Many physicians who want their own private practice, but don’t want to deal with the usual business and administrative headaches, engage Management Services Organizations (“MSOs”). MSOs are like multi-purpose vendors – they can handle the billing and collections, negotiate with the landlord, perform HR functions, and so forth. For a monthly fee, the physician can outsource all non-clinical matters to the MSO, under what is commonly known as an MSO/friendly-PC arrangement
Why only non-clinical matters? Because of an important legal doctrine, followed in Massachusetts and many other states, known as the Corporate Practice of Medicine (“CPOM”).
But many contracts between medical practices and MSOs (aka Management Services Agreements or “MSAs”) have given the MSO a great deal of power and control over the practice entity. The MSAs have often gone right up to the line of what CPOM allows – sometimes crossing that line.
State legislatures have begun to take note. In the 2024 legislative session, the Massachusetts House and Senate considered a bill that would have codified CPOM and greatly restricted the control that an MSO could have over a medical practice. The standard MSO/friendly-PC arrangement would have become illegal. As it turned out, the Senate and House couldn’t agree on a version to submit to the governor for a signature before the end of that legislative session.
But on January 8, 2025, Governor Maura Healey signed a modified version into law. Titled “H. 5159: An Act Enhancing the Market Review Process,” the law introduces significant changes to the regulatory landscape for MSO/friendly-PC arrangements. Effective April 8, 2025, the law expands the Massachusetts Health Policy Commission’s (HPC) authority to scrutinize healthcare transactions and operational structures. The HPC will be able to closely examine management agreements to ensure compliance with CPOM principles, including the extent of management control and the calculation of management fees.
The ultimate impact of H. 5159 will largely hinge on the actions of the regulatory bodies responsible for enforcing and implementing its provisions. For now, it seems likely that the MSO/friendly-PC structure will remain viable under the new law. But it is critical that Massachusetts-based MSOs carefully navigate these changes by strengthening compliance programs and reevaluating management agreements to align with regulatory expectations. Proactive adaptation will be key to mitigating risks. This includes revisiting fee structures, enhancing documentation of service arrangements, and preparing for increased scrutiny of ownership and governance frameworks. While these measures may increase administrative burdens, they are essential for maintaining compliance and ensuring long-term sustainability in Massachusetts’ evolving healthcare landscape.
This new law underscores a growing trend of state-level regulation targeting private equity involvement in healthcare. As Massachusetts sets a precedent with this legislation, other states may follow suit, further reshaping how MSOs operate across the country.
The Reinstein Law Firm has helped many physicians and businesspeople implement MSO/Practice arrangements successfully. If you’re considering it, or are concerned about your current MSO/Practice arrangement under the new law, please give us a call or contact us today.
