Reviewing a management services agreement

1. Map the work, the parties, and retained duties

Start by identifying every legal entity and its role. The practice, management company, any professional entity, property owner, technology vendor, and affiliated service company may be separate parties. Confirm legal names and signatories affiliate that can perform work or receive payments. State whether the manager may subcontract, which obligations flow down, and who remains accountable if a subcontractor fails.

Build a service map from the agreement and every exhibit and schedule document. For each function, record the manager's task, the practice's task, the person responsible for decisions, the evidence of completion, and any separate charge. Potential administrative functions include bookkeeping, payroll administration, recruiting coordination, facilities support, purchasing, information systems, marketing administration, and billing support. These are examples, not an assumption that every service belongs in one MSA. If an item is included in a separate lease, software license, staffing agreement, or vendor contract, note that relationship and check for inconsistent terms.

Use precise verbs. "Support operations" does not tell an owner whether the manager must prepare a reconciliation, maintain a vendor list, submit a report, or answer requests. A useful service description names the deliverable, frequency, due date and format. It might require a monthly operating statement with transaction-level support by a specified business day and a defined correction process. Distinguish a firm obligation from an effort standard, and state what records demonstrate completion.

Map authority separately from work. A manager may prepare a budget, collect proposals, or process payments without having final authority to approve them. The MSA should identify who can approve expenditures, hire or terminate personnel, sign vendor agreements, set compensation, open or control accounts, and commit the practice to recurring obligations. Set dollar limits and approval rules where appropriate. Clarify whether email, a procurement system, or a designated officer's signature constitutes approval. The practice should retain meaningful authority over its own business and professional responsibilities, consistent with applicable law and its organizational documents.

List the duties the practice keeps. These may include maintaining its entity and financial records, approving budgets and material purchases, supervising matters assigned to it, deciding which services to engage, reviewing manager reports, maintaining required insurance, and paying undisputed invoices. The actual list depends on the structure. Avoid language that makes the manager responsible for everything while another clause quietly requires the practice to do the same work. Conversely, do not accept a broad practice warranty that it will perform obligations the manager controls in practice.

Create a responsibility matrix before signing. For every service, assign one accountable party and identify the other party's input or approval. If the manager prepares payroll files and the practice approves them, say who checks changes, when approval is due, and how urgent corrections are handled. If the manager coordinates vendors but the practice signs contracts, identify who reviews insurance and pricing dates. This exposes empty handoffs.

2. Reconstruct the fee from the contract and invoices

Fees should be understandable from the agreement without relying on an oral explanation. Identify each fixed monthly charge, percentage fee, pass-through expense, setup fee, transaction charge and minimum cost. For each one, find its calculation base, exclusions, timing, supporting records, tax treatment if specified, and adjustment mechanism. Check whether the fee applies to collected amounts, amounts billed, or another defined measure. Those bases can produce materially different results, especially when collections, refunds, or timing vary.

Ask how the fee applies to credits, refunds, chargebacks, bad debt, taxes, financing proceeds, and amounts attributable to periods before the MSA. If a percentage applies, determine whether the same revenue is counted twice under separate fee categories. If a fixed fee increases annually or after a volume threshold, confirm the date, index or formula and cap the adjustment is automatic. Terms such as "costs," "overhead," and "reasonable expenses" need boundaries and documentation against duplicate recovery.

For pass-through expenses, define eligible categories and require itemized backup. Consider advance approval above a threshold, limits on markups, and a rule for shared costs among sites or clients. Explain whether the manager may retain rebates, vendor credits, discounts, or other economic benefits. Disclose any cost allocation method and make it open to review. Specify whether the practice can inspect source documents and how long records are retained.

Illustrative worked example: assume an MSA charges an illustrative 5% of defined monthly collections, plus an illustrative fixed fee of $8,000 and reimburses documented software costs. The illustrative monthly ledger shows $180,000 collected, $4,000 refunded for prior transactions, and $2,000 in software invoices. If the contract defines the fee base as net current-period collections and excludes prior-period refunds, the illustrative fee would be 5% of $180,000, or $9,000, plus $8,000 and $2,000, totaling $19,000. If the actual definition instead subtracts the $4,000 refund, the percentage component would be 5% of $176,000, or $8,800, and the total would be $18,800. Each number in this example is illustrative; the contract's actual definitions control. The point is to make the accounting rule visible and reproducible.

Reconcile a sample invoice line by line. Match each amount to the applicable fee clause, service period, calculation base and adjustment document. Check arithmetic and look for repeated charges under a fixed fee and an expense reimbursement. Where a charge covers multiple locations or affiliates, compare the allocation to the contract's stated method. Ask for a sample calculation before execution if the fee is complex. A manager should be able to explain the invoice in a form that the practice's finance staff can independently reproduce.

