Medspa Operations

The medical spa industry has grown rapidly over the last several years. In 2004, there were only 471 in the United States, but by 2009 there were nearly 2,000. The law of averages suggests that with more spas, more treatments and more injuries, there are bound to be more mishaps and adverse reactions at these facilities.

The lure of medical spas can become a financial siren song for physicians, many of whom are fed up with meager insurance reimbursement schedules and endless paperwork. These spas feature therapies such as lasers, intense pulsating lights (IPLs), infrared treatments, Botox, personal DNA testing, Pointe Lift, Liposolve, anti-aging drugs, photo-dynamic therapy (PDT) and telomere clipping. Not all spa treatments are high-tech; some, such as massage, are high-touch. Further boosting the income potential for doctors is the fact that modern technology often enables non-physician technicians to perform (ideally under medical supervision) many spa treatments and modalities.

These trends create income streams for physicians, but they may simultaneously increase professional/malpractice liability exposures. In fact, liability worries may prompt medspa owners and operators to book some relaxing spa time for themselves after surveying today's litigious environment.

Who Is Open to Risk?

Personal injury lawyers are always on the lookout for the next deep pocket, and many may see the medspa industry as a juicy target. Plaintiff lawyers also often see medspas as under-regulated entities operating on the fringes of medicine, populated by staff with suspect credentials. Google the phrase, “medi-spa accidents” and up pop multiple Web sites for personal injury law firms touting this type of case as a specialty.

Virtually anyone near a medspa mishap may be dragged into court. Accidents are rare, but they are not just theoretical. Consider these scenarios, some of which are factual and others hypothetical:

• In 2005, a North Carolina woman died after overdosing on a numbing cream she received before laser hair-removal treatment.
• A customer undergoing a chemical peel claimed she was negligently burned.
• A customer alleged he fell off a massage table and sprained his shoulder.
• A customer was dissatisfied with her Botox injections, claiming the spa personnel failed to warn her about discomfort and side-effects.
• A female model received Botox for her migraines and claimed she suffered auto-immune disease as a result.

Any of these situations may be fodder for a lucrative personal injury claim. When injury occurs, spa owners and managers may find themselves in court, needing strong legal advocacy and risk management advice.

Claims

Claims against medspas include lipodissolve complications, laser burns, drooping eyelids from Botox treatments, lumpy lips from dermal fillers, burns from IPL, infections from microderm abrasions, and scarring from tattoo removal procedures. Malpractice claims can include demands for medical expenses to treat complications and lost wages, sometimes to subjects in the public eye whose livelihood is tied largely to their beauty and appearance (e.g., models, actresses, celebrities). Further, injured claimants and plaintiffs may allege pain and suffering as well as loss of comfort, companionship and intimacy.

Bodily injury claims against medspas can represent significant potential liabilities. A physician's existing medical malpractice insurance policy may or may not cover these liabilities, and gaps in coverage may expose physicians to devastating financial liabilities.

Doctors can also face liabilities when they participate in off-site Botox parties and events. Some insurance policies cover residential Botox events, while others do not. Concerns harbored by insurance carriers and risk factors that should be pondered by physicians include:

• Is alcohol being served and consumed? (Are patients/customers fully aware of the risks of the procedure if they have been drinking alcohol? Issues of informed consent may enter into the equation.)
• Is the residential or off-site environment pristine and sterile?
• How many attendees will receive injections during the party or event?

Clearly, Botox parties represent a subset of medspa risks that can draw close attention, both from insurance underwriters and personal injury attorneys.

Theories of Liability

Allegations that physicians can anticipate plaintiffs making in medspa claims include:

• Deviations from the standard of care in carrying out medspa procedures;
• Over promotion of spa treatments or procedures in which the practitioner lacks training or expertise;
• Failure to train or supervise spa staff;
• Failure to maintain equipment used in spa treatments or procedures that culminated in patient injury;
• Failure to warn patients of possible side effects or adverse consequences of spa procedures;
• Failure to obtain informed consent for procedures conducted at a spa; or
• Use of defective or malfunctioning spa equipment when providing patient treatment.

