Management fees that reflect the full MSO contribution
In digital health, a management services agreement often covers much more than management services. It can be the agreement through which a professional practice receives the technology, brand, and other intellectual property developed by its management services organization (MSO). The fair market value analysis should reflect that full relationship.
Administrative costs tell only part of the story
A staffing-based fee can be appropriate for administrative work. But when the MSO also supplies a platform or licensed brand, those costs alone do not capture everything the practice receives. Omitting the intellectual property can understate the MSO’s contribution and leave the fee insufficient to compensate for the services and assets provided.
Recognize investment and the ability to scale
Software can support more activity without requiring the same proportional increase in administrative personnel. Brand development can also create benefits that extend beyond the work performed in a single period. We assess those contributions and the appropriate return attributable to them, considering the rights provided, the stage of development, and the practice’s use.
Match the method to the contribution
- Administrative services: assess required resources, market costs, and relevant service margins.
- Technology: evaluate platform functionality, development stage, use rights, and relevant software economics.
- Brand: assess the licensed rights and appropriate royalty or other valuation evidence.
- Other resources: address staffing, space, equipment, and third-party costs where included.
Bring the fee together
We reconcile the components into the overall payment, allocate shared resources to the entities receiving the benefit, and address overlap between service costs and licensed assets. This produces an analysis that explains both the component values and how they support the fee as a whole.