How to Create a Mutually Beneficial Medical Director Contract

Posted By Mike Meyer, Thursday, December 17, 2020

contract and pen

By Patrick O'Brien, JD, Legal Coordinator, American Med Spa Association

An employment agreement between a medical spa and a medical director must benefit both parties; otherwise, it likely will be unsatisfactory for one or both sides. If one or both sides do not take the time to read the contract, they could find themselves disappointed with the outcome. In addition, the agreement needs to clearly address certain aspects of state medical practice law to be compliant and avoid creating large risks for both the physician and the medical spa. Here are a few things that physicians and practices should find within a mutually beneficial and compliant contract.

A Medical Director or a Practice Owner

While finding a physician who would be a good fit for your medical spa is an achievement in itself, the next step is to formalize the agreement. However, before you do that, you need to consider if a medical director agreement is even appropriate. Many states limit the ownership of medical entities to only professional licensed persons; this is referred to as a prohibition on the "corporate practice of medicine." In these states, this means that hiring a medical director when you are not a physician can lead to legal trouble for the unlicensed practice of medicine. This can also open the physician's license up to board discipline for aiding and abetting the unlicensed practice of medicine.

In states that prohibit the corporate practice of medicine, a medical director agreement alone will not provide you and the physician the protection you need. Instead, a different ownership structure or MSO arrangement (you can read about MSOs here) will need to be used to comply with the state's ownership requirements. Regardless of whether one of these methods or a medical director agreement is used, the goal is largely the same—to legally provide medical services through the medical spa.

While the main concern with medical director agreements—or any employment agreement—often is what the compensation is going to be, other aspects are equally if not more important. These include clearly defining the responsibilities and duties of the medical director, as well as the limitations placed on the owners' decisions.

A Clear Goal

Before coming to an agreement, the medical spa must decide what exactly it needs the medical director to do. Who will the medical director be overseeing? A medical spa employing advanced practitioners such as physician assistants (PAs) and advanced practice registered nurses (APRNs) who can examine patients and create treatment plans will require significantly less day-to-day involvement than one that doesn't employ licensed prescribers, where the medical director would need to examine all new patients. How much training and procedure development needs to be done for the medical spa? Is this medical director taking over for a departing director that left the spa in a good position with regard to its protocols and standard operating procedures?

The medical spa must clearly communicate its intentions during the search process and make sure that the contract is built around that philosophy.

From the other perspective, a physician must honestly evaluate his or her goals when considering a medical directorship. While physician contracts typically last for one to two years, both sides generally expect that the relationship will continue thereafter, so a physician must consider his or her long-term plan. The physician must consider what the time commitment to the medical spa will be and if they are able to meet those obligations in addition to other obligations they have. Is the medical spa directorship a full-time commitment? Will it interfere with their other practices or goals?

Medical Decisions

All states frown on professionals "selling" their license or providing supervision in name only. While the paper agreement is important, it only works if it accurately describes what is really taking place at the medical spa. The purpose of the medical director is to provide supervision and oversight of the medical treatments provided under the authority of the medical director's license and to ensure that the patients are treated to the standard of care required. Additionally, most, if not all states require that physicians be free from interference or undue influence in their practice of medicine by people without a license to practice medicine.

As such, the medical director agreement needs to define and address which decisions are "medical" and are to be made by the medical director and which are normal business decisions that can be made by the medical spa owners. These areas will vary by state but may include issues such as hiring and firing of clinical staff, training requirements, charges for medical services, and choice of devices and medical supplies.


There are countless formulas and methods for arriving at a "fair" compensation for a medical director. However, the largest consideration is likely to be the time commitment. If the duties only involve quality control, auditing and supervision of PAs and APRNs, the time commitment may be a few hours a week. In this situation, the medical director will likely be working part time and in addition to their own practice. On the other hand, if the medical director is examining patients, creating treatment plans, delegating and supervising nurses and medical assistants, creating protocols, and training, the position is likely to require their full attention and frequent onsite presence. Obviously, the medical director will expect greater compensation in the second situation than in the first.

The prospective medical director will also want to weigh the professional risk they will be taking on with the role. Medical board issues or complaints for the medical spa will also bear on the medical director's license, so agreed compensation will need to account for the risk that they are assuming.

In addition to other issues we discuss above, many states have some version of a law or rule that prohibits kickbacks, payment for referrals, or splitting or sharing professional fees. Whatever compensation structure is settled on, it will need to be made in compliance with these laws.

I will be hosting a webinar on this topic at 1pm CST today. Click here to register now!

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