As the demand for aesthetic services and treatments grows, more entrepreneurs and medical professionals are venturing into medical aesthetic practices. While this opportunity is enticing, the path to establishing a successful aesthetics practice is loaded with legal risks and challenges. Let’s dig into ten legal pitfalls aspiring aesthetics business owners must proactively confront to ensure a smooth and compliant journey toward growth.
1. Incorrect Business Structure
Knowing how to structure your business may be the most critical aspect of setting up an aesthetics business. Many states prohibit non-physicians from owning a medical business. This is known as the prohibition of the corporate practice of medicine. However, a non-physician can still operate an aesthetics business using a proper legal structure. The most highly recommended structure is known as an MSO/MSA business structure. A non-physician who wishes to operate an aesthetics business would own a Management Services Organization (MSO) and then partner with a physician’s professional business entity, forming a contractual relationship known as a Management Services Agreement (MSA). This MSO/MSA structure allows a non-physician to operate an aesthetics business while staying within the legal parameters of their state. However, the need for this structure varies by state, so the best practice would be to contact a licensed attorney to determine the best way to structure your business.
2. Lack of Medical Structure
While it may vary from state to state, you will need a medical director if you are not a physician owning an aesthetic practice. The medical director is responsible for supervising the medical portion of the business to maintain the separation between it and the non-medical side to ensure proper compliance with state law through the MSO/MSA structure. The medical director’s responsibilities generally include but are not limited to (1) supervising the delegation of med spa services to other doctors to non-physician staff members; (2) conducting the initial good faith examination and diagnosis for the patient; (3) advising the patient of the dangers of doing the procedure. Doctors should also get informed consent; (4) know what the risks are for each procedure, such as rashes, burns, allergies, and infections; (5) review the medical information for the patient; (6) properly maintain records so they comply with federal, state, and local laws.
3. Inadequate Insurance Coverage
To make sure yourself, your business, and your patients are as protected as possible, it is essential to ensure you have suitable types of insurance. General liability and medical malpractice insurance are essential for an aesthetics business. General liability protects for bodily injuries or property damage at your location. Malpractice insurance offers protection in the form of professional liability insurance for your provider(s).
States vary in their requirements for malpractice coverage, and individual insurers vary in the extent to which they cover aesthetic, complementary, and alternative medical therapies. Professional liability insurance policies tend to be dense and filled with jargon, making it difficult to determine what is covered and excluded. As such, contacting an attorney who can help dissect these policies for you into something more easily understood is helpful.
4. Lack of Provider Supervision
Provider supervision is the level of supervision that non-physician providers may require to perform certain aesthetic procedures. Each state has specific laws regarding supervision by physicians, physician assistants, nurse practitioners, and other medical and non-medical personnel. States can vary on various requirements such as: (1) must the supervising physician be onsite; (2) how often does the physician need to see patients, either in person or via telehealth; (3) who can conduct a good faith exam? There are important questions to address when starting your business. Since these vary by state, you will want to ensure you understand your state’s requirements and communicate those with your physician and providers.
5. Violations of Scope of Practice by Providers
Scope of practice describes the procedures, actions, and processes that a healthcare practitioner is permitted to undertake in keeping with the terms of their professional license. The scope of practice is limited to the law, allowing for specific education, experience, and specific demonstrated competency. The aesthetics practice field is one with many different employee types. From physicians, physician assistants, nurses, nurse practitioners, and more. Each of these positions will have various scopes of practice. It is essential to know which procedures fall under which category to ensure they are performed and supervised by the proper personnel to provide your patients with the best care and protect yourself against malpractice claims. Unfortunately, what is allowed for each position can be a gray area in many states. Reaching out to a state licensure board or law firm licensed in your state is beneficial in these circumstances.
6. Lack of Patient Informed Consent
Patients in every state have the right to receive information and ask questions about procedures before treatment. The legal obligation of informed consent is to provide the patient with all the important information for a treatment decision. This means all information that would make a difference in the patient’s choice to have a specific procedure. This obligation applies across the board, no matter what therapies are involved. In aesthetics, informed consent is typically obtained by providing a patient with a document explaining the procedure. These forms should include the potential risks, procedure alternatives, and typical results. These forms should be procedure-specific and be compliant with state and federal regulations. The patient and provider should sign consent forms before each treatment.
7. Fee-Splitting and Kickbacks
Fee splitting or commissions can be sticky when you are involved in healthcare. Many states prohibit a healthcare business from paying commissions to non-medical individuals. Therefore, paying your physician or employees “by procedure” may cause issues. Additional regulations such as kickbacks, the corporate practice of medicine doctrine, or physician self-referral laws can also be implicated with commissions. Other systems, such as tiered payments, may be utilized to prevent legal issues if you’d prefer not to use an hourly wage.
8. Lack of Proper Business Licenses
Depending on your state and local government requirements, your aesthetics business may require certain licenses to operate compliantly. It is essential to acquire these to avoid fines or sanctions. These can range from general business licenses to more specific licenses for cosmetology or other services. You should ensure that all employees performing a job that requires a professional license have that license and are in good standing with their governing board. Contacting an attorney licensed in your area will ensure that you have the best knowledge of these required licenses.
9. Failing to Conform with HIPAA and OSHA Requirements
Even though many of the services offered at an aesthetics business may not constitute the practice of medicine, they are usually considered healthcare entities and should be operated as such. As healthcare facilities dealing with protected health information, medical spas may be required to comply with the Health Insurance Portability and Accountability Act of 1996 (HIPAA). This act prevents the unauthorized disclosure of patients’ protected health information. Your business should take great care to ensure that none of your patient’s private information is ever given out to someone other than them without their explicit permission. Additionally, healthcare facilities should also maintain proper OSHA protocols. These can be located on the OSHA website.
10. Waiting Until an Issue Arises to Hire an Attorney
As you can see from above, aesthetics practice has a lot of gray areas and specific regulations that may need help understanding. One of your best defenses is a good attorney who is well-versed in this field. It is commonly said that the best offense is a good defense, and this is especially true in the aesthetics field. Using an attorney as a shield can help you avoid becoming involved with many legal issues rather than waiting for a problem to arise and needing to find one that can assist you in a panic.