Keeping Your Doctors Close – Part III: What Health Systems Must Do

The first two parts of this series by John Marren (1948-2025) and Thomas Babbo of Hogan, Marren, Babbo, and Rose (“HMBR”) focused on why health systems need to engage in efforts to retain their affiliated physicians actively and why physicians are looking to be acquired by private equity, insurance carriers, and large physician groups. Amid the reality that physician acquisition is haunting health systems, the truth is that no one is coercing individual physicians to sell.

Many physicians are eager to put their practices on the market, not just for the payday. As explained in the previous articles, running a private practice is increasingly unsustainable, and the option of employment by a health system without significant redesign is increasingly unappealing, as witnessed by the current trend of physician turnover. The redesign necessary to eliminate physician dissatisfaction is discussed below.

WHAT HEALTH SYSTEMS MUST DO

In the evolving healthcare landscape, intelligent health systems can invest in strategies to compete with private equity firms, for-profit business platforms, medical groups, and other local hospital competitors. This includes developing innovative, value-based care models, enhancing patient experience, and investing in strategies that make physicians’ lives easier. In this context, a management services organization (“MSO”) focusing on value-based payor contracting, clinical informatics, revenue-cycle improvement EHR, and on-call management emerges as a promising physician alignment option, offering a beacon of hope and a potential for significant benefits in the face of these challenges.

MSOs can provide health systems with a unique solution in an era where acquiring physicians has become increasingly fraught. Health systems that acquire practices play a pivotal role in maintaining physician motivation, a factor that cannot be overstated, ensuring that employed physicians are as driven to maximize productivity as those in private practice. This is important as their income is typically more stable and less directly tied to their output.

Moreover, employing physicians is costly, with health systems facing significant salaries, benefits, and administrative support expenses – especially problematic when an employed medical group operates at a loss. Additionally, conflicts between health system administration and employed physicians regarding clinical decisions and operational policies can lead to tension and dissatisfaction among staff. Furthermore, for employers and government payors in an era of value-based care, studies^[1] The findings suggest that health system-owned physician practices may significantly increase healthcare costs due to the potential overutilization of expensive services.[2]

For a health system and physicians facing these challenges, developing a contemporary MSO platform for the broader medical staff can strike a unique balance – creating necessary alignment around clinical and reimbursement matters while maintaining much more physician autonomy than traditional employment models. The advantages include:

• Administrative Support: An MSO handles many non-clinical tasks, such as billing, coding, claims management, and revenue tracking. This allows physicians to focus more on patient care than administrative tasks, improving job satisfaction and efficiency and making them less likely to seek employment with a third-party.[3]
• Cost Savings: By aggregating services and supplies, MSOs can negotiate better pricing, reducing overhead costs for practices.[4]
• Financial Management: They provide support with budgeting, financial reporting, and analysis, which can lead to more informed decision-making and optimized revenue.[5]
• Regulatory Compliance: MSOs help ensure that practices adhere to industry standards and legal guidelines, which can be complex and time-consuming.[6]
• Value–Based Reimbursement. The MSO can provide actionable insights into quality metrics and patient outcomes, track physician performance and patient satisfaction, help practices meet the benchmarks required for value-based payments, and manage cost structures, which are crucial for succeeding in value-based care models.[7]
• Technology and IT Support: MSOs often offer IT solutions, including electronic health records (EHR) systems and data security measures.[8]

An MSO emulates the redesign necessary for recruiting and retaining physicians. An MSO can achieve a manageable physician workload and sufficient time for personal life, which is crucial. Physicians who can balance their professional and personal lives report higher job satisfaction. Ultimately, the goal is to allow physicians to maintain ownership of their practice while affiliating with the new MSO structure.

This operations, administration, and management platform—owned and managed by the health system—can draw upon existing resources, systems, and competencies and present the physicians as a single, clinically, and financially integrated provider network to third-party payors. For today’s health systems, an MSO can provide a practical alternative to private-equity physician practice roll-ups that commoditize the hospital and loss-generating, employed medical groups, reassuring administrators of a viable and effective strategy.

Our next installment in this series will focus on:

• Options for structuring an MSO.
• The steps necessary to build an MSO.
• The tools and resources are available.
• How the regulatory environment allows a health system to finance this process.
• How to attract a co-partner.

If you would like to discuss this method of aligning the health system and physician community and get answers to the questions above, contact Thomas J. Babbo, Thomas.Babbo@hmbr.com.

[1] Richard Scheffler, Arnold, Daniel and Whaley, Christopher. “Consolidation Trends In California’s Health Care System: Impacts On ACA Premiums And Outpatient Visit Prices.” Health Affairs 37, no. 9 (September 1, 2018): 1409–16. https://doi.org/10.1377/hlthaff.2018.0472

[2] Id, at 1.

[3] Breaking Down MSOs in Healthcare: What They Are and How They Can Benefit Your Practice, https://physiciansallianceofconnecticut.com/blog/breaking-down-msos-in-healthcare-what-they-are-and-how-they-can-benefit-your-practice/

[4] Understanding Management Services Organizations (MSOs), https://www.physicianspractice.com/view/understanding-management-services-organizations-msos.

[5] Id, at 4.

[6] Id, at 4.

[7] Expert Forum: How MSOs can help your practice (part 2), https://www.athenahealth.com/knowledge-hub/practice-management/expert-forum-how-msos-can-help-your-practice-part-2.

[8] Id, at4.