What Are You Worth As A Physician

By Arlen Meyers MD

You're a physician but what are you worth as a business asset? Here are 3 Ways to determine your price.

One of the key decisions every seller has to  make , whether it's a house, a business or any other asset for sale, is to detemine its value and price. I'm married to a residential real estate broker, one of the dwindling few left standing, it seems, in a business that's been in a tailspin for the last 3 years. Consequently, I hear lots of stories about how much people want for their houses and how they make the decision. Typically, sellers overprice, figuring that the largest drop in housing prices in 30 years does not apply to them, that they are entitled to recover every cent they spent on their gourmet kitchen renovation, and they need to build in some wiggle room in the price anyway since they know they will have to negotiate some away later. Then, of course, there is dreaded realtor's commission to factor into the equation.

When it comes to selling a business, there are three basic ways to value it.

The first approach is known as the Asset Based Approach. This approach derives an indication of value based on the costs to replace the tangible assets in depreciated or replacement cost condition. Some businesses for sale are generating negligible cash, so the assets are the only thing that has value. True, intangible assets, like intellectual property, and future market growth might have value, but let's keep this simple for now.

The Market Approach derives indications of value using ratios or factors derived from the earnings, sales and/or assets of past transactions of similar businesses. This approach is like getting comparables for house, asking what a similar house in a similar location has sold for in the recent past. In the case of businesses, the value is determined by comparing it to the selling prices of similar businesses.
 
The Income Approach derives indications of value by converting some level of earnings into a value using a capitalization rate, discount rate or multiple. There are several ways to calculate this net present value, but basically it has to do with using historical revenue numbers and applying a discount rate to determine the value of the revenue streams.

http://www.score.org/article_business_valuation.html

If you are considering branching out from your medical practice or leaving it all together, suppose you were to apply the same technique to valuing yourself?

Using the asset method, the monetary value of the chemicals and proteins in the human body is $4.50.

http://www.savingadvice.com/forums/everything-else/22337-how-much-your-body-worth.html

Using the comparables method, you are probably worth what most others who do what you do are worth. The average salary of a realtor, for example,  is about $45K and it is all commission based. But, don't tell that to all the ex-realtors trading resumes at Starbucks or Ms. Bigbucks still selling the occaisional multi-million McMansion.

Using the NPV method, you are worth the discounted net present value of the future cash flows you can generate compared to what you make doing what you are doing now.

Inevitably, despite the self-actualization talk, docs and  their families want to know how much they'd be worth if Mommy or Daddy did something different. Go figure.

About: Arlen Meyers MD MBA is the cofounder, and Chief Medical Officer of MedVoy, a medical tourism company. He is also a Professor of Otolaryngology, Dentistry and Engineering at the University of Colorado at Denver and CEO and President of the Society of Physician Entrepreneurs. He blogs at Freelance MD

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Financial Planning For Physicians

From the Medical Spa MD Podcast, episode 3 on Financial Planning for Physicians with Dr. Setu Mazumdar

We added a new podcast episode with Dr. Setu Mazumdar recently in which we discussed how physicians tend to underperform the market with their self-directed investments. Here's an excerpt from the podcast that I thought was pretty relevant.

Question: What are the physicians who are more successful with their financial planning? What do they have in common?

Dr. Mazumdar: First of all, I think it’s a very small group. Most of the people I’ve met… Sure they might make high income [inaudible – 00:50:27], but having high income and being successful I think are two separate issues. If you’re spending all the money that you’re making, you’d probably not accumulate enough assets where you can call yourself financially successful. But the common traits that I see are one having a [inaudible – 00:50:47] of plan and place.

The second thing that I’ve noticed are people who basically say: “You know I’ve realized that I can’t pick the winning stocks. I can’t time the stock market. I can’t pick the winning managers. The best I can do and what all the academic research says I should do is, match the market.”

The third, of course, is staying disciplined enough to stay with the good times and bad. As well as kind of taking the approach: “You know, I really don’t know what the future holds. It’s completely uncertain. I don’t know what my income is going to be. I don’t know if I’m going to be disabled. So I’m going to leverage time on my side and, of course, increase my savings to make sure that I have enough to retire on.”

