In this episode, hosts Brad and Michael share the story of a plastic surgeon who faced compliance challenges after adding a new laser device to his practice. Discover the pitfalls he encountered, including understanding state rules for supervision, figuring out who can perform certain procedures, and navigating the corporate practice of medicine (CPOM). Tune in for practical tips to stay compliant and reduce risks when introducing new services to your practice.
Listen to the full episode using the player below, or by visiting one of the links below. Contact ByrdAdatto if you have any questions or would like to learn more.
Transcript
*The below transcript has been edited for readability.
Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues simplified through real client stories and real world experiences, creating simplicity in 3, 2, 1.
Brad: Welcome back to another episode of Legal 123s with ByrdAdatto. I’m your host, Brad Adatto, with my co-host, Michael Byrd. And Michael, happy New Year to you, and let’s launch by opening the show with Season 19.
Michael: Thanks, Brad. We have completed a long journey talking about the seasons of a business.
Brad: It felt like an entire year.
Michael: Was actually an entire year, so I’m super excited to jump into a new theme this year.
Brad: I love it. A new year, a new theme, a new season. Tell the audience what we have in store for Season 19.
Michael: New year, new Brad.
Brad: Yes.
Michael: Yes. Alright. That’s not the theme though.
Brad: Feeling new. Yeah.
Michael: As a business and health care law firm, we meet a lot of interesting people and learn their amazing stories. This season’s [00:01:00] theme is Compliance Fundamentals. We’ll take real client stories, we’ll scrub the names to protect confidentiality, and these stories will be built around navigating compliance obstacles in the business of health care.
Brad: Awesome. Well, we’ll be talking about compliance a lot this season. It sounds like it could be a scary word. Should we be scared of it, Michael?
Michael: No, compliance is cool, Brad. No, as our partner says at AM Spa. Compliance is a broad word, and so all it is to kind of demystify it is, it’s a word used to describe all the laws that govern the practice of medicine or other health care practices. It’s a super heavily regulated industry, the health care world. There’s state and federal laws that can come into play, and because it’s so regulated, it affects [00:02:00] how you run a business, and oftentimes it’s counterintuitive. So when you are being compliance or compliance, it means that you’re running your practice in compliance with these various laws.
Brad: Well, we will take this through, like I see you said real client stories, examples of the laws that help kind of illustrate the strategy and help them understand like how to run a compliant practice. We often say compliance, it’s not stagnant. Actually, what does that even mean, Michael?
Michael: There is a misperception out there that compliance means kind of completing some task, like adopting a policy or providing some training, they kind of think, okay, this task is complete and I can check the compliance box, or I set my business up the right way – check, and compliance is ever moving. It’s a way of life for a successful practice. It’s like you’re trying to achieve Zen. [00:03:00] Laws change, technology changes, employees change enforcement, climate changes, and all of these affect compliance in this kind of constantly moving target.
Brad: Man, that is a lot to unpack for just kind of starting a season. Do you have anything lighter to help us ease into this compliance season?
Michael: Brad, I thought you’d never ask. I know you’re going to smile. What’s your favorite Tom Hanks movie?
Brad: Michael. Michael. Michael. After 18 seasons, you’re finally learning Movie talk is the only talk that our people want to hear.
Michael: Well, what if I’m buttering you up to talk about something that matters to me?
Brad: If it’s movie talk, you can butter me up. I’m good with it. Also, I don’t think Tom Hanks ever played a role as a tennis player. I think I’m safe. I think…
Michael: It’s a great script idea.
Brad: Oh, it is. That’s a tough battle for my brain is Tom Hank was in so many great movies, but I’m going to just go with one of my favorites of all time the [00:04:00] movie “Big”.
Michael: Great Choice. It stands up. I’ve seen it in recent years, and still a really great movie.
Brad: Agree. How about you?
Michael: Well, I probably can’t say that my favorite Tom Hanks movie is a bachelor party.
Brad: Oh, no, you can’t do that.
Michael: Because you and I would not behave the rest of the show as we kind of competed on movie quotes, so my favorite Tom Hanks movie has to be Forrest Gump. There are a lot of great choices, but there’s so many quotable lines with Forrest Gump. And please, Brad, do not go into Forrest voice.
Brad: Okay. No Forrest Gump voices. But does “Run Forrest, run,” does that count?
Michael: Well, technically that’s not a Forrest voice, but it still probably going to drive our audience away if you go with Jenny voice. Okay, Brad, so now I have a test question for you.
