By Alex R. Thiersch, JD, Founder/Director of the American Med Spa Association (AmSpa)
When opening a medical spa in Illinois, deciding on the appropriate corporate structure for the practice is an important choice that is not always at the front of peoples’ minds. There are many options, however recent updates to the LLC law in Illinois may make it the preferable structure for medical spas and aesthetic practices in the state.
Limited liability companies (LLCs) are businesses structured to allow their owners and operators more flexibility when compared to traditional corporations. They essentially allow the owners of a company to organize the company however they like and choose how they wish to be taxed. This gives owners a good idea of the company’s financial position at all times and allows them to plan accordingly for upcoming events. The LLC is a relatively new legal construct, but in the medical aesthetic industry, it has quickly become a preferred organizational method. As an attorney, I recommend that clients use LLCs all the time.
In Illinois, LLCs are governed by the Limited Liability Act, which was enacted on January 1, 1994. However, as of July 1, 2017, the act has been dramatically revised in an effort to bring it in line with recommendations from the National Conference of Commissioners on Uniform State Laws and similar legislation that has been passed in other states. These revisions help to make the act a bit more predictable and make the enforcement of certain provisions easier, because standardizing the law as much as possible helps to give both regulators and LLCs a good idea of how courts will interpret it in certain situations.
My colleague, Renee E. Coover, goes into detail regarding the changes to the Illinois law in this blog post for the national medical aesthetic law firm of ByrdAdatto. Although the revisions apply to LLCs in all different industries, they make some basic administrative and structural changes that medical spa owners and operators should be aware of.
First of all, the LLC Act now allows oral operating agreements. Typically, an LLC drafts an operating agreement—the “constitution” of the company, if you will. This agreement determines how the company acts and how changes can be made by specifying who gets what votes, who has control, how decisions are made, what happens when somebody leaves, what happens if somebody wants to sell, and so forth. The revision to the LLC Act allows oral operating agreements, so now elements of an operating agreement that have been agreed to orally do not need to be codified to be binding, which is a distinct change from the way that the statute has previously been enforced.
Another key aspect of these revisions that medical spa owners and operators should note is that the LLC Act now allows forthe waiver of fiduciary duties by a manager. A fiduciary duty is an inherent, implied duty of loyalty in which an individual acts in furtherance of the company’s interest at all times. The revisions to the LLC Act allow managers and members of the company to waive fiduciary duty, which gives more power and flexibility to the owners, who can essentially run the company as they see fit.
Finally, the revisions to the LLC Act establish specific authority for members and managers. This means that the LLC can file a statement with the Illinois Secretary of State’s office that either grants or limits the authority of a member or manager in the organization to make certain decisions outlined in the statement.
If you own a medical aesthetic practice or medical spa in Illinois that is operating under an LLC, you should consult a business attorney to make sure that your operating agreements are up to date. If you are considering starting a new company under an LLC, you should be aware of the revisions to the Illinois LLC Act and factor them into your decision-making process.
Opening a medical spa in Massachusetts comes with a number of regulatory and licensing requirements. ByrdAdatto Attorney, Renee Coover, explains how to navigate the process. Become an AmSpa member to find the laws governing medical spas and aesthetic practices in your state.
Posted By Administration,
Tuesday, September 5, 2017
By Alex R. Thiersch, JD, Founder/Director of the American Med Spa Association (AmSpa)
Owning a medical spa or aesthetic practice for non-doctors is a goal that’s often difficult to realize. In most states, only a physician or a physician-owned corporation can legally own a medical practice. However, non-doctors can essentially own a medical spa via a management services organization (MSO) and, while such an arrangement still hinges on the participation of a physician, it allows others a very significant role in the day-to-day operations of a medical aesthetic practice.
Most states observe a doctrine known as the corporate practice of medicine, which dictates that only a physician or physician-owned corporation can receive payment for medical services. Since many of the treatments offered at medical spas are medical in nature, the ownership of such facilities is typically governed by this doctrine. (AmSpa members: check your state legal summary to see if your state observes the corporate practice of medicine.)
But entrepreneurs who want to become a part of the medical aesthetic industry on an ownership level and live in states that observe the corporate practice of medicine can look into setting up an MSO, which provides management services (as its name suggests). It partners with a physician’s company, which only provides medical services. This arrangement, known as a management service agreement (MSA), allows a non-physician to supervise most aspects of a medical aesthetic business, including branding, marketing, owning the real estate, payroll, human resources, accounting, and billing—everything except medical services.
Paying the Cost to Be the Boss
It is helpful to think of this as a lessor/lessee situation in which the MSO is the landlord and the physician is the tenant. The physician pays the MSO “rent” to occupy the space, and the MSO maintains the facility and keeps the physician as comfortable as possible. However, unlike an apartment rental governed by a lease that dictates the occupant pay an agreed-upon amount of money for a certain term, the amount paid to the MSO each period changes according to the amount of business conducted by the physician. If more patients are treated in a month or quarter (depending on the terms of the agreement) than in the previous period, the MSO also makes more money. This helps to create a strong bond between the two sides of the business—if one succeeds, they both succeed.
