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Running the Numbers on Med Spa Compensation

Posted By Administration, Monday, October 22, 2018
Updated: Monday, October 22, 2018

By Alex R. Thiersch, CEO of the American Med Spa Association

A medical spa’s most valuable asset is not its location, its marketing, or even the multi-thousand dollar laser equipment. According to our 2017 Medical Spa State of the Industry Report payroll and benefits are the single largest category of medical spa expense. Also from our Industry Report receptionists (69%), aestheticians (78%), and nurses (50%) are among the most commonly employed positions at a medical spa. So even a very modest sized medical spa is going to employ a team of people. This team in addition to being the biggest expense is also the Spa’s biggest asset. A medical spa is all about offering services and procedures in a comfortable and inviting way and the people chosen to perform those services are critical to that goal. 

The success of a medical spa is directly tied to its ability to attract and retain excellent nurses, aestheticians, and staff. A competitive compensation structure is going to be a major part of attracting and retaining these stars. Commissions seem like a great solution to this: the medical spa incentivizes the employees to generate more business and the employee gets flexibility in their pay structure. In fact our State of the Industry Report uncovered that roughly a third of our respondents pay some sort of commission to their employee. 

However there are multiple reasons you should think twice before offering commissions.

Fee Splitting/Kickbacks

To understand why paying commissions may not be a good solution we need to answer the question “who earns the fee for a Botox injection or laser hair removal session?” Because most treatments and procedures in a medical spa are medical procedures it is the physician supervising the practice who earns the fee. It is the physician (or the midlevel practitioner they delegate the task to) who performs the initial exam and prescribes the course of treatment. They then delegate the administration of that treatment to the other licensed healthcare professionals. The physician in turn pays the overhead costs, payroll, and other expenses of their office. 

State legislatures have historically been concerned with protecting the public from financial arrangements which may corrupt the independent medical judgement of physicians. As such many states have passed laws that prohibit a physician from splitting their fee or paying a kickback in exchange for a referral of business. For instance California prohibits a licensed health practitioner from paying or receiving a commission or consideration to compensate or induce the referral of patients. The penalty for violating this section can include imprisonment up to a year and/or a fine up $50,000. Other states may not have as stiff of penalty but may still discipline the license holder for unprofessional conduct when engaging in this sort of activity. 

In offering to pay a commission to the nurse or staff for every procedure performed or sold the physician is giving a kickback or splitting their fee with someone in exchange for business.  Even in states that do not have an explicit prohibition on splitting fees or kickbacks paying commissions can raise issues of corporate practice and unlicensed practice of medicine. All states prohibit unlicensed persons from practicing medicine and many extend this to lay business entities (i.e. corporations). By paying a commission or sharing the fee for a procedure this can raise issues that a portion of the fee for professional services is being shared with people who are ineligible to have an ownership interest in a medical practice or not licensed to practice medicine. 

So What Can You Do? 

Of course many of these issues will be specific to your state’s law and medical board (AmSpa members can check their medical aesthetic state legal summary) but in general you can pay your employees a salary for the work they do and under certain circumstances bonuses tied to other performance metrics may be acceptable. 

See the compensation packages, and other business-building tools, available in the AmSpa store.

For instance bonuses tied to retail sales don’t involve medical fees and so don’t draw in the fee splitting issues. According to our 2017 State of the Industry Report, medical spas draw 18% of their revenue from retail items. Retail products are obviously not medical procedures so if your practice carries a line of beauty products you could get the double benefit of increased sales and increased employee retention by offering commissions on these products. 

What employees does your spa have? Have you had success with certain compensation structures? Let us know: We’ll be conducting our next State of the Industry survey soon and really hope to hear from you. Help us define data in the medical spa industry.

Tags:  AmSpa's 2017 Med Spa Statistical Survey  Business and Financials  Med Spa Ownership 

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Do You Need a License?

