Are you considering adding a Management Service Organization (MSO) to your medical spa practice? An MSO can streamline your operations, improve compliance, and boost profitability by allowing the healthcare providers to focus on patient care. However, creating an MSO structure involves legal considerations, making it essential to consult a healthcare attorney throughout the process.

In this guide, we’ll walk you through the steps to establish an MSO for your medspa, emphasizing the critical importance of working closely with a team of professionals to ensure compliance and success.

Step 1: Understand the Purpose of an MSO in a Medspa

An MSO is designed to separate the business and medical aspects of your practice. In most states, healthcare regulations prohibit non-physicians from owning medical practices (corporate practice of medicine doctrine). An MSO allows non-clinical individuals to manage the business side while ensuring licensed medical professionals retain control over patient care.

Check with your attorney: State laws vary, so start by consulting your healthcare attorney to determine whether an MSO is appropriate and how it would function within your jurisdiction.

In some practices, an MSO is helpful because there are multiple medical spa locations.  The MSO is often times the entity that is used for expenses that relate to the entire organization.  Marketing costs, accounting and finance costs, legal expenses, and any payroll that is devoted to running the entire organization might be paid from the MSO since those are typically one cost.  It’s easier to pay from one entity that is managing the entire business, than to, for example, divide the marketing invoice among all locations.  

Step 2: Establish the MSO’s Legal Structure & Flow of Funds

The MSO is established as a separate legal entity, typically an LLC or corporation. Work with your attorney to establish the entity and draft a legally sound MSA (Management Services Agreement) that complies with state and federal regulations. The MSA will include what services the MSO will provide to the medical practice(s), and will determine the Management Fee, which is the compensation paid by the medspa practice(s) to the MSO entity for the services identified.  

Your financial team should help determine the expenses that should be paid from the MSO, and how the flow of funds (the actual movement of money) will work.  Patient payments will be received by the medical practice.  Depending on the purpose of the MSO, some expenses of the business will be paid from the MSO and from the medical practice.  Typically, provider payroll, malpractice insurance, and medical supplies are paid from the medical practice.  In some cases, the remaining costs of the business are moved over to the MSO.  In practices with multiple locations, the MSO might only pay the “corporate” type expenses that can’t be tied to a specific location. 

The flow of funds is detailed in the MSA, so it’s important to understand what’s been drafted and work with your finance team to ensure everyone is on the same page with how the organization should receive income and pay costs. 

Step 3: Maintain Compliance Systems

Develop protocols to maintain compliance with healthcare regulations, including regular audits, record-keeping, and staff training. Create a tailored compliance plan with your legal counsel to ensure both the MSO and medspa operate within the law.

Step 5: Roll Out the MSO Model and Train Staff

Educate your team on the MSO’s role and responsibilities. Clearly separate clinical and non-clinical functions to prevent conflicts.  Ensure your accounting and finance team are clear on the flow of funds.  

On a regular basis, typically annually, assess the management fee.  Is it covering the costs of the MSO? Is it compliant with regards to the services rendered.  

Final Thoughts

Adding an MSO to your medspa practice can offer significant benefits, but only if done correctly. Consulting a healthcare attorney and including your finance team at every stage to help ensure your practice remains compliant and profitable.  For more information about how Maven Financial Partners can help implement or structure the funds flow for your MSO, please email us at hello@mavenfp.com.

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