California Med Spas; Tips, Myths, & Pitfalls

California Med Spas; Tips, Myths, & Pitfalls

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[Debra Scheufler]: Hi, Michael, how are you?

[Michael H. Cohen]: Hi, I’m good. Hey, I’m here with my son and we’re very close to nap time.

[Debra Scheufler]: Yeah, that’s fine.

[Michael H. Cohen]: And I hadn’t planned on that, so Aram will introduce you, he’ll introduce me as well. And I basically set this up so that we can really feature you, so I’ve set it up so that I can be redundant.

[Debra Scheufler]: Yeah, I’m good, I’m in good shape. I got it.

[Michael H. Cohen]: No one has to count on me having this secret knowledge that-

[Debra Scheufler]: No.

[Michael H. Cohen]: … only in the Jedi library, but for the fact that it burned, but fortunately I had read the volumes before it had burned. But I’m so tired of that, so I need another Jedi to be with me-

[Debra Scheufler]: Awesome.

[Michael H. Cohen]: … and that’s you.

[Debra Scheufler]: Oh, yeah. Okay, good.

[Michael H. Cohen]: Which means that I can whirl my ears toward the horizon but all is calm and quiet, but shouldn’t we be required to assemble a toy in the middle or something? The show will carry on.

[Debra Scheufler]: Okay, yeah. Very good.

[Michael H. Cohen]: Delighted to have you. Aram, how many people do we have signed up?

[Aram Zadeh]: We have three people who have already joined in our participation pool and as for the total number of registrants, we have 19.

[Michael H. Cohen]: Okay. Did they hear my Yoda analogy? I guess that’s for the…

[Aram Zadeh]: Yes. Anyone who is a Star Wars fan should have understood your Yoda analogy.

[Michael H. Cohen]: Okay. And I’ll turn it over to you guys to prepare for the launch.

[Aram Zadeh]: Sure.

[Michael H. Cohen]: Okay. Thanks for being here, Debra, really…

[Debra Scheufler]: Yeah, thank you so much for having me.

[Michael H. Cohen]: May the force be with you.

[Debra Scheufler]: Yeah. And with you as well and also with you, that’s like-

[Michael H. Cohen]: Also with you, yes.

[Debra Scheufler]: … also with you.

[Michael H. Cohen]: That was really Jewish.

[Michael H. Cohen]: We’re missing metaphors there.

[Michael H. Cohen]: Exactly.

[Debra Scheufler]: I’ve known Michael for, I don’t even know how many years we’ve known each other.

[Michael H. Cohen]: It has been many in age.

[Debra Scheufler]: It has, many in age…

[Michael H. Cohen]: Probably since my first trip to San Diego.

[Debra Scheufler]: You were down here then, you were practicing down here.

[Michael H. Cohen]: Yeah. It was in Orange County, I think.

[Debra Scheufler]: Oh, you were? And we had clients on the other side of a transaction, on opposite sides of a transaction.

[Michael H. Cohen]: That’s right.

[Debra Scheufler]: That were splitting up a practice.

[Participant]: I can’t hear them.

[Michael H. Cohen]: Hears what? See, there’s somebody laughing just now, maybe that was one of the elves that joined. The elves are always laughing.

[Debra Scheufler]: That’s right.

[Participant]: Hey.

[Michael H. Cohen]: Who is that?

[Debra Scheufler]: Hey.

[Michael H. Cohen]: Who is that? Is that the king and the queen of the elves?

[Participant]: Hey, that person.

[Michael H. Cohen]: Oh, it’s a human. Okay.

[Participant]: And there’s only Aram and…

[Michael H. Cohen]: And that person, Debra, and then there’s some other people here and more are coming. See? One just came.

[Participant]: Daddy, all I know is Aram and Debra and you and me. I don’t see anybody else.

[Michael H. Cohen]: Like yours with some more people?

[Participant]: No, I can’t hear their voice, I can’t hear them talk.

[Michael H. Cohen]: I think that they’re muted, but I’m sure they’re very excited to speak. As soon as Debra, Debra’s going to present things that she learned from the elves.

[Debra Scheufler]: Things that I learned from you mostly.

[Michael H. Cohen]: Well, I got it from the elves.

[Debra Scheufler]: Oh okay, so I got it by the second hand then…

[Michael H. Cohen]: The elves got it from Joshua, Joshua got it from Moses, and Moses got it at Sinai. No, well I’m looking forward, and you’re talking about medical spas today?

[Debra Scheufler]: I’m going to talk about medical spas and kind of broad brush on a little bit about COVID and just kind of update and then into med spa arena and just… I’ve been doing this for a long time and you learn a lot and you see people do really positive things that help their practice and things that detriment their practice.

