Expert: How Entrepreneurs Can Own a Medical Practice

Doris Dike expert opnion
(Courtesy of: Doris Dike)

The wellness sector has been booming, and that has made various healthcare players interested in performing procedures and even owning clinics. However, these would-be entrepreneurs should proceed with caution, because they could cross the line into prohibited—and illegal—activity.

Here in Texas, and in many states around the country, the “corporate practice of medicine” law prohibits corporations, entities, or non-physicians from owning medical practices. Its aim is to protect the general public from business owners more interested in maximizing their incomes than in providing patients with high-quality healthcare.

But non-physicians interested in owning a health-related business often struggle to identify what is considered a medical practice. The practice of medicine is not easily defined by legislatures, especially as it applies to the wellness/medspa industry, where many businesses owned by non-physicians may not be legal.

Take the case of Ricky Delatorre, a Houston medical assistant who owned RD Aesthetica MedSpa. In February 2019, he was arrested for performing non-surgical cosmetic procedures without a license or physician supervision. Investigators later discovered that the Botox seized from Delatorre’s office was a cheap product not approved for use in the United States. Delatorre faces a possible felony conviction for practicing medicine without a license.

In another instance, licensed cosmetologist Melissa Galvan gave a medspa patient high blood pressure medicine instead of the weight-loss pills she requested. The patient was later hospitalized, and Galvan was arrested for prescribing medication without a medical license and practicing medicine without a license. Each crime carries a felony conviction.

Safe options for savvy business people

The good news is that options exist for people who are interested in owning a wellness business or a medspa, even if they are not doctors.  Non-physician entrepreneurs can create a management service organization (MSO) that partners with physicians. The MSO can handle operational issues, financial management, human resources and personnel issues, staff education and training, coding, billing, and collection services; office space procurement and management, electronic medical record services, medical equipment purchases, and regulatory compliance oversight and management.

The clinical aspects of the practice would be part of a second business that is actually owned by a doctor. The doctor would perform and/or supervise any procedures performed or treatments offered onsite, and the doctor alone would incur all medical liability. The two parties would then iron out a management service agreement (MSA) outlining how the business would operate, how funds would be shared, and who would own what.

Benefits to both parties

By joining forces, each party reaps several benefits:

  • Providers limit their financial risk. For example, providers can allocate certain expenditures to the MSO, such as equipment and/or land.
  • Providers eliminate their administrative burden and are free to just practice medicine.
  • Any clinical liability incurred by the provider does not expose the MSO to liability issues.
  • The MSO owner has an opportunity to earn a steady and predictable income.

The “corporate practice of medicine” doctrine restricts the types of healthcare businesses non-physicians can own, but with MSO agreements and appropriate legal guidance, entrepreneurs have an opportunity to earn healthcare dollars without fines or possible jail time.

Doris O. Dike, Esq., is a healthcare attorney at Friedman & Feiger, LLP, a law firm based in Dallas, Texas. She represents physicians, specialty pharmacies, home health companies, healthcare entrepreneurs, and other healthcare providers nationwide.