As Texas physicians navigate an increasingly complex, corporate, and politicized healthcare system, physician autonomy has become a critical issue.
Nearly four in five physicians are now employees of hospitals, health systems, or corporate entities, and 48 percent of employed physicians cite diminished autonomy as the worst part of their job.
At the same time, market pressures, such as declining reimbursement rates, rising costs, complex billing requirements, and regulatory burdens, are straining independent physician practices to the point of unsustainability.
Many self-employed Texas physicians may feel they have only two choices:
- Sell their practice to a corporate entity and lose autonomy; or
- Continue to struggle alone against growing burdens.
There is a third option:
- Management services organizations (MSOs) can helpTexas physicians preserve clinical independence while gaining resources traditionally available only through hospital employment.
However, not all MSOs deliver on their promises, and the structure of these arrangements matters enormously.
MSO Structure and Services
A management services organization provides administrative, operational, and business support to medical practices while – when properly structured – allowing physicians to maintain autonomy and practice medicine independently.
What MSOs Provide
MSOs typically handle non-clinical business functions:
- Billing management – billing, coding, claims submissions, collections
- Human resources – payroll, benefits administration, recruiting
- Information technology – electronic health records, practice management software, data analytics, cybersecurity
- Payer contracting – insurance negotiations, contract management, payer compliance
- Regulatory compliance – federal and state health law compliance, auditing and monitoring compliance plans
- Financial management – accounting, financial planning, budgeting
- Operational support – facilities management, purchasing, marketing
How the MSO Structure Works
In a properly structured MSO arrangement:
- Physicians retain ownership. The physician-owned professional corporation (PC) or professional limited liability company (PLLC) maintains ownership of the medical practice.
- Clear contractual separation. A management services agreement (MSA) delineates responsibilities – the MSO handles administrative functions while explicitly preserving physician control over medical services.
- Revenue flows to physicians. Insurance payments and patient fees flow to the physician-owned entity, which then compensates the MSO for management services. Patients remain patients of the physician practice.
- Physicians control clinical decisions. Clinical protocols, treatment standards, patient acceptance, hiring of clinical staff, and medical judgment remain entirely within physician control.
The Rewards of MSOs for Texas Physicians
Texas physicians consider MSO partnerships to address genuine challenges in today's healthcare landscape.
MSOs Provide Operational Efficiency
MSOs handling revenue cycle management can ensure claims are submitted correctly and denials appealed promptly – maximizing collections. This directly improves your bottom line without requiring additional investment in billing staff, a third-party biller, or expensive practice management systems.
More Time for Patient Care
The administrative burden of running a medical practice can consume 15 to 20 hours per week – time taken away from patients and your personal life. MSOs shoulder that burden for you.
Enterprise-Level Resources at Practice-Level Scale
MSOs can provide enterprise-level technology – including AI-assisted assessment and diagnostic tools, enhanced negotiating power with insurers, and infrastructure for value-based care models that would be cost-prohibitive for solo practitioners.
Clinical Autonomy
Most importantly, well-structured MSO arrangements allow physicians to access these resources while maintaining the clinical autonomy and independent ownership that hospital employment would eliminate.
The Risk of MSOs: Profit Pressure Over Practice Quality
MSOs, especially those backed by private equity, may prioritize profits over patient care – a dynamic our firm has witnessed first-hand, representing physicians locked into arrangements with their MSO that actually violate Texas’s prohibition against the corporate practice of medicine.
The key question to ask before entering an arrangement: Does the MSO structure preserve the independence you are seeking, or is it merely a “out of the frying pan, into the fire” situation? In other words, you may avoid hospital employment only to see your clinical autonomy threatened by the terms of the agreement.
Steps to Protect Your Clinical Autonomy from MSO Influence
Texas physicians considering MSO partnerships should take specific steps to ensure the management services agreement preserves genuine independence:
Step 1: Understand CPOM Red Flags
Texas courts have identified warning signs that an MSO violates the prohibition against the corporate practice of medicine (CPOM) laws:
- Excessive fees. MSOs receiving more than 15% to 20% of practice revenue raise concerns. In Flynn Brothers v. First Medical Associates (1986), the court found a CPOM violation when a non-physician entity collected two-thirds of physician profits.
- Control over medical personnel. In Xenon Health LLC v. Baig (2015), a "contractual scheme" allowing non-physicians to recruit, place, and hire anesthesiologists was deemed a "sham arrangement" violating CPOM.
- Financial control of billing. A Travis County jury recently awarded $10.2 million to a physician group when a management company violated CPOM by controlling billing and concealing financial data from physicians.
- Clinical decision-making control. MSOs that establish protocols affecting medical care, impose productivity quotas, or dictate referral patterns violate physician independence.
- Restrictive exit provisions. Non-compete, non-solicitation, or non-dealing provisions that make termination prohibitively expensive can lock physicians into arrangements that compromise professional judgment.