[Aram Zadeh]: Well, everybody, we’re going to go ahead and get started here. For those of you who joined us a few minutes ago you might’ve heard the preview chatter that we had, we are joined today by our friend, Debra Scheufler. Debra is one of the top healthcare attorneys in California specializing on advising med spas and concierge practices.

Debra has also helped practices throughout the state establish their business structures and to navigate California board regulations and the cross section of laws, the government spas. She speaks regularly on a variety of business and legal topics and she has published on negotiations, business strategies and trademark law.

She guides clients through proactive planning for growth and risk management and provides legal triage when damage control and dispute management are needed. Debra presents the law as an accessible relatable tool, she’s taught undergraduate and master’s level courses in business law, ethics and negotiations and prior to practicing law, Debra was a professional dancer and then spent over 15 years in the fitness industry.

She’s also a passionate wildlife advocate and she volunteers at the California Wolf Center, so I’m very pleased to be able to introduce you all to her today. Now, just a brief disclaimer before we begin, that if any of you ask questions during the Q&A, please don’t share anything confidential since this will be recorded for the benefit of registrants and other people who weren’t able to make it live, we will be sharing the recording with them.

And nothing that we offer here should be construed as legal advice because it is all for educational and informational and maybe for entertainment purposes, depending on how fun things get. So Debra, I’m going to turn it over to you.

[Debra Scheufler]: Thank you so much, Aram. And I really am grateful to Cohen Healthcare Law Group and to Michael Cohen for inviting me to do this today. I’ve known Michael, we were trying to figure out how long it’s been, we’ve known each other for over 10 years and he’s kind of been my mentor in healthcare law throughout these years and we’re good friends, so I really appreciate being here today.

I have med spa clients all throughout the state and like I said, I’ve been doing this quite a while, I’m practicing for 24 years this month, so lot going on. I guess everybody in California is open now, at least all my clients are open to some degree. And I thought it would be a good idea to just talk about, reiterate some things that I tell clients regularly and kind of do a quick review and update on the COVID issues, so let’s get into that first.

And my PowerPoints, I started making PowerPoints when I was teaching at the university level and I kind of just use them as an outline to guide me along and I find it really fun and entertaining to pick out the graphics for these PowerPoints. So the slides themselves won’t provide you with a lot of information, but feel free to take notes and feel free to ask questions in the chat box if you want to know something specific and I’ll stop the screen share periodically to check on the chat box.

So let’s just do a quick review of the law and how the law affects healthcare practices. In the United States, the federal law rules and sets the basic guidelines for all areas of law and the states are allowed to legislate more narrowly but never more broadly. Now that being said, we have the FDA that provides the kind of overview of law for healthcare, but it’s really regulated by the states.

And for those of us who are licensed by governing bodies like doctors and lawyers, we all have our licensing body in the particular state in which we’re practicing. And the rules in every state are different, and if you’ve ever practiced in other states you will have witnessed this. We have our licensing board and then the counties and municipalities are authorized to issue ordinances that may also regulate more narrowly and we were really seeing that happen during this COVID time.

Having said that and I’ll get back to the county and state in a second, but another agency we need to pay attention to is the CDC. Now the CDC guidelines are not binding, but they’re really important to pay attention to because it’s very likely that they will be seen as the standard of care if any procedure or healthcare experience is ever questioned or challenged or if anything goes wrong.

And we never want to imagine that anything would go wrong, but when I started practicing law a long time ago somebody told me that every doctor and every lawyer gets sued at some point in their career and if you don’t, you’re in the very, very narrow minority. And why is that? Because we are in professions that are held to a higher standard of care under the law and I like to really dumb things down and make information accessible.

And my kind of simplistic interpretation of that is we know stuff that other people don’t know because we went to school for a really long time to learn it, and the stuff we know can really help but it can also really hurt people. So the law sets us to a higher standard of care and we have specific rules that apply to us in our professional practices.

And one of those is that when we form corporate structures are limited, well we can only form corporations in our professions but we don’t get that liability protection that many other professions get, we are still personally held liable for any professional negligence or malpractice that occurs. So that’s why we want to pay attention to those CDC guidelines because if anything ever does go awry, that may be reviewed as part of the standard of care.

Now, the med spas were closed for a long time when the whole COVID situation started and elective procedures and non-emergent procedures were not allowed. And then in or around May 8th, the state said, “Okay, now,” And the language was, “Hospitals and health care providers she’ll take measures to preserve and prioritize resources, hospitals and healthcare providers may authorize and perform non-emergent or elective surgeries or procedures based on their determination of clinical need and supply capacity and were consistent with state guidance.” That was the San Diego County reiteration of what the state had mandated.

