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Next Generation MSOs: Strategies to Grow beyond Traditional Practice Management Services

Next Generation MSOs: Strategies to Grow beyond Traditional Practice Management Services

  • April 6, 2021

The presence of management services organizations (MSOs), entities that provide an array of administrative support services to physician practices, has grown significantly in recent years. This trend is linked to private equity (PE) entry in the physician practice space because many PE transactions include an MSO.

However, MSOs are not always unique to PE-driven partnerships. Many private practice physicians join or invest in similar entities to achieve greater operational efficiency, take advantage of ‘strength in numbers’ when negotiating with payors, or remove the administrative burdens of practice management without sacrificing clinical autonomy.

The reality of navigating the COVID-19 pandemic in the past year has motivated both narratives. PE transactions are back to their upward trajectory, with 28 significant deals announced in December 2020 alone. Many private practices are searching for acquisition partners or mechanisms to improve efficiency in an environment of declining margins.

As a result of these factors, our team has seen increased interest in clients who either want to develop their own MSO or ask if their current MSO can do more. Because MSOs are structurally flexible (i.e., they are not limited to providing only practice management services), we believe there is a significant opportunity to achieve higher value for both the MSO and the practices served in today’s healthcare environment.

The following are some of these recent growth strategies:

  • MSO to MSO mergers further enhance economies of scale, expand geographic footprint, and broaden services or specialties offered to patients. Contract negotiation leverage may also improve with this alignment.
  • Investment in business intelligence (BI) platforms to support more efficient finance, operations, or strategic planning functions for member organizations served.
  • Developing clinically integrated networks, which may be spun off as a separate entity from the MSO itself.
  • Group purchasing development and management.
  • Real estate ventures or other non-traditional forms of revenue enhancement.
  • Develop internal technology services: general IT support, EMR/practice management systems, or even new technology innovation investments.
  • Supporting greater research presence for member organizations, either through data collection and reporting or ongoing clinical trial management.

While not a growth strategy in itself, we have also seen MSOs rebranding themselves as ‘BSOs’ (Business Services Organizations) to imply service offerings beyond traditional operations management, HR, revenue cycle, and other traditional services.

This list is not all-inclusive as there are many opportunities for growth and value-creation for MSOs/BSOs in our current environment. We believe the presence of such entities will continue to grow as PE firms pursue more physician practice acquisitions and private practices search for strategies to remain independent and viable.

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