How to optimize an MSO's financial performance.

Many hospitals and health systems create financial and strategic alignments with physicians to increase market share. One way to implement such an alignment is to form a management services organization (MSO). Forming an MSO, however, does not automatically guarantee success. To avoid financial losses, executives of hospitals and health systems need to diagnose potential problem areas in their MSOs and take control of problems before the organization and the physicians suffer financial losses. Among the areas that should be evaluated are the business scope of the MSO, the nature of practice acquisitions, physician compensation, governance, management skills, management information systems capabilities, organizational structure, and fee structure. Fee structures, in particular, can be used to align physician and MSO incentives.