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Taking Care of Business. Advice For Group Medical Practices From Partner, Lee Ferber.

Taking Care of the Business Side

Physicians in a group practice are often busy enough keeping up with the clinical aspects of the practice, let alone worrying about the administrative functions of the business. Furthermore, the need to develop an infrastructure that will support the new health care delivery reimbursement models and quality care initiatives is requiring practice owners to seek greater expertise and management skills from their staff. That’s where a management services organization (“MSO”) can provide the necessary guidance, skill set and depth of management to navigate the changes in health care.

An MSO is an organization owned by a group of physicians, a group of non-physicians or some combination of both. MSOs generally provide practice management and administrative support services to group practices. MSOs also provide a practice the financial advantages inherent in a larger centralized administrative operation.

While the MSO service model may be relatively simple and straightforward to explain, the more complex issue is determining whether this is an appropriate strategic decision for your practice. There are five critical questions you should consider carefully before making the MSO decision.

Does my practice need the professional management offered by an MSO?

Practices and physicians have been besieged by ever increasing administrative burdens. The health care regulatory and compliance environment, day-to-day considerations of office management and the constant planning required to run a “medical business,” all conspire to drain physician time and attention away from clinical matters. And as the size of the average practice continues to grow, there is a greater operational complexity and the need for more professional management. Some of the questions to ask of yourself when considering an MSO arrangement are as follows:

• Are you having difficulty with your billing and collection functions?
• Are decreased reimbursements and/or increased costs affecting your practice’s cash flow?
• Will your practice be able to meet the challenges of increased clinical integration?
• Are you having trouble recruiting new physicians?
• Has adopting new technologies (i.e. EMR) adversely affected your operations?
• Has becoming “Accountable Care Ready” placed an undue strain on your practice?

The greater the number of these issues you identify as potential “road blocks” to continued growth and profitability, the greater case you can make for considering an MSO relationship.

What do I need to look for when hiring an MSO?

Once you have made the decision to consider an MSO, there are several factors that will help you to assess and differentiate MSO providers. Chief among these are:

• Current and prior experience in managing other practices.
• Specific experience with similar specialties.
• Managed care contracting experience.
• Professional and industry contacts of the MSO.
• Depth of MSO management.
• Shared staffing issues.
• Financial strength of MSO.
• Experience implementing EMR and other new technologies.
• Experience with meeting government and/or managed care initiatives, i.e. NCQA certification, EMR/meaningful use.
• “Buying power” of MSO.
• Check references!

What are the common services provided by an MSO?

The menu of services provided by an MSO can range from full administrative and financial outsourcing- including real estate and equipment lease arrangements – to a specific sub-set customized for your situation. Standard services include:

• Overall practice management.
• Billing and collection.
• Statistical reporting.
• Accounting and finance.
• Payroll and human resources.
• Information technology.

What do I need to consider in an MSO agreement?

As in all transactions and agreements, you must arm yourself with a healthy dose of “caveat emptor” when considering or negotiating an MSO agreement. However difficult the struggle to achieve clarity and unanimity may be, it is well worth managing expectations on both sides.

Factors to be discussed and agreed upon include:

• The specific services provided.
• MSO personnel provided.
• Who pays for what (practice vs. MSO).
• Special projects – included in MSO fee?
• Shared staffing and employee benefits.
• Space and/or equipment to be provided.
• Terms for termination of services.
• Non-compete/restrictive covenants.
• Financing, if any, provided by MSO.

Are there options in the MSO fee arrangement?

Depending on the vendor selected, scope of services to be provided and other terms, the MSO fee structure can vary as well. Common MSO fee arrangements can be based on:

• A fixed fee.
• Cost plus fixed fee.
• Cost plus mark-up.
• Success fee.
• Some combination of above.

Bear in mind that you must be cognizant of fair market value (“FMV”) considerations when establishing the fee structure.

Adopting an MSO model is a profoundly important step in the development of your practice. A comprehensive MSO service model will affect every aspect of your practice and as such, must be judiciously considered before making the commitment.

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