Posted By Administration, Monday, October 15, 2018
Updated: Monday, October 15, 2018

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

Med spas in their quest to provide the best beautifying services to their clients straddle the line between medical procedures and traditional cosmetic treatments. So it is no surprise that traditional salon cosmetic procedures are major part of a med spa’s business. In fact, according to the 2017 Medical Spa State of the Industry Report, aesthetic and cosmetic procedures are the 2nd most common procedure done in med spas and are the 2nd best revenue generators. 

Traditional aesthetic procedures compliment the medical treatments offered by med spas, and since these are not medical procedures they don’t require physician supervision. Similarly they don’t require a medical or nursing license to perform. And most of the procedures don’t require the huge capital investments needed for machines such as laser or IPL devices. However, choosing to offer traditional aesthetic procedures does come with its own set of complications.

As you know med spas are medical practices and need to follow the regulations for medical practices. It follows then that med spas that offer salon treatments fall under spa and salon regulations, too. In some states a medical practice that offers aesthetic procedures through cosmetologists or aestheticians needs to also have their facility inspected and be licensed as a salon.

For instance, in California the Board of Barbering and Cosmetology requires that places offering cosmetology and aesthetician services must obtain an establishment license for the premises in addition to the practitioners holding their own cosmetology or aesthetician licenses. Similarly, in Texas aestheticians are only permitted to practice their art in licensed salon or cosmetology facilities. Typically, to obtain these licenses the facility must meet certain square footage, restroom, and sanitation requirements. This shouldn’t be an issue for most med spa locations but it is prudent to review the regulations for salons to avoid any future issues. You wouldn’t want to finish your build out only to find that one of your rooms is 5 square feet too small. 

If you plan to offer permanent make up or micropigmentation services you will want to check with your state’s tattooing or body art board. Permanent makeup is generally considered a form of tattooing and requires a tattoo license for the artist and usually must be performed in a licensed tattoo parlor. A few states have specific permanent cosmetic or micropigmentation licenses separate from their tattoo license.

While in many states physicians are given an exemption from needing a tattoo license this is not always the case, and even if a physician is exempt that doesn’t necessarily mean the med spa or other employees are. For instance, in Mississippi the exemption is only for the physician and doesn’t extend to delegated health professionals and the facility still needs to be inspected and licensed as a tattoo parlor.

If you are thinking of hiring an aesthetician or want to expand the “Spa” side of your med spa be sure you get the needed licenses. If you have questions about what licenses your med spa might need please contact us. AmSpa members receive an annual compliance consultation call with the law firm of ByrdAdatto.

Has your spa started offering more salon services? What are your most popular procedures? We want to know; data collection for the 2019 State of the Industry Report will be opening soon and we hope to hear from you. 

Tags:  AmSpa's 2017 Med Spa Statistical Survey  Med Spa Law 

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4 Ways to Increase Med Spa Retail Sales

Posted By Administration, Tuesday, August 21, 2018

By Alex R. Thiersch, JD, Founder/Director of the American Med Spa Association (AmSpa)

Increasing medical spa retail product sales can be one of the fastest ways to boost the profitability of your medical aesthetic practice.

Focusing on product sales can benefit your medical spa in a number of key ways, and according to the AmSpa 2017 Medical Spa State of the Industry Report retail products account for 18% of total revenue at the average medical spa. Once you’ve decided that you want to make this a larger part of your business, where do you get started?

A Product to Fit Your Business

When choosing product you want to make sure that what you are bringing in not only fits in with the brand direction of your business, but also that the products match the services you offer since proper use of a skin care program can produce better treatment results for your patients. You don’t necessarily have to stop at treatment products, however. A few on-brand retail pieces that don’t require a recommendation to buy can help create a more full experience for your customers. Are you a luxury brand? A wellness brand? You might consider dedicating some shelf space to items that reinforce this message. 

Tyranny of Choice

Though it’s good to have some selection of product in your medical spa, offering too many options at the same level of product treatment can be a detriment. Too many choices that aren’t differentiated can leave customers confused and less likely to purchase. Choosing a few lines that each have multiple levels of treatment will often serve you better.

As medical spa industry expert Bryan Durocher of Durocher Enterprises states, “While selection is important, sometimes it is better to go an inch wide and a mile deep.”

