Cash flow issues don’t usually start with cash, they start with decisions made long before revenue comes in. In this episode, hosts Brad and Michael share the story of two owners who set out to build a high-end med spa and invested heavily before validating patient demand. As revenue lagged behind expectations, they faced financial pressure that led to staffing gaps and risky compliance missteps. Tune in to learn how misaligned growth, operations, and compliance can compound under pressure, and how reactive decisions can quickly lead to compliance risks.
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] Welcome to Legal 123s with ByrdAdatto. Legal issues simplified through real client stories and real-world experiences. Creating simplicity in three, two, one.
Brad: [00:13] Welcome back to Legal 123s with ByrdAdatto. I’m your host, Brad Adatto, with my co-host Michael Byrd.
Michael: [00:19] As business attorneys for health care practices, we meet a lot of interesting people and learn their amazing stories. This season’s theme is “What Now?” Each episode will involve a real client story with a high-pressure moment for that practice.
Brad: [00:34] With the theme being “What Now?”, Michael, I feel like asking you, what now?
Michael: [00:40] Well, I’m glad you asked, Brad. I read an article recently about impersonators. It was called “Monetizing Being a Doppelganger.”
Brad: [00:50] Well, I do love a good impersonator, so I’m very interested in how we can monetize this.
Michael: [00:56] Of course, the article led with the most frequently impersonated star, “The King”himself. Elvis impersonators are earning as much as $129,000 a year.
Brad: [01:08] Well, that’s not a bad gig. Impersonating The King and earning over five figures. Did I hear you correctly?
Michael: [01:14] Yeah.
Brad: [01:15] Yeah, okay.
Michael: [01:15] And apparently, according to this article, if you look like a famous A-lister, you can earn between $500 and 10,000 a single appearance at a corporate event or private party.
Brad: [01:27] Maybe I should start working on my impersonations.
Michael: [01:31] Well, I don’t know, Brad, you need to look like someone famous first.
Brad: [01:36] Oh.
Michael: [01:36] I’m working on it, but it probably won’t be a compliment. And the article also noted something else. Do you have a guess on the appearance fee for a top cover band?
Brad: [01:51] Cover band, so this is not the real band, right?
Michael: [01:53] Right.
Brad: [01:54] 10 grand?
Michael: [01:56] Well, according to the article, Brit Floyd, a Pink Floyd cover band, lists their appearance fee between 35,000 and $50,000.
Brad: [02:06] Okay. Apparently, I need to learn how to sing, too.
Michael: [02:09] Yeah. They even have impersonators on social media, but the article notes that you have to be careful. You have to watch out for the ones trying to bilk you out of money by pretending to be somebody they’re not.
Brad: [02:20] Well, so for $50,000 for a band impersonating another band, that’s not bilking them? Tell me more, Michael.
Michael: [02:27] I can guess they get around it through disclosure, but I don’t have an answer for you there. Do you think you have a shot at making money as any type of impersonator, and if so, who would you be?
Brad: [02:44] In shocking news, as an extrovert, I have actually worked a lot of different impersonations. I don’t know if I’d be a doppelganger, but the one that was easiest back in the late ’80s, early ’90s is I could impersonate Michael J. Fox as Marty McFly from Back to the Future. I kind of looked like him back when I was skinnier and younger. How about you?
Michael: [03:05] Unfortunately, Brad, my internal confidence does not seem to line up with reality. I have not received feedback that I look like anyone famous, even though in my own mind I do. And I definitely do not have the energy or talent to impersonate someone, so I think it’s a dead end for me.
Brad: [03:27] I agree with your internal confidence that you should not try to impersonate anyone.
Michael: [03:33] All right, let’s jump into today’s story.
Brad: [03:36] Go for it, Michael.
Michael: [03:37] Before we start, Brad, I do not want any impersonations coming from you during the story.
Brad: [03:43] I make no promises, Michael.
Michael: [03:46] I’m very scared, but I did do this to myself.
Brad: [03:51] Okay.
Michael: [03:52] Our story today is about a person I met at a conference.
