Published: May 17, 2024
Revenue Cycle Management

MSO Operations: Follow the Stabilization-Optimization-Growth Model for Success

Suzanne Delzio
Suzanne Delzio
8 minute read
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MSO advisory firm Scale Healthcare has seen all of the missteps PE-backed groups make when growing their portfolio of practices. One of the most damaging, according to Managing Director Carl Friedrich, is when the MSO picks up a practice and then leaps right to growing the location. He explains

“One of the biggest mistakes that MSOs make is that they need to follow a very basic formula post-integration, post-close. Stabilization, followed by optimization, followed by growth. What happens is platforms often skip ahead to growth before they’ve conquered stabilization and optimization, and it’s often driven by business development’s responsibility to grow the platform.”

As much as sales pushes to increase patient volume at a new acquisition, only a well-organized practice delivering quality care will be successful in the long term. An organization marked by confusion, poor processes, and substandard care won’t develop the reputation that grows via word of mouth.  

Here, you’ll find all of the operations tasks necessary to refine the three separate post-acquisition stages. Patience in carrying them out ensures you and the practice build a firm partnership foundation and optimize from there. Only then can you offer your community ideal care at reasonable rates.

What are MSO operations?

MSO operations are a range of non-clinical support services the MSO provides to medical practices. These services include administrative support (billing, payroll, lease management, and credentialing), business services (marketing and advertising, accounting and financial services, and human resources), and value-based services (data analytics and patient outcomes). The operations undertaken by an MSO can vary widely depending on the needs of the practice and the services it offers. By handling the complex, non-medical aspects of practice management, MSOs allow healthcare providers to focus more on patient care. 

Operations job one: handling staff and clinician resistance

Your operations will go far more smoothly once you’ve won cooperation and support from your new acquisition’s clinicians and staff. As humans resist and even fear change, merging your two organizations should be undertaken with care. 

With awareness and respect of staff protocols and challenges, you can minimize resistance or pushback from the practice's existing staff. First, staff need sufficient preparation to broach any change.  We cover how to achieve complete transparency about why the practice appeals to your MSO and what you can bring to make their jobs better in our guide on how to optimize provider group performance. Our post about change management in healthcare also prepares you to lead practice staff. 

Prepare yourself for these manifestations of staff pushback:  

1. Resistance to new processes and technology:

If changes disrupt staff routine or require new skills, staff could express reluctance and even passively resist through foot-dragging. It will take on-the-job training to warm staff up to new processes. Because undertrained staff can lack confidence, they must receive robust support and collaboration with peers. Present the training involved as opportunities for growth and improvements to their work histories. 

2. Organizational culture shifts: 

Let’s face it, “corporate culture,” isn’t everyone’s favorite. Staff may have grown to love the small, familial environment where they’ve been working. Reassure staff that you value the cohesive structure they’ve built. Your new rules and protocols are designed to help it function even better. 

Physicians and other clinicians accustomed to having robust autonomy can writhe under new restraints, perceiving these changes as micromanagement. To contain these concerns, MSOs should always communicate changes clearly via meetings, written materials, and digital platforms.  

Even better, MSOs should establish open feedback channels where clinicians and others can express concerns and provide input on new guidelines. You can even set up regular feedback sessions or anonymous surveys that encourage physicians to engage in the transition and development of new protocols. By involving physicians in decision-making, you demonstrate your respect and help them retain a sense of control. 

3. Concerns over job security and changes in roles:

The clinicians and staff you face know well that MSOs often seek to cut costs by eliminating staff redundancies. Still, in a healthcare staffing shortage, individuals should recognize that their skills are in high demand. 

You may simply be reassigning tasks. Still, team members may feel their professional autonomy or career paths will be negatively impacted. The best thing to do is plan out and document the ways the individual retains a measure of autonomy and self-directed career progression. At the very least, invite them in to collaborate on these important aspects. 

4. Staff sense of dispensability

Most likely, you worked out the acquisition with practice owners, separate from the input of many clinicians and staff. To prevent them from feeling undervalued or overlooked, emphasize how their skills will be integral to the new partnership's success. List the features of the MSO that will support them in practicing medicine. 

5. Adjustments in compensation and benefits:

 Probably the first concern clinicians and staff have is how the changes will impact their standard of living. Make sure to present any modifications to compensation, benefits, or incentive programs as upgrades to their current packages. Reassure them that changes in work schedules will be minimal.

The more you get key players at the acquisition’s location on board, the more quickly the partnership will be established. 

Stabilization: post-acquisition MSO operations

Time frame

Prepare for an initial intensive integration phase of three to six months, followed by a longer-term refinement phase that could last up to one or two years. Expect some bumps along the way. Regular assessments and adjustments are likely as the practice and MSO work towards a stable and mutually beneficial partnership. 

