Is Private Equity Coming For MedSpas?

Over the last 12 months, one of the top trends we’ve seen in the Medical Spa industry is private equity coming to town and buying single and multi-location medical spas. Private equity comes in all shapes and sizes but after years of growth, the industry is ripe for consolidation and roll ups of smaller clinics. Much like the influx of private equity into dermatology clinics, we’re seeing a similar trend in medical spas. So what does this mean for you? Opportunity! Whether that means selling and fulfilling an exit plan or branding your medical as the alternative to a larger group. Either way, the time is now to prepare for what is coming to this industry.

Good Faith Estimates Are A Go

Prepared by: Carlos Arce, Esq.

Florida Healthcare Law Firm

The United States Department of Health and Human Services (“HHS”) released that more than 90,000 claims were filed in April 2022 through the independent dispute resolution portal via CMS’s website.[1] This has caused an overload in submissions which CMS was not prepared to address.

CMS has opened a rulemaking style “frequently asked questions” portal where providers can submit questions for answers. A few of these questions include the following: 1) Are providers or facilities required to provide a Good Faith Estimate (“GFE”) to individuals who schedule a same-day appointment or are walk-ins? CMS answered, “No. The requirement to provide a GFE to an uninsured (or self-pay) individual under 45 CFR 149.610 is not triggered upon scheduling an item or service if the item or service is being scheduled fewer than 3 business days before the date the item or service is expected to be furnished. For example, if an uninsured (or self-pay) individual arrives to schedule same-day laboratory testing services, the laboratory testing provider or facility is not required to provide the individual with a GFE; and 2) How do providers and facilities address situations where unforeseen items or services that were not otherwise scheduled in advance are furnished during a visit? CMS answered, “The interim final rules do not require the GFE to include charges for items or services that could not have been reasonably expected. A GFE provided to uninsured (or self-pay) individuals must include an itemized list of items or services that are reasonably expected to be furnished, grouped by each provider or facility, for that period of care.

As noted above the GFE is effective and operating under its interim final rules, which mean that the law is in effect, but changes are being done to it as we speak. There is lawsuit pending in  Texas, where the validity of the independent dispute resolution is being questioned. We expect to see changes in 2023.

For now these are the top codes which are being disputed per the data CMS released: Emergency department services (CPT codes 99281-99288), Radiology (70010-79999), Anesthesia (00100-01999), Surgery (10004-69990), Pathology and lab (80047-89398), Neurology and neuromuscular procedures (95700-96020), Critical care services (99291-99292), and Cardiovascular procedures (92920-93799), Hydration, therapeutic, prophylactic, diagnostic injections and infusions, and chemotherapy and other highly complex drug or highly complex biologic agent administration (96360-96549).

______________________________________________________________________________

Attorney Carlos Arce works with the Florida Healthcare Law Firm in Delray Beach, FL. He has deep experience with bodily injury trial work and in health law. Carlos has handled multi-million-dollar healthcare transactions and serves as out-of-house counsel to various small to large types of healthcare entities. He can be reached via email at [email protected] or by calling 561-455-7700.

[1] Top No Surprise Act CPT Code Disputes, Patsy Newitt, Becker’s ASC Review: https://www.beckersasc.com/asc-news/top-no-surprises-act-cpt-code-disputes.html?utm_campaign=asc&utm_source=website&utm_content=latestarticles

What are biggest trends in the Medspa industry?

Over the last 12 months, I’ve seen a consistent trend in the “MedSpa” industry. Three services have become more popular amongst Medspas either as a stand alone service or add-on to existing services.

  1. Hormone/Vitamin Therapy
    1. Patients are looking for the next best thing to them an edge in performance and vitality. Hormone and vitamin therapy has become increasingly more popular and available.
  2. IV Hydration Therapy
    1. Possibly the hottest trend in healthcare are IV hydration therapy clinics. Whether they be brick and mortar or mobile, IV services have seen a large increase in demand. With relatively low barrier for entry and overhead, IV hydration has become a main focus of Medspa operators over the past year.
  3. Lasers
    1. With advancements in technology and possibilities, laser services for skin treatments have become more available and affordable. While there are many device manufacturers on the market, some are able to assist their clients with turning the use of those lasers into serious financial drivers of Medspa revenue.