Make Sense of Senses

Major retailers know that engaging customers through multiple senses can yield benefits in retail sales. Visually interesting displays combined with calming music, or scents that match the scents of some of your products provide subtle boosts for retail sales.

Small changes to the layout of your space can also make a difference. Do you keep the lion’s share of your product behind a counter or in a locked case? This will impact your sales since people like to look at and hold things as they consider buying it. Does your retail area overlap with your waiting room? Think about separating them, because as Durocher states, “People that sit don’t shop.”

Your Team

Of all the possible points of improvement in retail sales you can possibly see in your business, training your team will give you the biggest benefit, bar none. When talking about retail sales Dori Soukup, of InSPAration Management says, “How can you expect to improve performance and achieve new results if the team is not held accountable for their actions or performance?” 

She emphasizes concrete expectations, measureable goals, sales systems, and team coaching when setting up a business for retail success. 

As Durocher states, “Have a defined client experience that incorporates retail products during the consultation, during service, and at the close of the visit.”

It’s also important to incentivize your team. While, in most states, you generally cannot pay staff commission for services in a medical spa because of fee splitting laws, you are generally allowed to pay percent commission on retail product sales.

Selling product is one of the keys to increased profitability in medical spas, and if you’re looking to get into the industry it’s a core principle you need to be familiar with. 

For more information on ways to build and run a successful, profitable, and legally compliant medical spa attend one of AmSpa’s Medical Spa & Aesthetic Boot Camps and be the next med spa success story.

 

Tags:  AmSpa's 2017 Med Spa Statistical Survey  AmSpa's Med Spa & Aesthetic Boot Camps  Business and Financials  Med Spa Ownership 

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Subscriptions: The Next Level of Membership Programs

Posted By Administration, Friday, August 17, 2018

By Michael S. Byrd, JD, Partner at the law firm of ByrdAdatto

Med spa patient loyalty and retention is one of the biggest concerns among med spa owners, according to the 2017 Medical Spa State of the Industry Report. The report also states that fully 55% of medical spa practices have instituted some sort of membership program. Paid membership programs can be a valuable tool to increase customer retention as long as you are keeping up your standard of care, and these programs can also be a huge help in gathering operating capital up-front and projecting future income.

“This membership model built Skin Body Soul,” says Brandon Robinson, founder of Skin Body Soul Spa. Robinson believes that paid memberships help to bring in patients that are willing to commit to the spa as much as the spa is committed to the patients.

Subscription billing for products flips the traditional product purchase model on its head. Rather than purchase a product, consumers purchase the right to use the product. Netflix and Spotify embody the power of this business model.

On January 17, 2016, Forbes magazine published an article titled  How the Subscription Economy is Disrupting the Traditional Business Model. Tien Tzuo, CEO of Zuora, points out that in this model the emphasis must be on the consumer experience and relationship.  Tzuo states, “Remember that subscriptions are relationships, and relationships are a two-way street!”

With the success of the subscription billing model for products, the question becomes whether this model can work with professional services. The aesthetic industry has seen a shift toward providing non-invasive services on a subscription basis. HintMD, a technology startup based in Silicon Valley, developed a dynamic subscription platform to enable medical aesthetic professionals to offer their services via a subscription offering. 

Aubrey Rankin, CEO of HintMD, says, “Our aesthetic subscription platform not only enables consumers to gain access to high-end aesthetic services and providers, but more importantly makes it easier for patients to commit to their prescribed treatment plan. By a patient simply following their treatment plan, a true win-win situation is created. Patients achieve optimal treatment outcomes through the ease of a predictable monthly subscription payment, and the aesthetic practice sees an increase in patient loyalty, which ultimately drives growing practice revenues.”

Our law firm, ByrdAdatto, has offered legal services on a subscription billing model for several years to our larger clients, and in January 2017, our firm expanded the subscription billing model to provide access to our smaller business clients as well. The adoption of this subscription business model by our clients far surpassed our expectations.

The goal with ours was to provide options for our clients in choosing how to pay for legal services. A little over a year since the roll-out, our Access+ subscription billing platform now represents close to 50% of our monthly revenues.