So it all sounds kind of basic, but you’d be surprised that most physicians don’t do those things.

Jeff: So you brought up another interesting point, which is matching the market. Why would I need a financial adviser? And why wouldn’t I just invest the money that I’m willing to put in the market, whatever percentage that is going to be, and have them match the S&P 500 or invest in a matching index fund?

Dr. Mazumdar: That’s a good question. I think if you look at all the data that’s done in this issue… exactly answering this question… OK, here’s a great study. It actually comes about once a year, maybe once every two years. It’s called the [Dalbar Study?]. Here’s what it basically says. It says: If you take the past 20 years and if you just stuck with the market, this includes 2008 & 2009 and all the bad things that happened in the past decade, if you take the past 20 years, you’re just basically stuck with everything. You still will have a pretty decent rate of return, around 8% a year.

It turns out that the average individual investor… their return in the past 20 years, and the way that it’s calculated is based upon mutual fund cash flows across tens of thousands of different accounts and different custodians, the average individual investor got a rate return under 2% a year. The market return of about 8% a year… the average individual investor got a return about 1.8% a year. It turns out that inflation is about 3% a year.

So basically the conclusion there is that investors, when they do it themselves, are getting in and out in the market exactly at the wrong time. They’re essentially buying high and selling low. And so one of the value of an adviser is basically discipline. And people tell me: “Do I really want to pay for discipline?” And my answer is: “Actually that’s the number one thing you should be paying for because your own worst enemy is usually yourself. And all the data show that.”

But then there are always other issues like: Investment is one thing, but how do you integrate that with state planning? How do you know if you have enough life insurance? How do you if you’re saving enough? How do you know this from the other? And it’s kind of like medicine. It’s too vast of a field for somebody who kind of sit down and have the inclination to do so and really figure it out.

Listen to the entire interview on the Medical Spa MD Podcast.

Medical Spa MD {3} Dr. Setu Mazumdar & Physician Wealth Management

Episode 3 of the Medical Spa MD Podast: Dr. Setu Mazumdar of Lotus Wealth Solutions discusses physician wealth management.

The interview in this episode is with Dr. Setu Mazumdar of Lotus Wealth Management. Dr. Mazumdar is an MD who's now changed careers to become a financial and wealth management advisor specifically for physicians who are looking to get their house (and medical practice) in order.

We discuss how physician training does not equip docs with the knowledge and skills that they need to actually accumulate wealth, and how you can make some changes that give you control over your finances. Dr. Mazumdar details common mistakes that docs make and how they can be avoided.

If there's anyone who you'd like to hear interviewed or you think should be a guest on Medical Spa MD, please let us know or just leave a comment.

Inside Sona Medspas Part 6: Medical Directors & Physician Oversight

 Medical Spa MD - Inside Sona Medspas Part 6: Physician Oversight

These posts are written by former Sona Medspa owner Ron Berglund to provide an inside view of the way medical spa franchises recruit, train, and support their owners as well as detailing some of the problems with medspa franchises.

Read Part 1: Why I bought a Sona Franchise l Part 2: Sona Promises l Part 3: The Franchise Pitch l Part 4: Legal Structure & Revenue Sharing l Part 5: Opening a laser clinic

Sona Medspas: Physician Oversight

About medical oversight at Sona?

What did Sona tell us?  Sona gave us some rather generic information about the requirements for a medical director as they were aware of the pertinent statutes and regulations.

Sona's manuals included a generic "Medical Director's Manual" and "Nurse Manual" which covered some of the relevant concerns. Their franchise documents and verbal statements naturally put the burden on each individual franchisee to get legal counsel in their state to cover all the bases, etc. They provided us with a generic "standing orders and protocols" document for the nurse to provide to the treating nurses (or "laser technicians") which provided a good start for most.

I know that in California and a number of other states the standard Sona model did not work and these franchises had to have significantly more creative (and expensive) legal work done to structure the operation properly. In a number of other states the clinics had to be located literally "across the hall" from the medical director- or the clinic had to incur significantly higher expense to have a physician actually "on sight" to comply with that state's laws and medical board regulations. (Read: Can a non-physician employ a physician.)