Set a practical invoice review window that preserves meaningful audit rights. State how the practice disputes a charge, what information it provides, who reviews it, and when a correction or credit is issued. Consider requiring payment of undisputed portions while a specific amount is reviewed. Define whether late charges apply to contested amounts. A deadline that starts before supporting records arrive can make a review right unusable.

3. Review term and renewal rights

Read the initial term and renewal mechanics alongside termination. Identify the start date trigger, length of the first term, automatic renewal period, notice deadline, permitted delivery method, and recipient. Calendar the notice date with a responsible owner and a backup. Check whether fees or service scope change on renewal and whether the practice has a right to decline a change without losing the entire relationship. A long initial commitment paired with a narrow termination right can be a significant business restriction.

Separate termination for convenience from termination for cause. For cause, define a material breach, notice method, and reasonable cure period, with a different approach for breaches that cannot be cured or require prompt action. Specify what happens after insolvency, loss of a required authorization, repeated service failures, material security incidents, or a change in control, where relevant and lawful. If the manager can terminate on short notice, assess whether the practice has enough time and access to transition. Remedies should work in both directions and avoid allowing a minor, disputed invoice to shut off essential administrative access without a path to resolve it.

Review assignment and delegation of control. The manager should not be able to transfer the agreement or key responsibilities to an unknown party without appropriate notice and, where negotiated, practice consent. The MSA should also say whether the practice can assign to a successor entity, buyer, or affiliated practice as part of a permitted restructuring or sale. Coordinate these provisions with any lease, financing documents, or other service contracts. A consent right with no response deadline or standard can become an unpredictable obstacle.

Specify what happens to data and work product during the relationship and after it ends. Identify the records each party owns or controls, the permitted uses, access rights, export formats, delivery time, and any charges for transition assistance. Distinguish practice records from the manager's pre-existing tools and templates know-how. If the manager hosts systems or holds records on the practice's behalf, require a usable export and a reasonable period of access after termination. Address confidentiality, permitted retention, secure deletion, backup copies, and legal retention duties in a way counsel can reconcile with applicable requirements.

"The practice owns its data" is not enough. A useful right allows retrieval of complete, readable records and metadata within a defined period and at a defined cost. Identify who provides credentials and how access transfers, including if the relationship ends during a payment dispute. Reserve payment remedies while requiring access needed for transition, subject to legal and security constraints. Define assistance rates or included hours in advance.

4. Set reporting, service levels, and a workable dispute path

The agreement should make performance observable. Define reports by contents, format, cadence, due date, and recipient. Depending on the services, reports might cover open tasks, invoice detail, vendor obligations, system availability, or unresolved exceptions. Identify source records and how corrected information is marked. Avoid a vague promise of "regular updates" with no defined cadence or useful content.

Set service levels for the services that matter. A service level may define response or completion targets, support hours, escalation contacts, outage notice, backup coverage, or error correction time. Choose measures the manager can reasonably control and the practice can verify. For recurring deliverables, specify what counts as late or incomplete. For systems, define availability measurement and exclusions in a way that does not swallow the commitment. If service credits are used, describe how they are calculated and whether repeated failures trigger a meeting, corrective plan, or termination right. Credits alone may not repair a serious operational failure.

Establish a regular operating review with named attendees and a written record. Cover missed deliverables, invoice variances, renewals, unresolved approvals and dependencies actions. Assign an owner and due date to each action. Escalation should proceed from day-to-day contacts to designated managers and then an agreed decision maker. Include time limits and preserve records during review.

Define the dispute process so it encourages early resolution without blocking urgent remedies. Require a written description of the issue, relevant invoice or service reference, and requested correction. Set a response period, a meeting step, and a point at which the parties may use a negotiated dispute forum or the forum in the governing contract. Clarify who can settle a dispute and whether a resolution must be documented in a signed amendment or credit memo. The MSA should also say which provisions continue while a dispute is pending, including payment of undisputed sums and access to records.

Plan for continuity before there is a crisis. Identify essential systems and accounts contacts that the practice needs to keep operating. Document who holds administrator credentials, where current records reside, how backups are maintained, and how the practice obtains access if the manager is unavailable. Require notice of material interruptions and a continuity plan with alternate contacts and recovery steps appropriate to the contracted functions. Include transition cooperation, knowledge transfer, and return of practice property at termination. Test the handoff process as part of routine governance, instead of discovering dependencies during an exit.

