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hello everyone and welcome to today's webinar management services organizations msos more relevant now than ever before my name is katie golialmo and i'll be the moderator today today our presenters are fire levitt's co-founding partner daniel fryer and senior council theresa de goliamo if you have any questions you may submit them below and we will do our best to get to them at the end of the webinar or after the webinar via email with that let's get started with daniel thanks katie welcome everybody i'm excited about today's webinar because this topic is a topic that has come up i think more uh frequently in the last two years or three years than probably the previous 10 years and we are in we have we are just inundated with requests to form msos various capacities so um aside from having you read this disclaimer which i won't do the only thing i'll mention today is that today we're doing a webinar we are not dispensing legal advice and we do not for purposes of today's webinar at least have an attorney-client relationship uh with respect to what we're talking about today even though some of you on this webinar may be our clients and uh thank you for that so today's webinar we're going to talk about five areas teresa is going to talk about what an mso is and how it might benefit healthcare practices why private equity seems to be interested and utilizes the mso model second issue is we're going to discuss the broad regulatory issues that affect msos and need to be considered in forming an mso we're going to number three talk about how to structure an mso to avoid regulatory pitfalls as well as just to meet the business needs and desires of the participants number four we're going to discuss how to establish an appropriate management fee and finally we'll talk about some practical practical examples of mso structures teresa why don't you explain what an mso is sure dan an mso is an entity that provides administrative support services to a medical practice this can encompass a variety of services ranging from billing and collection provision of vhr credentialing supervision of non-clinical staff hr functions the mso may also lease space and equipment to the practice and might also engage in some functions such as group purchasing acquiring malpractice discounts and generally achieving economies of scale that aren't really available to solo small or even medium-sized practices there are many types of msos some provide a few services others provide a broad array of services such that it is essentially a turnkey experience for the medical practice all of this can alleviate the administrative burdens of operating the medical practice and allow the clinicians to focus on patient care i would describe the major motivations for the practice as efficiency and cost savings which is really attractive to practices facing financial challenges in these difficult times and i'd also like to mention that an mso provides a vehicle for business ventures between licensed physicians and non-physicians and we'll talk later about the corporate practice of medicine prohibition and how that pertains to the mso model next slide yeah i'll talk briefly about the private equity perspective um many of you on this call may have direct or indirect experience with the private equity model of acquiring the assets of medical practices uh generally speaking and i can't think of really any exceptions in any state that has a corporate practice of medicine prohibition which teresa will talk about shortly the mso is used by the private equity for its ownership and what i've counseled clients on over the last couple years is if you are considering a private equity transaction forming an mso in advance can have a variety of uh benefits the the use the reason the mso is utilized is that as as teresa will explain uh from a regulatory perspective private equity uh entities are for-profit entities that are owned by non-physicians typically and they cannot own medical practices directly so that's one of the reasons you've seen a proliferation of msos teresa you can address some of the regulatory issues thank you dan a significant consideration in structuring compliant msos is the corporate practice of medicine doctrine this is rooted in the principle that the practice of medicine must be the exclusive domain of licensed physicians and there can't be any interference by outside influences on that licensee's clinical judgment one of the underpinnings of the doctrine is that you know licensees are regulated they're bound by ethical rules in a way that makes them very accountable and the influence of non-licensees can corrupt their medical judgment profit motives may lead to overutilization and can adversely affect patient care next slide the application of the corporate practice doctrine really varies among the states so in order to evaluate an individual state stance we'd have to look at statues regulations court decisions attorney general opinions licensing board actions or all of the above there are strong practice medicine corporate practice of medicine states and weak corporate practice of medicine states as described here but generally speaking even in states that do not strictly enforce the corporate practice of medicine prohibition the notion of non-interference with a physician's clinical judgment is evergreen next slide the implications of violating the corporate practice prohibition include potential discipline for the unauthorized practice of medicine fee splitting self-referral and there is also a potential for challenges from payers i'd really like to briefly summarize some of the important takeaways from these presidential cases mentioned here and i'll i'll do so as succinctly as possible um the 2005 new york case of state farm v malela is very well known for finding that when there is a non-physician ownership of a medical corporation it may be deemed a fraudulently incorporated enterprise now this concept of fraud in the corporate form is really important because it provides another avenue