As the medical spa industry recovers from the COVID-19 pandemic, many operators are assessing their position and wondering how to move forward with business. For many med spas, this is a great opportunity to take a fresh look at the relationship with their physician leader, who is often designated as the “medical director.” If this relationship is not structured properly, both the med spa and medical director could be at risk of violating laws that regulate the practice of medicine.
MEDICAL DIRECTOR AGREEMENT PITFALLS
Some med spa entrepreneurs believe having a medical director is all that’s needed to ensure compliance. And for the physician, a medical directorship can be a potentially lucrative opportunity to venture into aesthetic medicine. Although a medical directorship can seem like a win-win proposition for both the med spa and physician, the arrangement presents legal risks. Medical establishments are not simple businesses that can be started by anyone. Only licensed physicians can lawfully practice medicine, and only certain types of legal entities, such as professional corporations, can be formed to run a medical practice.
If a med spa conducts activities that constitute the practice of medicine- for example, hiring non- physician personnel to perform medical services or representing in its marketing materials that it renders medical treatment- then the med spa could be accused of engaging in unlicensed medical practice. Simply contracting with a physician to monitor the med spa’s operations isn’t sufficient to defend against such as accusation. To the contrary, the medical director may be accused of facilitating the unlicensed practice of medicine by a med spa. In fact, the Nevada State Board of Medical Examiners has taken disciplinary action on this very basis against physicians serving as medical directors.
THE MSO MODEL
To manage these risks, some med spas follow a management services organization (MSO) model. Under the MSO model, a legal entity authorized to operate a medical practice provides the medical services available at the med spa. This entity, in turn, contracts with another entity- the MSO- to provide comprehensive business management services to the medical practice. The MSO model can be more complex and require more involvement from the affiliated physician than the medical director model, but it allows for the division between the medical and non-medical business aspects of the med spa’s operations- minimizing the risk that the business arm of the med spa is unlawfully practicing medicine. Ultimately, a med spa’s legal and operational structure should be tailored to its specific circumstances. Key factors to consider include: the scope of services, the personnel who will provide the services and integration with non-medical spa services, such as cosmetology treatments. While the appointment of a medical director may be appropriate for some med spas, it is not guarantee that a med spa is appropriately established in compliance with the laws governing the provision of medical services. Ayesha Mehdi, Esq. is a partner in the Las Vegas office of Spencer Fane LLP, where she represents health care providers as a member of the firm’s health care group.
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