AMERICAN MED SPA ASSOCIATION by Medical Spas Review

ANNE BOLDUC Group Publisher & President

medical spas business review

EDITOR IN CHIEF Guy J. Jonkman

EDITORIAL BOARD

SENIOR EDITOR Bernard Burt

the medicine environment of the future –TODAY

ROBERT M. GOLDMAN, MD, PhD, DO, FAASP World Chairman-International Medical Commission Co-Founder & Chairman of the Board-A4M Founder & Chairman-International Sports Hall of Fame Co-Founder & Chairman-World Academy of Anti-Aging Medicine President Emeritus-National Academy of Sports Medicine (NASM) DR. RONALD KLATZ, MD, DO, is the physician founder and President of the American Academy of Anti-Aging Medicine. In 1984, Dr. Klatz was a pioneer in the clinical specialty of preventative medicine: as a principal founder of the National Academy of Sports Medicine and researcher into elite human performance and physiology. Dr. Klatz is a best-selling author, and is columnist or Senior Medical Editor to several international medical journals. He is the inventor, developer, or administrator of 100-plus scientific patents, including those for technologies for brain resuscitation, trauma and emergency medicine, organ transplant and blood preservation. DAVID B. MANDELL, JD, MBA, is a former attorney and author of ten books for clients, including For Doctors Only: A Guide to Working Less & Building More, as well a number of state books. He is a principal of the financial consulting firm OJM Group He has co-authored the Category I CME Monograph Risk Management for the Practicing Physician which has gone through 5 editions since 1998 & is certified for 5-hour business of medicine CME MANON PILON, Speaker, International Educator, SPA & Medical SPA Specialist – Mrs. Manon Pilon’s background spans over twenty-seven years of professional experience in SPA and MEDICAL SPA operation and management, marketing strategies, Medical Spa concept and development, and motivation methods. She is holding senior management positions in companies such as Europe Cosmétiques, CurAge Med, CurAge Spa, and Europelab. Founder of a private Aesthetics Professional School in Montreal, Canada. JAY A. SHORR, BA, MBM-C, CAC I-VI is the founder and managing partner of The Best Medical Business Solutions, a consulting firm assisting aesthetic and cosmetic medical practices and spas in the administrative, operational and financial health of medical practices. He is a motivational speaker, writer, advisor to the Certified Aesthetic Consultant™ (CAC) program and a Certified Medical Business Manager from Florida Atlantic University.

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MARA SHORR, the Vice President of Marketing and Business Development for The Best Medical Business Solutions, is a Level II-VI Certified Aesthetic Consultant, utilizing her knowledge and experience to help clients achieve their potential. She is a nationally published writer and speaker.

information. The information contained in this publication is in no way to be construed as a recommendation or approval by Medical Spas Review of any industry standard, or as a recommendation of any kind to be adopted by or binding upon any spa owner. Reproduction of any portion of this issue by any means (facsimile or electronically, for example) is strictly forbidden. The publisher assumes no responsibility for return of unsolicited photographs or manuscripts. Subscriber: Send subscription inquiries and address changes to: Circulation Department, Medical Spas Review, P.O. Box 2699, Champlain NY 12919. Give old and new address,

ALEX R. THIERSCH Founder and director of the American Med Spa Association (AmSpa), an organization created for the express purpose of providing comprehensive, relevant and timely legal and business resources for the medical aesthetic industry throughout the United States.

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CHERYL WHITMAN, is a published author, a popular speaker and a beauty-industry consultant with more than 30 years experience, including 15 years as the owner of Face Fantasie Day Spa in Fort Lee, New Jersey. As founder and CEO of Beautiful Forever, Cheryl spearheads a successful team of medical spa consultants and business professionals. In addition, Cheryl developed the Medical Spa Success System, a revolutionary program that provides a turnkey educational success system and consulting services package to help clients jumpstart brilliantly successful medical spa businesses.

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MEDI CAL SPAS

MEDICAL MALPRACTICE INSURANCE IS PART OF YOUR LIFE

Insurance

9 COMMON MISTAKES MADE ON MEDICAL AESTHETIC MALPRACTICE David Shaffer is the vice

INSURANCE APPLICATIONS

president of Professional Medical, the health care

By DAVID SHAFFER

division of Insurance Office of America, and is the

If you own or operate a medical aesthetics practice, dealing with medical malpractice

American Med Spa

insurance is a part of your professional life. And if you don’t pay close attention to the

Assocation’s (AmSpa)

specifics of your practice’s policy and/or the type of information shared with your insurer,

exclusive insurance agent

you could certainly end up paying more for it than you should; or find yourself without

and administrator of

coverage if—or when—a claim occurs.

