In this episode, hosts Brad and Michael share the story of a Texas plastic surgeon and med spa owner who implemented a commission-based pay structure to retain staff and boost performance. While the model initially increased revenue and morale, it quickly led to scope-of-practice violations, internal competition, and compliance concerns. Tune in to learn what to consider before introducing commission models in your practice, and how to design a compensation structure that rewards your team and protects 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 123’s 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 the Legal 123’s with ByrdAdatto. I’m your host, Brad Adatto, with my co-host, Michael Byrd.
Michael: As a business and health care law firm, we meet a lot of interesting people and hear their amazing stories. This season’s theme is Unintended Consequences. Sometimes a seemingly minor decision can lead to unexpected and far reaching outcomes.
Brad: All right, Michael, before I guess we jump in today’s unexpected/unintended consequences story, what do you got for us today?
Michael: I’m going to start with a question, Brad. A little hard hitting here.
Brad: Okay. Ready.
Michael: Do you think you’re a good fundraiser?
Brad: I like to think so, but I’m guessing you’re about to tell me that I’m not.
Michael: Well, that’s obvious, but not because of why you think. I just would say that naturally, obviously. But I [00:01:00] actually have something more impressive. No matter how good you are, I found someone better. Have you heard about Carson King?
Brad: Carson King? I am not aware who Carson King is, but I like his last name. It has some like real royal favor to it.
Michael: So Carson King was an Iowa State student who went to an Iowa football game. This is last fall, 2024. ESPN game day was there and so he decided to have a sign… You’ve seen all the signs when they do ESPN game. He had his sign that said, “Busch Light Supply needs to be replenished” and had his Venmo handle on there.
Brad: Nice. Yeah, I’m surprised that he was trying to get some of that lower-end beer for his call to action. But then again, I was a college student. If memory kind of serves me correctly, if I can still remember college, Busch Light tall boys were pretty cheap, if I remember buying those in college.
Michael: Yeah. [00:02:00] Maybe he didn’t want to be too presumptuous since he was asking for free beer. I don’t know.
Brad: Yeah, true. But it’s replenishing his beer.
Michael: But it was meant to be a joke. He was throwing it out there, getting on tv. But within a few hours at the game, he noticed that his Venmo account had several hundred dollars in it.
Brad: Okay. So that’s kind of nice. He could buy maybe a few beers for his friends.
Michael: Yeah, except it kept rolling. And by Tuesday after that Saturday game, he had raised $20,000.
Brad: So yes, buying beers for the friends was never, ever going to be a problem for the rest of his life. That’s incredible. 20K, I guess, beside the beer, where did he spend all his money?
Michael: Well, so here’s a little context or backstory. Are you familiar with the Children’s Hospital that’s kind of connected to Iowa’s Football Stadium?
Brad: No, this is the first I’m hearing about it, but I’d love to learn more.
Michael: I’ve actually seen this before on videos, but there’s a cool tradition [00:03:00] at Iowa Home Games where the fans do the “Iowa Wave,” and the whole stadium turns and waves to the children who are in the pediatric hospital, and they’re able to watch the games from the windows in whatever hospital wing they’re in.
Brad: That’s really cool that the kids can see the games from the windows. The fans are acknowledging them. However, I don’t think you still answer my question. What did he do with the money?
Michael: Young Carson bought a case of beer and then donated the rest to the Children’s Hospital connected to the stadium.
Brad: Well, I’ll not ask what you would’ve done in college with that kind of money, but King sounds like actually a really good kid.
Michael: I think the adult version of me would’ve done something similar, but I don’t know if college me would have. So I’m pretty impressed with him. But it gets better, Brad, the story went viral. Busch beer was tagged in the social media post about him donating all this money to the [00:04:00] Children’s Hospital and responded by saying it would match the amount that he raised in his Venmo account?
Brad: Wow. That’s super cool. Very kind of Busch beer.
