The Three Agreements Behind an MSO Structure, and What Each One Should Say

Most clinics in an MSO-PC structure never read their agreements closely. They sign what the setup provider sends, file it, and move on. That works until a bank, an insurer, a board, a buyer or a plaintiff's attorney asks to see it. At that point the agreements are the structure.

This post explains the three documents that matter, what each should contain, and what to be wary of. It is part of a short series on the MSO model; start with how the MSO-PC model works if you want the overview first.

Why Three Documents, Not One

It is common to see a single agreement trying to cover management services, clinical oversight and advice all at once. The problem is that it blurs who is responsible for what, which is the exact thing a regulator is trying to untangle. Separate documents force clear lines: the management company is paid for business services, the physician is engaged for clinical authority, and advisory work is documented as advisory work.

The Management Services Agreement

This is the contract between the MSO and the PC. It defines what the MSO does for the practice and what the practice pays for it.

• Scope of services: a specific list of business services: facilities, equipment, non-clinical staff, marketing, billing support, systems, purchasing. Vague scope is a warning sign.
• The fee: a defined amount that reflects fair market value for those services, stated in the agreement. See the fee section below.
• What the MSO does not control: an express statement that clinical decisions, treatment protocols, clinical staffing and professional judgment belong to the PC and its physician. In many strict-CPOM states, pricing of medical services and hiring of clinicians also belong to the PC.
• Term and termination: how long the agreement runs, how either side can end it, and what happens to patients, records and operations when it does. An agreement the practice cannot realistically exit is a control mechanism, whatever it says on paper.
• Records and data: the medical record belongs to the PC. The MSO may hold it as a custodian under a HIPAA business associate agreement, but it should not own it.
• Insurance and indemnity: who carries what coverage and who bears which risks, written clearly rather than left to default.

The Medical Director Agreement

This is the physician's agreement, and it is where clinical authority is documented. It typically covers the physician's duties, the protocols and standing orders they own, the cadence of chart review, availability and escalation, licensure in each state where patients are treated, malpractice coverage, and compensation. The compensation should be a flat amount for the role, not tied to the clinic's revenue or the number of charts signed. Our post on the difference between an MSO and a medical director explains how the roles fit.

The Consulting Agreement

Advisory work, such as launch support, offer review, protocol development help and operational guidance, belongs in its own agreement. Keeping it separate prevents the management agreement from becoming a catch-all and keeps each fee tied to a clear deliverable. It also makes clear that advice is advice: the physician and the practice decide what to do with it.

How the Management Fee Should Work

The fee structure is the clause that most often distinguishes a defensible agreement from a risky one.

• Flat, fair-market fee: a fixed amount that reflects what the services are worth, supported by some analysis of what comparable services cost. This is the design we use, and it is the most defensible in a CPOM state.
• Cost-plus: the MSO's actual costs plus a reasonable margin. It can work if costs are documented and the margin is defensible, but it requires more administration.
• Percentage of collections: the fee rises with the practice's revenue. Many states' fee-splitting rules treat this as a split of the professional fee, and it is the model recent legislation targets. Some states tolerate percentage arrangements within limits, so the answer is state-specific, but it is the design that draws the most scrutiny and is the hardest to defend if questioned.
• Why fair-market-value matters: the federal Stop Corporate Takeovers of Physicians Act, as introduced, would require MSO fees to reflect fair market value under FTC rules not yet written. Oregon's SB 951 does not set a fee formula but restricts MSO control over pricing, billing and clinician pay. A fee grounded in the value of real services holds up under either approach.

Succession, Transfer and Control Clauses

Look for any clause that lets the management company, or its owners, control who owns the PC. These are sometimes called stock transfer restriction agreements, succession agreements or option agreements. They allow the MSO to replace the physician owner, often for broad reasons. If the physician's ownership can be revoked at the MSO's discretion, the ownership is conditional, and that is the pattern Oregon's law restricts to narrow triggers such as loss of license, exclusion from federal health programs, a felony indictment, death or disability, or breach of contract. A buyer, a bank or a board reading that clause will draw the same conclusion. Your counsel should explain every clause that touches ownership transfer.

Red Flags When You Read the Agreements

• The management fee is a percentage of collections or of profit.
• The MSO has final say over hiring, firing, schedules or pay of clinicians.
• The MSO sets prices for medical services or controls billing policy.
• The MSO can replace the physician owner or restrict a sale of the practice.
• Patient payments go to the MSO first, and the PC is paid out later.
• The MSO, not the PC, owns the medical records or the patient list.
• The physician has long non-compete terms with the MSO that restrict practicing medicine.
• A single document tries to cover management, clinical authority and advice together.
• The physician signed without independent counsel.

Where MedGrid Fits

We keep the medical director agreement, the management services agreement and the consulting agreement as separate documents that say who does what. The management fee is flat and fair-market rather than a percentage of collections, patient revenue lands in the PC's own account, and the practice reviews its agreements with its own independently selected counsel. That is a description of how we build, not a legal opinion on your arrangement. If you have agreements from another provider and want a second read on what they say, we are glad to walk through them with you.

Frequently Asked Questions

• Can one agreement cover everything?: It can, but it blurs the lines regulators look for. Separate agreements for management, clinical authority and consulting keep responsibilities and payments distinct.
• How much should the management fee be?: It should reflect the fair market value of the services provided and be stated as a defined amount. The right number depends on your scope, your state and what comparable services cost.
• Is a percentage fee always illegal?: No. Rules vary by state, and some tolerate percentage arrangements within limits. It is the design that draws the most scrutiny, and the one recent legislation is aimed at, which is why we avoid it.
• Who owns the medical records?: The PC. The MSO may hold them as a custodian under a business associate agreement but should not own them.
• Do I need my own lawyer to review these?: Yes. The physician or practice should have counsel they chose independently, not counsel provided by the other side.
• What if I already signed something that looks like the red flags above?: Talk to healthcare counsel in your state about amending it. Fixing an agreement is generally easier than defending one after a complaint.

This article is general educational information, not legal advice, and it does not review any specific agreement. Fee-splitting, corporate practice and contract rules vary by state and are changing. Have licensed healthcare counsel in your state review your agreements.