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The Med Spa on the Corner Is Probably Breaking the Law

Look better. Feel better. Fountain of youth promises are making med spas one of the fastest-growing segments in healthcare. Botox injections, laser hair removal, IV hydration and therapy, medical weight loss, and hormone therapy seem to be available on every corner.

But most med spas are not compliant with Texas law. Either they are formed as the wrong entity type, they lack proper oversight and ownership, or all the above.

The consequences can be significant for everyone involved.

Med spa owners face potential civil and criminal liability for the unauthorized practice of medicine. Physicians associated with those med spas could find themselves subject to disciplinary action from the Texas Medical Board. And patients are caught in the middle.

The “med” in med spa stands for medical because many of the services they provide are medical in nature. Botox, Disport, Juvederm, and Kybella injections, microneedling, chemical peels, laser hair removal, dermaplaning, and CoolSculpting are considered “nonsurgical medical cosmetic procedures” by the Texas Medical Board.

IV hydration and therapy, platelet-rich plasma injections, medical weight loss injections, and hormone therapy are also medical services. If a procedure involves injecting a patient intravenously or subcutaneously, it is probably a medical procedure.

Before any medical procedure, a physician or midlevel provider (like a physician assistant or nurse practitioner) must perform a good faith exam, establish a medically appropriate treatment plan, and document everything in a medical record.

Midlevel providers must be supervised by a physician under a Prescriptive Authority Agreement. The physician must review a sample of the charts regularly and generally be available to the midlevel if they have questions.

This does not happen in many med spas.

Then there’s the business side. The practice of medicine in Texas is regulated by the Texas Medical Practice Act, the Texas Medical Board, and administrative rules. Because med spas provide medical services to the public, they must comply with all these rules just like any other medical practice.

Med spas must be formed as an acceptable legal entity type. In Texas, medical practices are limited to professional associations (PAs), professional limited liability companies (PLLCs), and general partnerships with other licensed physicians. Many med spas are incorrectly formed as corporations or regular LLCs.

This is not just a technical problem. It leads to improper ownership. Medical entities, like med spas, cannot be owned by non-physicians. They must be owned by persons licensed to practice medicine in Texas.

There is a lot of information on the Internet, much of which is incomplete or wrong.

Texas is a “Corporate Practice of Medicine” state, which means that physicians cannot be employed to provide medical services by companies not owned by licensed physicians. In practical terms, a non-physician cannot start a company and then hire a physician to provide medical services to patients of that company. With very few exceptions, medical services can only be provided through professional entities owned by physicians.

These same prohibitions apply to midlevel providers like Physician Assistants and Nurse Practitioners. Physician Assistants can co-own a medical practice with a physician only if the physician controls a majority interest in the practice. Nurse Practitioners cannot own any percentage of a medical practice.

These are just a few of the compliance issues for Texas med spas. There are also in-office and website disclosure requirements, registration requirements, reporting requirements, and restrictions on the type of marketing or advertising the practice can engage in.

Patients are caught in the middle. Those injured at a non-compliant med spa may not know where to turn.

These types of complaints to the Texas Medical Board are growing at an alarming rate. If the non-compliant med spa has a Medical Director, the Board can discipline the physician for inappropriate supervision or unprofessional conduct. Physicians associated with non-compliant med spas are putting their medical licenses at risk.

For the unlicensed med spa owner, the Medical Board can shut down their business. In extreme cases, the unlicensed med spa owner could be charged with practicing medicine without a license. If the patient suffers a physical or psychological injury, the owner could be charged with a third-degree felony which carries jail time of two to ten years and a fine of $10,000.

If the patient hires an attorney to sue for malpractice, the med spa’s insurance company may deny coverage if the med spa was not formed or owned in compliance with Texas law.

Med spas are big business and growing rapidly. But with great reward comes great responsibility. Entrepreneurs owe it to themselves and patients to set up the med spa the right way, with the right supervision, and the right ownership.

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Hospital to Pay False Claims Act Penalty for Allegedly Letting Unsupervised Residents Interpret X-Rays

When a healthcare provider submits claims to Medicare, they are making several implied representations: 1) the service was medicaly necessary; 2) the service was performed; and 3) the service was performed by someone with the proper credentials. If any of those implied representations are not accurate, and the provider has the requisite “knowledge” of the falsity, the claims violate the civil False Claims Act.

