Paying a Med Spa Medical Director: Fees, 1099 vs. W-2 and Booking

Every med spa that delegates injectables has a physician somewhere in the chain, and that physician gets paid. How the fee is set, which entity pays it, whether the director is a contractor or an employee, and which 1099 box it lands in are four separate questions that most owners answer once, the month the practice opens, and never revisit.

This guide covers the accounting side. Whether the arrangement is permitted in your state is a question for a health-care attorney.

What a medical director does, and why the fee exists

In most states, neurotoxin and filler injections, laser treatments and similar procedures are the practice of medicine. AmSpa's guidance is that medical treatments in a med spa should be performed by medical professionals under the supervision of a physician, that most states do not require the supervising doctor on site but do impose distance and documentation rules, and that a patient should be offered an exam by a doctor, NP or PA before treatment, the industry's good faith exam. Details vary by state.

The medical director is the physician whose license and judgment sit behind that delegation: written protocols, chart and adverse-event review, performing or supervising good faith exams, and availability to the injectors. That is what the fee buys. A director who signs and is never heard from again is a liability problem no accounting entry fixes.

Fee structures, fee-splitting and fair market value

Four structures cover nearly every agreement.

The percentage model is the one attorneys object to. New York's misconduct statute bars a physician from letting anyone other than a partner, employee or professional associate share in professional fees, and expressly includes arrangements where payment for space, equipment or personnel is a percentage of, or depends on, the licensee's receipts (Education Law §6530(19)). Florida lists any commission, kickback or split-fee arrangement for patient referrals among the grounds for physician discipline (s. 458.331(1)(i)). A director fee that rises and falls with collections invites that reading, which is why the attorneys we work with steer clients to a retainer, a per-exam fee or hourly billing.

Whatever the structure, write down why the number is what it is. A one-page fair-market-value memo lists the duties, the hours they take in a typical month, the hourly rate the fee implies, and how that compares with the director's earnings elsewhere. It protects the deduction and is the first document a buyer or a licensing board asks for; refresh it when volume changes, since a retainer set for one injector does not support three.

Who pays the director when there is an MSO

If the practice runs through a professional entity and a management services organization, the director is a clinical cost of the professional entity: the agreement is with the PC, the PC's account pays the invoice, and the PC's books carry the expense. An MSO that contracts with and pays the physician blurs the line the structure exists to draw.

When the MSO pays anyway, usually because it holds the cash, book an intercompany recharge: the MSO debits Due from PC, the PC debits Medical Director Fees and credits Due to MSO, and the PC settles it with the next management fee payment. Our MSO and professional-entity accounting guide covers the reconciliation. Paying from the PC's account settles who files the 1099.

Contractor or employee

Most medical directors are independent contractors on the facts: the physician has a practice of their own, often directs several med spas, sets their own schedule, carries their own malpractice policy and bills under their own name or professional corporation. The IRS common-law test weighs behavioral control, financial control and the type of relationship, and no single factor decides it; either side can ask for a ruling on Form SS-8, which takes six months or more.

The exception is the director who is really staff: fixed hours in your clinic every week, no other clients, your equipment, your protocols, your benefits. That physician is a part-time W-2 employee, the fee is wages, and the practice owes employer Social Security and Medicare tax at 7.65%, FUTA and state unemployment tax; see med spa employee vs. independent contractor.

Insurance and reimbursements

The agreement should say who carries malpractice coverage; a contractor director normally carries their own. If the practice buys a policy covering the director, pay the carrier directly and book insurance expense. If the director accounts to you with receipts for a cost the agreement says you cover, book that expense, not director fees; the 1099 instructions exclude reimbursements a contractor accounts for. If the agreement grosses up the fee instead, the whole amount is fee and reportable.

Which 1099 form, and the corporation trap

For payments made in 2026, both Form 1099-NEC and Form 1099-MISC use a $2,000 threshold, up from $600, indexed from 2027. The IRS instructions define 1099-MISC box 6, medical and health care payments, as payments of $2,000 or more in the course of your trade or business to each physician or other provider of medical or health care services, and state that the corporation exemption does not apply to medical or health care services provided by corporations, including professional corporations. Form 1099-NEC box 1a covers nonemployee service fees generally, including fees paid by one professional to another.