This is not an exhaustive list. Depending on the nature of the injury and situation leading up to it, plaintiffs could assert both a professional liability claim against the physician and medspa as well as a product liability claim against the manufacturer of equipment involved in the accident or injury. Given the fact that spa mishaps often involve equipment, there is a potential for “blended” claims including medical malpractice and product defect allegations. Such blended claims present special challenges for the defense, which will want to promote harmony among codefendants and avoid the finger-pointing and “mutually assured destruction” that can flow from codefendant infighting.

Financial Protection Needed

In this volatile setting, physicians need the risk management equivalent of a “GPS” to navigate their way. Physicians who own or work in medical spas will find themselves needing financial protection to address medical malpractice and related liability risks. Chief among these are the following:

Medical Malpractice Coverage

Insurers write most of these policies on a claims-made basis. (In broad terms, “claims-made” policies cover lawsuits and claims first asserted during the policy period, sometimes regardless of the date of accident. By contract, “occurrence” policies cover claims arising from accidents that occurred during the policy period, regardless of when the claim was first asserted.) Standard liability limits are for $1 million per occurrence and $3 million per policy aggregate. Customary deductibles weigh in at around $2500. Most insurance companies and insurance agents/brokers can quote a menu of options. Often, insurers write the coverage so that the physician and the medical spa share the insurance policy limits.

General Liability Coverage

View this as prosaic “slip and fall” coverage for premises that occur at the medspa. Leases provided by landlords may require that a medspa carry general liability coverage.

Property Coverage

Many medspas have expensive laser equipment and medical technology, which carry hefty replacement cost tabs. Property coverage will address loss of or damage to this type of property.

Workers' Compensation Coverage

This coverage benefits the medspa staff if any are injured or suffer occupational disease arising out of and in the course of employment.

Umbrella Insurance Coverage

Umbrella insurance, like general liability insurance, is often required by some leases. It provides excess insurance coverage over a multiplicity of underlying policies for losses that exceed or exhaust the limits of the underlying policies.

Employment Practices Liability Insurance

This is an often overlooked area of exposure by physicians, both within and outside of medspas. These policies financially protect physicians for employment-related claims not covered by workers' compensation insurance, including claims alleging wrongful termination, hostile work environment, sexual harassment, discrimination, wrongful demotion, failure to hire or promote, negligent evaluation, retaliation, deprivation of career opportunity and wrongful discipline.

Physicians involved in spa operations need comprehensive, seamless medical malpractice coverage. Medspa physicians should exercise prudent risk management when structuring their insurance coverage. For example, there should be an option for legal entities, owners, and supervisory medical directors to include coverage for direct patient care by a treating physician, plus coverage for the staff. The latter includes clerical and professional employees and Form-1099 contractors.

Doctors must also exercise care here to make sure that the medical malpractice coverage and financial safety net is comprehensive and not pieced together. Conventional medical malpractice insurance policies may contain exclusions that snag the unwary. For example, some malpractice policies extend coverage for direct patient care while performing procedures at a med-spa, but do not provide supervisory medical director coverage. In addition, many individual nurse policies either exclude aesthetic procedures or, if they cover them, often require the physician be on site or preclude coverage of nurses working as 1099 contractors.

Getting the Best Deal

Physicians seeking medical malpractice insurance protection for medspa activities should be aware of rating factors that will shape and determine the premium that they pay. Among the factors that insurance underwriters weigh when computing premium and insurance costs are:

• Location of the spa;
• Number of years that the facility has been in business;
• Claims history of both the physician and the spa;
• Extent to which the applicant/physician delivers direct patient care;
• Estimates of annual gross revenues;
• Annual number of procedures performed at the spa; and
• Types of procedures undertaken at the facility.

Loss Control Strategies

As in other liability realms, the best investment may be loss control. Some strategies for physicians who are involved in medspas:

Exercise care and selectivity in hiring one's staff and medical director. (Nothing is more important than experience!)

Stress the importance of ongoing continuing education classes, hands-on training workshops and seminars.

Document, document, document! Chart documentation is crucial for defending liability claims.

Take “before” and “after” photographs; these can be key and valuable in countering disfigurement claims, which may be prominent in medspa litigation.

Have written medical protocols for each spa procedure. The medical director should regularly verify that staff is meticulously following protocols. It is not enough to have protocols; systems must be in place to check adherence to protocols and make needed corrections.

Use thorough informed consent forms. The latter should include all potential outcomes and risks. Review them with each patient, including pre-and post-treatment instructions, before performing any procedures.

