I’m going to let you in on a little secret. Most med spas in Texas are not compliant with Texas law.
Either they are formed as the wrong legal entity type, they lack proper ownership or oversight, they are not following the standard of care, or all of the above.
The consequences can be significant for everyone involved.
For med spa owners, the Texas Medical Board can shut down your business. In extreme cases, you could be charged with practicing medicine without a license. If a patient gets injured, you could face civil liability. If your MedSpa is not formed or owned in compliance with Texas law, the insurance company could deny coverage, leaving you you holding the bag.
Physicians associated with non-compliant med spas can be disciplined by the Texas Medical Board. Those physicians are literally putting their medical licenses at risk.
Med Spas Provide Medical Services
I’m using the term med spa to describe several types of businesses—traditional med spas, IV hydration or IV therapy businesses, medical weight loss clinics, those types of retail medical services.
It should come as no surprise that the “med” in med spa stands for medical. We call them med spas because many of the services they provide are considered medical services. Botox injections, microneedling, dermaplaning and dermablading, cool sculpting, medium and deep chemical peels, are all considered non-surgical medical cosmetic procedures by the Texas Medical Board.
IV hydration and therapy, medical weight loss injections, and hormone therapy are also considered medical services. If a procedure involves injecting a patient or removing living tissue, it is probably a medical procedure.
Med Spas Must Be Formed Correctly
Because med spas provide medical services to the public, they must comply with Texas law just like any other medical practice, and that means they must be formed as an appropriate legal entity.
In Texas, medical practices can only be formed as professional associations, professional limited liability companies or PLLCs, or partnerships with other licensed physicians.
Many med spas in Texas today are incorrectly formed as corporations or regular LLCs. This is not allowed. Corporations and LLCs cannot be medical entities. The other requirement is proper ownership.
Med Spas Must Be Owned by Physicians
Medical entities, like med spas, cannot be owned by non-physicians. They must be owned by persons licensed to practice medicine in Texas.
Let me say that again.
Med spas cannot be owned by non-physicians. They must be owned by persons licensed to practice medicine.
A physician is a person licensed by the Texas Medical Board as a medical doctor, an MD, or a doctor of osteopathy, a DO.
But all is not lost. There is a way to structure a med spa correctly, even if you are not a physician.
Management Model
Through the magic of the management model, non-physicians can run a med spa and share in the profits.
Here’s how it works.
We still create a medical practice, like a PLLC, that will be owned by a physician, but we also create a management company owned by you that will run and manage the medical practice. You will be responsible for running the practice, but you do it through your your management company.
When patients pay for MedSpa services, that money is deposited into the Medical Practices Bank account. You, as the manager, have access to the Practices Bank account and you will pay all the business expenses from that account—rent, supplies, payroll, utilities, insurance, for example. What’s left over is paid to your management company as a management fee for your work in running and managing the practice.
So, in the management model, a physician still owns the medical practice, but you own the management company that runs the medical practice, and you take the profits as a management fee.
Special Arrangements
Let me pause here and say that if you happen to be a physician, things are more streamlined. We don’t have to use a separate management company. Physicians, of course, can own the medical practice.
If you are a podiatrist, chiropractor, or optometrist, there still must be a physician owner, but we don’t have to use a separate management company. You can jointly co-own the medical practice with the physician.
If you are a physician assistant, Texas does allow you to co-own the medical practice with a physician. However, you can only be a minority owner and the physician must be the majority owner.
Nurse practitioners unfortunately do not have the same opportunity as physicians. physician assistants. Nurse practitioners cannot co-own any part of a medical practice with a physician. The same is true for registered nurses.
So, if you’re a business person, a nurse practitioner, or a registered nurse, you must use the management model to operate a med spa.
Good Faith Exams
We have talked about the correct legal entity type and the correct ownership. Now let’s talk about an operational issue, the good faith exam.
A good faith exam is a medical examination conducted by a physician or a mid-level provider, like a physician assistant or a nurse practitioner, to assess a patient’s current condition and develop a plan of treatment. If you’ve ever been to a doctor, you have received a good faith exam.
Some med spas hire mid-levels on a part-time or as-needed basis to come into the med spa to perform these good faith exams. Other med spas use telehealth exams. Patients will schedule a telehealth exam prior to a med spa visit. The mid-level will perform a good faith exam and rule out contraindications and then write an order for a med spa treatment like IV infusion or a Botox injection.
Common Questions
That covers some of the requirements for Texas med spas. Now let me answer some common questions I get from clients.
Question 1. No one else I know is doing it this way. Are you sure this is right?
Yes, I’m sure. It’s unfortunate that many med spas are not formed or operating correctly. If you have researched med spas, you know how difficult it can be to get straight answers.
The problem is there is a lot of misinformation on the internet. Much of it is incomplete or just plain wrong. Some of it might be right for other reasons. states, but not in Texas.
It’s important to understand that each state has its own laws that apply to med spas. It’s no wonder there is so much confusion. The information I’m giving you is correct for Texas, but it won’t apply to other states.
Question 2. I don’t want the physician to have access to the business. How can I protect my business?
Well, I don’t blame you, and because of that, we build in certain protections into the documents.
We specify that the physician cannot sell or transfer their interest to any other person without your permission.
We give you access and control to the bank accounts for the medical practice. In that way, you control the money. We create a process to change physicians if that ever becomes necessary. If the physician some day decides they want to move on, we don’t have to create a brand-new medical practice.
We just transfer ownership of the existing medical practice to a substitute physician.
Finally, the management company that you own will own your med spa’s brand and name. The management company will license that name to the medical practice. The medical practice can’t use it without your permission. In that way, you always maintain control of your brand.
Question 3. How does the physician get paid?
The physician gets paid a flat fee every month for supervising the mid-level provider.
In Texas, mid-level providers must be supervised by a physician. The Texas Medical Board has established rules for this supervision. Physicians who don’t properly supervise the mid-level provider can be disciplined by the medical board.
The physician usually doesn’t see the patient. They supervise the mid-level provider who does see patients and for that they get paid a monthly flat fee somewhere in the range of $1,000 to $3,000 per month.
Question 4. What kind of insurance do I need?
You need a general liability policy for slip and falls and you need a professional liability policy for hypothetical malpractice claims.
Physicians and mid-level providers probably already have a malpractice policy. Sometimes you can add the MedSpaw as an additional insured to those policies.
My preference is that you get the med spa its own malpractice policy that covers every practitioner who works works for the med spa. That way, you don’t have to depend on others to have the right amount of insurance for your business.
Question 5. Are there any legal risks for the physician?
There is always some level of risk. A patient who has a bad experience can file a complaint with the Texas Nursing Board or the Texas Medical Board. If that happens, the provider will have to justify the services they provided to that patient.
For the physician, it’s important that they take seriously their responsibilities to supervise the mid-level provider. There must be a supervising agreement between the physician and the mid-level. The physician needs to review a sample of patient charts every 30 days and address any concerns with the mid-level, and the physician needs to be available to answer the mid-level’s questions as they come up.
For the mid-level provider, it’s important that they are thorough when performing the good faith exams and that they keep good medical records. What are the next steps?
Conclusion
I’ve covered a a lot of information. I would encourage you to watch this video more than once. You will probably key in on new information each time.
Well, that’s it. Best of luck to you. You’re on an exciting journey. I look forward to the opportunity to help you along the way.