Podcast - The Medical Spa Boom: Clinical Autonomy, Patient Safety and the Evolving Compliance Landscape

Morgan Ribeiro: Welcome to Counsel That Cares. This is Morgan Ribeiro, the host of the podcast and a director in the firm's healthcare practice. Today, we are diving into one of the fastest-growing and most closely watched segments of the healthcare and consumer wellness economy, and that is the medical spa industry. Over the last several years, med spas have experienced explosive growth fueled by increasing consumer demand for aesthetic services, advances in noninvasive procedures and significant investment from private equity firms, family offices and strategic healthcare investors. What was once a fragmented cottage industry has matured into a sophisticated market, attracting substantial capital and driving consolidation across the country. But with that growth has come increased scrutiny.

Med spa operators and investors are navigating a complex web of healthcare regulations, corporate practice of medicine laws, fee-splitting restrictions, supervision requirements, licensure and registration obligations, there's marketing and advertising rules, there's privacy concerns and, of course, the evolving federal and state enforcement efforts. And as transactions become larger and business models become more sophisticated, for those who are operators or investors, it's really important that they understand the regulatory landscape, which has become just as important to understand as the underlying economics of the business. On today's episode, we'll explore the key legal and compliance issues shaping the med spa sector, discuss how investors are evaluating regulatory risk, examine common operational pitfalls and offer practical guidance for owners and management teams seeking to build compliant and scalable businesses.

And joining me today are several professionals who are in the trenches when it comes to the operations and regulations impacting the sector. I'm thrilled to have Brett Elliott, a healthcare regulatory partner in Holland & Knight's Seattle office, Kim Rai, a healthcare regulatory and transactions partner based in Holland & Knight's New York office, and Dr. Rachel Fidino, the founder of New U Women's Clinic & Aesthetics. Thank you all for joining us today.

Kimberly Rai: Thanks for having us.

Morgan Ribeiro: Great, OK, so before we jump into the discussion, I think it's worth each of you introducing yourself and telling our listeners a little bit about your practice and the work that you do in the med spa sector. And Brett, I'll start with you.

Brett Elliott: Sure, so I'm a healthcare regulatory attorney, and part of my practice involves advising healthcare clients, and that includes med spa owners, operators and investors from entity formation and structuring to ongoing regulatory compliance. And part of my practice also involves helping clients prepare for and respond to government audits and investigations.

Morgan Ribeiro: Thanks, Brett. Kim?

Kimberly Rai: Hi, I'm Kim Rai. I'm a partner in Holland & Knight's New York office. I specialize in healthcare transactions and regulatory compliance work across the healthcare sector. So much like Brett, it includes medical spas, investors in medical spas and those that are trying to operate, as well as those who are just trying to target them in the context of mergers and acquisitions. So my focus is on structuring transactions while identifying and remediating regulatory risk areas, particularly those related to healthcare and noncompliance.

Morgan Ribeiro: Great. Thank you. And last but certainly not least, Rachel.

Rachel Fidino: Thank you for having me. I'm Rachel Fidino, and I'm a doctor of nursing practice and I am also double board certified as a Women's Health Nurse Practitioner and boarded in Advanced Genetics and the CEO of New U Women's Clinic & Aesthetics.

Morgan Ribeiro: Great. Well, thanks, everyone. I'm really excited about this conversation, and it's good, I think, for our listeners to better understand your expertise that you'll all bring to this conversation. I really think it would be helpful in this conversation before we sort of jump into the meat of operational and regulatory considerations, just to have a level-set about what we are referring to when we talk about med spas. So, Brett, maybe you can kick us off with that.

Brett Elliott: Sure. So generally, what we're referring to when we say a "medical spa" is a facility that combines a day spa environment with noninvasive medical aesthetic services. So that can include injectables and laser treatments that require a physician – and depending on the state, it may be a nurse practitioner – to both own and oversee the operation.

Morgan Ribeiro: Great. That's super helpful. I know the numbers in this space are pretty remarkable and just the growth that we've seen. Can you share more with us about the growing demand in this sector and why medical spas have become a significant healthcare sector?

