Is Your Physical Therapy Practice Also a Health Club?
Know the laws, rules, and regulations of your services.
By Paul J. Welk, PT, JD*
As physical therapy private practices continue to explore alternate revenue sources other than traditional fee-for-service reimbursement, unique legal issues may arise based on the new services provided.
Examples might include the performance of pre-work screens and other direct-to-employer–related services, cash-based programs, telehealth, and other less traditional services. While it may not be the first consideration that comes to mind, these additional services often will involve laws, rules, and regulations that have not historically affected physical therapy practice. This article will highlight certain areas related to the regulation of health clubs and spas and how those areas may relate to physical therapy practices that offer a diverse variety of services.
Most states have rather extensive rules and regulations governing health clubs and related facilities. In large part, these laws center around concepts of consumer protection. Common consumer protections contained within the laws, rules, and regulations governing health clubs include an individual’s ability to terminate or otherwise rescind a contract, an individual’s rights related to cancellation of a membership if a member moves away from the health club location, establishing contract fee limits and timelines, and setting forth specific circumstances in which an agreement can be cancelled.
Let us consider a traditional outpatient orthopedic physical therapy practice. In an effort to generate alternative revenue streams, the practice has added a number of different services. Specifically, the practice now offers Pilates classes multiple nights per week, has established an otherwise legally compliant program in which participants pay $50 per month to utilize exercise equipment within the facility during off hours, and has added a number of general health and fitness products for sale. For its Pilates program, the practice offers participants the ability to buy 10 classes for $100, and the equipment usage program charges a flat fee of $50 per month.
As the physical therapy practice considers these new business lines, it must assess applicable law to confirm whether or not it may subject itself to certain health spa or related laws and, if so, what is necessary for the practice to comply. For example, Texas state law defines a “health spa” as a business that offers for sale, or sells memberships that provide, the members instruction in or use of facilities for a physical exercise program but excludes from the definition “an entity operated exclusively to . . . provide physical rehabilitation activity related to an individual’s injury or disease.”1 Stated another way, an entity operated exclusively as a physical rehabilitation provider does not fall within the definition of a “health spa” and therefore is not subject to the requirements of the law. In considering a state’s definition of “health spa,” it would be of particular importance for the hypothetical practice described in this article to consider how the various programs that it offers may potentially subject it to complying with the requirements applicable to health spas. If this hypothetical practice were deemed to be a “health spa,” requirements under the law would include maintaining an operator’s certificate of registration, satisfying a security requirement (to protect the consumer should, for example, the practice file for bankruptcy), and complying with specific contractual requirements related to the contract term, cancellation, and financing.2 If an entity fails to comply with the requirements governing health spas, the client may have grounds to take a private legal action as well as the ability to file a complaint with the state attorney general.3
In addition to health club and spa considerations, physical therapy practices initiating programs that involve paying in advance for services such as Pilates classes must consider issues related to expiration rules or the charging of inactivity fees for classes not used during a certain period of time.4 For example, some states would prohibit a policy that any unused fitness classes expire three months after the date of purchase. Failure to comply with these requirements can lead to potential liabilities for the practice.
Although not an issue likely to be top of mind for any private practice physical therapy owner when considering new offerings, it is important to recognize whether these offerings may subject the practice to rules governing health spas, “expiration” laws, or other similar obligations. As a practical matter, the author is aware of an increasing number of cases where physical therapy practices have been alleged by their clients to be in violation of applicable state health spa laws.
Although compliance with applicable laws is of greatest importance, from a practical perspective making potential clients aware of the proposed terms and conditions of any program, including fees, expiration dates, and other similar terms, can help mitigate the risks of an unhappy client. By giving appropriate consideration to its compliance obligations, a practice can expand into alternative business lines in a way that is beneficial to both patients and the practice.
1See Texas Occupations Code – OCC § 702.003 (2018). Emphasis added.
2Texas Occupations Code – OCC § 702.001 et seq. (2018).
3See Texas Secretary of State, Frequently Asked Questions for Health Spas. Available at www.sos.state.tx.us/statdoc/faqs3000.shtml. Accessed December 6, 2018.
4See, for example, National Conference of State Legislators Publication on Gift Cards and Gift Certificates Statutes and Legislation. Available at www.ncsl.org/research/financial-services-and-commerce/gift-cards-and-certificates-statutes-and-legis.aspx. Accessed December 6, 2018.
Paul J. Welk, PT, JD, is a Private Practice Section member and an attorney with Tucker Arensberg, P.C. where he frequently advises physical therapy private practices in the areas of corporate and healthcare law. Questions and comments can be directed to email@example.com or (412) 594-5536.
*Please note that this article is not intended to, and does not, serve as legal advice to the reader but is for general information purposes only.