New York regulators are increasing scrutiny of medspa operations, with a particular focus on ownership, control, and management structures that implicate the corporate practice of medicine doctrine. While these principles are longstanding, the enforcement posture has shifted. Structures that previously operated with limited oversight are now subject to regulatory inquiry, investigation, and, in some cases, mandated restructuring.
For medspas operating in New York, particularly those that utilize non-PLLC management entities, compliance risk has increased significantly.
Corporate Practice of Medicine
New York is a strict corporate practice of medicine (“CPOM”) state. With limited statutory exceptions, only individuals licensed under New York Education Law Article 131, or professional entities owned and controlled exclusively by such licensees, may practice medicine or employ physicians to do so. (See N.Y. Educ. Law §§ 6507(4)(c), 6522; N.Y. Bus. Corp. Law §§ 1503, 1507).
The prohibition is not limited to nominal ownership. Courts and regulators have consistently held that non-physician control over professional medical judgment, fees, or operations violates public policy. (See State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d 313 (2005); People v. Santi, 3 N.Y.3d 234 (2004)).
Why Are Medspas a Target?
Medspas sit at the intersection of medical practice and consumer services, making them particularly vulnerable to CPOM violations. Many operate through management services organization (“MSO”) models in which a physician-owned PLLC contracts with a non-professional entity for administrative support. While such arrangements are permissible in theory, they are highly fact-specific and frequently drift into impermissible control.
New York regulators, including the Department of Health, the Office of Professional Medical Conduct (OPMC), and the Office of the Attorney General, are increasingly evaluating whether these structures are compliant in substance, not merely in form.
Regulatory Developments and Clarifications Affecting Medspas in New York
Although New York has not enacted a medspa-specific statutory framework, regulators have clarified and reinforced how existing healthcare and professional practice laws apply to aesthetic and cosmetic medical services.
Recent regulatory focus reflects the position that medspas are not exempt from medical practice requirements simply because services are elective, cosmetic, or cash-based. Procedures involving injections, diagnosis, treatment, or the use of energy-based devices are treated as the practice of medicine and are subject to licensing, supervision, and corporate structure requirements under New York law.
Areas receiving heightened regulatory attention include:
- Scope of Practice and Delegation: Ensuring injectable and laser procedures are performed by licensed physicians or properly licensed personnel acting within scope and under appropriate physician supervision.
- Physician Supervision: Increased scrutiny of arrangements where supervising physicians are contractually designated but not meaningfully involved in clinical oversight.
- Advertising and Consumer Protection: Review of marketing materials to confirm accurate representation of provider credentials and transparency regarding who is delivering medical services.
- Application of CPOM and Fee-Splitting Rules: Continued reinforcement that CPOM and fee-splitting prohibitions apply fully to medspa business models, including MSO structures.
These developments do not represent new law, but rather a more coordinated and active application of existing standards to a rapidly expanding industry segment.
Non-PLLC Management Structures Under the Microscope
Current enforcement activity reflects heightened skepticism of management arrangements where a non-PLLC entity exercises de facto control over the medical practice. Common problem areas include:
- Management agreements that grant the MSO authority over hiring, firing, or supervision of clinical personnel
- Fee structures tied directly to medical revenue or profitability, rather than fair-market-value administrative services
- MSO control over clinical pricing, treatment offerings, or medical protocols
- Banking, billing, or collections arrangements that deprive the physician owner of meaningful financial control
New York law is clear that a non-physician entity may not interfere with, influence, or control medical decision-making, nor may it extract professional fees under the guise of management compensation. (See Mallela, 4 N.Y.3d at 320–21; N.Y. Educ. Law § 6530(19)).
What Regulators Are Finding in Medspa Audits
Recent audits and investigations have extended beyond corporate structure and into day-to-day operations, often uncovering practices that raise patient safety concerns and reinforce CPOM enforcement priorities.
Issues identified during medspa audits have included:
- Performance of injectable or laser procedures by unlicensed or improperly supervised personnel
- Standing orders or treatment protocols implemented by non-clinical management without meaningful physician oversight
- Physician supervision arrangements that exist contractually but not operationally
- Business pressure on clinicians tied to revenue targets that may influence treatment decisions
These findings weaken the argument that management entities are purely administrative and support a more aggressive enforcement posture.
Enforcement Risk Is Active, Not Hypothetical
This is no longer a theoretical compliance issue. Regulators are issuing subpoenas, requesting management agreements, and reviewing governance documents, compensation models, and operational control. In some cases, operators are required to unwind management arrangements, revise fee structures, or suspend operations pending remediation.
Exposure is not limited to physician owners. MSOs, investors, and executives may face liability where there is evidence of knowing participation in unlawful control or fee-splitting arrangements. (See N.Y. Educ. Law § 6512; Executive Law § 63(12)).
Practical Takeaways for Operators
Medspa operators in New York should assume that existing structures will be reviewed with a critical eye. Immediate steps should include:
- Comprehensive review of management services agreements for CPOM and fee-splitting risk
- Verification that clinical control, governance authority, and financial oversight reside with the physician-owned PLLC in practice, not merely on paper
- Reassessment of management fees for fair market value and regulatory defensibility
- Confirmation that supervision, delegation, and scope-of-practice practices align with New York law and Department of Health expectations
New York is signaling renewed commitment to enforcing CPOM restrictions in the medspa space, driven in part by patient safety and consumer protection concerns. Physician ownership must be substantive. Management arrangements must be limited and defensible. Structures built for speed or scale without regard to New York’s regulatory framework now present meaningful exposure.
For medspas operating in the state, proactive compliance review is now a baseline requirement for continued operation.
Here at Rupp Pfalzgraf we can assist with reviewing and restructuring management services agreements, governance documents, and operational frameworks to align with current regulatory expectations and mitigate enforcement risk.