In Minnesota we employed the standard off-site "medical director" model which required a licensed physicians to "oversee" clinic operations and protocols. (Read: Physician oversight in medical spas l Mid-level providers in medical spas)

Sona was strict about requiring our docs to review and either sign or initial each patient chart and each entry on every treatment log to double check that proper parameters were being used, etc. We also had a decent system set up requiring "adverse event" reports for every "incident" which was also sent to the corporate office each month. Fortunately, we had very few adverse events over the years--partly because the majority of our treating nurses were primarily interested in CYA and not having any of their patients experience "discomfort" or causing any minor burns or blisters. Due to the very conservative teaching and recommended parameters furnished by Sona our BIGGEST problem through the years was with EFFICACY.

The majority of our treated patients still had significant hair remaining after five treatments-- which caused most Sona operations to slowly crumble due to patient dissatisfaction and demands for additional free treatments, etc.

Did your system work for your medical directors?

The main problem encountered by both Minnesota clinics for the first few years of operation was keeping a medical director in place.

 

We went through a succession of medical directors for a variety of reasons-- retirement, relocating, not being comfortable with the procedures or the risk involved (vs the small fee we were willing to pay the medical director which ranged from $1500 to $2000 per month per center).

 

The most outrageous situation was our young dermatologist who was forced to give up her "moonlighting" job due to an edict issued by her boss-- who coincidentally was the head of her department at a major university and also owned a competitive laser center in the same city!.

 

Medical Oversight Problems?

The centers in Minneapolis and St. Paul actually operated without incident for six and four years respectively without incident until a female police officer treated in St. Paul (Woodbury) experienced a minor burn typical of treating skin with a "base tan" with high parameters required for Alexandrite laser hair removal treatments beyond the third or fourth treatment when high parameters are required for efficacy. 

 

Even though I told this woman that our nurse absolutely followed our established laser parameters, etc. she insisted that the nurse had done something wrong so she lodged a formal complaint with the Minnesota Nursing Board. The nursing board did a preliminary investigation and shipped the case to the Minnesota Attorney General's office where it is still under investigation. All this attention caused me to take a close look not just at the Minnesota statutes and regulations covering physicians but also the Nursing Board Act.

 

I was very surprised to see the level of detail required to legally employ nurses to operate lasers in Minnesota. I wrote a separate blog on this topic in another section of the web site where I asked if anyone out there was aware of a college or university that could provide a 30 hour course on the use and operation of lasers required by the nursing board.

 

They also require a very detailed delegation /prescription document from the physician to the nurse similar to what a nurse would need to legally dispense prescribed medications.

 

What questions did the staff have about this?

In order to try to avoid getting my staff riled up and worried about these "legal" issues (and the fact that they may have been guilty of "practicing medicine without a license"), where they were potentially  at risk of losing their nursing licenses, etc., my usual practice was to say as litle about this as possible.

 

My nurses were always well trained (especially after we started doing our own in-house training) and always treated patients cautiously. As we became more experienced we began doing more and more test spots-- even though these were not encouraged by Sona for the 80% of our patients who were Caucasian. 

 

After our business had collapsed financially in early 2006 we actually operated for several months without a medical director because my partner refused to dig deep enough to pay for one and we were primarily treating existing patients by this time.

 

During the late spring of 2006 my experienced nurses started to ask directly who the medical director was and they noticed that nobody was reviewing the charts on a weekly basis as had been done the previous three years. At this point I told them that my personal friend (a dermatologist who had been traveling regularly between Florida and Minnesota the past five years and had served as our director for several months previously) had agreed to act as our medical director for the time being. This was a stretch, of course. It is tough to do things right when you are stone cold broke!

 

Whart were your concerns with the medical aspect of the business? 

Once again-- hind sight is 20/20. But in the aftermath of my Sona experience I am more convinced than ever that MEDSPAs are not the place for entrepreneurs and non-medical businessmen. Most of the "doc in the box" business models have collapsed-- and I believe more will soon follow.

 

I believe the survivors will be the physicians who are actually owning and operating the clinics. This makes sense marketing wise-- as docs can market extensively and much more economically to their existing patient population-- as well as legally. I would venture a guess that a prospect is five times more likely to respond to a direct mail piece or a newsletter that comes from her physician than a mailer from an unknown operation that-- for all she knows --could be operated by any flake out there (maybe even a telephone call center headquartered in Michigan!).

