54% of surveyed physicians in a 2025 Sermo Barometer said private equity (PE) investments have decreased patient care quality, and only 2% believe private equity has significantly improved care quality. In 2026, another Sermo poll found that 78% of physicians believed PE investment could compromise patient care.
That tension sits at the center of the Management Services Organization (MSO) conversation, because they are one of the main ways private equity enters physician practice ownership.
A psychiatrist on Sermo frames the central issue, “The promise of MSOs is efficiency and growth, but the real question is whether physicians can truly preserve clinical autonomy once financial incentives enter the equation. Striking that balance will define the future of independent practice.”
A recent Sermo poll asked physicians, “What is your current level of exposure to or experience with the MSO (Management Services Organization) model?” Responses showed a wide range of positions.
36% were W2 physicians who do not own a private practice. For the remaining respondents,
- 20% are independent but considering an MSO transition within the next two to three years,
- 16% are firmly opposed and intend to remain fully independent,
- 15% are actively evaluating MSO proposals or engaged in letter-of-intent discussions
- and 12% reported that their practice is already partnered with an MSO or backed by private equity.
A family medicine practitioner explains physician’s concerns, “When I started medicine 40 years ago, we were worried about taking care of our patients. There was no such thing as burnout. We didn’t worry about management organizations. We hired an office manager whom we trusted, and we did the clinical work, and the rest worked itself out. What I would give to go back to those days. Sure, we spent a lot of time at work, and we were tired at the end of a long week, but that’s what we signed up for. I think it’s sad that we have to even worry about management organizations.”
Disclaimer: This article is for general informational purposes only and does not constitute legal, financial, or business advice. MSO agreements have state-specific legal requirements that vary significantly. Physicians should consult a healthcare attorney and financial advisor when considering any MSO arrangement.
What is a management services organization and how does the MSO model work?
A Management Services Organization is a legal entity that provides non-clinical administrative tasks, operational, and business services to physician practices. MSO services can include revenue cycle management, administrative support, human resources, compliance, IT, marketing, billing, payer contract negotiation, vendor contracting, payroll, equipment, and more. In exchange, the MSO charges a management fee. The physician practice still owns and delivers clinical care— at least, this is what the MSO promises. The reported reality can often differ.
An ophthalmologist cautions on Sermo, “”MSOs are coming. They sound as if they are tempting, but I can see how it would be easy to give away too much power or give them too much authority. The doctor has to be very careful to retain control if he gets involved with one of these, I would think.”
In many states, it is illegal for non-physicians to own or control medical practices. The MSO structure allows non-physician investors, including private equity firms, to invest in the business side of a medical practice while the physician retains ownership of the clinical entity.
The Management Services Agreement, or MSA, is the document that defines the relationship. Corporate practice of medicine (CPOM) laws prevent non-physician ownership/control of medical practices to preserve physician autonomy, which indirectly protects decision-making, but MSOs can blur the line between clinical and non-clinical control.
To add to the confusion, guidelines and enforcement vary from state to state. For example, Florida, Arizona, and Ohio are described as more permissive or minimal-CPOM states while California, Texas, Illinois and New York are comparatively more strict.
A physician group can also form its own MSO as a back-office entity. In that version, the practice creates a separate legal entity and moves non-clinical staff, equipment, and operations into it. This physician group MSO model is a strategy for groups that want shared infrastructure without giving outside investors control.
When Sermo polled physicians on what the primary benefit of transitioning practice administrative services and operational processes to an MSO were, responses were varied.
- 35% cited administrative relief: Offloading the daily tax of billing, regulatory compliance, HR, and EHR management.
- 18% pointed to scalability & leverage: Gaining superior purchasing power, marketing infrastructure, and insurance negotiation leverage.
- 13% saw MSO value in succession planning: Establishing a clear corporate runway for an eventual retirement or practice exit.
- 12% emphasized financial liquidity: Capitalizing on current market EBITDA multiples to secure a substantial cash payout. An EBITDA Multiple is a valuation ratio that compares a company’s Enterprise Value (EV) to its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). It tells investors how many times the company’s operating earnings they would pay to acquire the entire business.
22% of respondents said none of these benefits justify the restructuring costs.