Brad: [03:55] Okay.
Michael: [03:56] She heard us talking about medical spa business and compliance challenges when we were together on a panel.
Brad: [04:06] Did she mention how much better I was than you?
Michael: [04:08] No, she came to talk to me.
Brad: [04:11] She was intimidated by me, is what I’m hearing.
Michael: [04:13] Yes. She’s based in South Carolina.
Brad: [04:16] Okay.
Michael: [04:17] Her name is, Brad, no singing, Julie McCoy.
Brad: [04:21] Okay. You cannot say her name and not hear the theme for ‘The Love Boat,” but I will not sing it today in fear the audience will stop watching.
Michael: [04:35] You’re growing up a little bit. I’m amazed. So Julie met with me after speaking because she felt like the medical spa and wellness center she started with her husband was in deep trouble. We’ll call the business Titanic Medical Spa and Wellness Center.
Brad: [04:59] With a name like that, it sounds like it has a lot of trouble.
Michael: [05:04] Yeah.
Brad: [05:04] I feel like I need a little more context.
Michael: [05:09] I love when you ask for context. So I will give you some.
Brad: [05:16] Thank you.
Michael: [05:17] Julie is the business person who decided to support her husband, a physician, when they started the Titanic. We’ll call his name Doc.
Brad: [05:26] All right. Another character from The Love Boat, but you’re starting to confuse me, Michael. Love Boat and Titanic are two different things.
Michael: [05:40] Yeah. Well, I will agree you’re not the smartest person on this podcast, so-
Brad: [05:43] Yeah, I was just helping you out there
Michael: [05:44] Glad you asked. Okay. Well, you’re-
Brad: [05:46] Trying to build up your confidence, by the way
Michael: [05:47] I’ll give you some confidence, or some props.
Brad: [05:49] Okay.
Michael: [05:50] Your ’80s TV memory’s on point, as usual.
Brad: [05:53] Yep.
Michael: [05:53] Yes, Brad, Doc was the character who played the ship’s doctor on “The Love Boat.” So Doc, in our story, has been an internal medicine doctor employed by a local hospital for a long time.
Brad: [06:09] Okay. Well, and for audience members who are not familiar with your typical physician who’s employed by a hospital, it can be pretty common, especially if you’re in the primary care world where most are either with a big group or a local hospital system. Generally speaking, it’s really more like a 9 to 5 job for a physician where that’s your employer. You go work for them every day, and you’re seeing patients either through the clinic or at the hospital itself.
Michael: [06:39] Yeah, and for those that want a little bit under the hood, there’s a lot of technicality that goes with being a hospital employee. This will vary state by state, but there are issues with a hospital actually W2 employing a physician. So there will be physician groups that are connected closely to the hospital that really serve that purpose. We call them hospital employees.
Brad: [07:10] Yep.
Michael: [07:10] So Doc had a vision that this small community they lived in needed an aesthetic and wellness center.
Brad: [07:20] Okay. So we established he was employed by the hospital. Was he then allowed to open up some side hustle? I guess let’s jump back to what his contract says with the hospital.
Michael: [07:32] Yeah. It’s a really important question. So oftentimes employment agreements will have what we call moonlighting clauses that govern what types of outside activities a doctor can do. Apparently in this case, Julie explained that the hospital was supportive of her husband, Doc, going forward with Titanic Medical Spa and Wellness, as long as it didn’t interfere with his day job.
Brad: [08:04] Well, I think if the hospital knew the name of Titanic Medical Spa and Wellness, of course they were supportive, because they knew that this practice would sink.
Michael: [08:13] Oh, okay. I think you’re taking it a little too literally, Brad.
Brad: [08:18] Oh.
Michael: [08:18] But okay, I follow. So back to the story.
Brad: [08:22] Okay.
Michael: [08:22] Doc had done some deep research, and he concluded that the brand needed to be upscale in order to be successful. He wanted to garner the trust and reputation of the community for, in his mind, instant success. He was going to come in with a tight, well-branded product and leverage his community of patients through his hospital role and reputation, and they were going to come flocking. He figuratively built a Titanic. It was upscale and a huge space so that there would be plenty of room to grow.