Educate patients and encourage questions. Make sure that staff documents that they reviewed these points with patients.

Be wary of patients harboring unrealistic expectations. For example, somebody brandishing a photograph of Jennifer Anniston, wanting a spa procedure to make her resemble the star, may be a red flag.

Do not let patients ' no matter how assertive ' dictate the treatment. The physician is the professional and must be able to say “no” occasionally (and diplomatically).

Realize that it is the spa owner's responsibility to be conversant with local state laws. Noncompliance with the law can cripple the defense of a liability claim. Further, laws pertaining to medical spas can vary dramatically from state to state. This can cause compliance issues, particularly if a spa has multiple locations that cross state lines; for example, one spa in California and another in Nevada.

Use written protocols, consent forms and invoices that bear the physician's business logo. In the event of a claim, this paper trail could be useful and important in defending a claim.

It is important for physicians to understand that, when they add additional locations through expansion of the medspa, insurance is not necessarily portable. If a doctor is asked to be a medical director at another spa, unless he or she has 51% or higher ownership in that spa, the entity may not be added to the physician's existing medical malpractice policy. Therefore, before agreeing to take a position as a spa's medical director, a physician should request written confirmation of the fact that the other spa's liability coverage will provide protection. If the latter is not forthcoming, the physician can buy a policy to provide coverage as a medical director and treating physician at the other (non-owned) spa.

Physicians should also be cautious about working for spas that lack “entity coverage.” In the event of the claim, the physician might find himself or herself in a position of absorbing any and all losses.

Conclusion

The medspa phenomenon is likely here to stay. If anything, robust growth may lie ahead, due to an aging population, an emphasis on personal appearance and “holistic” therapies that impart relaxation and beauty. Physicians may be attracted to this niche of health care for myriad reasons, but there are certain risks and perils that should be taken into account before any move is made. A coherent risk management and insurance strategy can help mitigate the risks, reduce liabilities and help safeguard physicians' financial health.

Kevin Quinley, a member of this newsletter's Board of Editors, is Vice President, Risk Services, for Berkley Life Sciences LLC, Woodbridge, VA.

The medical spa industry has grown rapidly over the last several years. In 2004, there were only 471 in the United States, but by 2009 there were nearly 2,000. The law of averages suggests that with more spas, more treatments and more injuries, there are bound to be more mishaps and adverse reactions at these facilities.

The lure of medical spas can become a financial siren song for physicians, many of whom are fed up with meager insurance reimbursement schedules and endless paperwork. These spas feature therapies such as lasers, intense pulsating lights (IPLs), infrared treatments, Botox, personal DNA testing, Pointe Lift, Liposolve, anti-aging drugs, photo-dynamic therapy (PDT) and telomere clipping. Not all spa treatments are high-tech; some, such as massage, are high-touch. Further boosting the income potential for doctors is the fact that modern technology often enables non-physician technicians to perform (ideally under medical supervision) many spa treatments and modalities.

These trends create income streams for physicians, but they may simultaneously increase professional/malpractice liability exposures. In fact, liability worries may prompt medspa owners and operators to book some relaxing spa time for themselves after surveying today's litigious environment.

Who Is Open to Risk?

Personal injury lawyers are always on the lookout for the next deep pocket, and many may see the medspa industry as a juicy target. Plaintiff lawyers also often see medspas as under-regulated entities operating on the fringes of medicine, populated by staff with suspect credentials. Google the phrase, “medi-spa accidents” and up pop multiple Web sites for personal injury law firms touting this type of case as a specialty.

Virtually anyone near a medspa mishap may be dragged into court. Accidents are rare, but they are not just theoretical. Consider these scenarios, some of which are factual and others hypothetical:

• In 2005, a North Carolina woman died after overdosing on a numbing cream she received before laser hair-removal treatment.
• A customer undergoing a chemical peel claimed she was negligently burned.
• A customer alleged he fell off a massage table and sprained his shoulder.
• A customer was dissatisfied with her Botox injections, claiming the spa personnel failed to warn her about discomfort and side-effects.
• A female model received Botox for her migraines and claimed she suffered auto-immune disease as a result.

Any of these situations may be fodder for a lucrative personal injury claim. When injury occurs, spa owners and managers may find themselves in court, needing strong legal advocacy and risk management advice.