And of course when this came down, everybody was… All my clients, all the doctors, all the med spas and all of us attorneys were saying, “Oh, can we reopen?” What does that mean? Well, when these rules are made in an exigent situation like we are in now, they’re made very quickly and every possible scenario that, that lock could apply to is not necessarily considered.

And even when laws are made over a long period of time and bills are proposed and it goes to the whole legislative process and they’re made into law, not every scenario is imagined and then what happens is that those written down rules or statutes are analyzed in courts for many, many years until we have a really strong body of law of what all that means. But none of that’s helped us now because we’re trying to reopen and get operating and start treating patients again.

And so when I first read this, I caucused with several of my doctors and with Michael and with Norm Davis, retired now, and we went through this language and tried to figure out what it meant. And I was very nervous, I always err on the side of caution and if you’ve worked with me, you know that to be true. I don’t even get close to that gray line because it’s just far too risky and we have way too much to lose, nobody wants to put their license on the line to make a couple of extra dollars or to try something.

So I, in San Diego, emailed the County of San Diego and said, “What about med spas?” Because we’re kind of this little stepchild that’s not necessarily always considered, I can’t tell you how many people I’ve talked to who don’t even know what a med spa is when I’m having this conversation. San Diego County have responded and said, “Yes, you may open, electric procedures are allowed now to the public health order, please refer to that public health order.”

And then San Diego had this safe reopening plan that everybody in San Diego and I’m sure other counties have something similar and everybody should have that filled out and posted and be complying with whatever your county requirements are. And having said that, that’s kind of the background or the framework on which we’re operating right now.

I’ve also thought about and discuss, as I said, with Michael and with some of my doctors about liability hotspots and part of our job as attorneys is to identify potential risks. I like to take a business and look at it as a whole and it kind of displays itself in my mind, like on this board in front of me and little lights pop up where I see liability issues. And so identifying those potential liability issues and putting practices in place that hopefully will avoid them is part of what we do as attorneys.

And the reopening liability hotspots are, some of them are more obvious than others and I want to get into some of those now. We want to make sure that our employees and providers are safe, so we want to make sure they’re not infecting anyone and that they are also safe themselves and we’re going to do that by complying with the safe reopening plan guidelines. And as medical providers of course, you all know what to do to keep infection at bay.

Everybody should be wearing masks, everybody should be staying six feet away from each other and the same with patients. And so in the beginning, we were discussing not doing anything around the nose and mouth and cheeks where the mask would have to be removed. And if you’re going to do that, you’re doing that at your own risk and you all have to assess the risk of whether you want to do that or not.

Because again, the rules, the written down rules are vague and more and more things are opening, now we can do dental work, cleanings and all that. So I would imagine we can do work around the mouth, but you have to be careful and patient safety as well. So one of the biggest risks that I see is pertaining to insurance coverage and this is what I had a long conversation with one of my doctors about when the first potential reopening arose.

And that is that if we are unsure of whether we are in compliance with the law and something goes wrong, that results in an insurance claim, the carrier will not necessarily cover that claim if they can show that you were out of compliance with the law. That’s why I went directly to San Diego County and asked them that question because I wanted to get it from the horse’s mouth, and now I have that in writing in case anything ever came up with one of my clients with a liability issue.

And so within that, now that we’re open and we’re all pretty secure that we’re open, making sure we’re complying with all of the PPE rules and use of PPE and screening patients before they come in and screening providers and employees before they come in and making sure people keep that social distancing, we don’t have our waiting rooms, there’s no magazines around, there’s no services.

If those things are available to patients, they have to be disinfected after every single person has touched them and that is extremely onerous. And most providers, most med spas are having their patients wait in the car I believe, before they come in for their appointment and everything’s by appointment. But that insurance coverage issue is something to really think about because if anything happens and these things come up unexpectedly and I’ll talk more about that when I get into pitfalls and start telling more stories.

But because we are treating a certain category of patient, there I believe there’s a certain inherent risk with that particular class of patient. This patient, the patients that come to med spas are informed, they’re doing research on the internet, they understand these procedures and it’s an emotional procedure because it’s elective, they’re choosing to come to us, as physicians there’s not an illness where you’re recommending a certain treatment and they’re not just turning all the authority over to you as the doctor or you as the provider.

They’re taking an active role in making these decisions and of course, we have conversations with patients when they come in about what they want, but also people are really emotional about their faces and everyone in the med spa industry, I’m sure has had an incident with a patient where in a patient has had an emotional reaction to something.

So because of this particular demographic of patient, I advise my clients to be extremely cautious about any kind of risk because that when a person is emotional about something, they’re going to be more likely to have a strong reaction or a less logical reaction and complain and we just don’t want those things to exacerbate. And right now, all of us are stressed.