AmSpa’s Medical Spa Insurance Program.

It is important to note that multiple factors should be taken into consideration when a medical aesthetics practice is being underwritten.

Additionally, underwriting rules, rates and

To learn more about the

guidelines vary between insurers. Because of these differences, pricing and coverage could

AmSpa Medical Spa

vary dramatically between insurers and medical aesthetic practices that appear to be

Insurance Program, call

operating identically. To help medical aesthetics practices pay the appropriate annual

260-637-9879 or e-mail

premium and ensure adequate coverage is being provided, the following list has been

david.shaffer@ioausa.com

compiled of the most common mistakes medical aesthetic practices make when applying for or renewing medical malpractice insurance. The following mistakes are those commonly observed when the entities of the medical aesthetics practice are shown as the policy’s named insured. When coverage to a medical aesthetics practice is extended through a physician policy, the underwriting review process does change, even though many of the same underwriting criteria are evaluated.

americanmedspa.org www.medicalspasreview.com

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Insurance

americanmedspa.org

PAY CLOSE ATTENTION TO THE SPECIFICS 1. INFLATED TREATMENT COUNTS

2. REVENUE OVERESTIMATES

medical

Another underwriting factor that is commonly used when

aesthetics practices, they will often consider

determining malpractice pricing for a medical aesthetics

the number of treatments the practice

practice is annual estimated gross revenues. It is not

administers when determining pricing.

uncommon for new facilities to greatly overestimate their

hen

underwriters

underwrite

It stands to reason that if a facility administers a greater

projected revenue.

number of treatments, there is greater potential of being sued when compared to a facility that administers fewer

After all, there is really no way for them to know exactly how

treatments. But how do underwriters actually view

much revenue they are going to generate in their first year.

treatment counts?

Unfortunately, this could likely result in these practices paying more than they need to for insurance. When a

Most insurers’ underwriting guidelines are seeking treatment counts based upon a medical aesthetic practice’s patient visits. Some practices confuse this and report, for example, the number of units injected or the number of times a laser is fired. What exactly is meant by “patient visits?” Here’s a real-world example. Assume a client undergoes a Botox treatment. The facility should attribute one treatment count for the patient, regardless of how many times he or she is injected or the number of units that are injected. If the patient chooses to have another type of treatment during the same day’s visit (laser hair removal, for example), it would count as a separate treatment. This patient then accounted for one Botox treatment and one laser hair removal treatment. In fact, I just had a client going through the renewal process, and they saw a 64% increase in price because they greatly overestimated the number of treatments expected to be perform in the coming policy year. Once we went back and looked at their renewal applications, we saw that their yearover-year projections had almost tripled, yet their anticipated gross receipts only reflected a marginal increase. Upon reiterating how they should be determining their treatment projections, my client took the time to reevaluate their projections. With an updated and more accurate treatment count in hand, underwriting was able to adjust the facility’s pricing to a level comparable to the insured’s actual growth.

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business is just starting out, unnecessary additional expenses can be the difference between success and failure. I usually tell prospects to be realistic and attainable with their first-year revenue projections. Underwriting knows that new medical aesthetic practices cannot accurately predict their revenues. However, the projections establish an initial exposure baseline for reviewing underwriters. After completing a year or two of business, practices will have a far better understanding of the demands of their client base, which will make determining future projections easier to accomplish. Unlike workers compensation policies, the vast majority of the malpractice insurers offering malpractice to aesthetics practices do not audit policy revenues (or treatment counts) at the end of the policy term. Therefore, if a projection of $1 million is shared and only $250,000 in revenue is generated, the insurer will not return any premiums resulting from overestimation.

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MEDI CAL SPAS

OF YOUR PRATICE’S POLICY 3. IMPROPER MEDICAL DIRECTOR COVERAGE

4. FAILURE TO IDENTIFY MULTIPLE LOCATIONS

Medical director coverage is another confusing area of the

It is important that a medical aesthetics practice with more

application process. Although the roles and responsibilities

than one location discloses each location when applying for

of a medical director may be clearly defined in an

medical malpractice insurance; otherwise, it could face

agreement/contract, the coverage afforded or needed may

enormous gaps in its coverage.

