Elective aesthetic treatments seem out of place in hospitals—but this may be an idea whose time has come

In the perpetual pursuit of revenue diversification—within the health care-services industry, yet away from reimbursement-dependent services—innovative and cutting-edge hospitals are entering the world of elective and aesthetic medicine by opening medical spas and related ventures.

Medical spas, by nature, offer a variety of noninvasive or minimally invasive services. These include laser hair removal, microdermabrasion, photofacials, injectables and fillers such as botulinum toxin Type A, and product lines that have a medical focus.

Many more advanced medical spas have expanded this menu of services to include nonsurgical facelifts, skin tightening, cellulite reduction, fractional laser procedures, acne treatments, vein treatments, and anti-aging treatments, which could be the next big boom in aesthetic medicine.

A Revenue Source

More than a decade ago, hospitals entered the retail arena by renting or leasing space in their lobbies and other areas to beauty-service outlets as an additional source of revenue. According to Gary Paquin, president of The Paquin Group, a health care retail consultancy in Cele­bration, Fla, “Medical spas and similar businesses fit very well into the contemporary health care retail model and would represent an excellent source of alternative revenues for hospitals.”

The leaders of Rush Health Systems, a hospital group that operates hospitals, ambulatory surgery centers (ASCs), diagnostic centers, and outpatient clinics in Meridian, Miss, are contemplating opening a medical spa on their premises. The medical spa will be owned and operated by the hospital group and supported by in-house medical and support staff.

According to Frank Farley, vice president of business development at Rush, “We are very excited about this venture and hope to attract a host of new clients who aren’t just sick but want to look good and feel good.”

Plez Tinsley, MD, who is one of the pioneers of the project at Rush, believes that the hospital can leverage its reputation as a high-quality provider of care to offer elective health care services to its patient base as well as to the community at large.

Over the long term, a medical spa can be expanded to not only offer elective cosmetic medical services but also to serve as an excellent referral source for aesthetic plastic surgeons who perform procedures at the hospital’s ASC, thereby potentially creating another secondary source of income.

A Good Investment

To most hospital directors, the capital investment to open a medical spa is affordable, compared to larger projects that they typically undertake. Opening a 2,000-square-foot medical spa costs between $250,000 and $500,000; this includes leasehold improvements, technology investments, start-up costs, and working capital.

Along with being affordable, the returns can be attractive. Capital recovery can occur within 2 years, and most well-managed medical spas reach an operational break-even point within 6 months. But—do hospital managers really understand the retail medical business?

According to Mac Fadra, a consultant and entrepreneur in the consumer medical and elective health care field, “A hospital can either recruit experienced physicians, management, and staff to operate the medical spa, or find an experienced franchisor or operator [company] and outsource the management and operation of the medical spa—much like a hospital-management company.

“The success of a medical spa may not be contingent solely upon the hospital’s reputation, but will depend upon direct-to-consumer marketing, internal marketing, the skills and experience of the physicians who oversee or perform care and services at the medical spa, the menu of services offered, technology selection, the credentials and capabilities of staff, and the quality of customer service offered,” he adds.

One of the biggest challenges hospitals may face is the willingness of consumers to visit a hospital for basic medical spa services, such as laser hair removal and botulinum toxin Type A, when they are typically offered in a medical-office setting. To overcome this barrier, these medical spas would, ideally, need to be located in an ambulatory setting owned by the hospital.

Critical Factors

How successful opening a medical spa in a hospital would be depends on several prerequisites, or critical factors. These include, but are not limited to:

Five Phases of Opening a Medical Spa
Phase 1FeasibilityFeasibility study
Market analysis and assessment
Competitor assessment
Needs assessment
Space-availability assessment
Phase 2 Strategic planBusiness plan
Financial projections and budget
Architectural layout and plans
Medical-leadership identification
Business-leadership identification
Phase 3 Operational planServices menu
Pricing strategy
Marketing plan, including advertising and public relations
Staffing structure
Construction and refurbishments
Database and patient-management system
Staff training
Clinician training
Technology selection
Phase 4 Launch Preparation for launch
“Soft” opening
Media launch
Grand opening
Friends and family treatments
Phase 5Operations Initial adjustments
Commencement of full operations
90-day review
6-month review
Adjustments to marketing plan
Service-menu additions
Pricing adjustments (if necessary)
Staff reviews: 90 days, 6 months, 1 year
Metrics review (monthly)
Operational audit

• commitment from senior management;

• adequate capital;

• support from the hospital’s medical staff;

• internal marketing;

• patient referrals from the physician base;

• a formal business plan;

• an aggressive, yet professional, marketing plan and campaign;

• a significant marketing budget;

• a selection of laser and intense pulsed-light technologies that are appropriate for the target demographic;

• an appropriate menu of services;

• a spa-like, rather than hospital-like, setting; and

• an appropriate product line, possibly private label.

The directors of hospitals and other health care organizations who are considering opening medical spas in their facilities should seek the help of an experienced consultant from the medical-spa world to address a host of issues, from developing a business plan to planning the space, selecting the technology, and implementing the project. The opportunity would be to offer noninsurance-based services to a loyal and established patient base.

Elective services would be paid out of pocket by patients. However, the hospital can bring in companies to provide patient-financing plans (interest- or noninterest-based) to help patients pay for these procedures. This helps make medical-spa procedures affordable to the average consumer.

Generally, a step-by-step approach is recommended (see table at left) for hospital directors contemplating opening a medical spa.

A Recipe for Success

The marketing campaign is the final vital step for launching and growing a medical spa. Without one, even a well-planned and well-funded medical spa could fail. This campaign should include advertising, publicity and public relations, internal marketing, open houses, patient referrals, promotions, direct marketing, and Internet marketing.

The marketing plan and media mix generally vary by the market where the medical spa is located. Whereas print advertising may work in some markets, television advertising would work better in others.

Establishing tracking tools and mechanisms to capture performance metrics is key to measuring the performance of a medical spa. These include:

• the lead-acquisition cost (by the media and the referral source);

• the patient-acquisition cost (by the media and the referral source);

• the return on investment by the media;

• the conversion rate (by the media, the phone staff, the sales consultants, and the estheticians);

• the no-show rate; and

• the repeat and retention rate.

Information Sources

Industry associations can serve as excellent sources of information on medical spas. One of them is the International Medical Spa Association (www.medicalspaassociation.org), an organization dedicated to excellence, innovation, and promotion in the medical-spa industry.

For information on clinical aspects of medical spa services, the American Society for Laser Medicine and Surgery (www.aslms.org) attracts aesthetic providers from a multitude of specialties. Its annual convention is well attended by providers, researchers, laser companies, and vendors.

Also, the American Society for Aesthetic and Plastic Surgery (www.surgery.org) is a useful resource to obtain statistics and information on the industry, both for surgical as well as nonsurgical, noninvasive aesthetic procedures.

In summary, while a foray into the medical-spa world could improve a hospital’s bottom line, it needs to be approached with professional and experienced help to be succesful. Like any other industry, the medical-spa world is becoming increasingly competitive with sophisticated and well-funded entities playing the game very aggressively outside the world of hospitals. PSP 

Cheryl Whitman, a beauty-industry consultant for more than 2decades, is the founding board member of the Medical Spa Society and an active member of the Day Spa Association. She can be reached at (201) 541-5405 or [email protected].