Lately, I have been reviewing a number of Management Service Organization (MSO) investment opportunities for healthcare entities. I feel like I’m playing “whack-a-mole" going through these contracts.
While an investment like this can be quite the profitable and worthwhile venture, I have noticed a vexing trend; The contracts I am reviewing are an MSO by name; not by service. This raises several legal issues of which physicians need to understand before making any commitments.
4 Major Warning Signs of a Risky MSO Investment:
- The “management service” organization does not provide any legitimate management services.
- Physician-investors are directed or “encouraged” to send specimens to the labs, order tests or products from the entities that contract with the MSO or to increase volume by ordering tests, products or services that are not medically necessary.
- The financial terms are lop-sided and strongly favor the deal promoter and the projected returns are inflated.
- The offering and operational documents are not consistent with the verbal sales pitch.
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Physicians should be very careful about investing in MSOs or other entities without thorough review and consideration of the consequences. Physicians should not rely solely on a verbal sales presentation, but should actually have the investment documents reviewed by an attorney with healthcare law expertise. MSO investments may be profitable, even very profitable, but many are also unethical and in violation of applicable laws and regulations.
Here's the Bottom-Line...
Any business arrangement involving a physician and a business entity to which the physician refers implicates the Stark Law and the Anti-Kickback Statues, which both prohibit paying physicians directly, or indirectly, for referrals. The fines and consequences of violating the Stark and Anti-Kickback Statutes can be severe.
About the Author
Cori H. Loomis, J.D. is an associate attorney at Christensen Law Group, PLLC. She is an expert in healthcare law, employment issues, and business transactions. You can read more about her and her legal experience here.