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Tuesday
Oct192010

Medical Spa MD {7} Part 1 - Jessica Wadley - former COO of Spa MD

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This episode of the Medical Spa MD Podcast introduces us to Jessica Wadley, who brings years of Medical Spa business experience to share with our members.

For over 12 years, Jessica Wadley has been coaching, speaking to, or helping salon/spa and medical professionals build their businesses and advance their careers. Her unique ability is “to lead and energize people by using quick, intuitive alternatives to build action plans and outline career paths that reverse engineer their dreams.”

Jessica is one of the country's most innovative spa and salon industry leaders. She was a leading force behind one of the most successful medical spas, La Jolla Spa MD, where she was Chief Operating Officer for just under five years. Her innovative business leadership enabled La Jolla Spa MD to gain international notoriety while being ranked the “Top Medical Spa in America” by American Spa Magazine and nominated as one of the “Best places to work” by the San Diego Business Journal. During her tenure, the company served as a training facility for top dermatologic companies such as Allergan, Lumenis, Medicis, and Cynosure. Jessica helped this leading edge company grow from $2 Million to $11 Million in revenue in 4 years.

In part 1 of this episode we discuss a host of issues around medical spa operations and staffing. We've got some agreement and you'll want to listen to how our thoughts (and strategies) differ around commission structures for staff and internal operations and training. 

Some of what we talked about in this episode.

PODCAST 7: Part 1 - Jessica Wadley - former COO of Spa MD

Andy:     Hello and welcome to the show. Well we give you the low down and inside information and the word from the expert that helps physicians reclaim control of their medical practice. So, if you’re clueless about running a business and you’re already working 60-hour week, this is for you.

Medical Spa MD brought to you by MedicalSpaMD.com, a worldwide community of physicians practicing cosmetic medicine. Hello Jeff!

Jeff:     Hello Andy!

Andy:     Jeff, I’ve just connected to Medical Spa MD group in Linked In and I was delighted to see that you’ve got hundreds of people in the group. How’s it going?

Jeff:     Certainly, we do. I mean, that group has been around for a while now so a lot of our members from MedicalSpaMD.com have joined up and connected via Linked In. I see the way that we are kind of going as a community that bridges a number of the social networks. So, we’ve got the main website the MedicalSpaMD.com, but you’re also welcome to join us on Facebook, Twitter, which is more of an abbreviated experience, or Linked In as a kind of a business individual. We manage those a little bit separately. For example on Facebook, we have a group “Physicians and Facebook Marketing”. It is designed around using Facebook in order to drive patient traffic and market your business. Now it is perfectly applicable or appropriate if none physicians can join that too and derive value from that. The reason that we’re doing that is of course is to use the tool and show you how we’re doing that inside of the actual network. So, rather than talk about that, which we do still on MedicalSpaMD.com, you know we have a group that teaches that specifically and at the same thing a little around Linked In and Twitter and those types of things, so you kind of can choose your poison there.

Andy:    Now Jeff, a little bit later, actually minutes from now, we’re going to be having part 1 of the interview with Jessica Wadley and that got me thinking you know because Jessica was a highly regarded, innovative, sort of leader in the Spa and [02:36]. And you’ve got me thinking how did spas… What is the sort of history or the origins, if you like, of Medical Spas?

Jeff:    Well, Medical Spas were an outgrowth really. What happened was in the late 90’s was really it kind of got started. And there were a number of cosmetic dermatologists and plastic surgeons who had the idea that I could associate or own a day spa where there’s patient traffic coming in, these are generally women and sometimes men interested in a kind of luxury cosmetic treatments and all those kinds of things. These are people who are going to come in and receive facials and massages. This is the same potential patient population that I’m going to draw from for my medical practice.

    They started building day spas in conjunction or associated with or in the same [03:41] separated by a door with their medical practice. They started generally on the coast in New York. There were a couple of them in California one of which is Spa MD in La Jolla were Jessica was involved. But, the idea behind medical spas was really those two things. There was a medical practice and then there was a day spa that was doing massages, facials, light chemical peels and selling skin creams, balms and lotions. And the idea was to drive traffic to the day spa and then siphon off a portion of that traffic that would be interested in medical treatments and then kind of kick them upstairs for the physicians. And that’s were really that kind of got started.

    Now, I started my clinic and that was in about 2000 so within 18 months probably of the first real kind of medical spas kind of starting up, we’re still calling our clinics medical spas. In effect, we were kind of pay backing on the luxury aspects of these, but our clinics were 100% medical. We did have aestheticians. In fact, we all had master aestheticians, which is a slightly more advanced degree than an aesthetician. And they were doing some non-medical treatments, but generally these were not designed to generate traffic. They were pretty much kind of a given away as a pre-opposed treatment for a medical treatment or as a kind of a thank you bonus, if that makes sense.

