A management services agreement has one job that matters legally: it has to give the management company real work and leave the physician entity real control. Regulators have started publishing lists of what the management side may not decide. Read your agreement against those lists, clause by clause. Below are twelve clauses, what each should say, and the authority that tells you why.
The lists you are drafting against
Three sources do most of the work, and they agree with each other.
The Medical Board of California lists decisions that belong to a physician, including the ownership and content of patient records, the “selection, hiring/firing (as it relates to clinical competency or proficiency) of physicians, allied health staff and medical assistants,” payer contracting parameters, “coding and billing procedures,” and approval of medical equipment and supplies. Then it adds the sentence that governs your drafting: those decisions “cannot be delegated to an unlicensed person, including (for example) management service organizations,” although the physician “may consult with unlicensed persons” and must “retain the ultimate responsibility for, or approval of, those decisions.”
California’s SB 351 turned much of that list into statute for private equity groups and hedge funds, effective January 1, 2026, and made offending provisions “void, unenforceable, and against public policy” (Health & Safety Code § 1191(c)(2)). It reaches those investors only. The Medical Board’s list applies to everyone. See what SB 351 changed.
Oregon’s statute is the most detailed. An MSO may not “exercise de facto control over administrative, business or clinical operations” in a way that affects clinical decision-making, including ultimate authority over hiring, schedules and pay of clinicians, staffing levels, diagnostic coding, clinical standards, billing and collection policy, prices, and payer contracts (ORS 676.555(2)(a)(G)). It applies from January 1, 2026 to entities formed on or after June 9, 2025, and from January 1, 2029 to older ones. Vermont borrowed the same idea in 2026, as we set out in Vermont’s control checklist.
The pattern to copy is “consult, not control.” The MSO recommends. The professional entity decides, and the agreement says so.
Twelve clauses
| Clause | What it should say | Why |
|---|---|---|
| 1. Term | At least one year. Renewal that either side can stop | The federal safe harbor requires a term of “not less than 1 year.” In Carothers, leases renewed automatically unless the lay lessor ended them |
| 2. Services | A list of non-clinical services. The MSO does not arrange, advertise or provide medical services, and does not market them under its own name | The Medical Board lists MSOs “arranging for, advertising, or providing medical services” as a prohibited arrangement. Oregon bars advertising the practice’s services under a non-entity name |
| 3. Clinical carve-out | The professional entity has final say on tests, referrals, care plans, clinical policy, staffing levels, time per patient and schedules | Medical Board list; H&S § 1191(a)(1); ORS 676.555(2)(a)(G) |
| 4. Personnel | The MSO employs non-clinical staff. The professional entity hires, fires, pays and evaluates clinicians | Medical Board list; § 1191(a)(2)(B). In Flynn Brothers the manager’s “right to select medical staff” helped void the contract |
| 5. Records | The professional entity owns patient records and controls their content. The MSO has custodial and technical access | Medical Board list; § 1191(a)(2)(A) |
| 6. Fee | A written method, set in advance, tied to the services and their cost. No share of professional fees where the state bars it | 42 CFR § 1001.952(d)(1)(iv); N.Y. Educ. Law § 6530(19); 225 ILCS 60/22.2(f) |
| 7. Fee adjustment | A scheduled review against cost and value. The MSO cannot reset it alone, and the practice sets patient prices | Oregon bars the MSO from “setting the prices, rates or amounts” the entity charges. New Jersey keeps patient fees in the licensee’s “sole discretion” |
| 8. Billing and bank accounts | The practice controls coding and charges. Collections go to an account in the practice’s name and control. No commingling, no pledging practice assets for MSO debt | 225 ILCS 60/22.2(d); Carothers; Flynn Brothers |
| 9. Restrictive covenants | No non-compete or non-disparagement clause against clinicians where the statute voids it | H&S § 1191(d) for private equity and hedge fund deals; ORS 653.297 in Oregon |
| 10. Termination | Both sides can terminate for cause. The practice can exit. No penalty that makes exit impossible | The New Jersey Board “expects that a licensee shall retain the right to terminate.” Northfield condemned “the threat of substantial monetary penalties” |
| 11. Succession | Refers to a separate share transfer agreement with objective triggers only. No undated resignations, proxies or MSO voting rights | Northfield; ORS 676.555(2)(a)(B), (C) and (2)(b) |
| 12. Change in law | A severability clause, a duty to renegotiate, and cooperation on transaction notices and ownership reports | § 1191(c)(2); ORS 676.555(5); AB 1415; N.Y. Pub. Health Law § 4550 |
The three clauses that lose cases
The bank account. Illinois lets a practice pay a billing company only if the practice “at all times controls the amount of fees charged and collected” and collections go to an account under its sole control. In Carothers, New York’s highest court noted that the physician owner “never wrote a check from the bank account.” In Flynn Brothers, revenue went to the manager’s office and into an account the manager kept, and the manager pledged the practice’s assets for its own debt. If your physician owner has never seen the operating account, fix that before anything else.
