Medical spas and integrative clinical care centers often raise legal issues relating to fee-splitting, kickbacks, Stark, and other conflict of interest areas.

We cover our Center vs. Mall model in this article:

Note that in the Mall Model, there is no "compensation" to the practitioner, but rather, the clinician is simply a tenant renting space from the Center and receiving administrative and management services in return.

Further, the Mall Model brings two useful advantages:

  • This model arguably presents less of a corporate practice of medicine problem for the Medical Spa or Integrative Care Center, because it puts the Medical Spa or Integrative Care Center at one further remove from the medical practice of Professional Medical Corporation (or Physician) than the "Medical Spa or Integrative Care Center" model.
  • This removal also could, theoretically, potentially distance the Medical Spa or Integrative Care Center from liability for actions of Professional Medical Corporation (or Physician).

However, the arrangement has to fall within applicable regulatory exceptions and even so, regulators may or may not agree that corporate practice of medicine issues have been successfully addressed.

The following additional points are important:

A revenue-sharing arrangement theoretically does not work on the Mall Model, because rent is a sum certain and if it were structured as a percentage of revenues then it would be viewed as a volume-based incentive to refer; and in any event, the flow of payments from patient to practice to the Center would be seen an a kickback.

 A revenue-sharing arrangement in lieu of straight compensation could potentially work in the Center Model if the percentage paid to the practitioner is FMV for productivity/production, and the corresponding percentage retained by the Center is FMV for rent/equipment/administrative and management services.  However, this depends on a lot of factors, including whether regulators will see this as a true fair market value arrangement as opposed to a disguised kickback.

If the practitioner is on the Mall Model, then the question of whether to classify as an independent contractor vs. employee is moot, because there is no “compensation”—he or she is just a tenant.

However, if the practitioner is on the Center Model, then we must look to see how the state labor department would consider the arrangement.

If the health care practitioner is housed within a professional corporation, it may be that the department is satisfied by the PT being an employee of the PC (while the PC is an independent contractor to the Center).

Sometimes we use hybrid models and these are still evolving as the regulatory landscape is constantly changing.  It is important to take these conceptual models as a framework only which has to be adapted and tailored by legal counsel to a specific factual situation.




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Michael H. Cohen is an attorney providing business legal advice to green entrepreneurs and companies, and health care law advice to businesses and physicians, acupuncturists, naturopaths, homeopaths and others in the holistic health, wellness, and green industries. As a founding attorney of the Michael H. Cohen Law Group, he represents businesses poised for vertical lift, whose leaders are conscious, intuitive, and committed to shaping a better world. Michael also advises medical spas and integrative medicine clinics, physicians, chiropractors, naturopathic physicians, massage therapists, energy healers, nutritionists and herbalists, dietary supplement and cosmetics companies, and businesses with bio-energy and other technologies and medical devices. Michael offers the Entrepreneur’s Legal Toolkit as a series of legal guides to businesses. The first legal e-book deals with Contract Essentials, giving legal tips every business needs to negotiate its legal agreements; the second addresses legal issues faced by multi-level marketing companies and individuals involved in multilevel marketing and direct sales; and the third one so far is a HIPAA Regulations and Privacy Manual at far less the cost than it would take for an attorney to prepare.

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