    So just can I talk about the 2 different kinds of systems… So, medical spa now kind of means anything that has a luxury or kind of a spa component. So, it bridges the entire gambit between an individual physician who now has a aesthetician renting a room from him in some state, that’s legal and does not work and kind of get into the reasons why what I don’t think that’s a successful model, and a clinic like Spa MD, which really has a boutique retail component. It’s a two-floor kind of a building and on the bottom floor there’s a luxury day spa, there’s a boutique, there’s kind of a small café and it’s associated inside of Spa MD. Upstairs is where physicians and medical treatments are performed, but downstairs… If you walk in just the downstairs, you would think that you’re in kind of a high-end day spa boutique kind of a thing. There’s not really any medical component that’s mixed that way. It’s very interesting and very successful business, one of the first. And they’ve done things extremely well, but they’re also a very large clinic. Jessica will talk about this. When you got 80 staff members, that’s a very large clinic and I think they have 6 docs, something like that.

Andy:    It sounds somewhat ideal. I actually quite like to go to La Jolla myself and check it out, Jeff.

Jeff:    It is. It’s inexpensive. We talked about pricing and a number of other things, but pretty interesting.

Andy:    Okay. Well, let’s have a listen to that interview. Just a couple of quick facts of course… She’s a highly regarded and innovative spa and salon industry leader. Of course, as we’ve mentioned she works at La Jolla, not pronounced “la jo-lla”, like I replaced that earlier Jeff thanks for that. And she was the Chief Operating Officer there and helped grow from 2 million to 11 million in revenue in 2 years, pretty impressive. Let’s have a listen to part 1 of that interview then.


INTERVIEW

[07:48]
Jeff:    Can you tell me a little about what you’ve done in your career?

Jessica:    My background primarily is in executive spa management and medical spa management. And back in the 90’s in the early 2000 a company called [08:03] only publicly helps spa chain exist they own… 100% of spas on cruise ships and they own destination spas all over the world, global spas. That’s how I got started in the spa business and from there I was recruited to La Jolla Spa MD in La Jolla, California to be the chief operating officer and to essentially grow the business and launch the business.

Jeff:    Now, when you day grow the business and launch the business, what state were they at when you got recruited you and who recruited you?

Jessica:    it was in La Jolla, California for La Jolla Spa MD. It was a start up essentially. I came on about 6 months after the operation had opened. And I started with that company for 5 years and in that 5-year time frame I grew the business from about 3 million to about 13 million in 5 years.

Jeff:    When you say 3 million, was that a kind of an existing practice that was now opening the medical spa?

Jessica:    Yes, exactly. So, there was an existing practice existing patients who had followed, but they never ventured into… Back then in 2003, medical spas were just really being born. So, this was the first true medical spa of its kind that wasn’t in a mall or anything of its nature or a chain center. It was a true medical spa to where on the first floor we had a luxury six-room treatment spa. We had about a 3,000 sq. foot retail center and on the second floor we had our cosmetic dermatology practice, plastic surgery office complete with a triple H fee accredited O.R. So, we have our own O.R. on site. And we have about over 35 lasers as well.

[10:01]
Jeff:    This idea was to provide kind of a spa environment and to kick in effect to drive traffic and then to take the percentage of those patients that are looking for more invasive or more medical treatments and in effect kick them upstairs. Is that right?

Jessica:    That’s correct.

Jeff:    And how did that work?

Jessica:    It is not a business that everyone should venture into. Historically, spas, aestheticians, massage therapists have significantly lower margins. It is very difficult to squeeze a profit out of a spa.

Jeff:    Now it is interesting that you say that because I have in my experience never seen that work. It is very often when a physician looks to open a medical spa, the kind of thing that they are thinking that they’re going to be doing is eyelid tattoos, massage and that kind of stuff but, it is very, very difficult. I’ve never seen it work, physicians running spas and the spa’s actually kind of making money.

Jessica:    Well, most of them do not know how to run spas. And most spas do not have an understanding of cosmetic dermatology and/or plastic surgery world or cosmetic surgery world. To get expert in these two areas is very rare.

Jeff:    And so how did you manage that?

Jessica:    It was certainly a long-term process and it was bumpy along the way. And to answer that question to your point is very complex. It will probably take two sessions. However having said that, building a very strong team culture and company culture is the number one most important. Having clear understanding and very [11:57] customer service goals and a process that the patients will experience when they’re coming in the door is absolutely a critical key to performance.

    You really have to design compensation plans in your spa level with aestheticians and your massage therapists that reward the right behavior and where also you can maintain your margins. I mean, you’re lucky to your point Jeff in a spa setting if you can process 8%.

Jeff:    And for physicians to go from a medical operating margins to something that is just barely kind of bumping by and very, very difficult.

 Jessica:    Yes. Well, what would I say to that physician is a couple of things. One, what’s your long term strategic plan? What happens when your hands no longer work? And, how are you going to continue to drive revenue to your practice? That’s my first point. The second point is I think every physician today would say: “I could certainly use an economic time to increase volume in my practice on a stronger referral base and more patients walking into my treatment room and/or my O.R.” So, you have to look at the spa, and I think Jeff you mentioned it, as a marketing vehicle to drive patients into the cosmetic practice.

