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How Core Doctors Are Missing Out With Med Spas, and How They Can Fix It

Posted By Administration, Thursday, October 4, 2018

By Alex Thiersch, JD, Founder and Director of the American Med Spa Association

The medical spa industry is worth over $4 billion and as it continues to boom core doctors—plastic surgeons, facial plastic surgeons, oculoplastic surgeons, and cosmetic dermatologists—are uniquely placed to do exceptionally well in this still-expanding space. As physicians, they are allowed to own medical spas, and ideally, they would not only profit from the medical spas themselves, but also use them to direct business to their surgical practices. After all, medical spas tend to do a lot of the same things these core doctors do, albeit non-invasively, and it does stand to reason that if patients go to a medical spa looking for a Botox injection, they might eventually want a nose job or a face-lift. In that case, the core doctor who owns the medical spa might be uniquely positioned to offer his or her services.

However, despite the apparent synergy between these two types of businesses, many of the core doctors who treat medical spas as extensions of their surgical practices end up very disappointed in the actual results. I chat with core doctors all the time, and those who have opened medical spas with the idea of using them primarily as feeders for their practices tend to view them as poor investments. Their medical spas tend to flounder, and the amount of business they drive to their surgical practices is disappointing.

In truth, medical spas that are designed primarily to act as feeders for surgical practices are set up to fail, and most core doctors tend to be very bad medical spa owners. They typically don’t understand the medical spa business, how much work it takes, the profit margins, the necessary volume, and numerous other factors vital to maintaining a successful medical spa. But that doesn’t mean that a medical spa can’t still be a successful business for a core doctor or help to generate surgical business—it simply means that a core doctor needs to understand the realities of the medical spa industry before he or she decides to dive headlong into it.

A Different Kind of Practice

The business model with which core doctors tend to be familiar is very different from the one under which medical spas operate. Surgical practices offer big-ticket procedures, such as breast augmentations and face-lifts; therefore, they do not need to deal with a large volume of patients and they do not need to do as much marketing as, say, a retail outlet —by the nature of their business, they tend to generate sufficient revenue to at least get by.

Medical spas are very different. Granted, they must follow the same rules and regulations to which more traditional medical facilities adhere, but the medical aesthetic field is unique in the medical world in that it is entirely elective and entirely cash-based. People who use medical spas do so because they want to, not because they need to, and treatments at medical spas are much less expensive than the ones available from core doctors’ surgical practices. Therefore, for a medical spa to succeed, it must have a high volume of patients, its employees must master the art of selling, and it must do what it can to get patients to return. In other words, it must be run like a retail center rather than a medical office.

For that reason, medical spa operators need to incorporate a totally different mind-set than the type that is typically utilized by core doctors. Medical spas run by core doctors who do not adapt to a more retail-oriented focus often end up failing. When I tell core doctors that I have medical spa clients who generate up to $6 million annually, they are usually blown away. Many of them cannot wrap their minds around how that can be possible.

Understand What You Know, And What You Don’t

In order for a medical spa to succeed in creating business for a core doctor’s surgical practice, it must first succeed on its own terms and, to facilitate that, core doctors typically need to let someone else run the show. Core doctors need to come to terms with the fact that the medical spa business is much, much different than the one they are used to, and they need to partner with people who are experienced with marketing and sales in a retail environment.

A core doctor’s time is better spent doing the things medical spas cannot do: highly profitable surgical procedures. If a core doctor can get a true businessperson to operate the med spa, they will do much better in the end. Giving up this control can be difficult for core doctors to do, since a lifetime of academic and financial success tends to make them think they can achieve anything. However, most doctors don’t go to business school—they usually don’t know retail and they don’t typically understand sales. These qualities—not medical knowledge or surgical skill—are what tend to make medical spas successful.

In addition, medical spa team members need to have the tools and the processes to be able to sell. A medical spa receptionist, for example, should not be someone fresh out of high school and being paid $12 an hour; a receptionist should be one of the highest-paid people on an administrative staff, because he or she needs to be able to sell. 

A medical spa should have talk tracks for nurses and estheticians, so they understand that their jobs are about selling themselves and selling the doctor. Employees at medical spas also need to understand that selling retail products is very important to maintaining a healthy business. These are things that successful medical spas do that may seem distasteful to doctors, who are used to a professional environment that is less aggressive. But this is the reality of the medical spa industry, and every day more and more physicians are finding this to be true.

The businesspeople who are entering the medical spa industry are willing to do whatever it takes to be successful. A core doctor might think he or she doesn’t need help, but chances are the opposite is true.

There are many resources in the AmSpa store to help you build your business and to train your team to put your medical spa practice in the best position to succeed.

