Minnesota Medical Spa Ownership
Minnesota does not have a law directly on point for who can own a medical spa and many ancillary legal questions. Many rules are gathered through inference, application of related cases or statutes, scope of practice rules for healthcare professionals, and experience with licensing boards and enforcement. Invest in experienced legal counsel to give legal advice directly to your situation, rather than relying on a free blog to make crucial business decisions. This blog is educational in nature and we make no guarantee as to its accuracy. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.
Ownership and Structure
1.Who can own a medical spa?
Minnesota does not have a law directly on point for who can own a “medical spa”. Reasonable minds disagree on the interpretation of the law until the Minnesota legislature has the gumption to provide clarity on the rules (but we are not holding our breath.) Minnesota largely relies on two legal opinions from 1955 and 2005 that are not directly on point for the main questions about medical spa ownership. Minnesota would certainly benefit from clarity on this issue at the legislature for medical spas.
Under the professional firms act, it is inferred that licensed professionals who are authorized to furnish at least one category of the professional firm’s relevant professional services may own a health services clinic or “medical” spa when set up correctly. This could be a physician, a group of physicians, a physician assistant, or an advanced practice registered nurse who is not under supervision, if cosmetic medical services are within their scope of practice.
A more liberal reading of the professional firms act suggests that Minnesota allows the following professionals to have an ownership stake in a physician owned professional service corporation (PSC), professional limited liability company (PLLC) or a professional limited liability partnership (PLLP) that renders medical services: physician assistants (PA), nurse practitioners (NP), registered nurses (RN), pharmacists, psychologists, podiatrists, chiropractors, mental health counselors, marriage and family therapists, social workers, dental hygienists, dentists, optometry and veterinary medicine. Unlike other states, Minnesota has not created a “threshold” ownership rule which is where at least 51% of the company is owned by a physician and the other 49% can be owned by other licensed professionals in certain categories.
Regardless, unlicensed persons may not have any ownership stake in a medical spa and neither a corporation nor any unlicensed person may engage, through licensed employees, in the practice of medicine. The only exception is for nonprofit corporations, who may employ physicians without violating the corporate practice prohibition.
Finally, a liberal reading of the Nurse Practice Act and Professional Firms rules and Corporate Practice of Medicine Doctrine implies that a registered nurse may own a “medical” spa if under proper supervision of a physician, physician assistant or nurse practitioner, and with a proper medical director delegation and supervision agreement. One question that is unresolved in Minnesota is whether the informal use of the term “medical” automatically implies the practice of medicine.
For the unlawful practice of medicine, you can be charged with a maximum fine of $3,000 for a gross misdemeanor. Also, a physician aiding or abetting an unlicensed person in the practice of medicine will be subject to disciplinary actions enforced by the Minnesota Board of Medical Practice. To further confuse the matter, licensing boards only have jurisdiction over the professionals that they license, otherwise the matter could be referred to the Minnesota Attorney General’s office.
See:
MN Op. Att’y Gen. No. 92-B-11 (Oct. 5, 1955)
Isles Wellness Inc. v. Progressive Northern Insurance Co., 703 N.W.2d 513 (Minn. 2005)
https://www.revisor.mn.gov/statutes/cite/609.02
https://www.revisor.mn.gov/statutes/cite/147.081
https://www.revisor.mn.gov/statutes/cite/319B.07
2. What is the “Corporate Practice of Medicine” (CPoM) doctrine?
The Corporate Practice of Medicine doctrine states that it is against public policy when corporations benefit from the practice of medicine. This is due to concerns raised regarding a corporation controlling the professional judgment of a physician, commercial exploitation of the health care practice, and that the physician’s loyalty to his/her patients may be in conflict with the physician’s loyalty to their employer. Corporations, however, can own healthcare businesses so long as licensed healthcare providers sit on the board and are involved in the decision making process of the corporation. In Minnesota, the Corporate Practice of Medicine doctrine derived from a case that did not directly speak to the implications of a “medical” spa. Again, this creates murky gray legal guidance absent further legislation or litigation in this area.
See https://www.revisor.mn.gov/statutes/cite/319B.07 (Professional Firms Act – https://www.revisor.mn.gov/statutes/cite/319B)
Isles Wellness Inc. v. Progressive Northern Insurance Co., 703 N.W.2d 513 (Minn. 2005)
MN Op. Att’y Gen. No. 92-B-11 (Oct. 5, 1955)
3. What is a “med spa” or “medical spa” or “medi-spa” in Minnesota?
A “med spa” or “medical spa” or “medi-spa” is a medical clinic and/or a health services day spa that provides nonsurgical aesthetic medical services by licensed healthcare professionals. The term is often used loosely without regard to the potential underlying legal implications of doing so.
