Articles Posted by Kerry Cahill

In today’s market, many spas are looking to expand their service lines to include cosmetic medical services, such as laser therapies, IV hydration, and Botox treatments.  With the prevalence of cosmetic medical services on the rise, people are now electing to receive these treatments in a spa setting – as opposed to a traditional medical office. Regulations abound, yet, they often fail to provide spas with direct guidance on these emerging services and the technological advancements in treatments. When forming a spa that provides cosmetic medical services (a “medi-spa”), there are a number of issues a business owner should consider.

First, it is critical to understand whether a medi-spa needs a state license or registration to operate. If a license or registration is required, it often must be obtained in order to form the entity itself.  The time it takes to obtain any necessary license or registration can also impact the medi-spa’s application to state tax authorities during the formation process.

Second, it is critical to understand what licensing boards regulate the medi-spa and its professionals. For example, estheticians are typically regulated by a state cosmetology board. Healthcare professionals can be regulated by a variety of boards, including but not limited to boards of medical examiners, nurses, chiropractors, pharmacists, and dieticians.  Each board has its own applicable rules and regulations, which often require certain credentialing and limit the scope of services the licensed individual can provide.

COVID-19, inflation, politics, and an impending recession: it is indisputable that the last two years have had an indelible effect on the healthcare industry. Acute care providers, in particular, have faced a plethora of economic challenges, including increasing costs for drugs and medical devices. However, on June 15, 2022, in American Hospital Association v. Becerra, Secretary of Health and Human Services, 142 S.Ct. 1896 (2022), the American Hospital Association (AHA) secured a win for 340B hospitals—often referred to as safety net hospitals—by successfully challenging the Department of Health and Human Services’ (DHHS) calculation of reimbursement rates. As a result, the Becerra court affirmed that DHHS was not statutorily authorized to vary reimbursement rates for different hospital groups; DHHS’s power to increase or decrease the price is distinct from its power to set different rates for different groups of hospitals. Id. As a result, the Becerra decision has far-reaching implications for acute care providers who provide services to uninsured, underinsured, and rural communities.

Legislative Backdrop

In order to appreciate the impact of Becerra, it is imperative to have a general understanding of the evolution of the regulatory landscape for healthcare providers. During the nineteenth century, acute care was generally provided in the homes of the wealthy or through benevolent institutions, including voluntary, religious, and public or governmental institutions. Generally, the Wilson-Gorman Tariff Act of 1894 applied to these early acute care providers, which provided that charitable organizations should enjoy tax-exempt status, provided they operate for charitable purposes.