Michael: Yeah. It kept catching momentum. Venmo chimed in and decided to match donations and a few other companies jumped in as well.
Brad: All of this for free beer. I mean, what a wonderful world we live in.
Michael: Such a crazy story, I know. Well, now I have a question for you. So fast forward to— the latest numbers I saw were probably like nine months later, 10 months later. How much do you think this beer sign in front of an ESPN college game day ended up raising for this Children’s Hospital?
Brad: I don’t know. I mean, with crazy beer sign moment— two to $300,000 would seem like an insane amount.
Michael: At the time I saw the article, over $3 million.
Brad: Oh my God. I need to drink bigger. I did something wrong there. Well, that is really amazing. I feel like [00:05:00] I need to bring Tito’s Vodka sign up at my next football game.
Michael: I don’t know, Brad. Well, first I’m not sure that you could follow Carson’s path if you had Tito money. You would just be buying $3 million worth of Tito’s.
Brad: But that’s what the sign says.
Michael: I know, but I think you’re missing the point. This story is about the power of community and unintended consequences. Carson’s joke that he started with ended up turning into a massive fundraising campaign for a pediatric hospital.
Brad: Yes. Very cool story I was not aware of, but thank you for sharing. But what does that have to do in connection with our story for today?
Michael: Well, today’s story is about a plastic surgeon who implemented a commission-based compensation model at his medical spa. And like Carson’s sign, it started with good intentions, but the results were far more complicated than expected.
Brad: Okay. I’m interested. Let’s get started.
Michael: All right, Brad, [00:06:00]. Our main character today is a plastic surgeon in Texas. We’ll call him Dr. Carson. He owned a busy surgical practice and a growing medical spa, which we’ll call Busch Light Medical Spa.
Brad: Well, I’m proud of that, that Carson became a doctor. I guess all that money he donated to the hospital thought about becoming a doctor so that’s great. But for the audience members, as you notice, Michael brought in Busch Light Medical Spa and Carson from the earlier story.
Michael: Yes. And Busch Light Medical Spa had two providers who treated patients; Nurse King and Ms. Venmo.
Brad: Very original names. Ms. Venmo, that’s actually my favorite one so far.
Michael: I had to make that one up. I was struggling.
Brad: Just pull that out of thin air.
Michael: Yeah. Well, I was going to name one of our providers after Busch Light, but then I thought we didn’t have the maturity to handle that, so I had to make it kind of a [00:07:00] non person with a medical spa. I’m pretty sure we would’ve gone off the rails.
Brad: Yeah. Thank you for doing that because I’m not mature at all as everyone knows and I don’t think we’re at the same level. So, good job. I like the names that you got. Good point of view there.
Michael: Well, here we go. We’ve got some context. Dr. Carson finally felt like he had the right team in place— and I emphasized finally. There was some…
Brad: He was excited.
Michael: He had his team. Nurse King was an RN and Ms. Venmowas an esthetician.
Brad: This sounds like your typical staffing needs for a med spa.
Michael: Right. And they kind of had traditional roles that you would see in a MedSpa as well, Brad. Nurse King was really focused on servicing injectables and lasers for patients. Ms. Venmodid traditional esthetician things like [00:08:00] facials and she had been trained on some light medical treatments like microneedling and body sculpting.
Brad: We won’t jump into all the pieces that surround that from Texas law or other states when it comes to estheticians diving into it. But I want to jump back a second. These are very common services you typically see in a med spa. A lot of times you’ll talk about having these injectables or fillers being in there, or you may even hear freeze the fat or burn the fat if you’re not trying to talk about a particular equipment. But a lot of times the equipment you’ll be referencing might be CoolSculpting or Emsculpting or some other type of name brand that you’re utilizing from a laser or other types of medical service that is required for these types of equipment.
Michael: Exactly. So, I alluded to this a moment ago, but Dr. Carson had struggled with staff turnover. So he was looking for a strategy to retain his team.