Jeff:    This is where I have always found a real problem. With any of my clinics, we pretty much stay away from medical treatments. We call them medical spas, but they were in a sense entirely non-surgical cosmetic medical treatments. We did not do any massage. We did do some facials, but we basically kind of added bonuses since we had aestheticians. But, my focus was on actually building things that provided that, high volumes, high margins and I’ve never experienced or seen a practice that was successful at having one or two aestheticians that were paying on commission and were doing massage and facials and converting that into medical treatments. And I’m going to be anxious to kind of hear what is your opinion is going to be on that.
   
    So as an example, it is common in the spa industry to be paid on commission or having a commission split based on treatments and the potential separate based on product sales. I don’t know how you’re going to feel about this, maybe this is going to be contentious. I’ve always seen that as a very corrosive element. Commission, especially for kind of medical treatments, laser hair removal and all that kind of stuffs, should almost never be done. In fact, we never did it. I instead implemented a profit sharing plan that rewarded what I considered to be the right behavior and kept what I considered corrosive out of the system. Now before I kind of get in to what I did, I’m anxious to hear how you both manage that or if you even see that as a potential problem and then how you addressed that.

Jessica:    I would agree with you and this could be very specific to the state of California because Texas, Nevada, Utah are much more liberal in terms of what’s been the medical spa treatments and what is it. In California it’s been very, very strict, which I think is good. But having said that, let’s be very clear that the aestheticians were only performing aesthetic luxury services that either were pre or post treatment to either prepare the patient to a true medical procedure performed by the MT or PA or physician on site so let’s be very clear about that. The difference is that we’re talking about marrying a retail luxury operation with a medical practice and to your point Jeff you’re correct and that is it’s very rare to marry those two formulas and have it work. But, make no mistake there are spas out there that are luxury retail that are profitable as stand-alone operation and there are clinical operations out there obviously that has much higher margins. So therefore the argument becomes, is it possible to marry the two? And what is the opportunity cost or what is the opportunity? Yes, there really should be A.) Marketing vehicle, and B.) It also can help assist with patient retention as well as post procedures.

    Now to answer your question about commission services and things about that… Yes, I had my aestheticians who were not performing laser hair removals, any type of laser or any type of injectable on commission. The reason why I think that formula can be so successful is because, I think Jeff you had said you hired thousands of aestheticians, I’ve hired thousands of aestheticians in my lifetime as well, is A.) You have to know how to hire the right aesthetician with the right technical skill who has an understanding of how to really consult with the physician and feed the patient to the physician number one you have to have a sales person. And that’s where most operations fail. They don’t know how to hire sales people and/or train them to become sales people. I did not have anyone in my operation, whether be an aesthetician or massage therapist who was not a sales person and I learned that very early in my career. Most people fail right there. They sort of allow mediocre stuff to not really perform a certain rate. To give you an example, my aestheticians were billing about $10,000 in services every two weeks and they were selling about $10,000 in retail every two weeks. Keep in mind those products and retail they were selling were our own product line and so our margins were much higher than your typical ‘buy our product’ market up 100% and there’s a tight little margin there.

Jeff:    Sure, it actually has kind of a retail component in it. You would walk in and there’s a kind of a retail boutique kind of a store front. I’ve been there and as I remember there was also a kind of a little smoothy shop and some other kinds of things. So, it was large operation. How big is the staff there?

Jessica:    We had about 80 employees.

Jeff:    And that is a breakdown of office staff…

Jessica:    Everything…

Jeff:    And how many physicians?

Jessica:    Towards the latter… there was about 5 to 6 physicians. And we had some part-time and some full-time.

Jeff:    So, this is not a typical location. It was certainly one of the bigger medical spas.

Jessica:    If your goal is to set-up an operation that doesn’t reflect a high-end luxury retail elective operation and you don’t have the capital to do that, you could potentially fail.

[20:09]
Jeff:    Do you have the PNL statement? Do you know how much it cost to set-up a practice and get it going?

Jessica:    Well, it’s a two and a half million dollar property privately owned in La Jolla, not to mention the biled out. This is one of the most expensive demographics existed in all of the United States, La Jolla California. So, for certainly the upstart cost were multi-million.

Jeff:    Yeah. So, how long was it before those were kind of recouped? I mean, were you guys growing it in a kind of a linear rate? Or, when you go from 3 million to 13 million, was it kind of a  j-curve towards the end there?

 Jessica:    it was certainly a j-curve towards the end. Obviously, you could do the math and say: “If you’re netting anywhere between 8% and 20% with a medical spa, you could do the math there and see how quickly you can gain a return on your investment. It is possible and it takes, and I think we’re going to segue into this, a full-time marketing machine to maintain that value. It takes a strong retail and luxury experience to maintain your patients as well. It’s really about the overall patient experience and maintaining that.

Jeff:    Very true. Now it is certainly possible to bite off a little bit smaller piece of… to carve off a leg of a turkey as oppose to deciding to eat the entire flock. So, most physicians who are opening up clinics, they are sole practitioner. They might potentially have a partner, but it is really much easier to grow out of your existing practice and keep your cost low while you improve your personal income in kind of business practices.

