Management service organizations own and provide nonclinical assets and personnel services to medical practices. Management service organizations allow for private equity entities to invest in medical practices.
In this video, Anjana D. Patel, JD, discusses the role of management service organizations in a private equity transaction.
“A management service organization, or MSO, is an entity that owns all of the nonclinical assets and nonclinical personnel that provide back-office management services to a medical practice,” Patel, a member of the firm in the health care and life sciences practice of Epstein Becker Green, told Healio.
According to Patel, many states have laws that stipulate that medical practices can only be owned by physicians. Because private equity entities cannot directly invest in or become an owner of a medical practice, Patel noted MSOs are formed to handle all nonclinical personnel and provide the nonclinical assets to the medical practice through a management services agreement.
“Because of the corporate practice of medicine provisions in many states, the MSO is truly the vehicle by which private equity can invest in a medical practice and it’s also the entity in which a selling physician group would get its rollover equity,” Patel said.