Legal Issues in Operating a med-spa in New York State

By Andrew M. Knoll, MD, JD, Cohen Compagni Beckman Appler & Knoll, PLLC

Thursday, April 14, 2022

Med-spas have garnered significant interest among physicians in recent years. It is an opportunity to earn extra money outside of the constraints of third-party payers, as well as performing a service that can be enjoyable and satisfying.

There is no legal definition of a med-spa. It is commonly thought of as a cosmetic practice that provides treatments typically offered at lay spas (e.g., skin peels) as well as treatments that are considered medical procedures (e.g., Botox and fillers).

Offering Spa Services in a Medical Practice

By far, the easiest model from a regulatory perspective is for the physician to provide cosmetic procedures within their practice. Procedures would be performed by the physician, or when appropriate, delegated to qualified individuals (discussed further below).

Andrew M. Knoll, MD, JD, Cohen Compagni Beckman Appler & Knoll, PLLC

However, there are two important caveats to consider if a physician plans to open a med-spa within his or her practice. First, if not a dermatologist or plastic surgeon, consult with your malpractice insurance carrier to ensure coverage. Typically, the carrier will require documentation of training before underwriting the practice. Second, always treat the encounter as a medical procedure and keep medical progress notes. Regulators from the Office of Medical Conduct (OPMC), for example, will likely not waive the requirement to maintain an accurate record, even if the treatment is legally permissible to be performed by a layperson.

Scope of Practice Issues

Just because the spa services are being offered within a medical practice does not mean the physician can delegate any procedure to anyone. Medical spa services all fall within the scope of practice of a physician, NP or PA. With a PA, the supervising physician must be qualified to perform the procedure.

A common question is what the scope of practice for a registered nurse is. (There is little utility in using an LPN because she would have to be in line-of-sight supervision of an RN or MD). The general rule is that nurses execute patient-specific orders. However, the ordering provider must first examine the patient — so-called “standing orders” do not qualify. Following an examination and order, the Nursing Board states the following falls within a nurse’s scope of practice:

  • Injections (e.g., Botox, fillers)
  • Non-ablative lasers
  • Phototherapy
  • Superficial skin peels

Micro-needling and PDO threading fall outside of a nurse’s scope of practice.

Aestheticians are licensed by the Department of State, not Education, and legally are no different than a medical assistant. They can perform laser hair removal simply because the practice remains unregulated in New York. Like MAs, they cannot perform invasive procedures. They also cannot hire a licensed professional to perform procedures. A common misconception is the idea that an aesthetician can hire a “medical director,” who performs or supervises the procedure and splits the fee with the aesthetician. That is impermissible in New York.

So what does this mean in practical terms? While New York has not explicitly given guidance in this area, other states have, and have used the stratum corneum layer of the skin as the defining boundary between medical and nonmedical procedures. Accordingly, it is both reasonable and defensible to use this boundary to delineate the scope of practice for an aesthetician in New York, which would permit treatments such as superficial chemical peels but not micro-needling.

Prohibition Against the Corporate Practice of Medicine and the PC/MSO Model

New York follows the Corporate Practice of Medicine (CPOM) doctrine, which prohibits a layperson or business entity from owning or operating a medical practice. This prohibition also includes splitting fees with a medical practice, which is defined to include any business arrangement where compensation is based on a percentage of collections.

A common business setup that complies with CPOM is based on the professional corporation/management services organization (PC/MSO) model. In the PC/MSO model, the MSO, which may be owned by a layperson such as an aesthetician, provides business services, such as space, support services, administrative services, billing, lay employees, etc. to the PC. The PC hires the licensed professionals and administers the medical services.

Consider the following hypothetical: Aesthetics, LLC wants to offer med-spa services. It cannot simply hire a medical director and give Botox under its corporate umbrella, so it contracts with John Doe, MD, PC, and PC intends to use an NP to perform the medical services. The parties enter a written contract whereby, for a fair market fee, the PC will utilize the space and provide administrative assistance to Aesthetics. This fee will not be based on the PC profits or a percentage of collections. There will be signage and statements on Aesthetics’ literature and website that all medical procedures are performed by the PC.

Next, the client/patient comes to Aesthetics and asks for laser hair removal (non-medical), a superficial chemical peel (non-medical) and Botox (medical). Aesthetics’ aesthetician performs the laser hair removal and chemical peel. The PC’s NP injects the Botox. The total bill is $2,000, with the Botox procedure costing $600. Aesthetics collects the $2,000, PC invoices Aesthetics for the $600 and Aesthetics electronically transfers the $600 to PC. This is an oversimplification of the arrangement and an individual wishing to enter such an arrangement should consult counsel because, as the old saying goes, the devil is in the details. This is none truer than in the highly regulated world of health care.

A more comprehensive version of this article first appeared in the Health Law Journal (2021 Vol. 26, No. 3) published by the New York State Bar Association, One Elk Street, Albany, NY 12207. To learn more about NYSBA, or to become a member of the Health Law Section, visit NYSBA.ORG today.