    In the State of Utah where we started out and also in Tennessee, Florida and the other states where we had clinics that is permissible. However, it used to be and still a little bit is kind of a wild west, each State is different. What I personally implemented was the physician sought out every patient before every treatment. So, while a non-physician could actually be pushing a button on an IPL doing hair removal… And to be honest, it is probably much more efficient as a practice and as a business in almost every other way not to have physicians or PA’s or MP’s doing that. Physician in our process saw that patient and did the skin typing and that kind of stuff. So, every treatment was seen by a physician. The treatment parameters was set and then the tech or the aesthetician was the one actually pushing the button on most of those treatments.

    Now, this gets a little bit into the kind of legal ramification on how this kind of system operate. Did you guys had the same kind of process?

Jessica:    No. We had very strict standards. Also, the State of California again is very strict so we do not have a choice to legally operate outside of the parameters nor was it our standards. Every single patient was seen by a medical professional, whether be a physician, a MP or a PA.

Jeff:    So, do have a RN who is actually kind of doing the actual laser hair removal?

Jessica:    No. RNs were not even in our standards. We had RNs operating… Now that was just our standard in the State of California, but our RNs mostly serve the role in the OR and performing pre-ops and post-ops.

Jeff:     So, when you were doing IPL treatment, who was performing that treatment?

Jessica:    Either a MP, a PA, or a physician.

Jeff:    So, you had MPs and PAs doing laser hair removal?

Jessica:    Yes.

Jeff:    My guess is our cost to do that had to be correspondingly higher. To have a PA doing a laser hair removal is more expensive, it’s not as expensive as a physician, than having a laser technician do it.

Jessica:    Correct. And then again in California though, that’s illegal. So, we didn’t have that challenge in terms of being competitive in the market place. So, we also again about… it was about to get experience… we were a marketing engine… we didn’t want to be the least expensive on the block. We wanted to really focused on the luxury retail environment also coupled with yielding the best results from those of the IPL stand point, laser hair stand point and that’s how we really positioned ourselves in the market.

Jeff:    Exactly. I mean, there is one thing that is true it is there can only be one lowest price. And that the patient who comes to you because you have the lowest price will leave you as soon as there is a lower price. And it is very common that physicians who don’t know anything about patient retention, marketing, or operations would attempt to compete and drive traffic by lowering their price and it is a hard lesson that K-Mart learned, right? Competing against Walmart… Walmart had the lowest price and K-Mart run out of business.

    And so when you had a new hire, what was your methodology or your system for training a new either a front desk person or an aesthetician?

Jessica:    Well, that’s another great topic. Training is so important and the reason why many medical spas fail is because they completely omit that very thing, which is little to no training. And so our training program was extremely extensive. Number one, we had operations manual and training manuals. We had talk tracks written out very specifically. We had a set of standards and the best experience of that. And that every single patient with experience coming in through the door, we would have them spend time with the medical professional over days. Obviously, they’re not physicians, they’re not medical professionals, but they need to be able speak to the potential patient over the phone and asses their concerns at least. Their whole goal, whether a front desk person, was to put an appointment and get them through the door. So, it’s a fine delicate balance between giving some type of information over the phone regarding a procedure and start booking them for a consultation. So, the training for any employee is very important, especially when you have a medical spa even combined with a cosmetic practice, because even a physician comes on board it’s very important for them to become knowledgeable about the retail products that you’re offering underneath the roof and the various spa treatments, as you know, can be quite a culture shock if you’re coming from a medical world. So, it’s very important to groom that culture and to marry that culture and it takes and takes thorough training.

Jeff:    And so, how long is the training do you have?

Jessica:    Well, we would typically have about at least at the minimum of 5 days training process, but on-going training constantly for your weekly meetings, for your monthly meetings. As you know, technology, treatments, and procedures evolve… It has to be a constant on-going training process. Now, that’s for your frontline staff obviously if you’re bringing up a physician on board. If were talking about medical personnel, the training’s going to be much more expensive.

Jeff:    Was there kind of a split in your system? I mean, was there a kind of an upstairs, downstairs kind of thing?

Jessica:    It was a constant effort to keep the team working as one. I think to your point the reason why most medical spas fail because they don’t know how to groom that team culture. The teamwork has clichés. That word is absolutely critical. Everybody has to have by ends into what you’re accomplishing. And that means that the aestheticians and the massage therapists and the spa staffs have to believe and know and believe in the physician’s credentials and really have a thorough understanding of everything on the cosmetic side and vice-versa. And most medical spas, and I’m sure you can attest to this Jeff, at least what I witnessed in spas in general, do fail because of this dysfunction. And so, that’s where really having strong leadership team is very, very important.


END OF INTERVIEW


[29:43]

Andy:     Well that’s it for the show. That’s the end of part 1 of the interview with Jessica Wadley and of course we’ll have part 2 in the next episode. So, thank you very much for listening and hope you enjoyed it. Now, we’d love to hear from you, of course. So, if you got any questions and comments please send them along to our email address at podcast@medicalspamd.com or leave a comment on the physicians’ forum on the MedicalSpaMD.com website.

If you’re a subscriber, that’s great, but if you haven’t subscribed yet and you’d like this how to be downloaded automatically when a new episode comes along then search for Medical Spa MD in iTunes or visit the MedicalSpaMD.com website and click on ‘Podcast’. Also, search for Medical Spa MD on Twitter, on Facebook, and in Linked In because you can find us there as well.
 
