Draft the management services agreement (MSA)

The management services agreement (MSA) defines what the dental support organization (DSO) provides to the PC, what the PC pays, and, most importantly, what the DSO does not control. It is the first document a regulator, a dental board, or an acquirer reads, and the one that determines whether your structure survives a corporate practice of dentistry (CPOD) challenge. Have a healthcare regulatory attorney licensed in your state draft or review the agreement. State-specific terms matter: the same national form was void in Texas and valid in Indiana during the OCA litigation,¹ and several states changed their rules in 2025–2026. A general commercial-services template may document the very control problem the structure is meant to avoid.

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The lesson of In re OCA: control is totaled, not itemized

In re OCA provides a useful way to test the agreement as a whole. The Fifth Circuit voided a national practice-management company’s service agreements because, taken together, they let the company own the offices, hire the staff, run the billing, and control the bank account. The orthodontists “were essentially only left with control over diagnosing and treating their patients,” which the court found insufficient.¹ Two consequences dominate dental MSA drafting:

• Courts aggregate the control levers. No single clause is evaluated alone. Bank-account control plus a forty-year term plus staff control plus a profit-share fee is read as one arrangement, and the arrangement is what gets voided.
• Do not rely on a severability clause to fix a defective structure. The court refused to sever because the unlawful obligations were the interlocking core of the deal, rather than incidental terms. Packard also shows that money invested under a void structure may be unrecoverable.¹

Draft every section asking not “is this clause defensible?” but “what does the whole document total to?”

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Prerequisites

• Both entities formed, with EINs
• Board and member consents authorizing execution
• Dental healthcare counsel engaged, licensed in the state
• The dentist-owner represented by independent counsel
• Your state’s fee-splitting rule confirmed, see Fee-splitting
• Role-specific registration or licensure filings completed where required, including in Texas, Kansas, Nevada, Arizona, and New Mexico. See Register a DSO

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Section-by-section

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1. Recitals and purpose

State plainly that the PC is a professional entity practicing through licensed dentists, that the DSO provides non-clinical administrative services, and that the parties intend the PC to retain complete authority over clinical matters. Recitals are read; make them say the right thing.

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2. Define the services scope

List each service specifically. A vague scope weakens the fee’s fair market value analysis because you cannot price services you have not described. Florida and Kansas provide statutory or regulatory lists that can inform the exhibit. Use relevant statutory and regulatory lists as drafting references. Florida’s board rule identifies practice-management services a lay entity may sell to a dental practice: office space, furnishings, and equipment suitability; staffing; regulatory-compliance services; productivity methods; inventory and supplies; financial and operational information systems; marketing and advertising; site selection and office design; and financial services including accounting, bookkeeping, A/R monitoring, payroll and benefits administration, billing and collection, and tax payment.² Kansas’s DSO statute identifies administrative services such as purchasing, billing, tax, compliance and quality assurance, legal, payroll, advertising, training, recruiting, recordkeeping, and programming. Those services must be performed “under the direction or with the consent or approval of a licensed dentist.”³ These lists are useful references, but they do not replace a review of the law in each state where the agreement will operate. Typical categories:

• Administrative and management support
• Non-clinical personnel, recruiting, employment, HR
• Premises, furniture, fixtures, and non-clinical equipment
• Information technology, including PMS licensing and support
• Billing and collection support. Describe this as support because claims go out under the PC’s TIN and use coding approved by the treating dentist.
• Payer contracting support
• Financial, accounting, and bookkeeping services
• Marketing and business development
• Purchasing and vendor management
• Regulatory and compliance program support
• Data analytics and reporting

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3. The clinical carve-out

The most important section. It must be explicit and it must track your state’s statutory language. Model shape:

Notwithstanding any other provision of this Agreement, [DSO] shall not, and shall have no authority to, control, direct, or interfere with the professional judgment of [PC] or its licensed personnel, including with respect to: (a) the diagnosis of any patient or the determination of whether a particular treatment is necessary or advisable; (b) treatment planning and the selection among treatment alternatives; (c) the acceptance or refusal of any patient; (d) the direction or delegation of professional services; (e) the number of patients any dentist sees, the time devoted to any patient, or the hours any dentist or hygienist works; (f) the hiring, supervision, evaluation, discipline, or termination of dentists, hygienists, or other clinical personnel; (g) the establishment or modification of clinical protocols or standards of care; (h) the ownership, custody, or content of patient records; (i) the assignment of CDT procedure codes or the content of any claim; or (j) the selection of clinical equipment, materials, and dental laboratories.

