Jeremy Sherer and Alexandra Wood offer tips on:
- How to establish a PC-MSO
- How PC-MSO considerations vary from state to state
Alexandra: What are structuring considerations for early-stage healthtech companies?
Jeremy: It depends on what kind of healthtech company we're talking about. It can be more straightforward in certain areas of the industry, but when it comes to virtual care delivery and digital health companies, it's important to get a relatively nuanced structure right very early on.
It’s the friendly PC structure or the PC-MSO structure, which establishes an arrangement between an affiliated professional corporation and its management services organization (MSO), which is often an investor-backed tech company. That forms the core of this ecosystem, where the MSO provides management services to a professional entity, which delivers healthcare services to the patient.
What can go wrong is if it’s not set up in a way that complies with the laws of all 50 states, you can get to a point where, suddenly, as a company you have a really fantastic opportunity to move into a new market and you’re very excited about it. Then we as your lawyers have to be the bears of bad news and say that this entity isn't set up the right way in order to comply with the laws of insert state.
This comes up in the state of New York, where there is a restriction against structuring the compensation between a professional corporation and a manager in certain ways. This can come up if you haven’t established native professional corporations in the states which require them as a matter of law. So if you wanted to take a Florida professional corporation and do business in California, we’d have to say sorry, it’s going to take us some time to form that California corporation and establish the arrangement between that PC and your tech company.
It really is one of these things where early on, you want to ensure you’re doing this the right way so that you don’t have to talk to your lawyers all of the time when you’re trying to decide how to scale and build the company – and can instead really respond to what the market is saying.
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