for a payer to deny or recover payments and it has absolutely nothing to do with the legitimacy of the medical claim submitted by the practice um this is something that people underestimate when they consider the corporate practice of medicine prohibition and this presidential case law makes it clear that an improperly structured professional practice can can form the basis of a challenge by payer moving on to the 2015 aspen dental matter this was an attorney general action where an msl was found to have infringed on the clinical purview of licensed dentists and it occurred in multiple ways two examples i'll offer were the mso had developed clinical protocols that really should have been the domain of the dentists and the mso also applied pressure on the dentist and the hygienist to increase the sales of services i think there's a lot of really good guidance for new york msos in particular in the aspen dental case but i'm going to limit my comments to three important points one we most often speak of the corporate practice of medicine but the corporate practice of dentistry is also an issue on point number two this case illustrates a different kind of outcome than the payer withhold i described in the malala case in aspen dental the ag imposed a corrective action plan with very strict parameters the group is continuing to be monitored by the ag's office and there was a civil penalty assessed of four hundred and fifty thousand dollars another issue that arose in the aspen dental case and it's an issue for which this case is off-sited was the manner in which the mso held itself out to the public one of the findings by the ag was that the mso's marketing materials referred to aspendental the mso in a way that implied that the mso was the provider of the dental treatment so an important takeaway for other msos is that it's really important to distinguish in advertising to the public between the management entity and the separately owned licensed dental or medical practice as it were um in the interest of time i i won't say much about the 2019 carruthers case except to comment that it echoed the malela case in that there were non-physicians found to have been de facto owners of a medical practice so it's another example of this so-called fraud in the corporate form a situation where the physician is really only a nominal owner who doesn't engage in the practice of medicine through the entity or otherwise exercise any control over the practice this is very problematic and and finally i want to mention the 2017 case of all statement northfield this case is notable because it involved a structure that was promoted by a california-based chiropractor and a new york-based healthcare attorney in a lecture series they called practice perfect so there was a new jersey license chiropractor who attended the lecture series and of note the corporate practice of medicine prohibition that i've discussed here was mentioned at this seminar and it was acknowledged to be an important issue but the work around that was suggested was extremely problematic they established a nominal only ownership of the medical practice by a physician who didn't treat patients and had no operational control of the practice this allowed the chiropractor owner of the mso to maintain control of the medical practice there are a couple of important points here one is a chiropractor is a licensed healthcare professional but this kind of arrangement isn't permissible in new jersey because a physician cannot be employed by a licensee with a more limited scope of practice and the court in the all-state case found two very notable features in the written agreements between the parties one was the ability of the mso to remove the physician owner and transfer the physician's interest to another physician of the chiropractor's choosing and the other was a very severe monetary penalty of 100 000 that would be charged to the medical practice for breaking the lease so the court looked at this and said it's so obvious that you're trying to prevent the physician owner from actually controlling the medical practice and the court used really strong language here they called it a sham designed to circumvent the law and create the appearance of compliance i have emphasized this language because it's a very important takeaway deliberately creating a form over substance patina of compliance will not support a defense particularly against these claims by carriers of insurance fraud they will look to the underlying structure and the operational realities to determine whether the law has been violated and i want to be very clear here the recovery of money by the payer in that case had nothing to do with the legitimacy of the medical claim the patient received medically appropriate treatment furnished within the standard of care it was documented it was coded and billed properly except that the underlying practice structure was deemed invalid and it rendered otherwise legitimate claims invalid as well so all of the facts and findings in these cases are just reminders to us that we have to approach this mso structure very carefully we cannot just be compliant on paper msos must also be operationally compliant to withstand the scrutiny next slide so fee splitting peace splitting is a term that is often used and it typically references state law prohibitions that have their roots in corporate practice and medicine restrictions various there there are people on this call from multiple states so we're not focusing on a particular state but fee splitting essentially is the splitting of fees between providers professional providers licensees and non-licensees this can arise when physicians enter into a contract with an mso and there's a percentage arrangement where the percentage fee exceeds fair market value such that the amount that's being charged by the mso is more than just for the services the mso is charging but rather is really a mechanism for the mso to be a profit sharer share in the profits of a medical practice paying an mso for legitimate services is generally appropriate