Brett Elliott: Yes. So there's been tremendous growth in this industry, and it's being driven by the increase in demand for aesthetic services. So there were roughly about 1,600 medical spas in the U.S. in 2010, and that number morphed into about 11,000 by 2024. The industry has continued to grow at a rate of about 13 to 15 percent annually, and it is now projected that the future growth and value of the global medical spa market will grow from about $24 billion in 2026 to anywhere from $78 to $88 billion by 2034.

Morgan Ribeiro: Those are some impressive numbers, and you can see why we're seeing a lot of dollars flow into this space. Rachel, from your perspective, what do you think has led to the increase in this demand, and how did you get involved in the space?

Rachel Fidino: I think one of the big drivers that a lot of people are using is social media. And social media is a pretty big driver for a lot of people getting their information, good or bad. So a lot of people are seeing a fundamental shift of how they're looking at overall wellness. And so it's not just a standard of people are coming in for Botox anymore. There's a strong overlap between women's health and wellness and, potentially, weight loss, besides just that overall wanting, potentially, rejuvenation of their skin. And so because of that big overlap, I think that the demand is changing. And GLP-1 has been a big driver for that, and a lot of people were coming in for potentially concerns of their weight and looking for a GLP-1 like tirzepatide or something like semaglutide. They're losing that weight and then from losing the weight that they're also looking at, well potentially, getting the hormones managed or now I have skin concerns and they're looking for potential laser treatments or thermal fillers or things of that nature.

So there's definitely been a big overlap, and that was really the foundation of how New U started, was from me being board certified in women's health. The foundation of New U was the backbone of hormone management in women's health. And really, for us, we were seeing if we can heal people from the inside out, really focusing on that women's help. And they're going to do all of the other things, wellness and medical aesthetics. And so for us that's kind of how we've grown our business structure.

Morgan Ribeiro: Awesome. Kim, as I noted in my introduction, with the growth of this sector has come increasing regulation. That's not uncommon for us to see that in sort of a high-growth space like this. How have medical spas traditionally been regulated, and how has that regulatory landscape changed over the last few years?

Kimberly Rai: Yeah, I think Brett and I talk about this quite often. It's kind of why we got together on this topic to talk about this because we both started practicing on this maybe a few years ago when it wasn't really regulated as much of like with the eye of being a physician practice, sort of the way it is now. I think now, like historically, the emphasis is more on spa and then how it's kind of more on the medical aspect of the procedures that are being performed. Traditionally, these businesses were largely operated under general medical practice or cosmetology rules as they existed at the state level.

And I remember a few years ago, I was advising a PE (private equity) firm that was investing in a medical spa franchise. And it took a lot of explaining of why corporate practice of medicine applies to this type of business. Once you have a licensed professional acting within the scope of their license, even if it's not all they're doing all day, corporate practice of medicine still applies. And so the entity still needs to be owned by a professional, depending on what state you're in, and the nuances, depending on where you are, is really important. This also includes the type of services that your licensed professionals can provide. For example, in New York, air candling cannot be performed by an aesthetician. It requires a separate licensure. And I think, you know, especially if you're like a PE firm, you're probably not thinking about that type of specificity when it comes to the types of services that are being performed at these types of facilities. Similarly in Texas, there's also a distinction where the aesthetician can perform kind of superficial exfoliation on the face. But once you're penetrating the dermis, the requirement is that you cannot do that as an aesthetician. And so it is very, sort of, nuanced in what those professionals can do in the medical spa setting.

Morgan Ribeiro: Great. I think there's probably lots of examples of just how much this varies state to state. Rachel, you're based in Washington, and Washington state allows nurse practitioners to own and operate medical spas with full practice authority. How do you decide which procedures your staff can perform and which ones you handle yourself?

Rachel Fidino: For me, it really starts with the scope of practice, not necessarily a staffing convenience. And I think that that's what differentiates us from, potentially, how other med spas are currently operating in our space, because there is a good faith exam that still needs to be done. And I think the important thing is, as a clinical owner, you have to look at the person's licensure. The scope practice in Washington state, as soon as you cross state lines, then that's when things can potentially be changed. What is the specific procedure? What protocol is in place? What training has that person done and competency?

So you have to look at those different things when you're making that determination to delegate, and then you're delegating after you have that good faith exam with that patient after you've gone through their medical history, contraindications, what medications they're taking. You have to take all that into context, and then you're delegating to your supportive staff such as your, you know, master aesthetician, your nurse injectors, and you have look at those clinicians and you have to look at what their license says, in that state, that they can perform that procedure or can they not? And so I think the biggest thing is, you know, me being a clinical owner and also a clinician in this space is, I have to make sure that I'm delegating to that appropriate person that is within their scope of practice, that they could be performing that procedure.