Claims

Claims against medspas include lipodissolve complications, laser burns, drooping eyelids from Botox treatments, lumpy lips from dermal fillers, burns from IPL, infections from microderm abrasions, and scarring from tattoo removal procedures. Malpractice claims can include demands for medical expenses to treat complications and lost wages, sometimes to subjects in the public eye whose livelihood is tied largely to their beauty and appearance (e.g., models, actresses, celebrities). Further, injured claimants and plaintiffs may allege pain and suffering as well as loss of comfort, companionship and intimacy.

Bodily injury claims against medspas can represent significant potential liabilities. A physician's existing medical malpractice insurance policy may or may not cover these liabilities, and gaps in coverage may expose physicians to devastating financial liabilities.

Doctors can also face liabilities when they participate in off-site Botox parties and events. Some insurance policies cover residential Botox events, while others do not. Concerns harbored by insurance carriers and risk factors that should be pondered by physicians include:

• Is alcohol being served and consumed? (Are patients/customers fully aware of the risks of the procedure if they have been drinking alcohol? Issues of informed consent may enter into the equation.)
• Is the residential or off-site environment pristine and sterile?
• How many attendees will receive injections during the party or event?

Clearly, Botox parties represent a subset of medspa risks that can draw close attention, both from insurance underwriters and personal injury attorneys.

Theories of Liability

Allegations that physicians can anticipate plaintiffs making in medspa claims include:

• Deviations from the standard of care in carrying out medspa procedures;
• Over promotion of spa treatments or procedures in which the practitioner lacks training or expertise;
• Failure to train or supervise spa staff;
• Failure to maintain equipment used in spa treatments or procedures that culminated in patient injury;
• Failure to warn patients of possible side effects or adverse consequences of spa procedures;
• Failure to obtain informed consent for procedures conducted at a spa; or
• Use of defective or malfunctioning spa equipment when providing patient treatment.

This is not an exhaustive list. Depending on the nature of the injury and situation leading up to it, plaintiffs could assert both a professional liability claim against the physician and medspa as well as a product liability claim against the manufacturer of equipment involved in the accident or injury. Given the fact that spa mishaps often involve equipment, there is a potential for “blended” claims including medical malpractice and product defect allegations. Such blended claims present special challenges for the defense, which will want to promote harmony among codefendants and avoid the finger-pointing and “mutually assured destruction” that can flow from codefendant infighting.

Financial Protection Needed

In this volatile setting, physicians need the risk management equivalent of a “GPS” to navigate their way. Physicians who own or work in medical spas will find themselves needing financial protection to address medical malpractice and related liability risks. Chief among these are the following:

Medical Malpractice Coverage

Insurers write most of these policies on a claims-made basis. (In broad terms, “claims-made” policies cover lawsuits and claims first asserted during the policy period, sometimes regardless of the date of accident. By contract, “occurrence” policies cover claims arising from accidents that occurred during the policy period, regardless of when the claim was first asserted.) Standard liability limits are for $1 million per occurrence and $3 million per policy aggregate. Customary deductibles weigh in at around $2500. Most insurance companies and insurance agents/brokers can quote a menu of options. Often, insurers write the coverage so that the physician and the medical spa share the insurance policy limits.

General Liability Coverage

View this as prosaic “slip and fall” coverage for premises that occur at the medspa. Leases provided by landlords may require that a medspa carry general liability coverage.

Property Coverage

Many medspas have expensive laser equipment and medical technology, which carry hefty replacement cost tabs. Property coverage will address loss of or damage to this type of property.

Workers' Compensation Coverage

This coverage benefits the medspa staff if any are injured or suffer occupational disease arising out of and in the course of employment.

Umbrella Insurance Coverage

Umbrella insurance, like general liability insurance, is often required by some leases. It provides excess insurance coverage over a multiplicity of underlying policies for losses that exceed or exhaust the limits of the underlying policies.

Employment Practices Liability Insurance

This is an often overlooked area of exposure by physicians, both within and outside of medspas. These policies financially protect physicians for employment-related claims not covered by workers' compensation insurance, including claims alleging wrongful termination, hostile work environment, sexual harassment, discrimination, wrongful demotion, failure to hire or promote, negligent evaluation, retaliation, deprivation of career opportunity and wrongful discipline.