and common paying at mso as if it were a partner in a medical practice is not uh and there are i we could probably do a an hour-long lecture just on various state feast living laws but it's beyond the scope of today's today's seminar seminar webinar but i i think it ought to be something that you understand uh is is an important consideration when you're putting together an mso relationship so the federal self-referral law otherwise known as the stark law is is a law that that is often implicated in these types of mso arrangements the law basically says and i'm not going to get into a long discussion of it because i'm sure many of you have heard have some familiarity with it but it prohibits physicians from referring certain types of services typically or specifically dhs designated health services to an entity in which the physician has a financial relationship so if a physician is referring patients to a lab that the physician owns or an imaging center or for physical therapy services that the physician has an ownership interest in then the stark law is implicated on this slide you can see a list of the of the full list of the categories of dhs and what often happens with us is we we were asked to analyze the situation and determine whether a particular dhs is implicated or stark is implicated and we look at these categories but what we really need are the cpt codes because cms publishes every year a list of those cpt codes that constitute dhs and they're very very extensive um in radiology alone there could be there could be you know 50 or 100 different codes or more that relate to dhs and there are there are certain radiology services for example that that although their radiology services don't constitute dhs so you really have to look at the cpt code list that cms publishes each year to determine the there there are exceptions to stark's prohibition on self-referral um that relate to the kinds of services that a management services organization provides and i'm going to in the next slide i'm going to explain a specific example of how star could be implicated in an mso arrangement but keep in mind that the most commonly uh violated part of the exception that applica that's applicable to msos is what i have here underlined is number five where the aggregate compensation paid to the agent in this case the mso over the term of the agreement is set in advance is consistent with fair market value in an arms length transaction and is not determined in a manner that takes into account the volume or value of referrals those three components that comprise this number five are are often the most challenging ones now in many in many mso situations um the you know stark law is not implicated in a typical you know in a typical transaction where the mso charges a fee to the practice and the practice is not performing dhs not performing lab services not performing imaging services stark is not implicated but there's an example here's an example of where stark may be implicated you have on the right side a medical practice it's owned by physicians and also owns its own laboratory and the physicians who own the medical practice refer to that laboratory there is an exception under stark that's called the in-office ancillary services exception that allows the referral of dhs within a single group practice as long as that group practice meets certain requirements so let's assume for the moment that the medical practice at issue meets those those requirements meets the definition of a group practice and and therefore complies with stark even though it's referring and the physicians are are profiting from the lab services now introduce the concept of the mso on the left one or more of the physician owners of the medical practice also own the mso and the mso charges a percentage fee like like is often the case for example in a private equity transaction mso charges let's say a 10 fee now what happens is the physicians who before the mso became involved received a percentage of uh received a portion of the of the lab revenue the dhs revenue from their ownership in the medical practice and complied with the group practice definition they were various it's somewhat complex how that how those lab revenues could be distributed but assuming that they complied with that now you have a situation where a portion of those lab proceeds those lab revenues are being paid over the mso because the mso is charging a percentage of total revenue now the physicians who are referral sources are getting a percentage of the mso's revenues which include the lab revenues and that can implicate stark and and that's where an analysis has to be done and and and a determination made whether or not that those stark revenues those dhs revenues have to be carved out of the mso fee or with the mso fee as an appropriate msophy teresa why don't you talk a little bit about the anti-kickback statute sure so i won't read the text of the anti-kickback statute that we've quoted here um probably many of you are familiar with the concept and the prohibit prohibited remuneration um that that is at the heart of the anti-kickback statute i'll mention that the statute has been interpreted broadly by the courts to cover any arrangement where one purpose is to induce referrals or reward referrals so one context in which this concern arises with respect to msos is when the physician owners of the mso are in a position to influence referrals and their distributions of the msos profits are larger as a result of the referrals so the management fee paid to the mso implicates the anti-kickback statute and needs to be analyzed as the undescribed with respect to stark next slide the good news is that the elements dan described for satisfying stark are applicable in the context of the anti-kickback statute and reduce the risk of violating it so all of those elements particularly the ones highlighted by dan will be very protective of the arrangement next slide just want to make a brief comment regarding marketing and advertising services there are a variety of marketing services