Morgan Ribeiro: Do you find with the model in Washington that there are some advantages, but also some responsibilities that come with that?

Rachel Fidino: Absolutely. I think one of the biggest advantages is it gives, you know, being a clinician in Washington state, gives me a lot of clinical autonomy from an operational standpoint that's very valuable. I think that's very helpful when you're making clinical decisions in real time. But as you know, I am an owner and operator and the clinical director. And so I think for me, with accountability comes, you know, having more autonomy, comes more of that accountability aspect. I'm making sure I'm doing chart audits and I'm making sure that our staff is still practicing within their scope, but also looking at, you know, what systems do we have in place? And there's just not this freedom that they can do whatever they want. There's still that oversight, and it really comes down to that oversight that's directly by me.

Morgan Ribeiro: Yeah. And I think, I mean, as we look at these regulations, it is not uncommon for us to then see a rise in enforcement actions, which we've certainly seen grow since 2024. Brett, can you share more about the growing number of state and federal enforcement actions involving med spas?

Brett Elliott: Yes. So what we've seen is a pretty dramatic shift in the regulatory environment for med spas. And this has happened in particular over the last 18 to 24 months. So federal agencies and a growing number of states have launched enforcement actions. States have also passed legislation that is specifically targeting medical spas and wellness clinics. And a lot of this is being driven by media scrutiny and attention over what has been a pattern of pretty serious patient safety issues.

So one of the biggest themes that we're seeing is that across all these enforcement actions, whether it be in New York or Texas or Georgia, is that regulators are going after practices where there is no one with actual clinical authority that is actively overseeing what's happening to the patients. So it's whether you have a medical director that may have signed a contract but is not actually involved in the business, or a medical spa that's relying on a generic standing order as opposed to individualized patient assessments, the common thread is an absence of medical oversight.

Morgan Ribeiro: Got it. Yeah. And I think that's a great segue to go over to Rachel as someone who is providing that oversight every day as a clinician and owner. Why does active medical involvement matter so much in this setting, and what could potentially go wrong when that's missing?

Rachel Fidino: I think one of the biggest misconceptions in this industry is people think that this is elective, it's aesthetic medicine, and so it's just not taken as seriously, which is a complete oversight, it's not. We're injecting medications into really near blood vessels that can cause an occlusion, that can cause blindness. We're using laser and energy devices that can potentially cause a burn or tissue injury. And, you know, with weight loss, there's a lot of scrutiny around weight loss medications. And I think that how these drugs are being prescribed really matters. And who is prescribing that medication that all needs to be looked at. It needs to be somebody that's actually prescribed [so that] that medication, we know where it's coming from.

The big question is: When something does go wrong, can we recognize that there's a vascular occlusion? And if that takes place, we need to know like, what is our protocol? So you have to have the protocols in place, you have to have an emergency planning, you have to have a medical director, somebody that's overseeing that person that knows what to do when something happens because within a medical practice, there's going to be things and adverse events that are going to occur. You're going to, at some point in your career, get into a vessel. And so for us, people respond back on safety, you know, all of our nurse injectors are trained in vascular occlusion, they're all trained in a facial ultrasound – you know, it was an investment on my part to bring in an ultrasound, but everybody, before they put a needle in somebody's face, they have to be trained in a vascular anatomy of the face and looking at the face as a three dimensions. I don't think that that's necessarily what everybody is doing. And so it's, for me, is looking at that clinical oversight, making sure that we're responsible and we're, you know, taking care of the patient.

Morgan Ribeiro: Great. Well, and I think, you know, we've now focused on the clinicians and those who are providing the care and these practices. And now I want to look at the actual, you know, supplies and the products that are being used because that's also, you know, an issue of safety at times. Brett, can you tell me more about what med spas need to consider when they're purchasing these products?

Brett Elliott: Yeah, so these product sourcing issues, and this is what Rachel just touched on, there is a pretty large market of counterfeit products and products that are purchased overseas from unauthorized sources. And so the reason that sourcing matters is that prescription injectables – and that includes Botox and other regulated products – may only be purchased from FDA-authorized licensed sources. So obtaining products from unauthorized distributors violates federal law. And specifically, it's the Drug Supply Chain Security Act.

