Crucial Issues for Aesthetic Medical Practices – Part One

As the population ages, many people want to age gracefully – with little help from physicians and health care providers. Many younger people place a premium on looking the best they can. The medical spa and aesthetic practice of medicine includes a broad range of medical disciplines to help women and men look their best. Aesthetic medicine includes cosmetic surgeons, dermatologists, family doctors, and many other types of physicians.

Aesthetic medicine includes many different types of treatments such as weight loss programs, Botox injections, standard facials and HydraFacial, laser hair removal, dermal fillers, chemical peels, acupuncture and many other services. Medical spas include medical practices, wellness centers, dermal clinics, and other types of medical practical practices.

Entrepreneurs and physicians starting these practices needs to comply with a broad variety of federal and state laws. These laws regulate the corporate practice of medicine, self-referrals, and kickbacks, the proper prescribing and distribution of medications, how the medical spa can be advertised, privacy issues, proper billing, and many other legal issues.

Some states, like New York, even have laws that regulate specific aesthetic services. New York’s General Business Law regulates:

  • Nail services
  • Waxing
  • Hair Remove
  • Chemical and hair services
  • Treatments on the face or body


Many doctors are trying to cash in on the beauty of operating a medical. For some doctors, the attraction is doing work that patients appreciate. Other doctors think the hours are better and that […]

It’s essential to speak with an experienced aesthetic medicine lawyer before starting a med spa practice and routinely during the operation of the practice. Failure to comply with the laws and regulations can result in civil and criminal penalties, loss of license, closure of the business, and other consequences.

A legal review will include an analysis of what type of legal structure works best – a corporation, partnership, or proprietorship. The attorney will explain the different types of corporate structures including a C corporation, an S corporation, or an LLC (a limited liability corporation).

In addition to some standard legal issues such as the best type of legal structure for the business and insurance issues; a skilled aesthetics lawyers will address the likely pitfalls, the areas that could result in investigations of the practice. The attorney will help the medical spa craft a compliance plan and company policy to help reduce the risk of non-compliance.

The corporate practice of medicine and ownership issues

Most states, such as California, provide by statute, that a corporation or any related type of business can’t practice medicine. The idea is that the states want doctors to make judgments based on what is good for the patient – and not on what is good for the corporation’ s profit. The goal is that the corporate officials shouldn’t be able to tell physicians how to treat their patients.

California’s prohibition against the corporate practice of medicine can be found in the California Business and Professions Code – Section 2400. The statute states that

Corporations and other artificial entities shall have no professional rights, privileges, or powers.

Generally, only state-licensed physicians can own a medical practice. Most aesthetic practices have some procedures that require medical protections. Since physicians have the ultimate responsibility for providing these safeguards, they should be the ones who own the med spa practice.

It may be permissible (ask your med spa lawyer for advice) for a doctor to be employed by the medical corporation or company – if the medical corporation or company is owned by licensed physicians.

The Medical Board of California also states that the following medical ownership and operating structures are not allowed:

  • Non-physicians (such as a nurse, aesthetician, or radiologist) can’t own or operate a business that provides patient evaluation, diagnosis, care, or treatment.
  • Physician(s) operating a medical practice as a limited liability company, a limited liability partnership, or a general corporation.
  • MSOs (managed service organizations) that go beyond standard administrative operations. MSO’s can’t cross the line into arranging for, advertising, or providing medical services. This prohibition applies even when doctors own and operate the medical spa or medical business.
  • Permitting a physician to act as a medical director when the doctor doesn’t own the practice. Generally, doctors can’t be hired to do Botox injections, medical microdermabrasion, and other spa treatments if they don’t own the practice.

In addition, anyone who is not a doctor can’t own shares in, or share profits or “split fees” with members of, the professional medical corporation.”

It may be possible for nurses, PAs, and some other non-physician healthcare providers to have a minority interest in the medical corporation.

Corporate practice of medicine and authorized practice issues

A second concern about the corporate practice of medicine is that non-licensed physicians should not be making medical decisions. This can be very problematic for a medical spa which hires many different types of people. Having a license to work as an aesthetician, acupuncturist, or other beauty health provider is not the same as having a medical license. It can be very easy for a non-physician to give medical advice and opinions about medical procedures. The med spa practice need to have policies in place so this line isn’t crossed.

Physicians who allow their estheticians and other non-physician medical personnel to practice medicine can be charged with the unlicensed practice of medicine – which, in turn, could lead to the disciplinary action against the medical doctor.

For example, the Medical Board of California asserts that the following would be considered the unlicensed practice of medicine – if done by someone without the proper medical license

  • Determining what diagnostic tests are appropriate for a particular condition.
  • Determining the need for referrals to, or consultation with, another physician/specialist.
  • Responsibility for the ultimate overall care of the patient, including treatment options available to the patient.
  • Determining how many patients a physician must see in a given period of time or how many hours a physician must work.

If the medical practice violates the corporate practice of medicine law for their state, then anyone who contracts with the medical practice can argue that their contract with the med spa should be terminated.

An experienced healthcare lawyer can also review healthcare legal issues such as:

  • Who can own the medical equipment in a medical spa?
  • Can non-physicians receive a percentage of the profits or must they be paid only for their services?
  • Who can order drugs or devices in the United States and overseas?
  • Can medical spas sell skin care and other aesthetic products?

