Today's Practice: Changing the Business of Medicine | Page 30

L E GA L

THE MYTH AND FAILURE
OF PHYSICIAN-SYNDICATED

“MSO MODELS”

Dr. Nick Oberheiden, Esq. | Michael C. Elliott, Esq. | Mindy M. Sauter, Esq. | Lynette S. Byrd, Esq.

INTRODUCTION
A recent trend in structuring physician-based
healthcare deals is the so-called Physician-Syndicated MSO-Model (“PSMSO”). In contrast to well-respected traditional management services organizations, PSMSOs are based on the suggestion that
physicians “manage” companies by providing a
plethora of atypical physician “services” such as
billing, accounting, marketing, and recruiting. This
brief article— co-written by long-time federal prosecutors in charge of healthcare fraud— will argue
that PSMSOs are inherently awed, both in fact and
in law, and may not withstand law enforcement
scrutiny.

THE IDEA BEHIND PSMSOS
Physician-Syndicated Management Services Organizations (PSMSO) were created to mitigate the risks
associated with physician self-referral laws. The

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creators of this model argue that because physicians do not own the pharmacy or toxicology
laboratory to which they refer business, their referrals are immune from Stark Law and better
protected from Anti- Kickback analysis.
However, the PSMSO model is flawed and its
implementation is problematic. The viewpoint
that PSMSOs are immune from legal regulations
is short-sighted and unconvincing in light of the
close contractual, percentage-based relationship
between PSMSOs and af liated pharmacies and
laboratories. In the PSMSOs reviewed by the
authors, physicians arguably do have a nancial
interest in their referrals, and the service fees
charged by the PSMSOs are nowhere near fair
market value. The truth is that physicians—busy
enough running their own practices— do not
“manage” pharmacies and do not provide meaningful “services” to laboratories. Physicians should
therefore be on alert that their distributions from
PSMSOs for providing such services could be
considered illegal kickbacks.

TODAY ’ S P R A C T I C E : C H A N G I N G T H E B U S I NES S OF M EDI C I NE