An In-Depth Look into the Diverse Types of MSOs
“I’m looking to sell my plastic surgery practice to a larger medical group or a hospital.” Perhaps this was your initial plan before you learned about the benefits of merging your multi-location practice with a private equity-backed medical support organization (MSO).
Whether you’re ready to retire, burdened by administrative tasks, or looking for opportunities for accelerated practice growth, joining an MSO is one of the best decisions you could ever make.
Consolidations in the Medical Industry Are Rapidly Growing
It’s important to note that private equity doesn’t fall into any of the conventional investment categories such as stocks, bonds, and cash. As an alternative investment class, private equity is composed of a pool of money that directly invests in existing private practices. Moreover, private equity firms obtain funds from the following limited partners (LPs):
Pension funds
Capital from other companies
Wealthy individuals or families
Investments that exclusively invest in other funds
As the healthcare landscape continues to evolve, new incarnations of medical service delivery models emerge. Gone are the days when physician clinical practices were limited to the individual practice setting. Now that private equity firms have taken a massive interest in offices with multiple doctors and locations, smart consolidations in the medical industry are growing at an unprecedented rate.
The Business of Plastic Surgery Merging with PE-Funded MSOs
An MSO is essentially a healthcare-specific administrative and management engine that provides various non-medical services to physicians, hospitals, and practices. Furthermore, this entity could comprise non-healthcare investors, a group of physicians, hospitals, or health plans.
MSOs are created within healthcare practices to fulfill multiple functions that benefit physicians, patients, and investors. For this reason, they address overarching areas: quality, patient satisfaction, costs, and revenue.
Since private equity-funded MSOs seek to dominate the plastic surgery market, they create a large multispecialty practice or combine multiple practices of the same type. They’re constantly looking for high-quality and successful plastic surgery practices with multiple sites, more than 10 physicians, and at least $2 million in EBITDA.
A Closer Look at the Different Types of MSOs
Administrative MSOs
These organizations provide critical administrative infrastructure to support medical practices or groups of physicians.
Their back-office business management services include any or all of the following:
Billing and collection
Accounts payable
Payer negotiations
Credentialing and contract management
Revenue cycle management
Human resources
Employment of non-clinical staff
C-Suite administrative services
Drug and DME supply chain services
IT services
Space rental
Equipment rental
Hazardous waste disposal
Marketing
Investment or Management MSOs
These business entities purchase and manage the tangible assets of practices, including medical buildings, offices, equipment, and supplies. They lease these assets back to the operating physicians. In this scenario, the physician still owns their medical records, keeps their staff, maintains their existing insurance plan contracts, and practices in their current office space.
Partnering with an investment or management MSO frees the physician from the ownership of administrative expenses and eases the burden of time-consuming, labor-intensive asset management duties.
Group Purchasing MSOs
Since group purchasing MSOs are primarily established to attain economies of scale, merging with these entities would help medical practices get the lowest pricing on the latest technology, medical supplies, healthcare insurance, software, billing services, and more.
“I’d Rather Transition Into an MSO Than Sell My Plastic Surgery Practice”
Viper Equity Partners is the leading growth transition consultation firm in the medical industry. We leverage our exclusive relationships with private equity-backed MSOs and family offices to bring your cutting-edge plastic surgery practice the best deals. Contact us today to schedule your free consultation.