California Medical Board cautions medical boards against "renting a license" by hiring doctors to run weight loss clinics and day spas owned and operated by laypersons.
In California, laypersons cannot employ physicians. Rather, physicians must own the entity providing professional services.
One potential work-around involves having two entities, the center and the manager, with a management agreement between them.
However, the management agreement must involve management services rendered to the medical center, day spa or clinic at fair market value.
There are sometimes federal (Medicare anti-kickback) as well as state law fee-splitting issues involved.
When analyzing fee-splitting issues for possible illegal kickbacks and other violations of law, it is important to realize that there are at least two possible places where fee-splitting can raise legal red flags.
One is fee splitting between the center (or medical spa, or clinical facility, weight loss clinic, etc.) and the practitioner.
The other is fee splitting between the medical center (day spa, wellness clinic, etc.) and the company providing management and administrative services to the center.
Both raise a legal issue known as the "corporate practice of medicine" doctrine. Essentially, this goes back to the idea that laypersons cannot be in charge of the practice of medicine. The flow of payments must be carefully tracked, and state law must be analyzed to see whether a given structure runs afoul of relevant law.
Sometimes states will be more lenient on fee-splitting between practitioners in a group practice, for example; but less lenient on fee-splitting between the management company and the group. The issue then is how to pull funds up from the group practice and into the management company which will have lay (non-physician, non-clinical) owners and/or investors, in a legally compliant manner. There’s no use setting up a new clinical entity if it’s going to attract regulatory scrutiny, investigation and possible fines and penalties. Better legally safe and sound than sorry.
Our law office frequently advises medical spas, weight loss clinics, and other clinical facilities and entrepreneurs on how to properly structure these kinds of entities and transactions.
Our attorneys’ legal advice includes both federal and state law, and we advise clients on how to minimize their legal exposure. "Don’t roll the dice, get legal advice!"
Healthcare & FDA attorney Michael H. Cohen is a thought leader in healthcare law & FDA law, pioneering legal strategies in healthcare. wellness, and lifestyle markets. As a corporate and transactional lawyer, FDA regulatory attorney who also handles healthcare litigation, healthcare mediation and healthcare arbitration, and international healthcare & wellness law speaker, Los Angeles / Bay Area healthcare & FDA lawyer Michael H. Cohen represents conscious business leaders in a transformational era. Clients seek healthcare & FDA attorney Michael H. Cohen‘s legal savvy on all aspects of business law, healthcare law, and FDA law, including:
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