 

Ron Berglund

Want to make REAL money?

Cosmetic medicine may not be the answer.

 
People both in and out of the medical field often comment on how much fun I must have at work.  And I actually do have a lot of fun.  I enjoy my job and I enjoy this field of medicine.  But it's still work.  And there are still problems as there are problems in any line of work.  But I always get a chuckle when people assume that since the office looks like a day spa and since our patients pay out of pocket, that any physician who works in cosmetic medicine must be rolling in the money.  I even hear that from other physicians.  My own ob/gyn is soon going to add cosmetic services to her practice so she "can finally get out of debt."  And while I think there are a few clinics out there that do exceptionally well.  For the most part adding cosmetic services to your current practice is like starting any new business.  For every Microsoft, there must be 5,000 others that fail.  Those odds of success and failure definitely apply to the field of cosmetic medicine.

Course most people think that all doctors are rolling in money.  I think most physicians earn a decent living, but when you take into account all the years in school, tuition, and the residency "stipend" that works out to be about minimum wage....well, I think there are a lot of easier ways to make that same amount of money.  Which is why I'm happy that I enjoy my work.  If I had entered medicine just to make money, then I might be disappointed that I didn't decide to become a plumber.  My plumber makes between $200 - $300 / hr and doesn't have to spend thousands on malpractice.  And he's so busy that his voicemail says don't even bother leaving a message if you are a new client.  He's already got all the work he needs.  And then he takes off to Mexico for 3 months out of the year.  Not that I'd want to muck around in some of the stuff he does.  But if you are only interested in money, then perhaps medicine isn't the right calling for you.  And if you are really interested in money, then cosmetic medicine may not be the pot of gold at the end of the rainbow that you think it is.

In fact, perhaps you should head straight onto Wall Street.  Monday's (November 27,2006 Lure of Great Wealth Affects Career Choices) New York Times had a front page article about a hematology/oncology physician who was making about $150,000/year in clinical medicine.  But then he straddled over to Wall Street and is now earning over $1-2+ million a year.  He launched from "decent" money to "insane" money.  

We often hear about Drs. X, Y, and Z entering this field from all different types of specialties.  And I'm sure they are lured by the predictable hours and lack of insurance wrangling.  But if they are drawn by the ideas of wealth and grandeur, they might be sadly disappointed. 

Sona MedSpas: An unhappy franchise owner.

Ron Berglund, a Sona medspa owner, left this comment on one of the most widely read articles on this site: What's wrong with medical spa franchises? The article Ron refers to is referenced here: Medspa boom is a bust for some.

"You may want to check out the November 21 issue of the Wall Street Journal. There is a very informative article about mdeical spas (primarily the Sona MedSpa and Radiance franchises).

Having been a franchisee (St. Paul, MN) for almost three years and now facing personal bankruptcy and financial ruin, I can vouch for the accuracy of the article. I have personal knowledge that perhaps 33% (and maybe over 50%) of the Sona franchisees have either already failed or are struggling. The Sona business model-- and I am guessing most of the franchised medspa models-- are replete with flaws, problems and booby traps.

For starters, any business that tells you to spend 25% of gross revenues on marketing and advertising is giving you a recipe for financial disaster down the road. Relying almost entirely on inflated revenues from prepaid multi-treatment packages (allowing you to take in - and spend-- thousands of dollars today without making any provision for the steadily growing future service liabilities) are also a trap for the undercapitalized and unsophisticated. Finally, Sona encouraged us to commit the mortal sin of cosmetic practice-- they coached us to overpromise results to the point of commiting fraud with thousands of clients. When the Sona-required lasers failed enable us to deliver these impossible results we were literally murdered with demands for additional treatments.

I predict a huge "shakeout" in 2007 as other medspa franchisees hit the courthouses with litigation and financial nightmares. The profitable delivery of esthetic medical services is a tricky and demanding challenge for anyone. I believe it takes a unique combination of business and marketing acumen together with great medical skill and emotional intelligence to navigate these tumultuous waters without drowning."

Ron Berglund 

The article Ron refers to is referenced here: Medspa boom is a bust for some.

From the same thread.