We’re living in a very strange time, our lives are thrown asunder, we’re not doing what we normally do, people have lost revenue streams, we don’t have our normal outlets for recreation and entertainment so stress builds up. And when people are more stressed, the medulla or emotional brain gets more active and the frontal lobe gets less active. And so people make less intelligent decisions, people make more hair-trigger responses and they’re more reactive. And I see this every day when I leave the house and I’m sure you all do too.

So for these reasons, it’s really important to be extra, extra cautious and be extra, extra calm. And for me, when I was in law school one of my professors said, I can actually remember back that far. One of my professors said, “You will counsel clients on far more than the law.” And during my introduction, it was revealed that I have studied many, many things and I’ve been meditating since I was 13.

And honestly, if I start getting stressed out about a client or about a situation, if I just stop and breathe, I might have to just go in the bathroom and just breathe for a couple of minutes into my diaphragm and it calms me down. So I highly recommend that if you start getting stressed about a patient, get yourself calm before you respond. So that’s my little update on the COVID situation and how we should be dealing with patients moving forward.

So let’s get into some just business tips. Medical practice meets business is true in all medical practices nowadays and peculiarly in this industry, because it is almost 100% elective. It’s aesthetic and we have a certain demographic of patient and notice that I say patient and not client and I always recommend that my clients refer to their patients as patients because we want to really keep it in our mind that this is a medical practice.

Even though we’re all here to make a living and generate revenue, we are held to that higher standard of care, you’re licensed professionals in the medical field and your licenses are on the line during this practice of medicine. So it’s really important to maintain that mindset always about what you’re doing. And the doctors who are running their practices are typically acutely aware of this and the medical directors certainly are acutely aware of this because ultimately, anything that goes awry in that practice, the buck stops with that medical license and that’s where the risk lies.

And I’ve things occur where a nursing license was affected and a medical license and there might be a suspension involved, certainly fines can be involved. And so we want to try and avoid all that by ensuring that the fact that we’re in a medical practice, that idea trumps the fact that we’re in a business.

There are three questions I ask clients when they come in to start any new business and they are:

  1. Do you have experience in the industry?
  2. Do you have a business plan?
  3. And what’s your exit strategy?

And these three questions apply to these medical practices, especially the aesthetic medical practices as well because you can build a lot of value in these practices. Experience in the industry is really important no matter what the industry is, because there are pitfalls that are inherent to any industry and you just cannot know about them unless you have worked in that industry.

I have a client, she’s really has investment property and that kind of thing but she wanted to buy a 7-Eleven, this was her idea. So what did she do? She went and worked for six months in a 7-Eleven so she could really learn the industry to figure out if this is something she really wanted to do and so that she would know what the downside of this business was. And that’s super, super important.

Why do I ask about a business plan? Because if you don’t know where you’re going, you’re not going to know whether you’ve gotten there or not. And you have to know what your expenses are going to be and how many procedures and treatments that you need to do to make sure that your revenue is where you want it to be. And I’m sure there are people in here, if there are here that have been in business for a really long time and you probably did this in the beginning or maybe you didn’t and you just lucked out.

But it’s important to kind of review these things as you go along, as your practice continues to make sure you’re on track. I have to let my dog out, sorry. This is the joy of working from home, is that we’re dealing with our kids and our dogs and whoever else we have. So an exit strategy, why do we talk about exit strategy?

Because the way you run your business and the way you plan it financially and the way you build value and assets in that business is going to be directed toward your exit strategy. And what do I mean by that? Are you creating a business that is…

Oh, Wendy you said, “Patients aren’t being honest about being positive or exposed.” Yeah, that’s a big risk Wendy, that’s a big risk for you and it’s a big risk for your providers unfortunately.

So it hurts my heart when I see people close down beautiful valuable operating businesses without trying to sell them.

And when we’re building our business, one of the things we want to build is the Goodwill, of course that’s our reputation but it’s associated with that brand and that name and that’s what I’m talking about when I’m talking about building value in your IP.

So the name of the business, it’s really important that the control and ownership of that name, it stays with the entity that is really running the business. And I’ll just say it like that and if anybody has any specific questions for me about that, you can let me know.

But in the MSO model where there’s a medical corporation and there’s an MSO, typically it’s whoever owns the MSO is really the driver behind the business. And that driver behind the business, there are ways to maintain ownership of that IP in that driver so that the value stays with the MSO.

And I’ll just say that much, if you have questions about that like I said, let me know. Marketing and sales are really, really important and this is a huge challenge in this industry because every single person who is in the practice that has patient contact should be part of the program.