For organizations considering a transition to a subscription billing model, the following must be considered:

  • The subscription billing model does not replace the need to provide excellent services; rather, it emphasizes the need to deepen the relationship with clients.
  • Defining the scope of covered services becomes imperative.
  • Key performance indicators to measure the success of your business dramatically change.
  • Plan your cash management in the transition process.

Subscription billing is not for everyone, so proceed with caution before completely switching to this billing platform.

If you believe you are ready to switch, but are looking for somewhere to start check out Ten Steps to Developing & Launching Medi Spa Memberships in the AmSpa Store.

ByrdAdatto represents physician practices, dental practices, law firms, medical spas, and other professional services companies throughout the United States. AmSpa members can take advantage of an annual compliance consultation call with the firm.

If you have any questions regarding your business model, need assistance with designing corporate structure, or merger and acquisition activity, feel free to reach out to us at mgire@byrdadatto.com or call 773-831-4692.

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 2017 Med Spa Statistical Survey  Business and Financials  Med Spa Law  Med Spa Trends 

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Who Are the Most Commonly Employed Team Members in a Med Spa?

Posted By Aly Boeckh, Thursday, October 5, 2017

By Alex R. Thiersch, JD, Founder/Director of the American Med Spa Association (AmSpa)

According to AmSpa's 2017 State of the Industry Survey, physicians, nurses and aestheticians are among the most commonly employed staff at
medical spas. 

Nearly 77% of all medical spas are in some way affiliated with a physician. However, only 48.4% of physicians have complete ownership.     

The full report is available for purchase for $995 here. AmSpa members can request a complimentary copy of the executive summary by emailing Morgan at morgan@americanmedspa.org.

Tags:  AmSpa's 2017 Med Spa Statistical Survey  Med Spa Employee Types 

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Top 5 Most Popular Med Spa Treatments

Posted By Aly Boeckh, Tuesday, August 29, 2017

Just how well do you know the medical spa industry and the clients that you serve? Would you be surprised to learn that Chemical Peels are the number one service provided in a medical spa? AmSpa's 2017 Medical Spa State of the Industry Report is here to help you decide on which treatments to offer, and how you can receive the biggest return on your investment.

Come to an AmSpa Medical Spa & Aesthetic Boot Camp for more business and legal insights and best-practices.

Let's take a look at the Top 5 Most Popular Medical Spa Treatments:

1. Chemical Peels

A chemical peel is a technique used to improve the appearance of the skin on the face, neck or hands. A chemical solution is applied to the skin that causes it to exfoliate and eventually peel off. The new, regenerated skin is usually smoother and less wrinkled than the old skin.

2. Aesthetician Services  

Aesthetician services involve skin care and beauty treatments such as facials, makeup applications, and hair removal through electrolysis, waxing or other techniques.

3. Botox and Filler Injections

The injection of botulinum toxin--commonly known as Botox, Dysport or Xeomin-- has become very popular for reducing wrinkles and rejuvenating the aging face. First granted U.S. Food and Drug Administration (FDA) approval to treat frown lines in 2002, Botox remains one of the most popular cosmetic procedures on the market, and its popularity continues to rise.

4. Microdermabrasion

Microdermabrasion skin rejuvenation is used as a method of exfoliation, as well as to treat light scarring, discoloration and sun damage, and stretch marks. Treatments include using a minimally abrasive instrument to gently sand your skin, removing the thicker, uneven outer layer.

5. Photo-facial pulsed light (IPL)

Intense-pulsed light (IPL) is a technology used in various skin treatments, including hair removal and photofacials. A handheld flashgun is passed across the skin, delivering a spectral range of light that targets the hair or skin issue. These types of treatments may also be called laser skin rejuvenation, photorejuvenation, or laser resurfacing.

Here's an infographic from the report that shows how all Medical Spa treatments measure up. 

AmSpa members receive a complimentary copy of the report's executive summary. Join today and receive your copy!