Do you need a medical director if you’re autonomous?

Autonomous practice for advanced practice registered nurses (“NP”) was a monumental change in law in 2021. Since then, NPs that qualify for autonomous practice have jumped at the opportunity to expand their offerings and create opportunities for themselves through a self-owned clinic, including Medspas and IV clinics. But where is the line for when an NP needs a medical director, or supervising physician, and when they don’t?

 

Florida’s autonomous practice law allows qualified nurse practitioners (2 years or 3000 hours supervised practice) to practice only in primary care practice, including family medicine, general pediatrics, and general internal medicine. The Florida Board of Nursing last updated its definition of “primary care practice” in February 2021 to include: “physical and mental health promotion, assessment, evaluation, disease prevention, health maintenance, counseling, patient education, diagnosis and treatment of acute and chronic illnesses, inclusive of behavioral and mental health conditions.” This would allow autonomous NPs to provide wellness services without supervision but not aesthetic services.

In Florida, when a physician supervises an NP that is at a location other than the physicians primary practice location and the NP is performing primarily dermatologic or aesthetic skin care services, the physician must be board certified dermatologist or plastic surgeon, within 25 miles of the physician’s primary practice location. The physician is limited to supervision of only one additional office location. If you are not primarily offering these services, then the specialty is not addressed under Florida law.  

The requirement of having a medical director, or supervising physician, is primarily dependent upon the services that you provide.

California Physicians are Now Penalized for Clinical Opinions With the Enactment of the California COVID-19 Misinformation Law

By: Amanda Howard

California’s “COVID-19 misinformation” law went into effect on January 1, 2023. The purpose of the law is to prevent the spread of false or misleading information, in other words, the most used word of the pandemic era, “misinformation” relating to COVID-19 by physicians during direct patient care.

So, what does the law mean?

What we do know is that the law is a vague, a no-no in the legal world. We know that patient care is now at risk. The law penalizes physicians who express any sort of doubt or concern about what the government, influential public figures or friends and family are informing their patients on concerning COVID-19.  The law effectively prohibits informed consent by preventing physicians from talking to their patients about the risks and benefits of treatments for a disease that is brand new to the world.  How will California patients make informed decisions on the issue?  Not with full and free input by physicians!  We also know the law arguably interferes with free speech, severely squashing 1st Amendment freedom that used to be near and dear to our nation.   

We don’t really know what violating this statute looks like or what the text really means.  Governor Newsom expressed support for the law when signing the COVID-19 misinformation bill into law stating the bill “is narrowly tailored to apply only to those egregious instances in which a licensee is acting with malicious intent or clearly deviating from the required standard of care while interacting directly with a patient under their care.” Untrue. Look at the text of the law. There is no tailoring going on. It’s just speech control.

More specially, the text of the law doesn’t define what constitutes an “egregious instance,” “malicious intent” or “clearly deviating from the standard of care.” All we know from the text is that “misinformation” is information contradicted by “contemporary scientific consensus contrary to the standard of key.” The key word here is “consensus.” That’s a funny word.  Recall that there once was consensus on using mercury to treat STDs and radioactive water to cure mental illness and bloodletting to release evil spirits as being proper medical treatments.  As you can guess – they’re not the result of “consensus” anymore because science is ever-evolving. Treatments that were all the rage decades and centuries ago are now debunked. And that’s a good thing. Because the entire scientific theory is rooted in healthy skepticism.

So, if it’s decided by regulators plying their word smithing skills that a California physician has violated the COVID-19 misinformation law, the here and now has consequences. It’s clear that physician can be put on probation or have his or her license to practice medicine suspended or revoked. However, the language also leaves room for civil lawsuits and criminal actions against physicians! The consequences are vague at best and subject to a spectrum of interpretations by a variety of people.  We lawyers call this legislative intent and effect as “chilling.” 