Still the Practice of Medicine

Although a medical aesthetic practice must be focused on sales, it is also required to follow the medical rules and regulations of the state in which it is located. These laws can vary widely depending on your state, so consult an attorney familiar with aesthetics when setting up your practice and your procedures. AmSpa members can check their state’s medical aesthetic legal summary to see the rules and regulations governing their practice.

Most states observe a doctrine known as the corporate practice of medicine, which dictates that a medical practice must be owned by a physician or a physician-owned corporation. As previously established, medical spas are retail outlets, but they are also unquestionably medical practices, so in states where the corporate practice of medicine is observed, medical spas must be entirely owned by a doctor or his or her corporation. 

This can present difficulties for a core doctor who wishes to partner with a businessperson to run a medical spa, because it is likely that said businessperson is going to want some equity in the practice. If the state in which the medical spa is located observes the corporate practice of medicine, this would be illegal.

Ownership Options

There are options, however. If a core doctor wishes to partner with an entrepreneur to open a medical spa in a corporate-practice-of-medicine state, they can look into setting up a management services organization (MSO). As its name suggests, an MSO provides management services. It partners with a doctor, for whom a separate company is created; this doctor’s company exclusively provides medical services. 

This arrangement, known as a management service agreement (MSA), allows a non-physician to supervise almost every aspect of a medical aesthetic business, including branding, marketing, owning the real estate, payroll, human resources, accounting, and billing—everything except the actual administration of medical services.

Essentially, this is a lessor/lessee situation. More often than not, the MSO owns and maintains the facility, while the doctor occupies the space. The doctor pays the MSO “rent” for the right to occupy the space, and the MSO functions in much the same way as a landlord, maintaining the facility and keeping the doctor as comfortable as possible. 

However, unlike a rental agreement that is governed by a lease that dictates the occupant pay a set amount of money for a certain term, the amount paid to the MSO fluctuates according to the amount of business conducted by the physician. If the medical organization treats more patients in a month or quarter (depending on the terms of the agreement) than it did the previous month, the MSO will also make more money. This represents the sort of equity a core doctor’s business partner might seek—in function, if not form. Read more on MSOs here.

The corporate practice of medicine also dictates the ways in which rank-and-file medical spa employees can be incentivized. In the world of retail, salespeople are often offered commission—they receive a percentage of the sales they make that meet certain conditions set by their employers. However, in states that observe the corporate practice of medicine, all payments for medical services must be made in full to a physician or physician-owned corporation. In these states, if a medical spa owner is paying employees commission, he or she is engaging in an illegal practice known as fee-splitting. 

This is somewhat common at medical spas—the people who own and operate these establishments generally only wish to reward the people who bring business to the practice. But the fact remains that if a medical spa is found to be engaging in fee-splitting in a state in which it is illegal, the doctor who owns the practice could face the suspension or revocation of his or her license, as well as a significant fine. What’s more, the person who receives the commission payment is also subject to a fine. Again, a performance-based bonus structure can be offered as an alternative to commission. Read more about med spa compensation here.

Medical spa owners and operators who are not familiar with the ownership requirements in their states should contact an experienced health care attorney to learn what is expected of them. 

Becoming a medical director for a medical spa, rather than opening his or her own facility, is another option for a core doctor. A lot of core doctors I have represented are doing this very successfully. The advantage of this arrangement is that the core doctors don’t need to deal with actual day-to-day operation of a retail store; they can simply lend their name to a medical spa, perform some consultations, oversee the practice’s other medical professionals, and then high-tail it back to their own practice rather than needing to worry about the minutiae of the business. This can provide a core doctor with a look at the industry without requiring him or her to make the enormous ownership commitment. It’s important, however, to understand the risks and responsibilities of med spa medical directors before making this decision.

Conclusion

The core doctors who oversee a properly maintained and operated medical spa stand to gain a great deal from the arrangement. A successful medical spa can earn a lot of money by itself and, if a medical spa has a lot of patients, it makes sense that the number of referrals to an affiliated core doctor’s surgical practice would be higher than if the medical spa is struggling.

If a core doctor wants to enter the medical aesthetic industry, he or she cannot engage in half-measures. A medical spa that is created to function primarily as an addition to a surgical practice is unlikely to find a great deal of success; a medical spa that is designed to succeed on its own terms, however, offers numerous benefits to its owners, not the least of which is the possibility of increased surgical business.

Attend an AmSpa Medical Spa & Aesthetic Boot Camp to learn the legal and business best-practices to build and run a successful medical spa practice.

