Can an MSO help you?

November 3, 2006

A management services organization can take some hassles off your back, but there's a price. Make sure you know what you're getting into.

Whether outsourcing various practice management functions is a good option for you depends partly on how high your overhead is and how much time you devote to running your practice. With MSO management fees for primary care offices typically running between 8 and 12 percent of collections, an MSO should be able to cut your overhead by at least that much to make signing on worthwhile.

If there's an MSO in your area, this is something to consider. But before you explore this option, it's important to understand the different kinds of MSOs and what they offer. Here's a brief rundown, along with some case histories and advice on what to look for in an MSO.

The majority of MSOs are owned by hospitals and manage only hospital-owned practices. But some hospital-owned MSOs offer limited services-such as billing, group purchasing, or IT support-to private-practice doctors, and others completely run private practices.

There are a few nonhospital-owned MSOs with nationwide operations, such as Med3000 and MedSynergies. But they may not be right for your practice. Med3000, for instance, offers traditional MSO services as well as sophisticated IT support to both hospital-owned and private groups. But it doesn't deal with practices of fewer than 10 physicians, and it prefers to work with groups of 30 or more, says Richard Schickler, executive vice president of physician services.

Some physician groups have started MSOs to manage both their own practices and smaller ones in their area. This gives them the critical mass they need to afford professional management and a first-class IT system, and can also help them with contracting. In contrast to the physician practice management companies that crashed and burned in the '90s, these MSOs don't own any practices, and some have achieved long-lasting success.

Some billing services also call themselves MSOs. But a billing service isn't an MSO, consultants say, unless it supplies other management services, such as credentialing and staffing. To Jeffry Peters, a Chicago consultant, what distinguishes an MSO is that it "works with physicians to establish a strategic plan for the practice. And it provides comprehensive services to manage the practice: the staff, the billing and collection, the IT, the supplies. So physicians can concentrate on practicing medicine and stay away from doing the day-to-day management."

What can an MSO do for you?

Whether hospital-owned or not, MSOs can help small practices acquire healthcare information technology, notes Michael La Penna, a consultant in Grand Rapids, MI. "MSOs can do group purchasing on things like EHRs. The MSO could be the coordinator for seven practices that get an EHR with a central server."

A number of MSOs are also helping doctors add ancillary services, either in their offices or in outside facilities that may be joint ventures with hospitals, notes Peters. They may also manage those facilities. And some MSOs help practices and IPAs collect clinical data to qualify for pay for performance.

In California, MSOs tend to manage capitation contracts for one or more groups or IPAs, notes Grant Cattaneo, a Burlingame, CA-based consultant. Few are affiliated with hospitals, and many don't do any practice management. Instead, they negotiate deals, process claims, and handle credentialing and utilization management for the physician groups that hold the risk contracts. Some large groups and IPAs have formed their own MSOs, partly to attract outside capital, Cattaneo says. Smaller, independent MSOs may serve a number of medium-sized and small practices. The emergence of pay for performance as a significant factor in physician income has prompted many small groups to seek MSO help, he adds.