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Understanding the Risks Associated with Medical Directorships

August 26, 2019

A medical directorship may seem like a reasonable way to bring in extra income without investing a lot of time and effort. However, depending on the arrangements, a medical director’s duties can be extensive and the liability issues not always obvious. Therefore, it is important to understand the legal, regulatory, and professional liability coverage issues prior to accepting a medical director position.

senior-doctor-directing-associate-socThe duties of a medical director may include:1

  • Ensuring that proper protocols are in place and individuals hired are appropriately credentialed and trained
  • Supervising other clinicians and staff
  • Overseeing treatment plans
  • Ensuring HIPAA and Medicare compliance
  • Approving marketing materials

While many tasks can be delegated, the medical director is frequently held responsible when a patient suffers an adverse event or the entity’s regulatory compliance is called into question.1,2 The defense of malpractice claims and medical board actions can also become complicated when a physician’s dual roles as medical director and attending physician become intertwined. Finally, physicians serving as medical directors may be surprised to discover that their professional liability policy excludes medical director duties, and that separate coverage is required. Therefore, it is important to ensure medical liability coverage prior to accepting a medical director position.

Case One: Overextension

Allegations against the family physician (FP)/medical director in the following case ranged from failure to hire qualified staff to failure to adequately assess the patient’s medications. The FP’s reliance on allegedly negligent staff to carry out the patient’s treatment plan complicated his defense. If he had not been the medical director responsible for qualified staff, then the otherwise clear-cut staff negligence as a cause of the patient’s injuries could have benefited his defense. However, as the medical director, the FP was ultimately responsible for the efficacy of the staff. His misunderstanding of the extent of his duties in both roles put patients at risk and complicated his defense.


In his roles as attending physician and medical director, the FP was primarily responsible for the injuries the patient suffered while she was a resident at a skilled nursing facility.

Case File

Business Arrangements

An FP contracted with a company that provided medical directors, attending physicians, and advanced practice clinicians to skilled nursing facilities (SNFs). Through the company, the FP was medical director at four different SNFs. In his role as medical director, the FP attended quarterly coordination of care and quality assurance meetings. The FP and the nurse practitioners (NPs) he employed also took on the primary care role for patients whose primary care physicians were not attending them at the SNF.

Among the four SNFs, the FP, and his two NPs provided primary medical care for approximately 150 patients. The FP visited each facility approximately one to three times per week. When he arrived, he checked in with the administrator and director of nursing, who told him whether there were any patient complaints or any patients he needed to see. He generally did not initiate patient examinations.

Adverse Event

A formerly healthy, cognitively intact 65-year-old man was involved in a major car accident in which he suffered a broken hip and femur, rib fractures, and a brain injury. He was admitted to the hospital. Following a lengthy hospitalization, he spent time in a rehabilitation facility and was ultimately admitted to an SNF on July 1, 2012. Because he did not have a primary care physician, he was assigned to the SNF medical director, the FP. The patient’s discharge summary from the rehabilitation facility noted he had a “rash” on his buttocks. Agitation associated with his brain injury was being treated with anti-psychotics and benzodiazepines.

On July 7, the patient was examined by the FP. During the examination, the FP failed to identify any skin breakdown and instead noted the patient’s skin to have good turgor. Medications for agitation and combativeness were increased. By July 8, nursing notes indicated the patient was minimally responsive when awakened and had developed pressure ulcers on the coccyx, buttock and heels.

The FP next examined the patient on July 28. He ordered labs, discussions with a dietician, and nutrition supplementation—presumably because the patient had lost 10 pounds since admission. (His reasoning was not documented.) Consultation with the wound care physician was ordered, although the FP would later testify that he had never examined the patient’s wounds. Consultation with physical therapy was also ordered, although the patient’s somnolence made physical therapy impossible. The FP noted that the patient was progressing satisfactorily and was continuing toward the goal to transition him home.

On August 15, the patient was transferred to the hospital with multiple stage IV pressure ulcers on the coccyx and buttocks and other wounds. He was diagnosed with osteomyelitis, and after a month of intensive treatment in the hospital, he died.

The patient’s family filed a claim against the FP (in both his role as the medical director and attending physician) and the various other administrators and staff involved in the patient’s care, alleging:

  • Negligent hiring of untrained and unqualified individuals to care for patients
  • Failure to order and coordinate wound care in a timely manner
  • Failure to adequately supervise staff
  • Failure to create treatment policies and protocols
  • Failure to properly assess the effect medications were having on the patient’s cognition
  • Failure to prevent malnutrition and dehydration
  • Failure to transfer the patient to a higher level of care when he developed life-threatening pressure ulcers, malnutrition, and dehydration

Elder abuse was also alleged against the FP, for which the plaintiffs were seeking punitive damages.


