Understanding Management Services Organizations (MSOs)

April 27, 2016

While MSOs can provide resources and administrative support for practices, it is critical to understand different contract provisions.

We all know that there is a lot to manage in any medical practice. Human resource issues, payroll, and benefits alone take significant time and effort to manage properly, coding compliance and revenue cycle management consumes much of a manager's time and effort, and making sure that you are receiving best pricing for supplies and services on top of all the usual day-to-day activities can simply be too much.

That's where MSOs come in. These are entities designed to help you with the administrative, or non-medical, work involved in running a practice. These organizations may be owned by non-healthcare provider investors, by hospitals, by groups of physicians, be a joint venture between a hospital and physicians, or even owned by health plans.

1. What they do

Here's a list of some of the areas in which an MSO can assist practices:

• Operational issues

• Financial management

• Human resources and personnel management

• Staff education and training

• Coding, billing and collection services

• Providing and managing office space

• Discounts and provision of EHRs and medical equipment

• Regulatory compliance oversight and management

• Credentialing and contract management

• Savings with group purchasing

• Risk management

2. The benefits to practices

The primary advantage to joining an MSO is to have access to management services and to ensure best (lowest) pricing on supplies and services. MSOs aggregate volume and as such, obtain economies of scale that allows them to obtain preferred pricing on everything from medical supplies to healthcare insurance. Many provide billing services allowing practices to outsource that altogether, and some offer significantly discounted EHRs where all members utilize the same vendor or platform.

3. Different MSO structures

There are two types of MSOs: those that provide business services to practices, allowing them to remain quite independent of the MSO, and those that own (buy) the tangible assets of practices and manage them directly. In the latter example, the MSO owns the equipment, supplies, and office space and leases it all back to the physicians. That is, the physicians continue to practice in their existing office space and own their medical records, keep their existing insurance plan contracts, staff, and so on, but no longer own the administrative expense and burden of managing those assets. This restricts autonomy somewhat and while it does not go as far as the physician becoming an employee, it does make it much more difficult for a physician to terminate an agreement with an MSO. However, if you want to practice medicine without the headaches involved in administration, then this may be the model for you.

MSOs are evolving to tackle the growing demands of a value-based marketplace. With many insurers now tying reimbursement to quality and outcomes, tracking performance and being able to meet clinical measures and metrics is becoming as burdensome as any other administrative work within a practice, and so MSOs are stepping in to offer solutions. Some will even go as far as developing clinical guidelines and standards of care, providing care coordination services, and fully integrating members clinically in order to take advantage of upside bonuses and shared savings from insurers.

4. Cautionary measures

While MSOs can provide the resources and support that you might need, it is critical that you fully understand the agreement that you are signing. The MSO should clearly spell out exactly what services are being purchased and the terms under which you are contracting. Make sure you understand any limitations associated with each service offering, such as the MSO billing and collecting from insurance companies but not managing patient collections, for example; and most critically, understand under what terms you may terminate the agreement including the amount of notice that needs to be given, how to buy back your assets (if you sold them), how to take your billing operation back in-house and so forth.

If you are joining an MSO that will purchase your assets, it is essential that the fee charged by the MSO is commercially reasonable and at fair market value. This is necessary in order to comply with safe harbors around Anti-Kickback, Stark, or Corporate Practice of Medicine statutes. Before agreeing to any price, get a fair market value opinion from an accountant or healthcare consultant that specializes in such transactions.

Based on our clients' experience, the MSOs that work best are typically the ones that are well-established, have plenty of experience in a particular specialty, and have physician-led governance to keep the physicians' best interests at heart.