From having run a large MSO, you should expect to face this question – “Who is the MSO?” – increasingly over time and in different forms. The underlying question is more directly stated as “what have you done for me lately?”
There is an implicit and delicate social contract between the field (i.e., providers) and the central corporate team (i.e., MSO). Initially, the social contract is the MSO pays the provider a purchase price and the provider agrees to commit the MSO. Over time, the social contract evolves. The field (i.e., the providers) will increasingly ask if that original social contract terms continue to make sense.
MSO’s over the past several years are mostly vehicles that tie together a disparate network of affiliate practices. Yes, the central MSO is providing services, but those services are often largely administrative in nature. Across many MSO’s, a meaningful portion of the real strategic value – for example, the referral streams, provider recruitment & succession planning. etc. – often still resides in the local markets.
Because of the recency of these transactions, the central MSO is often still viewed today as internal- i.e., on the same team as the clinic affiliates. Over time, the MSO is likely to be increasingly viewed through two lenses:
When viewed from the second lens, the terms of social contract will periodically be revisited. At that moment – what type of service provider do you want your MSO to show up to the discussion as?
Option 1: Show up prepared to respond as a base level service provider with strong services but mostly relegated to the realm of administrative tasks. Ok, that leaves you with a justified -10% of revenue share for standard corporate services relative to the MSO’s actual holdings that are probably more in the range of at least 25-35% of revenue assuming -10% corporate overhead service fees plus 51% ownership of an aggregate 30% pre-compensation earnings margin business.
Option 2: Show up as a value-add partner with compelling strategic leverage. Option 2 leaves the MSO with a greater chance of preserving the MSO share of the aggregate pie over time.
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