SilverLink - Fall 2008 - (Page 13)

RISK MANAGEMENT Beauty, Health & Wellness Industry When the Curtain Falls Is It Lights Out for the Medical Spa Industry? by Andrea Bell “The Show Must Go On.” On Broadway, this means that regardless of circumstances, waiting patrons must not be disappointed. But even in New York’s famed theater district, the lights grow dim when a show is no longer the hottest ticket in town. The same is true for the medical spa industry, where businesses open—and sometimes close quickly—much like Broadway shows. the-art, innovative products and treatments, some entrants have simply been lost in the shufﬂe—and for some aesthetic medical ofﬁces, the show is now over. Despite record proﬁts for the industry in general, many franchises and individual med spas have been unable to make a proﬁt and have closed their doors forever. On Broadway, when ticket sales slump, the curtain goes down—and the same holds true for the aesthetic medical community. Patients must keep coming back for treatments and products or med spas won’t survive. The Good News For the past several years, aesthetic medicine/medical spas have been the hottest ticket in town. The International Spa Association estimates that the medical spa industry has grown 15 percent per year, with industry revenues of over $1 billion in 2007. Aesthetic medicine is no longer exclusively practiced within the traditional specialties of dermatology and plastic surgery, but has become part of existing hospital systems and medical clinics. Branded medical spa franchises and individual med spas have opened at an unprecedented rate. One current trend is to blend several industries—such as beauty, health and wellness—as evidenced by the partnering of aesthetic medicine with ﬁtness and wellness facilities and / or day spas. In general, regulation of this industry has been left to the discretion of individual states, many of whom have struggled to keep up with the constant evolution of the industry (and the resultant progression of rules and regulations). Medical malpractice carriers face some of the same issues, as they seek to insure an industry in ﬂux (See “Beauty is in the Eye of the Beholder,” SilverLink, January 2007 at www.silverstonegroup. com.BeautyHealthWellness.html). Money Runs the Show Some franchisees experience a disconnect between the franchisor’s promises and reality. Dissatisﬁed with the franchise atmosphere—and hoping to increase proﬁts and take control of their ﬁnancial destiny—many franchisees attempt to “go it alone,” separating from their original franchisors (similar to private specialty practices breaking away from hospital systems). Some of these solo shops fail because they lack sound business practices. And as urban centers throughout the United States experience a sharp increase in the number of med spa providers, many independently run facilities cannot survive the competition and leave the market. As solo shops fail, some aesthetic medical practices capitalize on that failure by buying out competitors’ assets and taking over patient care—an easy way to add locations, increase exposure and create a larger patient base. Although selling to a competitor may appear to be an ideal solution to a cash ﬂow problem, the seller must be extremely cautious; if liability exposures and risk transfer are not handled properly at the time the business changes hands, problems can arise weeks, or even months, after the business has closed. The Not-So-Good News The industry’s unparalleled growth over the past years has, unfortunately, resulted in the marketplace being inundated with entrants seeking to take advantage of the relatively lax regulatory environment in aesthetic medicine. In a business based solely on customer service combined with state-of- These Flip-Flops Weren’t Necessarily Made for Walking One of the most misunderstood statements in the liability market is that it’s easy to “walk away” from a liability obligation. While that may be the case for some, it really depends on the owner’s individual situation. Because medical spas are complex entities with unique risk exposures, most 13 SILVERLINK — FALL 2008 http://www.silverstonegroup.com.BeautyHealthWellness.html http://www.silverstonegroup.com.BeautyHealthWellness.html

Table of Contents Feed for the Digital Edition of SilverLink - Fall 2008

SilverLink - Fall 2008 Table of Contents Risk Management: Toto A Marriage Made to Last Cashier’s Check Fraud? Selection Validation Digital Tool Box When the Curtain Falls Lightning Strikes Increased Fuel Economy Employee Benefits: To Infinity & Beyond Securing Retiree Healthcare Private Client Services: Batter Up! Shaking Things Up STOLI Under Attack Client Spotlight: Bellevue University Internal Happenings: SilverStone Group Wellness Activities Group

SilverLink - Fall 2008

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