There is a path to Med Spa ownership by which nonphysicians can manage medspas. It is called a management service organization (MSO) and, while it still relies on the participation of a physician via a management services agreement (MSA), it allows nonphysicians to maintain their role in the day-to-day operations of a medical aesthetic business.
The MSA allows the nonphysician-owned MSO to supervise several aspects of the Med Spa business. These may include branding, marketing, real estate ownership or leases, payroll, human resources, accounting, billing and more—everything except the actual administration of medical services.
The MSO typically owns and maintains the facility and the physician’s practice occupies the space. The physician pays the MSO “rent” for the right to occupy the space, and the MSO functions in much the same way as a landlord, maintaining the facility and keeping the physician as comfortable as possible. However, the MSO can invoice the doctor for more than just rent. Services such as patient coordination, marketing, record keeping, equipment rental, branding and design, accounting and other services can also be managed by the MSO and charged to the doctor. Additionally, unlike an apartment rental, the MSO’s management fee can be renegotiated throughout the year to allow for fluctuations in business. This helps to create a strong bond between the medical side of the business and the MSO—if one succeeds, they both succeed.
Some less obvious advantages have to do with separation of risk between two different entities, as well as the clear separation of medical services and business services. When entering into these types of contracts, there are a few pitfalls that you must be certain to avoid.
First, the doctor must be in control of all medical decisions, including the hiring of medical personnel. The easiest way for an MSO to get in trouble is for it to not actually treat the aesthetic practice as a medical company. If the doctor is not managing the medical aspects of the medspa, he or she may be subject to severe punishments—including license forfeiture and large fines—and the MSO would be subject to repercussions for practicing medicine without a license. Therefore, it is vital that all parties understand their roles and obligations. Second, all payment for medical services must be made directly to the physician-owned entity to a revenue account set up in the name of the physician-owned entity yet managed by the MSO. The MSO submits an invoice to the physician-owned entity for management services and is typically paid from that company’s account at the end of each pay period. Other practice expenses are paid from the same account. It is important to note that, although it may seem that a properly set up MSO is in charge of the medspa or practice, the doctor must be in charge of all medical and clinical decisions. This is necessary for both legal compliance and patient safety. He or she cannot be an absentee medical director.
MSO: Management Service Organization:
The organization that supplies management services to a business
MSA: Management Service Agreement:
A contract between an MSO and partnering business (med spa) outlining the business relationship