JustCurious asks: How does a medspa franchisee handle closing its doors? Aren't there agreements (in years) that must be signed with the franchisor and wouldn't there be penalties for closing shop? I've notice several medspa franchises closing or selling their business within 2 years of opening their doors and I'm wondering (a) what motivates them to close or sell so quickly and (b) what the penalties of closing/selling could be. Also, if a franchisee sells their medspa in this "billion dollar industry" so quickly, is that usually an indication of a failing business?

Dear Just Curious: Thanks for the response to my recent comment. You are asking two additional questions which are very important with regard to the subject at hand. First, you are asking how does a medspa legally close its doors. Closing shop would be no problem if all transactions were handled on a "pay as you go" basis. Unfortunately, most med spas sell primarily multi-treatment "packages". The Sona model encouraged us to do that almost exclusively. We typically sold five-treatment packages for laser hair removal, and often offered BOGO promotions wherein the client would purchase -- and pay cash up front for --five treatments at the "regular" price (full bikini @ $975 for example) and then would receive five FREE treatments for the underarms area. I had an excellent first year of operations since I was taking in thousands of dollars each month for treatments to be performed in the future. After signing up an average of 100 clients per month and pushing the future service obligation forward, you end up "painting yourself into a corner" and facing an insurmountable liability for performing treatments already paid for. Jeff Nebot had the same problem in St. Louis, except that his numbers were typically about triple my numbers. As this isn't enough of a problem, just imaging what happens when you try to sell or close the business!! You have several thousand clients who have prepaid and are legally entitled to the treatments they have already paid you for-- but you cannot afford to keep the Pnonzi scheme going! Believe me-- this makes any medspa almost impossible to sell because any prospective purchaser is scared to death to walk into this huge liability. That is the primary reason Jeff Nebot and I ended giving away our centers for free. Our buildout, furniture and equipment in St. Paul had cost us almost a million dollars and Jeff Nebot's investment was probably twice as much. I know first hand of several former Sona franchisees losing more than a million dollars on the whole mess-- in addition to a million headaches. There was a story posted on the Internet about the former Salt Lake City Sona franchisee closing her doors and failing to provide hundreds of clients with their pre-paid treatments. The article stated that Utah authorities chased the owners down in Texas and instituted some type of legal proceedings against them. I never heard how the matter was resolved, but I heard that the state was trying to impose some stiff penalties against the (Sona) owners.

Your second question asked how can it be that all these problems are occuring when this "med spa boom" is supposed to be happening all around us. The answer-- in my opinion-- is that the so-called med spa "boom" is to a large extent hype. I predict that the majority of the marginal operations will fall by the wayside during the next twelve month and the survivors will be the operatoins that are well funded and operated on sound business principles. Sona and many of the other franchised systems were attempting to offer a "get rich quick" scheme and also a model which-- for the most part-- utilized the physician as essentialy a mere figurehead. My personal belief is that the only truly successful med spa model requires three key components: 1. The physician is the key to the business-- similar to the dentist in the traditional dental office model; 2. The physician needs to be "on site" for a number of reasons-- business, professional and regulatory; and 3. The model requires superb marketing including a ton of cross-promotion and "guerrilla" marketing. Due to competition. typical profit margins and a number of other factors, med spas simply cnnot afford to allow advertising and marketing expenses to exceed over 10% of gross revenues. Whereas most physicians already have from 5000 to 15,000 patients in their data base who can serve as a "warm" client base for a med spa, all of the franchised med spa models start with zero and need to "buy" each client they recruit. Believe me--these outrageous advertising expenses eventually catch up with you! There is a reason the typical fast food franchises absolutely require that advertising expenses remain in the neighborhood of 7% of gross revenues. In order to survive in the low margin marketplace, there is no other way.

Ron Berglund 

What's a patient worth to your practice?

Most businesses exist to make money.  We've all heard the phrase "maximize profits and keep costs low." Among many factors, one of the major ways to build a successful and profitable medical practice is to reduce patient acquisition costs through a variety of patient retention techniques.