As always, please consider everything we say to be complete conjecture and random speculation, not medical or legal advice. Laws and regulation vary everywhere so consult a medical or legal professional in your country before taking any action.

So that’s it. So it’s goodbye from Andy White.

Jeff:     And goodbye from Jeff Barson.

Andy:     Wishing you all the best and we’ll see you next time on Medical Spa MD.


END OF PODCAST

PODCAST 7: Part 1 - Jessica Wadley - former COO of Spa MD 

 

 

Andy:        Hello and welcome to the show. Well we give you the low down and inside information and the word from the expert that helps physicians reclaim control of their medical practice. So, if you’re clueless about running a business and you’re already working 60-hour week, this is for you.

 

Medical Spa MD brought to you by MedicalSpaMD.com, a worldwide community of physicians practicing cosmetic medicine. Hello Jeff!

 

Jeff:           Hello Andy!

 

Andy:        Jeff, I’ve just connected to Medical Spa MD group in Linked In and I was delighted to see that you’ve got hundreds of people in the group. How’s it going?

 

Jeff:           Certainly, we do. I mean, that group has been around for a while now so a lot of our members from MedicalSpaMD.com have joined up and connected via Linked In. I see the way that we are kind of going as a community that bridges a number of the social networks. So, we’ve got the main website the MedicalSpaMD.com, but you’re also welcome to join us on Facebook, Twitter, which is more of an abbreviated experience, or Linked In as a kind of a business individual. We manage those a little bit separately. For example on Facebook, we have a group “Physicians and Facebook Marketing”. It is designed around using Facebook in order to drive patient traffic and market your business. Now it is perfectly applicable or appropriate if none physicians can join that too and derive value from that. The reason that we’re doing that is of course is to use the tool and show you how we’re doing that inside of the actual network. So, rather than talk about that, which we do still on MedicalSpaMD.com, you know we have a group that teaches that specifically and at the same thing a little around Linked In and Twitter and those types of things, so you kind of can choose your poison there.

 

Andy:        Now Jeff, a little bit later, actually minutes from now, we’re going to be having part 1 of the interview with Jessica Wadley and that got me thinking you know because Jessica was a highly regarded, innovative, sort of leader in the Spa and [02:36]. And you’ve got me thinking how did spas… What is the sort of history or the origins, if you like, of Medical Spas?

 

Jeff:           Well, Medical Spas were an outgrowth really. What happened was in the late 90’s was really it kind of got started. And there were a number of cosmetic dermatologists and plastic surgeons who had the idea that I could associate or own a day spa where there’s patient traffic coming in, these are generally women and sometimes men interested in a kind of luxury cosmetic treatments and all those kinds of things. These are people who are going to come in and receive facials and massages. This is the same potential patient population that I’m going to draw from for my medical practice.

 

                    They started building day spas in conjunction or associated with or in the same [03:41] separated by a door with their medical practice. They started generally on the coast in New York. There were a couple of them in California one of which is Spa MD in La Jolla were Jessica was involved. But, the idea behind medical spas was really those two things. There was a medical practice and then there was a day spa that was doing massages, facials, light chemical peels and selling skin creams, balms and lotions. And the idea was to drive traffic to the day spa and then siphon off a portion of that traffic that would be interested in medical treatments and then kind of kick them upstairs for the physicians. And that’s were really that kind of got started.

 

                    Now, I started my clinic and that was in about 2000 so within 18 months probably of the first real kind of medical spas kind of starting up, we’re still calling our clinics medical spas. In effect, we were kind of pay backing on the luxury aspects of these, but our clinics were 100% medical. We did have aestheticians. In fact, we all had master aestheticians, which is a slightly more advanced degree than an aesthetician. And they were doing some non-medical treatments, but generally these were not designed to generate traffic. They were pretty much kind of a given away as a pre-opposed treatment for a medical treatment or as a kind of a thank you bonus, if that makes sense.

 

                    So just can I talk about the 2 different kinds of systems… So, medical spa now kind of means anything that has a luxury or kind of a spa component. So, it bridges the entire gambit between an individual physician who now has a aesthetician renting a room from him in some state, that’s legal and does not work and kind of get into the reasons why what I don’t think that’s a successful model, and a clinic like Spa MD, which really has a boutique retail component. It’s a two-floor kind of a building and on the bottom floor there’s a luxury day spa, there’s a boutique, there’s kind of a small café and it’s associated inside of Spa MD. Upstairs is where physicians and medical treatments are performed, but downstairs… If you walk in just the downstairs, you would think that you’re in kind of a high-end day spa boutique kind of a thing. There’s not really any medical component that’s mixed that way. It’s very interesting and very successful business, one of the first. And they’ve done things extremely well, but they’re also a very large clinic. Jessica will talk about this. When you got 80 staff members, that’s a very large clinic and I think they have 6 docs, something like that.

 

Andy:        It sounds somewhat ideal. I actually quite like to go to La Jolla myself and check it out, Jeff.

 

Jeff:           It is. It’s inexpensive. We talked about pricing and a number of other things, but pretty interesting.