Insurance

americanmedspa.org

not. If a medical aesthetic practice’s medical director is working in a purely administrative capacity (no direct

Most policies will include a location-specific endorsement

patient care or patient interaction), the facility’s policy

restricting coverage to a scheduled insured location.

customarily will extend adequate coverage without the

Practices with more than one location need to make certain

need for adjustment. However, if the medical director wants

their underwriter is aware of all locations so they can either

or needs to become involved in patient care (i.e. patient

be added to the location endorsement, or have the location

consultations and/or good faith examinations), an

endorsement completely removed.

adjustment to the practice’s policy or even separate coverage is usually required. During the application process, an aesthetics practice needs to clearly explain the medical director’s role at the practice. Once clarified, there needs to be a determination of where coverage for the doctor will be provided. This could be through the practice’s malpractice policy, the doctor’s individual policy or perhaps a separate policy intended solely for medical directorship duties. In my experience, nearly all medical aesthetic practice policies will automatically extend to a doctor’s administrative duties. By that I mean, those services such as creating and updating policies, procedures, consents, signing charts, etc. - all responsibilities that do not directly involve the patient. Assuming the medical director is involved to a greater extent, such as, performing good faith examinations, conducting patient consultations before or after a treatment and actually performing treatments, additional coverage would be required.

www.medicalspasreview.com

Along the same lines, if a medical aesthetics practice is performing treatments, such as Botox or fillers, at off-site locations—in traditional spas, for example, or even in patients’ homes—it must be declare on the application. A lot of underwriters will hesitate at offering coverage when a treatment provider wants perform treatments off-site. This occurs most often when treatments are performed within a patient’s home. A Botox party is a perfect example. Multiple underwriting concerns arise from such events. Such concerns could be that alcohol is being served, potentially resulting in impaired judgment; the space is unsanitary; there is less control over the space, resulting in potential slip and fall accidents; theft; and more. Some insurance companies won’t have problems with offsite events, as long as the same policies, procedures and consents are used. Others don’t like the exposure and will elect not to provide coverage

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Insurance

americanmedspa.org

YOU COULD END UP PAYING MORE FOR THAN YOU SHOULD 5. FAILURE TO MAINTAIN A RETROACTIVE DATE

6. IMPROPER NAMED INSURED

It is important for an aesthetic medical practice to maintain

both a medical corporation and a management company,

its retroactive date—the first date for which an insurance

especially in those states where it is illegal for anyone other

company will provide coverage for claims occurring from

than a physician to own a medical aesthetics practice. And

treatments that have been provided—from one policy to

often, one or the other will be left off the application for

the next. If a practice retains coverage with the same

medical malpractice insurance.

insurance company, this will likely not be an issue; however, if it moves from one insurance company to another, it must make sure that the retroactive date is carried forward. Should this not happen, claims made from treatments that occurred prior to the inception of the current policy will not be covered. When an aesthetic medical practice retains its retroactive date upon switching insurers, the new insurance company will assume the defense and indemnification of a claim arising from services performed while a prior insurer provided insurance.

In many cases, a medical aesthetics practice is operated by

I always encourage people to show both medical corporations and management corporations as the applicant when completing their malpractice application. Including both entities on the policy will give the most flexibility to the practice if the relationship between the two corporations should experience turmoil and the relationship fails. In addition, including both entities ensures that each corporation is provided insurance if a claim does occur.

7. FAILURE TO ACCURATELY DEPICT A PHYSICIAN’S ACTIVITY Most policies that are written for medical aesthetics

This would be the case even though the new insurer didn’t provide insurance during the policy term in which the treatment was administered.

practices have the ability to incorporate physician coverage,

When a practice elects to forego its retroactive date, they are choosing to self-insure against any claims that may still arise from treatments occurring prior to the establishment of their new retroactive date.”

medical aesthetics practice, such as those at a private

but that coverage should be restricted to a physician’s activity at said practice. His or her activities outside the practice or at a different facility, should not be incorporated into their application when seeking coverage through the medical aesthetic practice’s policy. While completing an application for inclusion in a medical aesthetics practice policy, it’s important for physicians to limit their exposure bases to what is actually being performed at, and on behalf of, the medical aesthetics practice. This includes items, such as the number of hours worked, the treatments administered or any supervision. Restricting the exposures will help to reduce the pricing applicable to the physician’s inclusion in the practice’s policy. Practices don’t want to pay for physicians’ full-time premiums when they are only working 10 hours a month.

MEDI CAL SPAS •

www.medicalspasreview.com

MEDI CAL SPAS

OR FIND YOURSELF WITHOUT COVERAGE 8. FAILURE TO ADDRESS CLAIMS REMEDIES

For many, working through malpractice applications for the

Although it may not be terribly common for claims to occur

necessary evil. With any luck, by implementing these tips,

within a given medical aesthetics practice, when they do

your practice could potentially see lower annual premiums

arise, a practice needs to clearly demonstrate that it has

and, more importantly, prevent possible gaps in coverage.

first time or at each renewal may seem like a dreaded but

Insurance

americanmedspa.org

taken steps to address the issues that caused the claim. To help reduce their premiums, a practice needs to show that they have been proactive with risk management and have taken steps to become a better underwriting risk. This could be in the form of implementing additional staff training, amending policies and procedures, incorporating new safety measures, requiring direct supervision for a given treatment, terminating problematic staff or any other steps necessary to prevent the reoccurrence of a similar claim. Essentially, underwriting needs to see that the practice has taken positive steps forward with claim prevention.