With that said, keep the following in mind: for an average company, it costs five times as much to obtain a new customer than to retain a current one. It can reach up to sixteen times as much to turn a new customer into one as profitable as a lost customer.   And that can be directly applied to most medical practices, especially ones that focuses on cosmetic services or charge fee for service.  Gone are the days when physicians could expect people to patiently sit for over an hour in the dull, dark waiting room with old boring magazines to read and then expect them to be grateful to even be seen.  Most of our patients are frustrated if they can't be seen within a day or two and will not tolerate waiting beyond 10 minutes in the waiting room.  And I don't blame them.  They are paying a lot of money for their treatments and are busy themselves.  Plus if we can't accomidate them, then usually there are at least 5 other physicians in the area who can do their Botox that same week.

What's a practice to do?  Treat the patient more like a customer and understand your practice through their eyes.   According to Marc Mertz  with The Horizon Group, a national health care consulting company, most patients base their level of satisfaction on two things: the front office staff and the office itself.  Can that be true?  You mean they don't seek out the best physician through hell and high water?  Actually patients tend to judge your clinic by the things that you likely take for granted.  And no matter how skilled you are as the doctor or where you went to medical school, they key in on a rude receptionist or the paint chipping from an exam room wall.  In fact, according to a survey of family practice patients, the front-office staff, ambiance of the practice facility, clinical support staff, and then physicians were ranked in order of importance as factors influencing patient satisfaction.

This is very important information and if you were suprised by it, then it was even more important for you!  Physicians tend to focus on their clinical expertise and think that staying abreast in their field is enough to guarentee a happy patient population.  And while that may be true in some fields, that is not the case in the field of elective cosmetic procedures.  So how do we adapt to this information?  One sure way to fail is to ignore it.  But offices who succeed tend to take it in, learn from it, and actually implement the changes necessary to keep their patients happy and, in turn, keep them coming back to them over and over again.

To read more about steps that you can use to improve your office, click here

An anesthesiologist moving into cosmetic medicine.

I had occasion last Friday to be visited by an anesthesiologist from Denver, who is interested in learning more about Surface Medical Spas.

Dr. Nelson is currently a member of a rather large group of anesthesiologists (55). In choosing her residency, she had felt that anesthesiology was a good fit since it was procedure oriented, and a high paid specialty. She has since been slightly disenfranchised, and to be honest - bored. She is also not terribly excited by the fact that she does a lot of pediatric anesthesiology, and is on call as a junior member of her group so that she has interrupted weekends and evenings.

Dr. Nelson called me a few weeks ago to ass about Surfaces cosmetic and business training for physicians. I spoke with her at some length about what we did, and what I thought we might be able to help her with. I suggested she come visit us, if she felt so inclined, to learn more.

(I have found in the past that, speaking on the phone is great, as far as it goes - but, the amount of information that you can convey over the phone during a half-hour or hour-long phone call is just not that great. Whereas, six hours of speaking with sedition's and staff, and treatments performed, and consolations done, and how our office is run, conveys a huge amount of information, and has always been extremely beneficial.)

Dr. Nelson in on a Thursday, and had booked a plane ticket home on Friday at around 2:00 - which didn't give us much time. I met Dr. Nelson for breakfast, and we talked about both where she was as a physician, where she wanted to be, how she might go about getting there (moving from Anesthesia into cosmetic medicine, is still a bit of a stretch) I was impressed with Dr. Nelsons interest and drive. She had already spent a tremendous amount of time researching her options and had looked at several of the current batch of medspa franchises and licensing consultants. She half-jokingly referred to several of them as 'evil'.

Doctor Nelson and Doctor Bergstrom spent a brief period of time just talking and chatting about history and backgrounds before was invited into one of Doctor Bergstrom 's consultations.

(Surface consultations are performed very differently than what is typically done. First of all they are free. Secondly they are an hour long. Our patients are able to spend an hour of physician time discussing anything they want, including how much stuff hurts, how much stuff costs, whatever... )

After the consultation, Doctor Nelson had maybe about another hour that I spent talking to her before she had to catch her plane. She was, I think it is safe to say happy that she came. She expressed to me a number of times during that hour that she felt she had found her new home.  In fact, one of the direct quotes was, "I want to be Doctor Bergstrom," which I found both humorous and flattering.