Tags:  AmSpa's 2017 Med Spa Statistical Survey  Med Spa Trends 

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Top Medical Spa Legal Issues

Posted By Aly Boeckh, Tuesday, August 15, 2017
Updated: Tuesday, August 15, 2017

The medical spa industry exists at the unfortunate confluence of state statutes, regulations, and often, the rules of multiple professional boards. Although it is easy for a savvy veteran of the medical spa industry to unintentionally run afoul of this web of regulation, it is also shockingly common for some medical spas to be noncompliant with even the most basic of rules. Equally shocking is that the reason behind this noncompliance can be traced back to simple maxim: Many, if not most, of the services offered in medical spas constitute the practice of medicine.

All things considered, perhaps it’s not that surprising that this basic tenet gets overlooked, because medical spas go out of their way to create welcoming, relaxed environments in which patients can receive aesthetic or cosmetic treatments and services. This cultivated “retail” feel is intentional and is antithetical to the feel one often experiences when visiting a doctor, which is perhaps why the fact that medical spa services are the practice of medicine can also easily be overlooked or ignored. However, it is important for both the medical spa and the spa’s clients to bear in mind that most medical spa services do constitute the practice of medicine and should be treated accordingly.

KEY PROBLEM AREA NO. 1:

THE INITIAL EXAM

One key area in which medical spas are often noncompliant is the initial examination of a patient seeking treatment at a medical spa. In the American Med Spa Association’s (AmSpa’s) recent 2017 State of the Medical Spa Industry Report, 37% of respondents admitted that they either do not perform a good faith examination prior to a patient’s first treatment at the medical spa or that the examination is not performed by a physician, physician assistant (PA), or nurse practitioner (NP). Good faith examination is a term used in California to mean the performance of an appropriate prior examination and medical indication before pre- scribing, dispensing, or furnishing a dangerous drug, which would include botulinum toxin type A or fillers prescribed for a patient. Although the good faith examination serves a specific purpose, the responses to the AmSpa survey inform a broader area of noncompliance, because physicians, or the mid-level practitioners to whom they can properly delegate the task, often do not perform an initial patient examination or prescribe treatment plans for medical spa patients. And while the semantics might differ, all states have some requirement that a physician must prescribe a course of treatment before medical spa services may be rendered.

In most states, this initial assessment may be delegated to a PA or NP when proper delegation and supervision protocols are followed, but it would be beyond the scope of practice for a registered nurse (RN) or licensed practical nurse (LPN) to engage in this diagnosis phase of the treatment. This becomes a problem for medical spas, because it is common for a RN to see and treat patients in the facility without the patient ever coming into contact with a physician or a mid-level practitioner, such as a PA or NP. This means that even if the RN performs an initial assessment, that nurse would have acted outside the scope of his or her authority and that medical spa just joined the ranks of the 37% of spas that fail to perform a proper initial assessment of the spa’s patients. This makes this medical spa noncompliant with state law or regulation.

This issue is further complicated by the emergence of telemedicine as a viable alternative through which health care can be delivered, as it begs the question of whether an initial assessment that complies with state requirements
can be completed via telemedicine. To make matters worse, telemedicine is a still developing and evolving legal concept, and laws vary widely from state to state. When it comes to performing the initial assessment via telemedicine, states generally fall into three schools of thought: (1) the initial assessment cannot be performed via telemedicine at all; (2) the initial assessment may be performed via telemedicine where the physician, PA, or NP is present through streaming audio and video, and a nurse is physically present with the patient to guide them; or (3) the initial assessment may be performed via telemedicine where the physician, PA, or NP is present through streaming audio and video. Because many states lack a comprehensive statutory or regulatory structure addressing telemedicine, a medical spa wishing to implement 
initial assessments via telemedicine would be safest by seeking legal counsel on compliance requirements of the state.

HOW DOES YOUR MED SPA STACK UP?