The instructions do not name medical directors; here is how we decide. A physician paid to supervise delegated treatment, write protocols and perform or review good faith exams is being paid for medical oversight, so in our practice the fee goes in 1099-MISC box 6, whether the invoice comes from the doctor personally or from Dr. Smith, M.D., P.A. If the director has no clinical function and the agreement is pure administrative consulting, 1099-NEC box 1a fits, but in a med spa that is rare.

The trap is the corporation. Owners skip the form because the invoice says P.A. or P.C. and someone told them corporations do not get 1099s. For medical payments that is wrong, and the result is a missed return, not a misfiled one. Collect a Form W-9 before the first payment. Recipient copies of both forms are due January 31, a Sunday in 2027, so February 1, 2027 for 2026 payments; the 1099-NEC is filed with the IRS the same day, the 1099-MISC by February 28 on paper (March 1, 2027, also a Sunday) or March 31 electronically. Card payments are reported by the processor on a 1099-K, not by you; the 1099-NEC filing guide has the mechanics.

How to book the fee

Put the director on its own line under cost of services, next to injector compensation, not in general and administrative expense: the fee exists because treatments are delivered, a buyer wants all clinical labor in one place, and treatment-level margin is wrong without it. In our med spa chart of accounts the account is Medical Director Fees.

Accrue it every month. The invoice usually arrives in the first week of the following month, so at month-end debit Medical Director Fees and credit Accrued Liabilities for the retainer plus exams times rate, and reverse the accrual when the bill is entered. Take the exam count from the EMR, not the director's invoice, and reconcile the two; a director billing 75 exams against 60 in your system needs a conversation in month one.

A worked example: $3,000 a month plus $25 per exam

Take an illustrative single-location practice with $100,000 of monthly treatment revenue, $1.2 million a year. It pays its director, who bills through a professional association, a $3,000 monthly retainer plus $25 per good faith exam, and the EMR shows 60 exams in October, realistic against AmSpa's 2024 average of 245 visits a month, 73% of them repeat patients.

The October 31 entry is a $4,500 debit to Medical Director Fees and a credit to Accrued Liabilities, reversed November 5 when the invoice is entered and paid from the PC's account. The 1099 follows cash, not accruals: if the arrangement began in January 2026 and each month is paid on the 5th of the next, the 2026 Form 1099-MISC box 6 shows eleven payments, $49,500, and December's $4,500 lands on the 2027 form; the books still show $54,000, and the difference is the year-end accrual.

Had the same physician been a part-time employee, $54,000 of wages would carry $4,131 of employer Social Security and Medicare tax, $42 of FUTA and, for a new Florida employer at 2.7% on the first $7,000, $189 of reemployment tax: $58,362 before workers' compensation, about 8% more than the contractor fee.

Common mistakes

A percentage-of-collections fee that nobody ran past an attorney. No 1099 because the director bills through a P.A. The fee buried in professional fees next to the attorney, so treatment margin looks better than it is. No accrual, so months alternate between zero and two retainers. Exam counts never checked against the EMR. The MSO paying the physician with no recharge to the PC. A retainer never revisited after the second and third injectors joined.

When to get help

If the fee has been hitting the books as a lump of professional fees, the fix is small: a new account, an accrual, a W-9 and a note on which form the director gets. If the fee is a percentage, or the MSO has been paying the doctor, talk to a health-care attorney first and have the accountant rebuild the entries once the agreement is corrected. If you are drafting a new agreement, have the accountant read the fee clause first.

Balance Partners is a CPA-led accounting and tax practice in Tampa that keeps the books, payroll and 1099 filings for medical aesthetics practices nationwide. See our med spa accounting and tax services and payroll, W-2 and 1099 support pages, or request a 20-minute fit call and bring the agreement.

Jenny Gao, CPA, EA

Founder of Balance Partners. Florida-licensed CPA and IRS Enrolled Agent with more than a decade of accounting and tax experience. Jenny writes and reviews every guide on this site. About Jenny

This article is general educational information for U.S. business owners and is not accounting, tax, legal, payroll or financial advice for your situation. Rules change and vary by entity, state and facts. Balance Partners, LLC does not provide audit, review or other attest services. Last reviewed October 16, 2026.