Brad: And I would say, at least this is what we’re seeing in [00:09:00] the space right now with a lot of med spas. I’m sure you’ve heard the term hired guns. Hired guns means that somebody’s going to go out and just retain someone who’s already out and about, but there’s really not much loyalty when you’re bringing in a hired gun. They’re kind of a merchant. A lot of things that we’re seeing right now with this space is that since COVID, a lot of people are really jumping from one place to the next because the hired gun’s always looking for the better payday. So you can train someone up, but in reality, they’re keeping them has been very hard on a lot of clients since COVID because everyone’s constantly shifting to the next place because they’re acting more like hired guns than anything else.
Michael: Yeah. It’s fascinating too, is that after COVID was kind of the big wave of private equity acquisition of med spas, and you would hear that they were going to come to the rescue because they were going to provide kind of all the things like employee retention and all that stuff, and they’re struggling with the same thing.
Brad: Like an employee retention policy.
Michael: [00:10:00] Or just recruiting and keeping them. So they too realized this industry in particular with med spas have a ton of turnover. So it’s a very real problem and Dr. Carson had already experienced it. So he had decided that he was going to implement a commission-based compensation model for Nurse King and Ms. Venmoto try to incentivize performance and of course, for retention purposes.
Brad: Yeah. And for better, for worse, we can probably dive deeper into this as we go throughout the story, but the term commission based compensation really has become more of a common term and especially with the med spas as a way in which they’re compensating all employees in these med spas.
Michael: Yep. They’re not just for restaurants and automobile sales. Commissions is typically structured [00:11:00] in this space is paying a provider a percentage of their production on these different procedures. There are other structures that’ll be utilized when you hear this broad term commissions. We’ll touch a little bit on that a bit later in the story. But Dr. Carson had set his up to pay Nurse King and Ms. Venmoeach based on their kind of individual production.
Brad: Yeah. Maybe we’ll right now, just take a step back. I want to say the word commission snuck its way into the practice of Med Spa a.k.a. med spas over the last few years. I mean, we’ve said this before, this is like kind of where retail meets medicine. Because in the retail term it’s used all the time, but in the practice of medicine, it’s relatively new. Med spas because it is that connection between retail and the practice of medicine, they’re starting to utilize this term more often. And second, the market pressures have changed too, [00:12:00] Michael, where because these med spas are now paying commission-based compensation, those in the industry, they start worrying about once they get past all the legal implications, they’re still getting pushback that they’re faced with this challenge. They want to bring someone in and these new providers who are coming in, these hired guns are insisting that if I’m going to come and join you, I need paid via commission because the quote— “everyone else out there is doing it that way and that’s how I should be compensated.”
Michael: I can’t tell you the number of times that we’ve had a risk conversation about commissions and the doctor’s trying to recruit someone, a nurse for example and they’re just like, “Look, I’ve got three offers for commission based structure. I don’t really care about legal risk. I’m going to make more money doing it this way, so I’m going to go where there’s more money to be made.” But [00:13:00] kind of jumping back into our story— and he had implemented this. This is of course, before we had been working with them. So this is all kind of a buildup, but when they first started with this structure, it worked amazingly actually. I mean, Dr. Carson was thrilled because revenue skyrocketed. Both of these new employees, nurse King and Ms. Venmowere just blowing up and really working hard and generating a lot of revenues.
Brad: Well, that’s great. I’m glad to hear it’s a good start for this med spa that the revenue skyrocketed. However, this was not the rest of the story because we’re only about 13 minutes into this podcast. And you can’t fool me, Michael Byrd. This season is Unintended Consequences. So I know, and the audience probably knows at this point something happened next.
Michael: You’re just so proud of yourself. We’re [00:14:00] calling it out.
Brad: Just now.
Michael: All right. Well, you’re right, Brad. The unintended consequences did begin to surface. So what started happening when they were making all this money is Nurse King realized that she only got paid for the work she did. So she’s like, “Well, I can make more if I start doing more things,” and so she started doing the treatments that Ms. Venmodid as well.