Whether you’re on the right, left or in-between, enactment of the COVID-19 misinformation law is just the beginning of the practice of medicine in California being politically controlled and the doctor patient relationship being eroded.  

 

 

Prepping your Medspa for sale

Preparing your Medspa for a sale starts well before you receive any interest or desire to do so. If you’ve reached the point where you’re thinking about your exit strategy, its imperative that you address some of following items to ensure a smooth process and maximize your opportunity:

  1. Conduct a compliance audit
    1. Do you have appropriate facility licenses?
    2. When was the last time you reviewed and updated your policies and procedures?
    3. Do you have patient documents signed by each patient?
    4. Do you have appropriate employment policies and procedures in place?
  2. Gather Corporate Governance Documents
  3. Gather a list of key assets, contracts, vendors, and licenses
  4. Review your lease
    1. Can you assign it?
    2. What is the process for requesting assignment?
  5. Work with your accountant to prepare financial disclosures and determine a fair value for the sale price
  6. Work with a consultant or broker to market your Medspa for sale
  7. Discuss the process with your attorney
    1. Identify any potential legal issues outstanding within the company
    2. Discuss your goals in the sale to better evaluate potential sellers
    3. Understand the importance of negotiating the initial terms of the deal through the letter of intent phase
    4. Organize and prepare a data room for due diligence disclosures

Selling a business can be a long and arduous process but with a well-planned framework, it’s a processing that can be very rewarding. Preparing weeks, if not months, in advance of even seeking interest for the sale of your MedSpa.

 

Avoiding PIP Billing Litigation with Proper AHCA Licensing 

 Prepared by: Carlos Arce, Esq. 

Florida Healthcare Law Firm 

 It is a well settled presumption in Florida that healthcare providers can own a medical practice without the need for obtaining a Health Care Clinic License (HCCL). However, healthcare providers who bill motor vehicle insurances for personal injury benefits (PIP) need to be aware of the regulatory requirements and how enforcement has developed. Providers may know that each insurance plan has a Special Investigation Unit “SIU”, which is dedicated to detecting, deterring, and defeating insurance fraud. Providers may not realize that most recently, some of the biggest motor vehicle insurers have started taking action by pursuing litigation against providers who are not in compliance. The charges are serious! Fraud, unjust enrichment, Florida Deceptive and Unfair Trade Practices Act “FDUTPA”, and even using the Civil Racketeer Influenced and Corrupt Organization Act “Florida RICO.” Ignorance of these underlying laws will NOT be a defense for these cases. 

As such, providers need to understand the background and basis for the recent litigation. Under the Health Care Clinic Act, “Clinic” is defined as an entity that provides health care services to individuals and whereby charges for reimbursement for such services. Further, there is a list of entities and providers not to be deemed a “Clinic”, for purposes of this article, including sole entities, group entities, partnerships or corporations which are made up of various types of health care providers and are not required to be licensed as a Health Care Clinic. To further complicate things, at the end of the section in the Florida Statutes there are also exemptions. 

What does this mean? Providers who bill PIP must be licensed and wholly owned by one of the following: chapter 458 “Doctor of Medicine”; chapter 459 “Doctor of Osteopathic Medicine”; chapter 466 “Dentist”; chapter 460 “Doctor of Chiropractic Medicine”; chapter 395 “licensed hospital or surgical center”; clinic facility affiliated with an accredited medical school; entity certified as an outpatient physical therapy or speech pathology; or an entity that is owned by a publicly traded corporation, either directly or indirectly through its subsidiaries, that has $250 million or more in total annual sales of health care services provided by licensed health care practitioners if one or more of the persons responsible for the operations of the entity are health care practitioners who are licensed in this state and who are responsible for supervising the business activities of the entity and the entity’s compliance with state law. 

There are overlaying healthcare legal issues as well which relate to group practices owned by providers who are different types of providers, not meeting the “wholly owned” requirement, and providers who are allowed to be exempt, but bill independent contractors not licensed under the scope of the exempt entity. There are various cases that have been and are currently being brought by motor vehicle insurance companies against providers who do not adhere to these rules. 

