In this episode, we uncover the repercussions hiring the wrong person can have on a practice. Join us as we unravel the story of a plastic surgeon whose trusted nurse was caught stealing from the practice, and learn how her ambition to establish her own business jeopardized both the practice and patient safety. Discover the importance of thoroughly vetting employees and how implementing good faith exams can be a practice’s saving grace.
Listen to the full episode using the player below, or by visiting one of the links below. If you have any questions or would like to learn more, email us at info@byrdadatto.com.
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 Legal 123s with ByrdAdatto. I’m your host, Brad Adatto, with my co-host, Michael Byrd.
Michael: Thanks, Brad. As a business and health care law firm, we meet a lot of interesting people and learn their amazing stories. This season, we are riding the emotional rollercoaster of the crises that arise in the operating season of a business. Our theme this season is: Running a Business.
Brad: Yeah, Michael, and running a business, I mean, although there’s crisis that come with it, that’s just one of the seasons of the business. What are the other seasons?
Michael: So, there’s four seasons. There’s the building season, starting a business, we did that last time, the operating season, running a business; scaling season, time to grow, and then the buying and selling season. This podcast season [00:01:00] we said we’re going to be living in the operating season.
Brad: Yeah. And this season, we’ll actually be illustrating the problems that arise while running a business, and again, the kind of crises that concur. And we’re actually going to use real client stories and sprinkle some guests in there, but what else is going on, Michael?
Michael: Well, there’s a few great stories that did not quite have enough to make a full episode, and so we will talk about a few of these kind of mini-stories during our opening banter.
Brad: Awesome. I love it. What’s the mini story do we have today?
Michael: Brad, radiologists get a bad rap as not having interesting stories. The perception is that they sit in a quiet room, they read images all day, and its blah, blah, blah. Rinse and repeat.
Brad: Well, that is right. But actually, their business structure is fascinating to me. They often own the imaging and then obviously they provide the readings itself, and obviously there’s some complicated federal and state laws to consider when you’re [00:02:00] doing this, but it’s a lot of interesting stuff going on, Michael.
Michael: Well, it’s not really going with the nerdy regulatory type of excitement there. So, for those in our audience who do not geek out on building sophisticated business models, I was noting that radiologists are actually real humans with real emotions, Brad, and that they can be interesting.
Brad: Yes, I guess they’re not robots is what you’re telling me, but please tell me you’re not about to tell them the Zoom whiteboard story.
Michael: I am Brad. I am. Our client in this mini story is a radiologist, and we’ll just call him Dr. Lucky.
Brad: Let me guess. This is someone who actually won the lottery.
Michael: Not exactly, Brad. And you know the answer so that you’re just trying to set this up. Very good. Dr. Lucky’s practice was in the operating season of his business, and he was having some partner conflict, and I was getting involved to strategize under his rights, under his operating agreement. [00:03:00]
Brad: Okay, sounds like a normal day of the office.
Michael: So I walked in 10 minutes early to the whiteboard to get my stuff set up.
Brad: Oh, no, no, no. Hold on. Kennedy. I don’t know what’s going on here, but Michael just lied big- big time. 10 minutes early? I’m starting to… first red flag audience members is Michael showed up 10 minutes earlier, but maybe that’s why he – Oh, that’s why you’re calling him Dr. Lucky because you actually got there early, 10 minutes early. Okay, now I understand the story now.
Michael: Let’s not talk about my meeting habits, Brad. Plus, that’s only for meetings with you, not with clients.
Brad: Okay.
Michael: So, as I set my stuff down, a paralegal and Access+ assistant, were already in the room getting the Zoom set up. Now, you have to remember or know that this was during Covid and remember what it was like doing Zoom back in Covid. We had been doing it, but for most people this was brand new, and so there was always technological issues and getting things set up. And so, we made sure we got [00:04:00] everything done early, and so we were logged in, but had the video off and we’re muted. And believe it or not, Dr. Lucky was sitting on camera waiting for us to start. And so, we were kind of looking up at him and making sure everything was ready to go and everything was ready to go.
Brad: Okay. I don’t know, this really doesn’t sound that exciting, probably to the audience, Michael, maybe you should start talking about the compliance stuff again that we were talking about earlier.
Michael: Hold tight, Brad. I know you want to, but I’ll just say this. As we were seemingly non exciting, Dr. Lucky’s wife, and an infant child walked onto camera. And Dr. Lucky kissed them, and they didn’t have any idea we were sitting there and able to see them. We see Dr. Lucky kiss his infant on the head, and then he proceeded to suggest something to Mrs. Lucky. And let’s just say that Dr. Lucky was [00:05:00] offering to do something to Mrs. Lucky that his newborn child should not have been hearing.
