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MSO Management Service OrganizationA Management Services Organization (MSO) is a legal entity created to provide management and administrative services to other organizations. For the purpose of this article, we will describe the physician-owned MSO that provides services to multiple independent medical groups and is owned and governed by the owners of the medical groups the MSO serves. The physician-owned MSO is designed to allow private practice physicians to maintain 100 percent control of their practice while optimizing operating efficiencies, enhancing the care they provide and building long-term financial assets. The MSO model allows physicians to increase efficiency and cost-effectiveness in providing services to patients and other stakeholders. Following are the specifics of how this is accomplished. A medical practice can divide its general functions into clinical and business. Over the years, physicians have found that their business operation has increased in importance and complexity as adequate reimbursement becomes more of a challenge and government regulation increases. Business operations consume 5–10 percent or more of medical practice revenue with the remainder paying clinicians’ salary and benefits. Two non-clinical goals of a well-run medical practice should be to decrease business overhead and provide the best possible business and financial management. Success in these goals will maximize income of the medical practice owners.
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The MSO can be used to achieve these goals for several medical groups by placing their business management and financial functions within a single corporation, the MSO. The clinical practices are relieved of direct involvement in these functions and of personnel who may have been carrying out these functions.
The end result is that physicians continue ownership in their clinical practice and also own a portion of the MSO that provides services to the practices. If, for example, three medical practices got together to form an MSO, and the practices had 10, 20 and 30 owners, the MSO would be owned equally by 60 physicians. Each physician would purchase an equal number of shares to capitalize the MSO. The MSO, in this model, would be owned by individuals, not by the three practices. The MSO would be governed by a representative board of directors (or managing members if a LLC-limited liability corporation). Each practice would have proportionate representation on the board of directors. Using this example, the MSO board may have one member from the smaller practice, three from the largest practice and two from the remaining practice. The operating agreement of the MSO would have provisions to delineate the powers of the board and to assert minority rights that would prevent the smaller practices from being outvoted on important matters. |
It is important to note that after the formation of the company by the three medical practices in the example we are using, there are now four companies and the MSO is subservient to the owners of the three independent practices. Nothing changes about the clinical practices. They go on as usual providing patient care. Each practice maintains its existing contracts with, payers, facilities and its employees. The transformation from pre- to post-MSO is illustrated below.
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