Management services agreements and compliance when managing chiropractic multidisciplinary health care finances
Successfully operating a multidisciplinary practice requires a high level of attention to compliance in both the areas of patient care as well as multidisciplinary health care finances. This article will focus on financial procedures.
All the economic gains that a multidisciplinary practice may provide can quickly vanish without the correct legal and accounting procedures. These procedures and the regulations that govern them vary from state to state. When establishing your multidisciplinary practice, you should consult with a team of professionals well-versed in the specific requirements for owning a health care practice in your state. These professionals include a health care attorney, accountant and practice management consultant.
Management services agreements for chiropractic multidisciplinary health care finances
Multidisciplinary practices often require the establishment of a management services agreement (MSA) to have a compliant corporate structure. An MSA is a contract that documents the business relationship between two distinct corporate entities. In this instance, these entities include a multidisciplinary practice that provides medical and other services and a non-physician business that provides management services to that practice.
The multidisciplinary practice is typically structured as a professional corporation (PC) or professional limited liability company (PLLC). This entity is owned and operated by a licensed health care provider or group of providers depending upon the state’s requirements. The non-physician business entity is commonly structured as a limited liability company (LLC) and is referred to as a Management Services Organization (MSO). This entity may be controlled by an unlicensed individual or by a health care professional, such as a chiropractor, with a license that does not permit medical practice ownership.
If you fall within this category, and your multidisciplinary practice is operating under an LLC or corporation without an MSO, you may not have the correct structure for your practice.
Clearly defining roles and responsibilities
An MSA is a contract between the MSO and the multidisciplinary PC that clarifies that the two parties are separated entities that are working together. It further clarifies the distinct roles and responsibilities of each entity. The PC controls and operates all health care related aspects of the enterprise. This includes:
- The employment of licensed medical professionals, such as MDs, nurse practitioners and physician’s assistants;
- The oversight and provision of medical services;
- Setting the fee schedule for medical services; and
- Receiving reimbursement generated from medical services.
The MSO controls and operates all business-related activities, such as:
- The employment of non-medical personnel, including administrative and managerial staff members;
- The onboarding, training and management of non-medical personnel;
- Technological support;
- Scheduling assistance;
- Billing, bookkeeping and accounting;
- Maintenance of the physical plant; and
When is an MSA necessary?
The Corporate Practice of Medicine (CPOM) is a state-specific legal doctrine that regulates who may own or directly profit from physician services. In many states, individuals who do not hold a medical license, including chiropractors, may not own a multidisciplinary practice that provides medical services.
The CPOM is based on the concept that a medical physician’s judgement should be free from the influence of unlicensed individuals or corporations, and the pursuit of profits. The CPOM applies to all corporations that are owned (even if only a small part, as allowed in some states) by individuals who do not have a medical license.
A correctly structured MSA solves this problem. It allows the health care providers within the PC to make medical decisions independent from the MSO. It also allows the MSO to charge the PC for the business services it provides to the practice. Even when both parties involved are licensed health care providers, a multidisciplinary practice may still require an MSA. Some states only allow certain types of medical professionals to own a practice together. For example, a state may prohibit registered nurses from owning practices with medical physicians. In this case, the nurse would need to establish an MSO and set up an MSA with the physician-owned PC.
How profits flow without violating CPOM
The MSA formalizes the fee structure and flow of profits between the MSO and PC in a manner that avoids fee-splitting prohibitions.
The fee-splitting provisions, like the CPOM, are designed to prohibit the exertion of influence over the medical decision-making process by non-licensed individuals or entities. The fee-splitting parameters vary significantly between states and also operate on a federal level in regard to multidisciplinary health care finances.
Some states allow certain types of fee-splitting arrangements between physicians and non-physicians including outright ownership of multidisciplinary practices. In other states, sharing of fees generated from licensed providers by unlicensed providers is strictly prohibited. So how does an MSO receive cash flow?
Setting management fees
The multidisciplinary PC pays the MSO for the business-related services it provides. These payments are distributed as management fees established by the parties involved and documented in the MSA.
In many states (but not all), management fees may not be a percentage of the multidisciplinary practice’s revenue from patient care. Instead, the MSO structures a flat fee or a cost-plus fee based upon the fair market value of the services provided to the PC. The MSO cannot charge, for example, a management fee of 50% of the revenue of the PC. Instead, it would charge a specific dollar amount based on the negotiated rate of payment for the business-related services rendered by the MSO.
Expenses paid directly by the PC include the salary of licensed medical staff. Medical staff members should have employment agreements directly with the PC. The payment of all other non-health care-related expenses and salaries are paid through the MSA to the MSO.
The risks of noncompliance
Multidisciplinary practice owners should hold regular meetings with their accountant to scrutinize the invoicing and payments that flow to the MSO from the PC. This should include a review of the fair market value of the business services being provided by the MSO.
There should also be a regular review of the medical decision-making process and oversight of the providers in the PC regarding multidisciplinary health care finances. Improper practices in this type of arrangement can have serious consequences, including discipline by licensing boards, significant fines and other forms of punishment. Work with your attorney and consultant to ensure you remain in compliance with all laws and regulations.
MARK SANNA, DC, ACRB LEVEL II, FICC, is the CEO of Breakthrough Coaching. He is a board member of the Foundation for Chiropractic Progress and a member of the Chiropractic Summit. To learn more, visit mybreakthrough.com.