MedSpa Business Can Be Quicksand for Physicians

April 29th, 2022 by

Many physicians have come to realize the synergy and profitability of establishing a medspa business for their patients.  Done right, it can be the perfect compliment.  And being “off insurance” is a nice pivot for many physicians, especially those in the cosmetic space (or even many OB/GYNs).  While most physicians starting a medspa already understand about the scope of practice and physician supervision issues for mid-level practitioners, most don’t seriously consider the issue of structure.   In short, care has to be taken when structing these businesses. 

Focus needs to be paid to the Florida Patient Self-Referral Act of 1992, which contains a number of “Stark-like” provisions, including those that impact the ability of a practicing physician to own and refer to the business.  Many physicians may think (wrongly) that cash based businesses aren’t impacted by the PSRA or the Patient Brokering Act (PBA).  Wrong! There is no such demarcation in those laws. 

If the physician is retired or not practicing medicine, the structure issues are mitigated.  But for physicians in practice who own a med spa, they need to understand the PSRA provisions that speak to ownership interest limitations and also to ownership interest disclosure requirements.  While these issues are not insurmountable (and not nearly so daunting as supervising physician qualifications), they are not mere details.  They’re important ones!

Medspa owners often think that the usual (and harsh) healthcare laws, like the Anti-Kickback Statute (AKS), the safe harbors and the Florida Patient Brokering Act (and other state based laws like those related to fee splitting) don’t apply to cash based med spas.  That’s flat out wrong!  There is no such cash v. insurance delineation with these laws.  And while it’s true that the AKS applies only when state or federal healthcare program monies are at play, it’s also true that he PBA requires safe harbor compliance, thus expanding the AKS and safe harbor reach well beyond state and federal healthcare program based businesses. 

Where will medspas see these laws most likely coming to bear?  In healthcare professional and marketing compensation arrangements.  This is where issues like percentage based compensation arrangements, for instance, are specially tricky.  Medspa owners must be tutored on the meaning and application of all the laws mentioned above.  And since the navigation and application of those laws necessarily requires (1) education about the laws, (2) exploration of the options, and (3) a risk assessment for each such option, it’s easy to understand why one size fits none!  If anyone is selling the one size option, run!  They’re (unknowingly) walking right into quick sand.    

Pharmacy Fraud: Data Tells the Story

April 18th, 2022 by

Today’s Topic:  Did you know the DOJ never tires of chasing the bad guys?

If a pharmacy is going to engage in nefarious activities, it should expect to get caught. Fraud in these cases is generally easy to prove. Simply verifying inventory, orders and dispensing records yields incredible data that when combined with comparative data from peer pharmacies can be used by law enforcement to establish that fraud has been committed.

Latest Enforcement Activity

On April 13, 2022, the U.S. Department of Justice (DOJ) announced a 78-month prison sentence imposed against a 37-year-old owner/operator of several pharmacies in New York, Aleah Mohammed (Mohammed). The sentence was as a result of guilty plea entered by Mohammed in April 2021 for charges of mail fraud, health care fraud and conspiracy to commit health care fraud. As part of her guilty plea, Mohammed agreed to forfeit $5.1 million and pay $6.5 in restitution.

During the course of her criminal conduct, Mohammed engaged in multiple schemes to defraud health care programs, including obtaining more than $6.5 million from Medicare Part D Plans and Medicaid drug plans. Over a five-year period, Mohammed submitted fraudulent claims to Medicare and Medicaid for prescription drugs that were:

  • not dispensed;
  • not prescribed as claimed;
  • not medically necessary;
  • dispensed during a time when one or more of the pharmacies she operated was no longer registered with the State of New York; and
  • often for expensive prescription drugs to treat HIV.

Adding to the mounting evidence against her, Mohammed led a lavish lifestyle and purchased luxury items such a Porsche and jewelry.

Lessons Learned

It seems that criminals never learn. They think that they are smarter than law enforcement and will never get caught. But rarely do those criminals win in the end. It is basic accounting and law enforcement knows how to do that. Law enforcement mines each pharmacy’s data and looks for outlier information as compared to peer pharmacies as well as inventory data. So what information did the DOJ have at its disposal in this case?

  1. On hand inventory. As with any payer audit, the payer (and law enforcement) can obtain information concerning inventory on hand. If the pharmacy never had the inventory, it could not sell the drug.
  2. Drug purchasing records. Again, unless a pharmacy had the drug in inventory or purchased the drug through one of its wholesalers, it is hard for the pharmacy to defend against fraud charges when it is filing a claim for drugs never in its inventory.
  3. Dispensing records. Dispensing records also reveal information essential to determining what was in inventory, what was purchased and what was dispensed.
  4. Comparative data concerning dispensing of high-cost drugs as a proportion of other drugs sold.
  5. Comparative data looking at peer pharmacies for dispensing trends.