Brad: Okay. We’re starting to see a little shift in thinking here from Nurse King, but hopefully whatever services she was providing, she was trained on those treatments that all of a sudden this Nurse King was providing. So, okay, got it.
Michael: Yes, she was trained. So now Nurse King could do anything, or was offering to do anything and everything there. Ms. Venmo in turn was like, “Well, I guess [00:15:00] what’s good for you is good for me,” except for the fact that she’s an esthetician. So Dr. Carson asked to be trained on injectables and lasers; the services that Nurse King specialized in. And Dr. King agreed because he was so happy with how the performance of this medical spa was going and he wanted to keep this positive momentum.
Brad: I think it was Dr. Carson who agreed that Nurse King could do that is what I’m hearing.
Michael: Yeah, did I miss a mismatch?
Brad: No worries. I got it. The audience will get it since I helped them.
Michael: Yeah.
Brad: That’s a problem though. It sounds like they became competitors under the same roof, or they’re all trying to do the exact same services to get paid commissions.
Michael: That’s exactly what happened.
Brad: And I’m guessing that this might be a point where some of the unintended consequencescomes into today’s story.
Michael: Way to pay attention, Brad. Yes. [00:16:00] The culture at Busch Light Medical Spa shifted from collaboration to competition.
Brad: Yeah. And this really starts sounding like the issues we talked about just a second ago about all of a sudden they’re becoming hired guns, because his commission model is motivating to work harder, but it’s motivating them in the sense of like every person that comes through, they want to silo them into their little world so that they can continue seeing that patient and they can do anything that that esthetician does. The esthetician says, “I can do anything that RN can do.” Which then obviously in a culture where you said collaboration, where typically you’d want people to talk to each other about best practices and ways to do stuff. Now you’re building these turf, or turf wars will come because each person is really kind of trying to control their territory.
Michael: Right. Dr. Carson did not anticipate that the compensation system would undermine the team dynamic and so eventually he called us for help.
Brad: Okay. So he calls us for help. [00:17:00] Did you say that we needed vodka or anything of that sort for the help?
Michael: I did not.
Brad: You didn’t have like a sign that said Venmo, Brad Vodka?
Michael: No, but I’ll keep that in mind next time.
Brad: So what did he want you to do then, besides not Venmo’ing him money or me for vodka?
Michael: He wanted to redesign or fix the compensation system to align and encourage collaboration.
Brad: Actually, that makes a lot more sense than what I had said. So, Kennedy, you can just scratch anything I said ahead of that.
Michael: She automatically does that.
Brad: Thank goodness. Well, hopefully we were able to identify some of the restrictions out there relating to commissions in the medical practice, and probably give some guidance throughout this process.
Michael: A way to put the pressure on me to have flagged it. Well, it is a podcast.
Brad: It already happened so you can’t correct it now.
Michael: All right. Well, let’s go into commercial and on the other side, find out if I did flag it. Talk about the [00:18:00] legal implications to commission models and find out what happened with Dr. Carson and the Busch Light Medical Spa.
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Brad: Welcome back to the Legal 123s with ByrdAdatto. I’m your host, Brad Adatto, with my co-host, Michael Byrd. And Michael, for those who don’t know, this season, our theme is Unintended Consequences. And Michael, you just told us a really interesting story about unintended consequences for Dr. Carson’s commission model. Maybe you can give the audience a quick recap.
Michael: Yeah. [00:19:00] I might need your help again, since I missed a name in the beginning. So we have Dr. Carson who’s a surgeon and owns a medical spa, Busch Light Medical Spa. He had had some turnover issues and finally found a team he really liked. He had Nurse King and Miss Venmo, the aesthetician. He had as a strategy, decided to implement the commission model, started out working amazing and then it turned into a competitive environment. Both of the providers were trying to do all the services themselves so that they could get more commissions. So the vibe started changing and where we left off, Dr. Carson had reached out to us to ask us to kind of amend his comp system to better align a collaborative culture than kind of this competitive environment that he was experiencing.