 

Tags:  Business and Financials  Med Spa Ownership 

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5 Tips to Make Med Spa Consultations More Effective For Your Practice

Posted By Administration, Wednesday, October 3, 2018

By Dori Soukup, CEO and Founder of InSPAration Management

A consultation in a medical spa isn’t just the introductory part of a treatment, it’s a key piece of your med spa process that can lead to better results for your patients and better profitability for your practice. 

The “GUEST” is the most essential component to the success of any medical spa business. The way we take care of our guests while they are in the med spa is what determines whether they come back or disappear forever. 

When I ask industry professionals why they chose a career in the med spa industry, most of them say it was so that they could help people. Yet when a new guest visits a spa, they are normally expected to simply select a treatment from the menu, with is then administered with little (if any) discussion. Sometimes I intentionally select a treatment from the menu that is wrong for me to see if the provider will recommend something else more ideally suited for me. They rarely do. 

Why? Because in most cases, med spa professionals don’t take the time to conduct a proper guest consultation. To me, the guest consultation is the most important step of the entire experience. The consultation insures that providers are going to provide the guest with exactly what they need, address their challenges and deliver the results they are looking for. Without a consultation, we are disappointing our guests and hurting our retention rate.

If you want to improve your guest satisfaction, retention rate and income, I suggest implementing the following five steps to generating revenue through guest consultation. 

Check the AmSpa Store for more resources to help you implement your own successful consultation process.

1. Schedule Time to Conduct a Detailed Consultation

When you have a new patient, you should always reserve a consultation first in order to learn and discover their concerns and needs. It’s wise to have the receptionist reserve time for both a treatment and a consultation. 

Have the provider decide which treatment is ideal for the patient once a consultation is performed. To do this, your receptionist must be trained on how to present the consultation appointment and make the reservation for it. 

2. Identify Guest Concerns 

To identify the guest’s concerns, you can use analysis equipment for face and body depending on the type of treatments you offer. We found that when people see their skin care issues with their own eyes, they are more motivated to take action on your recommendations. You can also use consultation forms; just make sure the form includes problems that guests could be experiencing with their face and body. The guest will mark the concerns they have, which gives you the opportunity to make the appropriate recommendations. You should focus on solving their problems via your menu of services. 

3. Develop a Customized Treatment Program 

Addressing people’s concerns and gaining results normally requires multiple treatments. As a medical spa professional, you should recommend a series of treatments, not just one. One treatment is not going to solve problems or produce the results your guests are looking for. 

4. Recommend a Home Care Program 

At the end of the first treatment, take the time to help your guests by recommending a home care regimen. Home care is an important part of gaining results. Don’t cheat your guests of your professional advice or lose the additional income you could generate from home care products.  Find resources to help you train your team to better recommend products here in the AmSpa store.

5. Measure Results

 Since the goal is to recommend a series of treatments with your consultation, it’s important to measure results and gain a testimonial from happy clients. You can take before and after pictures, document conditions or measure improvements. Whichever method you choose, make sure you gain a raving fan to help build your business. 

When establishing your consultation procedure also remember that medical spas are medical practices, so before a treatment plan is finalized, and especially before a patient receives a procedure he or she must be seen by a physician or mid-level practitioner. Conducting the initial exam (or good faith exam) is one of the top legal issues in the medical spa industry so make sure your patients see the required medical professional prior to their first treatment.

Conducting a guest consultation is truly the most important function of your practice. It is the foundation of the entire experience. Don’t dismiss it, embrace it! Implementing the consultation process with every new guest will help you boost client satisfaction and your income! 

Dori Soukup is the Founder and CEO of InSPAration Management, a firm specializing in medical spa and salon business development, advanced education, and business tools. Throughout the past 15 years, Soukup has contributed to the success of spa companies worldwide. Her passion is developing innovative, effective educational programs and business strategies leading to exponential growth and profits. She is the recipient of the American Spa Preferred Educator award and is a sought-after global speaker within the spa and medical spa industries.

Tags:  Business and Financials  Guest Post 

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What Does Certification Mean in a Medical Spa?

Posted By Administration, Tuesday, October 2, 2018

By Alex Thiersch, JD, Founder and Director of the American Med Spa Association

Certifications are common in medical spas, but some of them mean more than others. In some cases, for instance, a certification doesn’t necessarily even mean you can perform the treatment in your state. Understand the difference between Board Certification, training programs that offer certificates, and state licenses so you don’t end up purchasing equipment you can’t legally use or worse, on the wrong side of an investigation.

Board Certified

In many fields of medicine, board certification can inform patients of a doctor’s specialization and help them choose which doctor is right for them. In the medical aesthetic and medical spa space, however, there are multiple types of certification to consider, and determining which are meaningful and which should be looked at with some trepidation is a dilemma for both consumers and medical spa operators.

