Management Services Organizations (MSOs) and Med Spas

As a physician entering the booming medical spa space, you may be exploring ways to structure your practice efficiently. Management Services Organizations (MSOs) have become a popular model for supporting medical spa operations. However, med spa operators may be unsure of how an MSO works or whether it is a good fit for a med spa. Here are some considerations one should have when considering whether to partner with an MSO.

What are MSOs?

An MSO is a business entity that provides comprehensive support to healthcare providers by managing non-clinical functions such as billing, human resources, marketing, regulatory compliance, and financial operations. Additional services may include payer contract negotiations, credentialing, recruitment and management of non-clinical staff, IT support, administrative services, and supply chain management for pharmaceuticals and durable medical equipment (DME). MSOs may also offer assistance with branding and marketing strategies, as well as provide access to physical space and equipment through rental agreements.

How MSOs Can Be Useful For Med Spas

MSOs can offer a wide variety of benefits for med spa operators. These are just a few of those benefits:

Operational Efficiency 

Running a med spa involves more than patient care—it includes scheduling, hiring, advertising, maintaining facilities, managing inventory, and more. Many clinicians are not trained in business management, and costly mistakes can be the result. By centralizing back-office functions and implementing best practices, MSOs help med spas streamline workflows, reduce overhead, and improve profitability. When done correctly, the MSO model allows clinicians to maintain full control over patient care, ensuring that clinical quality and ethical standards remain top priorities.

Scalability

For physicians looking to expand their med spa footprint, MSOs can make growth more manageable. MSOs bring in professionals with experience in healthcare operations, allowing med spas to scale quickly and efficiently. An MSO can help streamline new launches and maintain consistency in branding and operations. This is especially valuable in multi-state operations, where regulations may vary and central oversight becomes even more important.

Financial and Strategic Advantages

Forming or partnering with an MSO offers more than just compliance—it can significantly boost the financial performance of a med spa. By streamlining non-clinical operations and implementing efficient systems, med spas can benefit in several ways. MSOs can reduce overhead because the MSO manages administrative tasks, so costs associated with staffing, technology, and back-office operations are lowered. Med spas experience higher patient retention when an MSO enhances the patient experience through improved scheduling, marketing strategies, and customer service, fostering stronger loyalty and encouraging repeat visits. Additionally, the MSO improves revenue cycle management by providing specialized financial and billing services, which speed up claims processing and reduce billing errors. As a result, med spas see better cash flow and increased profitability.

Why Med Spas Should Be Cautious With MSOs

MSOs can be a great idea for med spas. However, there are some potential challenges that med spa owners should be fully aware of.

Loss of Autonomy 

One of the primary concerns voiced by medical professionals entering into MSO arrangements is the potential loss of autonomy, particularly in how business operations intersect with clinical decision-making. The MSO’s control over staffing, scheduling, marketing strategies, pricing models, and patient intake processes can indirectly influence the way care is delivered. For example, an MSO could decide on an aggressive marketing campaign. While that might bring a lot of people in the door, it may not align with the personalized attention that the med spa is known for. Additionally, med spa owners might find themselves needing to negotiate or compromise on operational matters they previously managed independently such as branding, vendor relationships, and even the design of the patient experience. 

Risk of Non-Compliance

If an MSO fails to comply with healthcare regulations such as the Corporate Practice of Medicine (CPOM) laws, the med spa could face legal issues. CPOM laws prevent non-physicians or business entities from owning or controlling medical practices. While an MSO can help med spas navigate these laws by overseeing non-clinical operations, any violation of the boundaries between medical and non-medical services can result in serious legal consequences.

Picking the Wrong MSO

Med spas should perform due diligence before entering into an MSO partnership and ensure that the MSO has a proven track record of success and a clear strategy for meeting the med spa’s needs. Med spas should be cautious of MSOs that overpromise and underdeliver. One risk of partnering with an MSO is that the fees paid to the MSO may not always reflect the value of the services rendered. Some MSOs may charge high management fees without delivering tangible improvements to the med spa’s bottom line. 

How MSOs are Formed

An MSO can be structured as either a limited liability company (LLC) or a general business corporation, depending on what makes the most sense from a legal and tax perspective. Once the MSO is formed, key ownership documents, such as operating agreements or shareholder agreements, must be drafted to define each investor’s rights, obligations, and decision-making authority. These documents are critical to ensure clarity and prevent future disputes. The MSO will then enter into a Management Services Agreement (MSA) with one or more medical practices, which governs the relationship between the two entities. The MSA outlines the scope of services provided by the MSO, including management fees and performance standards, as well as the duration and termination conditions. This agreement forms the foundation for the partnership’s operational and financial structure.

Contact a Medical Spa Attorney 

Whether you are launching a new med spa or restructuring an existing one, working with a med spa attorney who understands both the med spa landscape and MSOs is crucial. Setting up a compliant MSO structure for your med spa involves more than just business strategy. Med spa attorneys with a robust understanding of MSOs can help you build MSO arrangements that support the growth of your business. Contact our office today.