Draft the management services agreement (MSA)

The management services agreement defines what the MSO provides to the PC, what the PC pays, and, most importantly, what the MSO does not control. It is the first document a regulator, an insurer, or an acquirer reads, and the one that determines whether your structure survives a CPOM challenge. This requires a healthcare regulatory attorney licensed in your state. Not a generalist corporate lawyer, and not a template. The correct content differs materially between Oregon, California, New York, and Texas, and it changed in several states in 2025–2026. An MSA that doesn’t survive a challenge is worth less than no MSA, because it documents the problem.

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Prerequisites

• Both entities formed, with EINs
• Board and member consents authorizing execution
• Healthcare counsel engaged, licensed in the state
• The clinician-owner represented by independent counsel
• Your state’s fee-splitting rule confirmed, see Fee-splitting

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Section-by-section

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1. Recitals and purpose

State plainly that the PC is a professional entity practicing through licensed clinicians, that the MSO provides non-clinical administrative services, and that the parties intend the PC to retain complete authority over clinical matters. Recitals are read; make them say the right thing.

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2. Services scope

Enumerate specifically. Vague scope undermines the fee’s fair market value analysis, because you cannot price services you haven’t described. Typical categories:

• Administrative and management support
• Non-clinical personnel, recruiting, employment, HR
• Premises, furniture, fixtures, and non-clinical equipment
• Information technology, including EHR licensing and support
• Billing and collection support (note: support)
• Payer contracting support
• Financial, accounting, and bookkeeping services
• Marketing and business development
• Purchasing and vendor management
• Regulatory and compliance program support
• Data analytics and reporting

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3. The clinical carve-out

The most important section. It must be explicit and it must track your state’s statutory language. Model shape:

Notwithstanding any other provision of this Agreement, [MSO] shall not, and shall have no authority to, control, direct, or interfere with the professional judgment of [PC] or its licensed personnel, including with respect to: (a) the diagnosis or treatment of any patient; (b) the selection, ordering, or interpretation of diagnostic tests; (c) the determination of whether a referral is necessary or to whom; (d) responsibility for the overall care of any patient; (e) the number of patients any clinician sees, the time devoted to any patient, or the hours any clinician works; (f) the hiring, supervision, evaluation, discipline, or termination of licensed clinical personnel; (g) the establishment or modification of clinical protocols or standards of care; (h) the ownership, custody, or content of patient medical records; (i) the assignment of diagnosis or procedure codes; or (j) the selection of clinical equipment, supplies, or pharmaceuticals.

That list is not generic. Items (a)–(e) closely track California’s SB 351 enumeration; items (f), (i), and (j) track SB 351’s separate bar on management-entity participation in clinical staff oversight, billing, coding, and equipment selection; Oregon’s SB 951 additionally reaches scheduling, clinician compensation, and payer contract terms.¹ Draft the carve-out as the union of every state you operate in, then add state-specific riders where a state goes further.

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4. The management fee

Specify the structure, the calculation, the payment mechanism, and the review cadence. Also specify:

• Invoicing, the MSO invoices monthly; the PC pays within N days
• Payment source, from the PC’s operating account
• Priority, after the PC’s clinical payroll and direct obligations
• Deferral mechanism, what happens if the PC cannot pay in full
• FMV review, annually, and before any change

See Set the management fee and Evolve the fee structure.

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5. Records ownership

State unambiguously that the PC owns the patient medical records, that the MSO provides and administers the systems holding them, and that the PC retains access and control including on termination. This is a bright-line CPOM item.

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6. Compliance and BAA cross-reference

The PC is a covered entity; the MSO is a business associate. Cross-reference the BAA. Allocate compliance program responsibilities explicitly, stating that the PC is responsible for clinical and billing compliance and the MSO provides supporting resources.

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7. Term and termination

• Initial term, often 5–20 years for MSO-PC arrangements, but note that very long terms with limited termination rights read as control
• Renewal mechanics
• Termination for cause, both directions
• Termination for convenience, whether either party has it, and on what notice
• Termination consequences, records, systems access, transition services, and how the PC continues operating

Termination provisions are under active attack. California’s Attorney General has challenged friendly-PC MSA-termination provisions in litigation. An MSA the PC can never practically exit, combined with a nominal-price share transfer, is the combination regulators read as ownership by contract. Give the PC a real termination right.

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8. Exclusivity

Whether the PC must use the MSO exclusively, and whether the MSO may serve other practices. Exclusivity in the MSO’s favor is common; make sure it does not become a mechanism the PC cannot escape.

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9. Audit and inspection rights

Each party’s right to inspect the other’s relevant records. The MSO needs this to substantiate the fee; the PC needs it to verify what it’s paying for. Mutual rights read better than one-sided ones.

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10. Indemnification, insurance, and liability

• The PC carries malpractice; the MSO carries general liability and errors and omissions
• Cross-indemnification for each party’s own acts
• Liability caps, if any

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11. Security interest, with care

Some MSAs grant the MSO a security interest in the PC’s assets or receivables to secure the fee. This is a control indicator, and it interacts with Medicare payment rules restricting assignment. Discuss with counsel; do not include reflexively. See Working capital and AR lending.

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12. Transfer restriction cross-reference

Reference the separate stock transfer restriction agreement rather than embedding the mechanics here.

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13. Governing law, dispute resolution, assignment

Governing law should generally be the PC’s state. Address whether the MSO may assign the MSA, relevant in a sale.

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Steps

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Verify it worked

• Services enumerated in an exhibit
• Clinical carve-out tracks current statutory language for every state you operate in
• Records ownership stated as the PC’s
• Fee structure lawful in this state, with an FMV basis documented
• Invoicing and payment mechanics specified
• The PC has a real termination right
• Compliance responsibilities allocated, with coding assigned to the PC
• Board and member consents adopted
• Clinician’s independent counsel reviewed
• Annual review calendared

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Common failure modes

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Sources

1. Cal. S.B. 351 (2025); Or. S.B. 951 (2025). See Benesch, California Enacts SB 351 and Nixon Peabody, Oregon SB 951 explained.