The MSO Model, Explained for Texas Med Spas
Two entities, one agreement, and a set of boundaries that decide whether the whole thing holds up.
Why the structure exists
Texas prohibits non-physicians from owning or controlling an entity that practices medicine. The management services organization model is the standard answer: it lets a non-physician build and run the business without owning the clinical entity.
It is well established and widely used. It is also what regulators examine hardest, because a poorly drafted MSO arrangement is functionally indistinguishable from the non-physician ownership the rule prohibits.
How the pieces fit
The professional entity
A PA or PLLC owned by a licensed Texas physician. It employs or contracts clinical staff, holds protocols and delegation, and owns the patient relationship and the medical records.
The management company
Owned by you. It holds the lease, equipment, non-clinical staff, marketing, scheduling, billing operations and vendor contracts.
The management services agreement
The contract between them, setting scope of services, the fee, and where authority ends on each side. This is the document that succeeds or fails.
The alter ego problem
A structure can be perfectly correct on paper and still collapse under examination. If the management fee is set so the MSO captures effectively all clinical revenue, if the MSO hires and fires clinical staff, if it sets treatment protocols or directs clinical decisions, or if the physician owner holds no meaningful stake in outcomes, a regulator can reasonably conclude the non-physician is the true controller of a medical practice. That is exactly the outcome the structure exists to prevent. It is why the fee methodology matters more than the fee itself, and why this is legal work rather than a template.
Boundaries that need to hold
- Clinical decisions, protocols and delegation sit with the professional entity
- Clinical staff are hired, supervised and terminated on the clinical side
- The management fee is fair market value for services actually rendered
- Medical records and the patient relationship belong to the professional entity
Texas requirement
In Texas, only a physician licensed by the Texas Medical Board, an MD or DO, may serve as a medical director. A nurse practitioner or physician assistant cannot hold the role, though either may perform delegated services under physician supervision.
The medical director’s name and Texas Medical Board license number must be posted in all treatment areas.
MSO questions
Can I own the MSO and be an employee of the clinical entity?
What should the management fee be?
Can my physician partner own part of the MSO?
Do we need two sets of books?
Regulatory source
TDLR, Medspas at a GlanceStructure it correctly the first time
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Key takeaways
- The Texas Medical Board states that for a jointly owned entity, the organizers must be physicians and a physician or physicians must control and manage the entity.
- Physician assistants may hold no more than a minority ownership interest, and no individual PA’s interest may equal or exceed that of any individual physician owner.
- In a corporation, professional association or professional limited liability company, physician assistants cannot be officers.
- Structure decides who signs. It does not decide who may perform a treatment. That still runs through delegation.
What the Medical Board publishes about ownership
Most writing about MSO structures in Texas is inference. The Medical Board does publish requirements for jointly owned entities, and they are worth reading directly because they set hard edges that any structure has to respect.
On control, the Board states that the organizers must be physicians and that a physician or physicians must control and manage the entity. That is the sentence the rest of the structure has to accommodate.
Where physician assistants sit
The Board sets explicit limits. A physician assistant, or a combination of physician assistants, can have no more than a minority ownership interest. The ownership interest of an individual physician assistant cannot equal or exceed the ownership interest of any individual physician owner. For corporations, professional associations or professional limited liability companies, physician assistants cannot be officers. In a partnership, physician assistants cannot be a general partner and cannot participate in management.
Those are structural constraints rather than drafting preferences, and a proposed cap table either satisfies them or it does not.
What structure does not solve
Owners sometimes treat the entity design as the compliance work, as though a correct diagram settles the clinical questions. It does not, and the two failure modes are independent.
The Medical Board has determined that nonsurgical medical cosmetic procedures, including the injection of medication or substances for cosmetic purposes and the use of a prescription medical device for cosmetic purposes, are the practice of medicine, delegable by a physician to individuals with appropriate training. No entity arrangement changes that. A perfectly formed structure with no functioning delegation still has people performing medical acts without authority.
The Board of Nursing adds a limit from the other direction: a registered nurse may not delegate an activity if doing so requires professional nursing or medical judgment. Assessment, care planning and evaluating a patient’s response are not delegable regardless of who owns the entity.
Sources: Texas Medical Board FAQ 312 and Texas Board of Nursing Delegation FAQ.
The separation that has to be real
The whole point of splitting clinical from administrative is that the split describes what actually happens. Where these arrangements come apart is rarely the paperwork, it is the behavior underneath it.
Useful questions to ask about your own structure: who decides which treatments the practice offers, and is that decision documented as a clinical one? Who sets protocols, and are they written for this practice? Who hires and evaluates clinical staff on clinical grounds? Who holds the patient records? When a treatment is discontinued for safety reasons, whose decision is that and where is it recorded?
If the honest answer to most of those is the administrative entity, the diagram and the operation have drifted apart. That gap is what an examiner or a plaintiff’s lawyer looks for, and it is not fixed by a better-drafted agreement.
The facility layer sits outside all of this
One more layer is easy to lose track of. TDLR regulates the cosmetology and esthetics side and the premises, and its rules apply regardless of what the business calls itself. TDLR notes that facility requirements attach whether the business is styled a salon, a medical office, a medspa or a medispa.
That registration governs the facility and the cosmetology-side services. It grants nothing on the medical side. A structure can be correct at the entity layer, correct at the facility layer, and still be wrong at the delegation layer, because the three are assessed separately by three different regulators.
Source: TDLR, Medspas at a Glance.
Sources
- Texas Medical Board, Jointly Owned Entities — physician control, PA ownership limits, officer restrictions
- Texas Medical Board FAQ 312 — nonsurgical medical cosmetic procedures and delegation
- Texas Board of Nursing Delegation FAQ — limits on RN delegation
- TDLR, Medspas at a Glance — facility requirements regardless of business name
This page is general information for Texas practice owners and is not legal advice. Entity formation turns on statute and on your specific facts, and this page does not attempt to summarize the governing statutes. Review your structure with counsel and confirm current requirements with the applicable board before relying on it.