Deal or No Deal

In recent years, online deal sites such as Groupon and LivingSocial have become widely used by medical spas to raise their profiles in their communities. Typically, businesses use these websites to present special offers to entice new local customers. If enough potential customers choose to purchase a deal, it becomes available to redeem. If that happens, the site takes a predetermined percentage of the proceeds, and the business gets the rest. If the deal does not go through, the business owes the site nothing. On the surface, this sounds like a good, low-risk way for a medical spa to introduce its services to a new group of customers, and, by all accounts, medical spa deals represent a significant source of income for deal websites. However, there are a number of issues related to deal marketplaces that medical spa owners and operators should understand before they choose to use these sites to promote their businesses.

 

Fee-Splitting Red Flags

In most states, medical facilities, including medical spas, must be owned by physicians or physician-owned corporations. And in most of these states, all payments for medical services must be made in full to the owner of the facility—the physician or physician-owned corporation. If a percentage of such a payment goes to someone else, however, the facility has engaged in a practice known as fee-splitting, which is illegal in most states. Typically, this is an issue associated in the medical spa business with facilities that give employees commissions. But the use of deal sites to sell medical treatments is, from a legal
standpoint, a textbook example of fee-splitting, as the site gets a percentage of the proceeds generated by the sale of the voucher.

As of now, the American Med Spa Association (AmSpa) isn’t currently aware of any states that are actively enforcing fee-splitting violations involving deal sites. However, some states are known to be considering it. A few states—including Illinois, North Carolina, and Oregon—have announced that the practice is actually acceptable, provided the deals include certain disclaimers, such as a declaration that a customer has the right to seek a full refund if he or she is deemed unsuitable for the treatment being advertised. Other states are also reportedly considering such arrangements. Check with your local healthcare attorney to find out if your state has declared an official position on this matter; if it has not, you may wish to consider promoting your medical spa in different ways. (AmSpa partners with healthcare attorneys in each state. Access to these attorneys is available to AmSpa members at a discounted rate. Learn more and become a member at www.americanmedspa.org.)

 

Ethics

Even if your medical spa is located in a state where its use of deal marketplaces for promotion is more or less legal, you may still encounter pushback from doing business with these sites. A large segment of the medical esthetics community, mostly plastic surgeons and dermatologists, believe that using sites, such as Groupon, represent the commoditization of medicine. Essentially, the view is that medical treatments should not be discounted in order for practitioners to make money, as this suggests that the corporate bottom line—rather than quality patient care, which may be compromised by the number of people using a deal—is most important to the medical spa. That is arguably unethical.

However, although it is true that medical spas are medical facilities and should be held to the same legal standards as more traditional medical facilities, they do exist in something of a grey area when it comes to ethical issues such as this. The competing view is that treatments offered by medical spas are all elective and are not covered by medical insurance, so these facilities can basically charge whatever they feel the market can bear.

The naysayers do have a point about patient care, though. Often, a successful offering on a deal site can lead to an influx of clients, which can cause a medical spa to become extremely busy. If a facility does not have a staff of the requisite size and with the proper skills to deal with such a situation, the quality of patient care can suffer—not only for those who purchased the deal but also for the business’s regulars. This, in turn, can lead to the medical spa receiving negative reviews on websites such as Yelp, and that can have a long-term negative impact on a facility’s bottom line that far outweighs the short-term bump in business it receives from a deal promotion. In addition, very few people who are directed to medical spas via sites such as Groupon become regulars—most are simply in it for the deals.

On the other hand, many medical spas have very positive experiences using deal sites, and these tend to be facilities with capable, well-trained staff members, as well as owners and operators who understand how to deal with short-term service spikes.

 

Weighing Your Options

If you feel that your medical spa could benefit from using a deal site, make sure that it is legal in your state, and then evaluate the readiness of your staff and facility. A deal site promotion is not for everyone, but it can be a boon to your bottom line if you know what to expect.—Alex R. Thiersch

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