Med Spa Ownership
Sunday, September 9, 2012
One question that seems to come up time
and again is "who can own a med spa?” Unfortunately, there is not one
answer to this question. While some states make it easy for interested
individuals to find an answer to this and related questions, other
states bury it in cumbersome and confounding regulations that look
foreign to even the most astute lay person. To make matters worse, there
is currently no national standard regulating the ownership of med spas
in the United States, so what may be commonplace in one state is
strictly prohibited in another. While in Illinois, New York,
Pennsylvania and Wisconsin, the laws regarding med spa ownership are
clear that med spas must be physician-owned, some other states do not
make such a distinction.
AmSpa members should check the summary of their state's medical aesthetic laws to see the ownership requirements they need to meet.
In Illinois, for instance, the Illinois
Medical Corporation Act prescribes that a medical spa (i.e. any entity
that provides medical treatments) must be owned and operated by a
physician. A person who is not licensed under the Illinois Medical
Practice Act cannot lawfully have any part in the ownership, management,
or control of the medical spa at any time. The reason for this
requirement is to prohibit a business corporation or lay person from
controlling the medical decisions of a physician or professional staff.
This legal concept is known as the "corporate practice of medicine.”
Medical decisions must always be controlled by a physician, not a lay
person or corporation.
But California has a different set of
guidelines—there, only licensed health care professionals (including
non-physicians) can own any part of a medical spa. Although there is a
general prohibition on the practice of medicine by corporations, the
California "Moscone-Knox Act” establishes the right of physicians to
incorporate and operate professional medical corporations. If the med
spa is organized as a professional corporation, 51% of the corporation
must be owned by licensed physicians, but the other 49% may be owned by
non-physicians such as registered nurses and physician’s assistants.
In Florida, the laws differ once again
as Florida has no laws or court decisions prohibiting the corporate
practice of medicine. As a general rule, physicians and other health
care providers may be employed by or contracted by corporations and
other businesses owned and controlled by non-physicians. And
corporations and investors can freely invest in and own medical
practices that employ physicians so long as the physicians supervise and
control the management of the med spa.
Ohio has gone even further, the
legislature declaring that the corporate practice of medicine doctrine
no longer exists in Ohio. There, the law does not prohibit licensed
physicians from rendering medical services as employees of a corporation
or any other form of business entity. The Ohio Medical Practice Act
only require that the physician exercise professional judgment to render
medical services based on the best interest of the patient and within
the minimal standards of care of similar practitioners under the same of
Although it seems that the laws
regarding ownership vary from one state to the next, most states do
employ fee-splitting provisions that prohibit physicians from sharing or
splitting any percentage of their medical professional fees with any
non-physician. Thus, if the laws regarding ownership are not clearly
stated for a particular state, there may be provisions that prohibit fee
splitting between physicians and non-physicians, in essence rendering
it impossible for a non-physician to own and operate a medical spa and
split the fees from medical services with a physician.
Some med spas have attempted to
circumvent the ownership laws in their state by employing a physician as
a "medical director” while a non-physician owns and operates the med
spa in its entirety—overseeing all treatments, including medical
treatments. In these situations, the physician serving as the medical
director generally does not have any ownership interest in the med spa,
but is rather operating as an independent contractor for the med spa.
This is a perfect example of fee-splitting between physicians and
non-physicians and in several states, it is considered illegal.
In Illinois, for example, hiring a
physician to be the medical director for a med spa owned by
non-physicians is illegal and if caught, the physician’s license can be
suspended or revoked the med spa made to pay steep fines. "The Illinois
Department of Financial and Professional Regulation is really cracking
down on med spas that advertise as having medical directors,” said Alex
Thiersch, founder and General Counsel for the Illinois Medical Spa
Association. "In most cases, these spas are operating illegally, with no
This type arrangement seems to be
prevalent in several states because individuals do not know or do not
understand the laws governing the practice of medicine or do not think
these laws apply to med spas. But ignorance for the law in not
acceptable excuse if the State launches an investigation of a med spa
because of alleged illegal ownership.
It is imperative that to protect
yourself and your med spa business by structuring and operating the med
spa in compliance with your state’s laws. If you have questions
regarding what is legal in your particular state, a healthcare attorney familiar with the medical aesthetic laws in your state.
For more medical spa legal and business best-practices attend an AmSpa Medical Spa & Aesthetic Boot Camp.