And so the FDA has just proved that it will enforce this law against med spas directly. So just this past April, the FDA issued a warning letter to a med spa in Texas, after its investigation found that there was a pretty large discrepancy in the quantity of product that was purchased from authorized sources versus the product that was reported. And the investigation also found an unlabeled vial of Botox. And the reason that this warning letter is significant is because the FDA has traditionally enforced this law against manufacturers and wholesale distributors. And so now it's shown that it will enforce the law against dispensers of unauthorized products, which in this case was the med spa. And in addition, there's also been several federal and state criminal enforcement actions involving counterfeit and misbranded products.

Morgan Ribeiro: Rachel, from your seat as a provider and operator, how do you verify that your injectables are coming from authorized, traceable sources, and what would you tell other owners about the documentation and what that should look like?

Rachel Fidino: Procurement isn't an area that should be really focused, I believe, as an owner, on price. So for us, we're buying our Botox from our Allergan representative. And so I think that that is the biggest thing. And transparency one of our core values. And so I think it is important for patients to come in and have full transparency because there are a lot of people that are telling patients they're injecting Botox, and they're really not. And so for us, for one of our transparencies, we're always drawing up our Botox in front of our patients so they can see that what they're getting is Botox.

And I think as patients, they need to be asking some of those harder questions. And I don't think it should offend a clinician if they're doing the right thing. If somebody asks for, hey, can I see your Botox vial, if you have nothing to hide, you should have your Botox vial out on the counter, right? And so if you're getting it from your Allergan rep or you're potentially injecting dermal filler, you should have no problem opening up that syringe and being able to look at the lot number and expiration and the documentation matches all of that. I think that is the big thing, is going through and making sure that you're purchasing through authorized channels and then you have the lot numbers if something were to go wrong or there's a recall and you can trace all that back to your documentation.

Kimberly Rai: I can just also second what Rachel's saying, because I think a lot of what's happening, in New York especially, is kind of educating the consumer on what questions they should be asking. So in addition to enforcement on what's happening, you know, in the medical spa, there's a lot of education on the consumer to say, listen, you should be seeing licensed professionals. They should be showing you the vials. There should be like no level of secrecy when someone's putting something into your body. And a lot of that, I think, is new about telling these consumers, listen, you should let us know if you've went somewhere and it looks a little shady and that reporting mechanism is really being encouraged.

Morgan Ribeiro: Excellent point. I want to take a look, kind of forward-looking now. Rachel, you recently franchised your clinic into a new state and are actively looking for other operators interested in franchising. What advice do you have for other operators considering that type of expansion?

Rachel Fidino: With expansion comes a lot more complexity. And so I think that was the biggest thing. You know, I can have a brand, a patient experience, an operational manual, I can have all of these things. But when I start to cross into state lines, that is where things can get a little bit more complicated. And so, I'm very deliberate with that expansion with franchising. And I think that the biggest thing to take home with that is healthcare always comes first. I have to make sure that I'm looking for people that are going to be the right owners of these franchises.

And so I'm looking for the people that can represent the brand, but also that they have the culture in mind. I don't want to look for somebody that's saying like, how much money can I make at this location? They need to be understanding like patient safety, compliance, culture, training. And I think that is the biggest thing with keeping our brand that premier med spa. And that's how we kind of operate. As I always say, we're the Four Seasons of a med spa. And so for us, it's looking at making sure that as we go into other states, that we are following those state laws. And that's where having a really good healthcare attorney comes into play because they can help guide you with what can and can't you do in certain states.

Morgan Ribeiro: Great. And I know I mentioned the franchising component of that. Kim, any legal considerations as these med spas are looking at potential franchising opportunities?

Kimberly Rai: I think what Rachel said is directly on point here. What works in your state may not work in other states, and I think historically, Texas, New York, California have the rep of being very difficult, but we're finding other states – Oklahoma, Georgia – are also becoming very heavily regulated. So it is very important to balance the standardization you would want across different platforms across different states against what is actually able to be performed by your licensed aestheticians, nurse practitioners, do they have supervisory authority here? Do we need a physician to be involved? These are all questions that vary state by state.

