March 17, 2023

MSOs: Navigating the Regulations around Operating a Med Spa [With Summary Table of Key States]

Moxie Team

The "corporate practice of medicine" is a legal concept that allows only licensed physicians to profit from provision of medical services. In states where the corporate practice of medicine is in effect, non-physician ownership of medical practices, such as med spas, is prohibited. This prohibition can make it challenging for non-physician entrepreneurs to enter the med spa industry, as they cannot own the business or profit directly from the medical services provided. However, there are some options, such as a business structure called an MSO, that can allow you to work around the restrictions. This article summarizes why an MSO may be required, how an MSO works in conjunction with a medical practice, and where it’s required. We then provide a summary of the rules around MSOs in a few key states.

As a registered nurse, nurse practitioner, physician assistant, or even non-medical professional looking to build a business in the med spa industry, some restrictions can serve as a roadblock to your goals. Depending on where you are, you may not be allowed to open or own a med spa outright.

However, this isn't to say that you cannot build a business around med spas. Management services organizations (MSOs) are becoming increasingly popular for this purpose, offering several advantages to entrepreneurs looking to get started in this fast-growing industry. Since state-by-state legislation surrounding who can open a med spa varies by professional licensure, MSOs are an excellent way to ensure that you can offer your services to a med spa, own your own business, yet remain compliant with regulations while providing the highest quality care. 

Whether you're an entrepreneur, a healthcare professional, or a little of both, this guide will provide background info, valuable insights, and actionable advice on successfully establishing an MSO and taking your business to the next level.

What Is a Management Service Organization (MSO)?

In some states, only doctors can own a practicing medical due the prohibition of the “corporate practice of medicine”, which means that only a doctor can directly profit from medical services. Similarly, only physicians or physician-owned corporations can receive payment for medical services, including those commonly offered at med spas.

In these cases, you will often find a complimentary corporate structure — a Management Service Organization or MSO (typically an LLC) — that allows a non-physician owned business to license a brand name and provide management services to the doctor’s Practice Medical Entity (PC or PLLC) in exchange for fair market value.

For example, an entrepreneur might open a Management Service Organization called “Blueberry Management LLC” that provides management services to the doctor’s PC, which in turn provides direct services to patients. Blueberry Management LLC would benefit:

  1. By earning “management fees” paid by the PC for services rendered. These can be structured in a way that increases as the med spa grows.
  2. If/when the med spa and it's brand is sold.

Note: The LLC is not a medical organization - it is a management organization that provides services to the doctor’s Practice Medical Entity. Together, they might operate together under one brand, “BlueBerry Aesthetics”, which would be owned by Blueberry Management LLC and licensed to the Practice Medical Entity.

What Is the Relationship Between an MSO and a Med Spa?

The MSO presents a way for non-physicians to partner with the medical director of a med spa. 

You will often have an agreement whereby your LLC entity (the MSO) contracts via a managed service agreement (MSA). The practice can task the MSO with responsibility for all management services required by the med spa. At the same time, the practice (and physician) is responsible for all clinical decisions.

"[The MSO model] broadly has two functions. One function is to create boundaries from a compliance perspective. The medical practice is going to do everything in the chain of care for patients, and the MSO is going to be doing everything in the business side of managing the practice. The second big function of the MSA is to capture the economics of your business model. So, if you are a non-doctor and you're the one taking the risk and starting this business, and you're the one who has the expectation of enjoying the profits of this business, then you have to design the MSA in a way for the profits to compliantly end up going from the medical practice to the MSO." - Michael Byrd, Partner at ByrdAdatto

Do my state's rules require me to set up an MSO?

As noted above, in some states, only MDs can own med spas. In these jurisdictions, an MSO can be a way for a non-physician to operate a med spa.

Where the state does not prohibit the corporate practice of medicine or where your license type and experience allow you to practice independently or with a collaboration agreement, you can own the practice entity directly. Moxie provides lawyer-approved templates for typical scenarios.

Below, find a table of some situations where an MSO structure may or may not be required:

Note: This information is based on third-party research and has been reviewed by a lawyer - but this does not constitute legal advice. There may be specifics that aren’t applicable to your specific license, experience or state. And these things can change. Please consult with a lawyer knowledgeable about your specific experience.

If you’re ready to move forward, Moxie can connect you with a medical director, provide lawyer-approved templates that save you time and expense, and if needed, a lawyer. Setting upa new business can be a challenge, so we’re here to help. Learn More About Moxie and How We Can Help You Open Your Own Med Spa >

Disclaimer: The information contained  here intended to give you a general guide as to what professional licenses and conditions are required to own a practicing med spa entity. The information provided here is general in nature and the accuracy cannot be guaranteed. While it is based on current available information the rules and policies can and do change frequently. Specifics can vary widely based on your level of experience, state guidelines, and more. Therefore, it is each person’s responsibility to examine their individual professional situation and local law before before choosing to move forward. This information is not intended to provide legal advice, and it should not be relied upon as legal advice. We are not lawyers

Readers: You should not act upon this information without seeking knowledgeable legal counsel that takes the laws of your jurisdiction into account.

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