What is the difference between a California Professional Corporation and a Management Services Organization in California? What works best for your firm? How can a multiple entity strategy improve not only profitability but the quality of care and patient experience of related healthcare practices?

California has a unique corporate entity for medical and healthcare applications as well as those with a professional license.  The California Professional Corporation or “PC” provides distinct advantages to doctors, physicians, dentists, as well as healthcare and medical professionals.  The Professional Corporation may be an option for any other professional who must be licensed by the State of California such as engineers, architects, Certified Public Accountants or CPAs and lawyers.

The unique benefits provided by a California PC include (but are not limited to):

• Increased contributions to 401(k) or retirement accounts
• Separation of liability for malpractice or other legal exposures from other professionals in the practice
• The ability of the PC to offer and receive tax deductions for costly employment benefits such as:
  • Health Insurance
  • Disability Insurance
  • Dependent Care
  • Life Insurance

A Professional Corporation (or group of PC’s) may increase their efficiency, service and profitability through a Management Services Organization or MSO.  The MSO is designed to streamline the administrative functions of a medical practice or healthcare business through a separate entity focused solely on providing these support-level services.

It is common for an MSO to handle many aspects of HR, billing and payables, purchasing and contract negotiations, and even issues such as tax preparation and compliance and the provision of equipment and computer resources.

There are many restrictions on issues such as ownership and voting rights for a Professional Corporation, however, the rules are much more relaxed when it comes to the ownership interests in a Management Services Organization in California.  This allows investment capital to take an interest in the business side of your medical practice or healthcare business, reduce overhead and costs, increase profit channels, and free up medical professionals to focus on the quality of medical care and the delivery of an exceptional patient experience.

Pro-Tip: “Consider an MSO like your administrator for your business. But if you’re in the healthcare business, your administrator can’t do it all. It’s complicated. And there are actual schools that can take people to learn some of the things that your administrator’s supposed to do, like coding, like billing, like compliance, like HR, like leasing, like software programs. So many things that you have to deal with so many more clients, patients, you have to do so much that MSOs are a good option. Also, you can get non-doctors to partner with you and invest in your company to make you more profitable while you focus on being a doctor.

So in essence, the Management Service Organization takes over many of the aspects of running the business and that really frees up the licensed professionals to do what they do best, which is care for patients.  Some of your biggest organizations in the United States are run by MSOs or a combination of MSO and other entities. Sometimes you get so big you have to have individual contracting entities that just do the contracting side of the equation. Yes, they go out and find you the best pricing, or they’ll work with a multitude of other healthcare practices and do a group location of better pricing and contracts for the doctors

MSOs are different for every kind of practice. And every kind of practice has a classification under the code as to what they can’t do, who they can’t hire, and who they can practice medicine with, or who can supervise who. And we do that with various different types of ancillary service organizations, which means like X-ray companies, MRI, PT, physical therapy, imaging, all those things that you run your business with, and the rules on how you can and cannot work with them, those can be covered with your MSO.

Sometimes a physician, medical group or healthcare entity will be approached by people who want to set up MSOs. And sometimes the driving factor is the MSO itself, who’ll go out and locate a doctor and say, ‘look, I’ve got this great business model. We collect more. We save your personal time and we make you more profit. Why don’t you join us.’ Then they’ll come to us and say, ‘write up a custom MSO with this doctor in mind with these parameters, and set it up for us.’ And we do that. We bring two parties together and write it up in such a way that they can start a business.” – Dan Watkins, Founding Partner

Learn more about the strategies of a California Professional Corporation and a Management Services Organization or MSO and how the Watkins Firm can help to efficiently and effectively provide sound advice, counsel and legal services for your healthcare entity.  We invite you to review our podcast Episode 30 – Management Service Organizations or MSOs as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.