Management service organizations are becoming increasingly powerful in healthcare, particularly in gastroenterology, orthopedics and ophthalmology, Medical Economics reported Oct. 1.
The report, written by Ericka Adler, shareholder and manager of the Healthcare Practice Group at Roetzel & Andress in Chicago, laid out key things to know about MSOs:
1. What is an MSO?
A management services organization is a third-party operator that provides nonclinical services to physician practices, including revenue cycle management, human resources, compliance, marketing and billing support. MSOs can help physician practices implement quality improvement programs and offer guidance, potentially reducing the overhead costs associated with maintaining in-house departments.
MSOs can allow practices to stay up-to-date in compliance with Stark law, the Anti-Kickback Statute and the Health Insurance and Portability Act.
"At a time when many independent providers are overwhelmed by the administrative, legal, and other burdens of operating a healthcare business, MSOs can be a solution for practices that struggle to remain independent," the report stated.
2. MSOs' role in transactions
MSOs do not directly own clinical practices. Instead, they enter long-term management agreements with the practice, handling nonclinical needs in exchange for a significant fee. This MSO structure is commonly used in physician practice sales to private equity firms, where the PE buyers acquire the nonclinical assets and hire nonclinical staff.
To comply with state-specific corporate practice-of-medicine doctrines, MSOs ensure that physicians maintain control over decisions related to clinical care, often establishing physician-led advisory boards.
However, many MSO decisions still influence clinical operations. Critics argue that this model allows unlicensed individuals to become too involved in the daily management of healthcare practices, potentially affecting physician decision-making and patient care.
3. MSOs' recent scrutiny
Recently, more states have begun scrutinizing healthcare transactions, requiring state approval amid growing concerns about the influence of nonclinical actors, such as PE firms and MSOs, in the healthcare industry.
As of Jan. 1, Connecticut, Illinois, Massachusetts, Minnesota, New York, Oregon, Rhode Island and Washington have implemented reporting requirements for healthcare transactions. These laws give states the ability to assess the impact of specific healthcare transactions.