And so I think that's really the consideration for when you're franchising to, sort of, not get lazy and say, well, my model across all platforms, because you have specific protocols, guidelines, patient consents that are required in some states. And even at the very minutiae, like laser facilities. Laser hair removal in Texas requires a separate licensure. That's not the case in other states. And so it's really down to the service and down to the person, and it can be very discreet depending on what market you're in. So I think it's kind of a business and legal dance. You want to show that standardization across the platform so that you have your brand recognition, but you also want to make sure that you're operating within the nuances of the law that is applicable to the state that you are actually providing services in.

Morgan Ribeiro: Great. I mean, I feel like, Rachel, it seems like it's really important that the things that you've built in terms of culture and service and quality and the values, you want that to carry over regardless of the state, but how they actually operate and who's providing the care, you know, there's definitely some nuance to that state by state. Rachel, I also want to turn this one to you, just in terms of, as we're looking forward and where this sector is going, the last five, 10 years we've seen just exponential growth and a lot of change in a really short amount of time. I'm curious what you think will happen over the coming five to 10 years and what advice you would give to others that are thinking about entering the space.

Rachel Fidino: I think the next five to 10 years are going to completely refine what does it mean to have a med spa? The definition is definitely changing. Way more med spas are integrating into more functional medicine, more wellness, they're looking for that combination of hormone management for patients, weight loss, medical services, but also looking at peptides and a lot of other things. And so I think that with that comes a change with that conversation. The industry has grown very quickly. When you look at the medical aesthetics community, we're still in our infancy. So we're still learning, we are still growing, but I think with that comes regulation, and I really think that regulation in the med spa space is catching up.

And I think that the people who are owning these med spas, we're going to see a lot more scrutiny over ownership and scope of practice, prescribing these ghost medical directors. I think there's going to be a lot more regulation on these med spas. And so I think for a healthy industry, we really need that. We need to have that oversight because it can no longer be the Wild West out there. And I think that's how a lot of meds have operated, and I think that across the industry that really does need to change and there does need to be more regulation and oversight just to make sure that we always put the patients first.

Morgan Ribeiro: Awesome. Well, Brett, as we close out, I first want to look to you and certainly welcome input from others, but I always like to wrap up things with some practical advice or solutions for our listeners. So maybe you could just share with us a few compliance considerations for medical spa operators to consider.

Brett Elliott: Yeah, absolutely. So I think that anyone that's looking to get into this phase, before you even sign the lease, you need to start with compliance. Then everything else builds from that. So it's important to have a healthcare attorney that understands corporate practice of medicine rules and can help you navigate the patchwork of state-specific regulations. Also, it's important to not chase volume at the expense of safety, because a lot of the practices that are getting shut down or disciplined are ones that are running on a high-volume, low-oversight model. It's also important to invest in your team. So make sure that you train them properly and ensure that they stay within the scope. Because the RNs (registered nurses), the aestheticians – they are only as good as the protocols and the supervision that the provider actually gives to them.

Also, don't wait until auditors arrive to think about ongoing compliance. It's important, and this is where operators will be prepared in the event of an audit, to do internal audits, implement regular compliance audits that say quarterly at minimum, that focus on scope of practice and delegation, sanitation, record-keeping. And then finally, when auditors arrive, if there's an unannounced audit, your first phone call should be to your attorney. They will help you navigate the scope of the investigation and what is required to be turned over then and there, versus what can wait for an attorney to review. Responding to audit findings is where the stakes are the highest and where legal counsel is essential.

Morgan Ribeiro: Great. Kim or Rachel, anything to add to that list of practical advice when it comes to compliance considerations?

Kimberly Rai: I think Brett covered it really nicely. I think another important aspect of this is just educating your nonclinical staff as well, on how to deal with audits and also how to kind of support the compliance efforts that are occurring at the medical spa. It is like a very hybrid situation, right? You're kind of sitting at an intersection of like more service and then healthcare. And so I think the clinical folks sometimes have a good understanding more, have been a part of that world a little longer than maybe some of the nonclinical supportive staff, but they're still very integral to permeating that compliance and also preparing you if someone does come knocking.

Morgan Ribeiro: Great. Well, thank you all for this. I think there's so many considerations to make here. Really important advice as the sector of med spas continues to grow and evolve. And always appreciate chatting with each of you. Rachel, thanks for joining us today.