“Board certification” is a state or nationally recognized certification by a board that has been created to keep certain standards in a particular profession. For example, in order for a plastic surgeon to achieve board certification, he or she must go to school, train for a certain amount of time under another surgeon, and take a board exam, among other requirements. There are numerous specialties in which a doctor can achieve board certification, including obstetrician/gynecologist, family practice, neurology, and general surgery. 

These certifications are extremely precise, and they help inform consumers who are searching for a very specific type of doctor. If you need surgery, for instance, you are going to look for a board-certified surgeon, because this guarantees that the surgeon in question has met a governing body’s standard, and it can be presumed that standard is reasonably high.

Certification Classes

However, in medical spas, you’re much more likely to come across people who claim to be certified in areas such as laser use and injectables. This is a whole different world of certifications—these are not based on state or national standards, since those standards don’t yet exist, generally speaking. (Some states—including Georgia, New York, and Texas—have enacted laser certification laws that provide for a certain level of training, but the focuses of these certifications is very narrow and typically are relegated to laser hair removal. See AmSpa’s medical aesthetic legal summary to see if there are aesthetic certifications in your state.)

The “certified” laser technician is the most common of these types of professionals, but being certified in laser use typically means that a person passed a course administered by the manufacturer of a laser he or she is using. In most cases, this does not, in any way, mean that a state medical board or state licensing board recognizes that training as being substantial enough to warrant certification. Any private company can train someone and provide a certificate that states the person completed that training. In fact, many people who complete these courses declare themselves to be “certified,” but this is not the same thing as being board-certified.

In the medical aesthetics industry, many of these certifications are available, but none should provide the public with the same level of confidence that a doctor’s board certification does. It is up to the medical spa industry and the providers of the services to ensure that the public is not misled. 

Additionally, these certification classes may offer some level of training in the procedure but generally do necessarily allow a practitioner to perform the treatment in their state with or without supervision or delegation of a doctor. Check with your state boards, the AmSpa legal summary, or an attorney familiar with aesthetics before offering a new procedure. 

Truth in Advertising

Medical providers are bound to very specific requirements when it comes to advertising. If you say you are certified in something, you need to be able to prove that’s true. If a laser tech is certified by a laser manufacturer rather than an actual medical board, this must be made clear in any public-facing material. And though this should go without saying, a certification to fire a laser in a particular state is very different than a license to practice medicine, so saying that anyone other than a doctor is “board certified” likely is a good way to get a practice investigated.

(Note: Physician assistants can be certified through the National Commission on Certification of Physician Assistants, but this also does not imply a focus on aesthetics. The NCCPA provides an online tool to check if someone with a PA-C has actually been certified by the organization.)

All practitioners need to be careful about how they represent themselves to the public, and they need to be somewhat wary when a laser company says it can certify someone for a particular procedure, because that does not necessarily mean that the state recognizes their ability to perform it. Ultimately, responsibility and accountability lies with the on-site doctor to determine if a person is able to perform a procedure, regardless of whether or not he or she has been certified by a manufacturer.

Attend an AmSpa Medical Spa & Aesthetic Boot Camp to learn what you can and can’t do in a med spa, and to find ways to build an efficient and profitable medical spa practice.

Tags:  AmSpa's Med Spa & Aesthetic Boot Camps  Business and Financials 

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FTC Announces Enforcement Action Against IV Therapy Clinic for Misleading Advertising

Posted By Administration, Monday, October 1, 2018

By Patrick O’Brien, J.D., Legal Coordinator for the American Med Spa Association

The Federal Trade Commission (FTC) recently announced their first ever enforcement action against a provider of intravenous therapy (IV therapy) for making unsupported claims about the health benefits of their IV treatments. You can read the complaint and press release by clicking here. But in brief the FTC alleges that iV Bar’s website contained multiple false, and unsubstantiated representations as to the clinical or scientific effectiveness of the treatments. Setting aside the merit of the FTC’s claims, this case does highlight a hidden danger of medical spa and IV bar ownership: advertising.

Advertising is a critical part of a successful med spa or IV therapy clinic. Effective advertising is vitally important in attracting new patients and informing existing patients of other services you offer. You want to let consumers know of your expertise, the benefits you can provide, and to distinguish your practice above your competitors. However, med spa and IV therapy clinic advertisements, as with other medical practices, fall under several layers of rules and regulations. Since advertising by its very nature is easily accessible out in the public sphere it makes it a simple matter for regulatory bodies to locate advertisements that violate the laws. Therefore it is beneficial for med spa and IV bar owners to have at least some familiarity with the limitations of what they can say in ads.