Brad: Okay.
Michael: Do you know how many Academy awards that Tom Hanks has won? [00:05:00].
Brad: Gosh. All right. Without cheating. I’m mostly positive he’s won two. Maybe there’s a third one I’m missing, but I’m not objecting. But why are we having this? First off, give me the answer, but why are we having this Tom Hanks trivia?
Michael: You’re correct, Brad. Philadelphia and Forrest Gump.
Brad: I remember those too.
Michael: And then you asked why we’re having the trivia? Well, I thought you would never asked, Brad, but first I have another question, and this is important. It’s really important. Very important. I need you to focus.
Brad: Very focused.
Michael: You have not seen Tom Hanks lurking around our building or in our lobby? Have you? he might’ve been carrying something kind of big.
Brad: I’m starting to wonder Kennedy, what he’s been drinking. And is there something spiked in your coffee there? I’m really confused. What are you talking about?
Michael: Well, I read an article that Tom Hanks, since the 1970s, is a passionate [00:06:00] typewriter collector.
Brad: That was very sneaky of you. I was all excited about falling, doing the movie talk, and we had all this great buzz going, and now you want to discuss typing/typewriters.
Michael: Well, his collection was over 250 typewriters.
Brad: Okay. Does he like a special garage or office where all these typewriters like hang out?
Michael: That’s fair question, actually. And maybe based on the article I read, he ran out of room where to do with all these typewriters because Brad, according to this article Tom has been sharing the wealth of his collection by randomly giving his typewriters to businesses around the country.
Brad: Michael, are you hoping to get one of these random 250 typewriters?
Michael: Well, Brad, an old typewriter, old school typewriter might inspire me to work on my speed and accuracy typing on a keyboard’s just not the same.
Brad: Let me guess, with your logic, you’re thinking that would be like the former state champion, [00:07:00] he’ll go look this up in the mid 1980s and see that Michael Byrd who works at ByrdAdatto needs a typewriter.
Michael: It seems plausible.
Brad: Sure. Tom, if you’re listening to the show today, Michael needs a typewriter to sit next to his state typing championship trophy.
Michael: Enough about typing and Tom Hanks. Let’s get the season going with some compliance talk and jump into today’s story. Alright, Brad, our client in this story will be called Dr. Tom. He is a busy plastic surgeon in California with a thriving surgical practice.
Brad: I could see that name coming from a green mile away.
Michael: Dr. Tom’s surgical practice is called Bubba Gump Plastic Surgery.
Brad: You’ll know I’ll never eject to any movie references.
Michael: I know, Brad. I know. I’m just keeping things smooth today. And so, Dr. Tom had started offering in his surgical practice also some retail skin products and retail [00:08:00] services out of his practice.
Brad: And for those who are not familiar with plastic surgery practice, it’s pretty common that they may have certain other ancillaries that are running through their business or even other ancillary entities such as med spas. They could be there or they could have an ambulatory surgery center or surgery center itself. They could also have a real estate company that’s associated with it. Michael, are any of these ancillary services medical?
Michael: Yeah, good question. Picking up on the context clue when I said retail. That’s a actually a good context clue for that question. No, he was not offering any of these medical services. He basically sold skincare products and he had an aesthetician who provided facials and other aesthetic services, and this aesthetician’s name is Meg Ryan.
Brad: Nice. I’m going to allow it. She’s been a bunch of movies with Tom Hanks.
Michael: I’m here to impress Brad, Sleepless in Seattle, Joe versus the Volcano, [00:09:00] and You’ve Got Mail.
Brad: Tell your assistant Siri, I’m impressed with her or him, whatever Siri is.
Michael: Yeah, I think you’re setting my assistant off as we speak, so she heard you. Yeah, okay. Will do.
Brad: Let’s get back on track. I’m sorry, but you said aesthetician. It’s a vocabulary word that some people aren’t familiar with. There are many types of providers in the non-invasive medical spa world, and it’s important to get your arms around who they are and how they regulated.
Michael: Yeah. Well, let me touch how they’re regulated first. So, aestheticians are typically regulated, it’s always state law. They have a license that they receive, and it’s usually by a board of cosmetology for that state. And the board will issue rules governing their license, ranging from kind of the criteria to obtain the license to the scope of what they can do under their license.