You’re going to have a marketing strategy, but every single one of those professionals that has contact with patients should have some kind of training so that they can up-sell, cross-sell and convert. And I don’t want to get too far down this road, it’s a huge interest of mine because I’ve represented businesses my entire career and I work with other professionals that really teach this.

But if you’re looking at revenue and it’s not where you want it to be, these are areas you may want to look at, HR, now we’re getting back more into the legal arena. HR is really, really important to have HR systems in place. And what I mean by this is of course, you have to have a policy and procedure manual.

And the policy procedure manual in medical practices is typically updated every year because the products that you’re using and the equipment that you’re using, the protocols for those products and equipment may change every year. And so you’re going to update that every year, it’s extremely important that every provider signs off on that policy and procedure manual annually.

And I’ll tell you why later when I get to pitfalls, because this went horribly wrong for a client. You want to make sure that you have a trade secrets policy, so the civil code says that and this is a huge issue in this kind of personal service concierge type practice where the patients become attached to providers and will follow providers.

And there are very specific things that providers can and cannot do if and when they leave your practice. And so those are all set forth in the civil code and I typically provide my clients with a trade secrets policy just so that the providers understand what those are and they’ve signed off on it so they know what they can and can’t do if and when they leave. And that helps to maintain patient loyalty to the practice and not necessarily the provider.

And there are other things you can do, one of the big mistakes I see people making is that providers have a direct text access to patients for scheduling and this can be really risky for a couple of reasons. Number one, there can be HIPAA non-compliance issues with texting directly with patients on people’s personal cell phones.

And the other thing is that when those providers have direct access to patient contact information, they have a lot more leeway when it comes to these trade secrets issues that I’m talking about to maintain that patient following with them if and when they leave your practice. And again, you want to keep the patient loyalty with the practice for better revenue. We talked about control of the name, that’s really important, that’s just a huge issue for me. And another thing in the HR vein is employee screening, sometimes we get really busy in our practices and we just need a body to do a task in our practice. And if you’ve been in this business for a while, you know that the wrong person can be a poison. Let me pull this up.

Okay, the definition of a trade secret in the medical practice. So in all businesses and this is broad brush information, we can define trade secrets kind of as we wish but business procedures, marketing procedures, business plans, systems, revenue, formulas, vendors, and the identity of your patients can be deemed a trade secret.

So that’s kind of what I’m talking about and you can contact me directly if you want more specific information on that. So really what we’re looking at in this trade secrets conversation is controlling the degree to which providers can elicit that ongoing loyalty to them personally if and when they leave your practice.

So I’ll just say the civil code essentially says that an employee cannot use trade secrets to solicit customers, in this case patients, of their former employer to another business or another practice. So when we’re analyzing this question and I’ve actually litigated this, we first have to determine whether the information was secret.

And in the particular case that I litigated this, the employer did not maintain confidentiality of the identity of the customers. So there are certain measures that an employer can take to maintain the confidentiality and of course, in the medical practice it should be maintained under HIPAA anyway, but to maintain confidential identity of those patients.

So now that’s a trade secret, so let’s say we’ve got that defined as a trade secret then we ask, was there solicitation or not? And solicitation is an invite or an offer of a discount to come and patronize the new practice. It’s not necessarily just announcing, your former employee can run a billboard right outside of your practice and say, “I provider X am now at this practice.”

But what they can’t do is invite or entice by some monetary means discount or something like that, because that would be then deemed as solicitation. Now this is a really broad description and definition of what I’m talking about, again, every legal situation is different and this is not intended to be specific legal advice in order to create an attorney-client relationship with anybody. But that’s what I’m talking about when I’m talking about trade secrets and how to protect that.

So there are documents and procedures we can put in place to make sure that those trade secrets are protected, so that the loss of patients has minimized if and when somebody leaves. So let’s talk about, moving onto the next slide, why isn’t this going? Let me see. There we go, myths. Okay, so I have this whole legal myth-buster series that I do where I go through all these myths that people believe in about business in general and I can tell you, these things might seem really obvious to you but I have seen all four of these things happen in medical practices. So I can DIY structure and contracts and et cetera.

I have had doctors come to me who set up their own, went to some gloom and doom or just went on the secretary of state’s website and tried to set up their own entity, turned out it wasn’t a proper medical corporation, it had to be completely redone. I’ve had many clients try to draft their own contracts with information that they’ve found on the internet. The problem with this is that those agreements may be outdated and they may not be state specific.

And especially in the practice of medicine, law in general is state specific, but especially in the practice of medicine it’s state specific. And for those of us who’ve been practicing for a long time, one of the benefits of having an attorney who’s been around a long time is that we’ve seen a lot of things and we’ve seen all these situations before and we’ve worked diligently to amass a library of documents and clauses that apply to every kind of situation you can imagine.

