In today’s video, we discuss key mistake medical spas are making in their legal compliance, and how medical spas can thrive instead of floundering in the complicated legal maze.

I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We’ve advised over a thousand healthcare industry clients on healthcare and FDA legal issues and as a result, they’ve successfully launch or grow their existing health and wellness product or service line.  Just imagine how far down the curve your healthcare business or practice could be with modicum of focused legal advice especially at the outside, but all along the way.

Jane is a licensed Registered Nurse and Mark is a licensed Medical Doctor. Nurse Jane is great at marketing, she brings in tons of patients.  She found Dr. Mark, he had his own primary care private practice, and she convinced him that he could add to his income by doing some “light supervision” for her thriving medical spa.

Nurse Jane had a great virtual coffee and Dr. Mark is in, and Jane called us and introduced Dr. Mark first as her “partner” in the venture, then she corrected herself and said “medical director.” 

This is where the Hook comes in and the Buzzer sounds.  It might seem like a language game or a match made in heaven, but, the idea of having a partner in a medical spa who is a fellow licensed healthcare professional is often a huge compliance no-no.  Of course, there is a mix-and-match Moscone-Knox professional corporation, we talk about that elsewhere.

While the term “medical director” is immensely popular, especially among our healthcare startups, many prosecutors look at the designation, “medical director” as proof that the venture has violated the Corporate Practice of Medicine.  We have more detail about this in a blog post entitled, “If Someone Asks You to Be Medical Director, Run!”

Let’s take a step back and get the birds-eye view so we can get you more oriented here.

You’ll want to think about a medical spa as being two ventures in one.  Do you remember that old commercial for a breath freshener called Certs? It said, “two, two, two mints in one.”  I never forget those commercials that I watch in childhood. So, here’s what you got: two ventures in one.  First, you got the medical venture.  Second, you’ve got the business venture.

The medical venture is headed by the MD, who provides medical-grade therapies to the patients.  These therapies (like Botox) require a medical license to prescribe; and, require an MD or, an appropriately supervised mid-level professional—such as, for example, an RN—to administer.

Now there’s a carve-out for the advanced nurse practitioner, but for now just to say that they can’t be prescribed or administered by a layperson.

The medical venture might be in the form of a professional medical corporation—or in some states, a PLLC or a professional limited liability corporation.  In some states, like, California, there are laws that allow licensed healthcare providers to “mix and match.”  So, you might have the MD as 51% or majority shareholder and President of the Professional Medical Corporation, and the RN as 49% or minority shareholder, and an employee of the Professional Medical Corporation.

This brings its own complications. There are a lot of details to work out here in terms of revenue streams and who has control over the professional corporation. And who owes what duty to whom, and when it gets unwound it could be a mess. But for now, we’re talking about the separation of the MSO side with the business management or marketing services and the clinical side which provides the medical and the RN services

The compliance reason for the MSO is to separate out the business functions, and, comply with prohibitions against the Corporate Practice of Medicine (or “CPOM”) and fee-splitting or anti-kickback law.

The MSO should get paid at fair market value for providing management and marketing services to the medical corporation.

Once we get the regulatory issues ironed out, typically, our medical spa clients will need to have their core documents drafted or reviewed.  For example: Consent forms, an office policies form, privacy policy, terms of use, various agreements, employment agreements, contractor agreements, vendor agreements, agreements with mid-levels and the share of the shareholder agreements if you got the mix and match scenario

There are many corporate lawyers out there who like giving advice about documents but some don’t.  And many understand that healthcare lawyer is very specialized, it’s a highly regulated industry with its own language, its own liability pitfalls that can besiege a healthcare practice or business.  Because we focus solely on the healthcare industry, this is within our wheelhouse, this is what we love doing.

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