The list tracks specific state-law concerns. Items (a)–(f) and (h)–(i) correspond to six controls that K.S.A. 65-1471 does not allow a dental services agreement to transfer: treatment, patient acceptance, direction of professional services, patient-record ownership, equipment ownership, and supervision of clinical staff.³ Washington’s 2017 DSO statute enumerates ten clinical-interference prohibitions. Nevada conditions its support-services safe harbor on the vendor exercising no “authority or control over the clinical practice of dentistry.”⁴ California’s SB 351, effective January 1, 2026, adds investor-specific prohibitions that expressly cover dental practices.⁵ Build a protective baseline from the applicable states, then use state-specific riders where wording, scope, parties, remedies, or operative dates differ. A broad carve-out does not cure a conflicting grant of control elsewhere in the documents or operations.

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4. Rights that require state-specific allocation

These four subjects recur in statutes and enforcement records. Allocate each under the governing state text rather than treating one model clause as a national answer: The last row belongs mainly in the stock transfer restriction agreement. Check that the MSA does not recreate that control through termination or cross-default clauses.

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5. The management fee

Specify the structure, the calculation, the payment mechanism, and the review cadence. Specified revenue-dependent fees are restricted by statute or rule in Nevada (NRS 631.215(2)(i)), New Jersey (N.J.A.C. 13:30-8.13), New York (8 NYCRR 29.1(b)(4)), and North Carolina (21 NCAC 16X .0101), and percentage formulas appeared in the New York and California Aspen resolutions.⁶ Flat and cost-plus formulas can reduce one risk but are not automatic safe harbors; test the services, control, calculation, commercial terms, and applicable referral or fee-splitting rules. See Set the management fee and Evolve the fee structure. Also specify:

• Invoicing, the DSO invoices monthly; the PC pays within N days
• Payment source, from an account and by a person authorized for the contracting practice
• Priority, after the PC’s clinical payroll and direct obligations
• Deferral mechanism, what happens if the PC cannot pay in full
• FMV review, annually, and before any change

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6. The PC’s bank account

Account control was a material fact in the Fifth Circuit’s review of the specific OCA arrangements: the orthodontists lacked access to withdraw their own funds.¹ Map collections to the account authorized for the enrolled provider, preserve any professional control the state requires, and define the DSO’s visibility, preparation, initiation, approval, sweep, dispute, and stop rights precisely. See Intercompany money movement.

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7. Compliance and BAA cross-reference

Determine each entity’s HIPAA role from the covered functions and PHI flows. A DSO performing billing, analytics, or practice-management work involving PHI commonly acts as a business associate; cross-reference the BAA where required. Allocate clinical and billing responsibilities without purporting to erase either party’s nondelegable statutory, contractual, claims-submission, privacy, or security duties. See Put a BAA in place.

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8. Term and termination

• Initial term. Long terms are common in DSO arrangements, but the forty-year, exit-proof terms used in the OCA arrangements are a control indicator.¹
• Renewal mechanics
• Termination for cause, both directions
• Termination for convenience, whether either party has it, and on what notice
• Termination consequences, records, systems access, transition services, and how the PC continues operating

Termination provisions can reveal actual control. The California Attorney General’s Aspen settlement bars specified forfeiture of practice ownership on termination for the settling parties.⁶ Analyze whether term length, cross-defaults, succession rights, security remedies, system access, and exit economics collectively deprive the licensed owner of authority the governing law requires. Draft a workable transition path rather than relying on the clinical carve-out alone.

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9. Exclusivity

Whether the PC must use the DSO exclusively, and whether the DSO may serve other practices. Exclusivity in the DSO’s favor is common; make sure it does not become a mechanism the PC cannot escape.

