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:

Whether advising start-ups or established companies, Los Angeles / San Francisco / Bay Area healthcare & FDA attorney Michael H. Cohen brings his entrepreneurial spirit and caring insight to cutting-edge legal and regulatory challenges. The Michael H. Cohen Law Group counsels healthcare practices, entities, and companies, such as clinical laboratories, physicians, psychologists, chiropractors, acupuncturists, naturopaths, nurses, healers, medical spas, sleep centers, addiction treatment centers, surgery centers, anti-aging centers, integrative medicine clinics, anti-aging practices, mental and behavioral health counselors, medical service organizations, telemedicine and mobile (m-health) companies, online health ventures, stem cell and cord blood entities; and other health and wellness enterprises. Healthcare and FDA lawyer Michael H. Cohen is admitted to practice in California, Massachusetts, New York, and Washington, D.C. Our clientele is national and international, and we also counsel healthcare and FDA clients in Los Angeles, San Diego, Ventura, San Francisco Bay Area, San Jose, Santa Barbara, Sacramento, San Bernadino, Alameda, Contra Costa County, and other California cities and counties. Contact our Los Angeles, Ventura County, & San Francisco Bay Area FDA & healthcare attorneys today if you need a telemedicine lawyer, concierge medicine lawyer, HIPAA lawyer, FDA lawyer or FDA regulatory consultant (dietary supplements, medical devices, cosmetics, OTC drugs), advertising compliance lawyer, healthcare mediator or arbitrator, concierge medicine attorney, management services organization attorney, or other specialized healthcare legal advice or FDA regulatory consulting.

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