MSO Healthcare: How It Works, and Why Practices Use It

Management services organizations (MSOs) are a popular business model for healthcare providers who prefer to focus on clinical services rather than administration. These entities aid practice management by handling tasks such as billing, human resources, and IT support, allowing providers to focus solely on patient care.

The MSO healthcare model offers benefits for operational efficiency and scalability, but this business structure isn’t right for everyone. Learn more about MSOs and why so many practices have opted for this model. Then explore how Weave’s communication platform helps practices enhance communication and efficiency, no matter their business structure.

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What is MSO healthcare?

MSO in healthcare refers to “management services organizations,” which are non-clinical business entities that manage administrative and operational functions for providers. When medical practices partner with an MSO, they effectively separate clinical and non-clinical responsibilities. The MSO handles non-clinical tasks, while the providers focus on patient care.

MSOs often handle administrative functions such as:

• Revenue cycle management
• Human resources
• Information technology (IT)
• Regulatory compliance
• Marketing

This model improves operational efficiency and reduces the administrative burden on healthcare providers. It is distinct from traditional ownership-based healthcare models because it structurally separates clinical care from business operations.

How the MSO healthcare model works

Management services organizations follow specific processes to alleviate administrative burdens for healthcare practices. Unlike dental service organizations (DSOs), MSOs allow providers to retain ownership of their practices. Providers also have complete autonomy over clinical services.

This arrangement usually follows an “MSO-PC” structure, in which the physician owners manage the Professional Corporation and clinical tasks, while the MSO manages the non-clinical side of the business. This structure allows the practice to operate more efficiently and scale more sustainably by passing operational tasks over to a separate legal entity.

Learn how the MSO healthcare model works and the typical structure of this business arrangement.

Understanding the MSO-PC structure

When a healthcare practice partners with an MSO, the practice usually splits into two separate entities:

• The Professional Corporation (PC), which is the clinical entity owned by licensed physicians that is responsible for overseeing and delivering clinical services
• The Management Services Organization (MSO), which is the corporate entity that oversees administrative services

This structure is important for staying compliant with corporate practice of medicine laws. In many states, medical practices may be owned only by licensed physicians. The MSO arrangement allows a corporate entity to “own” part of the practice while complying with these laws.

The MSO-PC structure also preserves the integrity of patient care. Patients feel confident that they are receiving their provider’s full attention during services and that a licensed healthcare professional is still overseeing their care.

The role of management services agreements (MSAs)

MSO healthcare organizations typically adhere to a management services agreement (MSA) that outlines the services and responsibilities in the arrangement. Key terms may include:

• The scope of services
• The MSO’s compensation
• Any performance expectations

MSOs are generally flexible and can provide the specific services a practice needs. Some providers prefer to delegate all administrative tasks to the MSO, while others may outsource only a few processes, such as marketing and revenue cycle management.

Management services agreements ensure transparency and accountability for all parties involved in this arrangement. Before signing this agreement, you may want to review it with legal counsel to ensure you understand exactly what you are agreeing to.

Key services provided by MSOs in healthcare

MSOs can handle a range of non-clinical functions in a healthcare practice, such as:

• Billing and revenue cycle management
• Human resources, payroll, and staffing management
• IT infrastructure and support
• EHR management
• Regulatory compliance
• Marketing
• Operational support

Because these organizations operate out of centralized locations, they can often handle administrative tasks more efficiently than providers can. They also give practices access to specialized expertise to improve the performance of each service.

For example, many providers feel overwhelmed by the steps involved in effectively marketing their services. By passing this over to an experienced MSO, they can potentially improve patient acquisition by using proven marketing strategies and maintaining a consistent campaign.

Benefits of the MSO healthcare model

Partnering with an MSO for your healthcare business can significantly change your workflow, operations, and financial performance, so it is important to fully consider the pros and cons of this decision. The MSO healthcare model poses several significant benefits:

• Reduces administrative burdens for providers: Many healthcare providers would rather focus on patient care and clinical duties than on administrative tasks. With an MSO, you gain comprehensive administrative support or assistance with select services according to your practice’s needs.
• Improves revenue cycle management: MSOs can help optimize each stage of the patient life cycle to drive revenue growth. By devoting more time to this task than you may be able to alone, an MSO can potentially improve your practice’s financial performance.
• Enhances compliance and risk management: An MSO can continually monitor your adherence to healthcare regulations, helping reduce compliance risks before they become problematic. Having a third-party monitor compliance may be more effective than trying to handle this in-house.
• Improves scalability across multiple locations: If you are considering opening a second location for your practice, an MSO healthcare entity could make this venture more manageable by handling operational tasks at both locations.
• Elevates the patient experience: When your practice operates at a higher level of efficiency, the patient experience may improve as well. Your providers and front desk staff will have more breathing room in the day to spend on patient interactions and care.
• Lowers overhead costs: MSOs manage numerous healthcare practices, allowing them to consolidate purchasing power and secure discounted rates on medical equipment and other assets. Working with an MSO could actually reduce your overhead costs.
• Preserves clinical autonomy: The MSO model allows providers to retain clinical autonomy while gaining all of these operational benefits. Your providers will still have full control over medical decisions.

