Question re Healthcare Acquisitions

^Searchfunder member‌ I'd like to provide you with two perspectives on your query, emphasizing that these are not legal advice but reflections on experiences and common practices.

I'll give you 1 formal and 1 Informal for you to ponder: (Disclaimer: This is for educational purposes only and not legal advice) Formal Response on CPOM Doctrine and MSO Structure:
In response to your inquiry regarding the corporate practice of medicine (CPOM) doctrine in healthcare acquisitions, it's crucial to address potential risks and ensure compliance in these transactions. Creating a Management Services Organization (MSO) structure is a common strategy to mitigate CPOM concerns. This involves allowing the practice founder, assuming they are a licensed professional, to retain ownership of the professional entity. The goal of this structure is to maintain compliance with CPOM regulations. However, it's essential to consider the dynamics within the MSO structure, particularly the potential for the founder to wield significant influence over the professional entity. While this might not inherently violate CPOM, it could lead to governance challenges and conflicts of interest, especially if the founder's interests diverge from those of investors. Institutional private equity (PE) firms, before investing in healthcare practices, carefully assess risk and governance structures. They may decide to retain the founder in a leadership role if they bring valuable expertise and client relationships. Alternatively, PE firms might replace the founder with a licensed professional under their control or on their team. When a licensee assumes a leadership position, they bear the responsibility for ensuring compliance with CPOM regulations and other legal requirements. PE firms often conduct thorough due diligence to assess qualifications and risk profiles, negotiating governance agreements, employment contracts, and non-compete clauses to align interests and address conflicts. In summary, while the MSO structure can address CPOM concerns, careful consideration of governance, control dynamics, and risk mitigation is crucial to protect the interests of all parties in healthcare acquisitions. Informal Response on State Variability and Strategic Guidance:
Each state and healthcare situation is unique, and with upcoming changes in Home Health and lending further complicate the landscape. Given these moving targets, having someone on your board who can assist, especially in communication with your legal team, is essential. Even if you feel like "small potatoes," negotiations occur at all levels. Always prioritize legality, ethics, and morality. Surround yourself with a knowledgeable team that can provide guidance through the complexities of healthcare acquisitions.
Hope this helps you.

An M&A attorney with experience in this space will be a necessary resource in this, as the legal structure is inherently complex in order to ensure security of the non-practitioner owner's investment, forms of indemnity and protection for the practitioner who will own the "captive" PC, and to ensure that the entire MSO-PC structure holds up to external scrutiny if challenged under CPOM laws.