The Super MSO Model in Urgent Care
Understanding the Super MSO Model and How it May Be Helpful in Meeting the Challenges Faced By Independent Urgent Care Operators
Part II in the Series
As previously discussed in Part I of this series, many independent urgent care operators discover early on, and after significant investments are made, that they may not have a real clear business strategy or roadmap to build long-term value for their business; a strategy that will ultimately lead to a successful and lucrative sale down the road. Even though their centers may be highly profitable today, they are concerned about the financial risks associated with opening new centers. In Part II, we will discuss the Super MSO (Management Service Organization) model.
In the Super MSO model, independently owned MSO’s (referred to as “Legacy MSO’s”) contribute their assets, which include both hard assets, such as furniture and equipment, and intangible assets, such as leases, to the Super MSO. The Legacy MSO’s then essentially become holding companies of the new Super MSO. The Super MSO then enters into new management services agreements with the existing medical professional corporations (the “PC’s”) whereby it employs all non-licensed staff and provides all non-clinical administrative services to the PC’s.
One of the more significant benefits of a Super MSO is that a group of operators can now start to collaborate, develop comprehensive long-term business strategies, and start sharing financial risk. The Super MSO model can also allow operators to reach that “critical mass” sooner; in other words, to reach that critical number of centers that would make them more attractive to a potential buyer. In the end, a larger group is a much more attractive and less risky investment to a potential buyer.
In addition to giving the members of a Super MSO the opportunity to practice better medicine by establishing stricter clinical protocols and sharing best clinical practices amongst a greater number of providers, other potential benefits of a Super MSO are as follows:
- Potential to invest together
- Greater access to financing and capital markets
- Sharing of overhead, economies of scale
- Greater leverage with managed care contracting
- Enhanced internal compliance, e.g., billing and coding reviews
- Greater depth of professional management
- Sharing of resources, e.g., physician coverage
- Greater likelihood of success in physician recruitment efforts
While the Super MSO is a separate and distinct legal entity, the financial structure of the Super MSO is “divisional” in nature. Put simply, this means that the net revenue for each center is tracked separately and credited to each center, or “division”, after a charge for common overhead. While each member-operator must adhere to the by-laws of the operating agreement of the Super MSO, this divisional structure does provide for a significant degree of financial autonomy.
In any potential Super MSO formation, there is an extensive evaluation and vetting process, which goes beyond the scope of this article. Prospective member-operators will have many questions and concerns that will need to be addressed. In the end, the Super MSO model may not be the right fit for every operator, but like any new venture, the pros and cons, as well as the risks and benefits, of staying independent or joining a larger group will have to be weighed.
If you would like to learn more about the Super MSO model and explore whether this type of model may be beneficial for you, please contact one of the partners in Gettry Marcus CPA’s health care group who can assist you and provide the necessary guidance.
Gettry Marcus CPA, P.C.’s health care group is comprised of CPA’s who provide accounting, tax, audit, financial, and business consulting to physicians, hospitals and other providers across the health care spectrum. If you would like to discuss how one of our health care CPA advisors can assist you, please contact Lee Ferber, CPA.