The contractual separation of the two entities also helps mitigate risk for both parties. A physician risks very little when entering into an MSA. If the practice fails, he or she is probably going to be fine. The physician is not liable for the facility, its contents, and the land on which it is located; that risk belongs to the MSO. The MSO also typically covers the physician’s liability insurance. On the surface, this arrangement might seem heavily weighted in the physician’s favor, but that’s why the physician pays the MSO. Also, the MSO is not responsible for any sort of liability claim leveled against the physician.
When entering into these types of arrangements, a few pitfalls must be avoided. First and most importantly, the doctor must always be responsible for medical decisions. Second, payment for medical services must be always made directly to the physician’s company. The MSO is paid by the physician—at the end of each pay period, it submits an invoice for management services to the physician’s company. If this is properly executed, the MSO receives most of the revenue generated by the med spa.
In order for the practice to work properly and compliantly, the doctor must make all medical and clinical decisions. If the physician does not actually do this, he or she is subject to severe consequences, including license forfeiture and large fines. Furthermore, the MSO may be found to be practicing medicine without a license. As such, it is vital that when setting up an MSA, all parties must understand the roles and obligations to which they are agreeing.
A Formula for Success
MSOs have been used for many years by entrepreneurs to form management companies for medical organizations as large as hospitals and managed care facilities, so it makes a certain amount of sense that creating an MSO for a medical spa would be relatively simple. However, an MSA cannot be properly executed using forms downloaded off the internet, so it is important that you consult an attorney who has experience setting up MSOs if you want to enter into this sort of arrangement.
You can learn more about MSOs and many other legal topics of interest to medical aesthetic practices at AmSpa’s Boot Camps. We will be hitting San Jose, Calif., on Sept. 18 and 19, the Chicago suburbs on Oct. 14 and 15, and Atlanta on Nov. 6 and 7. We hope to see you there!
Posted By Administration,
Thursday, August 31, 2017
By Alex R. Thiersch, JD, Founder/Director of the American Med Spa Association (AmSpa)
Whether telemedicine is legal in medical spas and medical aesthetic practices is a hot-button issue. Little more than a decade ago, you likely would have been laughed at if you told someone that in 2016, most people would be walking around with high-definition (HD) video cameras in their pockets, but here we are. That’s why medical aesthetic practices should pay attention to telemedicine rules and regulations, even if it is not currently legal in their states.
Telemedicine is the use of electronic telecommunication technology to provide healthcare services to patients, and it is becoming central to the medical landscape. Theoretically, medical aesthetic practices could stand to benefit a great deal from using telemedicine, since conducting initial exams for minor medical services such as the ones provided by medical spas can be a drain on resources if they must be conducted in person. However, the laws that govern telemedicine are evolving, so medical spa owners and operators should familiarize themselves with the legal issues surrounding the practice and decide if they want to to give it a try. When looking for legal advice be sure to consult an attorney who is familiar with medical aesthetic laws in your state. (AmSpa members receive a complimentary compliance assessment with the business/healthcare/aesthetic law firm of ByrdAdatto.)
Conceivably, telemedicine could change the way medical aesthetics practices conduct initial examinations. Most states require a licensed healthcare professional – a physician, physician assistant, or nurse practitioner – to conduct an initial examination, generally face-to-face, with each patient prior to the administration of medical services. As a result, compliant medical aesthetics practices tend to need to have at least one licensed professional onsite at all times.
But what if you could simply reach a healthcare professional as needed instead of paying one to be in the office all the time? That’s the prospective advantage of telemedicine. Ideally, a healthcare professional could conduct examinations over a telecommunication protocol such as Skype or FaceTime, and the practice would not need to pay a premium to have a licensed professional onsite all day, every day.
A Legal Matter
This practice inspires a few questions. Can a healthcare professional conducting a remote examination detect all skin conditions or abnormalities that could complicate medical aesthetics procedures? Moreover, can such an exam sufficiently establish the doctor/patient relationship? Lawmakers across the country are currently evaluating these issues and more, as legislation governing telemedicine is still evolving and open to interpretation. No consensus of opinion exists from state to state or even lawyer to lawyer regarding the practice. Telemedicine is the topic of entire week-long conferences, which should give you some idea about the amount of controversy surrounding it.
Many states have telemedicine laws on the books, and they do generally tend to allow it, but typically for continuing care and consultations with specialists in other cities, states and even countries, rather than initial examinations. If a patient is already under the care of a doctor, telemedicine is more widely accepted than if a healthcare professional conducting an initial exam has never met the patient in person.
In Illinois, for example, the state medical board does not look favorably on the practice, despite the fact that there is no actual law prohibiting it on the books. In Texas, on the other hand, state legislators have passed a law that sets very specific standards for how an offsite consultation must work. It is permitted, provided the healthcare professional performing the offsite consultation is in a specific location and working under particular conditions. California’s medical board also allows telemedicine, provided certain conditions are met.
