Are your management services agreements fair market value & commercially reasonable?

Written by Jen Johnson and Spencer Coronado

The healthcare reimbursement environment’s shift towards value-based care aimed at generating cost savings and improved clinical outcomes has driven growth of management service organizations (MSOs), entities designed to provide management functions to entities in various healthcare sectors.

MSOs allow clinical personnel to focus on patients, while providing sector specific expertise related to reimbursement, quality reporting, and oversight. Often, MSOs have a referral relationship to the provider of the services, whether through physician ownership, or the MSO is a business that refers to the providing entity. As a result, it is important that fees stated in management services agreements (MSAs) between MSOs and healthcare entities are fair market value (FMV) and commercially reasonable (CR).

MSOs may include national, regional, health system, or physician-owned management service companies, and are increasingly providing specialized services through MSAs. These services vary and may include comprehensive ‘turn-key’ management services, revenue cycle management services, and other a la carte services. The goal is often to allow the healthcare entity to focus on clinical functions for improved patient outcomes. MSOs often provide management services with greater efficiency and economies of scale as a result of servicing multiple facilities such as ambulatory surgery centers (ASCs), imaging centers, physician practices, and hospitals.

More recently, there have been a growing number of highly specialized MSOs including rehabilitation, wound care, freestanding emergency departments, urgent care centers, behavioral health, and pharmacy, among others. While MSAs have been present in the healthcare sector for decades, and certain MSAs may exhibit standard fees and services (such as ASC MSAs), other growing or highly specialized segments provide more varied compensation and services. As a result, it is important to understand exactly what services are being provided by an MSO when determining whether the proposed fee is reasonable.

It is important to note, the MSOs addressed in this article reflect management services related to personnel provided to oversee and guide a business. Comprehensive MSOs, often seen in Corporate Practice of Medicine states and inclusive of operational personnel, rent, and other expenses, will be covered in a subsequent article.

Continue to the full article.