Multi-Disciplinary Healthcare Practices—Legal Pitfalls to Avoid
Hello, this is Michael H. Cohen – I am a healthcare and FDA attorney and the founder of the Cohen Healthcare Law Group. I am going to talk today about multi-disciplinary clinical healthcare practices. This comes up again and again among my own clients.
Typically, you’ll have an MD or DO—a physician collaborating with, let’s say, a chiropractor, an NP, or some other kind of healthcare professional.
There are a lot of permutations on the multi-disciplinary healthcare practice.
Yesterday, for example, the client was a Nurse Practitioner who wanted to set up a clinic that deal with functional medicine and wellness.
At the same time, we’re representing a medical doctor client who is involved with a chiropractic practice, and instead of starting a practice, he’s seeking to extricate himself from the practice.
One thing to remember is that, we can think about the world as having two different slices. One is the clinical practice itself, on one hand, and the other is the business side. The business side we typically put under a management company we called an MSO, a Management Services Organization.
Again, the key point to remember is that clinical practice is very different from the business side.
Can the Nurse Practitioner Use the MSO Structure?
So, for example, let’s go back to Nurse Practitioner client who wants to establish more than a practice. She wants to break out from her day job and start a clinic, and she wants to start a wellness clinic, a holistic health clinic, creating functional medicine, and have a collaborating physician, have chiropractors, have massage therapy, acupunctures, reiki, other practitioners.
So, what she really wants to do is branch out of her role as an NP, collaborating with an MD into wearing a second hat which is the hat on an MSO.
The MSO is going to do essentially all of the business things that otherwise would’ve been done inside a medical practice, inside the chiropractic practice. The MSO model is really the way for her to go because this allows her to put on a business hat, as a secondary role to her clinical hat. Now, she had a lot of questions, like most practitioners, most entrepreneurs starting this kind of venture.
What goes under the professional corporation and what goes under the MSO? Those are questions that we can help out with in a Legal Strategy Session.
(Again), the key point here to remember that those are two different boxes – the clinical side and the business side. So typically, practitioners on a clinical side stay within the clinical entity, whereas practitioners on the business side, not practitioners but service providers on the business side can be under the MSO.
The Chiropractor-Physician (DC-MD Collaboration)
Let’s turn to the chiropractor who’s creating or get involved in a multi-disciplinary practice that was initiated, sponsored by the chiropractors.
You’ll see this a lot. We have physician clients, chiropractic clients, entrepreneur, non-clinician, ventures, who are creating organizations, telemedicine companies. People creating something that then draws in the medical doctor.
So, for example, you have chiropractors that are trying to add a stem-cell practice to their existing practice, they need a medical doctor to do this.
What happened to this situation is that the MD got very enmeshed in the chiropractic web and the chiropractors didn’t create an MSO. This creates a compliance issue really for both of them, because we get an MSO that turns into what’s called a corporate practice of medicine problem.
The bottom line is that the chiropractors cannot hire or be supervising or be over an MD – the MD is really in his or her own separate clinical box.
With an MSO, the MSO can manage and market the medical practice. In fact, they can manage and market the entire system and presumably brand everything under that MSO name.
Using the MSO in the Multi-Disciplinary MD-DC Collaboration
I had a client yesterday, this one an MSO, and what they want to do is figure out how to drive the brand, drive the value, drive the product, drive the revenues in the MSO and given that in the eyes of the law in the sense that the MD/DO is top dog. And you’ve got the other providers, and you get the entrepreneur.
But from the branding, marketing perspective, from a revenue perspective, the entrepreneurs are important here because that’s what’s really driving the value, driving the revenue, and driving the brand forward.
So, the MSO is a really good tool – the point I want to make about the physician who gets drawn into the practice with the chiropractors is that without an MSO, everything is murky. Nobody knew whose revenues are whose, there was a lot of ongoing confusion during the process of disentangling about who built under whose name, will there be an accounting, none of this was ever provided.
So, a couple of takeaways here:
- If you are a clinician or an entrepreneur setting up a multi-disciplinary practice, look to the MSO model.
- If you‘re a clinician getting involved, make sure that you have representation by an attorney. And make sure that all the paperwork is something that you very carefully review.
- Make sure you have paperwork, and make sure you have legal documentation. Never, ever go into a deal without having proper legal documentation or legal review.
Do You Want to Pay the Pound of Cure Later?
Have an ounce of prevention or pay the pound of cure later.
It’s really important because at the outset of a relationship. everybody’s friendly, everybody’s collaborative, and this is going to be the greatest in the world – the patients are going to benefit, the practitioners are going to smile, and give each other the love and the high-five, and practice in a very inter-disciplinary way, and the brand is going to succeed, and everyone is going to be happy.
A couple of things can happen.
1) Losses. The thing might not take off, there could be losses, then who’s going to be accountable? Who’s accountable for what and who’s paying for what and who’s charging for what?
This not only has business implications but also compliance implications.
The MSO must charge a fair market value, and this has to be documented and justified an accounted for.
2) Wild Successes. Another thing that could happen is the brand could be wildly successful, what happens then?
Now millions of dollars are made, the brand expands to a second location, goes across states, now who’s in control? Who can terminate whom? Who is actually riding the tide of adventure?
These are all things that legal counsel can help you carefully craft, strategize, think about, and work through at the outset.
If your work things out, then when and if it becomes time to parting of the ways, either because the venture didn’t succeed as people hoped, or because it has succeeded beyond anybody’s wildest dreams – then what you have to rely upon? Do you have all the goodwill that went into the relationship 5 years ago? 2 years ago? 5 months ago? 5 minutes ago? Let’s be optimistic here, 5 years ago, to rely on – or you go back to the contracts that we carefully drafted at the beginning.
We have clients that come with boilerplate contracts that somebody else drafted. This other attorney wrote a blog post on multi-disciplinary healthcare practices, or something else and suddenly became the expert, call themselves a healthcare lawyer and maybe they are, and they have these documents. (Then again) Take a careful look, if you’re going to buy an automobile – you’re going to kick the tires, you’re going to look under the hood, you’re going to get a mechanic, right?
If you’re going to enter a venture that is going to be your bread-winning vehicle for you and your family; if you are going to put your professional license at risk when you get into a venture; if you are going to associate, affiliate with other healthcare practitioners; if you are going to get investments, then you got of course all the potential liabilities – securities, law liabilities for representations, other liabilities.
If you’re going to operate in any kind of venture, get the expertise that you need to develop your systems, your procedures, and your business – you won’t regret it. If and when things take a different turn than what you’d expected, even when if they thrive, you’re going to want to have that wind at your back, you’re going to want legal support.
If you want to reach out, give us a call, we’d love to hear from you!
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