4. What specifically is “the practice of medicine” in Minnesota?
In Minnesota, the practice of medicine is defined as engaging in one of the following:
- Advertising or showing to the public that the person is authorized to practice medicine in Minnesota;
- Offering or undertake to prescribe, give, or administer any drug or medicine for the use of another;
- Offering or undertake to prevent or to diagnose, correct, or treat in any manner or by any means any disease, illness, pain, wound, fracture, infirmity, deformity or defect of any person;
- Offering or undertake to perform any surgical operation
- Offering to undertake to use hypnosis for treatment or relief
See https://www.revisor.mn.gov/statutes/cite/147.081
a. What procedures are considered the practice of Medicine?
i. Prescribing, giving, or administering any drug or medicine for the use of another
ii. Diagnosing, correcting, or treating an individual
iii. Performing any surgical operation
iv. Using hypnosis
Generally, medical doctors/physicians (and physician’s assistants) have exclusive authority to practice in these areas, unless authority is explicitly allowed in another practice act, such as nursing.
5. What is a Management Service Organization (MSO)?
A Management Service Organization (MSO) is a non-professional entity that provides non-professional or non-clinical services to physicians, medical spas, or medical practices. These services may include management and administrative tasks, but not clinical decision making.
6. What type of legal entity may own a medical spa?
The following types of entities are permitted to own a medical spa in Minnesota: a sole proprietorship, a partnership, a professional service corporation (PSC), professional limited liability company (PLLC) or a professional limited liability partnership (PLLP). Generally most medical spas will operate as a PLLC (or an LLC that has made a professional firm election.)
7. What are the penalties for improperly owning a medical spa by violating the Corporate Practice of Medicine Doctrine?
For the unlawful practice of medicine, you can be charged with a maximum fine of $3,000 for a gross misdemeanor. Also, a physician aiding or abetting an unlicensed person in the practice of medicine will be subject to disciplinary actions enforced by the Minnesota Board of Medical Practice (Board).
https://www.revisor.mn.gov/statutes/cite/609.02
https://www.revisor.mn.gov/statutes/cite/147.081
8. If I am an unlicensed person, can I share in the profits of a medical spa?
No, not in a direct profit-sharing manner. Unlicensed, non-physicians may earn in the revenue of a medical spa if there is a contractual agreement for providing fair market value administrative or management services, leasing space or equipment, or licensing intellectual property. This is generally accomplished through a Management Services Agreement. In addition, if the medical spa is receiving public funding (medicaid or medicare for example) then strict federal rules around fee splitting, kickbacks and physician self-referrals apply.
See https://www.revisor.mn.gov/statutes/cite/147.091
https://www.hhs.gov/regulations/index.html
9. Can a chiropractor or dentist serve as a medical director?
Generally no, under a conservative reading of the law, because it is not within their scope of practice to perform cosmetic medical services. As a general safe rule, to serve as a medical director you must be licensed in Minnesota as a doctor of osteopathic medicine or physician, a physician assistant, or an advanced practice registered nurse. The rules regarding scope of practice are more clear for chiropractors to not be able to serve as a medical director. There is a minority opinion, based on a liberal reading of the dentist scope of practice rules, that with advanced skills directly relevant to the type of procedure(s) they are serving as a medical director, that they could be a medical director, in limited scope.
10. In a medical spa, who can make hiring and firing decisions?
The decision to hire or fire must be made by an MD, DO, PA, NP, or APRN only if it involves medical personnel. Hiring or firing of non-medical staff can be made by unlicensed persons.
11. Do I have to be a doctor to own medical spa equipment, like lasers, or real estate?
Under Minnesota law, the use of lasers is considered the practice of medicine. Therefore, the practitioner must be an MD, DO, PA, NP, or APRN, and the statute does not allow for delegation of the use of lasers with supervision of a medical director. (Minn. Stat. §147.081) The only exception to this, with an analysis of the different types of lasers, is for advanced practice estheticians (APE). The statute was passed into law before modern-day lower risk lasers were created.
An unlicensed person or entity may own real property, space and equipment in a medical spa.
12. Can a nurse, physician assistant or nurse practitioner take a commission for administering a medical treatment?
Yes, if it is a reasonable salary for administering such medical treatment. However, if there is a percentage of profit created, then this may violate the fee-splitting and anti-kickback statute for physicians.