Brad: Oh, no.
Michael: So yes, right, Brad, oh, no. And Mrs. Lucky then disappeared off camera, so the awkwardness dissipated. Okay. And we’re like, all of us blushing a little bit until she walked back on camera without the child and proceeded to sit in Dr. Lucky’s lap with her back to the camera, thankfully. And then Dr. Lucky kind of started monkeying around with the technology, and he turned the sound off on the Zoom, but he did not, unfortunately, turn the video off. And we didn’t see any skin or anything, but there was no doubt in any of our minds as to what they were doing.
Brad: Oh, goodness. I’m assuming that the poor child was somewhere else, right? That’s what you said?
Michael: I’m hoping that poor child was in another room with headphones on, [00:06:00] because otherwise that kid would’ve had his eyes burning, like those of us in the room. And so, we scrambled to turn the video off from our end, so we didn’t have to see anymore.
Brad: And the audience is probably like, this can’t be true, Michael.
Michael: Brad, I have images steered in my brain that would say otherwise. So yes, this did happen. The good news is that Dr. Lucky was in a great mood when the whiteboard started.
Brad: Well, I guess that is good news, especially since it started with partner conflict. Our best stories do seem to come from these very unexpected things when they just kind of pop up, so to speak, during the operating season.
Michael: You had to do that, didn’t you?
Brad: I did.
Michael: Okay. But this is why it could not be a full episode story. I think the only lesson that I learned from that is the importance of being able to compartmentalize, because I had to keep a straight face during the whiteboard.
Brad: And being a 13-year-old boy, man, that must have been really [00:07:00] hard. I can really start throwing us off track now. Let’s get back into why our audience is with us today. What is today’s story?
Michael: Well, our client in today’s story, Brad, is, we’ll just call him Dr. Unlucky.
Brad: Okay. And I’m assuming this has nothing to do with someone who just got lucky, but okay. Just don’t take us down that same path. My teenage brain, I don’t know if I can handle this. Why Dr. Unlucky?
Michael: Well, Dr. Unlucky is a plastic surgeon, and he hired the wrong person, Brad. He was replacing a position in his medical spa, and he decided to hire someone we’ll call Nurse Houdini.
Brad: Okay. That’s starting to sound a little ominous, but wait, why Nurse Houdini? I’m thrown off here.
Michael: Well, Nurse Houdini, she had a lot of success as a nurse injector, and in fact, she had a really large following, and she was skilled in [00:08:00] the art of Botox injections.
Brad: I’m not following the use of this name. It doesn’t seem to really make sense to me.
Michael: Oh, I forgot to mention this part. She was also skilled in the art of deception.
Brad: Better information. All right, all right, tell me a little more about this poor Dr. Unlucky.
Michael: Well, Dr. Unlucky had a thriving surgical practice and a successful medical spa, but his biggest challenge on the medical spa side was retaining employees.
Brad: Okay. Well, first for our audience members, there are several factors that really can cause these kinds of turnovers, including employees feeling overworked, practices failing to really detail their professional advancements and opportunities. Maybe they perceive that they don’t get paid well, or they’re not great benefits there. And I’d say this, Michael, and you probably agree; in the med spa space, there are more situations where the providers, once they’re really trained on something, they start looking really quickly, well, can I get a better deal other, otherwise? And of course, if those other factors I just described were present, that tends [00:09:00] to make them accelerate them jumping quickly.
Michael: Yeah. I mean, you and I’ve been on panels and whether it’s large organizations, large medical spas with multiple locations or your normal small business owner, the common theme, the biggest challenge they face is employee retention. They can’t find enough talent. I think all the things you said, plus there seems to be a shortage of talent, plus in this space in particular, there just seems to be almost just the part of the culture is bouncing from one place to the next to get the next big thing. But he had actually – Dr. Unlucky had hired us a few years prior to start kind of helping with the turnover problem, at least through the legal lens. He needed some advice. And Dr. Unlucky decided that he wanted to go with a commission-based structure for his injectors and needed our help to put that in place. [00:10:00]
Brad: Michael, well, among other things, let’s just first start off with the first vocabulary word of the day. What is commission-base or commission structure mean?
Michael: So, in the context of a medical spa, it’s the way they’re paid. And you’ll see this in other elective medicine practices. And so, in a lot of businesses, an employee gets paid a salary, right? And then sometimes they get paid a bonus at the end of the year. Sometimes they may even have some sort of performance bonus targets. In a commission structure, you kind of scrap that and you’re saying, look, what you do, what your performance is, we’re going to pay you a percentage of that money that comes in. And so, they’re literally getting paid a percentage of their revenues as opposed to just a normal salary.
