
Navigating the complexities of MSO agreements requires both legal expertise and a deep understanding of the healthcare industry. At Sauchik & Giyaur, we bring years of experience advising healthcare providers on MSO agreements. Our team of experienced attorneys can help ensure that your MSO agreements are properly structured, compliant with all regulatory requirements, and align with your business goals.
Whether you are negotiating an MSO agreement for the first time or need to review and update an existing agreement, we can guide you through every step of the process. Our services include:
· Drafting and negotiating MSO agreements
· Advising on compliance with healthcare regulations
· Structuring fee arrangements to avoid legal pitfalls
· Assisting with contract termination and exit strategies
· Offering ongoing legal support for your MSO relationship
Get in Touch
Whether you’re a physician practice, dental group, or other healthcare provider, our team is here to guide you through the key considerations and help you structure agreements that protect your business while complying with applicable laws. If you are considering entering into an MSO agreement or need guidance on an existing arrangement, please do not hesitate to reach out to our team at (212) 668-0200 or via email at info@mdrxlaw.com for a consultation.