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Are Medical Director Agreements Required in MSO Arrangements?

Posted By Administration, Monday, February 17, 2020

mso agreement

By Kita McCray, JD, ByrdAdatto

The purpose of a medical director agreement is to memorialize the responsibilities of a physician, which typically entail supervision and delegation, and address physician compensation. In a management services organization (MSO), the physician who owns the medical entity usually is the physician who is in charge of supervision and delegation. Where a single physician owns, delegates and supervises, he or she would not need a medical director contract with themselves. Moreover, financial terms, including medical director compensation, typically are captured in the management services agreement (MSA) between the MSO and the physician-owned medical entity. Thus, medical director agreements are only necessary when a company is operating in a state that allows non-physician-owned companies to contract with or directly employ physicians, and in MSO arrangements where the supervising physician is different than the physician owner.

To determine whether your company needs a medical director agreement, you should begin by looking to two places:

  1. Your state’s corporate practice of medicine (CPOM) doctrine, if any; and
  2. Any applicable supervision and delegation laws or regulations applicable to physicians.

The CPOM is a doctrine that prohibits an unlicensed individual or non-professional entity from:

  1. Practicing medicine;
  2. Employing or contracting with a physician to practice medicine on its behalf; or 
  3. Interfering with or influencing a physician’s professional judgment or practice of medicine.

This includes both the physician’s health care or medical decisions, and business or management decisions that necessarily implicate the practice of medicine.

In CPOM states—such as California, Texas and New York—the medical entity must be properly owned by a licensed physician. A company owned by a non-physician who employs a physician to render medical services and receives compensation in exchange for providing those services is structured in violation of CPOM. Where the MSO model is used to comply with CPOM prohibitions, a medical director agreement would be unnecessary, unless the physician-owner hires a different physician to supervise the medical entity’s operations.

In non-CPOM states, such as Florida, non-physician-owned companies are allowed to contract with or directly employ physicians, so long as the physician’s professional judgment and practice of medicine are not interfered with. Therefore, a medical director agreement would be necessary to specify the responsibilities and compensation of a physician acting as a medical director. Such responsibilities typically are for treatment plans, supervision and delegation, and they are in accordance with state supervision and delegation laws or regulations that are applicable to physicians.

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Kita McCray’s decision to become a lawyer was solidified in fourth grade after job shadowing a local lawyer in her hometown of Ferriday, Louisiana. In college, Kita dedicated all her enthusiasm and energy to becoming well-read in classic English literature before attending law school. But while working as a public health graduate researcher, she developed an interest in health law and policy, and decided to focus her legal studies toward health care law.  Today, Kita brings the full scope of her multidisciplinary background to assist clients with their business and health care needs.

Tags:  Business and Financials  ByrdAdatto  Med Spa Law  Med Spa Trends 

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