CAMLAW: Complementary and Alternative Medicine Law Blog

Legal issues involving medical directors of spas

The California medical board has made an interesting statement about a physician serving as medical director of a spa.

According to the California medical board's website, the corporate practice of medicine doctrine prohibits: "A physician acting as 'medical director' when the physician does not own the practice. For example, a business offering spa treatments that include medical procedures such as Botox injections, laser hair removal, and medical microdermabrasion, that contracts with or hires a physician as its 'medical director.'"

This is news, because many spas in fact do have medical directors.

Of course California often goes its own way when it comes to regulation, including of medical matters.

And apparently it has a very "strong" corporate practice of medicine doctrine, whereas the rule is much "weaker" in other states.

Often we will give advice to help structure practices, particularly integrative care practices, so as to help prevent corporate practice of medicine problems. We do this in tandem with concerns about Stark and anti-kickback provisions.

California medical board has its own page about corporate practice of medicine, in which it notes:

The following is to provide guidance to physicians on the prohibition against the corporate practice of medicine.

Note: This area of law can be complicated, therefore physicians are encouraged to discuss their medical practices and business enterprises with appropriately knowledgeable legal experts. The Medical Board of California continues to receive complaints and inquiries about the law, and some repeating issues are presented here.

The Medical Practice Act, Business and Professions Code section 2052, provides:

"Any person who practices or attempts to practice, or who holds himself or herself out as practicing...[medicine] without having at the time of so doing a valid, unrevoked, or unsuspended guilty of a public offense."

Business and Professions Code section 2400, within the Medical Practice Act, provides in pertinent part:

"Corporations and other artificial entities shall have no professional rights, privileges, or powers."

The policy expressed in Business and Professions Code section 2400 against the corporate practice of medicine is intended to prevent unlicensed persons from interfering with or influencing the physician's professional judgment. The decisions described below are examples of some of the types of behaviors and subtle controls that the corporate practice doctrine is intended to prevent. From the Medical Board's perspective, the following healthcare decisions should be made by a physician licensed in the State of California and would constitute the unlicensed practice of medicine if performed by an unlicensed person:

Determining what diagnostic tests are appropriate for a particular condition.

Determining the need for referrals to, or consultation with, another physician/specialist.

Responsibility for the ultimate overall care of the patient, including treatment options available to the patient.

Determining how many patients a physician must see in a given period of time or how many hours a physician must work.

In addition, the following "business" or "management" decisions and activities, resulting in control over the physician's practice of medicine, should be made by a licensed California physician and not by an unlicensed person or entity:

Ownership is an indicator of control of a patient's medical records, including determining the contents thereof, and should be retained by a California-licensed physician.

Selection, hiring/firing (as it relates to clinical competency or proficiency) of physicians, allied health staff and medical assistants.

Setting the parameters under which the physician will enter into contractual relationships with third-party payers.

Decisions regarding coding and billing procedures for patient care services.

Approving of the selection of medical equipment and medical supplies for the medical practice.

The types of decisions and activities described above cannot be delegated to an unlicensed person, including (for example) management service organizations. While a physician may consult with unlicensed persons in making the "business" or "management" decisions described above, the physician must retain the ultimate responsibility for, or approval of, those decisions.

The following types of medical practice ownership and operating structures also are prohibited:

Non-physicians operating in a business for which physician ownership and operation are required: any business advertising, offering, and/or providing patient evaluation, diagnosis, care and/or treatment. These are services which can only be offered or provided by physicians.

Physician(s) operating a medical practice as a limited liability company, a limited liability partnership, or a general corporation.
Management Service Organizations arranging for, advertising, or providing medical services rather than only providing administrative staff and services for a physician's medical practice (non-physician exercising controls over a physician's medical practice, even where physicians own and operate the business).

A physician acting as "medical director" when the physician does not own the practice. For example, a business offering spa treatments that include medical procedures such as Botox injections, laser hair removal, and medical microdermabrasion, that contracts with or hires a physician as its "medical director."

In the examples above, non-physicians would be involved in the unlicensed practice of medicine, and the physician may be aiding and abetting the unlicensed practice of medicine.

One has to be very innovative and thoughtful in drafting contractual language between a medical spa and a physician (or professional medical corporation) for aesthetic medical services in order to respect these strong prohibitions. Corporate practice of medicine, scope of practice, and malpractice liability also should be considered together, along with insurance reimbursement considerations, to help structure a situation that is ideally legally defensible as well as clinically appropriate and financialy remunerative.

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Michael H. Cohen, Esq.; 468 North Camden Dr. | Beverly Hills, California 90210 | 310-844-3173