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.
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”) give the MSO a great deal of power and control over the practice entity. The MSAs often go right up to the line of what CPOM allows – and sometimes they cross that line. On top of that, MSAs are often extremely difficult for the Practice to get out of. Still, it has often proven to be satisfying and lucrative for MSOs and medical practices alike, and MSO/Practice arrangements have flourished.
State legislatures have begun to take note. In the last legislative session, the Massachusetts House and Senate considered a bill that would have codified CPOM and greatly restricted the control that an MSO can have over a medical practice. The standard modus operandi of MSOs would have become illegal, and the MSOs would have become much more like regular business vendors with cancellable contracts. It would have changed the entire MSO/Practice dynamic.
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 the legislative session. Whether it will be revived next session is unclear.
An important note: The bill, as drafted in the last session, seems not to apply retroactively. Existing arrangements would potentially be grandfathered. As a result, physicians and businesspeople are motivated to move quickly to set up MSO/Practice arrangements.
The Reinstein Law Firm has helped many physicians and businesspeople implement MSO/Practice arrangements successfully. If you’re considering it, please give us a call.