- Nominal physician "ownership." Some MSOs install a "friendly" or "captive" physician owner who is licensed across states and serves as the sole owner of all the MSO's practices – allowing the MSO to functionally control practices while remaining CPOM compliant on paper.
Step 2: Beware of Overly Restrictive Non-Compete Agreements
Management services agreements typically include non-compete provisions for physicians, particularly when serving in management or administrative roles.
Section 15.50(b) of the Texas Business and Commerce Code (revised in September 2025 with the passage of Texas Senate Bill 1318) creates two distinct standards for physician non-compete agreements:
Non-compete provisions that restrict physicians from practicing medicine must comply with stringent requirements, including:
- Geographic Limit: Maximum five-mile radius from the physician's primary practice location
- Duration Limit: Cannot exceed one year from termination
- Buyout Cap: Physician must have a buyout option capped at total annual salary and wages at termination
- Good Cause Termination: The non-compete becomes void if the physician is involuntarily terminated without "good cause" (related to job performance or conduct)
- Patient Protections: Must allow access to patient lists (treated within one year of termination), medical records, and continuing care for patients with acute illnesses
Non-compete provisions that restrict only "managing or directing medical services in an administrative capacity" are likely subject to general enforceability standards. Under this framework, courts analyze whether the restriction is reasonable in time, geographical area, and scope of activity, and whether it imposes no greater restraint than necessary to protect legitimate business interests.
Whether these MSA non-compete provisions must comply with Texas's strict physician non-compete requirements or general enforceability standards is an open legal question – and the answer could significantly impact your ability to leave the MSA and start your own practice.
Here’s the legal gray area: If the narrower physician-specific requirements apply, the buyout cap becomes an issue: MSOs do not typically pay physicians salaries because CPOM prohibits unlicensed entities from employing physicians or selling medical services. Instead, physicians pay MSOs for management services. Yet physician non-competes require buyouts to be enforceable, and the revised law caps buyouts at the physician's annual salary and wages. Since MSOs don't pay physician salaries, the buyout must be zero, allowing physicians to exit the non-compete without payment and rendering it unenforceable.
Courts have not yet established clear guidelines for enforcing non-competes against physicians in MSAs since the passage of SB 1318. Until they do, physicians and MSOs face uncertainty about whether these provisions are enforceable. This ambiguity may prompt MSOs to develop creative workarounds – such as paying physicians for clinical services through staffing arrangements between the MSO and the medical practice. Whether such arrangements are enforceable under the new non-compete law or whether they stand up to CPOM scrutiny remains to be seen.
Learn more about Texas Requirements for Physician Non-Competes.
Grandfathered agreements: MSAs signed before September 1, 2025, that have not been renewed are governed by the older "reasonableness" standard for physicians, which often allowed broader geographic ranges and required only a "reasonable" (uncapped) buyout price.
Step 3: Pay Attention to Critical MSA Provisions
Your management services agreement should explicitly protect clinical autonomy:
- Clinical independence language. The MSA must state unambiguously that physicians retain complete control over medical decision-making, hiring and supervising clinical staff, and setting clinical standards and protocols.
- Fixed fee structure. Avoid percentage-of-revenue arrangements. Compensation should be fixed fees based on fair market value, not tied to practice revenue or referral volume.
- Physician control of billing. Ensure physicians maintain oversight of fee schedules, billing practices, and the collection of fees for professional services rendered.
- Reasonable termination rights. Include exit provisions that allow physicians to terminate the relationship without prohibitive costs or overly broad non-compete or non-solicitation restrictions. Understand what happens to patient records, billing systems, and staff if the relationship ends.
- Data ownership. Clarify that physicians own patient medical records and practice data.
- Dispute resolution. Establish clear mechanisms for resolving disagreements without litigation.
MSO Legal Advice for Texas Physicians
The healthcare attorneys at Hendershot Cowart P.C. have extensive experience helping Texas physicians navigate (and exit) MSO arrangements, protect clinical autonomy, and ensure compliance with Texas’s prohibition against the corporate practice of medicine.
Our attorneys can specifically evaluate:
- Corporate practice of medicine doctrine compliance
- Stark Law and Anti-Kickback Statute compliance
- The enforceability of non-compete agreements
- Adequacy of professional liability insurance coverage
- Exit rights and associated costs
After entering an MSO arrangement, your attorney can assess whether the relationship actually matches the legal structure. If the MSO begins exerting inappropriate control over clinical decisions, financial transparency, or exit rights, your attorney can help you enforce the agreement as written or leverage the corporate practice of medicine doctrine to demonstrate to the Texas courts why the agreement may be illegal.
MSA Reviews by Texas Healthcare Attorneys
Autonomy is fundamental to physician professional satisfaction and quality patient care. Don't sacrifice your independence without understanding exactly what you're agreeing to.
Ready to discuss an MSO partnership or concerned about your current arrangement? Call (713) 783-3110 or contact us online to schedule a consultation with one of our award-winning healthcare attorneys.