A hospital in Iowa learned this lesson the hard way. Marty Stempniak, writing for Radiology Business:

The U.S. Attorney’s Office first filed suit against University of Iowa Health Care in 2019, accusing the institution of perpetuating a “batch signing scheme.” Through it, the Iowa City hospital would allegedly bill for radiology services rendered by residents during 12- to 15-hour on-call shifts.

However, the physician supervision and approval required by Medicare never occurred, the office alleged in its complaint. …

Rather than complete the necessary review, the office alleged, physicians instead would engage in “rapid-fire signing of dozens of reports within a matter of a minute or so, solely in order to falsely bill the government for ‘interpretations’ that never took place,” the complaint alleged.

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Two nurses sent to prison for illegal kickback scheme

Healthcare providers besides physicians can also violate the Anti-Kickback Statute. And, do not think that only physicians can make illegal refurrals. Paying anyone something of value for patient referrals—even a marketing company—can be illegal.

Southern District of Texas Press Release:

At the time of their pleas, they admitted that from 2014 through 2016, both obtained patient referrals by paying marketers and patients. Nwankwo further admitted to bribing a physician to authorize medically unnecessary home health services for Hefty patients.

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DSOs vs. Texas’ Corporate Practice of Dentistry Doctrine: What You Need to Know

The Corporate Practice of Medicine (CPOM) is deeply rooted in Texas law. But the Corporate Practice of Dentistry similarly provides that “a person may not practice dentistry without a valid license issued by the Texas State Board of Dental Examiners. The Texas Dental Practices Act sets forth several categories of activities that constitute the practice of dentistry. For example, a person who owns, maintains, or operates a business which engages another person to practice dentistry – under any type of contract or arrangement – may be considered as engaging in the practice of dentistry.”

Like in the medical context, DSOs are often to allow unlicensed persons to share in the revenue of the dental practice.

As Keith Lefkowitz, Hendershot Cowart, P.C. points out:

In 2015, the Texas legislature passed a law requiring Dental Support Organizations to register with the state annually and provide “the name and business address of each dentist in this state with which the dental support organization has entered into an agreement.” 

The Secretary of State shares this information with the State Board of Dental Examiners, allowing them to monitor which practices are receiving services from a DSO. 

As a result, it is imperative for licensed dentists to ensure that contracts and arrangements for business support services comply with state law and TBSDE rules and regulations, especially the Corporate Practice of Dentistry doctrine.

This type of registration system is not required for MSOs, Management (or Medical) Services Organizations. MSOs are very common in the medical industry, but, in some contexts, have been abused.

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The U.S. Fifth Circuit Court of Appeals Is Poised to Address Emergency Abortions and the Scope of EMTALA’s Preemption of State Abortion Laws

Steven G. Pine, gina L. Bertolini, with K&L Gates:

Shortly after the Dobbs decision, HHS laid out its position in a 11 July 2022 memorandum issued to state survey directors (the EMTALA memo) that asserted, among other things, that state laws purporting to limit abortion services more narrowly than provided under EMTALA are preempted.

Three days after HHS issued the EMTALA memo, the Texas Attorney General (AG) filed a federal complaint in the Texas District Court seeking a declaratory judgment that HHS had acted beyond its authority in issuing the EMTALA memo, as well as an injunction seeking to prevent enforcement of the EMTALA memo. … [T]he Texas District Court granted Texas’ request for an injunction, in part, in a preliminary order issued 23 August 2022. …

The outcome of this appeal could significantly impact how hospitals, health systems, and other providers deliver emergency abortion care across the country. HHS continues to stand behind the EMTALA memo, which has only been enjoined in the state of Texas to date, stating that it would investigate reports or complaints regarding an EMTALA violation and “will not hesitate” to refer states attempting to prohibit providers from offering emergency care consistent with EMTALA to the DOJ “to take appropriate legal action.”

I anticipate the Fifth Circuit will affirm the District Court, but other appellate courts will reach different conclusions. Ultimately it will be up to the U.S. Supreme Court to settle the scope of EMTALA preemption. Again, I think they will find there is no direct conflict between EMTALA and state law, and thus, no preemption.

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Texas Small Businesses: Control Healthcare Prices and Regulate Hospital Consolidation

Will Maddox for D Magazine:

Consolidation is on the rise as well. According to research from Deloitte, the largest 10 healthcare systems in the U.S. control nearly a quarter percent of all hospitals. Between 2013 and 2018, the ten largest health systems saw revenue increase 82 percent from $505 billion to $918 billion, five times faster than the rest of the market.