Brad: [09:05] Hearing this, I’m starting to imagine a giant iceberg floating toward this practice. This sounds very costly. How much did this cost?
Michael: [09:17] Yes, I’m starting to sweat a little bit as I talk, reliving this conversation. Julie shared that they had borrowed $500,000 for the finish-out.
Brad: [09:28] For the finish-out?
Michael: [09:29] Yes. And it was a beautiful space.
Brad: [09:30] Well, for $500,000 that they borrowed, it has to be pretty impressive. So for audience members who are not as familiar, if you’re finding a space, there’s a couple of months that go by where you’re trying to find the right space, then some negotiations back and forth. Eventually you do sign everything. And so that can be anywhere from six to 12 months from when you start the process. But step-wise, the very first step is really working on that letter of intent. A good letter of intent for your lease is you’re really thinking about what are the economics of this? Do they make sense? That’s where either your attorney or your commercial broker can kind of negotiate that piece. And that will then lead right into the actual lease. Hopefully you had all the business terms correct, and there’s some back and forth on that. And then where you were hitting on is that you eventually meet with somebody to help design the space. So he was saying he wanted it to look like the Titanic. So I guess it had red carpet and giant red features all over. I don’t know if that was actually the Titanic, but anyway, all this being said is you eventually get to the point where construction starts. In your typical lease, they’re going to give you TI, which is tenant improvement, meaning there’s an allowance built into your cost. So not only did they build it into the lease for the tenant staying with it, but then you said they spent an additional $500,000. So the landlord said, “Okay, here’s some money to build out your Titanic-looking space,” and then they went well above that by a half a million. So that’s a lot of money for a space.
Michael: [11:00] Yeah. And I don’t know exactly how much allowance they got since we didn’t represent Julie and Doc. But going through your timeline and what it looks like to rent space, Doc made decisions early that influenced that $500,000. When you pick out the space and the square footage, the bigger it is, the more that’s going to influence the finish-out costs, not to mention your rent. Then as you get into the design phase, that’s where they were likely working on branding to make it feel premium. And it continues into construction, where you may be doing add-ons and change orders, so your ideas keep adding up and you’re running up a bill.
Brad: [12:08] Yeah.
Michael: [12:08] I will say, Brad, I started sweating when she was talking to me, especially since she opened by saying she thought her business was in trouble.
Brad: [12:19] Yeah, I’m starting to sweat a little too, just thinking about when we went through our three builds at this firm.
Michael: [12:26] Yeah.
Brad: [12:26] We did not go a half a million over budget. We did go over budget, so that’s something. All right, let’s go back–we now know they’re in trouble, but it’s a medical practice. What services were they providing?
Michael: [12:41] They planned to capitalize on Doc’s patient base and offer a suite of wellness services.
Brad: [12:51] Ooh.
Michael: [12:52] Weight loss, HRT, and other women’s health-related services.
Brad: [12:57] Okay, so for the audience, this doctor is coming from primary care, and this is a huge shift. In primary care, you’re treating problems after they arise. In wellness, it’s forward-looking, often with a cash, membership-driven model. You’re trying to fundamentally change health through routines or prescriptions. One key issue is marketing–you have to be careful how you promote outcomes like longevity or weight loss.
Brad: [13:47] Now you’re taking cash and thinking differently operationally. He likely relied on the hospital for payer systems before, but now they need protocols: who touches the patient, training documents, and how patients are managed. This all ties back to being prepared–contracts, staffing, and compliance. There’s a lot to think about, especially coming from an employee mindset, so hopefully they addressed these layers before opening, beyond just building an extravagant space.
Michael: [14:38] You’re right. He does have the training to move into elective wellness services, but it’s different when you’re not treating a problem but creating wellness. That transition may have impacted him. It’s also possible his lack of business experience played a role. Those factors together could explain their current situation.
Brad: [15:35] And based on the services, it sounds like a huge space. Why did they need that much?