that an mso might provide and there are some basic ones that generally don't raise concerns under the anti-kickback statute and i'd like to give a couple of examples um the mso might monitor the practices google adwords campaign or generate some data analytics reporting and metrics to measure the success of a search engine optimization effort or some such thing and those aren't the kinds of marketing or advertising activities that really worry us um the anti-kickback statute is implicated when a direct marketing arrangement occurs where there is um outreach directly to physicians who are in a position to refer to the practice this can happen whether it's in person or sometimes via a referral website where practices pay to join and and they participate um in such a way that they're paying a percentage of the referrals generated by the advertisement so when more aggressive direct marketing techniques are involved we would recommend the parties consider addressing those services through a separate agreement and and not through the management services arrangement and i'll and i'll just add to that teresa that the any in any instance where you have um a marketing team whether it's part of an mso or part of a standalone marketing company that is directly soliciting from physicians the reason it implicates potential anti-kickback issues is that the the very act of soliciting a physician can depending on how intensive it is actually constitute a referral making it so that the marketing company is actually deemed to have made a referral to the to its customers even though it's not a provider because the definition of referral under the anti-kickback statute is so broad that it actually includes the arranging four services we have been involved um on a national basis with with many uh sales companies sales forces that have been investigated both civilly and criminally for engaging in that type of intensive marketing and then receiving you know a payment from their customer that that the government felt constituted remuneration in exchange for referrals or a kickback so this is a big slide uh and it's and it's worthy of a few significant comments structuring the msr arrangement so we spent a lot of time putting together msos i mean for me the first question when a client says we'd like to do an ms put together an mso is well why do you want to put together an mso um you know i think it's my job it's our job as attorneys to to ask that question before we go ahead and just create something for a client that may or may not be useful uh and and the question becomes why why is the client interested in putting together an mso and there could be a variety of reasons we've talked about a few of them it could be that that you want to pull out the um the assets from the practice put it into a separate mso so that that mso can be owned potentially by non-physicians it could be owned by inve outside investors it could be owned by non-licensees who are part of the practice but can't own the practice it could it could be used to limit the amount of liability or improve asset protection uh method methods so that now the practice has fewer assets that are exposed in the event of a malpractice case it could be used because the parties want to form an mso so that they can provide mso services to other practices that are not related to the practice at issue if they have particularly good systems in place it could be used because the group wants to consider private equity and they feel that having an mso will improve um the optics of the platform as a whole informing an mso i will say that the vast majority of msos that we form are formed as limited liability companies as opposed to any other form first of all you certainly want the mso to be limited liability so it has to be either an llc or typically a corporation llcs tend to be more flexible in corporations because they can always be converted without usually any major tax implication to a corporation at some point if they they need to be and because llcs are very flexible in terms of how profits can be distributed and an example of why flexibility is important is if you have a medical medical practice that forms an mso that's owned by the same positions that own the medical practice there may be reasons in in the mso to distribute profits of the mso differently than just per capita and without getting into too much complexity if you have an mso that consists of a large practice that services a large practice with various divisions in it but the mso charges you know kind of a fixed amount or a percentage amount then the uh if the practice you know positions and divisions are all earning different amounts of money but mso is charging a flat percent or a flat amount and the mso profits are distributed per capita then you're sort of um redistributing some of the revenues from the practice in a way that may not be palatable so a doctor that would otherwise only get you know 12 percent of the revenue is now getting you know 15 or 20 because their ownership interest in the mso so you can you can restructure the profit distributions in an llc very flexibly whereas with a corporation profits have to be distributed based upon ownership we also often will form msos in delaware rather than forming them in the state where they may reside and the reason for that is is very simply that delaware is looked at by corporate america as a safe haven for um for businesses the laws of delaware are favorable uh with respect to uh entities and it's a familiar place so that if you're looking ultimately for future investment you're likely to appeal to those investors the um determining the ownership composition of the mso is very important in in in some instances depending on what the mso is doing how it's charging having physician owners can be a good idea uh it can also be a bad idea depending on you know if those physicians are employed physicians you know in some cases people want employees to be owners of something but don't necessarily want to do the practice but in some cases if you have a physician