Collectively, the data and these records make it easy for law enforcement to identify and prosecute fraudulent claims. Even so, criminals seemingly are undeterred, and schemes like this one are repeated time and again.

Closing Thoughts

Simply put, crime does not pay. It does not matter whether it is in the pharmacy industry or elsewhere, when government funds are involved, law enforcement will surely be looking for wrongdoers. This probably is not the last case of its kind this year, so expect to see more news of pharmacies/pharmacists behaving badly.

Positioning Your Dental Practice for Sale

March 10th, 2022 by

Thinking about selling your dental practice is a major career step which cannot be treated lightly. It is imperative to not only stay in step with all the legal practices and procedures to protect against liability issues down the road but also to ensure that you get the most profit possible from the business you’ve worked so hard to create. The process of preparing your dental practice for sale should start months in advance so you can address any issues early and prior to having a purchase agreement in place.

Know the Cost of Selling Your Dental Practice

Before you begin the process of putting your dental office up for sale, it’s a good idea to know all the costs involved. Speaking with your accountant to better understand the tax implications and how to manage equipment issues, unsold goods, employee transfer, and more can help you determine when might be the right time to sell. In some cases, it may be prudent to postpone a sale by a few months or years to get everything in place. You should also meet with a practice consultant that can help re-organize the practice and its flow. An experienced healthcare business attorney can help restructure corporations, contract key employees, prepare a fair market value lease agreement, and even begin to draft key terms for the sale. read more

Getting the Vax Facts

February 28th, 2022 by

By: Dave Davidson

Despite two years of COVID and a year’s worth of vaccinations, there remains some confusion over the privacy of an employee’s vaccination status.  As a healthcare employer, are you permitted to ask your employees if they’re vaccinated?  Do you breach the Health Information Protection and Accountability Act (HIPAA) in doing so?  The quick answers to those questions are: it’s OK for an employer to ask; and as long as the inquiry is made to the employee (and not to a third party or sought from medical records), the employer probably hasn’t violated HIPAA.

First, let’s address HIPAA applicability in general.  As a health care attorney, HIPAA is an integral part of my “filter” in providing legal analysis.  However, it surprises me when I hear people who work outside the health care arena claim HIPAA protection over all kinds of information – and most recently, their COVID-19 vaccination status.  Those protections are from a much broader interpretation of the HIPAA protections than is actually provided.  In a nutshell, HIPAA applies to health plans, health care clearinghouses, and health care providers (along with their business associates).  Unless an employer falls into one of those categories, HIPAA does not play a role.  Nevertheless, health care employers who have employees who are also patients, or employees who have provided Protected Health Information (PHI) to their employer cannot just shrug off their HIPAA obligations when it comes to vaccinations.  PHI must always be safeguarded in accordance with the HIPAA Privacy Rule. read more

Emergency Rule Facilitates Medication-Assisted Treatment in Florida

February 24th, 2022 by

Effective immediately, Florida’s Department of Children and Families promulgated an emergency rule with the hope of facilitating Medication-Assisted Treatment for those suffering from opioid use disorders. The crisis in Florida has been devastating. Deaths and overdoses due to opioid use in the state has increased by 37% percent over the past three years.

The emergency rule facilitates Medication-Assisted Treatment by modifying the clinical and operational standards that would otherwise apply; specifically, the emergency rule: read more

Controlled Substances Policies Help Identify Risks Before the DEA Comes Knocking

February 21st, 2022 by

Today’s Pharmacy Law Topic:  Did you know that your controlled substances policies should be protecting your pharmacy and helping you identify risks before the DEA comes knocking?

By: Karen Davila

As I’ve said in earlier articles, controlled substances are a big part of the business and create significant risks faced by retail pharmacies.  But many of those risks can be mitigated through written policies and procedures and consistent adherence to those policies and procedures.  These are the first line of defense and one of the most important strategies to identify and mitigate the risk of regulatory enforcement action before the DEA comes knocking.

Regardless of the size of your pharmacy, you should have written policies and procedures addressing the core requirements of both federal and state law.  Below is a list of essential controlled substances policies relating to inventory controls, dispensing and destruction/reverse distribution.  Although not an exhaustive list, these are key to decreasing the myriad risks inherent in stocking and dispensing controlled substance prescriptions. read more

Controlling Controlled Substances Risks

February 10th, 2022 by

As a pharmacy, it is part of the job to stock and dispense controlled substances.  But with all of the headlines about misuse of opioids and DEA raids, pharmacists are concerned about the risks of having controlled substances on hand and confused about when to refuse to fill a prescription.