Brad: Yeah. And audience members understand a couple things. Number one, when Michael’s saying commission is really talking about a percentage of their net collections, generally speaking. But you have to [00:11:00] be really careful here using the term commission, just in general. Because there are a lot of states that have certain prohibitions in there, and they may view that it might violate certain state fee splitting laws or corporate practice medicine laws or state anti-kickback laws. In addition, there’s situations where the utilization, that term, again, could raise the risk with medical and nursing boards. So, just be understanding that it, it could be considered unprofessional conduct by using commission, not paying them a percentage of what they’re doing. That’s just a word that gets bounced around a lot.
Michael: Well done, Brad.
Brad: Thank you, sir.
Michael: Because there are details to be determined and what does it mean? We use the word, net collections, and what all goes into that and then what the percentage is going to be, it becomes really important to document these types of arrangements so that you don’t have misalignment of expectations. And you see that pop up sometimes. So, you put it into [00:12:00] an employment agreement and have it clearly laid out what their compensation structure is, in this case, using the loosely the word commission structure.
Brad: Great. And so, he is addressing one of the issues, which is people trying to figure out how they get paid well, so that’s good that he’s doing it. So, with this turnover problem, he addressed one piece, compensation, but this is the carrot – but did with the stick, did Dr. Unlucky also want to include non-compete in the employment agreement?
Michael: That’s a great question. Brad. Gold star.
Brad: Hey Kennedy. Just put that in the loop for me. Thumbs up from Kennedy.
Michael: Dr. Unlucky was not ready to go there. He was having trouble recruiting. And let’s face it, Dr. Unlucky was kind of a people pleaser. He hoped that the carrot approach with the more robust and incentivized compensation arrangement would solve his problem. And I think he just didn’t want to have the hard conversation of telling someone, “Hey, if you come here, you’ve got to sign onto to this non-compete.” He just wasn’t ready to have these types of restrictive covenants.
Brad: [00:13:00] Okay. Well, he’s taking some risk with the turnovers and without those non-competes, but it sounds like he was fully aware of his options.
Michael: We had an extensive conversation on this, and he understood that, and he was willing to take that risk. And the problem Dr. Unlucky had, at least with Nurse Houdini, is that he hired the wrong person. He hired a bad person.
Brad: Okay, I think I got the gist as to why you keep calling this nurse Houdini for a skill in the art of deception. Tell us a little more about this nurse Houdini.
Michael: Well, there were red flags for Dr. Unlucky to see here about Nurse Houdini.
Brad: Am I supposed to ding on that?
Michael: Wrong season, Brad. Keep it focused.
Brad: Sorry, old habit. Well, I’m mostly focused because you’re talking, but just continue.
Michael: Well focus for you, it’s always dicey.
Brad: That’s true. Fair assessment.
Michael: So, Nurse Houdini’s resume [00:14:00] showed that she bounced from medical spa to medical spa. So, he saw that very thing that you and I were just talking about, and high turnover can be a red flag.
Brad: Sure can. And I know many people who pick up on seeing a person jumping from place to place as that red flag. So, did Dr. Unlucky ignore this and not try to figure out her story as to why she was doing this?
Michael: Well, I was not involved with the interview process, but he told me a little about her when he decided to hire. And she had, I guess had a story. And she had convinced him that she had been searching for a place to call home where she could maximize her compensation based on her work.
Brad: And I’m assuming she finally found her home, and we’re in the operating season and this story is real about crisis, Michael, that would kind of pop up during your operating season. I’m assuming this doesn’t end well, so let me guess what happened. Well, maybe, maybe I’ll wait for it. What happened here?
Michael: Well, I’ll just say this, [00:15:00] Brad, the good news is, is that she was there for a year and a half – actually a little bit longer than that.
Brad: She was home.
Michael: That’s good when she found her home. The bad news is, is that Dr. Unlucky staff accidentally noticed in the trash one day that there were some expired Botox boxes that had been used.
Brad: Well, that is not the statement I thought you were going to say. That sounds very random. It’s a very random discovery just in general.
Michael: Yeah, totally. It was kind of like the first pull on a little piece of thread. And so they started trying to figure out what in the world, like, why would you have an expired product sitting in the trash that someone had used. And so, they started looking into it and trying to figure out what happened. They fortunately had video cameras set up to capture a lot of this. And ultimately what started to unfold, Brad, is that Nurse Houdini had her own inventory of [00:16:00] Botox from prior employers. Her inventory was all expired, and so she would bring the old Botox to the office and switch it with the current Botox that the office had and take the good stuff home. and then she would use the expired Botox on the patients at Dr. Unlucky office.