Fortunately, applying for a Health Care Clinic License is far from an impossible task when working with proper counseling and support. Here is what providers can expect when applying for an HCCL: 

  • The first step is figuring out what kind of license is needed. It depends on factors such as the provider specialty and objective of the practice. It may be that a Healthcare Clinic License is fine, or the provider may require another type under the AHCA guidelines. Do not make assumptions with respect to this step! 
  • Second, a provider will need to verify that they meet all the requirements to receive said license. Factors such as ownership, specialty and practice objective all factor in this step as well. 
  • The third step is completing the license application, which will require certain attestations, a copy of the provider’s agreement with a medical director, a financial responsibility portion which needs to be filled out by an accountant who regularly deals with these types of applications, and level two background checks for all the employees or contractors who shall have access to the clinic. A licensing fee is also required and will need to be submitted with the documentation. 
  • Fourth, AHCA typically sends back an omission letter which states issues with the application and pending items. While this can be a cause for concern for many providers, it is actually a routine response from AHCA and the agency allows 21 days for correction of the issues mentioned in the omission letter. 
  • The final step is on-site inspection. Providers will need specific policies, procedures and other legally supportive documents in order to successfully pass the inspection. Providers who arrive at and pass this step are presumptively issued a healthcare clinic license. 

Licensing concerns can be intimidating to correct alone, especially if providers learn of the issues from AHCA or worse, a PIP carrier raises them via a costly lawsuit. Ensuring compliance with the laws now is the best way to prevent problems later. 

______________________________________________________________________________ 

Attorney Carlos Arce works with the Florida Healthcare Law Firm in Delray Beach, FL. He has deep experience with bodily injury trial work and in health law. Carlos has handled multi-million-dollar healthcare transactions and serves as out-of-house counsel to various small to large types of healthcare entities. He can be reached via email at [email protected] or by calling 561-455-7700. 

RENEWING YOUR LEASE: 5 IMPORTANT THINGS TO KNOW

Article By: CARR

Leases and lease renewals are not typically conducted on a level playing field. After all, the landlord is in the real estate business and most doctors are not. By planning ahead and having professional representation, it is possible to negotiate a lower lease rate and receive a substantial tenant improvement allowance and free rent.

HOW DOES THE LEASE RENEWAL PROCESS WORK?

An important clause found in a standard lease is the renewal option. This allows you to extend your lease for a predetermined amount of time (often three, five or ten years) by giving your landlord advance written notice. Renewal options include terms for specific lease rates, concessions such as free rent and tenant improvement allowance, and whether a new base year for operating expenses will be granted. Whether or not a renewal clause exists in the original lease, all of these terms are negotiable and play a large role in the financial structure of a lease renewal.

Renewal negotiations are most effective when conducted in the proper timeframe, by having multiple viable relocation options and creating a strong posture to maintain the upper hand.

WHEN SHOULD THE PROCESS BEGIN?

As a rule of thumb, you should begin to consider the renewal process 12 – 18 months in advance of your lease’s expiration. This is recommended so that you can compare all relocation options in the market before your current lease options expire. Tenants who miss their lease options incur more risk. Landlords view this as an opportunity to push rents higher as the window of opportunity to relocate closes. If tenants holdover (stay in the space after the lease expires), they often see penalties of 150 – 200% of their last month’s rent and can also incur damages if they holdover without permission. The bottom line is that if there is not ample time to relocate if necessary, the landlord has a strong upper hand.

WHAT TYPE OF COST SAVINGS CAN BE ACHIEVED THROUGH A SUCCESSFUL RENEWAL?

If properly negotiated, you can achieve significant rent savings, a build out allowance, free rent and other concessions. It is very common to start a lease renewal term at a lower lease rate than what you are currently paying. In many markets, landlords are offering aggressive concessions and more attractive lease terms to good tenants to keep their buildings leased and avoid vacancies. The amount of overall savings will depend on the availability of competitive vacancies, the efficiencies of the buildings, and your market knowledge and ability to negotiate business points.

WHAT ARE SOME COMMON MISTAKES PRACTICES MAKE DURING THE PROCESS?