owner of an mso you implicate stark as i mentioned before because now the physician is earning money off of designated health services not only as a position as part of a group practice but also as part of an mso and it's harder to meet the start um exceptions to that another step in structuring the mso is is you know you typically have um you know in terms of documents you have a form the mso and that mso would have an operating agreement governs the ownership interests in the mso and then the mso would have a management services agreement or administrative services agreement as it's sometimes called with the practice and that msa or management service agreement would list the various services that will be provided um those those services should be enumerated i typically put them in an exhibit so that they can be changed over time without having to change the body of the agreement there are if the if the practice sorry if the mso is going to be providing billing and collection services there are certain states that require that you register with the state department of banking insurance as a billing company and so you need to do that some states will will not require you to do that if if the owners of the mso and the practice are the same and you only have one customer namely the practice but if you extend beyond that or if the ownership changes so that the mso is owned by different folks than the practice then you you're going to need to look into those laws calculating the management fee is one of the most complicated parts of putting this relationship together and there's a couple of different methodologies for doing it as i referenced before you know most private equity transactions charge a percentage and in some states you you cannot do that you cannot charge a percentage in some states you can and in some states it's a little bit gray so for example in new york you generally cannot charge a percentage fee even a billing company cannot charge a percentage fee in new york other states you can charge a percentage fee and some states i mentioned it's not entirely clear whether you can do it but the private equity model generally favors very strongly a percentage fee and the mso gets its fee and then the practice gets the balance of whatever is collected and distributes it to the to the physicians um aside from a percentage fee the problem with the percentage fee can be you know you can get into fee splitting problems you can also get into stark problems i mentioned before so very common approach uh is what's called a cost plus approach under a cost plus model the management company typically takes on a turnkey role meaning it rents the space that the office the office of the practice it employs all the non-clinical staff you cannot employ the clinical staff in most states because that's the practice of medicine but it can employ all the non-clinical staff it buys all the supplies and equipment it takes on the risk of the equipment for example if you have an equipment lease it would take on that risk it would arrange for the purchase of malpractice insurance it would provide operational services to the practice it would provide administrative support to the practices to practice the cost of all that uh which is borne by the mso in a cost plus model would be charged back to the practice so that that gets the mso to break even and then there's a plus component which is cost plus a percentage of those costs we typically see that in the range of let's say 10 to 20 give or take so that the management fee would be the cost of the services plus a percentage of the cost of the services which all together avoids um charging a percentage of the collections in order to avoid a fee splitting issue altogether one of the um and i've also seen a flat fee approach so one of the challenges to uh of setting a management fee in a way that's not percentage based rather is cost plus or flat fee is that in some in some uh models where the goal is what we'll call a captive practice model and i'll get into that a little bit later where essentially the goal is for the mso to to exert as much control over the practice as is legally permitted the goal is to sweep as much of the profits out of the practice as can legally be be done and this can be fraught with some some danger it's often done in a very cavalier way where basically the practice owned by the physician the physician gets a set salary and then everything else gets pulled out into the mso in most states that's not appropriate to word it that way the end result may be that that's the case depending on how much the revenues the practice are so one of the challenges of a cost plus approach or a flat fee approach is if the practice generates more money than it needs to pay the physician an agreed upon amount and then pay the mso the left the remainder i'm asked this question what happens to the remainder and my answer is well it goes to the owner of the practice who is the physician and that's just the way it is um it may it may be avoidable it may be non-avoidable it often doesn't matter you know in the private equity setting you know with a percentage arrangement it's a non-issue the more money the more money that's generated every everybody including the private equity owned mso and the practices they make out well but in a cost plus approach where the there's there's a ceiling as to how much the mso can pet can charge the balance could go to the physicians uh there's a variety of ways of dealing with that but you know the first thing we do is make sure that whatever we're doing is legally compliant because as teresa said if it's not the consequences are pretty severe as as she demonstrated in some of those cases you know in in calculating a management fee we also often recommend that a formal evaluation be done to ensure that the fee is consistent with fair market value and is commercially reasonable so commercially reasonable it's worth mentioning is often is the is the red-headed stepchild of of stark and anti-kickback it's often overlooked and it's it's more popular