 

Andy:        Okay. Well, let’s have a listen to that interview. Just a couple of quick facts of course… She’s a highly regarded and innovative spa and salon industry leader. Of course, as we’ve mentioned she works at La Jolla, not pronounced “la jo-lla”, like I replaced that earlier Jeff thanks for that. And she was the Chief Operating Officer there and helped grow from 2 million to 11 million in revenue in 2 years, pretty impressive. Let’s have a listen to part 1 of that interview then.


 

 

INTERVIEW

 

[07:48]

Jeff:           Can you tell me a little about what you’ve done in your career?

 

Jessica:     My background primarily is in executive spa management and medical spa management. And back in the 90’s in the early 2000 a company called [08:03] only publicly helps spa chain exist they own… 100% of spas on cruise ships and they own destination spas all over the world, global spas. That’s how I got started in the spa business and from there I was recruited to La Jolla Spa MD in La Jolla, California to be the chief operating officer and to essentially grow the business and launch the business.

 

Jeff:           Now, when you day grow the business and launch the business, what state were they at when you got recruited you and who recruited you?

 

Jessica:     it was in La Jolla, California for La Jolla Spa MD. It was a start up essentially. I came on about 6 months after the operation had opened. And I started with that company for 5 years and in that 5-year time frame I grew the business from about 3 million to about 13 million in 5 years.

 

Jeff:           When you say 3 million, was that a kind of an existing practice that was now opening the medical spa?

 

Jessica:     Yes, exactly. So, there was an existing practice existing patients who had followed, but they never ventured into… Back then in 2003, medical spas were just really being born. So, this was the first true medical spa of its kind that wasn’t in a mall or anything of its nature or a chain center. It was a true medical spa to where on the first floor we had a luxury six-room treatment spa. We had about a 3,000 sq. foot retail center and on the second floor we had our cosmetic dermatology practice, plastic surgery office complete with a triple H fee accredited O.R. So, we have our own O.R. on site. And we have about over 35 lasers as well.

 

[10:01]

Jeff:           This idea was to provide kind of a spa environment and to kick in effect to drive traffic and then to take the percentage of those patients that are looking for more invasive or more medical treatments and in effect kick them upstairs. Is that right?

 

Jessica:     That’s correct.

 

Jeff:           And how did that work?

 

Jessica:     It is not a business that everyone should venture into. Historically, spas, aestheticians, massage therapists have significantly lower margins. It is very difficult to squeeze a profit out of a spa.

 

Jeff:           Now it is interesting that you say that because I have in my experience never seen that work. It is very often when a physician looks to open a medical spa, the kind of thing that they are thinking that they’re going to be doing is eyelid tattoos, massage and that kind of stuff but, it is very, very difficult. I’ve never seen it work, physicians running spas and the spa’s actually kind of making money.

 

Jessica:     Well, most of them do not know how to run spas. And most spas do not have an understanding of cosmetic dermatology and/or plastic surgery world or cosmetic surgery world. To get expert in these two areas is very rare.

 

Jeff:           And so how did you manage that?

 

Jessica:     It was certainly a long-term process and it was bumpy along the way. And to answer that question to your point is very complex. It will probably take two sessions. However having said that, building a very strong team culture and company culture is the number one most important. Having clear understanding and very [11:57] customer service goals and a process that the patients will experience when they’re coming in the door is absolutely a critical key to performance.

 

                    You really have to design compensation plans in your spa level with aestheticians and your massage therapists that reward the right behavior and where also you can maintain your margins. I mean, you’re lucky to your point Jeff in a spa setting if you can process 8%.

 

Jeff:           And for physicians to go from a medical operating margins to something that is just barely kind of bumping by and very, very difficult.

 

 Jessica:    Yes. Well, what would I say to that physician is a couple of things. One, what’s your long term strategic plan? What happens when your hands no longer work? And, how are you going to continue to drive revenue to your practice? That’s my first point. The second point is I think every physician today would say: “I could certainly use an economic time to increase volume in my practice on a stronger referral base and more patients walking into my treatment room and/or my O.R.” So, you have to look at the spa, and I think Jeff you mentioned it, as a marketing vehicle to drive patients into the cosmetic practice.

 

Jeff:           This is where I have always found a real problem. With any of my clinics, we pretty much stay away from medical treatments. We call them medical spas, but they were in a sense entirely non-surgical cosmetic medical treatments. We did not do any massage. We did do some facials, but we basically kind of added bonuses since we had aestheticians. But, my focus was on actually building things that provided that, high volumes, high margins and I’ve never experienced or seen a practice that was successful at having one or two aestheticians that were paying on commission and were doing massage and facials and converting that into medical treatments. And I’m going to be anxious to kind of hear what is your opinion is going to be on that.

                   

                    So as an example, it is common in the spa industry to be paid on commission or having a commission split based on treatments and the potential separate based on product sales. I don’t know how you’re going to feel about this, maybe this is going to be contentious. I’ve always seen that as a very corrosive element. Commission, especially for kind of medical treatments, laser hair removal and all that kind of stuffs, should almost never be done. In fact, we never did it. I instead implemented a profit sharing plan that rewarded what I considered to be the right behavior and kept what I considered corrosive out of the system. Now before I kind of get in to what I did, I’m anxious to hear how you both manage that or if you even see that as a potential problem and then how you addressed that.

