Risks In Using an MSO: What to Know

Management Services Organizations (MSOs) have become extremely attractive to medical practices because they offer providers administrative support, cost savings, and the potential for increased efficiency. However, while MSOs can be valuable partners for medical practices, they also carry significant risks that providers must carefully evaluate before entering into an agreement. Understanding these risks can help protect both the business and clinical aspects of a medical practice. Here is what to know before contracting with an MSO.

Benefits of MSOs

MSOs offer a variety of benefits. Here are some of the reasons that medical practices contract with MSOs:

Administrative Relief: MSOs handle non-clinical tasks such as billing, payroll, compliance, and human resources, allowing physicians to solely focus on patient care.

Cost Reduction: Centralizing and streamlining operations can lower overhead and improve efficiency.

Practice Growth and Expansion: MSOs can help practices enter new markets or add service lines that would be difficult to pursue independently.

Access to Capital: Many MSOs provide outside funding, including private equity, enabling investment in infrastructure, technology, and strategic initiatives.

Operational Flexibility: Financial and administrative support allows healthcare providers to modernize their practices while maintaining focus on clinical excellence.

Risks of MSOs

While MSOs offer significant benefits, partnering with an MSO is not without potential pitfalls. Understanding these risks before entering an MSO relationship is essential for protecting both the practice and patient care. Here are some things that medical practices should keep in mind:

Contractual Risks

MSO arrangements are formalized through contracts. A contract between an MSO and a medical practice is a management services agreement (MSA). These agreements can carry significant risks if they are poorly drafted, overly restrictive, or unclear. Without careful review and negotiation of the MSA, providers may find themselves locked into arrangements that are financially burdensome, operationally limiting, or incompatible with long-term professional goals, underscoring the importance of legal guidance. Some contracts include automatic renewal clauses, making it difficult for a provider to exit the agreement without advance notice or financial penalties. Restrictive termination provisions may require providers to meet strict conditions or pay substantial fees to end the relationship. Additionally, many contracts include non-compete clauses that limit where and how a provider can practice independently after leaving the MSO, potentially restricting future business opportunities. 

Financial Risks

While MSOs often advertise significant cost savings and the potential for increased revenue by handling administrative tasks more efficiently, not all agreements are structured equally. Poorly drafted contracts can include hidden fees, unexpected charges for routine services, or revenue-sharing arrangements that heavily favor the MSO at the expense of the provider. These financial pitfalls can reduce the expected benefits of such an arrangement and, in some cases, threaten the profitability of a practice. Providers may also encounter unclear billing practices, undisclosed overhead costs, or long-term financial obligations that were not initially apparent.

Operational Risks

Operational risks can emerge when an MSO takes over critical functions of a provider’s business, including staffing, marketing, billing, and day-to-day administrative management. While outsourcing these responsibilities can free up time and resources for providers to focus on patient care, it may also result in a loss of control over essential operational decisions. Providers may find that policies implemented by the MSO conflict with their preferred business practices, patient care standards, or branding strategies. Without careful oversight and clearly defined roles in the contract, providers risk operational inefficiencies, misaligned priorities, or decisions that could negatively impact both patient experience and business performance.

Risk of Reduced Professional Autonomy

Partnering with an MSO can sometimes restrict a provider’s autonomy when it comes to critical business and clinical decisions. Some MSOs may exert influence over areas such as pricing strategies, treatment protocols, marketing initiatives, or staffing choices, which can occasionally conflict with the provider’s professional judgment or personal approach to patient care. This influence can create tension between the provider’s desire to maintain high-quality, individualized care and the MSO’s operational or financial priorities. 

Mitigating Risks 

While partnering with an MSO is not without risks. However, many of these risks can be mitigated, making contracting with an MSO worthwhile. Before entering into an MSO, providers should take several precautionary steps to protect their practice and professional interests.

To mitigate contractual risks, providers should engage experienced healthcare attorneys to review and negotiate the MSA before signing. Attorneys who understand MSOs can identify problematic clauses, such as automatic renewals, restrictive termination terms, or non-compete provisions, and suggest modifications that protect the provider’s long-term interests. Clear language regarding obligations, deliverables, and termination rights can prevent future disputes and reduce exposure to unforeseen penalties. Periodic contract audits are also advisable.

Financial risks can be minimized through detailed financial due diligence and transparent accounting practices. Providers should request a full breakdown of fees, overhead costs, and revenue-sharing arrangements and confirm that billing procedures are clearly documented. Independent financial reviews or consultations with healthcare finance experts can help ensure that projected cost savings and revenue benefits are realistic and fairly distributed. Including explicit clauses in the MSA regarding fee structures, reporting requirements, and audit rights can further reduce the likelihood of hidden charges.

Operational risks can be mitigated by defining roles, responsibilities, and decision-making authority in writing. Providers should retain control over core clinical and business functions critical to patient care, branding, and quality standards. Regular performance reviews can help ensure alignment between the MSO’s activities and the provider’s objectives.

To safeguard professional autonomy, providers should negotiate terms that preserve authority over clinical decisions and maintain discretion in key areas such as pricing, treatment protocols, and staffing.

Contact an Experienced MSO Attorney

Given the complex legal, financial, and operational considerations involved in arrangements with an MSO, consulting an experienced healthcare attorney is essential for medical practices. Early legal guidance ensures that your partnership with an MSO supports both your practice’s growth and the delivery of high-quality patient care. Mitigate risks by contacting an experienced MSO attorney today.