> ## 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.

# MSA clause anatomy

> Clause-by-clause reference for management services agreements: market-standard patterns, strict-state versus permissive-state variants, and negotiation notes.

Reference companion to [Draft the MSA](/guides/agreements/draft-a-management-services-agreement). For each clause: what it does, the market-standard pattern, how it varies by state strictness, and what to negotiate.

Sample language here is illustrative, not a template. Every MSA must be drafted by healthcare regulatory counsel licensed in the state, against that state's current law.

## Clause index

| #  | Clause                               | Risk weight          |
| -- | ------------------------------------ | -------------------- |
| 1  | Recitals and purpose                 | Low                  |
| 2  | Services scope                       | **High**, drives FMV |
| 3  | **Clinical carve-out**               | **Critical**         |
| 4  | **Management fee**                   | **Critical**         |
| 5  | Records ownership                    | **Critical**         |
| 6  | Compliance allocation                | High                 |
| 7  | Term                                 | Medium               |
| 8  | **Termination**                      | **High**             |
| 9  | Exclusivity                          | Medium               |
| 10 | Audit and inspection                 | Low                  |
| 11 | Indemnity and insurance              | Medium               |
| 12 | Security interest                    | **High**             |
| 13 | Transfer restriction cross-reference | Medium               |
| 14 | Assignment                           | Medium               |
| 15 | Governing law and disputes           | Low                  |

## 1. Recitals and purpose

**Does:** Frames the relationship. Recitals are read and are used interpretively.

**Pattern:** State 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.

**Negotiation note:** Costless to get right. Say the true thing.

## 2. Services scope

**Does:** Enumerates what the MSO provides. Drives the fair market value analysis: you cannot price services you haven't described.

**Pattern:** An exhibit listing services by category: administrative and management support; non-clinical personnel; premises, furniture, and non-clinical equipment; information technology including EHR licensing; **billing and collection support**; **payer contracting support**; financial and accounting services; marketing; purchasing; compliance program support; data analytics.

| Strict states                                                                                         | Permissive states          |
| ----------------------------------------------------------------------------------------------------- | -------------------------- |
| Use "support" and "administration" language consistently; avoid anything implying MSO decision-making | Broader language tolerable |

**Negotiation note:** Put services in an exhibit, not the body — it's easier to amend and easier to point to when supporting FMV.

## 3. Clinical carve-out, the critical clause

**Does:** States what the MSO may not control. This is the clause a regulator reads first.

**Pattern:**

> 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.

**Where the list comes from:** Items (a)–(e) track California's SB 351 enumeration of interference with professional judgment. 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>

| Strict states                                                          | Permissive states                                                          |
| ---------------------------------------------------------------------- | -------------------------------------------------------------------------- |
| Enumerate the union of every operating state's list, plus state riders | A general clinical-independence clause may suffice, but see the note below |

**Draft to the strict standard even in permissive states.** You will expand, the law is tightening rather than loosening, and diligence applies the worst-case jurisdiction.

**Negotiation note:** There is nothing to negotiate here. A narrower carve-out is not a win for the MSO — it is a liability that reduces the enterprise's value.

## 4. Management fee, the other critical clause

**Does:** Sets what the PC pays and how.

**Patterns:**

| Structure      | Language shape                                                                                 |
| -------------- | ---------------------------------------------------------------------------------------------- |
| **Flat**       | A stated monthly amount, with an annual review and adjustment mechanism                        |
| **Cost-plus**  | A defined cost base, a stated markup percentage, and a true-up mechanism with stated frequency |
| **Percentage** | A stated percentage of a defined revenue base                                                  |

Must also specify: monthly **invoicing** by the MSO; payment from the **PC's** operating account; **priority** after clinical payroll and direct obligations; a **deferral** mechanism; and an **annual FMV review**.

| Strict / fee-splitting states (NY, FL, others) | Permissive states |
| ---------------------------------------------- | ----------------- |
| Flat or cost-plus only                         | Percentage viable |

**Negotiation note:** For cost-plus, the cost base definition is where disputes live. Specify what is included, what is excluded, and the allocation methodology across PCs.

See [Set the management fee](/guides/agreements/set-the-management-fee).

## 5. Records ownership

**Does:** Confirms the PC owns the patient records.

**Pattern:**

> All patient medical records are and shall remain the property of \[PC]. \[MSO] shall provide and administer systems for the maintenance of such records solely as \[PC]'s agent, and shall have no ownership interest therein. Upon termination, \[MSO] shall promptly deliver to \[PC] all such records in a usable format and shall retain no copies except as required by law.

**No state variance — this is a bright line everywhere.**

**Negotiation note:** The termination delivery obligation is the part that gets omitted. Insist on it, and specify the format and timeframe.

