Setting Up the Proper Flow of Funds in Your MSO to Remain Compliant
Something that astounds us as legal counsel is that clients will spend large sums to properly construct the MSO model, but never actually implement the funds flow required to remain in compliance. A key element to the efficacy of an MSO funds flow structure is to ensure that the flow of funds closely mimics what is outlined in the chart below.
Before reading on, if you’re not familiar with the MSO structure, start with the articles below.
Steps in a Proper MSO Funds Flow Process
The flow of funds process should be as follows:
A patient receives medical services in the practice.
The patient makes payment to a bank account associated with the clinical entity. This means that the owner of the clinical entity is also the owner of the bank account, but generally the MSO will have co-signer rights on this clinical bank account as they will need to assist with proper distribution of funds and paying bills.
From those clinical fees paid, the proper clinical providers are compensated. This may include the Medical Director, nurse injectors, laser technicians, and anyone else with clinical duties.
Following the clinical payments, the management fee is paid to a bank account associated with the MSO in accordance with the fee established in the Management Services Agreement.
The MSO now pays its necessary expenses for administering services.
Although this process can feel cumbersome and may call for separate payrolls (that is, one under the clinical entity and one under the MSO), it is a requirement to ensure that concerns with fee-splitting and corporate control are alleviated.
(We explain fee-splitting here.)
An arms-length transaction via the MSA, in conjunction with separate bank accounts, is the only way to ensure that funds are not commingled to such an extent that it defeats the entire purpose of the MSO.
Need guidance setting up a proper flow of funds in your MSO?
Our legal team specializes in helping practice owners set up, grow, and sell compliant healthcare practices and MSOs. Reach out to our team to learn how we can support your goals. Want even more resources? Become a Marti Law Group member. Learn more about our memberships here.
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