Brad: Right. [00:20:00] Now, Michael, in the beginning of the story when you were mentioning, we had an RN doing certain things, we had an esthetician doing certain things throughout the whole scope of practice statement. So let’s get into- for audience members not familiar, like understanding the scope of practice, considerations of what should a nurse or an esthetician be doing and should they really be doing the same things?
Michael: Yeah. It’s important too, because it can be misleading in a state like Texas where there is a broad delegation ability. So if you think of it at a high level, there’s kind of a bucket of states that will dictate very specifically who can perform by delegation, medical treatments. That’s like California, New York that will say, “Basically, RNs are higher, can be delegated medical treatments.” If that were our story today, then Ms. Venmo[00:21:00] would not have been able to do any of the stuff, even the stuff she was doing at the beginning, the microneedling and body sculpting. You have another bucket of states, which is like Texas, where the medical board puts the risk on the doctor from a standard of care perspective to— They say like, “It’s your license that’s on the line.” So you have the responsibility to make sure the standard of care is being held. It’s your responsibility to make sure anyone that’s performing the treatments has the appropriate training, and it is relevant what license you have, but it’s not. It can’t, like an aesthetician can be delegated medical treatments if the doctor believes that person can maintain the standard of care with their training. It does start crossing over into that. Just because you can, doesn’t mean you should. When you get into things like injectables where you really can— [00:22:00]. I tell a doctor to picture themselves standing before the board and trying to justify how someone who’s had no formal anatomy training could be injecting a toxin into somebody’s face. So there is a definite— It’s very blurry when you get into a state like Texas. It’s not just what you can do, but what you should be doing.
Brad: Yeah. And some ways of looking at that, Michael, is that the more invasive the procedure is, the more concern as a physician you should have about pausing and making sure, are you the doctor being consistent of the standard of care? Do you really understand the skillset that this individual has? Are you truly comfortable with them doing? It’s not just like that I can delegate to them, but have you actually supervised them to actually perform those services? So those are the things that you start worrying about because if something goes wrong, as you said, [00:23:00] that doctor is standing in front of the board trying to explain why this person did this procedure didn’t really have any formal anatomy training.
Michael: Yeah. I touched on when Ms. Venmostarted doing injectables and lasers, those scope of practice risks. What was interesting is that there was also some business issues or business risks that started happening when Nurse King started doing the microneedling and the other treatments. These are lower revenue treatments and so she was not maximizing her time. She had only so many hours in a day and what the practice started experiencing was that Nurse King’s profitability started declining because times that she could have been doing injectables, she might have been doing a lower impact service for a client. So there was a business impact as well to Busch Light Medical.
Brad: That’s a really good takeaway. [00:24:00] I’m assuming you did not figure that out. Somebody who was smarter than you may have pointed that out to you. But Michael’s point, which is so important, is just because the nurse is busy and there’s money coming in, doesn’t mean that’s a good utilization of her time and effort especially with probably as I’m assuming, they’re paying the RN a lot more than they’re paying the aesthetician in general either for commission base or base salary or whatever it was. But now you have someone doing something that’s much lower than their pay grade should be. And so that’s the part where I think from our audience members, just to kind of think about when you are utilizing individuals. But let’s get back in the story, how do we end up helping with this new compensation system?
Michael: Well, Dr. Carson kind of came to us loaded up with his idea for a solution. Oh, good. He proposed a model where each provider would get a bonus for upselling services to the other. In other words, he wanted to get everybody doing what they were originally doing, but he wanted to incentivize, [00:25:00] for example, Ms. Venmo for sending those injectables to Nurse King and then paying Ms. Venmobased on not trying to hoard that work herself, but to send it up to Nurse King.
