3 min read
2024-11-15
MSO-PC isn't exotic. It's just multi-entity banking that most banks fumble. Here's the structure in plain English.
Your group has one CEO, one brand, one dashboard. And seven bank accounts, because your CPA insists they stay separate.
Welcome to MSO-PC. It's the structure that lets non-clinicians fund healthcare without breaking the law. It's also the structure that breaks most banks.
The Setup
A licensed clinician owns the Professional Corporation, or PC. The Management Services Organization, or MSO, handles everything that isn't clinical: HR, billing, IT, real estate, marketing. The two are tied together by a Management Services Agreement (MSA).
That's it. That's the whole model.
Why Two Boxes Instead of One
Most US states have a Corporate Practice of Medicine doctrine, often called CPOM. It says clinical decisions belong to clinicians, not investors. So if you want outside capital in healthcare, you can't put it directly on the practice's cap table. Not PE. Not family offices. Not even a parent company across state lines.
The MSO-PC split solves that. The PC stays clinician-owned. The MSO is investor-owned. The MSA moves cash and services between them at fair market value.
It looks like a tax dodge. It isn't. State medical boards and PE diligence teams have blessed the model for decades when it's papered correctly.
An Example You Can Picture
Picture a 5-state dental DSO. The MSO is a Delaware C-Corp, owned by a private equity sponsor. Each state has its own PC, owned by a licensed dentist who lives there.
The PCs collect from patients and payers. The MSO bills each PC a monthly management fee. The dentist owners take distributions from the PC. The sponsor takes distributions from the MSO. Everyone's lawyer sleeps at night.
Where the Money Actually Flows
Patient and payer dollars hit the PC first. That's a hard rule. The PC then pays the MSO a management fee. Common patterns:
Flat monthly fee
Percentage of net collections
Cost-plus margin
A blend of all three
Done right, it's clean and audit-ready. Done wrong, it looks like fee-splitting. That's illegal in most states.
What Banks Usually Fumble
Generalist banks treat each entity like a separate customer. Sounds fine. Until you operate it. Real friction looks like this:
Onboarding takes 35-75 days for a 5-PC group
Each PC needs its own login. Treasurers juggle 7+ portals
Sweep rules between entities are built manually. Or not at all
Payer EFTs route to the wrong entity. Reconciliation eats Fridays
Add it up and a five-PC group burns 4-6 weeks of CFO time on banking ops every quarter. Not glamorous. Not optional either.
Five Questions for Your Bank
If your bank can't answer all five with a straight face, you're paying them to do their job:
Can you onboard 5+ entities in under 10 days?
Can I see all entities on one dashboard?
Do you support automated sweeps between PC and MSO accounts?
Can you route payer EFTs to virtual accounts per location?
What's my FDIC ceiling per entity?
For Lemma, those answers are yes, yes, yes, yes, and $10M per entity through the IntraFi Cash Service sweep network.
The MSO-PC structure isn't the problem. The bank is. Pick one that ships entities like a software product. That's the fix.
FAQ
Common questions