The written allocation should match ordinary operations. Walk through a purchase, personnel change, invoice, system issue, and vendor renewal. For each, ask who initiates, decides, approves, keeps evidence, and meets the deadline. If answers depend on informal practice, document it or revise the plan. A contract and workflow that diverge invite disputes and missed obligations.

Compare the MSA with exhibits and related agreements. Look for different fee bases, conflicting terms, inconsistent definitions, cross-defaults, changeable incorporated policies, and duplicated service obligations. Check which document controls conflicts. Confirm every referenced attachment is present and identifiable. Avoid policies or rate cards the manager can revise without notice, limits, and a right to respond.

Review insurance, indemnity, limitation of liability, and confidentiality as connected risk terms. Determine whose conduct each party is covering, whether exclusions or caps remove the protection that appears to be offered, and whether the cap is proportionate to the fees and the possible operational impact. Consider distinct treatment for confidentiality, security, infringement, gross negligence, or intentional misconduct as advised by counsel. Confirm insurance types and limits fit the actual services and parties, and that certificates and notice-insured language are operationally obtainable where relevant. The labels alone do not reveal the allocation; read the triggers and exceptions.

Check confidentiality, systems access, and security responsibilities. Identify who may access information, for what purposes, through which systems, and under what safeguards. Specify notice and cooperation for a suspected incident, record preservation, and responsibility for investigation or remediation costs as negotiated and legally appropriate. Confirm equivalent subcontractor obligations. Avoid broad rights to use information for undefined purposes or retain it indefinitely without a clear basis.

6. Common mistakes and how to avoid them

One common mistake is treating a broad service list as proof that every task is covered. A heading such as "finance administration" may omit reconciliations, payment approvals, exception handling, or delivery deadlines. Turn each broad label into a deliverable and name what remains with the practice. A second mistake is accepting a fee formula that depends on undefined accounting terms. Reconcile sample invoices and define the base and exclusions before the formula becomes an automatic monthly charge.

Another mistake is reviewing the main agreement but ignoring schedules, vendor terms, or policies incorporated by reference. Those documents may contain extra fees, shorter notice periods, or unilateral change rights. Collect and compare every referenced item, and make the hierarchy explicit. Do not assume that a sales presentation, budget, or service proposal changes the signed contract unless it is incorporated in an enforceable way.

Owners may focus on the initial term and miss renewal mechanics or the difficulty of leaving. Calendar notice dates, verify delivery methods, and understand data export, credential transfer, transition fees, and vendor obligations. A termination clause is not a complete exit plan without timely access to records and systems.

A final recurring mistake is assuming that a clause transfers a responsibility in a way that the law permits. Contract language cannot necessarily change who may exercise regulated authority or who remains accountable under governing rules. The relevant result depends on the entities, jurisdiction, actual operations, and applicable law. Ask specialized healthcare counsel to assess the structure and compare written terms with real workflows before signing, and again when the parties materially change services or control.

7. Prepare a focused counsel review and decision record

Give counsel the complete package: exhibits, fee schedules, policies, related leases or vendor agreements, sample invoices, and a workflow description. Ask counsel to review structure and operations, including which entity contracts and pays, what authority the practice retains, whether services and fees align, and whether the arrangement fits applicable healthcare requirements. The legal questions depend on jurisdiction and facts; boilerplate review is not a substitute for tailored assessment.

Ask for prioritized issues, often including authority, fee methodology and term rights, records access and security changes. For each, decide whether the business needs a limit, clearer workflow, different remedy, or operational control. Keep a decision log with the issue, agreed language, implementation owner, and open dependencies so negotiated terms reach operational staff.

Before signature, circulate the clean final version and a comparison with the last reviewed draft. Confirm negotiated changes appear in the right clauses and exhibits, attachments are present and names are accurate, and signers have authority. Resolve any side letters or oral commitments on which the practice relies. Store the signed package accessibly and assign someone to manage notices and renewals reconciliation.

Action checklist

List each party, service, decision maker, deliverable, retained practice duty, and subcontractor.
Recalculate sample invoices from the exact fee definitions and collect supporting records.
Calendar renewal and termination notices; confirm assignment, data export, and transition rights.
Set reporting dates, service measures, escalation contacts, dispute steps, and continuity access.
Compare exhibits and related contracts for conflicting fees, terms, policies, or defaults.
Have healthcare counsel review the entity structure, authority allocation, fee terms, and actual workflow.
Record final decisions, assign operational owners, and store the complete signed agreement package.

Questions about your own practice? Contact Richard@DoctorsInvestorClub.com.