Read more about legal issues in medical spa advertising here.

Deceptive Practices Acts

In addition to the Federal Trade Commission Act, many states have adopted some form of a deceptive trade practices act designed to protect consumers from fraudulent and deceptive advertising and statements. These are usually enforced by the State’s attorney general and many provide private rights of action allowing the consumer to sue the business directly. For example the Texas Deceptive Trade Practices Act makes it a deceptive practice to represent that goods or services have approval, uses, benefits which they do not. Damages in the Texas statute can include compensation for economic and mental anguish and if the court finds that the conduct was “knowing” and “intentional” it can result in three times the economic and mental anguish damages being awarded to the consumer. 

Medical Licensing Boards

Med spas and IV therapy clinics are medical practices and as such will fall under their state’s rules for physician advertising and professional conduct. Many state Medical Practice Acts, including Florida’s, prohibit physicians from using false, deceptive, or misleading advertising or as is the case in New Hampshire claiming professional superiority. Even if not explicitly in the statutes, state medical board’s ethics rules and opinions often contain similar prohibitions. For a good general overview there are the American Medical Association’s ethics opinions such as this one which states, in part:

Because the public can sometimes be deceived by the use of medical terms or illustrations that are difficult to understand, physicians should design the form of communication to communicate the information contained therein to the public in a readily comprehensible manner. Aggressive, high pressure advertising and publicity should be avoided if they create unjustified medical expectations or are accompanied by deceptive claims. The key issue, however, is whether advertising or publicity, regardless of format or content, is true and not materially misleading.

Often, state medical disciplinary boards are influenced or adopt guidelines similar to the AMA’s.  
The business name you advertise under can also be subject to various rules. Several states, one such being California, prohibit a physician from doing business under a name different than their own unless they obtain a fictitious or assumed name registration. Still other states limit the use of words such as “spa”, “clinic”, or “medical” unless certain requirements are met or procedures offered.

AmSpa members can utilize their annual compliance consultation call with the law firm of ByrdAdatto to understand the medical advertising requirements in their particular state.

Conclusion

False, misleading, and deceptive. If you feel like you are seeing a trend you are right. Generally these laws and boards use similar language to protect consumers and patients. However the specific interpretation and implementation of these terms is not identical and one type of ad or commercial may be acceptable in one state and not in another. So before you launch a “too good to be true” campaign you would do well have it reviewed by your counsel or to read up on your jurisdiction’s advertising rules.  

Attend an AmSpa Medical Spa & Aesthetic Boot Camp to learn how to build and run a profitable, efficient, and legally compliant medical spa practice.

Patrick O'Brien grew up in west Texas loving the outdoors and Scouting, earning the rank of Eagle Scout. After attending Southwestern University, he worked in Margin trading with a major investment brokerage. There, he saw how yesterday’s decisions affect tomorrow, and learned how to proactively navigate situations to give clients the best possible outcome. This problem solving inspired his return to school and pursuit of a law degree from Southern Methodist University. He brings his legal training and business acumen to AmSpa to get ahead of legislative changes which affect our members. When he is not in the office he enjoys reading the same book to his toddler for literally the twentieth time today. But he laughs every time so it is worth it. He also loves cooking and spending time outdoors with his wife, son, and loyal hound.

Tags:  AmSpa's Med Spa & Aesthetic Boot Camps  Med Spa Law  Med Spa Trends 

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The Keys to Private Equity in Med Spas for DSOs and MSOs

Posted By Administration, Friday, September 28, 2018

By Michael S. Byrd, JD, Partner, ByrdAdatto

In many states, only doctors can own a medical spa, unless you set up a special organizational structure to manage your practice.

Dental Service Organizations (DSOs) and Management Service Organizations (MSOs) share similar business and legal compliance characteristics. DSOs are management organizations in the business of providing all back-office business management services to dental practices. MSOs, on the other hand, provide similar business services to support medical practices.

Learn more about MSOs by reading here or by watching our webinar on the topic.

The common thread between MSOs and DSOs in the private equity world is that they tend to manage practices that operate like a retail store from a business perspective and like a health care practice from a regulatory compliance perspective. In the DSO market, this looks like branded chain of dental offices typically found in retail real estate space. Similarly, the MSO market looks like retail elective health care services, such as medical spas, weight loss centers, and IV therapy centers. In addition to the business similarities of DSOs and MSOs, the regulatory hurdles are similar for the management of dental and medical practices, and the legal solutions to these regulatory hurdles are structurally the same.