A radiologist warns on Sermo, “Doctors tend to dislike the burdens of business and so can be too quick to divest themselves of these onto an MSO, but they must actually remain in control.”
How MSOs are reshaping physician practice ownership
Global healthcare private equity reached a record $191 billion in deal value in 2025, with North America remaining the largest market, meaning it’s likely as a physician that you will either work with or for an MSO at some point in your career.
The scale of private equity investment in physician practices
“The biggest challenge seems to be balancing access to capital and scalability while preserving long-term clinical autonomy and physician-led decision making,” a plastic surgeon summarizes in Sermo’s physician community.
Private equity firms often use a roll-up strategy (also called a “practice roll-up” or “consolidation strategy”) to build a larger, more valuable business by combining smaller practices. They will acquire independent practices, consolidate them under a single MSO platform, standardize operations, and pursue a sale within a defined investment timeline.MSO structures allow PE firms to own the business operations while physicians retain clinical ownership on paper.
Becker’s ASC Review reports that private equity’s healthcare strategy is shifting toward MSO infrastructure tied to outpatient assets, specialty platforms, and vertically integrated physician networks.
It is worth noting that while MSOs are often PE-backed, they’re not synonymous. Some MSOs are physician-owned without PE involvement.
Administrative pressure on independent practices
Independent practices face rising staffing costs, payer complexity, EHR expenses, compliance demands, and the transition to value-based care. Private practice can preserve clinical autonomy, but ownership also brings administrative weight, staffing challenges, overhead pressure, and financial vulnerability.
That is why MSO healthcare arrangements can look attractive for overwhelmed physicians. The promise is simple, keep your practice, offload the business burden, gain leverage, and access capital. The reality depends on the contract.
The regulatory response
Milbank’s April 2025 report, “The Corporate Backdoor to Medicine,” called for MSOs and physician practices to disclose financial backers, ownership structures, and contractual affiliations to state regulators. It also warned that corporate-backed MSOs can allow investors to gain functional control over medical practices.
Some states are pushing back. Oregon’s SB 951, enacted in June 2025, restricts MSO ownership and governance links with professional medical entities. California’s SB 351 also targets private equity interference in physicians’ professional judgment and core clinical operations, while Washington, Vermont, and North Carolina have considered similar limitations.
The clinical concern for physicians is not theoretical. A 2025 Annals of Internal Medicine study found that emergency departments at private equity-acquired hospitals had 7 additional deaths per 10,000 visits after acquisition relative to controls.
A family medicine physician on Sermo offered the balanced view: “I believe that the organization of management services is an extremely important tool for the attention and monitoring of the administrative, clinical, and medical processes carried out today. This paramount importance must continue. On the other hand, it enables the implementation of more effective organizational care strategies that foster trust and reduce the stress associated with medical administrative processes in current healthcare. Therefore, having an organization—and what management services—is of paramount importance.”
What physician leaders should look for in an MSO agreement
As a physician, it’s critical to thoroughly evaluate an MSO agreement as both a business deal and a clinical control document. The key question is not whether the MSO says you retain autonomy. The key question is whether the contract lets you exercise it.
A recent Sermo poll asked physicians which regulatory or legal guardrail they found the most challenging to evaluate in an MSO agreement. The results showed that a quarter of respondents were unfamiliar with how healthcare regulatory statutes interface with corporate structures.
As for the remaining votes, 21% identified navigating the geographic and temporal scope of non-competes when a physician considers leaving as the toughest challenge. Other responses included verifying that MSO distributions do not inadvertently reward or track clinical referral volume (19%), the legal and financial mechanisms available to buy back or dissolve the partnership if the MSO defaults (19%) and ensuring that the “Friendly PC” structure strictly respects state Corporate Practice of Medicine doctrines (16%).
An ophthalmologist on Sermo put it plainly, “One would have to hire an experienced attorney to review these contracts. The risk is losing control of the practice and finances.”
Other considerations for MSO contract review include:
The management fee structure
Physicians on Sermo share insights on the best way to evaluate an MSO agreement,including which financial component requires the highest level of scrutiny.
