By Emilie J DiChristina, MBA for Practicefirst

In every practice, regardless of size, operational costs are increasing, capital expenditures (such as those for an EMR) are increasing, human resource costs are increasing, supply costs are increasing, utility costs are increasing, and the providers do not have the time to look for the best deals or negotiate with payers to offset these costs.

What to do? What to do?

One of the ways medical providers (including hospitals and physicians), and many other organizations such as schools, small businesses and not-for-profits are dealing with these challenges are through the development of a MSO – Management Services Organization.

While MSOs are often hospital driven, locally we are seeing a push  to develop MSO which bring together similar specialties, or specialties which will be supportive through a referral base and/or one-stop-shop model. The providers who join the MSO have some degree of financial buy-in either as part of the overall MSO umbrella, or through the purchasing of certain “menu” items such as billing, human resources, payroll, IT, purchasing, etc.

While very large practice may have their own Practice Administrator, their own in-house IT support, compliance personnel, Meaningful Use specialists and HR generalists, most practices do not have the size and scope to offer all those services internally, leaving practices at real risk, Likewise, even the largest practice does not have to bargaining power to achieve hospital sized discounts when purchasing, or negotiate higher rates from third-party payers.

Physician practices are suffering from rising costs and decreasing revenues, and individual practitioners are suffering from a decreased quality of life, particularly if they are trying to be the provider and “chief cook and bottle washer” for the practice.  Increased numbers of physicians are seeking out alliances in droves, looking for help and benefit without giving up their autonomy to practice as they see fit.

So whether seeking to work with other providers of the same specialty, or with a wider range of provider types, the goal is to become more collaborative and more integrated while avoiding any potential regulatory risks (price fixing, anti-trust, inurement, fraud and abuse) and the MSO is generally thought to be the most flexible option. MSOs bring together providers into beneficial alliances without requiring the provider to give up their autonomy.

The way a MSO is set-up (simply described) is to have a management team and an executive director run a business if which the customers (providers buying into the MSO) help define the services which will be provided, the most cost effective way to provide those services, and then to collect fees for those services from the client providers and insure that the services meet the needs of the clients.

For example the MSO usually offers a purchasing department. For a fee, providers who wish to use this centralized purchasing department will receive greater purchasing power when buying the everyday practice items including paper and pens, exam table paper, otoscope tips, and will also have greater power in negotiating for the high ticket items such as capital equipment. The goal is to standardize where possible, negotiate with the greater volume and decrease cost to the client practices.

The whole purpose of an MSO is to offer a specific menu of services made available to practices and structured in a cooperative fashion.  What we are seeing in WNY are MSOs which involve physician equity positions with a stated goal of assistance and guidance without interference.  The physicians are involved in an advisory policy-making capacity, to prioritize efforts and to pick services which will have universal appeal, are apolitical, and offer immediate payback.

The menu of services of an MSO frequently include overall management and consultative practice services, billing and collection, purchasing, equipment and personnel pooling, risk management and human resources/r