New Jersey’s Corporate Practice of Medicine and Its Impact on Medical Spas
Like many states, New Jersey prohibits the corporate practice of medicine (CPOM) by limiting medical practice ownership and operation to certain licensed health care professionals. This doctrine affects not only traditional medical practices, but also wellness clinics, IV hydration clinics, medical spas and all health care-adjacent businesses, like medical spas or “MediSpas.” Understanding its implications and consequences can aid health care professionals in successfully owning and operating a medical spa or similar type of health care-adjacent provider.
Defining “Practice of Medicine”
It is a third degree crime in New Jersey to “practice medicine” without a license or to provide services that exceeds the scope of a valid license and/or training. The “practice of medicine” is broadly defined to mean “any method of treatment of human ailment, disease, pain, injury, deformity, or mental or physical condition.”
In conjunction with this broad definition, New Jersey further requires that medical practices be owned by licensed professionals and organized as either a professional entity, a solo practice, a partnership or a limited liability company. In practice, this means that medical practices that treat an ailment or condition must be:
- Owned by licensed professionals
- Operated by licensed professionals
- Formed or incorporated as one of the corporate forms listed above
Given the breadth of the definition of the “practice of medicine,” medical spa services are considered the practice of medicine and, thus, medical spas are considered medical practices and must comply with New Jersey’s CPOM doctrine.
That being said, unlicensed persons or licensed persons who are not eligible to own a medical practice can be involved with New Jersey medical spas, so long as they do not own or control it. Generally, other than direct employment, they can become involved through a management service organization, or “MSO.”
Management Service Organizations
An MSO provides back-office, administrative services, such as human resources, payroll, inventory management, scheduling, bookkeeping, billing/collections, marketing, intellectual property, information technology, property management and non-professional employee leasing. In this scenario, a Management Services Agreement is usually executed between the MSO and the medical spa which outlines the services the MSO will provide and the fee the medical spa will pay for the services. Even though these arrangements are permitted, the Management Services Agreement must comply with New Jersey law. The MSO cannot control the medical spa from a clinical perspective (which, as mentioned above, is considered the “practice of medicine”), so all clinical decision making must be reserved for licensed health care professionals. Additionally, the fee paid to the MSO should be carefully structured so that it reflects the value of the services the MSO provides and is compliant with New Jersey law.
Individual Licensure
In addition to CPOM considerations, it is important to ensure that any medical spa services that constitute the practice of medicine are administered by duly licensed and trained individuals. As mentioned above, providing services to a medical spa client within the scope of a health care practitioner’s license is important for avoiding liability. However, acting within the scope of the license may not be enough — the licensee must also be sufficiently trained in the services he or she provides, such as microneedling, administering toxin injections and conducting laser hair removal. It is important to ensure that all providers have completed adequate training and are competent in providing the services offered by the medical spa and/or are appropriately supervised by a licensed provider.
Medical spas have become increasingly popular with both patients and health care professionals and, to ensure the longevity of the medical spa, it is important to consider and understand applicable New Jersey law from the time of formation of the corporate entity through providing services to patients and contracting with MSOs or other vendors.