It will be interesting to find out if or how she pursues both her contacts with Surface as well as any other potential avenues. We left it with her thinking about what her options might be in the near future. Whether she joints Surface in some capacity, or opens up a clinic of her own, I  wish her the best of luck.

California Medical Board: Use Of Mid-Level Providers for Lasers, IPLs, Botox, & Other Treatments

The State Medical Board of California has addressed the Use Of Mid-Level Providers for Lasers, IPLs, Botox, & Other Treatments. (Links to PDF) It's a common question that is often brought up over in the discussion areas.

You should read this information carefully. Although it's specific to California, the information is substantially similar to many states.
Read also: Medical Spa Legal: How to...  l  Medspa Legal Discussion Area  l  Building a Medispa inside your practice  l  Medical Spa Franchises

From the Medical Board of California:

Due to an influx of calls to the board regarding who may perform what type of medical / cosmetic procedure and where, the following frequently asked questions and responses are provided for informational purposes and as a reminder. This is a reprint and update to an article published in the October 2002 Action Report.

Who may use Lasers or Intense Pulsed Light devices to remove hair, spider veins, and tatoos?

Physicians may use Lasers or Intense Pulsed Light devices. In addition, Physician Assistants and Registered Nurses (not Licensed Vocational Nurses) may perform these treatments under a physician's supervision. Unlicensed Medical Assistants, Licensed Vocational Nurses, Cosmetologists, Electrologists, or Estheticians may not legally perform these treatments under any circumstance, nor may Registered Nurses or Physician Assistants perform them independently, without supervision.

Who may inject Botox?

Physicians may inject Botox, or they may direct Registered Nurses, Licensed Vocational Nurses, or Physicians Assistants to perform the injection under their supervision. No unlicensed persons, such as Medical Assistants, may inject Botox.

I've been approached by a nurse to be her 'sponsoring physician' for her laser and Botox practice; would that be legal?

No. There is no such thing as a 'sponsoring physician'. Nurses may not, under California law, employ or contract with a physician for supervision. A  nurse may not have a private practice with no actual supervision. While the laws governing nursing recognize "the existence of overlapping functions between physicians and registered nurses" and permit "additional sharing of functions within organized health care systems that provide for collaboration between physicians and registered nurses" (Business and Professions Code section 2725), nurses may only perform medical functions under "standardized procedures." The board does not believe this allows a nurse to have a private medical cosmetic practice without physician supervision.

I've been asked by a layperson to serve as a "Medical Director" for a "medi-spa" that provides laser and other cosmetic medical services; would that be legal?

No. No one who cannot legally practice medicine can offer or provide medical services (Business and Professions Code section 2052). A physician contracting with or acting as an employee of a lay-owned business would be aiding and abetting the unlicensed practice of medicine (Business and Professions Code sections 2264, 2286, and 2400). To offer or provide these services, the business must be a physician-owned medical practice or a professional medical corporation with a physician being the majority shareholder.

I see these ads for "Botox Parties" and think that it has to be illegal. Is it?

The law does not restrict where Botox treatments may be performed, as long as they are performed by a physician or by a registered nurse, licensed vocational nurse, or physicians assistant under a physician's supervision.

Who may perform microdermabrasion?

It depends. If it's a cosmetic treatment, that is to say it only affects the outermost layer of the skin or the stratum corneum, then a licensed cosmetician or esthetician may perform the treatment. If it's a medical treatment, that is to say it penetrates to deeper levels of the epidermis, then it must be performed by a physician, or by a registered nurse or physicians assistant under supervision. Treatments to remove scarring, blemishes, or wrinkles would be considered a medical treatment. Unlicensed personnel, including medical assistants, may not perform any type of microdermabrasion.

I would like to provide non-medical dermabrasion, and hire an esthetician to perform that and also cosmetic facial and skin treatments. What do I need to do?

It is legal for physicians to hire licensed cosmetologists or estheticians to perform cosmetology services, if they have obtained a facility permit from the Bureau of Barbering & Cosmetoloty. All licensed cosmetologists, including estheticians, must perform their services in a facility with a permit.

Why can't I use a medical assistant instead of a nurse?

