Medical Spa Legal Requirements

Posted By Madilyn Moeller, Wednesday, December 8, 2021

Gavel and stethoscope

By Patrick O'Brien, JD, Legal Coordinator, and Madilyn Moeller, Editorial Assistant, American Med Spa Association

Dozens of decisions are needed to open a medical spa. Some will be easy, some will be difficult, and some will be made without even realizing you made a choice. Here is a look at some of the legal and business requirements you may encounter. There is no one "correct" answer with these, and it is always a good idea to consult an expert, such as a CPA or attorney, for guidance.

As a Business

The business legal structure that's right for your medical spa will depend on the licenses of the owners and co-owners and the laws of your state. Generally, because medical spas are treated as medical practices, they will need to be owned in an approved way. Some states restrict medical entities to professional ownership, and the entity may need to comply with the professional corporation's act or professional limited liability act. In other states, general business entities, such as an LLC or corporation, may be permitted. The type of structure you choose will impact the way you need to file taxes, both at the federal and state level. Once you have created your business entity with the state, you will need to obtain a federal employer identification number (EIN).

The business licenses you need will vary based on your state or local rules. For example, if you plan to use a business name that is different from your corporate name, you may need to register it as a different name or that you are "doing business as" (dba). And there will be rules about what kinds of names you can and can't use. You may need to obtain a sales tax certificate or have your facility inspected. Your city's business development website can be a valuable resource to outline what you might require.

Many states require business owners to participate in the workers' compensation and unemployment programs. In addition, carrying business liability insurance can help protect you from unforeseen problems.

As with any other business, medical spas will need to enter contracts and agreements with various other companies and service providers. These can include purchases or leases for any number of things, including human resources and payroll systems, electronic medical records systems, buying or leasing your office space, lasers and medical equipment, retail skin care products, and medication and consumables needed for treatments. All these products and services will be governed by a contract that has many terms and conditions in addition to the price. It is often a good idea to carefully review or have an attorney review agreements before you sign to make sure you fully understand the deal.

As an employer, you will have many responsibilities to your employees beyond payroll. Many states make employers responsible for several worker disclosures and documentation. There are also employee benefit and retirement programs that need to be administered. An HR company can help you comply with many of these requirements and simplify the management of them. You will also need to create an employee handbook to outline your policies and provide employees notice of what is required. Work with an attorney or labor consultant to develop this document so you can make sure that important needs and situations are covered. Additionally, your medical spa will need to meet workplace safety requirements under state rules and OSHA standards. These include training, notices and monitoring documentation.

Your legal counsel can also help you draft the policies needed for your medical spa, including a privacy policy built around HIPAA requirements. This should inform how you approach emails, testimonials and before-and-after photos, among other things. Regulations for telehealth differ between states, so seek local legal counsel to find out what you need to do to maintain telemedicine compliance.

As a Medical Practice

Medical spas, in the majority of states, are treated as medical practices. Therefore, in addition to the requirements needed to open a business, a medical spa owner must comply with the rules for operating a medical practice. This can include using the correct legal entity, such as a professional corporation, and having the proper ownership of the practice. Several states only allow physicians to own medical entities; in these jurisdictions, non-physicians may be limited to a minority share or entirely prohibited from ownership. However, non-physicians are often still able to participate in medical spas through management services organizations (MSOs), which provide the administrative services that keep the business side of a medical spa running smoothly. Even in states that allow anyone to own a medical spa, these non-physicians will still need to hire a physician or other health care professional to provide the medical services. Check with your legal counsel to learn about the regulations for medical spa ownership in your state. Once you have the ownership settled and the proper business entities established, you may need to register with your state medical board. Several states have additional requirements to register medical entities, business names and/or medical spas with the state medical board in addition to the state's regular business registration requirements.

Medical spas will have—in one way or another—someone serving as the 'medical director'; this will be a physician or other independent health professional. The medical director is the person responsible for delegating and supervising the medical treatments within their scope of practice. The rules for this are complex. It may require a combination of onsite or indirect supervision and will usually require a set of policies and procedures to be developed for the facility; consult with your legal counsel to make sure you are conforming to the rules and have the appropriate documentation in place.

You may be eager to add a full array of services to your medical spa, but you must remember that your staff needs to meet the requirements to provide those services. These requirements are not the same nationwide—each state has its own rules about who can provide which services. (AmSpa Plus Members can access a treatment delegation table for their state outlining who can do what for 21 different treatments and six distinct job titles.) In addition to potentially needing a professional license and to be supervised, all providers will require appropriate training in the services they provide. States may have specific certifications or courses that are needed, or they may require that the provider demonstrate their expertise to the medical director.

Part of being a medical practice also impacts your employee's compensation structure. Many states prohibit kickbacks, payments for referrals and professional fee-splitting. While these laws are usually targeted at combating larger insurance fraud schemes, they are written broadly to include many other types of payments and compensation.

The medical spa will also need medical intake forms, histories, informed consents and a medical records system since each customer is really a patient. These will have to comply with patient privacy laws, such as HIPAA and state medical practice rules.

Marketing and advertising a medical spa is another area where there are extra considerations; health care marketing has distinct rules. Typically, medical professionals cannot make statements or advertising that is considered deceptive, misleading or false. This can include seemingly innocent claims of being "the best" or that your patients will look younger or meet other cosmetic goals. Many states also require certain information to be provided in any advertising, through disclaimers. That means you must review any information on your website, social media accounts and advertisements and make sure you are meeting your state's standards. State licensing boards can issue fines or take action against a person's license if there are violations.

As a Practitioner

Licensed practitioners within a medical spa will, not surprisingly, need to maintain their licenses by adhering to their board's standards and conduct and renew their license as needed. This usually includes obtaining a certain amount of continuing medical or nursing education. The requirements and topics will vary based on the license and the state in which the practice is located. Continuing training and education is important for license renewal, and choosing the right classes can help providers keep up with the latest techniques and technologies and improve their practice. Some states may impose additional training requirements on practitioners working in the aesthetic medical field. Generally, the practitioner will need to keep records and documentation of all these requirements to present to the board if needed.

A medical spa must maintain normal business liability insurance, and it also has the risk of incurring medical related liability. It is an extremely good idea to carry professional liability/malpractice insurance to protect the professional license that makes the medical spa possible. Some states specifically require physicians and nurse practitioners to carry policies of certain minimum amounts. While this coverage may not be required in your state, any provider of health care services can benefit from the protection in the event of a patient injury or disputed services.

AmSpa Members receive a complimentary 20-minute introductory compliance assessment with a ByrdAdatto attorney. Click here to learn how to join AmSpa today!

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