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Med Spa Law Terms You Need to Know

Posted By Administration, Wednesday, September 26, 2018
Updated: Thursday, September 27, 2018

By Renee E. Coover, JD, ByrdAdatto

As revenues in the medical spa industry increase, so does the enforcement of medical spa regulations. The 2017 Medical Spa State of the Industry Report calculated that the industry was valued at nearly $4 billion with an annual growth trajectory of 8% through 2022. Legally speaking the report found that 37% of practices were not performing good faith exams, 31% were paying commission on medical treatments, and 10% were even relying on laser techs or aestheticians to perform injectable treatments. An expanding industry can present increasing risk for medical spa owners and operators. As the number of medical spas has increased, so has the number of lawsuits filed against them, and because there are few specific rules and regulations governing the administration of nonsurgical cosmetic procedures, there are limited opportunities for training and certification.

In order to protect yourself and your business from exposure to problems such as these, you should familiarize yourself with the nature of the industry and some issues that are commonly faced by medical spa owners and operators. The specific rules and regulations that govern medical spas may be a bit difficult to pin down, but ignorance is never an acceptable excuse.

The industry

The American Medical Spa Association (AmSpa) defines a medical spa as follows:

“Medical spas operate under the full-time supervision of a licensed medical professional in a spa-like setting. When visiting a medical spa, patients can be pampered with traditional spa services but also have the option of getting medical services like Botox, laser hair removal and medical-grade skin therapies. The medical professionals of the med spa are licensed, educated and trained in the medical procedures and treatments provided to ensure the highest level of care for every patient. State regulations differ as to what type of ‘medical professional’ can be an owner or medical director of a medical spa, so we recommend you contact your local attorney for your state’s laws and regulations.”

The blanket term “medical spa” covers a range of establishments, including laser clinics, free-standing medical spas and Botox bars. In addition to traditional storefronts, these businesses are turning up in hotels, shopping malls and airports as more and more physicians seek to supplement their incomes by opening medical spas.  

Despite this growth, the industry’s rules and regulations are somewhat nebulous. However, there are a few core principles that conscientious medical spa owner and operators can observe to keep themselves out of legal trouble.

Medical spas are regulated as medical facilities
Laws governing the industry vary from state to state 

A medical spa can be a profitable business venture, but it can also attract legal problems that can stifle its earning power. Following are the top legal issues that medical spa owners and operators commonly encounter:

The Legend of the “Medical Aesthetician”

Aestheticians are the fastest-growing segment of the medical spa industry. In nearly every state, aestheticians are regulated as an individual profession. However, you should be wary of anyone who refers to herself as a “medical aesthetician.” Simply using the term is enough to trigger an investigation in many states.

Why? Because in most states, aestheticians cannot perform medical procedures, and suggesting otherwise is inherently misleading. The proper term is “aesthetician in a medical spa.” Check your spa’s business cards, website and marketing materials to make sure that the term “medical aesthetician” is nowhere to be found. You may be inviting far more scrutiny than you realize simply by using an improper title. Read more on misleading med spa titles here.

The Commission Conundrum

Offering employees commissions for bringing in business may seem like a great way to incentivize performance, but in most states, it is illegal. Why? Because in states that recognize the Corporate Practice of Medicine, all medical fees generated by a medical spa must be paid only to a physician or a physician-owned corporation. Splitting fees from medical procedures with a nonmedical employee is known as “fee-splitting,” and it is prohibited by law. If you are taking or giving a commission in a state that observes The Corporate Practice of Medicine Doctrine you are exposing both yourself and your medical spa to disciplinary action.

“If a medical spa is found to have done this, the physician faces suspension or revocation of his or her license, as well as a significant fine,” says Alex Thiersch, JD, founder and director of AmSpa. “The employee who receives the commission payment also faces a significant fine, so all involved should make sure that this is avoided. States are cracking down on fee-splitting, so there’s no better time than now to make sure your house is in order.”

Instead of offering commissions, medical spa owners and operators should enact a preset bonus structure to reward employees. That way, they can show their appreciation without putting themselves in regulatory crosshairs. There are two compensation packages available in the AmSpa store (among other business-building tools) that offer ways for you to incentivize your stay while staying within the bounds of the law.

Gift Cards

You may also wish to reward employees or even patients who bring in business with gift cards, but doing so in a medical setting such as a medical spa can represent a violation of state and federal anti-kickback laws, which prohibit physicians from paying for referrals. These laws are designed to ensure that physicians cannot simply buy patient referrals. 

“Because gift cards have a cash value attached to them, they can be viewed as representing a kickback and, therefore, expose the practice to legal action,” writes Thiersch

Supervision and delegation

Medical spa physicians are busy people. For example, in many states, a physician is required to conduct an in-person initial consultation and exam on every patient who intends to undergo a medical procedure, including laser treatments and injectables. Obviously, this would require physicians to spend a large amount of time conducting these exams and far less time performing more lucrative procedures. Luckily, this task can often be delegated to mid-level practitioners—nurse practitioners or physician assistants, for example—since it is within their scope of practice.

Generally, any patient care task at a medical spa can be delegated to whoever the physician wants, provided that person has been properly trained, is experienced and is properly supervised. For example, laser technicians can perform laser treatments, because those tasks fall within their scope of practice. Aestheticians, on the other hand, typically cannot perform medical procedures, so they cannot be delegated such tasks. Make sure that your medical spa complies with these standards. Read more about supervision and delegation here.

Ownership

In states that enforce the Corporate Practice of Medicine Doctrine, only licensed physicians or physician-owned corporations may own a medical corporation. By definition, medical spas are medical corporations and thus, in states that observe the corporate practice of medicine, only physicians are legally allowed to own medical spas. 

Although this is unfortunate for aestheticians who would like to try to cash in on this growing industry at an ownership level, there are other ways for aestheticians to get a piece of the pie. Aestheticians typically can own the management company that administrates the day-to-day operations—billing, purchasing supplies and equipment, leasing space, providing support services, etc.—of the medical spa. Such a company cannot share in the profits of the medical spa, but it can be paid a fee by the medical corporation. Read more about non-physician medical spa ownership structure here.

You can attempt to find more information about topics such as these and your specific situation by conducting Internet searches for terms such as “medical practice act,” “[your state] board of regulation” and “aesthetician act.” However, such information is difficult to find, and there is little of it available in many states. AmSpa members can check their state’s medical aesthetic legal summary or take advantage of their annual complimentary compliance consultation call with ByrdAdatto.

Attend an AmSpa Medical Spa & Aesthetic Boot Camp for a deeper dive into medical spa legal topics, and to learn strategies to make your practice efficient and profitable.

Renee E. Coover, JD, is an associate with ByrdAdatto, a law firm focusing on business, healthcare, and aesthetics. She has a unique background, blending litigation with healthcare law. A former litigator in high-stakes employment cases, Renee has extensive experience with counseling and representing businesses in employment matters, policies, and contract disputes, and defending business owners in state and federal trials. She has also served as General Counsel for the American Med Spa Association, advising health care professionals on regulatory and legal issues governing the medical spa industry.

Tags:  Business and Financials  Med Spa Law  Med Spa Ownership 

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