Filling the Insurance Gap for Healthcare MSOs

Management Services Organizations (MSOs) are becoming increasingly popular in the healthcare industry as healthcare providers seek non-clinical and administrative support. The benefits of MSOs include efficient business models, risk reduction, and improved quality of care. However, MSOs can create potential gaps in insurance coverage in the healthcare industry.

What Sort of Risk Exposure Do MSOs Have? 

The types of services MSOs provide can vary greatly from one MSO to another and between the individual clients they service. Some of the services MSOs may provide include: 

●    HR, Payroll and Benefits Administration
●    Facilities Management & Purchasing 
●    IT Infrastructure and Security 
●    Patient Communication
●    Compliance and Training 
●    Payer Contracting 
●    Coding and Billing 

While MSOs may have some medical malpractice exposure, their liability exposure is generally related to financial loss triggers such as coding and billing errors, privacy breaches, or IT systems going down.

A Growing Trend 

For private equity businesses, investing in MSOs can be an attractive option because it allows them to enter the healthcare market without the high cost and regulatory burden of owning and operating healthcare facilities. Instead, they can invest in MSOs that provide support services to multiple healthcare providers, which can help them diversify their portfolio and reduce their risk exposure.

In addition, MSOs can provide a valuable exit strategy for private equity businesses. By building up an MSO with a strong client base and a diverse range of services, private equity businesses can sell the MSO to a larger healthcare company, generating a return on their investment.   Private equity investments in healthcare providers have nearly quadrupled in the last 7 years, reaching nearly $75 billion in 2022. With more than 1,000 private equity deals in healthcare each year over the past three years – many involving MSOs – the landscape in the healthcare industry is rapidly changing.

Insuring MSOs and Healthcare Providers

One interesting fact is that as the healthcare industry evolves, new insurance solutions are emerging to fill the insurance gap for MSOs. Some insurers are developing products specifically designed for MSOs, providing coverage for the unique risks that these organizations face. These products can include cyber liability coverage, privacy breach coverage, and errors and omissions coverage.

Another interesting fact is that MSOs can also help healthcare providers comply with the Affordable Care Act (ACA) regulations, as well as other state and federal laws. MSOs can help providers navigate complex legal and regulatory environments, which can help reduce the risk of regulatory fines and legal disputes.

In conclusion, as the healthcare industry continues to evolve and change, MSOs will continue to play an increasingly important role in providing non-clinical and administrative support to healthcare providers. As a result, insurance solutions designed specifically for MSOs will be necessary to fill the insurance gap and protect against potential liability exposure.

When providing coverage to a healthcare provider that uses an MSO, it is important to understand the provider’s relationship with the MSO and what services the MSO provides. The MSO must have coverage too, with policies that are tailored to their needs. Assessing liability for both the healthcare provider and MSO is a complex task, and it is not always easy to identify the gaps in coverage or potential exposure issues.

Our dedicated national underwriting team at Admiral has exceptional expertise in professional liability coverage. Not only do we understand the risk exposures and know what to look for when helping brokers write coverage — we also know what healthcare providers and MSOs need, and are able to provide a full range of insurance solutions.

If you are a wholesale broker in need of an insurance partner with deep expertise in the healthcare industry, contact us to become an appointed broker. If you are a retail insurance broker with healthcare clients, we urge you to connect with one of our wholesale partners.

Products and services described above are provided through various surplus lines insurance company subsidiaries of W. R. Berkley Corporation and offered through licensed surplus lines brokers. Not all products and services may be available in all jurisdictions, and the coverage provided by any insurer is subject to the actual terms and conditions of the policies issued. Surplus lines insurance carriers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.