The DSO market is the mature older brother of the emerging MSO market. Tusk Partners recently with fascinating insights titled “What private equity looks for in acquiring a DSO.” The article highlights the financial condition of private equity in the DSO market, noting a strong seller’s market. The key indicator of this financial market for 2017 is a valuation multiple of around 10.5 times EBITDA. The article additionally highlighted feedback from private equity professionals on the question of what private equity looks for when evaluating a DSO business. The salient points from the feedback highlighted in this article is:

  • PE Investors are typically growth oriented, versus value oriented. It’s important to be clear that the business strategy is in alignment with private equity strategy.
  • The founders must be able to clearly articulate a vision for the next 3-5 years.
  • The founders must be able to clearly communicate the competitive advantage (secret sauce) over the competition.
  • The DSO must be compliant from a regulatory standpoint. Compliance includes the legal structure from a corporate practice perspective, as well as patient privacy and patient billing.
  • The DSO must be able to articulate a strategy to attract and keep clinicians.

Businesses in the younger and emerging MSO market would be wise to pay attention to the trends and developments in the DSO market. Private equity is coming in to the MSO market even though it is several years younger than the more developed DSO market. Clint Carnell, the CEO of The HydraFacial Company and founder and chairman of Orange Twist Brands, has a deep background in private equity funding. After discussing the legal regulatory complexities of the MSO model and the insights from the Tusk Partners article, I asked Clint what he believed to be the most important strategy in building an MSO towards private equity funding. Clint succinctly and profoundly responded “You have to keep it simple.” Clint’s response is telling, as it spotlights the business from the view of a potential private equity investor. Private equity investors must be able to clearly understand the business itself, the value proposition, and the business’s vision. If the MSO house is not in order from either a regulatory or business perspective, private equity will quickly run.

ByrdAdatto represents DSOs and MSOs in all stages and helps build and maintain compliant structures that are designed to withstand the scrutiny of private equity due diligence. If you have any questions regarding your DSO or MSO business, need assistance with corporate structure, or merger and acquisition activity, please contact ByrdAdatto. AmSpa members receive a complimentary 15-20 minute annual compliance consultation call.

Michael S. Byrd , JD, is a partner with the law firm of ByrdAdatto. With his background as both a litigator and transactional attorney, Michael brings a comprehensive perspective to business and health care issues. He has been named to Texas Rising Stars and Texas Super Lawyers, published by Thompson Reuters, for multiple years (2009-2016) and recognized as a Best Lawyer in Dallas by D Magazine (2013, 2016).

Tags:  Business and Financials  Med Spa Ownership 

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An Exit Strategy: When the Physician Leaves a Med Spa

Posted By Administration, Thursday, September 27, 2018

By Renee E. Coover, JD, ByrdAdatto

As medical spas increase in number and size throughout the country, it is not uncommon for physicians to leave one med spa to join another or open a new med spa. When a physician leaves, many questions arise: is the med spa required to notify patients of the physician’s departure? Can the physician contact the patients to announce he/she is leaving the med spa? Who should take possession of the patient’s medical records? These questions can be easily answered if the departing physician and the med spa negotiate an exit strategy and even execute a “separation agreement” to clarify the terms of the physician’s departure. 

“The goal of any separation plan should be to remove the emotional issues, which often are intertwined in a practice breakup or departure, and concentrate on the fundamental business elements to assist a smooth transition,” says Brad Adatto, JD, partner at the law firm ByrdAdatto. Adatto lists ten items to help medical spa practices start thinking about shaping their separation plans including reimbursement, liability, debt, and more.

One of the questions patients frequently ask is how to find the physician once he or she has left the med spa. The med spa is required to provide that information to patients. According to the American Medical Association Code of Medical Ethics, the “patients of a physician who leaves a group practice should be notified that the physician is leaving … and should also be informed of the physician’s new address.”  It is unethical for the med spa to withhold this information upon request of a patient of the departing physician. 

But what if the departing physician wants to contact patients to advise them of the departure? Can the departing physician get in trouble for “soliciting” patients from the med spa? This depends on whether the departing physician has signed an agreement with the med spa that includes a non-solicitation clause. In most cases, the physician will be required to sign a Non-Solicitation Agreement upon employment stating that he or she will not solicit the patients of the practice for his/her own benefit or induce patients to cancel their relationship with the practice and follow the departing physician to a new practice. If the physician contacts patients, even just to announce the departure, this could be construed as a method to solicit those patients and would constitute a breach of the Agreement. This holds true in the med spa setting, where the same rules and regulations of the medical practice apply. To avoid breaching the non-solicitation agreement, the departing physician should discuss an exit strategy with the med spa to determine how patients will be notified of the departure and put the agreement in writing. Read more about restrictive covenants in your med spa contracts here.