Brad: All right. I’m going to take on the next part, again, since we’re using this vocabulary. [00:10:00] The esthetician specializes in improving health and appearance of the skin by offering – important word “non-invasive” cosmetic treatments like facials, chemical peels, waxing hair removal. And the job primarily focuses on enhancing a client’s natural beauty, and then they may also offer personalized skincare recommendations.
Michael: Yeah. And importantly, most boards of cosmetology specifically say that they cannot be involved in the practice of medicine under their board of cosmetology license. There are some exceptions in actually some states that have expanded scopes that cross over, but for the most part, that’s what you’ll find. Now, there’s another provider in the practice, Brad. And the other provider dabbled in the retail side, but mostly helped out on the surgical side. She’s an RN or a registered nurse, and we will call her nurse Darrel Hannah.
Brad: [00:11:00] Like the old movie reference there, that she’s from the movie Splash – another great Tom Hanks movie also, John Candy was great in it also.
Michael: Yes, yes. So now let’s break down the vocabulary for registered nurse.
Brad: A registered nurse, or as you said, RN as they say it in the industry, is a person who graduated from college of nursing program or from a school of nursing and has passed a national license exam.
Michael: RNs typically have a scope to be delegated tasks. They will provide assistance to the doctor in a surgical setting and can carry out treatments with the proper training and supervision in a non-surgical setting. Again, noting this is a state specific issue.
Brad: And they help provide and coordinate patient care to the patients on the delegation, like you said, of the physician, sometimes physician assistant, and in some cases a nurse practitioner.
Michael: Yeah. So now we have all that defined who the people are. And I have to say Dr. Tom was living his best compliant life. [00:12:00] He was directly involved in all things surgical. The retail products were non-medical, as I said. And Meg Ryan, the esthetician was living inside her scope of practice and all the things that she was doing.
Brad: I just realized, I think you said Dr. Tom was living his best compliance. That makes me a little worried there. Michael, what happened?
Michael: Well, Brad, he met a sales rep named Lieutenant Dan, and he was a rep for a “Light laser company”.
Brad: I’m proving all these movie names Michael. And in the reference to Light Savers, I like that.
Michael: Light laser.
Brad: Oh, yes. Not light saver.
Michael: We’re not going Star Wars, Brad. Let’s talk about light lasers. Light laser is not really a vocabulary word and more a term of art you people will use in the industry to talk about certain types of lasers. [00:13:00] For context, and I love context, lasers in a medical spa setting can range from invasive enough to basically be surgical and needing a physician to perform it ,down to these light lasers that are much less invasive and and less risky. The light lasers can kind of often be used to compliment a skincare offering.
Brad: So what happened to Lieutenant Dan besides having his legs blown off in Vietnam?
Michael: Well, Lieutenant Dan was trying to sell a laser to Dr. Tom, and he told him that his esthetician, Meg Ryan, could receive training from the company and perform the procedures while Dr. Tom was busy doing surgery.
Brad: Is this when Dr. Tom called you?
Michael: This is when Dr. Tom should have called me. And to be clear, Dr. Tom and I have worked together for years. Dr. Tom liked Lieutenant Dan and his eyes [00:14:00] could see this profitable laser how it would fit into the practice and how it would just fit perfectly and make lots of money and get a great return on his investment. And so, he just went ahead and signed the contract to lease the laser.
Brad: Yeah. I mean, first off, of course he likes Lieutenant Dan. He’s a good guy. But we’ve seen this scenario before. How did you find out about it?
Michael: I was catching up with Dr. Tom in general about the practice, and he just kind of had a throwaway comment during our conversation about how excited he was by this new device, and at this point he had even had the device for a few months.
Brad: Michael, did you crush his dream?
Michael: Well, I definitely gave him an answer to a question he did not think to ask. Let’s go to break. And talk about some lessons to be learned from Dr. Tom’s story.
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Brad: Welcome back to Legal 123 with ByrdAdatto. I’m your host, Brad Adatto, with my co-host, Michael Byrd. Now Michael, this season, our theme is Compliance Fundamentals. Man, that sounds like a cool word. And Dr. Tom is living a peaceful, compliant life until you had to crush his dreams about a faithful investment in a laser he made.
Michael: Don’t make me the bad guy here, Brad. It’s the first episode.
Brad: Oh, you did a great job, Michael. We’re all proud of you.
