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MSOs: Your Path to Profit Optimization

Posted By Administration, Friday, June 28, 2019

doctor businessperson partnership

By Nicole Chiaramonte, CEO, TWG Consulting Corp.; founder, Synergy MedAesthetics; and aesthetic industry investor

The skyrocketing demand for aesthetic services in the U.S. has created a tremendous opportunity for business experts, entrepreneurs and investors. In an industry that until recently was run exclusively by physicians, the mainstreaming of management service organization (MSO) partnerships allows doctors to partner with entrepreneurs and benefit from their business expertise while they focus on the medicine.

With the advent of selfies, the Kardashian phenomenon and social media, women and men of all ages are flocking to spend money to look their best. The current medical establishment is not necessarily ready to handle this in a way that is beneficial for them, their employees and their patients. This is where MSO partnerships have allowed for a win-win-win in the aesthetic world.

An MSO allows investors and business experts to partner with a physician in a legal manner, thus not violating the corporate practice of medicine. These partnerships have proven to be profitable for all involved when properly executed. To understand the benefits of MSO partnerships for all parties, one must first understand the unique benefits and skillset everyone brings to the table and, just as important, what their responsibilities are in such arrangements.

Entrepreneurs

As an investor in the aesthetic industry, you will provide your time, investment capital and business expertise to the partnership. This may include a love for spreadsheets and a “Beautiful Mind” ability to read into the deeper layers of a profit and loss statement, balance sheet or statement of cash flow to identify unnecessary losses and quickly increase profit margins. These skills are what you bring to the table and why you are needed in this industry.

But your education has just begun. To be truly successful in this venture, you will need to gain a comprehensive understanding of aesthetic procedures—not only what they are and what they do, but also why they work. You will learn more than you ever thought you would know about the body’s healing systems, skin health, facial anatomy and more. Attend every practitioner training you are allowed to audit, conduct research online, and understand the competitive products, technologies and services. You will need to know them all this well enough to effectively market the practice, train administrative staff and answer patient questions.

When negotiating percentages of ownership in an MSO with a physician, remember to honor the dedicated time and expense required of your partner’s medical degree, as well as the responsibility he or she takes on with every treatment performed. Your active hours contributed to the operation may be significantly more when compared in the short-term, but his or her ongoing risk is real.

Physicians

It is common for doctors to feel the risk to their license is too great to enter into an MSO—they resist the idea of relinquishing a percentage of profit or determine they can best run a practice on their own. In my experience, 100% of the time, a physician enjoys more income from a partnership than he or she did prior to partnering into an MSO. In addition, physicians experience considerably less stress, aggravation and demands on their time when their partners are able to assume responsibility and management of staffing, human resources, inventory, accounting, payroll, patient management, and advertising and marketing.

Partnering with someone who has gone to the lengths necessary to know your industry, proper protocols, SOPs and standing orders is key for physicians considering MSO partnerships or medical directorships. Your partner should put the safety of your license above all else. If you have the right business partner, he or she may inform you about new clinical studies, FDA approvals and technique developments before you hear about them. This is especially necessary in an environment where you are a non-practicing aesthetic medical director who has delegated to onsite mid-levels (nurse practitioners and/or physician assistants).

Once a partnership is in place and responsibilities and parameters are set, it is time to get to work on profit optimization. In my experience of owning 20% to 85% interest in 12 MSOs, the following areas are the first places I audit, whether the practice is in operation or brand new.

  1. Back bar/treatment room materials. This includes everything from Hydrafacial MD products to Botox and machine consumables. How often are you checking for inventory loss or overuse of product that throws your margins off by up to 70%?
  2. Capital purchases. If you are paying list price for new machines, this can take a huge bite out of your profits, benefiting no one but your sales rep.
  3. Staffing. You must make sure you have proper hours, compensation levels and adequate coverage with the necessary practitioners.
  4. Advertising and marketing. From website development to ongoing social media marketing, is your practice paying a premium because you are deemed “medical?”

In short, aesthetic practice profitability is illusive to some and an exact science to others. MSO partnerships are legal, profitable ways to operate an aesthetic practice to the benefit and delight of all involved.

Tags:  Business and Financials  Guest Post  Med Spa Law  Med Spa Ownership  Med Spa Trends 

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