One of the most common mistakes practices make is negotiating without the help of a commercial real estate professional, specifically one who specializes in representing healthcare providers. Some believe they can save money by not using an agent; but to benefit in real estate, leverage is the key to posture. Landlords are in the real estate business and negotiate with professional guidance. Selecting an expert to represent you provides the leverage needed to receive the best possible lease terms. Further, landlords are typically responsible for paying commissions so professional representation is available to you at no out of pocket cost.

Another mistake practices make when entering into a lease renewal negotiation is not being familiar with their current lease terms and risk exposure. Prior to contacting the landlord about a lease renewal, you should be well aware of your current lease terms including every option and deadline. Most leases contain options that must be exercised within a specific time period, typically six to twelve months prior to the lease’s expiration. If you allow this period to pass, you risk losing all rights outlined in the option, which can cause the negotiations to begin at a disadvantage.

HOW DO I CALCULATE WHAT I AM CURRENTLY PAYING PER SQUARE FOOT?

Knowing what you are already paying per square foot is especially important if you are thinking about renewing your lease. What you are paying now versus what buildings are leasing for in your immediate area can be vastly different, especially if your lease has had automatic escalations in the rate over the term of the lease. The way to calculate your price per square foot is to multiply your monthly rent by 12 months and divide it by your square footage. Keep in mind that NNN or CAM charges (operating expenses for the property) are also calculated the same manner.

SUMMARY

Successfully negotiating a lease renewal is more than bartering, bluffing, or asking for a good deal. Landlords and their professional representatives are in the full-time business of maximizing their profits, even if it means taking advantage of uninformed tenants. You can level the playing field by engaging your own professional representation, gaining competitive market knowledge, and by having multiple options for your office space. When done properly, a well-negotiated lease renewal can have a dramatic impact on your practice’s profitability.

 The Downside of Doing Commercial Real Estate Yourself 

Article By: CARR

Healthcare Real Estate by CARR

 Are you one of the rare healthcare providers or administrators who understands how much is at stake in commercial real estate negotiations? If so, then you probably know that commercial real estate is the highest negotiable expense for your healthcare practice. Consequently, most healthcare providers fall into the statistic that tells us that 80% of healthcare practices still take a ‘do-it-yourself’ approach to these crucial negotiations and site selection process. 

In this article, we will break down several reasons why doing commercial real estate without representation will likely cost you a significant amount of time and money.

TIME 

The average commercial real estate transaction takes dozens of hours to complete. When you calculate the hours of research, driving the market, communicating with listing agents, touring properties, negotiating letters of intent (LOI’s), negotiating lease contract terms, printing / signing / mailing documents, and the dozens of other miscellaneous tasks you encounter in almost every commercial real estate deal, you can easily spend 30-40 hours or more on a single transaction. That equates to an entire week of work! 

Given the fact you have a full-time job already, you have two options as to where you will find those hours: 

1) During normal business hours (when you could otherwise be generating revenue) or 

2) During your valuable time off that would normally be spent with your family, relaxing, taking care of personal errands or making memories with those you love. 

Neither option is a good one, especially when you consider how much money you could be making per hour if you invested that time into your practice. Since time is a commodity you cannot get back, it’s important it be invested where it can yield you the highest return. 

MONEY 

The average healthcare practice loses tens of thousands of dollars in this ‘do-it-yourself’ approach. 

In the vast majority of commercial real estate transactions, you will also be working with a listing agent. That agent has a fiduciary responsibility (legal obligation) to the landlord to ensure they get the best possible deal and that their interests are protected and paramount over any other party in the transaction. 

This is also the person who actually collects a commission on the transaction. The commission amount is set aside before the property is even listed, and it will either be paid to the listing agent only or it will be split between the listing agent and the agent you hire to represent your needs. Often times if there is no buyer / tenant agent, the listing agent gets paid an amount that equals a ‘double commission’. 

If you take the ‘do-it-yourself’ approach, someone else is making the money for doing the job you did yourself. The craziest part is, the person making money is opposing you in the transaction! And, you just helped that person collect twice as much as they would have if you would have hired an expert agent to represent your needs and protect your interests!