I mean I’m not trying to be self-serving here, but especially in a high-risk industry like the practice of medicine, it’s really important to get your legal documents from the right place. And I can find the law on the internet, there’s a lot of things that are available on the internet but the university of Google is not a substitute for your medical degree and it’s not a substitute for our law degrees.

I mean, my point here really is that and it’s kind of tongue in cheek to say that. But my point really here is that there are so many different areas of law that come together to regulate the practice of medicine. There’s the federal law, the FDA and Michael was an expert in that area. There’s the medical board then you’ve got the nursing board, and you may have other providers that have their own boards that regulate what those professionals can do.

You have corporate law, I just went through a big snafu on corporate structure and who can be a director of a medical corporation? And one doctor suggested that maybe his attorney should be on the board and that just is a big no-no. And in a medical corporation a licensed physician must have control of that entity, which is why the doctor has to own a minimum of 51% of the medical corporation.

And if you’re in an MSO situation and you’re a nurse or a PA you know this, but also think about this and this is what came up. Let’s say there’s three directors on the board of directors, two of them are RNs, that’s a big no because both of those directors have a vote. It’s one vote for director and now the two RNs can outvote the MD and that’s not allowed.

So there are so many different areas of law that regulate the practice of medicine that kind of intersect and we have to make sure that we’re looking at all of them. And you can’t just go in one place and so, oh here I wish, I wish we could go. Michael, don’t you wish we could go to one place and just find all the rules for the practices of medicine? But alas, no, it’s a matter of putting many areas of law together.

I recently had someone come to me going to number three who has a, we’ll just call it an MSO but it’s not because there is no medical practice. And had hired a medical director and thought it was just okay for that MSO or that non-medical corporation to just hire a medical director and now we can practice medicine. No, you cannot do that, very, very risky. I’m sure nobody on this call is doing anything like that but I see it frequently, I can trust equipment salespeople.

I have been in my doctor’s office during lunch and the drug salespeople were, that’s when they come during lunch. And I could hear them giving essentially continuing education to the doctor and this is really dangerous. And when ultherapy first came out, I think and I don’t remember this 100% but I think they were saying that estheticians could run that machine.

And I remember talking to Michael about this, this was several years ago in fact. The equipment salespeople are going to, their job is to sell medical equipment and they cannot give you medical advice, they cannot give you continuing medical education and it’s really important to make sure that you vet these things with your legal advisor before buying a piece of equipment and thinking, “I can use it in the way that this…”

So Sam, this is a state specific, and in California a non-medical business cannot… I mean, this is a complex question and you can contact me separately for this and I’ll explain this in more detail to you.

[Michael H. Cohen]: Yeah. Debra, I’ll just jump in here and say, you’re doing just such a phenomenal job, I really appreciate you’re sorting out all these threads and definitely the cautions to people. I mean first of all, I just would like everyone to appreciate that there are very few lawyers out there that even speak this language that we’re speaking.

And as Debra said, if you could just look it up, if you could just say, “Hey Siri, how do I get from A to B?” It’d be great. It’s like, “Well, turn left here, turn right there, you’re done.” But there isn’t really a map, a lot of times it’s interpreting and interpolating different-

[Debra Scheufler]: And you and I have had these conversations, Michael, where we’ve looked at different questions and we’ve just had to say, “Well, we have to look at these four areas of law and they kind of intersect here and this is kind of the advice we would give.” And they normally come up when people are trying to do something out of the norm.

[Michael H. Cohen]: Which is almost all the time in healthcare law.

[Debra Scheufler]: Which is really common in healthcare law-

[Michael H. Cohen]: It’s always out of the box.

[Debra Scheufler]: … in healthcare law and I’m going to get into-

[Michael H. Cohen]: It’s always great, it’s not like, “Oh, it’s great.” As if everything else is just very straightforward and this is suddenly mysteriously great. I think it’s even the wrong metaphor, it’s multicolored, it’s very nuanced all the time and just I remember, like I just jump in here. When I was in Hebrew school, we would study Talmud and you would have your finger on one page and then you’d go back to another page, another paragraph and you’d literally have your fingers dancing all over.

And it’s kind of like that because you really have to interpret these different areas. And the other thing I wanted to say is that, so it’s very nuanced and that’s why Debra and I often consult with each other because we can read the nuances differently but always it’s about telling people what their risks are. And the other thing is it’s better to know before than after the fact, because after the fact if you’re in trouble with a medical board and you need to know that there are different areas of risks, there’s unlicensed practice which is criminal as opposed to for example, getting the wrong form of corporation, it’s a technical violation but it has other stuffs and there’s other exposures. And so anyway, I think you’re doing a fabulous job sorting out the threads and thank you for new people because people don’t know that…

The third point here is you’re saying you can’t trust the advice that you get from other people, especially marketing and salespeople. I mean, almost for sure to guarantee they’re going to be more aggressive than is warranted and it’s best to have your own legal counsel. You can’t rely on their attorneys or claims that other people made, because the fact that someone else is doing it is not in itself protection.

