Entrepreneurs or physicians seeking to expand their med spa or med spa franchise across state lines should be alert to variations in state law. Some variations are minor and may only impact policies and procedures. Other variations may impact the fundamentals of your med spa business model and necessitate alterations.
Here are five common state-specific issues to consider before expanding or franchising your med spa business across state lines.
1. State Law May Restrict Who Can Own a Med Spa
More than half of states, including Texas, California, and Illinois, do not allow corporations or non-healthcare professionals to own med spas under the Corporate Practice Of Medicine doctrine (CPOM).
Some CPOM states may allow nurse practitioners or other health care professionals to own a medical spa; other CPOM states only allow physicians to own a medical spa. Texas, for example, restricts majority ownership of medical spas to physicians, while allowing physician assistants to own minority interests in some circumstances.
In addition, each CPOM state may also implement and enforce CPOM differently – entity formation and employment contracts are almost always impacted as a result. Using Texas as an example again, the clinical side of a medical spa must be set up as a professional limited liability company or professional association.
Other states, like New Mexico and Florida, do not limit corporate ownership of medical practices. Florida, for example, places no restrictions on who can open a med spa. Corporations can also employ physicians in Florida.
Med spas that do not comply with the prohibition against the Corporate Practice of Medicine, in states where it applies, can face civil and even criminal penalties.
Med Spa Ownership vs. Practicing Medicine
While CPOM laws may vary from state to state, all states have laws restricting the practice of medicine to those persons that satisfy the state’s applicable physician licensing laws.
In Texas, “practicing medicine” means the diagnosis, treatment, or offer to treat a mental or physical disease or disorder or a physical deformity or injury by any system or method, or the attempt to effect cures of those conditions, by a person who:
- Publicly professes to be a physician or surgeon; or
- Directly or indirectly charges money or other compensation for those services.
The offer and sale of most medical spa procedures would implicate the Texas legal definition for practicing medicine, regardless of the seller’s intent to provide treatment or whether the customer in fact received any treatment.
State CPOM Prohibitions Do Not Mean a Non-Physician Can’t Be Involved in the Operations of a Med Spa
A non-doctor may be involved in the day-to-day operations of a med spa – even if limited by Corporate Practice of Medicine prohibitions – via a management services organization (MSO). This is a separate entity (usually an LLC) set up to manage the non-medical operations of the med spa or clinic.
The MSO owns the brand, office space, equipment, etc., and can license the brand, lease space, and/or provide services to the physician’s professional entity in exchange for compensation.
In most states, the MSO can be set up as a Corporation or as a Limited Liability Company (LLC) and is often attached to the physician-owned entity through a management services agreement.
Learn how Management Services Agreements allow non-physicians to participate in the day-to-day operations of a medical clinic without violating the Corporate Practice of Medicine doctrine.
2. The Standard of Care May Differ from State to State
“Standard of care” is not a medical term; it is a legal concept. The exact legal standard varies, but generally, it means exercising the degree of care that a prudent and reasonable healthcare provider would exercise under the same or similar circumstances.
The standard of care, however, can vary across state lines because standards of care are largely determined by state legislatures, state administrative agencies, and state courts.
State-by-state variations in standards of care may impact patient safety standards and procedures, treatment plans, as well as medical oversight. Failing to uphold a state’s standard of care risks disciplinary action by state medical boards, civil liability, and criminal conviction.
A healthcare attorney can advise you on how to comply with your state’s standard of care.
3. Physicians May Need a Pharmacist License
Some state medical boards distinguish between administering medication (i.e., giving a drug for immediate, in-office use) and dispensing medication (i.e., giving a patient prescription drugs to take at home).
Texas physicians may administer drugs but are not allowed to dispense drugs unless the physician is also licensed as a pharmacist (with a few exceptions). That can create problems for med spas or wellness clinics that want to sell and dispense a multi-month supply of medication, such as part of a weight-loss program.
Other states do allow physicians to dispense medication, provided they comply with the state’s regulations, which can include additional licensing and/or fees. New Mexico, Arizona, and Louisiana, for example, allow physician dispensing in compliance with state law.
The healthcare attorneys at Hendershot Cowart can provide you with guidance on prescribing regulations that apply for the states in which you wish to expand.
4. The Facility May Need a License
In some states, the med spa facility itself may need a license. The licensing body varies from state to state, as do fees and facility requirements.
In Texas, med spas do not need facility licenses. Other states, including Arizona and Illinois, do require a medical facility or medical corporation license.
5. Many States Have Distinct Fraud Regulations
Many states have their own versions of federal regulations like the Anti-Kickback Statute and False Claims Act. While the federal laws primarily apply to federal healthcare plans, state versions often apply much more broadly. These laws limit the arrangements you can lawfully make with marketing partners or referral sources, and each state is different.
Texas’ Patient Solicitation Act, for example, is modeled on the federal Anti-Kickback Statute. It prohibits any kind of payment for patient referrals. It is common in the retail space to offer “refer a friend” bonuses, but Texas med spas cannot do so without breaking the law.
States also regulate healthcare advertising, just as the FTC does at the federal level. Texas strictly controls medical advertising, including but not limited to:
- Using testimonials.
- Claiming board certification.
- Making comparative claims.
- Promising insurance acceptance.
Florida has similar (but not identical) regulations.
Speak With a Med Spa Compliance Lawyer Today
If your med spa enterprise is ready to expand across state lines, consult the healthcare attorneys at Hendershot Cowart for a state-by-state compliance plan.
Our experienced healthcare attorneys can help you design a compliant business model for the Texas regulatory environment and advise you on state-specific issues outside of Texas, including referrals to local counsel as needed.
Ready to take your med spa enterprise across state lines? Contact the healthcare attorneys at Hendershot Cowart P.C. today. We can review the relevant issues state by state and create a compliant ownership model and procedures that work for your business.