Although the FP believed he should be dismissed from the lawsuit because he had little involvement in the patient’s care, the plaintiff’s attorney viewed him as the target defendant with the greatest level of malpractice exposure. The defense team believed any jury would have a difficult time parsing the care provided by each defendant and evaluating the quality of that defendant’s care without thinking about the overall care and outcome. With the plaintiff’s attorney focusing on the FP, his documentation and supportive testimony from other members of the patient’s healthcare team would be extremely important to the success of his defense. Unfortunately, there was neither.

Issues Regarding the FP’s Medical Care of the Patient

A major problem underlying this claim was the physician’s misunderstanding of his roles and responsibilities. He thought of his roles as very narrow. However, he had signed a medical director contract that gave him a broad set of responsibilities. He also viewed his responsibilities as the patient’s attending physician more narrowly than what experts considered safe or standard of care.

Defense experts were unable to support the FP’s care of the patient for a variety of reasons. They were critical of the sparse and seemingly inconsistent documentation. For example, the FP consistently described the patient as making satisfactory progress, even though the original plan was for a 30-day stay, at the conclusion of which the patient would be able to return home. Defense experts were also critical of the FP’s complete reliance on the wound care specialists and nurses to manage the treatment of the patient, and failure to review the nursing and wound care team’s documentation of the care they were providing. They believed the documentation evinced an overall inattentiveness to the patient’s ongoing medical problems. One expert described the FP’s treatment as “cursory.”

Because the physician had very little independent recollection of the patient or discussions he might have had with the nursing staff or administrators regarding the patient, there was little evidence to defend against the malpractice and elder abuse allegations.

Issues Regarding the FP’s Medical Directorship

The FP’s minimal involvement in the administration of the SNF became problematic during litigation. He had signed a medical director contract that made him responsible for overseeing nursing staff, ensuring that nursing care was appropriate, and ensuring that treatment plans were carried out. The fact that he was charged with overseeing nursing care made it difficult for him to criticize the nurses for not providing adequate care to his patient. Furthermore, although the FP’s agreement with the SNF indicated he would, he did not make staffing decisions and did not know how the decisions were made. This became an issue when it was discovered that LPNs (not RNs, as required by state law) had been handling the patient’s assessments and care plans. Also, the wound care physician attending the patient had no training in wound care, though he was employed by a group that advertised as wound care specialists. There had been no effort on the part of the administration to confirm the qualifications or verify the credentials of the wound care physicians and staff with which it contracted.

Elder Abuse Allegations

In addition to alleging malpractice, the plaintiffs alleged elder abuse and made a claim for punitive damages. Unlike malpractice, elder abuse judgments are usually not restricted by tort reform measures (e.g., caps on damages for pain and suffering).3 The patient’s condition when he entered the hospital provided convincing evidence of neglect, which supported the elder abuse allegations.

Medical Liability Insurance Issues

In this case, the FP had not made arrangements to have his medical directorships endorsed onto his medical malpractice policy, which specifically excluded liability arising from “administrative or management services provided by an insured to another organization not owned by you unless specifically endorsed on to this policy.” The FP’s policy also excluded indemnity for punitive damage awards.

The case was settled on behalf of the FP and the other defendants.

Case Two: Off-Site Supervision

Although they might not look like medical facilities, medical spas are subject to the same rules and regulations as physicians’ offices when medical procedures are being performed. In the following case, a dermatologist was influenced by the laser company’s and aesthetician’s assurances of the propriety and low risk of serving as the medical spa’s medical director.


The medical director’s failure to adequately supervise an aesthetician providing laser treatments contributed to the patient’s injuries.

Case File

Business Arrangements

An aesthetician wanted to add laser treatments to her existing business. She offered a dermatologist a monthly fee to serve as the medical director and “supervising physician” at her spa. State law required a “supervising physician” for the type of laser treatments she planned to provide. The state law allowed for indirect supervision (i.e., the physician had to be available by telecommunication, but was not required to be on site). The aesthetician told the dermatologist there was no expectation for her to be on site or provide laser treatment or any other spa treatment. The laser equipment company would provide the aesthetician the training she required to be credentialed to operate the laser. The aesthetician would retain her own professional liability insurance. The dermatologist signed the agreement, assuming everything proposed was legal and low risk.

Adverse Event

Within the first year of the arrangement, an incident occurred in which a patient sustained second- and third-degree burns to her arms during laser hair removal. The laser settings were too high because the aesthetician had failed to take into account the patient’s tan. Within a year the spa closed and the aesthetician filed for bankruptcy. Shortly thereafter, the dermatologist and aesthetician were sued for malpractice. The patient claimed the dermatologist’s supervision of the aesthetician was negligent.


Defense experts who reviewed this case believed the aesthetician was negligent. However, they questioned how the dermatologist could supervise the aesthetician when the physician had no training in laser hair removal. They noted that the state practice statute required supervising physicians to be knowledgeable in the laser procedures they were supervising. Experts were also critical of the dermatologist’s lack of oversight of patient treatment plans and non-involvement in treatment protocols.