This could be because you don’t actually understand everyone’s role within a deal. After all, when you called the name on the sign, they told you they wanted to help you get into the space! 

The problem is that to them, you are just a customer. The landlord is their only client in the deal. That might not sound like a big difference, but it has a HUGE impact on the outcome of the terms that each party receives. They have a legal obligation (called a fiduciary) to ensure the landlord gets the best possible deal within your transaction. They have no such obligation to you, since you are not their client. 

Without representation that looks out for your best interests, you are almost guaranteed to leave a significant amount of money on the table during negotiations. 

EXPERIENCE 

Some tenants and buyers balk at the idea of hiring an agent to represent them in a commercial real estate transaction through an agency agreement. Those people typically don’t understand that agency is a term created by governmental bodies to protect the consumer (you). If you don’t have an agent involved to exclusively represent you in your transaction, then there is no real estate expert who has a fiduciary responsibility to protect your interests. 

The vast majority of landlords have an agent and other experts they regularly consult with that work diligently to ensure the landlord receives the best deal possible. 

Think about that for a moment… The landlord, who has done hundreds of real estate transactions and whose entire livelihood is based on real estate, hires an agent so they can leverage that agent’s experience. Why would a healthcare buyer or tenant who will only transact a few times over the course of their career try to do it alone? 

KNOWLEDGE 

This is the most important part of representation. We live in a world where “knowledge” is at our fingertips. The problem is, the knowledge that is available is often a cheap knockoff of the real thing. 

Have you ever had a patient confidently give you their diagnosis of what is happening to them because they looked it up on WebMD? When you explain to them their actual diagnosis, they say, “Are you sure?” 

They are trying to compare your thousands of hours of experience with their 15 minutes of Googling symptoms. There is a monumental differ

ence in your experience versus theirs. Be careful getting too frustrated, though, because many doctors and practice administrators do the same thing when it comes to commercial real estate. 

Those doctors and administrators will hop on a commercial real estate website for 15 minutes, and now they are suddenly a commercial real estate expert. What they fail to acknowledge is that anyone can find properties or call or email a listing agent to get a property brochure. The part where expert guidance is needed is found during the negotiations (and there is definitely more to a negotiation than simply the lease rate or purchase price). 

This concept is also important in deciding how you select your agent. Many doctors fail to realize the complexities of commercial real estate and imprudently hire a residential real estate friend or patient. That is similar to having a tooth ache and going to the veterinarian for help. Sure, they may have some dental experience (on felines), but it’s hardly the same thing. 

Ok, I need an agent. How do I go about picking the right one? 

Here is a quick guide to ensure you are covered. 

GOOD: Having a commercial real estate agent represent you in your real estate transaction. 

BETTER: Having a commercial real estate agent who only represents buyers and tenants represent you in your real estate transaction. (This prevents any potential conflict of interest and also ensures you will see every potential property available to you.) 

BEST: Having a commercial real estate agent who only represents healthcare buyers and tenants represent you in your real estate transaction. (This not only ensures you of their unwavering loyalty to you against any possible landlord, but it also ensures you have someone who understands your real estate needs and how to structure a deal that best suits your unique situation as a healthcare provider.) 

When it comes to ‘do-it-yourself’ real estate negotiations, you don’t save any money. Instead, you stand to lose a fortune. Hiring an agent will at a minimum save you a substantial amount of time. Hiring the right agent can ensure you get into the best possible situation and has the potential to save you tens to hundreds of thousands of dollars in your next transaction. 

How to Evaluate a Lawyer for your Healthcare Business

Choosing a lawyer to help you start your healthcare business is a big decision. We want you to make the right one. Here’s a list of questions to ask before hiring a healthcare lawyer.

1. Have you worked with my type of healthcare business in the past?

2. What can you help me with?

3. How much will it cost?

4. What is your hourly rate?

5. Do you offer flat fees?

6. Do you provide patient forms?

7. Why do I need a lawyer?

8. How do I sign up?

9. What are your credentials?

10.  How does your retainer work?

11. Who will I work with?

12. What are the top issues that my type of healthcare business face?