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Many Physician Practices Have Formed MSOs with Local Hospitals

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We’ve been looking at the various hospital-practice arrangements physicians may encounter as they look for their next job. Most of these arrangements are designed to ease the financial burden on both the hospital and the practice and to further align physicians with the hospital’s strategic goals. So far, we’ve looked at medical directorships and comanagement agreements. In this post, we explore the growing popularity of management services organizations (MSOs).

Private physician practices are struggling to stay afloat under the new healthcare paradigm, which is why so many are open to options beyond the traditional practice’s business model.

One of these options is management services agreements, Kenneth J. Terry, MA, reports over at Medscape, especially as overhead costs continue to increase. “Many smaller practices have outsourced their billing or their revenue cycle management (RCM) in an effort to reduce overhead and cope with the increased complexity of billing. Management services organizations (MSOs) have traditionally offered not only RCM services, but also supply purchasing and other back office services.”

Michael LaPenna, a healthcare consultant based in Grand Rapids, Mich., told Terry that “MSOs are growing again because information technology has become too complex for most private practices.”

Furthermore, LaPenna said, hospitals are using “MSOs or MSO-like services to provide technical support to practices that have received Stark subsidies from those hospitals to purchase EHRs. In that case, the practice must pay for the technical support at fair market value. If the hospital can get the practice on the same EHR that its employed physicians use, the independent practices are more aligned with the hospital.”

In some cases, hospitals are just managing the practice outright. But David Zetter, a practice-management consultant based in Mechanicsburg, Penn., said that IPAs are usually responsible for MSOs, not hospitals. If you do encounter a practice that is managed by a hospital, however, it’s probably costing them upwards of 15 percent of their revenue, LaPenna said.

As physicians who are looking for jobs, MSOs are yet another factor of the marketplace that you may encounter in your next position. How do you view MSOs? Have you had experience with one in the past? Was it a good or bad experience? Which questions would you ask a potential employer about their MSO?

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