CPOM Corner: Are Members of a Management Service Organization Providing Non-Clinical Services to a Medical Practice “Beneficial Owners” Under the Corporate Transparency Act?

Our healthcare and business law firm works with medical practices to ensure compliance with state and federal laws, rules, and regulations. The Corporate Transparency Act (“CTA”) aims to combat illicit activity including tax fraud and money laundering. The reporting rule under the CTA requires certain entities to file beneficial ownership information (“BOI”) reports. This has raised an important question for healthcare practices structured to comply with the Corporate Practice of Medicine (CPOM) doctrine: Are members of a Management Service Organization (“MSO”) providing non-clinical services to a medical practice “beneficial owners” under the CTA? This blog post dives into that question. If you need assistance understanding how the reporting rule applies to your business or would like to discuss this blog post, you may contact our healthcare and business law firm at (404) 685-1662 (Atlanta) or (706) 722-7886 (Augusta), or by email, info@littlehealthlaw.com. You may also learn more about our law firm by visiting www.littlehealthlaw.com.

Understanding Beneficial Ownership Under the CTA

A “beneficial owner” is defined by the CTA as any individual who:

Directly or indirectly owns 25% or more of an entity; or
Exercises “substantial control” over the entity.

For most MSOs, the focus is on the “substantial control” standard. According to the CTA, substantial control includes:

Senior officers who oversee operations.
Individuals with the authority to appoint or remove senior officers.
Decision-makers who influence the nature, scope, and policies of the business.
Individuals with any other form of substantial control over the reporting entity.

For #3, FinCEN provides the below chart to help businesses understand who an important decision maker may be:

MSO Members and Substantial Control

MSOs provide non-clinical operational support to medical practices, often to comply with state CPOM doctrines. While the MSO is not involved in patient care decisions, it often manages significant operational aspects like budgeting, payroll, and contracts. This role can lead to indirect “substantial control” over the medical entity.

In most cases:

MSO members do not meet the first two criteria for beneficial ownership (ownership or officer appointment powers).
However, they may qualify under the “important decision maker” criterion if they influence the practice’s key operational decisions through an agreement like a Management Services Agreement (MSA).

For example:

If an MSO member negotiates major contracts for the medical practice, determines budgets, or chooses operational strategies for the practice, its leaders may indirectly exert substantial control.

Does This Conflict With the CPOM Doctrine?

Listing an MSO member as a beneficial owner under the CTA does not imply ownership of the medical practice or involvement in clinical decisions. It reflects the operational influence of the MSO, which remains separate from the clinical governance required under CPOM. Of course, legal analysis of this may change as companies continue to report, but keep in mind that the BOI Report is not a public document.

Best Practices for Compliance

Given the broad definition of beneficial owners and important decision-makers, a conservative approach to the BOI reports is the following:

List MSO members with substantial influence as beneficial owners of the physician-owned practice.
Clearly document the division of responsibilities in agreements like an MSA to reinforce CPOM compliance.
Consult legal counsel to align BOI reports filings with both CTA and CPOM requirements.

Conclusion

While the CTA’s definition of substantial control is broad, MSO members may qualify as beneficial owners if their role significantly impacts the operational decisions of the medical group. If you need assistance understanding how the reporting rule applies to your business or would like to discuss this blog post, you may contact our healthcare and business law firm at (404) 685-1662 (Atlanta) or (706) 722-7886 (Augusta), or by email, info@littlehealthlaw.com. You may also learn more about our law firm by visiting www.littlehealthlaw.com.

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