Brad: This is horrible. Boy, is he really living up to his name, Dr. Unlucky – because he’s unlucky now. Actually, the patients are unlucky. Wait, hold on. What was she doing with the unexpired Botox?
Michael: Well, I guess had a little side hustle, Brad. She was injecting some of her book of business, I don’t know what that means, but she had a line of business and she’d do it out of her house on nights and weekends. And I guess that clientele got to get the fresh inventory. But what’s still kind of a mystery is she seemed to have [00:17:00] an access point to get some more of this expired Botox because this went on for 18 months.
Brad: I think I need to be dinging again. I know it’s a wrong season, but what the heck is going on here, people? I know we hear stories about people stealing product from practice, but this is like the next level stuff.
Michael: Let’s go into commercial. And on the other side we’ll talk a little more about how Dr. Unlucky handled this situation.
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Brad: [00:18:00] Welcome back to Legal 123s with ByrdAdatto. I’m your host, Brad Adatto, with my co-host, Michael Byrd. Now Michael, this season our theme is the Operating a Business. That sounds kind of cool, right? And we’re talking about real stories that happen and the problems that kind of pop up in the operating of a business. Michael, let’s talk about the issues with Nurse Houdini and her switching the expired Botox for Dr. Unlucky’s Botox.
Michael: I almost don’t know where to start.
Brad: Sure.
Michael: Let’s first start with the compliance-related issues, so there are two areas of major concern. So, you have the treatment of Dr. Unlucky’s patients with expired Botox. That’s not good. And you have the treatments that were happening at home without supervision by Nurse Houdini.
Brad: Yeah. Can I jump in and at least attack the second one first, maybe about the treatment at home? And I think audience members who probably listens for all, y’all are [00:19:00] probably jumping up and down. Like, how is she doing that? There are a lot of red flags there, obviously, but clearly, if she’s not having any proper good faith exams, like who’s clearing these patients, making sure they’re a good candidate for those services? And then who is the supervising physician overseeing her and making sure that these patients are having great outcomes? Because although Dr. Unlucky is the physician that typically supervise her, he was not clearing these patients much less knowing what was going on. And then obviously, bigger discussions as RNs don’t have it in their scope to treat patients without having this good faith exam conducted, which I’m sure that this is some of the stuff you’ve talked about with Dr. Unlucky. That still could have – even though he had no idea what was going on, and even though he was not clearing these patients, he still is her supervising physician. And that could, if there ever was a complaint, [00:20:00] he could get dragged into it not even knowing that his RN was doing this.
Michael: I’m taking your gold star back.
Brad: Oh man!
Michael: I’m just kidding. You did a good job. I just wanted to mess with you because I could not. You did such a good job, Brad, that I had to come up with an opposite. So, let’s talk about the other issue. The first issue, which is the treatment of Dr. Unlucky patients with expired Botox. So, the treatment of patients with expired product really brings in standard of care issues for the patient. And so, Dr. Dr. Unlucky, I mean, think about this, 18 months, and he had to figure out who received this expired product. I mean, that’s just one service he’s been doing in his business for the last couple of years. And then, did they all receive expired product? Did only the people she treated receive expired product? Or were the others getting access to it? He, at the beginning had no idea. And so, they did [00:21:00] have some pretty decent logs and they were pretty accurately able to determine that it was only Nurse Houdini’s treatments that received this expired product – And unfortunately, it was most of them. And because so much time had passed, several patients had received multiple rounds of expired products.
Brad: Oh my gosh.
Michael: And so, he faced, first, kind of this difficult issue of notification of the patient.
Brad: And this is, I mean, we’ll I’m sure we’ll address it in a second, but just thinking about, this is really tricky for Dr. Unlucky because I doubt that the… I mean, I’m assuming if there was some poor outcomes, they would’ve known about it. And it doesn’t sound like – the only way to discover this was the trash can, not from poor outcomes from the patients.
Michael: I mean, you’re right. This is Botox and I mean, there was no issues during this entire time of reporting patients having complications or anything, so Dr. Unlucky had this [00:22:00] ethical dilemma. He was ethically facing having to tell patients that this happened even though they had nothing wrong with them, and so he was going to create some unhappy patients. Now, he did the right thing Good for him. And he communicated upfront to all the patients treated by Nurse Houdini that they had likely received some expired Botox and actually called them to discuss whether or not they’d had any complications along the way.
Brad: That’s a tough call because you’re not even positive if they received it. Also, and obviously the patient felt like they had great outcomes. And I mean, you talk about, first of all, good for him for leaning into it, but he had to really lean this into this issue. What happened though with these conversations with these patients?
