Who Legally Owns a Medical Spa?

Who Legally Owns a Medical Spa?

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Who could legally own a medical spa? That’s the question we address in today’s video.

By the end of today’s video, you’ll understand how medical doctors and healthcare entrepreneurs use the MSO (or management services organization) model to mitigate the considerable enforcement attention to medical spa operations.

I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We’ve advised dozens and dozens and dozens medical spas on healthcare compliance legal issues.

So: a healthcare entrepreneur, let’s call him Mick, and a healthcare attorney, let’s call her Dana, walk into a bar.  The healthcare entrepreneur asks: “Who owns a medical spa?” And then, a few drinks later, asks the healthcare attorney: “How can I legally own a medical spa?”

“Well,” the healthcare attorney begins.  “That’s a complicated question, but I’m going to make it easy.”  She takes the healthcare entrepreneur’s beer and places it down in front of her and says: “This is Dirk, the medical doctor, the one you’re looking to ‘partner with’ in your medical spa.”

The healthcare attorney takes her own drink and puts it down six inches from the beer and says, “and this is you, the business arm, let’s call this an M – S – O, which stands for Management Services Organization.”

“MSO,” the healthcare entrepreneur says, “I’ve heard of that.  Hasn’t that been around since the 70s, or something like that?”

“That’s right,” the healthcare attorney says, stopping to enjoy a bit of her drink.  :
But so has Stevie Wonder, and that doesn’t make his music any less wonderful….

“Anyway, speaking of Songs in the Key of Life, let’s talk about healthcare laws in the key of compliance. The MSO is still a good model, we use it to separate the medical side, from the administrative and business side.

“In other words, the MSO helps us handle this problem: how do you over here, and the medical doctor over there, work things out, when state law does not allow you to be ‘partners,’ because the MD is a licensed healthcare professional and you’re not.”

The healthcare attorney took out a pen and put it between the two glasses, connecting them.  She then took the pitched of beer and placed it equal distance between the two glasses, forming an equilateral triangle, and placed a pen to connect each glass to the beer pitcher.

“We have a triangular relationship and here’s how the services flow, and the money in exchange for services.

“See, the patient receives medical services from the physician, and in turn pays the physician the MD’s professional fee for those medical services.  The physician receives management and marketing services from the MSO, and in turn pays the MSO an MSO fee, subject to a Management Services Agreement (or MSA).

“That’s the MSO model in a nutshell.  And so if you ask who owns the medical spa, you have to distinguish the branding of the medical spa in terms of what the public sees, versus what the legal relationships are.

“The medical spa could be branded with the name of either the physician, or, more likely the MSO.  There are some legal issues here, we address in a blog post about what California law calls, the Fictitious Name Permit.  But for now, understand that the public doesn’t see the MSA or legal arrangement between the physician and the MSO.

“What the public does see is that the medical spa provides some services like facials and massage therapy, and some medical services such as cosmetic injections and fillers.  A licensed cosmetologist or esthetician can provide facials, a massage therapist can provide massage therapy, but only a licensed healthcare practitioner such as an MD, or a nurse operating under standardized protocols once the MD has created the physician-patient relationship, can deliver the medical services.”

Well the healthcare attorney and the medical spa entrepreneur became friends, and they spent the rest of the evening talking about fine compliance points, and even sharing some jokes and laughter in between.

It was kind of like that movie, My Dinner with Andre, with Wallace Shawn. As Wally put it: “why do we require a trip to Mount Everest in order to be able to perceive one moment of reality?  … I mean, isn’t there as much ‘reality’ to be perceived in the cigar store as there is in Mount Everest?”

They were both capitalists, they both liked films, neither had climbed Mount Everest, and neither smoked cigars … but the healthcare startup guy and the healthcare attorney agreed that they could each perceive reality much more clearly with these compliance pointers, and that the medical spa would be on surer legal ground.

Thanks for watching. Here’s to the success of your medical spa or other healthcare venture, we look forward to speaking with you soon.

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