MSO FMV Management Fee Guide

Our MSO FMV Management Fee Guide is designed to help attorneys, physician groups, and MSO leadership teams structure management fees that further their business goals while remaining compliant with corporate practice of medicine (CPOM) and healthcare fraud and abuse laws and regulations. Determining and supporting fair market value management fees is important for all MSOs, but is not well understood by most healthcare executives. To make matters more complicated, each MSO, and the FMV management fees charged for its services, is shaped by its own unique characteristics:

1. Parties Involved: The combination of parties entering into MSAs varies significantly, but typically fall into three main categories.

   1. Third-Party MSOs: MSOs that have separate ownership from the physician group, and typically provide services to multiple groups

   2. Captive MSO/Friendly PC: MSOs that provide services to one practice or group of physicians, often with common ownership

   3. Joint Ventures: Situations where two healthcare providers (or entities at least partially owned by providers) enter into an MSA, and are often in position to refer patients to each other

2. Management Fee Structures: MSO management fees are typically structured using one of three main structures (or a combination).

   1. Percentage of revenue (e.g. 30% of practice revenue)

   2. Fixed fee (e.g. $500,000 per year)

   3. Cost plus markup (e.g. 120% of MSO cost)

3. Scope of Services: The services provided by the MSO can vary from simple managerial oversight to coverage of the entire cost structure of the group, and the specific bundle of services provided has a significant impact on the FMV management fee.

   1. Sometimes only back-office administrative services are provided, resulting in relatively low management fees if structured as a percentage of revenue or on a fixed fee basis.

   2. However, in captive MSO/friendly PC models, the MSO often provides clinical office space, medical supplies, clinical staffing, and a variety of other resources depending on state CPOM laws, resulting in significantly higher management fees.

MSO FMV Management Fee Guide 4.27.23.pdf

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Please contact Will Hamilton at whamilton@healthfmv.com with questions or to set up a time to discuss your MSO.