Michael: Well, I’ll start with this. He didn’t get sued.
Brad: Well, that’s a good start.
Michael: Yes. So that’s a great outcome considering there was a big fear there. And actually Brad, most [00:23:00] were appreciative of the communication and it actually enhanced the relationship and didn’t escalate. Now, there was a few that were pretty upset. And he ended up comping them some Botox treatments to try to manage the situation.
Brad: Another issue is whether he should be thinking about or considering notifying the nursing board and many states medical boards and nursing boards have these ethical obligations to report things like this when a nurse does something like this.
Michael: Yeah, there’s this common thought when you see other professionals doing things that are not safe for patients to kind of not be happy about it, but also be like, that’s not my problem – and it actually might be. I mean, especially when it’s someone you’re supervising, you know, there’s this inherent obligation to make a notification in many states.
Brad: [00:24:00] Yeah. And I’ll just say this, adding that sometimes it’s just an embarrassment, Michael, that they have that they want to put their head in the sand. But to your point, if your state requires you to notify it, you can’t put your head in the sand.
Michael: And so, he did – Dr. Unlucky reported Nurse Houdini, and she ended up getting some pretty hot water after the fact. She was gone from the practice by the time this really started kicking in, so we don’t really know the outcome of what happened with her in the nursing board, but it didn’t go well.
Brad: Yeah. Well, this brings us to some additional important questions. what did the practice do with Nurse Houdini as she potentially put the practice patients in harm by bringing this expired Botox back into the office and of course, was stealing from the practice?
Michael: Yeah, multiple things that are problems. So, Dr. Unlucky had signed the employment agreement and this provided a clear path to terminate for cause. We talked in the prior episode about [00:25:00] bad boy clauses or bad girl clauses, and there’s a few of them to choose from here.
Brad: Right. And audience, it’s important to note that he could have terminated her without this employment agreement, just Michael’s alluding to that. A lot of times the employment agreement just has a clear path about how you can terminate the person.
Michael: Absolutely. And let’s shift a little bit because it seems pretty obvious, she can’t be there when you do bad things like that, but let’s talk about what Dr. Unlucky could have done. Like, what could he have done to prevent the theft of the product in the first place?
Brad: It’s a great question and it’s one of those harder things to answer because there’s so many factors that you can start looking at, but you understand fraud happens and they’re committed in practices on lots of different levels. And this isn’t just one single way to like to say, oh, if you do this one thing, you’re going to end all fraud. That’s just not how it works. And when it comes to theft, especially if controlled substances, a practice really needs to have great policies and processes in place to really prevent, detect and respond [00:26:00] to these types of action. And you have to sit back and ask yourself, “Okay, what are the things should I be considering at my practice?” Start asking yourself these simple questions just to help maybe start thinking about ways to start minimizing fraud. Like for example, who is buying, who’s procuring the drugs, and where are they stored? Who has access to prescribing these drugs? Meaning like, is it just some verbal order you give or are you still having some paper files? Or are you doing electronic prescription? Who has access to those things? Who is then physically removing the drugs from the storage and then dispensing the drugs? Again, these are all, could be different people and who is in the processes and what a process do you have dealing with the waste and destruction of drugs? Now, just ask yourself those questions. And if you can’t answer those, you probably need to go back and start thinking about it, because all of those are important elements, at least to help start minimizing those types of fraud.
Michael: Yeah. And I just wanted to add on real fast, Brad, I mean, there’s additional questions like how’s it stored? Are you locking it up? How many different people are involved? [00:27:00] So if there’s just one single point of failure, which actually was, I think one of the problems here, I hadn’t really thought about this until just now, but remember we talked about when he was trying to figure out who all used this expired product, and I said that it was all her patients, all of Nurse Houdini’s patients. Well, the way their system was that every injector kind of had their own kind of storage area and their own – so she used from her inventory and the others used from theirs. And so, in a sense, there was no oversight of her as it related to her product, and so, it’s kind of inventory management.
Brad: Absolutely. And your point is really well taken. But audience, think about it – to that point is, that’s why to start asking those questions. And to Michael’s point, [00:28:00] which is great; if it’s the same person, you have an issue for potential fraud. That’s the same thing, by the way, with funds in your practice and other things, but controlled substance is controlled for a reason. But Michael, we’re almost getting close to the end of today’s episode. Do you have some final thoughts for our audience?
Michael: Well, the obvious one, Brad, is this, it’s always better to be lucky than unlucky.
Brad: 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.
Outro: [00:29:00] 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.
