How Does an MSO Contract with a Professional Medical Corporation?

How Does an MSO Contract with a Professional Medical Corporation?

In today’s video, we talk about the relationship between the MSO and the professional medical corporation—or in the case of mental health, it might be a psychological or behavioral health corporation—this is a scenario we know well.

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

Let’s take the case of Bob, a physician, he recently contacted us about his wellness center.  He had formed a corporation but he wasn’t sure whether it was the right kind. We advised him to look at his Articles of Incorporation.  If it’s intended to be a professional medical corporation then the Purpose of the corporation has to be “the practice of Medicine,” or “the practice of Medicine and other healing arts.”  If those words are missing then you’ve probably got a general corporation.

What’s the difference? Only a licensed physician, MD or DO, or a professional medical corporation, can practice “medicine.”

So, if the organization appears to the one practicing medicine, but is a general corporation, there is a risk of prosecution for unlicensed practice of medicine.  Many healthcare entrepreneurs worry about getting sued, but they’re missing the bigger risk, which is criminal prosecution for unlicensed practice—of medicine, of psychology, or something else. You can get insurance against liability, but criminal exposure is something else.

In Dr. Bob’s case, he had a professional medical corporation (thank goodness!), but he still needed something else: a separate, general corporation, to serve as the MSO.  And then an MSA or MSO Agreement to govern the relationship between the professional medical corporation and the MSO.

If this sounds like a lot of three letter words, think of it this way.  You have the doctor’s professional corporation, which handles the medical aspects of the venture, and then you’ve got the MSO or general corporation, and it handles the management, administrative and marketing aspects.  The doctor owns the medical corporation—or at least in California 51%; while anyone can have ownership in the MSO.  And, it’s important to have an Agreement between the professional corporation and the MSO, so you spell out who gets to decide what in the overall venture.

These are all questions we deal with routinely, day-in and day-out.

Thanks for watching. Please contact us with your questions, you might want to do a legal strategy session. We have helped so many healthcare industry clients just like you navigate this terrain, and we look forward to working with you on your journey to success!


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