Another question that frequently arises when a physician leaves is what to do with patients’ medical records. A patient’s records may be necessary in the future for medical care, employment, insurance, or even litigation. When the physician leaves, the med spa retains the patient’s records in most cases but this should also be spelled out in a separation agreement with the departing physician to avoid confusion. 

For a departing physician, there are many key issues to resolve before leaving the med spa. In addition to the questions discussed herein, there are also questions of insurance coverage, severance pay, return of equipment or property and other financial issues. Having a separation agreement in place prior to the physician’s departure can save both the physician and the med spa time and money. The separation agreement should detail the terms of the physician’s departure and outline the answers to the important questions that affect the terms of leave. 

If you have questions regarding the proper exit strategy for physicians in med spas, it is important to consult with an attorney who can advise you on the myriad issues and craft an exit strategy. 

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 Ownership 

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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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Putting It in Perspective

Posted By Administration, Tuesday, September 25, 2018

By Alex Thiersch, JD, founder and director of the American Med Spa Association

Every now and then, business owners should take stock of where they are in the world. What entrepreneurs do is not super complicated—they’re not curing cancer or negotiating for world peace. Medical spa owners do make people’s lives better through the use of esthetic medicine, granted, but it’s important for their own sanity that they put their business lives into perspective so that they can properly evaluate where they are and where they’re going.

Anyone who knows me knows that I am a graduate of the University of Iowa, and recently I traveled to Iowa City to watch a Hawkeyes football game. A fairly new tradition was established at Iowa games, and being a part of it live moved me a great deal. In 2017, the new University of Iowa Children’s Hospital building opened right next to Kinnick Stadium, where the Hawkeyes play football. The hospital is a tall building, and from the upper floors you can see right into the stadium. On game day, a number of the kids in the hospital go up to the top floor’s Press Box Café to watch the action; after the first quarter, everyone in the stadium—the fans, the players on both teams, and the referees—look up to the hospital and wave at the kids, and the kids wave back.

 

These kids are dealing with conditions and diseases that most of us can’t even begin to imagine. What they’re going through and what their families are going through is truly beyond what most of us can comprehend. The courage that these kids show is absolutely amazing.


When the wave happens, there’s not a dry eye in the house. Actually being at Kinnick Stadium and taking part in it is an extremely emotional experience, as these people who are going through things that are much bigger than a silly football game.

Every now and then, it’s very helpful to experience something like this. As business owners, you need to understand what you’re doing in the context of the world. When you’ve got both feet on the ground, it allows you to make better decisions. Managing employees, entering into deals, spending money, paying yourself, paying other people, and dealing with disputes and competition can feel overwhelming, and it can take over your life—believe me, I know. But when you see something like the Iowa wave and you think about what the kids at the children’s hospital are going through, you get this overwhelming sense of smallness that tells us that the things that are stressing us out in our everyday lives and with our businesses are not all that important.

Travel to a foreign country to see how people outside your culture live. Volunteer at a hospital or a dog rescue to find out what others who are less fortunate are going through. You may be surprised by how trivial the things we think are important seem, and getting some perspective will ultimately make you a better business owner and a better person.

The next time you’re struggling and feeling stressed out, come back to this page and watch the video again. Is your problem really that important? Spoiler alert: It’s probably not.

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When Do You Need a Medical Spa Business Attorney?

Posted By Administration, Friday, September 21, 2018

By Michael S. Byrd, Partner, ByrdAdatto

Compliance is cool, but do you have a compliance plan? Are you aware of any state laws that could affect your med spa ownership structure? A common problem among clients is the struggle with this common question: When do you need to hire a business attorney? Consistent with the adage “an ounce of prevention,” our most successful business clients follow the 5/50 rule.

The 5/50 rule is actually a choice we present to our clients when this very question is posed. The choice is whether the client would like to pay $5 now to proactively structure their business, set up compliance protocols, or address legal issues in their business. The alternative choice is to do nothing now and pay $50 to clean up the mess later. Though admittedly we should adjust the rule to realistic dollar comparisons, the 5/50 ratio is realistic. In making the choice more personal by drawing an analogy to one’s personal health, we ask our clients whether they would rather stick to an annual wellness treatment plan and pay the associated costs or go to the doctor and react to a stage 4 cancer diagnosis.

Our clients often then ask how to know whether they are properly using legal counsel to guide their business. A great litmus test is to look at budget and spending for legal counsel for the business. If a business has budgeted or spent under $12,000 in an uneventful year for legal fees, the business is not utilizing legal counsel proactively. Most on-going businesses spend between $18,000-$30,000 per year when using counsel to advise and proactively address the legal needs of the business. Smaller businesses or single-owner physician practices may spend less, but still be in the $12,000 range on the low end.