Who can be a medical director and what can the medical director do?

Physicians need to own the medical spa. They can then either run the spa themselves, serve as their own medical director, or hire another physician to serve as the medical director. A medical director should know how to perform each of the services the medical spa offers.

Medical directors should also:

  • Supervise the delegation of med spa services to other doctors to non-physicians staff members
  • Conduct the initial examination and diagnosis for the patient
  • Establish protocols for the procedures
  • Advise the patient of the dangers of doing the procedure. Doctors should also get an informed consent
  • Understand what it means to supervise a procedure
  • Know what the risks are for each procedure such as rashes, burns, allergies, and infections
  • Be ready and able to respond to any complications
  • Review the medical information for the patient
  • Maintain records in a proper way so they comply with federal, state, and local laws

For more information on medical supervision requirements – when and if some treatments can be performed by non-physicians, the proper way to delegate duties and procedures, and legal issues on certain types of treatments such as Botox injections, see Keys to Navigating Enforcement Risks & Legal Pitfalls When Owning & Operating Your Medical Spa

Financial relationships with ancillary medical services

Stark Law forbids physicians from referring patients who use Medicare or Medicaid to medical services (also called ancillary services) where the physician is also an owner, has an investment in the medical service or has an improper compensation arrangement. The reason behind Stark law is that doctors should refer patients based on what is in the best interest of the patient and not what’s in the doctor’s financial interest.

Formally, Stark Law forbids referrals to a “designated health service.” Designated health services include physical therapy, occupational therapy, radiology, ultrasound, clinical laboratory services, durable medical equipment, prosthetics, home health services, inpatient and outpatient hospital treatments, and other types of services.

Aesthetic practitioners often have professional relationships with different types of designated health services. Doctors should be wary of offers to invest in these designated health services or to enter into professional arrangements to provide services. First, the physicians who run a med spa should consult with an experienced healthcare lawyer. The relationship may be illegal which could result in substantial civil and criminal penalties. If a med spa violates Stark Law, it will be required to return any funds paid in by Medicare or Medicaid for medical services. The med spa could be also be subject to claims if it violated the False Claims Act which regulates false billing to federal agencies.

The healthcare lawyer will explain that Stark Law does provide for numerous exceptions. Becker’s Hospital Review summarizes the exceptions to Stark Law as follows:

Many of the exceptions require compensation paid to a physician to not take into account the value or volume of a physician’s referrals or other business generated between the parties to a gainsharing agreement. Many exceptions also require the arrangement to be commercially reasonable and compensation to be at fair market value.

Stark Law exceptions may apply (the financial relationship may not constitute a “financial relationship”) in the following types of business relationships:

  • Renting office space – if the statutory conditions are met
  • Renting medical equipment such as laser machines for weight loss and other aesthetic equipment
  • Bona fide employment relationships
  • Personal service arrangements
  • Physician recruitment
  • Isolated financial transactions
  • Certain arrangements with hospitals
  • Charitable donations by a physician
  • Non-monetary compensation
  • Fair market value compensation
  • Medical staff incidental benefits
  • Risk-sharing arrangements
  • Compliance training
  • Other factors listed in the Stark Law statutes

Experienced healthcare lawyers will also explain how the Anti-Kickback Statute is similar to Stark Law and how it differs. In addition, the attorney will explain what state anti-referral laws apply to a medical spa practice.

Additional aesthetic legal issues

Medical Spas should also review with the healthcare lawyer the following healthcare legal issues:

  • How their aestheticians and other beauty spa staff are credentialed. Proper credentials vary from state to state and from profession to profession.
  • What actions or inactions constitute medical malpractice. Medical spa practices should review with their healthcare lawyer what their professional liability insurance actually covers. Insurance coverage also differs from profession to profession.
  • Physicians should review their duty to get informed consent from their patients. The duty to explain the known risks and to get a written consent may extend beyond medical procedures like Botox injections to beauty procedures that aestheticians, threaders, and other beauty staff members provide. Even massage therapists my need to get a written consent.

Med spas need to understand how to best protect their practice from complaints of unauthorized practice of medicine, the corporate practice of medicine, and charges of improper financial relationships.

Additionally, medical spas should have a compliance plan in place so the submissions of bills don’t lead to complaints of improper billing or claims under the False Claims Act.

Adding to the list of healthcare law issues:

  • Patient records need to comply with HIPAA (Health Insurance Portability and Accountability Act)
  • The products used must comply with the FDA (Food and Drug Administration) regulations
  • Many other laws may also apply to the practice

Any physicians starting a new medical spa where aesthetic services will be provided should consult with an experienced medical spa and healthcare lawyer. To learn what your duties and obligations are and what policies and procedures you need to have in place, contact Cohen Healthcare Law Group, PC. today.  Our healthcare lawyers and FDA lawyers have the legal experience and skills to help a wide variety of medical practices with legal requirements governing a broad range of medical procedures and healthcare situations.  We also provide healthcare legal advice to healthcare startups involved with medical spas, cosmetics, and aesthetic medical practices.

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