Brad: This is a great idea, audience member. The best way to explain is you’re in the frying pan and you jump into a boiling hot fire breathing dragon’s mouth. So meaning that, don’t do that because this is going to raise a lot of compliance concerns. If you’re paying commissions for referrals or upselling, this can trigger a host of different rules, and these rules go all over. But a lot of times you hear the word kickback or fee splitting. So those who are not familiar with those laws, there are some federal laws that’s to do with these anti referral laws, called Stark and Anti-Kickback laws. But a lot of people are like, “Yeah, but this is cash based, so it must be okay.” No, the answer is no, because most of your states have some version of the anti-referral law, anti-fee splitting, anti-kickback, [00:26:00] anti patient buying. And then that’s just the laws. Most of your boards, your nursing boards, your medical boards will have some issues which they believe this is unethical, unprofessional to be upselling people because you’re supposed to be practicing medicine, which is best for the patient, not best for your bottom line. So that’s just kind of a little bit of a takeaway of being very careful thinking that you’re switching something that’s going to help your business, but now you’re actually increasing your overall risk.
Michael: You’ll be proud of me because I did flag this for Dr. Carson. I don’t think I told him that he was jumping into a fire breathing dragon’s mouth, but I did tell him bad.
Brad: Yeah, that works.
Michael: Yeah. So back to it. I mean, that’s why it’s critical to design compensation systems with legal guidance. You can motivate your team without violating the law.
Brad: Yeah. And it’s not just about the legality. You mentioned this also it’s about the culture. [00:27:00] A good compensation system should foster collaboration and not just competition where you have these territories being driven between your employees.
Michael: Dr. Carson started to pick up on this and he had a real mess on his hands at the office. He was really looking to get everyone rowing together.
Brad: So what did he end up doing?
Michael: Well, you, somewhat flagged it a moment ago. We brought in our friends at Maven. They’re also the ones that helped identify this productivity issue that I mentioned. On the nursing side, they’re good at that. But they helped design a compliance system based on KPIs or Key Performance Indicators. We also worked through the scope of practice issues. Nurse King and Miss Venmowent back to their original roles.
Brad: Which is what you hired them for so that makes sense. So how’d it work out?
Michael: [00:28:00] Well, unfortunately, Ms. Venmo left. She wanted to continue doing the higher risk treatments and getting paid the commissions for doing those higher risk treatments. So she went to find someone who was willing to take that risk and hire her to do it. But Nurse King turned around. She actually continued to be a high performer, but what she really started doing was becoming a team player under the new system and it really set the practice with some positive momentum beyond the profitability. It had some foundational culture with this new comp system and the team.
Brad: Yeah. And Michael, I think, just wrapping up real quick since we’re almost out of time, this story really does demonstrate that keeping the right people in your medical practice is important, but understanding the regulatory risk that comes with paying commissions— Like I said, we have federal and state and then local board rules you have to worry about. But ultimately, not only can you have to worry about that risk, [00:29:00] but what does your culture look like if everyone’s just at your entire place hired guns. To be clear, audience members, we’re not saying don’t do commissions. We’re just saying that before you do it, you should pause and make sure how does it work in your state and what is the risk associated with that. But I think we’re almost out of time, so I’d love your final thoughts here.
Michael: Yeah, I mean, I would just add to that, that you can just kind of blanketly throw a commission structure out there and it’s kind of like throwing a sign up for free beer and you may experience an unexpected amount of profits coming in initially. But there are downsides to running a medical practice versus being a college student and trying to figure out what to do with that unexpected money.
Brad: Yeah. You don’t want to, unlike the college student who donate all that money to the hospital, you may be donating all that money to the medical boards because you did something wrong.
Michael: Exactly.
Brad: Audience members, we are back again next Wednesday. The show will be discussing Unintended Consequences with setting [00:30:00] compensations for a physician employee who may eventually become your future partner. 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.
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