Some issues that still need to be sorted out include the question of whether a doctor can conduct initial exams on patients in states other than the one(s) in which he or she is licensed to practice. Historically, it has been difficult for physicians to obtain medical licenses in multiple states. However, an initiative known as the Interstate Medical Licensure Compact (IMLC) aims to help provide healthcare to underserved areas via telemedicine by making it easier for doctors to acquire medical licenses in multiple states. As of now, medical boards in 22 states are in various stages of adoption of this accord. Check the IMLC website to learn if your state is among them.
A side effect of IMLC adoption is that it will soon be realistic for medical spa chains to conduct initial exams from a central location, which certainly could help expand their profit potential. This aspect of the story is developing, but it could have industry-altering ramifications.
Learn About It
With imaging technology such as Visia improving rapidly and HD video becoming even sharper and more lifelike, conducting initial exams via telemedicine may very well be the industry’s future.
Learn more about telemedicine and many other legal topics of interest to medical spas at AmSpa’s Medical Spa and Aesthetic Boot Camps. We will be hitting San Jose, Calif., on Sept. 18 and 19, the Chicago suburbs on Oct. 14 and 15, and Atlanta on Nov. 6 and 7. We hope to see you there!
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.
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.
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!
By Alex R. Thiersch, JD, Founder/Director of the American Med Spa Association (AmSpa)
The state of California can be viewed as the epicenter of aesthetic medicine. The industry is already huge there, and many more doctors—core and non-core alike—are moving into the market and opening medical aesthetic practices in the state. Due to the size of the medical aesthetic market in the state, California’s Board of Barbering and Cosmetology tends to set a standard for other regulatory agencies around the country, so even if your medical spa isn’t located in the Golden State, it’s worth paying attention to what happens there to learn what might be forthcoming in your neck of the woods.
In California, there are very specific regulations that govern who can perform which treatments at a medical esthetic practice. These rules are very strict—much stricter than many medical spa owners and operators understand, and much stricter than in most other states.
For example, the Medical Board of California and the California Board of Registered Nursing have ruled quite clearly that anybody with less certification than a registered nurse should not be firing lasers. So essentially, the operation of aesthetic lasers in the state of California must be limited to registered nurses, nurse practitioners, physician assistants, and doctors.
We have seen that in California, many laser centers allow lasers to be fired by people who do not fit into these categories—typically laser technicians. Unfortunately for these facilities, the Medical Board of California, the California Board of Barbering and Cosmetology, and the California Board of Registered Nursing are making a conscious effort to crack down on practices such as these. The doctors who own and operate practices where estheticians and laser technicians are permitted to fire lasers can be punished severely.
It is important to understand that even if a person is a so-called certified laser technician, he or she is not necessarily permitted to fire lasers in California. Additionally, doctors in the state are not permitted to delegate laser services to employees who are no higher than registered nurses in terms of certification. We recently have seen several estheticians cited by the Board of Barbering and Cosmetology, as well as several doctors cited by the Medical Board of California for not following these rules, simply because the doctors and estheticians are not familiar with the specifics of the state laws. As is the case with most legal issues, ignorance is not an excuse, so if you believe your California medical spa might not be compliant, consult a healthcare attorney and make the changes that he or she recommends. (Note: The American Med Spa Association (AmSpa) works with a national law firm that focuses on medical aesthetic legalities and, as a member.)
Injectables, microneedling and dermaplaning
The situation in California concerning injectables is somewhat similar. In the Golden State, nurses and other licensed medical professionals can inject Botox and fillers and conduct microneedling and dermaplaning treatments, but under no circumstances should anyone else be doing it. This is another area that is being focused on by the Medical Board of California, the California Board of Barbering and Cosmetology, and the California Board of Registered Nursing.
“This isn’t new—estheticians cannot penetrate the skin,” said Kristy Underwood, executive director of the California Board of Barbering and Cosmetology, at the AmSpa Medical Spa Boot Camp in San Jose, Calif., in September 2016. “They also can’t use any metal needles, period … [California] estheticians are prohibited from using metal needles, as well as anything that might be used in a manner that is disapproved by the FDA.”
Underwood also spoke about the issue of needle depth.
“[California] doesn’t define the depth,” she said. “We do say that [estheticians] can’t go below the epidermis.”
It is worth noting that thus far, microblading—a treatment in which fine incisions and ink are used to create a semi-permanent makeup-like definition, typically for eyebrows—has thus far escaped scrutiny from these regulatory agencies. This is because the state considers that this particular treatment is governed by tattoo licenses. Therefore, if your medical aesthetic practice is offering this service, you should make sure that the people who are performing it have tattoo licenses, which in California typically are issued by counties. Otherwise, your practice is open to regulatory intervention.
We will be discussing these and many other legal topics of interest to California medical spas at our San Jose Medical Spa and Medical Aesthetics Boot Camp, which will take place on Sept. 18 and 19. We have reached out to both the California Board of Barbering and Cosmetology and the Medical Board of California, and we hope members of both will pop in to answer any legal and regulatory issues attendees may have. Click here for more information and to register for the Boot Camp. We hope to see you there!
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:
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-splittingis 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.
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.)
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.