The Non-Physician’s Guide to Management Services Organizations in Texas

Estheticians working on a client at a Med Spa.

Many physicians struggling to meet the demands of operating a medical practice in today’s regulatory landscape find that Management Service Organizations, or MSOs, offer workable solutions with upside for efficiency and growth. But physicians aren’t the only ones who benefit from such arrangements.

MSOs offer non-physician health care professionals the opportunity to participate in health care enterprises usually reserved for licensed physicians, such as med spas, IV hydration clinics, or other clinics providing medical services.

In this blog, we’ll break down the basics of MSOs; the regulatory issues posed by Texas’ Corporate Practice of Medicine doctrine; and how RNs, physician assistants, nurse practitioners, and other health care professionals can be involved in the operations of a medical practice through an MSO.

How Do MSOs Benefit Non-Physician Health Care Professionals?

Nurses, physician assistants, nurse practitioners, nurse estheticians, and other health care professionals see first-hand the explosion of opportunities in the health care field. Patients are actively seeking innovative services to improve their health and well-being. Due to Texas’ Prohibition against the Corporate Practice of Medicine, however, many entrepreneurial non-physicians are prohibited from owning med spas and other such enterprises.

Fortunately, the MSO model can give non-physicians an avenue to participate in medical practices by assigning all non-medical aspects of the practice to a separate entity, which can be wholly owned by a non-physician.

Why Can’t a Nurse or Physician Assistant Own a Medical Practice?

Many states, including Texas, prohibit the Corporate Practice of Medicine (CPOM) to root out improper relationships in which a physician’s medical judgment is influenced by non-medical management. Per this legal doctrine, corporations and non-physicians are prohibited from employing a physician to provide health care services in the state.

Physician assistants can be minority owners in a medical practice with a physician or physicians, as long as their share in the practice does not equal or exceed the ownership interest of any individual physician owner. This is the only exception.

What Is an MSO?

Medical Management Services Organizations, or MSOs, are management entities that handle the business side of providing health care. Unlike medical practices, which must be owned by a licensed physician in Texas, MSOs may be owned by anyone with an interest in investing in the booming health care industry.

MSOs typically handle the administrative aspects of a practice, such as:

  • Management, financial, and actuarial management
  • Employment of non-medical personnel
  • Providing and managing office space
  • Administrative and claims management
  • Billing, coding, and collections
  • HR, accounting, and payroll
  • Regulatory compliance
  • Administrative and risk management
  • Quality reporting and improvement
  • Data acquisitions, analytics, and care management workflow
  • Information systems support

MSOs are established through management services agreements, which are complex contracts and can carry a substantial amount of risk if set up or executed improperly. To manage these risks, agreements must clearly delineate between the medical and non-medical aspects of a practice and ensure compensation is consistent with both state and federal laws.

Additionally, arrangements in which MSOs exert any amount of direction or control over a provider’s professional judgment can land physicians and non-physician providers in hot water for violating the CPOM.

Anti-Kickback Statute Considerations for MSOs

All participants in an MSO arrangement must be mindful that a management services agreement creates exposure to liability under the Anti-Kickback Statute (AKS), including criminal liability for knowingly and willfully receiving or soliciting remuneration for federally paid health care services.

To avoid enforcement and penalties, steps must be taken to ensure MSO arrangements fit within AKS safe harbors and meet all requirements therein. This includes structuring written agreements that specify MSO services, remain in effect for at least one year, and set commercially reasonably fees in advance at fair market value.

Hendershot Cowart Health Law Attorney Keith Lefkowitz points to a 1998 OIG advisory opinion that warns the “Anti-Kickback Statute, on its face, prohibits the offering or acceptance of remuneration for the purposes of arranging for or recommending the purchasing, leasing, or ordering of any service or item payable under Medicare or Medicaid.”

“Accordingly,” says Lefkowitz, “the OIG takes the position that many marketing and advertising activities involve at least technical violations of the statute. To the extent that the MSO provides marketing and advertising services for a physician practice, we would want to make sure we meet the applicable safe harbor in any MSO arrangement.”

A qualified attorney with experience in this arena can help providers and professionals structure sound compliant agreements most appropriate for their situation and objectives.

Seek Counsel to Structure Compliant MSO Arrangements

MSO arrangements that run afoul of federal health care laws subject physicians and non-physicians alike to violations, penalties, and degradation of their practice and professional standing.

It is essential to seek the guidance of attorneys experienced in health and medical law. At Hendershot Cowart P.C., our health care attorneys have extensive experience counseling both physicians and non-physicians on the proper execution of the MSO model, as well as a range of health care and regulatory compliance matters. To speak with an attorney, call (713) 909-7323 or contact us online.

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