Corporate Practice of Medicine - Healthcare Empowered

Med spa growth across Texas and the nation continues to increase. The American Med Spa Association (AmSpa) found in 2018 that there were 5,431 med spas in the United States with average revenue of more than $1.5 million. That was up by 9% from the year before.¹

Revenues during 2020 were strong relative to other industries. While 52% felt the impact and project revenues below $1 million, 37% projected revenues between $1-4 million.²

The outlook for the future is bright. Sixty-two percent (62%) of med spas owners expected their revenue in 2021 to increase by more than 10%:³

Many respondents expressed optimism for the post-pandemic future, with some citing the so-called “Zoom effect” as a reason why more people than ever before might seek out aesthetic services.

It’s no wonder Texas is experiencing a growth in med spas. Unfortunately, there is a lot of misunderstanding about med spas. While people rush to open practices and reap the financial rewards, many (or most) are not following Texas law. Starting a med spa without the right knowledge, structure, ownership, and licensure could subject you to legal liability, civil and criminal penalties, cease and desist orders from the Texas Medical Board, breach of contract, and a host of other unanticipated risks.

What are Med Spas?

The American Med Spa Association defines a medical spa as a hybrid between an aesthetic medical center and a day spa with four core elements: (1) the provision of non-invasive (i.e. non-surgical) aesthetic medical services; (2) under the general supervision of a licensed physician; (3) performed by trained, experienced and qualified practitioners; (4) with onsite supervision by a licensed healthcare professional.⁴

While that definition is technically accurate, it obscures the point that because med spas offer medical services, they are considered medical practices in Texas and must comply with the rules and regulations that apply to traditional doctor’s offices.

In addition to providing aesthetic cosmetic treatments common in many spa settings, med spas provide services that cross the line into the practice of medicine. A small sample of these services include:

Laser Hair Removal
Botox injections and other dermal fillers
IV infusions
Platelet-Rich Plasma injections, including O-Shot
Hormone therapy
Cosmetic surgeries

The Texas Medical Board refers to these types of services as Nonsurgical Medical Cosmetic Procedures and requires that an appropriately trained physician, or properly supervised midlevel practitioner, perform an appropriate patient assessment and issue an order for the medical cosmetic procedure.⁵

I once had a client physician who was the supervising physician for a med spa. Unbeknownst to him, the med spa did not hire a midlevel practitioner and was allowing a registered nurse (RN) to “order” and administer Botox injections. He immediately resigned from the clinic and reported the conduct to the Texas Medical Board. Last I heard, the TMB was imposing civil penalties against the clinic.

There are also specific licensing requirements associated with some of these services. For example, clinics owned by non-physicians that provide laser hair removal services must be licensed by the Texas Department of License and Regulation. That licensing requires specific training for the employees and contracts with designated and supervising physicians. Because the laser equipment emits radiation, it must also be licensed by the Radiation Control Program of the Department of State Health Services.⁶

These licensing requirements cut both ways. If a person with an esthetician license is working in a medical office, the medical office is required to have a salon license. ⁷

Legal Structure for Med Spas

Because med spas are medical practices, they must follow the requirements of Texas law regarding professional entities. Medical practices can only be structured as professional limited liability companies (PLLC) or professional associations (PA).⁸ They may not be formed as corporations or regular limited liability companies (LLC).

Time and time again, I see “med spas” offering medical services through corporations and standard LLCs. Doing so is a violation of the Corporate Practice of Medicine doctrine and could carry civil and criminal penalties. ⁹

Ownership of Med Spas

Equally important, medical practices can only be owned by physicians.¹⁰ The only exceptions are podiatrists, chiropractors, optometrists, and sometimes physician assistants. ¹¹ That means that nurse practitioners or unlicensed persons cannot form a “partnership” with physicians to own a med spa.

Said another way, unless you are a physician, chiropractor, optometrist podiatrist, or physician assistant (in limited situations), you cannot own a med spa. This too is a violation of the Corporate Practice of Medicine.

Physician Supervision

In addition to the ownership requirements, nurse practitioners and physician assistants (“midlevel practitioners”) must be supervised by a licensed physician as required by the Texas Medical Practice Act and the rules of the Texas Medical Board.¹²

This supervision is memorialized in a Prescriptive Authority Agreement or Collaboration Agreement, which documents the procedures and prescriptions the physician is delegating to the midlevel to perform.¹³

If the med spa is jointly-owned by another authorized person (chiropractor, podiatrist, etc.), the physician generally will also serve as the Medical Director for the practice and be responsible for all medical protocols and policies.

Danger for the Uninformed

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

If you need help forming a med spa, or if you have already formed one and need assistance bringing it into compliance, please don’t hesitate to contact me at 214-855-3040 or wemmert@ccsb.com.