Medical assistants are not licensed professionals. While doctors have become accustomed to their assistance in medical office practices, medical assistants are not required to have any degree, nor do they have to pass an examination or be licensed. For that reason, the law only allows them to perform technical supportive services as described in sections 2069-2071 of the Business and Professions Code, and Title 16, California Code of Regulations, sections 1366-1366.4.

What is the penalty if I get caught using or helping an unlicensed person to perform medical treatments?

The law provides a number of sanctions, ranging from license discipline to criminal prosecution, for aiding and abetting the unlicensed practice of medicine. Physicians could be charged with aiding and abetting unlicensed practice, and the employee could be charged with the unlicensed practice of medicine. 

I understand that all of these practices may be illegal, but I see advertisements all the time for these kinds of illegal practices. What should I do?

You may file a complaint with the Medical Board. To do so, please send the advertisement, the publication name and date, and your address and telephone number where you may be reached,  to our Central Complaint Unit at 1426 Howe Avenue, Suite 54, Sacramento, CA 95825. The board will contact the business, inform them of the law, and direct them to cease any illegal practice. If it is simply the advertisement that is misleading, they will be directed to change or clarify the ad.

It is impossible to cover all of the relevant legal issues in a short article, and these questions and answers are not a substitute for professional legal advice. Physicians may want to consult with their attorneys of malpractice carriers about the use of their office personnel. In addition, the board has a number of written materials with more thorough information on this subject. There are legal opinions on the use of lasers and dermabrasion, materials outlining the legal limitations on use of medical assistants, as well as the actual statutes and regulations. To request any of these documents, please contact the Medical Board of California, 1426 Howe Ave., Suite 92, Sacramento, CA 95825, or call (916) 263-2389.

Saying "I'm Sorry" Can Prevent Angry Patients

While most docs are scared to death to admit any kind of misstep, an apology in the right circumstances can turn the corner and avoid an escalation in unpleasantness. Trying to talk a patient into believing that their eye isn't acctually drooping is just not going to work.

“The majority of people who file medical lawsuits file out of anger, not greed,” says Sorry Works! founder Doug Wojcieszak. “That anger is driven by lack of communication, being abandoned by doctors and no one taking responsibility for his mistakes. Apologizing and offering some up-front compensation reduces this anger.

” Seventeen states have enacted apology laws; some make remorseful words inadmissible in court if uttered soon after mishaps occur. U.S. Sens. Max Baucus, D-Mont., and Michael Enzi, R-Wyo., introduced the Reliable Medical Justice Act on June 29 to provide federal funding for apology projects around the nation. While the need for federal grants here is a mystery, Washington should encourage this concept without reflexively whipping out the checkbook. Implementing it in VA hospitals would be a solid start.

Link to article.
The Sorry Works! Colation

Update on 2005-12-23 16:45 by Medical Spa MD

Comment by Aesthetic M.D.

While I agree that saying "sorry" can go a long way in helping patients heal from medical errors or mistakes, I think there are many other "grey areas" that occur in medicine. Aesthetic medicine is a field where people have high expectations...some of which might even be unreasonable. Here it is imperative to counsel before procedures as to possible outcomes. Explain what may or may not occur as fully as possible in order to manage expectations. So often a mistake or error has not necessarily taken place, but the patient's expectations were not met. What may ensue is a situation that is frustrating for both patients and physicians. I think most people would tend to agree that human nature is to avoid confrontation. Many of these unsatisfied patients are labeled as "complainers" or "problem patients." And many physicians just brush off these patients leaving them even more frustrated and disgruntled.

An apology may not be the appropriate sentiment and saying “I’m sorry you feel unsatisfied” may sound patronizing. The best approach may actually be the one that, at first, feels the most uncomfortable or laborious. But I have found that taking the time to sit down, face to face and to truly listen to what the patient has to say (without interrupting) is often all that is necessary. After they have finished, it might be appropriate to explain why something different from what they had expected did indeed occur. And finally try to rectify or fix their area of dissatisfaction, if it is possible. What I want them to understand is that I do care about whether or not they are happy and that I will try to do everything in my power to make them feel satisfied. As much as most physicians may not want to admit it, we are in a service industry where “the customer is always right.” So much of what we do is judged subjectively and there isn’t always a “right” or “wrong.” And if they are upset then it is the least we can do to offer support and exceptional customer service.

by: Aesthetic M.D.