9. NEW PROCEDURE ADDITIONS If a medical aesthetics practice is planning on incorporating a new procedure into its services menu shortly after securing a malpractice policy, it has a couple of options. It can seek underwriting approval and add coverage to its policy when the new treatment is actually added; or, alternatively, if the addition is imminent, the practice could consider a different course of action. What I’ve found is that, if a new procedure is going to be added within a reasonable amount of time—usually one to three months of the policy’s effective date—I encourage my clients to incorporate it into their new business or renewal application. When the underwriters are conducting their initial valuation, they can usually add a treatment into coverage at a lower cost than doing so mid-term. A midterm change may require an additional premium just because the adjustment needs processing.

www.medicalspasreview.com

David Shaffer is the vice president of Professional Medical, the health care division of Insurance Office of America, and is the American Med Spa Assocation’s (AmSpa) exclusive insurance agent and administrator of AmSpa’s Medical Spa Insurance Program. He has been working in the medical professional liability insurance field since 1996, where he uses his unique combination of underwriting expertise and broker knowledge to assist medical aesthetic facilities, medical spas, hospitals, healthcare facilities, physicians and physician groups with their insurance needs. In addition to medical professional liability, Shaffer also has the ability to assist clients with other insurance needs, such as employment practice liability, directors and officers, business office packages, workers compensation and various other lines of coverage customary to the healthcare industry. To learn more about the AmSpa Medical Spa Insurance Program, call 260-637-9879 or e-mail david.shaffer@ioausa.com

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Acquisition

MEDICAL PRACTICES PROVIDING BASED MEDICAL SERVICES

Most physicians I speak with seeking enhance their practice Monte Zwang is a principal of Wellness Capital Management, providing cash flow and financial strategies to businesses in the wellness industry including medical practices, wellness practitioners and day spas. Monte has been a consultant for more than 25 years, teaching business planning and cash flow management to entrepreneurs and company leaders in health care, spa, and hospitality industries. Zwang is an experienced deal maker and real estate broker. He sources capital and negotiates sales, acquisitions and merger transactions. For more information visit: WellnessCapital.com

are looking for opportunities for growth. By MONTE ZWANG

etâ&#x20AC;&#x2122;s face it, physicians know everything. They are phenomenal marketers, great business people and create a phenomenal culture within their practice (just kidding). Usually, they are good at some of this and lacking in others. If a doctor is willing to open and creative, an opportunity exists that will allow them to grow their practice, provide cash paid services and reduce their business risk. In the ongoing blending of Day Spa and Medical Spas and Allopathic and Complementary Medical services the rules are changing, Not only are they changing, they vary greatly from state to state. The ability for Day Spas to augment their service menus with lasers and injectables is desirous but not within their scope of practice.

Why does it make good business sense for physicians to acquire profitable Day Spas? Many spas have underutilized treatment rooms that can easily be converted to medical use.

MEDI CAL SPAS â&#x20AC;˘

The spa portion of the business is fully equipped and would need minimal renovation. Medical practices that provide evidenced based services and marry them successfully with a business that is built on relaxation and skincare services has the best of both worlds. A Day Spa has existing and verifiable customer traffic and profitability. They have an established and loyal clientele who visit the spa approximately every four to five weeks. Spas serve a guest with a demographic that is similar to that of the medical practice. This creates the ability to market to a built in clientele. Complimentary skin health evaluations can be offered by the doctor to the existing clientele of the Day Spa. Non-medical esthetics create the opportunity to build trust in the medical services. They also allow an opportunity for medical guests to have an opportunity to get comfortable with the staff and quality of care for less expensive, non-invasive services.

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MEDI CAL SPAS

TOGETHER WITH SKINCARE SERVICES HAS THE BEST OF BOTH WORLDS Successful spas have a positive and supportive business culture. They train and develop their staff and provide a hospitable and healing environment for guests. Medical practices should aspire to provide a culture like this. If the hospitality is continued and the culture does not change, the business has a good chance for continued success.