But there are a few simple steps pharmacies and pharmacists can take to control their risks.  Doing so should help pharmacists feel more at ease in handling CS inventory and evaluating CS prescriptions.

Effective Controls on CS Inventory

Ordering and accounting for controlled substances can be a challenge.  But many risks can be controlled by having well-written policies and procedures that are strictly followed, as well as assuring adequate security and periodic inventory/audits. read more

Pharmacy Enforcement Remains Top Priority

January 31st, 2022 by

Today’s Topic:  Did you know that pharmacies and pharmacists continue to be a top enforcement priority for the U.S. Department of Justice and the myriad health care fraud task forces around the country?

Recent Sentencing in Compounding Pharmacy Fraud Case

This past week, a Mississippi pharmacist was sentenced to 5 years in prison for defrauding TRICARE (the government healthcare payer for the U.S. military and veterans) and some private insurance companies of $180 million through various kickback schemes.  These schemes might sound familiar because they all take on common characteristics- essentially payments to someone in exchange for referral of prescriptions to boost the pharmacy’s numbers.  And, more often than not, these prescriptions are medically unnecessary and driven by the greed of the people involved instead of the best interests of the patients.

This particular case became known as the “Mississippi Pain Cream Scheme” and led to three individuals who pled guilty, were sentenced to jail time and lost virtually everything. This past week’s announcement involved the sentencing of David “Jason” Rutledge, a pharmacist and co-owner of several compounding pharmacies.  Two others pled guilty earlier, including a Louisiana veteran, Tommy Shoemaker, who in December was ordered to pay $1.7 million in restitution and forfeit proceeds from the sale of his luxury vehicles.  And the Florida connection- Mitchell “Chad” Barrett of Gulf Breeze, was the mastermind behind this scheme as well as a larger national scheme that resulted in more than $1.5 BILLION in fraud nationwide!  It’s no wonder the government is on the hunt. read more

OSHA Covid Vaccine Mandate

November 30th, 2021 by

President Biden and the Democrat party’s new plan to mandate COVID-19 vaccine has taken an administrative turn to the Occupational Safety and Health Administration, or commonly known as OSHA. The agency set out a new Emergency Temporary Standard (ETS) earlier this month requiring all employers with 100 or more employees to either incorporate a written mandated vaccination policy, or to adopt a policy in which employees either choose to get vaccinated or subject to regular COVID-19 screening, along with a compulsory face mask requirement.

It has been an agenda for the Biden administration to get people vaccinated, and so far, each corner they’ve turned has resulted in a dead end. Just like the rest of the attempts, it seems that this one is futile as well. As a matter of law, the federal government may not impose a law mandating its citizens to take the vaccine, whereas a state may. (See previous article and Mass. v. Jacobsen). The OSHA ETS is an administrative loophole that Biden hoped to manipulate and pass through opposition; it has not. read more

Compounding Pharmacy Enforcement Shows no Signs of Slowing

November 9th, 2021 by

There’s certainly a lot of enforcement activity against compounding pharmacies these days.  The ramp-up began around 2012 after a fungal meningitis outbreak that caused 64 deaths and many more infections related to the compounding activities at New England Compounding Centers.  That heightened scrutiny continues to rock the compounding pharmacy world, not just from the drug quality, safety, and security standpoint, but also from the standpoint of the potential fraud and abuse inherent in the pricing of ingredients and the final compounded product as well as relationships between compounding pharmacies and the physicians who refer to them.


Announced yesterday by the U.S. Department of Justice (DOJ), the latest enforcement action is against Professional Compounding Centers of America Inc. (PCCA), a Houston-based supplier of wholesale compounding ingredients to other pharmacies.  In many prior enforcement actions, compounding pharmacies have been charged in various schemes to defraud the federal government by filing false claims for prescriptions that were not medically necessary or not requested by patients and paying kickbacks to prescribing physicians.  While similar in some ways to prior enforcement actions, this one differs because in this case, the DOJ reached back to the wholesaler of the compounding ingredients that were sold to the pharmacies that then submitted inflated claims to TRICARE.  Here, the DOJ nabbed PPCA in a complaint alleging False Claims Act violations, specifically that PCCA reported fraudulent and inflated Average Wholesale Prices (AWPs) for the compounding ingredients that it sold to pharmacies.  Those inflated AWPs resulted in pharmacies submitting inflated claims to TRICARE, the federal payer for military personnel and their dependents. read more