Begin work on the following stabilization operations right away: 

1. Integration of systems and processes

Electronic Health Records (EMR) and IT Systems: Given that the MSO strives to create efficiency, of course it cannot sustain eight different EMRs across its 12 acquisitions. Work with the practice to create a reasonable timeline for migrating to your preferred EMR. This is also a good time to update health records for all patients. 

Financial systems: Merge the practice’s accounting and financial systems, including payroll, billing, and insurance claims processing with yours. Align all steps with your protocols.

2. Compliance and legal alignment:

Regulatory compliance: Document that the practice meets all local, state, and federal regulations, which may include HIPAA compliance, licensing, and accreditation standards. In truth, this step should have been taken care of while you were evaluating the practice. We’ve compiled a convenient pre-acquisition due diligence checklist here

Contract review and negotiations: Review contracts with suppliers, insurance companies, and other third parties. As an MSO, you can leverage size to win better fees from insurers and better prices from suppliers.  Use your existing relationships with these partners to begin the cost containment and revenue optimization work. 

3. Operational optimization:

Staff training and development: Staff will need training programs for new systems, processes, and standards. Consider leadership training for appropriate individuals so they can help manage the transition and future growth.

Resource allocation:  Examine any documentation delineating resources. Work with the practice to optimize human resources, equipment, and facilities. This can involve reallocating tasks, introducing new roles, or restructuring teams to improve efficiency.

4. Financial management:

Budgeting and financial planning: Establish new financial plans and budgets that reflect the goals you’ve worked out with the practice. Our post about optimizing provider performance after acquisition linked above describes in detail how you should be completely transparent with the practice on shared goals. The culmination of this transparency is a business plan with all points signed off by both parties.  

Revenue cycle management: Establish all operational points in the practice’s revenue cycle. Work with them on efficiency on all tasks from patient scheduling and eligibility determination to billing. 

5. Quality assurance and performance metrics:

Quality control systems: Review the practice’s quality control system for strengths and weaknesses. Bring in those that will help the practice improve patient satisfaction and outcomes and keep them compliant with all federal and state laws. 

Performance metrics and benchmarking: MSOs often find that the practices they acquire do not have the sophistication to establish performance metrics and benchmarks. With a portfolio of healthcare assets, you can at least help them benchmark against others. Set up metrics to monitor practice performance against benchmarks to identify areas for improvement.

Signs you’ve achieved practice stability

It takes a combination of quantitative and qualitative measures to determine practice stability. Here are key indicators that you’re there:

1. Financial performance - A consistent or improving trend in revenue and costs suggests that the practice has adapted well post-acquisition. Regular monitoring of financial metrics such as the rate of claim denials, days in accounts receivable, and the accuracy of billing reveals the effectiveness of revenue cycle management.

2. Operational metrics - The smooth operation of daily functions, from patient scheduling and check-in processes to clinical workflows and discharge procedures, indicates operational stability. Look also for declining staff turnover rates, a sign indicating the practice’s stability and positive work environment.  

3. Clinical outcomes -  Improving clinical outcomes reflects that any redesigned treatment guidelines are effective. Further, fewer incidents such as medication errors, falls, or complications can indicate that clinical processes are stable and effective.

4. Patient satisfaction - monitor the patient surveys you’ve put into place. Increasing satisfaction levels are a sign that the practice is running smoothly. Also compare the volume of complaints before and after the merge. Declining numbers show that new processes have been accepted. Stable retention of patients and even growth in volume are two more signs that the practice is on the right track. 

5. Compliance and regulatory adherence - absence of compliance breaches reflects that clinicians and staff are following the protocols that keep the practice compliant with all federal and state laws. Monitor that all accreditations from healthcare organizations are current.  

6. Staff integration and morale - low levels of internal conflict among staff members can indicate that the team has integrated well and is functioning cohesively. Positive feedback on training programs and professional development opportunities reflects that staff has accepted new management.   

7. Technology and systems integration - smooth operation of integrated systems, such as EMR, RCM, and billing systems, without significant issues or disruptions, can indicate that the practice’s technology works coherently. Explore any data collection and reporting you set up with each to make sure they’re rendering the insights you need to optimize revenue cycle processes. 

By effectively managing these tasks, the MSO can help the new practice stabilize and thrive, optimizing both clinical and business outcomes. Each of these areas requires careful planning and execution to ensure that the transition minimizes disruption to both staff and patients while building the foundation for future success.

Optimization: post-acquisition MSO operations

The optimization phase can be tricker than stabilization because it involves pushing clinicians and staff to perform at a higher level. By aligning the practice with your broader goals, you may be asking the practice for dramatic changes. The optimization phase focuses on refining processes, maximizing resources, and improving patient care and satisfaction. Tread carefully, as these changes can translate as more work for staff and clinicians.

