Are Laser Hair Removal Centers Medical Practices???

There have been waves of laser hair removal centers since the first FDA cleared laser was introduced for permanent reduction of hair (1995).  Centers open and close with regularity. It is difficult to maintain a profitable business if it is solely a laser hair removal business.

Eventually, those that open the laser hair removal centers realize this and expand their product and service. Frequently, this is not legally supportable.

The long and short of the situation is that hair removal is not considered to be the practice of medicine.  There are dozens of therapies to remove hair dating back to the ancient Egyptians. Sugaring, waxing, electrolysis, needle free electrolysis, chemical de-epilation are all effective but none are permanent.  The only permanent treatment is laser.

Their are several types of laser for hair removal and a center should have at least three in order to treat the most patients in the most effective way.  This is because of different skin type (color), different hair color and the location of the body.  So, it is not as easy as leasing a laser and opening a location.

Even though laser hair removal is not a medical procedure, the devices are MEDICAL devices. It is unlawful for non-physicians to own or operate the lasers because they are medical devices.  you would never know this if you attend a spa expo and see the laser companies falling over themselves to sell a laser to a non-physician. As I have been known to say, any laser company would sell a laser to my dog Stoli if he could pony up the money!! The laser companies invariably claim to have a letter from a "guy" that indicates that it is acceptable to sell a medical device to a non-physician.

there are some light based devices that are a lower class of ,medical device that can be utilized and owned by non-physicians. These are non effective and low power.

Non physicians can own and operate laser hair removal centers, but care must be made in the formation and implementation of the business plan. As with everything, there is a right way and a wrong way...but the penalties for doing it the wrong way can lead to substantial fines and penalties and loss of professional license (cosmetologist, nursing etc).

Independent Contractor Agreements in Medical Spas

The initial review of ICAs in medicine and medical spas focuses on the Internal Revenue Service (IRS) guidelines. In recent years, the IRS has taken a stronger position in determining that many agreements do not qualify as an ICA. The ramifications of an agreement being disqualified as an ICA are severe. The hiring entity will be required to pay significant payroll taxes and the contractor will lose many deductions that would have been allowed in an ICA. The IRS is thereby incentivized to disallow an independent contractor status.  Blatant abuse of the IRS guidelines may result in additional civil and criminal penalties.

The central element is the amount of “control” that the entity has over the “hired” medical personnel (contractor).  In medicine this is challenging since most medical facilities and practices have procedures, protocols and policies that need to be consistently followed by all medical personnel. This assures continuity of care for patients. It also creates a nightmare in drafting an ICA that does not appear to have too much control over the contractor. It does not help that contractors need to have set schedules for patient scheduling and proper coverage of office hours. On-call provisions have also proven problematic in drafting an ICA. As you can see, it will take more than calling an agreement an “ICA” for it to be considered as such.

Elements of “control” would be the manner in which the services are performed, the hours of work, uniforms, materials being utilized etc. So for example, if a practice mandates that a medical provider utilize Juvéderm as a filler of choice, this would be one indication that the relationship is one of employment as it illustrates “control” by the practice over the medical provider. Another example of “control” would be if a hiring practice delegates any managerial or personnel supervision upon the contracted medical provider.

Medical benefits, pension, regular bonuses, medical liability insurance and paid Continuing Medical Education (CME) are all additional elements or variables that might lead someone to conclude that there is an employment relationship versus one of independent contractor.

 Medical liability insurance is a particularly tricky area since the practice will typically receive a substantial group discount based upon claims history and number of providers.   However, it would be another indication that there is an employment situation if the practice provided coverage for the contractor even if the contractor were to reimburse the practice and functionally pay the premium. Additionally, an insurer may deny coverage for an incident occurring during the care provided by an independent contractor. Never, indicate to an insurer that an independent contractor is an employee.  A sound practice is to send them a copy of all employment and independent contractor agreements as part of the renewal process. The independent contractor should be required to provide his or her own professional negligence policy and be certain that the hiring practice is included as an additional loss payee/insured. This policy will be more costly than it would be if provided for and by the practice, but this is the more prudent approach.  Naturally, it may be necessary to “gross up” the contractor for the cost of the policy. However, I would not recommend mentioning this in the ICA as it may appear that you are mutually attempting to avert the guidelines for an independent contractor.  The better approach would be to determine the cost of the coverage and include it in the base compensation and acknowledge in the ICA that the contractor is required to obtain his or her professional negligence policy, pay for it and include the practice and hiring and/or supervising physician as additional loss payees/insureds.