Conclusion

Profitable spas operate at a Net Income of 5-15%. Nationally, 60% of them do an annual sales volume (services and products) of $250,000 or less. Less than 10% have sales volume above two million dollars per year. $450,000 to $1 million is considered strong revenue. To generate comparable revenue and produce a profit would take a medical practice two to three years.

Can a doctor transform a spa without turning it into a clinic? I would guess not and have only seen it work successfully in limited instances. It is always a challenge to “leave your ego at the door” and foster a relationship of respect and trust with the owner, staff and guests of a Day Spa. Respect what you are buying in terms of business success, services and culture. Changing these because you feel you can do it better, will limit your chances for success.

Service menus can be merged. Medical services can be presented in a welcoming and attractive manner. Providing medical services in a portion of the spa will increase the gross profit margin by adding services that net 35-50%. The performance of a medical practice is contingent on the presence of the doctor and their skill when performing procedures.A successful Day Spa provides numerous avenues for revenue generation and is not dependent on any single practitioner to perform services.

Acquisition

Cultures clash. There is a big difference between a spa and medical clinic. Physician owners of Day Spas will need to role model what they expect in terms of management, communication, teamwork and hospitality.

Growing a practice or medical spa in today’s business environment is challenging and takes courage. It also requires a business plan. This business plan should combine the revenue projections, costs, profitability and debt of both businesses. With the melding of a profitable Day Spa, a medical practice can experience substantial growth in revenue and profitability in a relatively short period of time. It is my hope that the information presented here will clarify the benefit and open your eyes to the opportunity of acquiring a Day Spa.

Typically, Day Spas are located in retail malls or mixed used office buildings. These locations are less intimidating, more visible and accessible than medical clinics that are located in medical office buildings or hospitals. www.medicalspasreview.com

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Selling online

YOUR ONLINE STORE WON’T SELL ITSELF

HOW TO MARKET YOUR ONLINE STORE MARA SHORR, serves as the Vice President of Marketing and Business Development for The Best Medical Business Solutions, a Florida-based company helping aesthetic and cosmetic medical

By MARA SHORR, BS, CAC II-VI

here are countless benefits to selling your wares online. Of course, additional exposure to an otherwise untapped audience, selling to your audience during out-of-office hours and customer convenience are among them.

But knowing that your online store won’t sell itself is key. Once your online store is up and running, the key is to make sure to market it to maximize your investment.

practices and spas across

Come up with a strong promotion plan focused on your online store alone, and then make sure you incorporate it financial, operational and into your practice’s overall plan. the country with the

administrative health of their business. She is a Level II - VIII Certified Aesthetic Consultant utilizing knowledge and experience to help clients achieve their potential.

A national speaker and writer, she can be contacted at marashorr@ thebestmbs.com

This should include:

• Make sure that you still have a place for your patients to purchase products in your office. Pull together a beautiful display where all of your customers can see it. Remember, your sparkling new online store doesn’t take the place of a brick and mortar shelf lined with products. Ideal locations include the reception and checkout area, but make sure to put anti-theft tracking systems into place to make sure the product doesn’t grow legs and walk out your door. • Explaining the benefits of products they’d benefit from to your patients during your consult. However, be sure to let them know the expected lifespan of the product. (For example, should their new cleanser last three months? Make a note to either rebook them in 2.5 months for another treatment or, if they’re not ready or able, send a note via your store’s email communications that they’re due to reorder. Make it simple for your patient!) • Customize promotional pieces, like flyers and brochures, listing the specific website URL for your online store. Make sure every patient leaving your office receives one.

MEDI MEDICAL CALSPAS SPAS •• April/May 2015

• Have a framed sign in your reception area, letting them know they can order products online. • Feature a specific item from your store in your enewsletter in every issue. (After all, you DO send out a monthly e-newsletter… right?) There’s no need to offer a discount with each highlight; building brand and product awareness and showcasing the product benefts is key. • Make sure anyone calling in about new products or services is also made aware of the online store by your receptionist. Better yet, include wording about your online store in your onhold recording! • Utilize social media, including Instagram, Pinterest, Facebook and Twitter, to gain additional attention. Hashtags are key here; if you don’t understand how to use them, ask your favorite social media expert. Ask your online store’s sales representative how other practices have found success, and look to them for tricks as well. Covering the basics is easy. But we have a saying in our office: “I never stole an idea I didn’t like.” Chances are your technology has some hidden promotional tools that you can get creative with. Use them!

Of course, be sure to check the sales tax rules when selling online and be prepared to submit these taxes accordingly. Looking for specific software suggestions? While we’re fans of the DermPro software (I love that it offers everything mentioned above), there are, indeed, many choices out there. Your online store is great way to increase your revenue, but partnering with the right technology and instituting a great promotional plan is key.

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