Physicians involved in spa operations need comprehensive, seamless medical malpractice coverage. Medspa physicians should exercise prudent risk management when structuring their insurance coverage. For example, there should be an option for legal entities, owners, and supervisory medical directors to include coverage for direct patient care by a treating physician, plus coverage for the staff. The latter includes clerical and professional employees and Form-1099 contractors.

Doctors must also exercise care here to make sure that the medical malpractice coverage and financial safety net is comprehensive and not pieced together. Conventional medical malpractice insurance policies may contain exclusions that snag the unwary. For example, some malpractice policies extend coverage for direct patient care while performing procedures at a med-spa, but do not provide supervisory medical director coverage. In addition, many individual nurse policies either exclude aesthetic procedures or, if they cover them, often require the physician be on site or preclude coverage of nurses working as 1099 contractors.

Getting the Best Deal

Physicians seeking medical malpractice insurance protection for medspa activities should be aware of rating factors that will shape and determine the premium that they pay. Among the factors that insurance underwriters weigh when computing premium and insurance costs are:

• Location of the spa;
• Number of years that the facility has been in business;
• Claims history of both the physician and the spa;
• Extent to which the applicant/physician delivers direct patient care;
• Estimates of annual gross revenues;
• Annual number of procedures performed at the spa; and
• Types of procedures undertaken at the facility.

Loss Control Strategies

As in other liability realms, the best investment may be loss control. Some strategies for physicians who are involved in medspas:

Exercise care and selectivity in hiring one's staff and medical director. (Nothing is more important than experience!)

Stress the importance of ongoing continuing education classes, hands-on training workshops and seminars.

Document, document, document! Chart documentation is crucial for defending liability claims.

Take “before” and “after” photographs; these can be key and valuable in countering disfigurement claims, which may be prominent in medspa litigation.

Have written medical protocols for each spa procedure. The medical director should regularly verify that staff is meticulously following protocols. It is not enough to have protocols; systems must be in place to check adherence to protocols and make needed corrections.

Use thorough informed consent forms. The latter should include all potential outcomes and risks. Review them with each patient, including pre-and post-treatment instructions, before performing any procedures.

Educate patients and encourage questions. Make sure that staff documents that they reviewed these points with patients.

Be wary of patients harboring unrealistic expectations. For example, somebody brandishing a photograph of Jennifer Anniston, wanting a spa procedure to make her resemble the star, may be a red flag.

Do not let patients ' no matter how assertive ' dictate the treatment. The physician is the professional and must be able to say “no” occasionally (and diplomatically).

Realize that it is the spa owner's responsibility to be conversant with local state laws. Noncompliance with the law can cripple the defense of a liability claim. Further, laws pertaining to medical spas can vary dramatically from state to state. This can cause compliance issues, particularly if a spa has multiple locations that cross state lines; for example, one spa in California and another in Nevada.

Use written protocols, consent forms and invoices that bear the physician's business logo. In the event of a claim, this paper trail could be useful and important in defending a claim.

It is important for physicians to understand that, when they add additional locations through expansion of the medspa, insurance is not necessarily portable. If a doctor is asked to be a medical director at another spa, unless he or she has 51% or higher ownership in that spa, the entity may not be added to the physician's existing medical malpractice policy. Therefore, before agreeing to take a position as a spa's medical director, a physician should request written confirmation of the fact that the other spa's liability coverage will provide protection. If the latter is not forthcoming, the physician can buy a policy to provide coverage as a medical director and treating physician at the other (non-owned) spa.

Physicians should also be cautious about working for spas that lack “entity coverage.” In the event of the claim, the physician might find himself or herself in a position of absorbing any and all losses.

Conclusion

The medspa phenomenon is likely here to stay. If anything, robust growth may lie ahead, due to an aging population, an emphasis on personal appearance and “holistic” therapies that impart relaxation and beauty. Physicians may be attracted to this niche of health care for myriad reasons, but there are certain risks and perils that should be taken into account before any move is made. A coherent risk management and insurance strategy can help mitigate the risks, reduce liabilities and help safeguard physicians' financial health.

Kevin Quinley, a member of this newsletter's Board of Editors, is Vice President, Risk Services, for Berkley Life Sciences LLC, Woodbridge, VA.