The 'Ghost' Director Trap, Outcompeting Medspa Franchises, and The Business of Safety

[00:00:10] Introduction & The Dangers of Ghost Medical Directors

We are operating in the wild, wild west of medicine. Between ghost medical directors, corporate franchises pushing volume over quality, and a severe lack of standardization, the aesthetic industry is full of operational landmines. Welcome back to the Business of Aesthetics podcast. I'm your host, Don Adeesha. To help us navigate this chaos and build a defensible business, we are welcoming back Dr. Kate Dee. Dr. Dee is a Yale-educated physician and the founder of Glow MediSpa. After a successful career in breast imaging, she transitioned into the aesthetics world and was shocked by what she found. She is the author of Medspa Mayhem, the host of Medspa Confidential podcast and the founder of Medspa Board. Having previously joined us to discuss overarching ethics and compliance, today she is back to talk about operational defense. Today we are discussing the financial risks of absentee medical directors. We are talking about how to out-compete private equity franchises and the actual business value of clinical safety. This episode is brought to you by Ekwa Marketing, the digital growth partner behind this podcast and a trusted resource for aesthetic practices looking to dominate their local markets. Now, with that being said, Dr. Dee, welcome back to the podcast.

Thanks so much for having me. It's great to be here.

Absolutely. Now, Dr. Dee, you have famously referred to the aesthetic industry as the Wild West. And… have been critical about the absentee leadership model. Now, from a purely financial and liability standpoint, what is the specific operational danger a practice owner invites when they attempt to scale their business by using a ghost medical director?

Yeah, so just to state, there are a lot of people who call it the Wild West. It's not just me, so I did not originate that idea. But one of the key problems in the industry is this idea of a ghost medical director or an absentee medical director. And what I call them in my book is a fake medical director because they're not actually medically directing. So here's what I mean by that. So the way the medical system developed, doctors couldn't do everything and we had all these other people in the system as part of the team in order to carry out medical care. It's supposed to be the doctor decides the medical care and then it's carried out by the team. There are all these people in the industry who are practicing medicine essentially without a license. and they're renting out a doctor's license who has nothing to do with the practice. And that's completely illegal and unethical on the part of the physician, okay? So the physician is renting out their license. They don't even know the staff using it. They don't know what's going on in the spa. They are not aware of the protocols and procedures in place. They don't know where the products are coming from. So what are the risks of that? Like what you're gaining is not paying a doctor, I guess, of like a salary or not having a doctor on staff or not having a doctor as a partner. But what you're risking is harm to the patient. You're risking arrest of your staff members. you're risking a lawsuit and you're also risking like really bad reputation and reviews. Now, if you think that that's overblown, you can just look at recent arrests of RNs and several different places around the country where it was exactly this, right? The medical director was nowhere to be seen. The RN is practicing online. on their own, and that's not legal. So nurses are not allowed to practice medicine. They can really legally only carry out doctor's orders. They can't make medical decisions. There are many states where nurse practitioners can do that, but not all, like about half of the states. A little over half of the states allow nurse practitioners to make independent decisions. But but even half the states, even nurse practitioners can't do that. And so you have a risk of losing your entire business if you use that model. Now, it doesn't mean that it's not happening. It's happening all over the country. But. There is a clampdown that is starting because of the really bad outcomes that have happened in a number of these places around the country. The authorities are starting to actually arrest people. And so that could be your business. And so you're risking your nurse's license, you're risking all your staff. And so ultimately your business could fail just because you're using this model. I know that is very common, but it's not the right thing to do. And as a physician, I can't even imagine trying to live with myself knowing that someone I didn't even know was practicing under my license and it was my liability that was at risk. That's crazy. And that's the other thing I didn't mention is the risk to that physician is your license. They will take your license away if they know you're doing this and you will not be able to do it anymore.

There we go. Dr. Dee, I'm also curious as to what are some of the most common ways the boards are catching these ghost arrangements today?

Well, I don't, I mean, I actually think that the boards are not catching it really at all. I think what's happening is these practices are getting reported either by a patient that's been injured or or by an employee who's a whistleblower or by a competitor who knows that they're doing something illegal and it's getting reported. So that's happened. I mean, you know, in one case, it was somebody who was offered a job, who declined it because they knew the practice was illegal. And instead of that practice going, oh, gosh, we better clean things up, they didn't do anything about it. And then that person who declined the job reported them to the authorities, both to the medical board and to the attorney general. And so, you know, it's not that the medical boards are sweeping the system to see if you're really doing your job or not, but you're very vulnerable if you're cutting that corner and someone reports you.

That was the incident that happened, I think, in Arizona, correct?

Yeah, well, there's been more than one. But yes, yeah.

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[00:07:33] The Lack of Standards & Federal Regulation

Right. So now, Dr. Dee, you came from breast imaging, which is arguably one of the most heavily protocol-driven and scrutinized practices in medicine. When you first transitioned into the aesthetic space, what was the single biggest operational shock you experienced regarding how most clinics handled their internal clinical protocols?