 

Jessica:     I would agree with you and this could be very specific to the state of California because Texas, Nevada, Utah are much more liberal in terms of what’s been the medical spa treatments and what is it. In California it’s been very, very strict, which I think is good. But having said that, let’s be very clear that the aestheticians were only performing aesthetic luxury services that either were pre or post treatment to either prepare the patient to a true medical procedure performed by the MT or PA or physician on site so let’s be very clear about that. The difference is that we’re talking about marrying a retail luxury operation with a medical practice and to your point Jeff you’re correct and that is it’s very rare to marry those two formulas and have it work. But, make no mistake there are spas out there that are luxury retail that are profitable as stand-alone operation and there are clinical operations out there obviously that has much higher margins. So therefore the argument becomes, is it possible to marry the two? And what is the opportunity cost or what is the opportunity? Yes, there really should be A.) Marketing vehicle, and B.) It also can help assist with patient retention as well as post procedures.

 

                    Now to answer your question about commission services and things about that… Yes, I had my aestheticians who were not performing laser hair removals, any type of laser or any type of injectable on commission. The reason why I think that formula can be so successful is because, I think Jeff you had said you hired thousands of aestheticians, I’ve hired thousands of aestheticians in my lifetime as well, is A.) You have to know how to hire the right aesthetician with the right technical skill who has an understanding of how to really consult with the physician and feed the patient to the physician number one you have to have a sales person. And that’s where most operations fail. They don’t know how to hire sales people and/or train them to become sales people. I did not have anyone in my operation, whether be an aesthetician or massage therapist who was not a sales person and I learned that very early in my career. Most people fail right there. They sort of allow mediocre stuff to not really perform a certain rate. To give you an example, my aestheticians were billing about $10,000 in services every two weeks and they were selling about $10,000 in retail every two weeks. Keep in mind those products and retail they were selling were our own product line and so our margins were much higher than your typical ‘buy our product’ market up 100% and there’s a tight little margin there.

 

Jeff:           Sure, it actually has kind of a retail component in it. You would walk in and there’s a kind of a retail boutique kind of a store front. I’ve been there and as I remember there was also a kind of a little smoothy shop and some other kinds of things. So, it was large operation. How big is the staff there?

 

Jessica:     We had about 80 employees.

 

Jeff:           And that is a breakdown of office staff…

 

Jessica:     Everything…

 

Jeff:           And how many physicians?

 

Jessica:     Towards the latter… there was about 5 to 6 physicians. And we had some part-time and some full-time.

 

Jeff:           So, this is not a typical location. It was certainly one of the bigger medical spas.

 

Jessica:     If your goal is to set-up an operation that doesn’t reflect a high-end luxury retail elective operation and you don’t have the capital to do that, you could potentially fail.

 

[20:09]

Jeff:           Do you have the PNL statement? Do you know how much it cost to set-up a practice and get it going?

 

Jessica:     Well, it’s a two and a half million dollar property privately owned in La Jolla, not to mention the biled out. This is one of the most expensive demographics existed in all of the United States, La Jolla California. So, for certainly the upstart cost were multi-million.

 

Jeff:           Yeah. So, how long was it before those were kind of recouped? I mean, were you guys growing it in a kind of a linear rate? Or, when you go from 3 million to 13 million, was it kind of a  j-curve towards the end there?

 

 Jessica:    it was certainly a j-curve towards the end. Obviously, you could do the math and say: “If you’re netting anywhere between 8% and 20% with a medical spa, you could do the math there and see how quickly you can gain a return on your investment. It is possible and it takes, and I think we’re going to segue into this, a full-time marketing machine to maintain that value. It takes a strong retail and luxury experience to maintain your patients as well. It’s really about the overall patient experience and maintaining that.

 

Jeff:           Very true. Now it is certainly possible to bite off a little bit smaller piece of… to carve off a leg of a turkey as oppose to deciding to eat the entire flock. So, most physicians who are opening up clinics, they are sole practitioner. They might potentially have a partner, but it is really much easier to grow out of your existing practice and keep your cost low while you improve your personal income in kind of business practices.

 

                    In the State of Utah where we started out and also in Tennessee, Florida and the other states where we had clinics that is permissible. However, it used to be and still a little bit is kind of a wild west, each State is different. What I personally implemented was the physician sought out every patient before every treatment. So, while a non-physician could actually be pushing a button on an IPL doing hair removal… And to be honest, it is probably much more efficient as a practice and as a business in almost every other way not to have physicians or PA’s or MP’s doing that. Physician in our process saw that patient and did the skin typing and that kind of stuff. So, every treatment was seen by a physician. The treatment parameters was set and then the tech or the aesthetician was the one actually pushing the button on most of those treatments.

 

                    Now, this gets a little bit into the kind of legal ramification on how this kind of system operate. Did you guys had the same kind of process?