twin you know the fair market value concept is often given all of the all the attention but i'm going to give you an example of what commercial reasonable means if the management company is trying to get the management fee as high as possible and it's charging let's say for rental of a space that is much more than the practice needs um so envision an mso that's owned by primary care doctors and it's managing a specialty practice that the primary care doctors refer to regularly so the pr so the specialists own the practice they pay a management fee to the to the mso which is owned by their referring doctors the specialists are happy to pay as much as they can legally because they're getting referrals but if part of that management fee is is to cover the cost of space or equipment or other things that that are beyond what the uh specialist practice needs then even if even a fair market value for that amount of service or space is paid it's it may not be deemed to be a commercially reasonable transaction because the amount of space the amount of service is more than what is needed by that specialty group so we often get a formal valuation to kind of uh by by a third party uh to to do that assessment and we use um in terms of doing valuations we use two different categories of evaluation firms there are large national companies that are more expensive they're more competent a little bit more i'm not even going to say more comprehensive but they're better known in the industry and then there are smaller valuation companies often associated with accounting firms that can be very very good at doing those valuations a little bit more cost effective and depending on the magnitude of the um of the transaction we might recommend one or the other law firms do not do valuations the i'm going to skip over to the next one let's talk about just examples of mso structures there's we'll talk about three the p model we talked about a little bit the friendly pc model and the deceased physician model i've already talked a little bit about p but i'll just mention that the pe model typically is to go into a region find a practice that it can utilize as a platform member pe you know generally doesn't have the expertise to build a practice from scratch so they want to find a practice they can utilize as their platform and they will go in there they'll enter into a management service agreement usually charge a percentage and that percentage will pull out a certain amount of income from the practices into the mso and whatever the profitability of the mso is that becomes the the earnings of the of the mso that are you know upon which the purchase price is based the friendly pc model which i mentioned before is often used in conjunction with the deceased physician model what i mean by that so i've had we've had a number of of clients um over the years where the let's say the physician or someone either the solo physician or the physician in partnership with another physician has died and the family or the estate of that physician wants to continue to operate the medical practice and profit off the medical practice in an illegal way they cannot own the medical practice the family unless they are all physicians which in most cases they're not so we form we may form an mso which manages the practice and manage it through this friendly pc model friendly pc model which i'm going to explain in a second can also be used in other in other contexts it's often used by private equity you know they buy a practice they install a single physician owner and the other physicians become employees it's used by hospitals in most hospital transactions throughout depending on the state but certainly most that i've seen the hospital doesn't actually own the medical practice itself what the hospital is affiliated with a medical practice that is technically owned by the hospital's vp of medical affairs who is the technical owner of the practice and the practice that employs all the physicians that that are the subject of a purchase agreement etc the friendly pc model the essence of it is that the mso provides turnkey services essentially runs the the non-clinical aspects of the practice and installs a physician owner who is the technical owner of the practice i'm just going to caution everyone about the friendly pc model it can it can work very very well if it's done properly but it's more frequently done improperly than properly in my experience i will say that again in another way most friendly pc model transactions in my opinion are done improperly they don't recognize that in order for physicians to have adequate control over the practice of medicine to avoid a corporate practice of medicine violation the physicians can't just have control over seeing a patient in an office one day in my opinion physicians have to have some level of control over what services are being provided what equipment is being leased or purchased to provide services what the contracts of managed care companies look like and what is expected of the physicians that perform services through those contracts what contracts would hospitals look like um things like that there there's more than just the actual treatment of a patient in the office or in the hospital that is necessary in order to afford physicians enough control over practice that we don't avoid corporate medicine issues i'll let theresa talk about some of the takeaway points and then maybe we can answer any questions if there are any thanks dan so takeaway number one is really that msos alleviate the administrative burdens on a medical practice they can achieve economies of scale and be very useful to physicians who are feeling the financial crunch um they provide a vehicle for non-physicians to participate in business ventures with physicians without running afoul of the corporate practice of medicine prohibition and for physicians who are winding down or retiring vis-a-vis their ownership of an mso entity they can continue to participate in profits after they've stopped providing services so that's another avenue for an