Acquiring via MSOs

by a searcher from Bridgewater State College

2 months ago

Has anyone made an acquisition (med spa, longevity clinic, dermatology etc.) using an MSO?

We're trying to understand MSOs in greater detail, specifically how value (profit) flows from the practice to the MSO (investor group).

Thanks all!

1 like
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5 comments

professional from Harvard University

Yes, something like that where the business arrangement make sense on its own two feet.

I'm not an expert and it may vary by state, but if in NY, for example, you're structured in a way that you're sweeping all the profit all the time, that's not gonna look great.

2 months ago | like reply | 0 likes

professional from Harvard University

There are generally three ways the MSO can charge the PC/PLLC (i.e., the actual medical practice). 1) cost plus (e.g., all the MSO's costs plus 20%), 2) fixed fee (e.g., $50k a month), or 3) percentage of revenue (e.g., 20% of revenue), though in some states with strict corporate practice of medicine laws (e.g., NY), you can't charge a percentage of revenue.

What many people fail to realize is that the MSO can't just be a ruse, i.e., a shell that non-doctors hide behind to really run a practice: it has to really be an independent business, providing true value to the medical practice. If scrutinized, it has to be able to justify its existence as a business matter.

People who are doing this properly will commonly get an FMV analysis done by an expert to validate how the MSO is charging the practice.

2 months ago | like reply | 0 likes

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