Medical Director vs. MSO Model: Which Legal Structure?
Clients with medical spas, IV hydration clinics, and health and wellness centers often come to us wondering how to structure their venture with a physician. Sometimes it’s the healthcare entrepreneur who comes to us, sometimes a nurse in search of a collaborating physician, or a psychologist, social worker, nutritionist, or health coach.
The key here is to structure the venture so as to mitigate risks of corporate practice of medicine and kickbacks and fee-splitting.
Hi, I’m Michael H Cohen, founding attorney at Cohen Healthcare Law Group; we help healthcare companies just like you navigate legal challenges so you can grow or scale your amazing healthcare venture.
Typically, in California, which is known as a State that has a “strong” corporate practice of medicine prohibition, we have to structure the overall venture carefully so that it doesn’t appear as if the non-physicians have too much control over the practice of medicine.
Legal Tip number one: this includes ensuring that only physicians hire and fire clinical staff, and at the end of the day, the physicians even have to approve (or should approve) all the advertising.
Legal Tip number two: in a strong “corporate practice of medicine” State, which means that there is strong enforcement and little tolerance for too much MSO control, we also rigidly separate the professional medical corporation and the management and marketing arm of the business. Managing and marketing are housed in the MSO which receives an MSO fee at fair market value for its services.
Legal Tip number three: in a strong “corporate practice of medicine” or CPM State, we don’t like the concept of a “medical director.” The reason is that the medical doctor is not there to “direct” the overall venture. Rather, the doc is directing clinical operations while the MSO is responsible for branding, promoting, and running the business side.
In a “weak” corporate practice of medicine State, there is often a legal agreement between the business side and the clinical side within the same entity such that the business venture can hire and fire doctors, but cannot exercise any medical judgment over their decisions.
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