In the event that a prospective contractor indicates that he or she cannot obtain professional negligence insurance, consider this one of those “red flags” that you should learn to recognize.  Several years ago, there was tremendous difficulty obtaining professional medical liability insurance particularly in certain specialties (OB/GYN for example). However, today, there is little difficulty unless a contractor has a significant loss history.

Another prudent approach is to indicate in the agreement that the medical practice has policies, procedures and protocols that must be followed for best patient care. This is particularly important in the medical spa arena. The ICA should also include an acknowledgment that the practice has certain hours that it is open for patient care and that medical providers are required to perform services during these hours. This will enable the agreement to provide legitimate business and medical reasons for what would otherwise appear to be “control”.

In most employment situations, the IRS has between 17 and 24 elements (depending upon the industry) that it will consider in determining whether an employment scenario is an independent contractor one.  Many areas of business now have their own variables that the IRS employees within that industry. Real estate and many sales positions have clear variables that would be addressed in an ICA. There are no specific variables yet for medical agreements.

The IRS also looks at the type and nature of the agreement to aid in the determination of whether an arrangement qualifies as an independent contractor relationship. A practical example can give some guidance.  In medicine, a physician employed as an independent contractor by a medical practice to perform cosmetic procedures while maintaining his or her own independent office would clearly be appropriate for an ICA. However, a physician employing medical personnel for his or her own practice to perform cosmetic procedures under an ICA may be subject to review.  The reason is that this latter scenario is one in which the medical personnel performing the cosmetic procedures would typically and historically be an employee. There is a higher degree of control.

Independent Contractor Agreements are very useful in medicine today. In situations in which physicians are either hiring or being hired by a practice, care must be utilized to limit the amount of “control” in which the hiring practice is exerting on the proposed contractor. Careful attention must also be given to the historical nature of a proposed relationship. If it is typically and historically one of employer/employee then additional care must be provided on the ICA to avoid an unfavorable determination on the status of the relationship.

Independent Contractor Agreements are particularly troublesome in situations in which a physician, medical practice or non-medical business entity is “hiring” a medical provider to perform additional services within a practice or even more problematically, another business entity in which the “hiring” physician is supervising such medical personnel. There is an inherent appearance that the hiring entity is exercising control over the contractor and the actual type and nature of agreement is more often than not legally unsupportable.

Non Corporate Practice of Medicine

I received a call today from a client. She received medical treatments in a medical spa in Southern California.  The provider was an RN who owns the medical spa. I have previously advised the client that the medical spa is not operating legally since it is owned by a non physician.  There was a complication and predictably, there is no physician on site or otherwise available.

Forty-five out of fifty states prohibit non physicians from owning or operating medical facilities. This includes medical spas or medical practices that engage exclusively in cosmetic, medical procedures.  There are limited exclusions to this (such as HMO's).  I do not understand why so many facilities ignore this well-standing premise of law.  In particular, nurses seem to feel that they can own a medical facility and provide treatments since they are fee for service or cosmetic in nature.  Many estheticians seem to believe this as well.

The short version of the story is that only physicians can own and operate a medical facility in the forty five out of fifty states (the notable exception is Florida).  Nurses must be employed by such a facility or otherwise contracted with them.  A medical director or supervisor is not enough to enable a nurse to own or operate a medical spa.

There are legal means in which a nurse and physician may own a medical spa together.  A medical spa is considered to be a medical facility and it must be governed accordingly.

An Important Update on HIPAA

Over a year ago, an important update to HIPAA occurred and few medical practices and vendors have made adjustments to there operations as a result.  For the first time, HIPAA now is also enforced against the vendors of a medical practice.  HIPAA addresses protection of certain Protected Health Information (PHI) of patients.

Historically the duty of protecting the information and the fines and penalties for a violation were the sole duty of the medical practice. However, new legislation signed into law in 2009 and made effective February of 2010 now places a duty on the business vendors of a medical practice too.

It is now important (if not required) that a medical practice have a Business Associate Agreement in place with business vendors who have access to the PHI.  Examples of this would be computer software vendors, outside marketing firms, staff that is not directly employed by the physician practice (such as in many medical spas in which spa personnel schedule appointments or handle check in an check out), even janitorial if there is a possibility of them accessing PHI, pharmaceutical reps..and many more.

In my experience, practices are not adopting new Business Associate Agreements and this is vital.  Business vendors are not doing it either - however they are likely to be unaware of the need for them.  In my opinion, changes in patient intake forms should be adopted as well as a result of this new law.