## 6. Compliance allocation

**Does:** Allocates responsibility for regulatory compliance.

**Pattern:** The **PC** is responsible for clinical and billing compliance including coding accuracy; the MSO provides personnel, systems, and program infrastructure in support; clinicians retain authority to reject a coding change; cross-reference the BAA.

**Negotiation note:** State the coding point explicitly. It is both a CPOM item and a billing compliance item, and its absence is a self-audit finding.

## 7. Term

**Pattern:** An initial term, often 5–20 years, with automatic renewal.

**A very long term with limited exit reads as control.** Combined with a nominal-price share transfer, a 30-year MSA the PC can never leave is the combination regulators characterize as ownership by contract. Prefer a moderate term with clean renewal.

## 8. Termination

**Pattern:** Termination for cause by either party with cure periods; termination for convenience on stated notice; and detailed consequences, records delivery, systems access wind-down, transition services, and final fee reconciliation.

**Give the PC a real termination right.** California's Attorney General has attacked friendly-PC MSA-termination provisions in litigation.<sup>2</sup> An MSA the PC cannot practically exit is a control indicator, and the absence of a meaningful exit is precisely what distinguishes a services agreement from ownership.

**Negotiation note:** Transition services on termination protect both sides. A PC suddenly without billing, scheduling, or EHR access cannot treat patients.

## 9. Exclusivity

**Pattern:** The PC uses the MSO exclusively for the covered services; the MSO may or may not serve other practices.

| Strict states                                                                          | Permissive states |
| -------------------------------------------------------------------------------------- | ----------------- |
| Pair exclusivity with a genuine termination right, or it compounds the control problem | Standard          |

## 10. Audit and inspection

**Pattern:** Each party may inspect the other's records relevant to the agreement, on reasonable notice.

**Negotiation note:** Make it **mutual**. One-sided audit rights in the MSO's favor read worse than reciprocal ones, and the PC genuinely needs to verify what it is paying for.

## 11. Indemnification and insurance

**Pattern:** The PC carries professional liability; the MSO carries general liability and errors and omissions. Cross-indemnification for each party's own acts. Specify limits and additional-insured status.

## 12. Security interest, include with care

**Does:** Grants the MSO a security interest in the PC's assets or receivables to secure the fee.

<Warning>
  **Do not include reflexively.** A security interest over practice receivables is a control indicator, and it interacts with Medicare payment rules restricting assignment of the right to payment. If a lender requires it, structure it with healthcare finance counsel. See [Working capital and AR lending](/concepts/finance/working-capital-and-ar-lending).
</Warning>

## 13. Transfer restriction cross-reference

**Pattern:** Reference the separate stock transfer restriction agreement rather than embedding the mechanics. Keeps each document readable and lets the transfer restriction be amended as state law changes without reopening the MSA.

## 14. Assignment

**Pattern:** Whether the MSO may assign the agreement, and on what conditions.

**Negotiation note:** Critical in a sale. An MSA that cannot be assigned, or that requires the PC's consent, gives the clinician-owner leverage over your exit. Address it at drafting, not at the LOI.

## 15. Governing law and dispute resolution

**Pattern:** Generally the PC's state, since that is where the regulatory analysis lives. Specify the forum and whether arbitration applies.

## The state variant matrix

| Clause               | Strict (CA, OR, NY, NJ, TX, IL, MA, NV)          | Moderate              | Permissive                                  |
| -------------------- | ------------------------------------------------ | --------------------- | ------------------------------------------- |
| Clinical carve-out   | Enumerated, statute-tracking                     | Enumerated            | General clause plus enumeration recommended |
| Fee structure        | Flat or cost-plus                                | Any, with FMV support | Any                                         |
| Term                 | Moderate, with real exit                         | Standard              | Standard                                    |
| Termination          | Genuine PC right required                        | Recommended           | Standard                                    |
| Security interest    | Avoid                                            | With care             | Standard commercial                         |
| Transfer restriction | **Check state law directly**, OR restricts these | Standard              | Standard                                    |
| MSO registration     | Check, some states require it                    | Check                 | Usually none                                |

## Sources

1. Cal. S.B. 351 (2025); Or. S.B. 951 (2025). See the [legislation tracker](/reference/legal/cpom-legislation-tracker) for citations and effective dates.
2. DLA Piper, [Corporate practice of medicine enforcement: New pressure points and a path forward](https://www.dlapiper.com/en/insights/publications/2026/07/corporate-practice-of-medicine-enforcement) (July 2026).


## Related topics

- [Draft the management services agreement (MSA)](/guides/agreements/draft-a-management-services-agreement.md)
- [Set the management fee](/guides/agreements/set-the-management-fee.md)
- [Evolve the fee structure (fixed → cost-plus → percentage)](/guides/agreements/evolve-the-fee-structure.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)
- [The complete agreement stack (checklist)](/reference/legal/agreement-stack-checklist.md)
- [CPOM & MSO legislation tracker](/reference/legal/cpom-legislation-tracker.md)