A physician practice may hire a management services organization (MSO) to handle billing, scheduling, staffing support, technology, purchasing, and other nonclinical operations. That can be a sensible business arrangement. It also creates a contract where economic incentives, access to information, and control over operations must be defined carefully. The question is not simply whether the management fee seems affordable; it is whether the arrangement preserves appropriate professional decision-making and manages federal and state regulatory risk. For a fuller drafting checklist, see twelve clauses to review in a healthcare management services agreement.
Define exactly which services the MSO will provide
A useful agreement distinguishes specific administrative deliverables from clinical decisions. List responsibility for payroll administration, vendor contracting, claims submission support, HR services, appointment scheduling, facilities, IT, and procurement. State who approves expenses, who can sign contracts, who controls practice bank accounts, and what reports the MSO must deliver. Avoid a broad clause giving a nonclinical manager unspecified authority over everything the practice does.
For each function, identify whether the MSO acts on the practice’s behalf or independently contracts with vendors. If the practice remains legally responsible for payer billing and medical records, a vague delegation clause does not eliminate that responsibility. A service schedule and authority matrix are usually more practical than a long list of general promises.
Preserve the boundary between business administration and clinical judgment
Physicians should evaluate whether the arrangement gives a manager inappropriate influence over treatment, referrals, coding choices, medical necessity determinations, patient communications, or selection of clinical personnel. State professional-practice restrictions require jurisdiction-specific analysis, so an agreement that works for a particular organization in one state should not be copied automatically into a New Jersey practice.
A contract can acknowledge the physicians’ professional authority while still permitting the MSO to make ordinary nonclinical decisions. The operating model should match the words. If the written agreement reserves clinical control to physicians but the day-to-day financial incentives effectively penalize independent medical judgment, the distinction may provide little practical protection.
Review compensation through an Anti-Kickback Statute lens
The federal Anti-Kickback Statute can be relevant when compensation is connected to federal healthcare program referrals or other covered business. HHS OIG’s safe-harbor resources explain regulatory exceptions, including the personal-services and management-contract provisions at 42 C.F.R. § 1001.952(d). Those rules merit fact-specific analysis before a fee formula is adopted.
According to OIG’s fraud-and-abuse FAQs, safe-harbor compliance is voluntary and falling outside a safe harbor does not automatically make an arrangement unlawful. But partial satisfaction does not yield partial safe-harbor protection. Review the precise conditions, the parties’ relationship, services actually furnished, fair-market-value support, and possible referral incentives rather than relying on the label ‘management fee.’
Do not let the percentage formula drive the risk review
Parties often focus on whether the MSO should receive a fixed amount, an expense reimbursement, or a percentage of receipts. The legal analysis cannot be resolved solely by a slogan declaring one formula acceptable and another impermissible. A percentage formula may create economic concerns, and the facts and governing law determine the significance. Ask whether the fee rewards referrals, shifts professional control, exceeds commercially reasonable value, or gives the manager upside unrelated to services rendered.
Control of cash and data is as important as the fee
The agreement should specify where payments are deposited, who may direct disbursements, how the practice reviews transactions, and how financial records can be accessed. Separate service fees from client funds and identify clear reconciliation duties. Set monthly reporting requirements for collections, contractual adjustments, denial rates, refunds, and payer audits. The practice should be able to independently test the numbers used to calculate compensation.
For systems that create, receive, maintain, or transmit protected health information on a covered entity’s behalf, assess business associate obligations. HHS business associate guidance describes required contractual protections. The management agreement and any business associate agreement should align on access, security, permitted uses, incident reporting, and end-of-relationship return or handling of information.
Plan for a separation before the relationship breaks down
An MSO transition can become a crisis if the practice lacks access to its scheduling system, clearinghouse, telephone numbers, websites, billing records, passwords, vendor accounts, or operational data. Define termination rights, cure procedures, assistance obligations, system-export formats, and a realistic transition period. Address business continuity without granting a departing manager indefinite control over the tools needed to treat patients.
Be specific about non-solicitation terms, employee transitions, vendor continuity, payer notices, and dispute resolution. An agreement that merely says each party will cooperate in good faith after termination leaves too much uncertainty when trust deteriorates.
What a disciplined pre-signing review looks like
Before executing the agreement, counsel should review entity ownership and governance, the scope of clinical decision-making, compensation analysis, banking and claims workflows, vendor roles, privacy and security responsibilities, insurance, licensing, payer commitments, and termination mechanics. Interview the people who will actually operate the arrangement. If their description of day-to-day control differs from the written contract, revise the arrangement rather than relying on assurances.
BOLO Health Law advises healthcare businesses on practice ownership and restructuring, healthcare contracts, and outside general counsel. If your practice is negotiating or revising an MSO agreement, request a consultation before committing to a compensation structure or operational transfer.
Attorney advertising. Prepared October 16, 2026, for informational publication October 17, 2026. This article is general information, not a legal opinion on any particular MSO arrangement. Federal and state requirements depend on facts, payer relationships, professional disciplines, and jurisdiction. Contacting BOLO does not establish an attorney-client relationship.