Michael: [15:46] I was curious too. These are mostly prescriptive services.
Brad: [15:50] Yeah.
Michael: [15:50] Julie explained that they filled the space by investing another $500,000 in lasers and aesthetic devices, which they also financed.
Brad: [16:05] Okay. That adds up quickly. These machines can cost $20,000 to $200,000 each. Once you buy them, they’re yours unless defective. That’s a huge commitment, especially without an established patient base. They didn’t yet know what patients needed, so that equipment could easily become very expensive underutilized assets.
Michael: [17:01] Yeah, pretty expensive ones at that.
Brad: [17:04] So again, I think I was doing the math a little bit before that, but it sounds like they’ve already spent at least a million dollars that we know of just to kickstart this thing. I’m stressing out, Michael.
Michael: [17:18] Yeah. Well, let me give you your props again, Brad. You did successfully add 500,000 plus 500,000 to get to a million.
Brad: [17:26] Oh, wow.
Michael: [17:26] Yeah.
Brad: [17:27] Thank you. I didn’t realize I did that.
Michael: [17:28] Yeah.
Brad: [17:28] I kind of blacked out.
Michael: [17:29] Yeah.
Brad: [17:29] Yeah.
Michael: [17:29] Yeah. It was impressive. So Julie explained that because they were cash-strapped, she helped her husband out, and they had not really hired any other employees.
Brad: [17:42] Did she handle the operations and sales, Michael?
Michael: [17:45] Yes, Brad, she did.
Brad: [17:46] Okay.
Michael: [17:47] And as it turns out, she was handling all the treatments as well, because remember, Doc had a day job.
Brad: [17:53] Julie, as you said in the beginning, was the business person. I don’t believe you said she was a provider, right? And we’re in South Carolina, right?
Michael: [18:01] You got it, Brad. Yep. She would be considered an unlicensed person. And as it turns out, in South Carolina, that’s a no-no. You cannot be delegated medical treatments. And if I was sweating at the beginning just listening to the financial strain, I was really having to catch my breath when I heard that she was running these devices and treating patients while her husband was across the street at his day job.
Brad: [18:42] At this point, Michael, I’m very happy that she came and talked to you after the speech because first, she’s probably delaying me getting to the bar, but second, if I got there, I would be buying her shots because it would be that upsetting. One thing to note is that sometimes at trade shows, salespeople–who we love–will say, “Don’t worry, doc. I can train anyone to use this machine.” And that may be true, but she was not a licensed person, and that is a big red flag in most states, including South Carolina. Typically, RNs or higher are the only people who can perform medical services.
Michael: [19:35] The good news is that this is what gave her the confidence to talk to me after the speech. She heard us talking about scope of practice, and once she started, she immediately shifted into sharing the financial distress of the situation.
Brad: [19:52] Well, we’ve been using a lot of water analogies this season–Titanic, Julie, Doc–so let’s bring it back to the framework. Were they acting like a pirate, a Navy SEAL, or a cruise director?
Michael: [20:17] They started out acting like cruise directors but shifted into pirate mode when financial pressure hit. To set context, Brad, remind the audience: how do cruise directors act?
Brad: [20:33] Cruise directors are buttoned up. They want to minimize risk and rely on checklists, making sure everything is accounted for step by step. Once the ship is set, there is no deviation. It’s all about following a fixed plan with no changes.
Michael: [21:10] Okay. And how do pirates act?
Brad: [21:15] Pirates are fun. They’re high energy, moving fast, breaking things, and throwing caution aside. They are the opposite of cruise directors. If there is risk, they do not focus on it. They move quickly, make decisions on the fly, and do not prioritize compliance or structured thinking.
Michael: [21:50] So connecting it: at the beginning, Doc had a vision and immediately executed on it, but it was not connected to reality. He did not pressure-test it financially. Then when pressure hit and they could not afford staff, they shifted into pirate mode. It became survival–Julie stepped in, got trained, and started operating devices. They were moving fast and taking risks out of necessity, not strategy.