Termination. Carothers turned partly on symmetry: the lay party “had the right to terminate each lease without cause, regardless of payment, on 30 days’ notice,” and “no similar provision allowed plaintiff to terminate.” The New Jersey Supreme Court found control exercised “through interconnected contracts and the imposition of the threat of substantial monetary penalties.” A practice that cannot leave is a practice that is controlled. We walk through that case in New Jersey already punished the sham PC.
The fee. A fee that tracks revenue is fee sharing in New York and barred for management services in Illinois, and a fee far above value is evidence of control everywhere. The detail is in fair market value for MSO fees.
Oregon rewrote its own rule within weeks
If you read summaries of Oregon’s SB 951 from mid-2025, check the date. The bill as first enacted barred a practice owner from serving as a director, officer, employee or contractor of the MSO. HB 3410, effective July 24, 2025, removed that stand-alone ban. What remains is an ownership rule: the MSO and its shareholders, directors, officers, employees and contractors may not own or control a majority of the professional entity, alone or together. The de facto control list above survived intact. Our summary is in Oregon SB 951.
Oregon also gives the physician a remedy. A provision that authorizes a prohibited act “is void and unenforceable,” and the licensee or the entity may sue for damages and an injunction (ORS 676.555(5)). Your agreement will be read by someone with a reason to find the bad clause.
What this means for you
Print the agreement and mark each of the twelve clauses as present, absent or wrong. Start with the bank account, termination and the fee, because those are the facts courts have relied on. Replace every “MSO shall determine” on a clinical or personnel matter with “MSO shall recommend, and the practice shall decide.” Put the succession terms in their own document with objective triggers. Then date the review and repeat it when your state legislates. California, Oregon, Vermont and Massachusetts all have since the start of 2025. The structure itself is explained in friendly PC and MSO.
Related reading
Frequently asked questions
What should a management services agreement include?
A term of at least a year, a list of non-clinical services, a clinical control carve-out, personnel and records clauses that leave clinicians and charts with the practice, a fee method set in advance, practice-controlled billing and bank accounts, mutual termination rights, a reference to a separate succession agreement, and a change-in-law clause. Each maps to a published regulatory list.
Can an MSO hire and fire clinical staff?
It should not. The Medical Board of California lists hiring and firing of physicians, allied health staff and medical assistants, as it relates to clinical competency, among decisions that cannot be delegated to a management company. Oregon bars an MSO from ultimate authority over hiring, terminating, scheduling or paying medical licensees. The MSO may recruit and recommend.
Who should control the practice bank account?
The practice. Illinois conditions percentage billing arrangements on collections going to an account in the practice’s name and sole control. In Carothers, New York’s Court of Appeals noted the physician owner never wrote a check from the account, and in Flynn Brothers a Texas court voided an agreement where the manager held the money.
Are non-compete clauses allowed in an MSA?
It depends on the state and the parties. California’s SB 351 voids clauses that bar a provider from competing after leaving, in management contracts with private equity groups and hedge funds. Oregon voids most non-competition agreements between a medical licensee and an MSO, with narrow exceptions, and limits non-disparagement agreements too.
This is general information, not legal advice. Rules vary by state and change. Confirm your own facts with counsel.