The first step to change how and when legal counsel is used is to shift thinking in budgeting and shift thinking on utilization. Good attorneys think strategically and creatively and can be a great confidante for new business ideas or issues.  Start calling your business attorney as a sounding board to work through these ideas and issues.  It does not have to be lonely at the top.

ByrdAdatto has created a platform to ease this transition. Specifically, our Access+ monthly retainer program creates a set monthly fee for a defined scope of work suitable for the typical needs of a business. The key to this program is unlimited access by phone and email to the attorneys at ByrdAdatto. The hope is that this will incentivize proactive communication with us to help keep the business on the 5 side of the 5/50 rule.

For more ways to build and run your medical spa practice legally and profitably attend an AmSpa Medical Spa & Aesthetic Boot Camp and be the next med spa success story.

Michael S. Byrd , JD, is a partner with the law firm of ByrdAdatto. With his background as both a litigator and transactional attorney, Michael brings a comprehensive perspective to business and health care issues. He has been named to Texas Rising Stars and Texas Super Lawyers, published by Thompson Reuters, for multiple years (2009-2016) and recognized as a Best Lawyer in Dallas by D Magazine (2013, 2016).

 

Tags:  AmSpa's Med Spa & Aesthetic Boot Camps  ByrdAdatto  Med Spa Law 

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Physician Liability in Med Spas

Posted By Administration, Thursday, September 20, 2018

By Renee Elise Coover, JD, ByrdAdatto

Physicians in the medical spa industry are lured by the lucrative income and flexible nature of med spa ownership but as the popularity of this business model increases, so does the risk for liability. 

The number of med spas in this country is at a record high. Dermatologists, plastic and cosmetic surgeons are opening med spas or adding med spa services to existing practices as the demand for non-invasive cosmetic procedures rapidly grows. Additionally, non-core physicians, mid-level practitioners, and entrepreneurs are beginning to outpace core doctors in the medical spa space, according to the 2017 Medical Spa State of the Industry Report

Though med spas offer non-invasive and fairly simple medical treatments like Botox and laser hair removal, these procedures carry the same risk of litigation as any other medical procedure. Due to the aesthetic nature of the treatments and spa-like setting where most treatments are performed, there is a public perception that med spa procedures are risk-free. This misconception has contributed, in part, to the recent rise in litigation, putting med spas in the spotlight for all the wrong reasons. 

Physicians now must be especially cautious when signing on as a “medical director” of a med spa, offering med spa-like treatments or opening a med spa of their own. As the saying goes, ignorance is not an excuse; but for many physicians, ignorance of the law can also cost them their license.

There are several common patient allegations that put physicians at risk of losing their medical license. Lawsuits are often filed by patients due to allegations of lack of supervision of medical treatments, inadequately trained med spa personnel, less than optimal results, and lack of informed patient consent. 

For more information about medical malpractice lawsuits listen to the recent episode of AmSpa’s Medical Spa Insider podcast with patient advocate law firm Sukhman|Yagoda.

 

Perhaps the most problematic issue that most patients are not even aware of is improper ownership of the med spa. In many states med spas must be physician-owned in accordance with that state’s medical practice rules, but many physicians either do not know the laws or they are trying to get around them. If a physician signs on as a “medical director” of a medical spa but has no ownership and no supervision of the medical procedures, the med spa will be charged with the unauthorized practice of medicine in several states and the physician could lose his or her license.

Non-physicians interested in participating in medical spa ownership should click here to learn about MSO ownership structures.

In Illinois, the Department of Professional Regulation has put med spas on their radar and in the past few years, hundreds of physicians have been fined, suspended or lost their licenses due to allegations of improper ownership or lack of supervision in the med spa setting. 

Physicians must be very cautious when opening a med spa or offering med spa services as part of an existing practice.  To reduce the risk of liability, physicians should educate themselves and their staff regarding written protocols, relevant laws and regulations for their particular state, legal and regulatory issues associated with med spas, adequate supervision and proper delegation of medical procedures, and risk management

AmSpa members can view the legal summary of medical aesthetic regulations or schedule their complimentary annual 20-minute consultation call with an attorney from ByrdAdatto.

For more guidelines on how to open and run a legally compliant and sustainably profitable medical spa practice attend one of AmSpa’s Medical Spa & Aesthetic Boot Camps

Tags:  AmSpa's Med Spa & Aesthetic Boot Camps  Med Spa Law  Med Spa Ownership 

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