 

Jessica:     No. We had very strict standards. Also, the State of California again is very strict so we do not have a choice to legally operate outside of the parameters nor was it our standards. Every single patient was seen by a medical professional, whether be a physician, a MP or a PA.

 

Jeff:           So, do have a RN who is actually kind of doing the actual laser hair removal?

 

Jessica:     No. RNs were not even in our standards. We had RNs operating… Now that was just our standard in the State of California, but our RNs mostly serve the role in the OR and performing pre-ops and post-ops.

 

Jeff:           So, when you were doing IPL treatment, who was performing that treatment?

 

Jessica:     Either a MP, a PA, or a physician.

 

Jeff:           So, you had MPs and PAs doing laser hair removal?

 

Jessica:     Yes.

 

Jeff:           My guess is our cost to do that had to be correspondingly higher. To have a PA doing a laser hair removal is more expensive, it’s not as expensive as a physician, than having a laser technician do it.

 

Jessica:     Correct. And then again in California though, that’s illegal. So, we didn’t have that challenge in terms of being competitive in the market place. So, we also again about… it was about to get experience… we were a marketing engine… we didn’t want to be the least expensive on the block. We wanted to really focused on the luxury retail environment also coupled with yielding the best results from those of the IPL stand point, laser hair stand point and that’s how we really positioned ourselves in the market.

 

Jeff:           Exactly. I mean, there is one thing that is true it is there can only be one lowest price. And that the patient who comes to you because you have the lowest price will leave you as soon as there is a lower price. And it is very common that physicians who don’t know anything about patient retention, marketing, or operations would attempt to compete and drive traffic by lowering their price and it is a hard lesson that K-Mart learned, right? Competing against Walmart… Walmart had the lowest price and K-Mart run out of business.

 

                    And so when you had a new hire, what was your methodology or your system for training a new either a front desk person or an aesthetician?

 

Jessica:     Well, that’s another great topic. Training is so important and the reason why many medical spas fail is because they completely omit that very thing, which is little to no training. And so our training program was extremely extensive. Number one, we had operations manual and training manuals. We had talk tracks written out very specifically. We had a set of standards and the best experience of that. And that every single patient with experience coming in through the door, we would have them spend time with the medical professional over days. Obviously, they’re not physicians, they’re not medical professionals, but they need to be able speak to the potential patient over the phone and asses their concerns at least. Their whole goal, whether a front desk person, was to put an appointment and get them through the door. So, it’s a fine delicate balance between giving some type of information over the phone regarding a procedure and start booking them for a consultation. So, the training for any employee is very important, especially when you have a medical spa even combined with a cosmetic practice, because even a physician comes on board it’s very important for them to become knowledgeable about the retail products that you’re offering underneath the roof and the various spa treatments, as you know, can be quite a culture shock if you’re coming from a medical world. So, it’s very important to groom that culture and to marry that culture and it takes and takes thorough training.

 

Jeff:           And so, how long is the training do you have?

 

Jessica:     Well, we would typically have about at least at the minimum of 5 days training process, but on-going training constantly for your weekly meetings, for your monthly meetings. As you know, technology, treatments, and procedures evolve… It has to be a constant on-going training process. Now, that’s for your frontline staff obviously if you’re bringing up a physician on board. If were talking about medical personnel, the training’s going to be much more expensive.

 

Jeff:           Was there kind of a split in your system? I mean, was there a kind of an upstairs, downstairs kind of thing?

 

Jessica:     It was a constant effort to keep the team working as one. I think to your point the reason why most medical spas fail because they don’t know how to groom that team culture. The teamwork has clichés. That word is absolutely critical. Everybody has to have by ends into what you’re accomplishing. And that means that the aestheticians and the massage therapists and the spa staffs have to believe and know and believe in the physician’s credentials and really have a thorough understanding of everything on the cosmetic side and vice-versa. And most medical spas, and I’m sure you can attest to this Jeff, at least what I witnessed in spas in general, do fail because of this dysfunction. And so, that’s where really having strong leadership team is very, very important.

 

 

END OF INTERVIEW 

 

 

[29:43]

 

Andy:        Well that’s it for the show. That’s the end of part 1 of the interview with Jessica Wadley and of course we’ll have part 2 in the next episode. So, thank you very much for listening and hope you enjoyed it. Now, we’d love to hear from you, of course. So, if you got any questions and comments please send them along to our email address at podcast@medicalspamd.com or leave a comment on the physicians’ forum on the MedicalSpaMD.com website.

 

If you’re a subscriber, that’s great, but if you haven’t subscribed yet and you’d like this how to be downloaded automatically when a new episode comes along then search for Medical Spa MD in iTunes or visit the MedicalSpaMD.com website and click on ‘Podcast’. Also, search for Medical Spa MD on Twitter, on Facebook, and in Linked In because you can find us there as well.

 

As always, please consider everything we say to be complete conjecture and random speculation, not medical or legal advice. Laws and regulation vary everywhere so consult a medical or legal professional in your country before taking any action.

 

So that’s it. So it’s goodbye from Andy White.

 

Jeff:           And goodbye from Jeff Barson.

 

Andy:        Wishing you all the best and we’ll see you next time on Medical Spa MD.

 

 

END OF PODCAST

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