These benefits have made the MSO model popular across the healthcare industry.

Challenges and risks of MSOs in healthcare

There are also a few downsides that come with management services organizations that you should consider before proceeding with this business model. Partnering with an MSO requires you to sacrifice some freedom over your business decisions, which can be challenging for providers who have spent years refining and developing their practices.

Other potential downsides include:

• The complexity of legal and regulatory requirements: You must ensure the arrangement complies with the corporate practice of medicine laws and other federal and state regulations.
• Management fees and other financial considerations: You will need to pay the MSO either a percentage of your revenue or a management fee in exchange for their services. If your practice is already going through financial difficulties, working with an MSO may not be wise.
• Risks related to poorly structured agreements: Ensuring your MSO agreement is properly structured is key. Reviewing this document with an attorney can ensure it is well structured to align with your goals and that you understand all its terms before signing.

Who should consider an MSO healthcare model?

The MSO healthcare model is most common among healthcare practices with high overhead costs, strict compliance requirements, or the goal of acquiring a large patient volume. Practices that often partner with MSOs include dermatology, ophthalmology, orthopedics, urgent care, aesthetics, and other healthcare providers.

You might consider working with a management services organization if any of the following are true:

• You own a small or mid-sized practice.
• You are looking to scale or expand your business.
• You want to relieve administrative burdens, or you simply feel that you spend too much time on administrative tasks.
• You want to bring in private equity investors without violating the corporate practice of medicine laws.
• You are thinking of opening a second location and need administrative support.

Ensure that this move aligns with your operational and financial goals. Partnering with an MSO may initially eat into your revenue, but it could also provide financial benefits that increase profitability over time, offering a worthwhile return on investment.

Meanwhile, an MSO may not be the right choice for:

• Practices that want to maintain full autonomy over operational and clinical decisions
• Practices without administrative burdens or that feel they can handle operations on their own
• Practices without the revenue necessary to pay MSO fees while staying afloat

Management services organizations are just one type of partnership for healthcare practices. You might consider outsourcing specific functions to individual third-party vendors instead, or using automated tools to streamline operations yourself.

The role of technology in MSO healthcare success

The right technology can help your practice operate more efficiently and improve patient engagement, with or without the support of an MSO. Modern healthcare practices use centralized communication systems that streamline a range of patient interactions.

With a centralized tool, your entire practice can view conversation histories and connect with patients through a single platform, maintaining consistency when conversations switch to different staff members. You can offer two-way texting with patients and provide a convenient method for them to ask questions, while limiting staff access and controls where needed.

Advanced healthcare technology also offers tools like:

• Digital scheduling, so patients can book their own appointments online without needing to call your practice
• Automated reminders that the tool sends to patients a certain amount of time before their appointments, preventing your practice from needing to call patients to remind them
• Payment processing that allows patients to pay bills via a range of digital methods and automatically reminds them when payments are overdue
• Review management tools that alert your practice when you receive a new review on an online platform, allowing you to respond promptly, and automatically request feedback from patients after appointments

These tools can significantly reduce the time your front desk staff spends on administrative tasks while still maintaining high-quality interactions. Automation tools can also promote more consistent interactions, so patients come to know what to expect from your practice.

With a patient engagement platform, you can also gain access to real-time data to support decision making in your practice. You can continually monitor data such as no-show rates, patient acquisition rates, missed calls, and more.

All of these features help support patient retention and satisfaction in your practice, with or without the support of an MSO.

Improving communication across teams and patients

Many independent practices struggle with administrative burdens due to fragmented communication systems. When communications exist across multiple platforms, front desk staff and clinical personnel may not always have access to the most recent conversations. Switching between tools takes time and often leads to duplicate work, which can further increase administrative workloads.

Looking for a unified communication tool offers the greatest benefits for your practice. Software that combines phones, texting, emails, scheduling, and reminders into a single platform can give you easy access to all patient communications and conversation histories so your practice never misses a beat.

You can also dispatch all communications from the same interface to save time. Unified platforms provide you with comprehensive information about patient profiles to support consistency, helping you improve patient loyalty and build trust.

How Weave supports MSO healthcare organizations

Weave is an all-in-one patient engagement and practice management platform designed for healthcare providers like you. Our platform centralizes communication across teams and locations, with features such as:

• Two-way texting
• Online scheduling
• Automated reminders
• Payment processing
• Review management
• Email marketing
• And more

Weave reduces administrative burdens in healthcare practices so providers can focus on clinical care and patient satisfaction. Our platform is flexible to your needs and scalable for MSO operations.

Build a more efficient and scalable healthcare operation

MSO healthcare models help practices operate more efficiently by passing administrative tasks over to a third party. If you want to focus more time and energy on clinical care, this model may be right for you.

Weave also helps streamline operations through a wide range of digital tools and automations in a centralized platform. Request a demo today to explore Weave’s capabilities and learn how our platform can drive practice growth.