How the MSO-PC Model Actually Works, Step by Step

Most people who open a med spa, wellness clinic or telehealth practice hear "MSO" within the first week and spend the next month nodding along without fully understanding it. That is understandable. The model is a structure built to satisfy a legal doctrine, and the doctrine is rarely explained plainly.

This is the plain version. It covers why the structure exists, what each side holds, how money and decisions move between the two entities, and what separates a structure that holds up from one that only looks right on paper. It is the first in a short series on the MSO model; later posts cover the entity form, the agreements, and the questions to ask before you sign anything.

Why the Model Exists

Corporate practice of medicine, or CPOM, is a doctrine that says the entity practicing medicine should be owned and controlled by licensed physicians, so that clinical decisions are made by people answerable to a medical license rather than to an investor. It is enforced in some form in roughly 32 states, with the strictness varying widely. See our explainer on what corporate practice of medicine actually restricts for the state-level picture.

That creates an obvious problem for a founder who is not a physician: you can have the brand, the capital and the operating skill, but in a CPOM state you generally cannot own the entity that treats patients. The MSO-PC model solves it by dividing the clinic into two entities with a contract between them. The physician-owned entity does the medicine. Your company does everything else.

What Each Entity Holds

The line between the two is the whole point, so it is worth being specific about it.

• The PC holds the medicine: clinical decisions and treatment authority, the engagement of the clinical team, standing orders, protocols and chart review, and the medical record. It is owned by the licensed physician, and patients are the PC's patients.
• The MSO holds the business: the brand, marketing, lease and equipment, non-clinical staff and payroll, scheduling, systems and vendor accounts, purchasing, and billing and back-office administration. It can be owned by anyone, including a non-physician founder.
• The contract between them: a management services agreement sets out which services the MSO provides to the PC and what the PC pays for them. It is how the two sides work together without either one taking over the other's role.

How the Money Moves

Money is where most structures go wrong, so follow it carefully.

• Patient revenue lands in the PC: the entity that delivers care is the entity that gets paid. Patient payments go into the PC's own account, not the MSO's. That is what keeps the arrangement consistent with CPOM.
• The PC pays the MSO a management fee: the MSO is paid a flat, fair-market fee for the services it actually provides. It is not a percentage of medical revenue, because a fee that rises with collections starts to look like a split of the professional fee rather than payment for services.
• The accounts stay separate: the PC's clinical account and the MSO's operating account are not commingled. Separation protects the physician's license and your investment if either side is ever questioned.
• Non-medical revenue is the MSO's: retail products, memberships and similar non-medical lines can belong to the MSO, depending on state rules. Medical services stay in the PC.

Who Decides What

The physician signs medical decisions; you sign business decisions. In practice that means the PC, through its physician, decides which treatments are offered, to whom, under which protocols, and who is qualified to deliver them. The MSO decides things like where the clinic is located, how it is marketed, which software it uses and how front-desk staff are scheduled. Most states look hardest at the gray area in between: hiring and firing of clinicians, pricing of medical services, treatment protocols and billing policy. In many strict states those belong to the PC even though they feel like business decisions.

This is where the model stops being a diagram and becomes a discipline. The question a regulator asks is not "do you have two entities?" but "who actually decided?"

The Documents That Hold It Together

A properly built structure uses separate documents for separate jobs rather than one agreement trying to do everything.

• Management services agreement: defines the MSO's services, the fee, the term and how the relationship ends. Our post on the three core agreements goes through the clauses in detail.
• Medical director agreement: defines the physician's clinical authority and duties: protocols, oversight, chart review and availability.
• Consulting agreement: covers advisory work that does not belong in the management agreement, so the roles stay distinct.

Where the Structure Quietly Breaks

• The name on a filing: a physician owns the PC but does not actually decide anything. That is the pattern the Oregon law and the federal CPOM bill are written to address.
• The percentage sweep: the management fee is a share of collections, and the founder's return depends on how much medicine the clinic sells.
• The swappable physician: an agreement lets the management company replace the physician owner at will, which means the physician's ownership is conditional on the MSO's approval.
• Merged accounts: patient payments flow into the MSO and are paid out to the PC later, which reverses the direction the money is supposed to travel.
• The wrong entity form or the wrong license holder: the professional entity is formed in a form the state does not recognize, or around a license that cannot authorize the care being delivered.
• One physician, many clinics: a single physician owns dozens of PCs and cannot realistically exercise authority over any of them.

What About States Without a CPOM Doctrine?

A handful of states have no meaningfully enforced corporate practice doctrine, and a non-physician can own the clinic directly there. Even so, the medical side still needs a licensed physician's protocols, delegation and oversight, and many founders in those states choose to keep the same separation for liability, banking and future-sale reasons. Whether to split the entities is a state-by-state decision, which is why we start with where you operate.

Where MedGrid Fits

MedGrid connects you with a physician licensed in your state, forms the physician-owned professional entity, and builds the management company around it. Each PC is physician-owned, one physician per PC and one PC per location or state. Patient revenue lands in the PC's own account, set up through our banking partner. The management fee is a flat, fair-market-value amount rather than a percentage of collections, and the practice reviews its agreements with its own independently selected counsel. The medical director agreement, management services agreement and consulting agreement are separate documents that say who does what. Onboarding typically runs about 30 days, longer in states with slower filing backlogs.

Frequently Asked Questions

• Do I need an MSO if I am not a physician?: In a CPOM state, generally yes, or some equivalent structure, because you cannot own the entity that practices medicine. In a state without CPOM enforcement you may not need the split, though many founders keep it anyway.
• Who owns the PC?: A licensed physician, in the states that require it, and in the form that state recognizes. The MSO's owners generally cannot own the PC.
• How does the founder get paid?: Through the MSO, from the management fee and from non-medical revenue that belongs to the MSO. Because the fee is flat and fair-market, it reflects the value of the services rather than a share of medical profit. That is the trade-off the model asks you to accept.
• Is a management fee the same as fee-splitting?: Not when it is a fair-market payment for real services at a defined price. A percentage of the professional fee is what raises fee-splitting concerns in many states.
• Can the MSO make clinical decisions?: No. The MSO supports the practice; it does not decide who is treated, how, or under which protocols.
• How is this different from just hiring a medical director?: A medical director is a clinical role. The MSO-PC model is an ownership and money structure. Our post on the difference between an MSO and a medical director goes through how the two fit together.

This article is general educational information, not legal advice. Corporate practice of medicine rules, permitted entity forms and fee-splitting laws differ by state and change over time. Confirm your structure with your medical director and licensed healthcare counsel in your state.