Key Legal Issues for Medical Spas and Aesthetic Medical Practices
Aesthetic medicine requires careful attention to the intersection of corporate practice of medicine, licensing, anti-kickback and fee-splitting considerations, and other legal and regulatory issues. This overview will help you better understand the legal implications of opening a medical spa.
“The medical spa industry is exploding with potential business opportunities. Yet, many physicians and business owners open an aesthetic medical practice or join a medical spa with little awareness of the potential legal and regulatory pitfalls that await the unprepared clinician or entrepreneur,” says attorney Michael Cohen, JD, MBA.
The IAPAM asked attorney Michael Cohen of the Law Offices of Michael H. Cohen to give IAPAM members some key points to keep in mind in order to help them navigate the key legal issues relating to opening a medical spas or aesthetic practices. Here are the highlights of that report.
Legal Structure for the Business
Many physicians want to know what is the best business structure for a medical spa, or for their own medical practice when they affiliate with a medical spa. This is a complicated question that cannot be answered in a bullet point, as it involves a number of distinct legal issues.
The first has to do with the corporate structure itself. In general, incorporation provides limited liability, which means that the individuals running the business typically are insulated from the liabilities of the corporation, so long as the corporation is properly capitalized and administered with all the necessary corporate formalities. However, a physician or other professional can still remain liable personally for professional negligence. Further, different kinds of corporate structures can have different tax implications (for example, an LLC versus a “C” or “S” corporation). Non-physicians are ordinarily prohibited from owning shares in, or sharing profits or “splitting fees” with members of, the professional medical corporation.
Clinical Practice Structure
Structuring the clinical practice structure for the physician, as well as for the medical spa or other health care institution, requires careful attention to state licensing laws. Most states define the “practice of medicine” in terms such as “diagnosing and treating disease,” and make the unlicensed practice of medicine a felony. Legal concerns can arise because courts define the terms “diagnosis” and “treatment” broadly. Because Non-MDs need to be careful not to cross the line from permissible, licensed activities that fall within their legally authorized scope of practice, into the unlicensed practice of medicine.
The other side of the licensure coin is the question of which therapies require medical supervision, and which can be performed independently by a nurse-practitioner or other legally qualified provider.
If physician supervision is required and the patient is nonetheless injured through the non-MD’s negligence, the physician can potentially be held liable on two different theories of negligence: “directly” liable for failing to properly supervise, and “vicariously” liable for negligence by the non-MD who will be seen as the MD’s agent.
Credentialing Health Care Providers
Medical spas and wellness centers face a dilemma when it comes to vetting practitioners. On one hand, if the organization does not ensure that it is hiring the most qualified, competent providers, and a patient is injured while under a practitioner’s care within the spa or center, the organization can be considered negligent for failing to exercise due diligence in hiring. On the other hand, if the organization sets up a credentialing scheme, designed to ensure that affiliated practitioners have satisfactory qualification and competency, and a patient is injured while under the care of one of the practitioners, the organization may be considered negligent for failure to exercise due care in credentialing. Credentialing is complex as it varies by state and profession.
Medical Malpractice (Negligence) and Professional Liability Insurance
The legal definition of medical malpractice (or professional negligence) is: failure to use due care (or follow the standard of care) in treating a patient, and thereby injuring the patient. Generally, while licensed medical doctors are judged by medical standards of care within their specialties, each non-medical profession is judged by its own standard of care—for example, nursing; acupuncture; chiropractic; physical therapy; massage therapy.
States vary in their requirements for malpractice coverage, and individual insurers vary in the extent to which they cover aesthetic medical therapies and complementary and alternative medical therapies. Professional liability insurance policies tend to be dense and filled with jargon, making it difficult to determine exactly what is covered and what is excluded.
A lack of proper informed consent can serve as an alternative theory to medical malpractice. The legal obligation of informed consent is to provide the patient with all the information material to a treatment decision—in other words, that would make a difference in the patient’s choice to undergo or forgo a given therapeutic protocol. This obligation applies across the board, no matter what therapies are involved. Materiality refers to information about risks and benefits that is reasonably significant to a patient’s decision to undergo or forgo a particular therapy; about half the states judge materiality by the “reasonable patient’s” notion of what is significant, while the other half judge materiality by the “reasonable physician.”
Professional discipline refers to the power of the relevant professional board—in the physician’s case, the state medical board—to sanction a clinician, most significantly by revoking the clinician’s license. Typically, the state medical board will revoke a physician’s license for egregious behavior such as gross negligence, but medical board discipline also has been a concern when physicians deliver emerging therapies that may be therapeutically valid although they may not yet have garnered widespread approval.
Anti-Kickback and Fee-Splitting Considerations
Federal law prohibits physicians from receiving an illegal discount or payment in exchange for referring patients. The prohibited practice, also known as a “volume-based inducement,” is codified in the so-called “Stark” and federal anti-kickback laws, and often mirrored in state fee-splitting laws. These rules also have numerous exceptions (known on the federal side as “safe harbors”), such as rules that would allow physicians under certain circumstances to have legitimate fee-sharing arrangements within a professional medical corporation or a properly structured group practice.
You can download the full report, including Michael H. Cohen’s tips for key section at http://www.iapam.com/legalguide/. This information has been taken from part of the course curriculum that will be taught at the IAPAM’s 2-day Aesthetic Medicine Symposium. You can also find the latest medial spa and aesthetic industry news at http://www.AestheticMedicineNews.com.
For more information and further resources regarding legal issues applicable to aesthetic medical practices and medical spas, visit the Complementary and Alternative Medicine Law Blog.
The materials in this press release have been prepared by for informational purposes only and are not legal advice or counsel. The information contained in this release is provided only as general information, which may or may not reflect the most current legal developments. Readers should not act upon any information in this release without seeking professional legal counsel.
About the Law Offices of Michael H. Cohen
The Law Offices has expertise in legal and regulatory issues including liability risk management, insurance, billing and reimbursement matters, business practice structure, FDA/dietary supplement and medical device regulation, laboratory requirements and medical/health board disciplinary issues. The law firm’s principal, Michael H. Cohen, JD, MBA, has worked as a corporate lawyer on Wall Street, has written numerous books and articles on legal issues in complementary and alternative medicine, and has served on the faculty of
The International Association for Physicians in Aesthetic Medicine is a voluntary association of physicians and supporters that sets standards for the aesthetic medical profession. The goal of the association is to offer education, ethical standards, credentialing, and member benefits. IAPAM membership is open to licensed medical doctors (MDs) and doctors of osteopathic medicine (DOs). More information about the Symposium can be accessed through http://www.AestheticMedicineSymposium.com.
FOR MORE INFORMATION:
Jeff Russell, Executive-Director
International Association for Physicians in Aesthetic Medicine (IAPAM)
Michael H. Cohen, JD, MBA
The Law Offices of Michael H. Cohen
or Michael’s Blog: http://www.camlawblog.com/