It is not unusual to interact with people who work on commission, as many in the industry earn commissions on sales. Given the prevalence of the practice, you might assume that it is fine for a medical spa to give commissions to, say, a laser technician or nurse who goes above and beyond to drum up business for the establishment. But you would be wrong, and it is important to understand why.
The practice of medicine is governed by an entirely different set of laws than other industries. In most states, a patient who receives a medical service—such as most of the services provided at medical spas—is required to provide payment to a physician or a corporation that is owned solely by a physician. Payment for medical services cannot be paid to non-physicians (this is known as the “corporate practice of medicine”). Furthermore, a physician is prohibited from splitting any part of medical revenue with a non-physician. This is known as “fee splitting” and, in most states, it is illegal. (Please check with your local healthcare attorney to determine whether your state is one of the few that allows fee splitting).
The reason most states have enacted laws against fee splitting is because public policy dictates that medical decisions should be made by doctors, not profit-minded corporations. Regardless, this practice is very common at medical spas, because the physicians who own and operate these establishments rarely conduct the actual treatments, opting instead to perform more lucrative procedures elsewhere. As such, most of the client interactions at medical spas are handled by other medical professionals—such as estheticians, laser technicians, nurse practitioners, nurses, and physician’s assistants—who end up being the spa employees who establish client bases. In a sense, it stands to reason that a physician would like to reward the people who are working to make his or her business a success, but doing so with commissions places both parties involved in the transaction at risk.
Troubling Consequences
If physicians are found to be engaging in fee splitting in a state in which it is illegal, they may face the suspension or revocation of their licenses, as well as a significant fine. What’s more, the non-physician who received the commission is subject to the same type of punishment. So, if you are an employee who is being paid commission in a state in which fee splitting is illegal, it is certainly in your best interest to stop receiving these payments, and if you are a physician who is offering commissions in one of these states, you should cease doing so immediately. Additionally, if you are engaging in the practice of giving gift cards to clients who refer friends, be advised that, depending on state law, that practice can also be viewed as a form of illegal fee splitting. This is because they represent a form of payment that is not made directly to a physician or physician-owned corporation. To make sure you fall on the right side of the law, consult your local healthcare attorney to find out about the laws governing fee splitting where you live.
This is not to say that non-physicians working at a medical spa cannot be awarded extra compensation—physicians can establish bonus plans, pay-per-service systems, and perhaps even profit-sharing programs to provide incentives that are similar to those that can be achieved through commissions. These types of setups can be very lucrative for employees, and they prevent everyone from running afoul of any fee splitting-related legislation.
The Exception
Viewed through an impartial lens, it would appear that using voucher discount programs, such as Groupon and Living Social, to drum up business represents a form of fee splitting. After all, medical spa vouchers sold through Groupon—from which Groupon receives a percentage of the sale, which is not at all unlike a commission—can be used by customers to purchase medical treatments. However, several states have passed laws that permit commission-like reimbursement to voucher-based outlets such as Groupon, provided the medical outlet maintains a high level of transparency throughout the process. If you are interested in such an arrangement, you should check with your local healthcare attorney to find out the specifics of the law regarding Groupon in your state.
It is worth noting, however, that even if working with Groupon in the manner described above is legal in your state, it is considered unethical by some in the industry. As such, you would be better off negotiating a flat fee with Groupon than paying it on a percentage basis. As always, it is better for your business to try to stay away from morally questionable practices than to dwell in the grey areas, even if you are leaving some money on the table by doing so.—Alex R. Thiersch
Alex R. Thiersch is the founder and director of the American Med Spa Association (AmSpa), an organization created for the express purpose of providing comprehensive, relevant, and timely legal business resources for the medical esthetic industry throughout the U.S. For more information about becoming a member, visit www.americanmedspa.org. Contact Thiersch at [email protected].