The top concern is vesting and exit requirements (32%), with physicians prioritizing the length of time and clinical productivity targets needed to fully vest or exit after the sale. Vesting and exit requirements are the legal rules governing when you actually own that equity and what happens when you leave. Without carefully negotiated provisions, you could leave with little or no equity value even after years of work.
The second most-watched component is fee structure (24%), as physicians focus on whether the MSO uses a fixed fee, cost-plus model (when the MSO calculates how much it costs to run the practice and then adds a predetermined markup to that number), or percentage of gross revenue that could trigger regulatory compliance issues.
Flat fees are generally more transparent. Percentage-of-revenue fees can create incentive misalignment because the MSO benefits as revenue rises. Ensure to ask what the fee includes, what costs are excluded, whether there is a cap, and whether the fee could create compliance concerns.
Term length and termination rights
Long-term agreements (10 to 20 years) with limited termination rights are common in PE-backed MSO structures. If you cannot realistically terminate the relationship, regulators may see the physician owner as a captive figurehead rather than an independent clinical leader. Asking what happens to patient care, staff, space, equipment, receivables, and local practice rights if you leave can tell a lot about the intent of the private equity firm.
Clinical autonomy protections
The MSO agreement should clearly state that physicians retain authority over clinical decisions, treatment protocols, clinical staffing, and patient care standards. Any language that gives the MSO influence over clinical operations can violate corporate practice of medicine laws. CPOM exists to keep clinical judgment independent from business or profit motives.
Equity, compensation, and exit provisions
In a “friendly PC” (a.k.a “friendly captive PC”) model, the physician sells non-clinical assets to the MSO and may receive equity in the MSO. But each successive buyer seeks greater returns, which can reduce doctor’s compensation over time.
It’s important to ask what happens to your equity at exit. Are there stock transfer restrictions? Can your medical practice be sold without your consent?
Non-compete and restrictive covenant provisions
MSO agreements frequently include non-compete clauses that survive termination. Understand the geographic scope, duration, and enforceability in your state. A non-compete that prevents you from practicing within 50 miles for three years after leaving the MSO can have significant negative consequences on your career growth.
An intensive care practitioner warns, “Never sign an MSO agreement without a specialized healthcare attorney. Escaping burnout is crucial, but selling your clinical autonomy to a spreadsheet is not the cure.”
When an MSO makes sense for physicians and when to reconsider
A Sermo poll shines light on physicians’ concerns when considering an MSO agreement, with responses split between two equally dominant issues: 25% worry about indirect corporate pressure that could alter clinical workflows, impose scheduling limits, or restrict product choices, while another 25% fear inflated management fees that extract too much cash from the clinical practice (the PC) to the business side (the MSO).
Beyond these top concerns, 20% of physician respondents cited cultural clashes between frontline clinical teams and non-clinical corporate executives focused strictly on profit, and 14% worry about equity risks, finding that rolled-over equity could be diluted or become illiquid during a recapitalization event.
Many healthcare providers are exploring new business models, but limited business knowledge and lack of time remain major barriers. An MSO can make sense when the burden of administrative services is consuming clinical time or the practice needs billing, regulatory compliance, human resources, payer negotiation, or IT infrastructure. Additionally, when the physician wants to scale revenue or operational efficiency without selling to a hospital system, an MSO deal can be appealing.
Here’s a simple test. Ask yourself, will you still control clinical decisions, staffing, your schedule, and your compensation? If yes, the MSO may support your medical practice. If not, the MSO may become your effective employer in everything but name.
A pediatrician on Sermo shares, “MSOs can be a good solution for offloading operations and growing, but the real problem lies in who ultimately controls the important decisions. If not negotiated well, you might get paid today and lose autonomy tomorrow. For me, it should be treated less as a sale and more as choosing a long-term partner.”
A Sermo poll also asked, “How confident are you in your ability to negotiate a secondary sale (“the second bite of the apple”) in an MSO roll-up?” This refers to physicians’ ability to participate financially in subsequent sales of the MSO platform after the initial acquisition.
10% of physicians are highly confident, reporting they thoroughly understand recapitalization events, drag-along rights, and how to protect equity from dilution, while 31% are moderately confident, meaning they understand the concept but would be completely dependent on outside private equity counsel for assistance.
