In today’s video, we’ll talk about a healthcare startup that wants to buy a medical or psychological or chiropractic practice and/or let’s just say partner with an MD, NP or RN, psychologist, or chiropractor.

Hi everyone, I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare industry clients just like you, navigate healthcare and FDA legal issues so you can launch or scale your healthcare business.

This one has a lot of issues.  First, the healthcare startup cannot purchase a medical, nursing, psychological, or chiropractic professional corporation or practice in most states, if the startup itself is not a professional corporation – typically that is majority owned and operated by the corresponding licensed clinician.  So, let’s say Bob the healthcare entrepreneur is not a licensed MD, NP, RN, psychologist, chiropractor, and so on, he cannot practice the profession or purchase the clinical venture itself.

What Bob can do is create an MSO and the MSO can contract with the clinic and provide the space for rent, the business administration and marketing, and all the non-clinical aspects of the overall business.

Next, it’s important to understand that the MSO must charge for its services at FMV, fair market value – otherwise there are kickback and corporate practice of medicine concerns. In California, fees can be set as a percentage of gross revenues, not net. And some states like New York don’t even allow gross revenues.

For the marketing part of the MSO charges, we do recommend a flat fee approach, again, to ameliorate anti-kickback concerns, as we discuss elsewhere on the blog.

Some clients come to us, they’re looking for the “friendly PC” or “captive PC” model.  There’s nothing friendly about the arrangement when the medical board or other regulators come in and find a corporate and unlicensed practice violation.  We don’t support the friendly PC model; we think it’s risky.

The MSO principles, on the other hand, are true and tried … as long as the MSO doesn’t exert undue influence or control over clinical decision-making.  The MSO cannot transfer economic benefit and control from the PC to the MSO (as much as they would like to), as this would violate corporate practice of medicine.

For more of the legal nuances, contact us to book a Legal Strategy Session.

Thanks for watching. Please contact us with your questions. We have helped hundreds and hundreds if not thousands of healthcare industry clients build their dream.  We look forward to working with you on your journey to success!