Michael: Thank you. I needed that, yes. [00:16:00] So, kind of quick recap of our story. We have Dr. Tom, a plastic surgeon in California, very straightforward practice, sole owner, single location, primarily surgical practice, but he did have kind of some retail business that he offered through the practice and by retail really to be clear, non-medical services. And he was selling some skincare products, and then he had an aesthetician that would provide kind of facials and other things that would be complimentary to the kind of that aesthetic setting. And all was going great. He was compliant, he was in front of it. He met Lieutenant Dan, really liked him, as you said, very likable guy, and he became enamored by the possibilities of a laser that Lieutenant Dan was selling through his laser company. [00:17:00] And so, he went straight from conversation to purchase, bought the laser, sent his esthetician in for training with the laser company. And just kind of offhand mentioned it to me when we were catching up on other things, and then I started to point out things that we will talk about now.
Brad: Okay. Well, talk to the audience about why high? I don’t know; having a light saver or light laser could create a problem. You choose which one you want to go with.
Michael: Well, I’m going to go with light laser because I don’t think the audience wants to hear you go into Star Wars talk. So, the tricky thing about a light laser is that, though they are less risky and they feel complimentary to the traditional kind of aesthetician type services, they are in most states [00:18:00] actually the practice of medicine. And so, this is from a compliance perspective, a game changer. That’s one of the fundamental things when I’m talking about compliance fundamentals that we look for is, if a service is being provided and it’s considered by the state to be the practice of medicine, you’re kicking in all the practice of medicine laws. And even if it is something that is non-invasive as a kind of a light laser, you’re still subject to those rules and subject to the risks that go with not following those rules. So Brad, talk about why this would be problematic for the esthetician, Meg Ryan, based on California’s delegation rules.
Brad: Well, I’ll take a step back first and just make sure, the audience members understand. In many states, the [00:19:00] higher level invasive medical service, the higher level supervision and scrutiny will be applied, so that’s the first thing. There’s strict delegation of medical procedures to RNs and higher level practitioners is viewed in many states as the aspect of maintaining patient safety and quality care. So the practices, when they do this, they’re ensuring that they’re basically following basically the standard of care and the appropriate level of education, license and training. To your question though with Meg being an aesthetician in California, there are very limited things that they can do in California on the medical side.
Michael: Yeah, and I’ll kind of jump from there. I’ll also start kind of 50,000 feet and come down to California for everyone’s perspective. So, there’s generally two ways delegation rules are set up across the country. One way is, which is how California is, is that they just say, this is who you can delegate to, and so it’s super clear. [00:20:00] And then in other states, they kind of put it on the doctor’s license. The rule is, “Doctor, your license is on the line. This license is what gives you the authority to provide this medical treatment, and so it’s on you to know what’s the appropriate standard of care,” and part of that is who you can delegate to. But as I mentioned or alluded to, California just says it straight out. In California for something that’s considered the practice of medicine, it can only be delegated to an RN or higher. Sometimes LVNs, (Licensed Vocational Nurse), which is a nurse, but in California actually, they have their own board, so it’s a lower level of training and less scope, and they can be involved in some procedures, but as a general, [00:21:00] you want to think RNs are higher.
Brad: And you mentioned that mermaid, I mean, that nurse Darryl Hanna earlier, could she be a solution?
Michael: Well, on paper, yes, because as I mentioned, RNs or higher can be delegated a medical treatment in California. She had the right scope of practice under her license to be delegated these treatments. Now, there’s two other issues. One, does she have the training to do it? Because remember, she didn’t go to this class, and so she would have to get proper training. And then the second thing is that she does not have the scope of practice to do a good faith exam.
Brad: Okay. She does not, and for our audience members not familiar with what is a good faith exam, that is the initial medical consultation between, generally speaking, the physician and a patient. [00:22:00] And your, the physician is to determine is that patient based on some data, a good candidate for those services. Now in many states, physician assistants and nurse practitioners can also do that good faith exam. And in other states, which I know we’ll have an episode on telemedicine, this can be done via telemedicine.
Michael: Yeah, that’s good answer, Brad. So I’m going to shift over, we remember in the story, Dr. Tom signed this lease. So we talked about this lease for the equipment in the story, I want you to kind of share how these equipment contracts typically work.
Brad: Yeah. Especially medical equipment contracts, they often have terms covering payment plans and maintenance and upgrades and support services. Great. But these agreements usually have some fixed duration. Sometimes they automatically renew the clause or they includes penalties if you early terminate, and attempting to terminate these contracts prematurely can be challenging due to potential financial penalties, including many [00:23:00] cases, a physician, depending on how expensive it is, they might have done a personal guarantee. The standard agreements make it extremely difficult just to terminate and get out of these contracts and just return the equipment.