Additionally, 29% are skeptical, maintaining the belief that secondary sales favor institutional investors far more than founding physicians, and finally, 30% are completely unfamiliar with the process, stating they do not understand how equity rollover or recapitalization mechanics work in a multi-tier MSO structure.
That low confidence reinforces a central point: exit economics must be evaluated before signing any services agreement, not after it’s too late.
Red flags that signal a bad MSO deal
The red flags of a bad MSO deal usually need to be unearthed in the fine print.
To help explain what to look out for, physicians on Sermo identified the “red flag” that would cause them to walk away from an MSO deal:
- 24% said uncapped management Fees: A management services agreement (MSA) that allows the MSO to unilaterally adjust fees.
- Another 25% said loss of clinical board seats: Corporate governance terms where physicians lose majority control over clinical advisory committees.
- 21% identified draconian non-competes: A non-compete clause that effectively forces a physician to relocate states if they exit the contract.
- 14% flagged opaque valuation models: Private equity sponsors who refuse to clearly break down how they calculated the medical practice’s EBITDA multiple.
17% of respondents said they would need a comprehensive expert audit to determine their specific breaking point, reiterating the need for expert advice in deals like these.
Other warning signs to watch out for in Management Services Agreements include:
- The MSO sets or influences clinical staffing levels, patient volume quotas, or treatment protocols.
- The management fee is calculated as a percentage of revenue with no cap.
- The contract exceeds 10 years with no meaningful termination provision.
- The MSO controls billing, collections, and bank accounts with limited physician oversight.
- The agreement restricts the physician’s ability to sell or transfer their interest.
- The MSO’s financial backers and ownership structure are not fully disclosed
“Incentives for doctors are also a problem. They sound great, and may induce signing up, but what they really are is the MSO rewarding doctors for doing things its way, which again violates laws against CPOM,” a radiologist cautions on Sermo.
How to protect yourself before signing an MSO agreement
Step 1: Hire a healthcare attorney with MSO experience
Your chosen attorney should understand CPOM doctrine, Anti-Kickback Statute, Stark Law, fee-splitting rules, and state-specific MSO regulations.
Step 2: Request full disclosure of the MSO’s ownership and financial backers
Know who is behind the MSO. If it is PE-backed, ask about the fund’s investment timeline, exit strategy, debt structure, and prior recapitalizations.
Step 3: Have the agreement reviewed by a physician who has been through the process
Legal review is necessary, but not always sufficient on its own. A trusted physician who has been inside an MSO arrangement may spot practical issues like compensation drift, staffing pressure, EHR control, or autonomy erosion.
Step 4: Negotiate the terms you need before signing
You are rarely trained in finance, leadership, marketing, or business operations in medical school, but those skills become essential when evaluating major practice decisions. Aim to negotiate for a shorter term with renewal options, a flat management fee, clear clinical autonomy protections, reasonable restrictive covenants, physician governance rights, and termination provisions you could actually use.
How top physicians navigate MSOs
The rise of MSOs aren’t going anywhere, and it’s important for physicians to fully understand what they entail. The management service organization market was valued at $20.89 billion in 2024 and is projected to reach $53.12 billion by 2035 at an 8.85 percent CAGR.
If you’re a practice owner drowning in administrative tasks, an MSO with transparent terms, a flat management fee, and explicit clinical autonomy protections can help you to focus on patient care while accessing infrastructure they could not build alone.
For physicians facing blackbox ownership structures (complex, multi-layered corporate structures designed to conceal who ultimately owns or controls a company), percentage-of-revenue fees with no cap, and 20+ year contracts with career-ending non-competes, the same structure can become a trap. Your outcome depends on the terms, physician leverage, and the quality of legal counsel.
As a pediatric neurologist writes, “An interesting tension: medicine trying to free itself from bureaucracy by handing it over and risking becoming shaped by it in return.”
Physicians who understand the structure can negotiate from strength rather than discovering the consequences after signing. Fortunately, you do not have to figure it out all alone. Access real-world physician insights on navigating private equity and MSOs from peers who have done it. Connect with other physicians world-wide on Sermo.