Time frame

The optimization phase of a new provider acquisition might involve an initial intensive period of significant changes within the first 6 to 18 months, followed by a longer-term phase of continuous improvement and refinement. For some practices, reaching a state where the benefits of optimization are fully realized could take several years, particularly if ongoing adjustments are made to adapt to changing healthcare landscapes and technologies. Given that many MSOs seek to resell their acquisitions within three to five years, selecting the right target in the first place can make all the difference. 

Here are the key tasks involved in optimizing a physician practice within an MSO:

1. Process reengineering - the MSO needs to examine current practice processes at every step of the revenue cycle. It should then work with the practice to streamline workflows to improve efficiency and reduce redundancies. This includes examining patient flow, administrative processes, and clinical operations. Our guide “Revenue Cycle Optimization” can help. 

One of the benefits of an alliance with an MSO is the access to technology. Without the expertise and budget the MSO provides, many practices and providers groups cannot benefit from the increased speed and accuracy revenue cycle management software delivers. Ease the addition of technology to practice workflows by explaining how these tools support staff rather than criticize or replace them. Emphasize that, given the staffing shortage, the goal is to retain as many staff members as possible. 

2. Performance enhancement -  implement programs aimed at enhancing the quality of care, such as evidence-based practice protocols, patient safety measures, and continuous quality improvement cycles. Utilize organizations like NCQA which, operating with high ethical standards, helps practices, health systems, and health plans (insurers) improve the quality of the procedures and plans they deliver. 

One tricky area is measuring employee performance. Work with staff to set up productivity and other metrics for themselves to strive for. Provide training and development programs to ensure they have the skills and knowledge to achieve these goals. 

3. Financial optimization:  given inflation, provider costs for labor and supplies have skyrocketed. Identify areas where costs can be reduced without compromising quality, such as bulk purchasing of supplies through the MSO, renegotiating vendor contracts, or optimizing staffing models.

4. Revenue enhancement: exploring new revenue opportunities through expanded services, improved billing practices, and enhanced coding accuracy to maximize reimbursements.

5. Technology integration:  your first step when tackling technology is to enhance the practice’s EMR use. Most likely, after transitioning the other assets in your platform to your EMR,  you’ve discovered its best features. Share the financial and time-saving advantages the EMR offers. Together, you and your acquisition can achieve better documentation, improved patient tracking, and streamlined care coordination.

Beyond simple document management your EMR along with your revenue cycle management software should help you gain insights into practice performance, patient health outcomes, and business operations. All of these inform strategic, long-term decisions.

6. Regulatory compliance and risk management:  regularly review and update practices to ensure compliance with the latest health regulations and standards. Conduct risk assessments to identify potential areas of vulnerability and implement strategies to mitigate these risks.

7. Patient experience enhancement: implement a process for collecting and analyzing patient feedback to identify areas for improvement in patient care and service. This patient feedback may uncover new services of specialties the community needs. Raise these issues with practice leaders. 

8. Market expansion and branding:  work with the practice to develop and implement marketing strategies that align with the MSO's brand. Leverage digital marketing, community outreach, and patient engagement programs to share the practice’s achievements and unique procedures

9. Strategic networking and collaboration:  build partnerships with other healthcare providers and community organizations (chambers of commerce) to enhance visibility in the community. 

Each of these tasks should help you build toward an effective and patient-centered practice that aligns with the strategic goals of the MSO. Optimization is an ongoing process, however, requiring continuous evaluation and adaptation to new technologies, market conditions, and healthcare standards to ensure long-term success.

How to know when the practice is optimized

An MSO can gauge whether a newly acquired practice is optimized by assessing several critical factors. Strive for ambitious goals in efficiency, profitability, and quality of care. These key metrics indicate an acquired practice or physician group is optimized:

 1. Maximized financial performance -  examine the revenue cycle for: reduced claim denials, lower days in accounts receivable, and higher collection rates. These data points indicate that the practice is optimizing its revenue potential. Also analyze operational costs versus industry benchmarks to ensure that the practice is managing expenses efficiently without sacrificing care quality.

 2. Enhanced operational efficiency- review how your changes are impacting the practice’s workflows. Have patient wait times diminished?  Has staff productivity improved? Does all staff seem competent in using any new technology to automate tasks, manage patient records, and facilitate communication within the practice and patients? 

 3. Clinical outcomes improvements - watch for indicators of improved patient care,  such as health outcomes, adherence to clinical guidelines, and reduced rates of hospital readmissions. Check with your KPIs to ensure the practice is at least meeting if not exceeding standards set by healthcare accreditation bodies. These often go beyond basic regulatory compliance.

 4. Patient satisfaction improvements -  higher ratings in patient satisfaction surveys, particularly in areas such as ease of access, quality of care, and interaction with staff indicate that new guidelines and protocols have eased patient journeys. Watch your retention and referral rates as well. These suggest that the practice is a preferred choice in the community.