 

KEY PROBLEM AREA NO. 2:

 COMMISSIONS

Another area where medical spas commonly fail to comply with regulation is in the payment of commissions to people working in spas for the performance of specific services. In fact, according to AmSpa’s 2017 State of the Medical Spa Industry Report, 31% of respondents pay commissions for the performance of certain medical treatments. Commissions do not, in and of themselves, violate state law. Rather, commissions fall within a veritable minefield of regulations that intersect to make what otherwise would be a benign form of compensation when properly structured into a payment that is at best unprofessional conduct and at worst illegal. Improper commissions are commonly referred to as fee-splitting, which can be true, but such commissions actually run the risk of violating multiple areas of the law, including fee-splitting, kickbacks, the corporate practice of medicine doctrine, or physician self-referral laws.

Fee-splitting is defined as the practice of sharing fees generated from the performance of professional services with other persons as compensation for referring a patient. Kickbacks are somewhat different from fee-splitting as the focus is not on the source of the income (professional services), but rather whether the compensation, regardless of source, was used to generate referrals.

Kickbacks are generally defined as any sort of compensation, money or otherwise, that is directly or indirectly given or received to induce or reward patient referrals. Physician self-referral prohibitions go hand-in-hand with kickbacks, because they prohibit a physician from paying for referrals to or from another medical practice in which a physician has an ownership interest. Self-referral prohibitions often can be avoided by simply disclosing to a patient the physician’s interest in the practices, and the fact that a fee is being paid for the referral in the form prescribed by a particular state.

Finally, the corporate practice of medicine doctrine prohibits certain business entities or unlicensed individuals from practicing medicine or employing a physician to provide medical services. This means that a commission that (1) is a portion of a professional fee or (2) is paid as compensation for giving or receiving referrals or (3) is paid between entities in which the same physician has an ownership interest or (4) is paid to persons ineligible to have ownership in a medical spa all potentially violate state law or regulation, depending on the particular prohibitions that a state has codified.

Naturally, this raises the question of when can commissions be paid for the performance of medical services. The simplest answer is to avoid commissions to navigate the regulatory mine- field. The best practices of medical spas are to pay a bonus for specified performance metrics or pay a discretionary bonus.

NAVIGATE CAREFULLY

The payment of commissions and the performance of proper initial assessments of medical spa patients are just two examples of noncompliance. Because medical spas exist at the intersection of state law, regulations, and professional board rules, it is easy for a well-intentioned medical spa to be noncompliant. With that in mind, always remember that most treatments at medical spas are considered to be the practice of medicine and everything from the assessment of the patient to the delivery of treatments should be navigated carefully. Also, if a medical spa is going to use incentives as part of a compensation package for its employees, do not pay commissions. Finally, if you ever have any questions or concerns regarding your spa’s compliance with laws, regulations, and professional board rules, please seek legal counsel. (Author’s note: The American Med Spa Association (AmSpa) works with ByrdAdatto, a national law firm that focuses on medical aesthetic legalities and, as a member, along with a number of other great benefits, you receive a free initial consultation. To learn more, click here.) 

This article was originally published in Modern Aesthetics May/June 2017 Supplement issue.

MICHAEL S. BYRD

As the son of a doctor and entrepreneur, Michael S. Byrd , Partner at ByrdAdatto Law Firm, has a personal connection to both business and medicine. He routinely lectures at continuing medical education seminars on the various business and legal issues that medical professionals face. Outside of healthcare, he has handled sensitive and complicated business matters for entrepreneurs, business owners, attorneys, CPAs, high net worth individuals, and public figures. He is also active on the Board of Directors of the LEAP Foundation, an organization that provides pro bono medical services to those in need.

BRADFORD E. ADATTO

Bradford E. Adatto, Partner at ByrdAdatto Law Firm, decided to become a lawyer during sixth-grade Career Day, when he promised to represent his best
friend, a future doctor. Adatto’s background is in regulatory, transactional, and securities law. Having worked in healthcare law his entire career, he has an in-depth knowledge of the “do’s and don’ts” of this heavily regulated industry. Adatto is actively involved in various community and philanthropic associations, and serves as a Board Member of Carry the Load, a charitable organization founded to help veterans and their beneficiaries.

Tags:  AmSpa's 2017 Med Spa Statistical Survey  Med Spa Law 

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