Compensation structures are critical to the success of any business, and in the medical spa industry, they are especially complex. Unlike traditional spas, med spas are medical practices, and their employees administer medical treatments. This distinction comes with a host of legal considerations, particularly when it comes to how employees are compensated. One area that often leads to trouble is the use of commissions, which, while common in retail environments, especially in spas, can be problematic in medical settings. The term “commission” in the medical industry does have certain red flags associated with it and should be used infrequently when detailing medical compensation. The term “bonus” or “incentive compensation” should be used instead when discussing compensation.
Legal Restrictions: The Issue of Fee Splitting
A key concept in the regulation of medical practices is the corporate practice of medicine doctrine (“CPOM”), which prohibits non-physicians from directly engaging in the practice of medicine, including receiving compensation for medical services. Some medical board rules further specifically prohibit physicians splitting fees with others. Additionally, most states also have anti-referral and anti-kickback laws that can render a “commission” structure non-compliant. And if not to make it even more difficult, in the absence of these there could still be professional and ethical rules that can be triggered. As such, med spas that offer “commissions” could be non-compliant with these laws and must thread the needle carefully. It is important to note many states do have a narrow solution. Specifically, it can be compliant in several states for a provider to receive compensation for work actually performed by the provider receiving the payment. Tailoring the structure of the compensation in those states to navigate compliance is essential.
Penalties for Medical Spa Compensation Violations
For those who disregard these laws, the penalties can be severe. In states like California, non-compliant compensation structures can result in fines of up to $50,000 and could even trigger a criminal investigation. The risks are not limited to the business owner but can extend to employees as well. These penalties highlight the importance of ensuring that any compensation structure complies with relevant state regulations.
Commission-Based Compensation Alternatives for Medical Spas
Fortunately, there are alternatives to commission-based compensation that can effectively incentivize employees without violating the law. One popular option is the use of performance-based bonuses. These bonuses can be linked to both individual performance and the overall performance of the med spa, rewarding employees for their contribution to the business’s success while staying within the legal framework.
Additionally, in most states, employees can still earn commissions on non-medical services and products, such as skincare or retail items, which are not subject to the same restrictions. This allows businesses to maintain some of the incentive-driven compensation structures while staying within legal boundaries.
Medical Spa Tipping Policies
Tipping is another important aspect of compensation in many industries, including the med spa sector. While tipping is typically associated with customer-facing services like those in restaurants or salons, it can also play a role in med spas. Clients may offer tips for excellent service or results from non-medical treatments, such as facials, skincare consultations, or body treatments. However, it’s crucial for med spa owners to be clear about their tipping policies.
In some states, tipping is a gray area, especially when it involves medical services. As with commissions, medical spas should ensure that tipping does not violate any state laws regarding fee splitting or compensation for medical services. To avoid legal pitfalls, some med spas choose to have clear policies where tipping is accepted for non-medical services only and is handled separately from employee wages or commission-based structures.
Navigating Medical Spa Compensation Laws with Confidence
Med spas must carefully navigate the regulations governing employee compensation to avoid costly mistakes. While the temptation to offer commissions is understandable, it is important to recognize the legal risks involved. By using alternative compensation structures like bonuses or commissions on non-medical products, med spa owners can reward their employees and grow their businesses without risking legal trouble.
At ByrdAdatto, we help our clients to understand compliance with compensation laws in their med spas. Contact ByrdAdatto for guidance on the complexities of these regulations.