Michael: Yeah, and to kind of jump off of that, you have, remember the good guy, Lieutenant Dan, who was a good guy. His role, his hands get tied that the sales rep often is removed from the equation once you sign on the dotted line. And so, oftentimes you may sign a purchase order or some type of contract with the company, which now if there’s a problem, you’re not dealing with your rep necessarily, you may be dealing with someone inside the company, but if you do a lease or you finance it, you’re also usually contracting with a third party company that’s not even the actual [00:24:00] company you buy the device from. Now, it may be a sister company or related, but now you’re really – kind of think of it more like dealing with a bank, even if it’s for leasing because that’s where the “financing” or lease terms comes from. And so, the risk or point here in a story like this is that Dr. Tom was very removed from access to Lieutenant Dan and even Lieutenant Dan’s bosses once he realized that there was a compliance issue with him being allowed to have Meg Ryan, the aesthetician, help with these services.
Brad: Okay. Well, all great information. I want to jump back into our story today. What happened with Dr. Tom?
Michael: Well, he was not happy. In fact, he was angry [00:25:00] with Lieutenant Dan, as you might imagine. He even went so far as to have conversations about drumming up a class action lawsuit against the company. Like, how could this company have this initiative where they don’t even tell you who can actually operate the machine they’re selling you. They just care about the sale. This is the theory that was being bantered to me. And then they even make it more by they provide training to these people that aren’t even allowed to use it in the state. The problem was with Darrell Hanna, the RN, is that it really just at the end of the day, didn’t make sense for him for her to operate the laser. She didn’t really have an interest in learning it. She was helping on the surgical side, which was a higher revenue source. [00:26:00] And the amount of work it would take to kind of go down this class action realm wasn’t realistic, and it was little Dr. Tom against giant kind of pharma industry company. And so, then he is left and he’s thinking, and Dr. Tom is surgical, he doesn’t have time to do the good faith exams. He would be the only known solution in their office. And so, he ended up having an expensive coat rack that went unused until he reached the point that he could turn it back in. And he never made any money off the laser.
Brad: That is terrible. Well, and I think for our audience members really to taking a step back. Now, when you’re entering these medical equipment agreements, you need to think about this is going to be a long-term agreement. They generally have limited termination options that they can – obviously in this [00:27:00] case, pose significant risk to, especially a small startup practice, or even in this case, Dr. Tom has an existing organization. These agreements, they lock you in and a lot of times there’s some unfavorable turns, potentially hindering you to be able to adopt in the changing market conditions or in this case, other changes as to who can actually use the equipment. And without the flexibility to terminate, practices often find themselves stuck with these equipment, as you said, they become coat hangers or giant tables and they’re no longer aligned in the sense of how they’re can use them because these compliance constraints that we’ve been talking about earlier.
And as much as we love the salespeople; we love you salespeople, y’all are fun, great human beings who work with these organizations, you said this earlier, they’re never going to feel any pressure after they sell it to you because they’re not in charge of it anymore. They made sure you got it, and they just want to make sure that you [00:28:00] got this great machine. They don’t really go through the process of making sure can you use it. So something that Dr. Tom may have done properly would’ve been confirm with your legal team first if you can use this equipment in your state, and then who can use it and what type of supervision is required in those circumstances. Michael, we’re almost near the end the time today. What are some final thoughts that you have?
Michael: Well, a two minute conversation would’ve saved Dr. Tom a hundred thousand dollars plus, so it is good advice, Brad. And compliance is tricky. We started the conversation talking about how it’s not stagnant. Like, you are compliant, you’ve got everything working, you’ve got a good system, and then you’re not. And so, there are what seems like normal business decisions that have to be run through a compliance filter to kind of stay in front of compliance before you make [00:29:00] a final decision for your practice.
Brad: Awesome. Well, Michael, next Wednesday we’re back, we’ll discuss the impact AI is having on the medical industry. Thanks again for joining us today. And remember, if you like this episode, please subscribe, make sure to give us a five star rating and share with your friends.
Michael: You can also sign up for the ByrdAdatto newsletter by going to our website at byrdadatto.com.
Speaker 1: ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, nor does it establish an attorney-client relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. The views expressed by guests are their own, and their appearance on the program does not imply an endorsement of them or any entity they represent. Please consult with an attorney on your legal issues. [00:30:00]
