The use of management service organizations (MSOs) to operate and control medical practices across the country is expanding (MSO Model). This approach is a popular method of allowing non-physicians and/or investors to manage medical practices in states where the corporate practice of medicine is otherwise prohibited.
Under the MSO Model, an MSO will sometimes work with existing medical practices; other times, in order to expand, the MSO must work with a physician to start a practice from scratch.
When starting a new practice, the MSO Model often relies on locating “friendly” physicians who are willing to own and work under the MSO. If you are approached to serve as a “friendly” physician, here are six issues to consider:
- Hire a lawyer. The documents the MSO provides are typically complex, and you are urged to sign quickly in order to secure the opportunity. It’s important to be smart and to assure the structure is compliant and properly drafted.
- Understand exactly what your role will be. Will you be the owner of a professional entity? Will you be paid for having a management role, such as acting in a medical director capacity and overseeing mid-level staff? Will you only be compensated for actual medical services? Will you be working in the practice, and how does this fit with other contracts you may have in place? You should review all of your expected commitments to the MSO and seek out appropriate and fair market value compensation.
- Know what liability you will take on. A “friendly” physician who owns the professional entity for the benefit of the MSO Model should be properly insulated from personal legal responsibility. Your lawyer should be looking for the MSO to indemnify you for financial, tax and other risks that you, as the owner of the professional entity, may possibly be responsible for.
- Ensure there is a painless exit strategy. Most arrangements between a “friendly” physician and an MSO Model are for extended periods of time. Many MSOs will reserve the right to require you to transfer ownership of the professional entity to any individual of their selection at any time. However, often the documents do not allow you to depart without an extensive notification period or a financial penalty.
- Be mindful of your professional responsibilities even when acting as a “friendly” physician. You must always have the right to make professional decisions. I also like to see language that allows the physician to quickly depart if he or she feels there are compliance concerns that are not being addressed.
- Watch out for noncompete or restrictive provisions that can impact physicians who may have their own separate professional practice or which might otherwise limit opportunities after they terminate involvement with the MSO. These provisions can be overly restrictive and should be negotiated.
Most importantly, you should always ask yourself why you want be involved with the MSO Model. Make sure there is an upside in terms of your increased professional opportunities, compensation, or the right to invest and benefit from the MSO Model’s financial success. Serving as a “friendly” physician when there is no advantage, means that you are just being used — and the arrangement is not friendly at all.
Ericka L. Adler, JD, LLM has practiced in the area of regulatory and transactional healthcare law for more than 20 years. She represents physicians and other healthcare providers across the country in their day-to-day legal needs, including contract negotiations, sale transactions, and complex joint ventures. She also works with providers on a wide variety of compliance issues such as Stark Law, Anti-Kickback Statute and HIPAA. Ericka has been writing for Physicians Practice since 2011.