In New Jersey’s highly regulated healthcare landscape, launching or expanding a medical practice involves more than just clinical expertise. Legal and business considerations play a major role in how practices are structured and operated, especially when physicians rely on outside organizations to handle non-clinical operations. One of the most important documents in this process is the Master Service Agreement (MSA), which governs the relationship between a medical practice and a Management Services Organization (MSO). When properly structured, a Master Service Agreement can help ensure compliance with New Jersey’s Corporate Practice of Medicine (CPOM) doctrine while supporting a practice’s operational and financial goals.

At our firm, we regularly advise physicians, practice owners, and healthcare entrepreneurs on how to structure Master Service Agreements that comply with state law without sacrificing flexibility or growth. In New Jersey, the CPOM doctrine prohibits non-licensed individuals or entities from owning or controlling a medical practice. This restriction exists to protect patient care from being influenced by commercial interests. While MSOs play an important role in supporting healthcare businesses, they cannot interfere with or direct the clinical aspects of patient care. That’s where the Master Service Agreement comes in—it sets the terms of the business relationship and draws a clear line between clinical and non-clinical responsibilities.

An effective Master Service Agreement must clearly define the scope of services being provided. This typically includes administrative tasks such as billing, human resources, IT support, facility management, and marketing. At the same time, the agreement should explicitly state that all clinical decisions, treatment protocols, and oversight of medical personnel remain under the sole control of the licensed physicians. Any language suggesting that the MSO has a say in clinical operations can raise red flags with regulators, potentially leading to compliance issues or enforcement action.

Another important aspect of a compliant Master Service Agreement is how compensation is structured. Payments to the MSO must reflect fair market value for the services provided. Flat fees or cost-based models are generally safer, while percentage-based arrangements require careful justification to avoid being viewed as impermissible fee-splitting. It’s also essential that both parties have the ability to terminate the agreement under reasonable conditions. This flexibility supports physician autonomy and ensures that no arrangement compromises clinical independence over time.

Unfortunately, we often review Master Service Agreements that unintentionally cross legal boundaries. Common issues include MSOs being granted authority over hiring or firing clinical staff, managing patient scheduling, or having compensation tied to revenue in a way that resembles profit-sharing. These terms may seem harmless at first glance, especially when the goal is to streamline operations or incentivize performance. However, if not properly structured, they can violate New Jersey law and expose both the practice and the MSO to legal risk.

Even well-intentioned arrangements can present challenges when the lines between business and medicine become blurred. That’s why involving legal counsel early in the process is so important. A carefully crafted Master Service Agreement doesn’t just ensure compliance—it provides clarity, minimizes risk, and supports the long-term success of the practice. Our role is to help clients design and document arrangements that allow them to operate efficiently, grow responsibly, and stay on the right side of the law.

For healthcare providers and entrepreneurs in New Jersey, structuring a compliant Master Service Agreement is a critical step in building a sound, sustainable practice. Whether you’re launching a new venture, entering a partnership, or revisiting an existing agreement, it pays to get the legal foundation right from the beginning. If you’re considering a Master Service Agreement or want to ensure your current structure aligns with New Jersey law, we invite you to contact us. Our team is here to help you move forward with confidence.