Building a Medical Spa Inside Your Existing Medical Practice

The physicians conundrum: Everywhere, physicians are contemplating or engaged in expanding into the "medical spa" market. Seduced by the media buzz around this hot new phenomenon, many doctors see the medical spa as a means boosting their income and eliminating the growing grind and countless headaches of their daily practice. They read about growth statistics, see dazzling new equipment at trade shows, watch competitors popping up, and fear that they may be falling behind the times. With pen in hand they're ready to sign lease agreements, loan documents, and lots of checks in order to catch up with a crowd of savvy entrepreneurs who know where the real action is. And the truth is, they're right. Medical spas are the natural evolution of cosmetic medicine, and those who don't join the revolution will watch from the sidelines as their fate is decided.

Medical spas are the forerunner of a revolution. From Galen until now, the primary method of care has been through the hands and individual knowledge of a physician. But that's changing. The default method of care is becoming technology based. In every market and time, technologies are developed that replace an individuals knowledge and skill.

Lasers, IPLs, radio frequency, infrared, personal DNA testing, Pointe Lift™, Liposolve™, Clear², PDT, telomere clipping, anti-aging drugs and a smorgasbord of other technologies in development promise to change medicine in the same way that computers, jet engines, and GPS have changed aviation. Technology now enables a technician (under medical supervision) to perform effective medical treatments and places the physician in an oversight roll instead of being the primary practitioner. In the near future, physicians will have more in common with an astronauts than the Wright Brothers.

But changing technology poses very deep problems for physicians. Technology allows easy replication and scalability, forces an unimaginably steep new learning curve on overworked doctors, and eliminates many of the barriers and protections that physicians have relied on in the past. And it's only going to get worse.

Consider this. The combination of markets that Surface competes in is huge (40-50 billion per year and growing), highly fragmented (individual practitioner model), completely new (technology based), and free of any meaningful national players (yet). Already there are very deep pockets investigating ways to exploit this emerging marketplace. The Wal-Marts and Home Depots of this new medical marketplace are being built.

But there's opportunity as well. Technology opens new doors for physicians who can manage this new paradigm. That's why a ready supply of smart and motivated physicians tired of the daily grind of insurance patients are moving into the marketplace and successfully competing. For the first time, physicians outside the current specialties of plastic surgery (cutting and stitching) and dermatology (diseases of the skin) have the potential to earn the income of these "big money" specialties. This new market will inevitably give rise to a new specialty whose focus will be "non-surgical cosmetic medical technologies". You can see the fragmentation today. Many dermatologists now label themselves as "cosmetic" to market themselves as a subspecialty.

Hurry up and wait. You can't get enough good information fast enough. But this is a new business and demands a huge investment of time to make the right decisions. Sales reps will stream into your clinic armed with charts and graphs that go up and to the right, advertisers will drop phrases like "top of mind awareness", and you'll have a creeping suspicion that the market is getting away from you. Go slow. There are a host of land mines in the area and there are some that will be advising you to jump directly on them.

So, how do you build a medical spa inside your existing practice? Surface has three locations, four physicians, master aestheticians, technicians, patient coordinators, managers and office staff. Every treatment at Surface is governed by a set of proprietary protocols. As a business, we have advised dozens of individual physicians, managers, and investors about opening and operating medical spas. Be advised this is not easy, but here are a few suggestions.

Physician heal thyself: This is your business. Consultants make their money by telling others how to run businesses that they can't run themselves. Believe me, if a medical spa consultant was worth hiring, they would be running their own medical spa. Consultants will tell you that you have to have massage, retail should be 30% or your gross sales, and "you might want to consider hydrotherapy". Wrong. The day that retail is 30% of our gross sales I'll eat my left foot. Our retail is around 3%. If it ever gets to 5% we'll cut back. If this is going to be your business, make your own decisions.

Find someone smarter than you: The most important step is good management. Without that, people can, and have, lost everything. If you don't have good management skills, hire someone from outside medicine who does.

Franchises: "Turn key solutions". That's how almost everything is marketed to physicians. Buy this technology, hire this personnel, run these ad slicks, and everything will fall into place. Sorry. It doesn't work that way. Most of these franchises are sold as a sort of "we've already worked out the kinks" sort of deal. It's a lie. Franchises focus on the treatments that everybody else will be able to replicate with ease. It's more a case of, " In the kingdom of the blind, the one-eyed man is king". You don't need a franchise.

All technology is not created equal: Despite what company reps will tell you, choosing the right technology will mean big differences at the end of the year. Efficacy, cost per treatment, initial costs, usage, and a long list of other considerations should go into technology decisions. Many physicians jump first and then end up with $80,000 towel dryers that they still have to make payments on every month. Used medical devices are readily available from the constant stream of bankruptcies and failed medical practices. Choose your technology carefully.

Understand the marketplace: Medical spas are a luxury business. And for most physicians it comes as an unwelcome surprise that their new patients are more demanding. Long waits, aloof staff members, poor communication, and ambivalent staff, are all in the past. You're touting yourself as a luxury service, act like one. Hire top-notch people that are service-oriented, friendly and courteous. Protocols can be taught easier than attitude.

Rein in your ego: This is business. It's not personal. If you feel you must charge twice as much as your competitors because you "deserve it" or you're board certified, get used to empty appointment book. One of my personal pet peeves is the condescending attitude of many physicians.

Do not use "advanced" or "laser" in your name: The number of "advanced" laser clinics is staggering. Don't do it. It's inane, overused, and bland. I actually had a physician ask me if changing his name from Advanced Laser Centers to Advanced Laser Group would get him more business.

Network with successful medical spas: Successful business owners are only to happy to help newcomers to the industry. We have constant dialogue with physicians and investors who are investigating the marketplace and have advised clinics on four continents. Successful medical spas will be happy to build bridges with smart businesses.

Don't look to day spas to solve your problems: Physicians hear "spa" and immediately think that day spas have the answers they're looking for. Wrong. The average net margins for day spas are around 8%-10%. The average physicians is 60%. This is a different market.

Don't base your pay on commission: Commissions sound like a great solution. You save overhead and motivate your staff to grow the business. Wrong. Commissions are used in spas to keep overhead low, but guess what. Staff members working for commission aren't working for you. Commissions lead to overly aggressive staff that don't do anything for your reputation.

Don't gild the Lily: You may have heard that you have to "build out" your clinic at the cost of $80-$120 per square foot. Nope. You don't have to start with treatment tables that have your clinics name embossed on them. Spend all your money before you open and you won't be able to spend it where you'll really need it... getting butts in the seats.