 5. Robust compliance and risk management - is your new acquisition in good shape for regulatory audits? Do you know when these audits will occur? Keep strategies and systems in place to identify, assess, and mitigate risks associated with clinical care, data security, and staff safety. When your new practice follows strict compliance regulations when no one is looking, it will pass with flying colors at audit time. 

 6. Staff satisfaction and development -  high retention rates indicate a positive work environment and effective management. Consider using surveys to gauge whether your ongoing training and development opportunities for staff are enhancing their skills, knowledge, and job satisfaction.   

 7. Effective leadership and governance - is the staff at your acquisition contributing to 

 decision-making processes that align with long-term goals and market conditions? Your governance and management structures depend on their input.

 8. Continuous improvement culture - do signs exist that the practice continuously seeks and integrates innovations and best practices to improve care and operations? Namely, are they getting on board with the technological improvements you’ve brought?  

An MSO considers a practice optimized when these elements align to create a harmonious, efficient, and productive environment that meets or exceeds all set benchmarks for financial and clinical performance. This level of optimization not only enhances the practice’s sustainability but also its competitiveness in the local healthcare market.

Growth: post-acquisition MSO operations 

For the practice or physician group, the prime directive of a merger with an MSO is to help the practice grow and thrive. As mentioned above, in addition to modernizing the organization, the MSO strives to resell it at a profit. The practice benefits from the MSO's resources, expertise, and networks to enhance its operations and expand its reach. 

MSOs undertake the following tasks to help a physician practice or group grow:

1. Administrative assistance - by taking over administrative and revenue cycle responsibilities like billing, coding, compliance, and human resources, MSOs free physicians and other clinicians to focus on patient care. Improved care fuels improved reputation which drives patient volume . 

2. Cost improvements - due to their larger scale and expertise, MSOs can negotiate better terms with suppliers and vendors, reducing costs for medical supplies, equipment, and services. In addition, when it comes to payer negotiations, it backs practices and physician groups with more firepower. With more cash for investment, the practice can invest in equipment, an on-site lab, or even more physicians to handle increased demand. 

3. Access to capital and investment - should a practice or physician group need new equipment to meet community demand, MSOs often provide financial resources for these infrastructure upgrades or expansions that a practice might otherwise struggle to afford.

4. Technology and innovation - the latest medical technologies and software solutions promise to cut costs and make new hires unnecessary. It takes the guidance and expertise of an MSO to modernize a local practice or physician group to integrate the tools that streamline practice operations. These modernizations cut costs, recover revenue from underpayments, and help sweep in upfront payments

5. Quality improvement -  MSOs often develop standardized clinical protocols and best practices to improve patient outcomes and ensure consistent, high-quality care across all managed practices. They implement tools for tracking performance metrics and outcomes so that care continually improves. 

Through these comprehensive supports and services, an MSO can significantly enhance the growth and development of a physician practice, making it more sustainable and competitive in the healthcare market. This partnership allows practices to navigate the complex healthcare landscape more effectively and focus on delivering exceptional patient care.

Optimize a new acquisition’s operations with automated contract management and underpayment tools

Over the past decade, private equity-backed management services organizations (MSOs) have invested close to $1 trillion in nearly 8,000 healthcare transactions, with a particular focus on specialty physician groups.

The healthcare industry is consolidating for several reasons, including escalating supply and labor costs. Additionally, as people live longer, there is increased demand for innovative and costly procedures. At the same time, consumers face growing challenges in managing their healthcare expenses.

As you aim to optimize revenue, consider that enhancing revenue streams for the physician groups within your portfolio can also provide the capital necessary for the growth of your entity. Two effective methods to increase revenue include recovering underpayments and boosting upfront collections through precise patient payment estimates.

 MD Clarity specializes in underpayment recovery and patient payment estimates and eligibility. Our contract management and underpayments tool, RevFind, processes, digitizes, and analyzes payer contracts, comparing each payment to the terms of the contract and notifying staff of any discrepancies. It identifies underpayments by practice, location, and facility, so that MSOs can compare payer reimbursements. This intelligence helps them negotiate for underpayment recovery and even better contract terms. Actively addressing underpayments can lead to significant cash recovery and better profit margins.

Our patient payment estimate tool, Clarity Flow, automates eligibility checks, produces accurate payment estimates, and informs patients via text or email about their financial obligations, including deductibles, copays, and coinsurance. Patients value understanding their financial responsibilities and how much will be covered by their insurance. The ability to make payments directly from the estimate also reduces confusion. With clearer payment processes, patient satisfaction increases, enhancing the likelihood of timely and complete payments.

Schedule a demo to see how our tools can enhance your revenue and cut your costs.  

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