California Steps Up Enforcement with New Law Targeting Medical Spa Treatments: Part 2 (Corporate Practice of Medicine Issues; Legal Strategies)

New California law enhances penalties for medical spa owners and operators that violate the prohibition against unlicensed medical practice, raising visibility and adding deterrence. In Part 1 (Increased Enforcement, Penalties) we talked a little about the new bill.

Here is the new law:

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. The Legislature finds and declares that the Medical Practice Act prohibits corporations and other artificial legal entities from exercising professional rights, privileges, or powers, as described in Article 18 (commencing with Section 2400) of Chapter 5 of Division 2 of the Business and Professions Code, and that the prohibited conduct described in Section 2417.5 of the Business and Professions Code, as added by this act, is declaratory of existing law.

SEC. 2. Section 2417.5 is added to the Business and Professions Code, to read:

2417.5. (a) A business organization that offers to provide, or provides, outpatient elective cosmetic medical procedures or treatments, that is owned or operated in violation of Section 2400, and that contracts with, or otherwise employs, a physician and surgeon to facilitate its offers to provide, or the provision of, outpatient elective cosmetic medical procedures or treatments that may be provided only by the holder of a valid physician’s and surgeon’s certificate is guilty of violating paragraph (6) of subdivision (a) of Section 550 of the Penal Code.

(b) For purposes of this section, “outpatient elective cosmetic medical procedures or treatments” means medical procedures or treatments that are performed to alter or reshape normal structures of the body solely in order to improve appearance.

(c) Nothing in this section shall be construed to alter or apply to arrangements currently authorized by law, including, but not limited to, any entity operating a medical facility or other business authorized to provide medical services under Section 1206 of the Health and Safety Code.

SEC. 3. No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

My colleague, Of Counsel attorney Tracy Green, was quoted in an “Bill Aims to Crack Down on Illegal Medical Spas” by journalist Anika Anand. According to Tracy:

  • California has some of the strictest laws prohibiting the “corporate practice of medicine” in the United States.
  • Competitors often file complaints. This starts regulatory investigations of medical spas offering Juviderm, laser hair removal, and other anti-aging and medical spa treatments.
  • When medical spa owners, operators, employees and staff do not consult an attorney before opening, they run into serious legal and regulatory problems.
  • The California medical Board is stepping up enforcement efforts to increase deterrence.

The article by Anand notes that:

  • From 2002 to 2010, more than 1,500 medical spas opened in the U.S., according to the International SPA Association. There is no official count of medical spas operating in California because they aren’t required to register with the state medical board or any other government agency. Under California law, medical businesses must be owned by a physician or owned at least 51 percent by a physician and the remainder by a licensed practitioner, such as a nurse.
  • Also, a physician or an advanced practitioner, like a physician assistant or nurse practitioner, needs to examine the patient before any treatments, such as Botox or dermal fillers, are administered or prescriptions are given.
  • The medical board doesn’t regulate medical spas. But through its Operation Safe Medicine program, it regulates the unlicensed practice of medicine and investigates complaints.
  • The article references a December 2011 press release by the medical board regarding a complaint about unlicensed medical practices in Beverly Hills, California, and notes: “undercover operation found that non-physicians were giving medical treatment and prescription medications were being sold without a physician’s order or without the patient being seen by a doctor, the release says. The medi-spa’s services include electrolysis, microdermabrasion, and depigmentation and exfoliation peels.”

The article does not discuss business strategies used by medical spas and multidisciplinary healthcare practices to avail themselves of Business & Professions Code 650(b), which states:

The payment or receipt of consideration for services other than the referral of patients which is based on a percentage of gross revenue or similar type of contractual arrangement shall not be unlawful if the consideration is commensurate with the value of the services furnished or with the fair rental value of any premises or equipment leased or provided by the recipient to the payer.

The management services model is one frequently employed to create a management agreement between a medical practice on one hand, and the management company on the other.

For more information, see:

It’s best to consult an experienced med-spa attorney who understands the ins and outs of healthcare regulation affecting ownership and operation of a medical spa, and delivery of medical and other health care services.

For additional resources, see:

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Michael H. Cohen is an attorney who represents medical spas, multi-disciplinary healthcare practices, and other medical, health and wellness practices and entities, providing clear legal advice to grow their business. Contact the Cohen Healthcare Law Group today.

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