The Fountain of Youth may be elusive, but fueled by a strong health and youth culture and an aging population, the quest to find it remains very real in 21st century America.
The media are filled with so many stories about what to eat, how to live and what procedures to undergo that looking and feeling good can easily seem like a birthright, or possibly a competitive sport. It has paid off. According to International Spa Association, one in four Americans has visited a spa and in 2008 alone, there were 160 million spa visits to 21,300 spa locations
For the insurance industry, the medical spa, or “medi-spa” segment of the industry has been a source of steady growth, said Vice President Michelle Kim, who heads the Allied HealthCare Professional Liability Underwriting division at Hiscox USA. Medi-spas make up a significant portion of Hiscox’s allied health care book, adding that she expects this to continue “as we see new treatments offered all the time.”
Medical Spas New and Old
Medical spas have the distinction of being both the newest and oldest manifestation of the spa. Since Greek and Roman times, spas have been used to preserve and restore health. Drinking or bathing in water from medicinal springs has long been, and still is, prescribed to relieve a host of heart, lung, skin and muscular conditions.
About 30 years ago, the availability of modern medicine to fight disease and chronic conditions led to a change in the concept of spa. The industry divided into day spas and destination spas, and focused on relaxation and esthetics, often including medical programs for weight loss and nutrition. The Federal Drug Administration’s approval of Botox cosmetic in 2002 as a relatively noninvasive treatment for wrinkles between the eyes, brought another esthetic medical component to the spa, creating a whole new industry segment, said Executive Director Hannelore R. Leavy who founded the Day Spa Association in 1991 and the International Medical Spa Association in 2002. She estimated there are between 2,000 to 2,500 medi-spas in the U.S.
“Medi-spas are a cross between a medical facility and a day spa with some aspects of both,” said Senior Professional Lines Broker David Derigiotis of Burns & Wilcox. “They offer facials, massages, kelp wraps and acupuncture, like day spas, but they also offer laser hair removal, Botox, collagen injections, and microdermabrasion—services that are more invasive and require training, but do not necessarily require a board certified doctor to perform.”
Beyond the massage therapists, cosmeticians, and aestheticians who typically provide services at day spas, medical spas are usually headed by a physician and often include registered nurses, physician assistants, nurse practitioners and medical assistants, said Kim.
Though sometimes less-invasive treatments are performed by a doctor at a surgicenter, more serious esthetic treatments, including plastic surgery, liposuction and dermabrasion, almost always require a surgicenter. The lines can be blurry, though.
Surgicenters generally handle elective and nonemergency procedures that do not require an overnight stay. They are better equipped than medical spas, but less expensive than hospital stays. Cost is especially important when procedures are not covered by a health insurance policy. Tummy tuck, breast augmentation and laser eye surgery are generally performed at a surgicenter, and less-hazardous, nonesthetic surgeries like some orthopedic procedures also are commonly done at these outpatient facilities. Physicians at a surgicenter would, of course, require the protection of medical malpractice insurance, said Derigiotis.
Insuring Medical Spas
Medi-spas generally are insured under the “allied medical” banner of professional liability, with a policy typically covering the spa as an entity and every employee who provides hands-on services to clients. Underwriters generally consider the type of procedures offered, the number performed and the spa’s revenues, said Derigiotis.
Also important is the mix of procedures, said Professional Lines Underwriter Kim Smith of Burns & Wilcox. “What’s the percentage of clients getting laser treatments or microdermabrasion versus manicures and wraps? Is it more like a day spa with an occasional Botox injection, or does it do mostly light medical procedures? The exposure will be weighted along these criteria,” Smith said.
In its underwriting, Hiscox would expect the medical director to be a physician with a relevant specialty like dermatology or plastic surgery, said Kim. They would consider the size and type of staff mix, who does which procedure and what kind of training they received. Manufacturers of equipment and injectables often provide training and certification in the safe and proper use of their products.
As with most businesses, good management is important in preventing claims. High turnover, for example, could result in untrained or undertrained staff performing laser hair removal and causing burns and scarring. Allergic reactions and charges of sexual misconduct are not uncommon, and need to be handled appropriately and documented properly.
Claims can come from the most routine services. One claim involved a massage that went a little deeper than the client expected and resulted in a torn rotator cuff, said Kim.
Unsupervised use of analgesic creams has proven to be a problem for medi-spas. In a widely publicized 2005 case, a spa employee sold a 22-year-old North Carolina woman a strong topical lidocaine cream and told her to use it on her legs prior to coming to the spa for a laser hair removal treatment. Before leaving for her appointment, the client applied the cream to her legs from ankle to thigh and wrapped her legs. She then suffered an overdose and died. The case is almost identical to one involving a 25-year-old Arizona woman, according to published reports.
As part of the underwriting process, Hiscox makes sure a medical spa has excellent client-selection protocols in place. These screen for things like skin type and medical history to qualify clients for particular procedures, and to weed out those who might be harmed by the procedure. Hiscox also wants to see that insureds are getting signed informed consent forms from clients, and that spas do background checks on staff.
Medi-spas are best insured in the nonstandard market because they change too quickly for standard carriers. “Otherwise there would be carriers insuring treatments and procedures that no one knows about today,” said Kim. “A spa might start out as a nail salon offering nails, facials and chair massages, but then bring in teams of health-care providers to move into medi-spa procedures. Or the reverse could happen and it starts as a dermatology office, and expands into spa services that eventually take over the business. They need to be watched and revaluated,” she said.
Kim, Smith and Derigiotis all recommend that both general liability and professional liability coverage be provided by the same carrier to avoid coverage issues in the event of a claim.
Despite the economic slowdown, the medispa has been the fastest growing sector of the spa industry and continues to grow, according to the International Spa Association. Kim suggested that “some people might view [medispa procedures] as a lower cost alternative to expensive plastic surgery, providing similar results” without draining the bank account. Despite the growth, though, Kim has noticed a pattern of accounts going out of business, only to be replaced by new medispas. That suggests to Derigiotis that the industry provides opportunities for retail agents who want to expand into a new area.