Experts believed the plaintiff’s attorney would cite as standard of care evidence the “American Academy of Dermatology Position Statement on Medical Spa Standards of Practice,” which holds medical directors responsible for treatment delegated to non-physician personnel in a medical spa and advises against off-site supervision. The position statement also holds medical directors responsible for performing initial assessments, preparing written treatment plans, obtaining informed consent, creating and maintaining medical records, reviewing and signing patient charts, and obtaining appropriate training in all of the medical and aesthetic services performed in the medical spa.4

The case was settled.

Medical Liability Risk Management Recommendations

Whether serving as a medical director of a medical spa, SNF, or some other type of healthcare practice, it is important to understand the legal and regulatory issues associated with the position that may or may not also apply to your role as an attending physician.

General Medical Director Duties

Laws in the practice jurisdiction and the terms of the medical directorship contract make every medical directorship unique. Consider the following recommendations:4,5,6

  • Promulgate and enforce policies and protocols that ensure:
    • Appropriate initial assessments of each patient completed by an individual with an appropriate level of training
    • Written treatment plans for each patient completed by an individual with an appropriate level of training
    • Appropriate and documented informed consent from each patient
    • Creation and maintenance of medical records in accordance with local, state, and federal laws and regulations, which would require periodic review of patient medical records to ensure compliance
    • Immediate notification of the medical director about adverse events
    • Appropriate processes for screening, hiring and credentialing all licensed staff and clinicians
    • Appropriate clinician and staff instruction, training, and licensure for every procedure they perform, including continuing education in appropriate subject matter, which would require ready availability of documentation of training and education
    • Appropriate emergency and treatment sequelae response
    • Appropriate delegation and supervision for all procedures
  • Take a leadership role in quality management and risk management activities.
  • Monitor clinicians and staff to ensure adherence to policies and protocols.

Physician Duties Potentially Associated with Medical Directorship

It may be difficult to separate physician duties from medical director duties. Consider the following recommendations:2

  • If you are serving as the medical director and attending physician at a facility, treat the patient within the standard of care of a physician.
  • If your medical directorship contract also designates you as the “supervising physician,” follow the supervision laws in your jurisdiction.
  • Do not supervise or delegate medical tasks outside of your own specialty. For example, an OB/GYN who has no training or experience in laser sun spot removal should not supervise or delegate to an aesthetician, even if the aesthetician is qualified to operate the equipment.
  • Only delegate a task to or supervise individuals consistent with their practice scope. For example, a cosmetic surgeon who is qualified to use a laser should not task another staff person who is not trained, certified, or licensed (as indicated) to use that equipment.

Due Diligence before Signing a Medical Director Contract

Before signing a medical directorship contract, consider the following recommendations:2

  • Consult with a healthcare attorney.
  • Ensure that the proposed business arrangement does not violate state or federal laws.
    • Comply with corporate practice of medicine laws in your jurisdiction.
    • Ensure that your payment arrangements are in compliance with fee-splitting laws.
  • Understand your duties under the contract and consider whether you can appropriately perform those duties; for example:
    • Are the procedures you will be supervising within your specialty?
    • Do you have time in your schedule to fulfill the contractual obligations?
    • Is the entity staffed adequately for you to appropriately delegate clinical or administrative duties?
  • Consult with the underwriting department of your medical malpractice insurance carrier to ensure that the medical directorship and the procedures and services the entity is offering are covered by your policy.
    • NORCAL Group policyholders should contact their agent or call 844.4.NORCAL for assistance.
  • Check the Better Business Bureau, healthcare rating websites such as Healthgrades, and the medical board to gauge the compliance, liability risk, and goodwill of the practice.

This content from Claims Rx


1. Nick Hernandez. “The Responsibilities and Risks of Being a Medical Director.” The Doctor Weighs In. 6/23/2016. (accessed 7/26/2019)

2. Renee E. Coover, JD. “Want to be a Medical Director at a Medical Spa? Beware.” Modern Aesthetics. March/April 2014. (accessed 7/26/2019)

3. S.Y. Tan, MD, JD. “Lawsuits Against Skilled Nursing Facilities.” Family Practice News. 5/12/2015. (accessed 7/26/2019) – registration required

4. “Protecting Patient Safety & Ensuring Quality Care: State Regulation of Medical Spa Facilities.” American Academy of Dermatology Association. 5/7/2011. (accessed 7/26/2019)

5. Michael R. Lowe, JD. “Medical Spas – Legal Considerations for Physicians.” Lowe & Evander, P.A.. (resource not available online at the time of publication)

6. Frederick D. Greene, et al. “‘So, Doctor, Can You Fix This?’ A Case Involving a Medical Spa.” Strategic Management of Health Care Organizations. John Wiley & Sons. 2012. 717-741. (accessed 7/26/2019)

Filed under: Case Study, Practice Manager, Business of Medicine



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