> ## Documentation Index
> Fetch the complete documentation index at: https://mso.getlemma.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Draft the management services agreement (MSA)

> Section-by-section drafting guide for the document at the center of the MSO-PC structure: services scope, the clinical carve-out, fee structure, term, and audit rights.

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.

## 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](/concepts/model/fee-splitting)

## Section-by-section

### 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.

### 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

<Tip>
  Attach the services as an **exhibit** rather than burying them in the body. It makes them easy to update by amendment and easy to point to when supporting FMV.
</Tip>

### 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.<sup>1</sup>

**Draft the carve-out as the union of every state you operate in**, then add state-specific riders where a state goes further.

### 4. The management fee

Specify the structure, the calculation, the payment mechanism, and the review cadence.

| Structure      | Draft as                                                                      |
| -------------- | ----------------------------------------------------------------------------- |
| **Flat**       | A stated monthly amount, with an annual review and adjustment mechanism       |
| **Cost-plus**  | Defined cost base, defined markup percentage, defined true-up                 |
| **Percentage** | Stated percentage of a defined revenue base, **only where state law permits** |

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](/guides/agreements/set-the-management-fee) and [Evolve the fee structure](/guides/agreements/evolve-the-fee-structure).

### 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.

### 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.

### 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.

### 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.

### 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.

### 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

### 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](/concepts/finance/working-capital-and-ar-lending).

### 12. Transfer restriction cross-reference

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

### 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.

## Steps

<Steps>
  <Step title="Confirm the state-specific requirements">
    CPOM posture, fee-splitting rule, any MSO registration or notice requirement, and whether recent legislation applies. Check the [legislation tracker](/reference/legal/cpom-legislation-tracker).
  </Step>

  <Step title="Draft the services exhibit first">
    It drives the fee and the FMV analysis.
  </Step>

  <Step title="Draft the clinical carve-out against current statutory language">
    Not against a 2019 template.
  </Step>

  <Step title="Set the fee and document the FMV basis">
    Before execution, not after.
  </Step>

  <Step title="Have the clinician's independent counsel review" />

  <Step title="Adopt board and member consents on both sides">
    Evidence that both entities acted independently.
  </Step>

  <Step title="Execute, with an effective date aligned to when services begin" />

  <Step title="Calendar the annual review" />
</Steps>

## 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

## Common failure modes

| Failure                                                               | Consequence                                                |
| --------------------------------------------------------------------- | ---------------------------------------------------------- |
| Generic services description                                          | Fee cannot be FMV-supported                                |
| Carve-out that says only "shall not interfere with clinical judgment" | Doesn't address the enumerated functions statutes now name |
| Percentage fee in a fee-splitting state                               | Direct exposure                                            |
| MSO owning records                                                    | Bright-line CPOM violation                                 |
| No practical termination right for the PC                             | Reads as ownership by contract                             |
| Coding responsibility unassigned or assigned to the MSO               | CPOM and billing compliance exposure                       |
| Never reviewed after execution                                        | Compliant when drafted, non-compliant now                  |

## Sources

1. Cal. S.B. 351 (2025); Or. S.B. 951 (2025). See Benesch, [California Enacts SB 351](https://www.beneschlaw.com/insight/california-enacts-sb-351-new-restrictions-on-private-equity-and-hedge-fund-involvement-in-physician-and-dental-practices/) and Nixon Peabody, [Oregon SB 951 explained](https://www.nixonpeabody.com/insights/alerts/2025/07/11/oregon-sb-951-corporate-practice-of-medicine-law-explained).


## Related topics

- [Step 5: Sign the agreement stack](/start/zero-to-paid/sign-the-agreement-stack.md)
- [Set the management fee](/guides/agreements/set-the-management-fee.md)
- [Hire healthcare counsel (and use them well)](/guides/agreements/get-agreements-reviewed.md)
- [Run a CPOM self-audit](/guides/compliance/run-a-cpom-self-audit.md)
- [What an MSO can and can't do](/concepts/model/what-msos-can-and-cant-do.md)
- [Fee-splitting rules, explained](/concepts/model/fee-splitting.md)
- [MSA clause anatomy](/reference/legal/msa-clause-anatomy.md)
- [The complete agreement stack (checklist)](/reference/legal/agreement-stack-checklist.md)