Consolidation has been occurring since the 1990’s, and will likely continue as more hospitals struggle to stay profitable. Torch, an organization of rural and community hospitals, has some troubling statistics:

  • Texas leads the nation in rural hospital closures.
  • 26 Texas rural hospital closures (permanently or temporarily) have occurred in 22 communities since the beginning of 2010. Nationally, more than 120 rural hospitals have closed in the same time frame.
  • A Centers for Healthcare Quality and Payment Reform study estimates 76 rural Texas hospitals are at risk of closure and 12 rural Texas hospitals are at immediate risk of closing.
  • The closures are taking an economic toll on Texas as a rural hospital closure – on average – costs 170 jobs and an annual payroll of $22 million.
  • Closures have a ripple effect in the community reducing sales tax revenue to local government, reducing school student numbers driving down state payments to the local school, and hurting local businesses across the community.
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FBI: Healthcare Hit with Most Ransomware Attacks of Any Critical Sector

More scary statistics related to ransomware attacks on healthcare providers. Nearly half (47%) of healthcare IT professionals said their organizations experienced a ransomware attack in the past two years, up from 43% in 2021, according to a survey released by the Ponemon Institute

Ill-prepared providers must make the hard choice to pay or not to pay. The consequences can be devastating.

Ron Southwick, writing for Chief Healthcare Executive:

The Lehigh Valley Health Network in eastern Pennsylvania disclosed a ransomware attack last month, and said it would not pay. Lehigh Valley said a gang known as BlackCat, which has ties to Russia, launched the attack. The health network said this month that the ransomware group posted photos of cancer patients on the dark web, according to WPVI-TV in Philadelphia and other media outlets.

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Ophthalmology Practice Agrees to Pay Over $2.9 Million to Settle Kickback Allegations

From the Eastern District of Texas:

Ophthalmology provider group, Arlington Ophthalmology Association, P.L.L.C. d/b/a Kleiman Evangelista Eye Centers (“K&E”), with offices located in Arlington, Dallas, Plano, Southlake, Mount Pleasant, and Gun Barrel City, Texas, has agreed to pay $2,902,505 to resolve False Claims Act allegations that it offered and paid kickbacks to optometrists to induce referrals of patients who were candidates for cataract surgery in in violation of the False Claims Act and Anti-Kickback Statute, announced Eastern District of Texas U.S. Attorney Brit Featherston.

This is a great example of how business practices common in other industries do not work in healthcare. Even if Medicare was not involved, Texas’ Patient Solicitation Act prohibits “offering to pay or agreeing to accept anything of value to secure or solicit a patient or patronage for or from a licensed professional.” It is called an “All-Payor” statute, meaning a violation is not limited to referrals for services paid by government health programs

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DOJ Continues to Eye Clinical Researchers

Jonathan Porter, writing for Healthcare Law Insights, highlights several types of fraud associated with medical research and clinical trials: Clinical trial fraud, grant fraud, and failure to disclose ties to foreign governments, are all types of fraud associated with medical research and clinical trials. The Department of Justice, through it’s consumer protection branch, has become more interested in this type of fraud, which will necessarily impact researchers, including universities and research hospitals:

What is clear from these cases is that universities and hospitals must be aware that they have liability if their employees commit fraud or make false statements. Investing in a robust compliance program to root out fraud is critical, in order to both reduce False Claims Act risk and to save institutional reputation. Contact your Husch Blackwell attorney today with questions.

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Safety vs. Hospitality: A Healthcare Dilemma

The root problem is our society is mentally sick. Violence is the symptom. All the security in the world won’t stop someone who is intent on hurting others. Any solution must address the problem.

Will Mattox, writing for D Magazine:

But the issue seems to be getting worse. The American Hospital Association says that 44 percent of nurses experienced physical violence, and 68 percent experienced verbal abuse during the pandemic. Given the rise of violence in the workplace in healthcare settings, one might expect these facilities to be as secure as a sporting event or airport, with metal detectors at every entrance, guests and staff asked to empty their pockets while being searched, and visible security forces throughout the facility.

But herein lies the growing tension in healthcare, especially around hospital operations and design. Healthcare leaders don’t want their facilities to feel like locked-down institutions. Walking into a new hospital these days is more likely to feel like entering the lobby of a luxury hotel with engaging art, attractive light fixtures, natural light, and multiple seating areas. A metal detector, security guard with a wand, or other deterrents might ruin the ambiance medical centers want to exude.