mso to be useful on the physician side next slide as dan described very well msos are very attractive opportunities for private equity investors for owners planning possible future acquisition they should be concerned not only with operating performance metrics but regulatory compliance because that is certainly part of the due diligence that a private equity investor will consider next slide so i hope there's a lot of takeaways from today's presentation but um the final comment i'd leave you with is that a carelessly structured mso arrangement has the potential to result in a variety of very expensive consequences we've talked about a number of them uh here today and um it's a cautionary tale against a carelessly structured arrangement so with that i think we can shift to q a yeah so one question um one question is how can one best structure an mso to if you're seeking uh investment uh either by pe or elsewhere and i think that's a good question the the the thing to understand is that i think using the pe the private equity model as a basis for structuring an mso even if you have no interest in private equity is a good idea and the reason is private equity is at its essence it's just it's a for-profit or for for-profit organizations private organizations that seek investment capital usually from institutional investors who are looking to take a piece of their total portfolio and put it into a hot potentially high reward but higher risk investment where they can double or triple their their investment over a three to five year period that's typically what what we're seeing and so uh private equity is controlled by a lot of very high level financial folks who have spent a lot of time and energy trying to structure things a certain way so when they when they go in and they look to buy an mso or by a practice by practice assets they want to see certain things and i think it's probably a good idea to utilize that model usually utilize that structure in forming an mso even if you have no intention of doing a private equity though because it's a proven it's a proven model so when private equity looks at msos what they're looking for are a platform that can do the billing collection can do the human resources can provide services to the to the to the practice have a robust compliance program and essentially enable a um a scaling up of the size of the practice with little investment so if a practice has five people today it has an mso that can grow into 50 people without a massive investment of capital other than other than potentially additional personnel and has the has the systems in place that would suffice for a 50-person practice uh even though currently there's only a ten person practice and one of the the hallmarks of an mso that's been purchased by a private equity is that it has a robust compliance program the what i've been through a lot of due diligence with private equity ensuring compliance they look at every little aspect if you have any dhs under stark they're going to do an analysis of that they want to look at your coding and billing practices so you know msos should probably consider having outside consultants who can help them with coding and billing and and regularly check to make sure that they're they're engaged in best practices and there's a reason private equity does that because they they don't want to buy something they don't want to buy a company that ultimately is uh is you know has liabilities that reduce the value of the business looking at your business that way is is a very reasonable way to do it another question is you know i'm considering forming a group practice can i use an mso as a transitional entity this is this is a question that comes up pretty frequently when i'm talking with doctors who are looking to form what we'll call a super group and i often use i often will help form that group and form an accompanying mso but sometimes and i've been asked this numerous times we're having trouble getting doctors to merge into a single tax id number entity can we use an mso have a commonly owned mso so we can all sort of get used to each other in this honeymoon period and then use that mso to help merge us all into a single tax id number and the answer is is yes i'm a big fan of the group practice model and we've done many lectures on that concept and how to put those together and mso is a is a i think a very good way for folks to introduce themselves to what it would be like to do business with each other without having to get married right away and the mso you know model is uh it allows you to consolidate your billing and collection it allows you to consolidate your credentialing what you what you can't easily do through an mso and i want to make this clear is you can't really effectively negotiate managed care contracts through an mso because of the risk of an antitrust violation and also be also for the practical problem that most insurance companies do not recognize msos unless you have a single tax id number practice uh an mso used in that fashion is more of like an ipa and there are very few successful ipas that have done more than negotiate one or two contracts there are some exceptions to that but generally ipas are not a very effective way to negotiate managed care contracts in the modern age but what msos can do is they can help practices engage in value-based contracting by helping structure those deals and even negotiate those deals the anti-trust concerns of negotiating a fee-for-service contract are not as serious or not as significant as negotiating a value-based contract because value-based contracts are pro-competitive whereas fee-for-service negotiations with competitors are considered to be anti-competitive so um i don't know if there's any other open questions at this point but if you have any questions and you'd like us to answer them you can feel free to email us and katie has provided i think some email information we will also be happy to share this presentation with anyone who requests it otherwise it will be available at any point i thank you for your time