Brad: [22:51] Exactly. It was not the fun version of pirate mode. It was survival–pivoting constantly without a clear direction. But I think we have to go to, let me think what’s next.
Michael: [23:05] Go to break?
Brad: [23:06] Yeah.
Michael: [23:06] Yeah. On the other side after break, we’ll talk about the mess that Julie and Doc have with the sinking Titanic Medical Spa and Wellness Center.
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Brad: [23:50] Well, welcome back to Legal 123s with ByrdAdatto. I’m your host, Brad Adatto, with my co-host, Michael Byrd. Now, Michael, for those that don’t remember, this season, our theme is “What Now?” And we’ve been exploring a fascinating but scary story that’s making us sweat about a med spa that truly is a sinking ship. We went real into depth about the story, so instead of that, what is the biggest risk that you’ve pulled from the story so far?
Michael: [24:19] The biggest iceberg?
Brad: [24:20] Yeah.
Michael: [24:21] There’s a lot happening. You have to start with scope of practice.
Brad: [24:25] Yeah.
Michael: [24:25] Right? The fact that they switched into pirate mode and that Julie was treating patients, the consequences of acting like a pirate is that you’re in a bet-your-license scenario at this point. We’re not talking about bankruptcy or other bad outcomes, but if Doc cannot support the family and continue his career at the hospital, it’s a completely different situation. And let’s be clear, the primary risk is on Doc as the licensed physician allowing his unlicensed spouse to provide treatments. There is really no way to minimize that risk. Even with processes and oversight, the moment a board gets involved or a patient gets hurt, the focus will be on the unlicensed person treating patients.
Brad: [25:42] I totally agree with you. That’s a big trap they’re in right now–they’re not paying attention to scope of practice or the supervision rules that come with it. But Michael, let’s keep moving. What else did you learn?
Michael: [25:56] To add on to the compliance risk, there’s a hidden risk we have not really discussed. Doc’s primary practice is fully insurance-based, including private insurance and federal payers. Brad, I’d love for you to briefly talk about the contractual risk of offering overlapping services on a cash basis at the Titanic while those same patients may also be on insurance at his primary practice.
Brad: [26:41] Absolutely. This is something a lot of people overlook. If you have a contract–say with a hospital or payer–you are agreeing that when a patient presents with a certain need, you will treat them within that framework and they will pay deductibles or co-pays. If that same patient goes across the street and pays cash for a service that may have been covered under insurance, you may be violating those agreements. That includes Medicare, Medicaid, TRICARE, and commercial payer contracts. Especially with services like hormone replacement, there can be real conflict. That’s a major friction point you have to be aware of if you’re still working full time under those payer arrangements.
Brad: [27:35] The other big issue is malpractice coverage. When you’re working for a hospital, you’re typically covered under their policy. But once you step into a separate practice, you need to ensure you have proper coverage for everything being done, including anyone providing services.
Michael: [28:19] From a financial standpoint, they borrowed about a million dollars and likely signed personal guarantees. That means if the business fails, their personal assets are at risk. It highlights the importance of understanding your exposure when taking on debt.
Brad: [28:54] We’re almost out of time, so two quick questions: what happened to Julie, Doc, and the Titanic, and what are your final thoughts?
Michael: [29:02] I’m not sure if they made it financially. I do believe they fixed their compliance issues–Julie told me she stopped performing treatments, and they brought in properly licensed providers. But I’ve lost touch since then. As for final thoughts, acting like a cruise director feels intentional and safe, but it can ignore situational awareness. If you’re a startup without patients and you’ve borrowed a million dollars, you need strategy–not just execution. Otherwise, you can easily build too much complexity too early.
Brad: [30:05] Totally agree. Well, audience members, that’s all the time we have today. But don’t worry–we’ll be back next Wednesday with: My Practice Founder Died, What Now?
Brad: [30:19] Thanks again for joining us today. And remember, if you liked this episode, please subscribe, make sure to give us a five-star rating, and share with your friends.
Michael: [30:25] You can also sign up for the ByrdAdatto newsletter by going to our website at byrdadatto.com.
Outro: [30:32] 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.