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10. Audit and inspection rights

Each party’s right to inspect the other’s relevant records. The DSO needs this to substantiate the fee; the PC needs it to verify what it’s paying for. Mutual rights read better than one-sided ones.

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11. Indemnification, insurance, and liability

• The PC carries malpractice; the DSO carries general liability and errors and omissions
• Cross-indemnification for each party’s own acts
• Liability caps, if any
• Kansas voids indemnification clauses covering acts that violate the dental practice act. Check for equivalent provisions in your state.³

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12. Security interest, with care

Some MSAs grant the DSO a security interest in the PC’s assets or receivables to secure the fee. This is a control indicator: the California AG’s 2026 Carbon Health settlement attacked management-company credit arrangements that locked the practice into exclusive, above-market financing.⁷ Discuss with counsel; do not include reflexively. See Working capital and AR lending.

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13. Transfer restriction cross-reference

Reference the separate stock transfer restriction agreement rather than embedding the mechanics here.

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14. Governing law, dispute resolution, assignment

Governing law should generally be the PC’s state. Address whether the DSO may assign the MSA, relevant in a sale.

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15. State-mandated text

North Carolina’s board rule (21 NCAC 16X .0101) additionally requires the arrangement to be written and signed with all material terms and the compensation methodology stated, and prohibits revenue-linked fees, control of records, and control of clinical personnel. S.B. 257, signed July 7, 2026, ended the board’s mandatory review of management arrangements, but the substantive rule stands.⁸ Check DSO laws by state for equivalents wherever you operate.

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Steps

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Verify it worked

• Services enumerated in an exhibit, within the statutory safe-harbor zone
• Clinical carve-out tracks current statutory language for every state you operate in
• Records ownership stated as the PC’s
• Clinical staffing, treatment, and coding decisions stated as the PC’s
• PC controls its own bank account
• Fee structure lawful in this state, with no percentage fee in NV, NJ, NY, or NC, and an FMV basis documented
• Invoicing and payment mechanics specified
• The PC has a real termination right, with no ownership forfeiture on exit
• North Carolina conspicuous warning included where applicable
• DSO registration filed where required
• Board and member consents adopted
• Dentist’s independent counsel reviewed
• Annual review calendared

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Common failure modes

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Sources

1. In re OCA, Inc., 552 F.3d 413 (5th Cir. 2008), opinion (agreements void; severance refused; control aggregated); Packard v. OCA, Inc., 624 F.3d 726 (5th Cir. 2010), opinion (no restitution); Orthodontic Affiliates, P.C. v. OrthAlliance, Inc., 210 F. Supp. 2d 1054 (N.D. Ind. 2002), opinion (same form upheld under Indiana law). Full annotations: DSO & dental case law.
2. Fla. Admin. Code R. 64B5-17.013 (Proprietorship by Nondentists), rule text; Fla. Stat. § 466.0285 (offending contracts void), statute.
3. K.S.A. 65-1471 (dental services agreements; limitations and administrative-services safe harbor), statute; Alaska Stat. § 08.36.367 (lay asset ownership permitted, records excepted), statute.
4. NRS 631.215(1)(l), (2)(i), statute; RCW 18.32.675, statute.
5. Cal. S.B. 351 (2025), effective January 1, 2026; Benesch, California Enacts SB 351.
6. N.Y. AG, Aspen Dental Assurance of Discontinuance (June 18, 2015); Cal. AG, Aspen Dental settlement (May 7, 2026); N.J.A.C. 13:30-8.13; 8 NYCRR 29.1(b)(4); 21 NCAC 16X .0101, rule (PDF).
7. Cal. AG, Carbon Health settlement (June 2026); DLA Piper, Corporate practice of medicine enforcement: new pressure points (July 2026).
8. N.C. Gen. Stat. § 90-40.2 (S.L. 2012-195), statute; 21 NCAC 16X .0101 (eff. April 1, 2001); N.C. State Board of Dental Examiners, Management arrangements (noting S.B. 257, signed July 7, 2026, ended mandatory review).