[Debra Scheufler]: Exactly, exactly. And the fact that they’re doing it and they didn’t necessarily get “caught” isn’t protection either. And we’ve recently seen some things go really wrong for some people and I’m going to get into that next, I’m going to talk about pitfalls but see how we’re doing on time. Okay, let me keep going here because this is the longest section. Do you have anything else you want to say, Michael?

[Michael H. Cohen]: No, I’m just cheerleading along the way for everything that you’re presenting, so…

[Debra Scheufler]: Okay, pitfalls, I’m going to go through these quick because we have 15 minutes. No medical corporation, I talked about that earlier, you have to have the proper structure in order to practice medicine and it has to be a medical practice.

And however, whatever the structure is, it has to be a medical practice, otherwise you have either unauthorized practice of medicine, unlicensed practice of medicine, or you can have corporate practice of medicine.

I’ve seen it happen where a client, there is a patient appointment and at that time a PA was doing all the GFEs and this patient had scheduled someone else, not the client who was running the business, the practice, scheduled this patient when the PA wasn’t available.

And came in and it was just for something, it was just for like a neurotoxin, something simple. And went ahead and treated her and she turned out to be an agent from the task force for safe medicine. And my client got busted and it was a huge problem, there was a license suspension, there were multiple fines to multiple practitioners and it was just not worth it. So please don’t ever take that chance.

And I want to get into that a little bit more now too, I have advisement my clients to be really careful about taking new patients right now, people that they don’t know because there’s an extra risk associated with the practice right now and for me, I would just rather work with known entities.

Poor patient management, we get to know our patients intimately in this type of practice and we’re not being run by insurance so we can spend a significant amount of time with them and I see providers kind of become get into this friend zone with patients. And it’s really important to manage that because you as providers are professionals, again, your license is on the line and you want to maintain those professional boundaries with people.

It’s a good idea to have a set of documentation for things that can go awry, like for instance, I just had someone call me and say a patient didn’t pay her. Showed up for the treatment, said, “Ooh, I forgot my wallet.” And left. And now we’re working out putting together a set of documents to manage that, how to manage an incident if a patient says that they were injured or they had a bad reaction to a treatment.

If you’re an MSO type of practice, it’s really important to make sure that your medical director is available and that’s required by law that your medical director is available to handle emergencies. And that can be by telemedicine in many cases, but we want to make sure that, that medical director is available. A huge problem that I see all businesses but very common to the med spa and concierge practice area is failure to document things.

We keep our medical charts concise and up-to-date and it’s also really important to document, again, if there’s an incident and a patient says that they had a reaction to something to make sure you get pictures right away and document that as you go along and it’s really important to document things with employees. One of the biggest issues that arises when businesses have employee problems is that there’s not a solid employment file to support what’s been going on if a termination is imminent.

So let me give you an example, I love to tell more stories but here’s an example of how that can go horribly wrong. A provider is been working at the practice for a while and has progressively declined in their performance, maybe they’re showing up late or not showing up for shifts or for patients. And the business owner is kind of letting it slide because the business owner is just running the business and sometimes for us it’s just enough to get through the day-to-day operation of the business.

And you’re thinking about terminating this person but you’re being nice and giving her, in this case, a second chance and a third chance and a fourth chance and now she’s pregnant. Now you have a huge hurdle to jump over when terminating her because you don’t have a documented employment file and you have the potential for a discrimination action. So it’s really important to keep those employment files documented, make sure you’ve got your trade secrets documents on file, make sure they’ve signed off on that policy and procedure manual every single year.

The story I have about this is that I had a client who had a new nurse who had just gotten certified in doing neurotoxins or whatever, it was a filler. And he treated this woman and the woman complained and it was high drama because the woman had come in on a… what is that? Groupon, come in on a Groupon and wanted her whole face for five units or something like that.

And of course that’s impossible, this is the typical joke in the med spa industry is that they want miracles for $200. And anyway, complained and complained to the med board and the nursing board and one of the questions the nursing board asked was, and wanted to see documentation on was whether that nurse had signed off on the policy and procedure manual every year.

