You might have heard this term if you are looking to grow your medical practice. It is a contract between two different business groups. One group is usually a medical practice owned by doctors. The other is a business group that handles the office work. This business group is often called a management services organization.

If you are a doctor, you want to focus on your patients. You do not want to spend all day on taxes or fixing the office printer. That is where this contract helps. It lets the business group take over the boring tasks. They handle things like the building, the computers, and the marketing. Meanwhile, you keep the power over medical care. This split is very important for staying legal.

What is a Management Services Agreement

A management services agreement is the bridge between a doctor and a business partner. In many states, a person who is not a doctor cannot own a medical practice. This is due to rules meant to keep business goals away from medical choices. To fix this, doctors often set up a friendly PC. This is a special type of professional company for licensed workers only.

The business group or management services organization signs the contract with the friendly PC. The contract says exactly who does what. The medical group handles hiring nurses and setting prices for checkups. The business group handles things like paying the light bill and finding new patients. It is a joint venture where both sides have clear jobs.

When is an MSA Required

You might need this setup if you want to bring in partners who are not doctors. Most states have a rule called the corporate practice of medicine. This rule says that only a licensed doctor should make choices about patient care. If a big company tries to tell a doctor how to treat a patient just to make more money, it is a problem.

A management services agreement solves this by keeping the clinical and business sides separate. It is also useful when different types of medical pros want to work together. For instance, a nurse might want to start a medical spa with a doctor. If the state says a nurse cannot own a practice with a doctor, they can use this contract to build a legal structure that works for everyone.

How do profits flow in a way that does not violate CPOM

Money can be a tricky subject in healthcare. You cannot just split patient fees with someone who does not have a license. This is often called fee splitting. It is illegal because it might make doctors refer patients just to earn a kickback. To avoid this, all the money from patients goes into the doctor’s bank account first.

The business group then gets paid a fee for the work they do. This fee cannot just be a random slice of the pie. It must be based on the actual value of the services. If the business group takes a huge chunk of the money without doing enough work, state agencies might look at it as a cover for illegal ownership.

Avoiding Fee Splitting Prohibitions

Fee splitting is a major risk for any medical group. If an unlicensed person gets a cut of the patient’s bill, it might look like they are the ones really running the show. Most states want to make sure that payments for medical care stay with the people giving the care. The business side only gets paid for business tasks.

If you are experiencing a state audit, they will look at your bank accounts. They want to see that the doctor is the one who gets the money from the insurance companies. If the money goes straight to the business group, you could face big fines. A good contract makes sure the path of the money is clear and legal.

Establishing Management Fees

How do you pick a fair price for management? Many people think they can just charge a percentage of the practice’s earnings. While some states allow this, many do not. A better way is to use a flat fee or a cost plus fee. This means the doctor pays the business group for the actual costs of running the office plus a small, fair profit.

This fee must match the fair market value. If a business group charges 50 percent of all revenue, it looks like they are taking too much. It might look like they are trying to own the practice without a license. Using a specific dollar amount for services like IT or billing is a much safer bet.

How Does the MSO Pay Expenses

The management services agreement lists the order for paying bills. Usually, the doctor’s salary is first. After that, the practice pays for things like staff pay, rent, and medical tools. The last thing to get paid is the management fee for the business group. This shows that the medical practice comes first.

The business group has the power to look at the books to make sure there is enough money for everything. They help the practice stay on track so that everyone gets paid on time. Having a clear order for payments keeps the business running smooth and helps avoid fights over money.

The Risks of MSAs

There are some big risks to think about. For doctors, the risk is mostly about their license. If a board thinks a doctor is letting a business person make medical choices, the doctor could lose their right to work. There is also the risk of the unauthorized practice of medicine for the business owners.

Federal laws like the Anti Kickback Statute are also a factor. This law says you cannot pay someone to get patient referrals. If the business group is getting paid in a way that looks like a reward for sending patients to the doctor, the government might step in. These violations can lead to heavy fines or even time in jail.

What should a management services agreement include

Every agreement needs to be in writing. It should list the names of everyone involved and where they are located. A good checklist includes:

• A signed contract by both sides.
• Clear words that anyone can read.
• A detailed list of every job the business group will do.
• A clear plan for how and when the money will be paid.
• A length of at least one year to meet certain federal rules.

Risks involving Stark Law and False Claims Act

The Stark Law is a rule that stops doctors from referring patients to places where they have a financial interest. If a doctor owns a piece of the business group and sends patients there for tests, it could be a violation. This law was made to keep medical choices honest.

The False Claims Act is another big one. It lets the government go after people who lie to get money from programs like Medicare. If the billing done by the business group is wrong or fake, the doctor and the business could both be in trouble. Whistleblowers who find this fraud can even get a reward for telling the government.

Illegal vs Legal Free Medical Services

Sometimes doctors want to give away care for free. But you have to be careful. If the value of the service is below what is normal, it might look like a bribe. Giving away a free checkup to get a patient to sign up for a surgery could be seen as an illegal kickback.

There are times when free care is okay. For example, if the patient lives in a place where there are not many doctors, you might be able to help them for free. You must follow the rules for underserved areas. Always check the law before giving away services to make sure you are not breaking any fraud rules.

Do I Need an MSA

If you are a doctor working with an investor, you probably need one. It protects your license and your business. It is also a good idea for nurses or other pros who want to open a medical spa. Getting a healthcare lawyer to help you build the right setup is the best way to stay safe.

When you are going through the process of starting a new venture, talk about the money first. Many partners fall out because they do not agree on how the fees work. Setting these rules early helps you avoid stress later on.

Experience a safer way to grow your practice with a healthcare lawyer who knows the rules. Call Dike Law Group at (972) 290-1031 to talk about your management services agreement today.