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Medical spas face fee splitting issues

By Michael H. Cohen, Esq.

California Medical Board cautions medical boards against "renting a license" by hiring doctors to run weight loss clinics and day spas owned and operated by laypersons.

In California, laypersons cannot employ physicians.  Rather, physicians must own the entity providing professional services.

One potential work-around involves having two entities, the center and the manager, with a management agreement between them.

However, the management agreement must involve management services rendered to the medical center, day spa or clinic at fair market value.

There are sometimes federal (Medicare anti-kickback) as well as state law fee-splitting issues involved.

When analyzing fee-splitting issues for possible illegal kickbacks and other violations of law, it is important to realize that there are at least two possible places where fee-splitting can raise legal red flags.

One is fee splitting between the center (or medical spa, or clinical facility, weight loss clinic, etc.) and the practitioner.

The other is fee splitting between the medical center (day spa, wellness clinic, etc.) and the company providing management and administrative services to the center.

Both raise a legal issue known as the "corporate practice of medicine" doctrine.  Essentially, this goes back to the idea that laypersons cannot be in charge of the practice of medicine.  The flow of payments must be carefully tracked, and state law must be analyzed to see whether a given structure runs afoul of relevant law. 

Sometimes states will be more lenient on fee-splitting between practitioners in a group practice, for example; but less lenient on fee-splitting between the management company and the group. The issue then is how to pull funds up from the group practice and into the management company which will have lay (non-physician, non-clinical) owners and/or investors, in a legally compliant manner.  There's no use setting up a new clinical entity if it's going to attract regulatory scrutiny, investigation and possible fines and penalties. Better legally safe and sound than sorry.

Our law office frequently advises medical spas, weight loss clinics, and other clinical facilities and entrepreneurs on how to properly structure these kinds of entities and transactions.

Our attorneys' legal advice includes both federal and state law, and we advise clients on how to minimize their legal exposure.  "Don't roll the dice, get legal advice!"

 

Michael H. Cohen is an experienced health care law attorney who has taught health care law and policy at Harvard University and counseled many different kinds of practitioners and businesses, including:

• physicians (MD's and DO's)
• physician groups, hospitals, and clinical facilities
• integrative medicine centers
• professional health care educational institutions and associations
• dentists
• registered nurses and advanced practice nurses
• clinical psychologists
• chiropractors
• acupuncturists
• massage therapists
• homeopathic physicians and homeopaths
• naturopathic doctors and naturopaths
• energy healers, hypnotists, medical intuitives
• dietary supplement manufacturers and distributors
• cosmetics manufacturers
• entrepreneurs and start-ups
• publishers
• wellness clinics
• herbalists
• bio-energy companies
• medical device inventors
• telemedicine enterprises
• many varieties of businesses

As a founding attorney of a law firm at the cutting edge of health care and business law, he represents enterprises whose leaders are conscious and committed to a better world. He also offers the Entrepreneur's Legal Toolkit as a series of legal guides to businesses.

See what clients say about his legal work or visit the Legal Services page for information on business law and health care legal services.

Our healthcare law and business law firm also provides special expertise to attorneys and law firms whose clients are involved in wellness industry projects or who require guidance regarding such legal issues as:

• fee-splitting, Stark and anti-kickback
  
• medical board or other professional discipline
  
• negligence, informed consent, and medical malpractice liability
  
• HIPAA and patient privacy issues
  
• Medicare (including opting out vs. participation vs. non-participation)
  
• professional liability insurance and insurance (billing and coding) issues
  
• telemedicine, tele-psychiatry and telehealth
  
• other legal and regulatory compliance issues.

To speak with a lawyer about health care law issues pertaining to complementary and alternative medicine, or to consult a business lawyer about laws and legal issues for entrepreneurs and new enterprises that are seeking legal advice, contact our law firm today.

Full post as published by Complementary And Alternative Medicine Law Blog on February 23, 2011 (boomark / email).