MAY-JUN 2017

MedEsthetics—business education for medical practitioners—provides the latest noninvasive cosmetic procedures, treatment trends, product and equipment reviews, legal issues and medical aesthetics industry news.

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? LEGAL ISSUES | By Alex R. Thiersch, JD © GETTY IMAGES 18 MAY/JUNE 2017 | Med Esthetics Understanding MSOs Management Service Organizations offer a path to nonphysician medspa ownership. Due to corporate practice of medicine doctrines, in most states the owners of facilities that perform medical proce- dures must be either physicians or physician-owned cor- porations. However, there is a path to medspa ownership by which nonphysicians can manage medspas. It is called a management service organization (MSO) and, while it still relies on the participation of a physician, it allows nonphysi- cians to take on a very signifi cant role in the day-to-day operations of a medical aesthetic business. UNDERSTANDING THE LAW In the U.S., most states observe a doctrine known as the corporate practice of medicine, which dictates that only a physician or physician-owned corporation can receive pay- ment for medical services. Because many of the treatments offered at medspas are medical in nature, ownership of such facilities is governed by this doctrine. However, if you are an entrepreneur who wants to become a part of the medical aesthetic industry on an own- ership level—and you live in a state in which the corporate practice of medicine doctrine is observed—you may be able to set up an MSO. As its name suggests, an MSO provides management services. The organization partners with a physician for whom a separate company is created. The two entities then create a management services agreement (MSA), which allows the nonphysician-owned MSO to supervise several aspects of the medspa business. These may include branding, marketing, real estate ownership or leases, payroll, human resources, accounting and billing—everything except the actual administration of medical services. "Once an MSO is formed, you will need to enter into an MSA between the MSO and the medspa," explains Bradford Adatto, partner at Dallas-based healthcare law fi rm ByrdAdatto. "The MSA contains the terms and conditions that detail the services rendered between the parties, and the compensation for such services. To have a valid MSO, whatever services are agreed upon in the contract must be carried out in both form and substance." Essentially, you should think of this as a lessor/lessee situation. The MSO typically owns and maintains the facility; the physician occupies the space. The physician pays the MSO "rent" for the right to occupy the space, and the MSO functions in much the same way as a landlord, maintain- ing the facility and keeping the physician as comfortable as possible. However, the MSO can invoice the doctor for more than just rent. Services such as patient coordination, marketing, record keeping, equipment rental, branding and design, accounting and other services can also be managed by the MSO and charged to the doctor. Additionally, unlike an apartment rental, the MSO's management fee can be

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