Well the employer had thrown the one, by the time this all came down it was another year and had thrown the policy procedure manual after that prior year. And this resulted in an extended investigation and there were three lawyers involved because the practice needed an attorney and the poor little nurse needed an attorney who is just brand new at doing this type of treatment and the patient had an attorney and it was just a hot mess. And so the better documented we have things, the less…

Here’s the key. If something comes up, if a challenge comes up where you’re just much more prepared for it and the last thing I want to talk about is exploring gray areas without legal guidance. And we’ve had things in the news recently where people have had challenges for trying something new and creative that was in contravention of FDA law or perceived as in contravention of FDA law.

And even if it turns out in the accused favor, it extremely emotionally draining and costly to have to go through that type of investigation, so it’s better to just walk the straight line. Other things I’ve seen is it’s a very gray area whether dentists can perform these medical aesthetic treatments. In some States it’s completely allowed, it’s very gray and I don’t even have an opinion on it in California but I’ve seen people do it.

Creative business ideas that might result in corporate practice of medicine or unauthorized practice of medicine or practice of medicine without a license, I’ve seen those kinds of things come up lately so it’s really important to get… If you have a creative business idea, I’m all about creative business ideas, I’ve been an entrepreneur all my life and most of my clients are entrepreneurs.

And especially in a highly regulated industry like this, like the practice of medicine, it’s really important to vet that through your attorney. I don’t have my classic the end slide, I usually have a tail of a wolf on my the end slide but I forgot to do that one. and I’m going to see if anybody has any other questions that haven’t been answered. Okay, let me just… Oh Kaitlin, it’s important to have an attorney in the state not necessarily the county.

Michael, I know Michael has clients all over the state, I have clients all over the state because the state is what, except for in situations like COVID and those rules can be ascertained relatively quickly. It’s more important to have an attorney that specializes in your area of law or has experience in your area of law, that’s far more important than having someone who’s in your county.

I have clients that I’ve never even met. In February, right before the lockdown I just took a trip to the bay area to meet four clients that I had never met in person and I had represented them all for a couple of years so that’s the answer to that question.

So Kaitlin, Katrina, oh Katrina, I’m sorry I was calling you Kaitlin, I couldn’t read that well. In California, there is very specific rules about who can be an independent contractor and who must be an employee and that might be a conversation we have separately.

But essentially if they’re not a physician working for the practice, more than likely they need to be an employee and cannot be an independent contractor. Yeah, that’s right, 85. Yes, Wendy, that’s right, the Dynamex case got codified as (AB)5. And you can look at that Katrina, and if you want some more help on that you can talk to me specifically.

Jean, “How to ask for referrals or reviews like Yelp and testimonials?”

Well without violating anti-kickback regulations, I’m going to let Michael chime in on this too, but I think as long as you’re not giving them something for it, you can encourage reviews. But Michael, what is your answer to that question?

[Michael H. Cohen]: I don’t want to have a thought at the moment on that. We’ve covered so many things, I’m going to just let you keep going here.

[Debra Scheufler]: Okay, all right. Okay, Jean, we can talk about that separately too. Okay, I think I answered all the questions, does anybody else have anything they want to know?

Well thank you very much, everybody. It’s been a real pleasure to be here with you all, I hope you got something out of this and Jean send me an email. And Michael, thank you so much for having me and giving me the opportunity to yammer on for an hour.

[Michael H. Cohen]: Debra, it’s so great to have you here. Well, I know we regard each other’s mentors but you really have a lot of specific information and just to reiterate again, the things that Debra knows and that we learn as lawyers, it’s not necessarily because we’re better at research than anybody else. I mean if you’re a good law student, you learn legal research. But a lot of it is just the school of practice, you represent someone they got in trouble or they learn something from some experience and you really grow by experience. So the way that Debra knows a lot is she’s represented a ton of people which is like sure you can all tell she’s incredibly knowledgeable, resourceful and talented and experienced and experience counts for a lot as well. It sounds like, Debra, you’ve seen the investigator’s side where things have gone wrong as well as the preventative side.

So really kudos to you, thank you so much for giving us such a thorough presentation. And there’s so many risks and pitfalls that you outlined, it’s staggering and there’s a lot to know. So I would encourage people who have specific questions and just to get a general overall read, really Debra is a tremendous lawyer and resource in our community and please spread the words and send this webinar to your friends as well.

And we really appreciate your questions too, because they sharpen us and they give us a lot to think about. And also Debra has videos and blog posts we do as well, so you have a ton of resources to give you more informational materials to help you formulate more questions and also to help you assess risks and exposures and what’s going on with you. But having said that, Debra, also you’re helping people to practice in a way where they mitigate their risks, so really appreciate that and thank you again.

[Debra Scheufler]: Yeah, thank you so much. Have a great day, everyone.

[Michael H. Cohen]: Have a great day everybody, we’ll see you again soon. Bye-bye.

[Debra Scheufler]: Bye.

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