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Dermatology Reimbursement
Reimbursement trends are vital to the profitable operation of dermatology practices nationwide. With looming changes in the healthcare system anticipated in the near future, the reimbursement of certain dermatology services and procedures could be potentially cut. The value of a dermatology practice is largely dependent on a consistent revenue stream, making reimbursement and revenue cycle management especially important for potential sellers. Additionally, those physicians contemplating buying a dermatology practice should be equally aware of future trends to ensure ongoing success of practices which they purchase.

A Changing Specialty
Some of the confusion surrounding Dermatology reimbursement is attributable to misconceptions which Congress, MedPAC and the Centers for Medicare and Medicaid Services (CMS) hold regarding dermatology and the changing direction of the field. As the prevalence of skin cancer has increased, dermatology has refocused itself as a surgical specialty. Over the past decade and a half, skin biopsies escalated by 76%, destructions by 64% and Mohs surgery by over 400%. Medicare and Ambulatory Medical Care Service databases revealed that the amount of skin cancer-related procedures rose over 75% from 1.2 million in 1992 to 2.1 million in 2006.

CPT and Dermatology Reimbursement
Both the practice of dermatology and management of dermatology clinics have been in a state of change. Policies regarding CPT coding and reimbursements are still being reformed. In the last few years, significant CPT coding changes have been made to clarify procedures. Because private insurance carriers bundled distinct codes, disregarded modifiers and misapplied Multiple Procedure Reduction (MPR), efforts were taken to remove any ambiguity in CPT. Reports should be detailed enough for another dermatologist or coder to understand the medical necessity of the procedures performed.

Strategies to Increase Revenue
In light of declining reimbursements, there are several strategies dermatologists can use to increase their revenues and grow their practices:

1. Be flexible and adapt—not only react—to the market. While certain areas may be more profitable than others, an immediate realignment of emphases is not advisable. The mix of services a practice offers should depend on the style of the dermatologist. Profit strategy should follow this framework.
2. Recognize opportunities. Different geographical locations offer different opportunities: Patients on the coasts present more sun-related problems, while there is a general dearth of dermatologists in central and northern regions. Emerging technology (e.g. EHR or teledermatology) also provides new paths for practitioners. Each dermatologist should consider what he or she wants in a practice.
3. A third of dermatology practices include a Physician Assistant or Nurse Practitioner on staff (American Academy of Dermatology Association). Dermatologists may wish to consider adding a PA or NP to their practice personnel. Many extenders have expanded their dermatology-specific training and can be a great addition to a practice, in lieu of employing an associate physician.

Operational Improvements
Although structural investments are necessary for long-term growth, operational improvements can lower waste and better patient experience. Potential areas for changes include: third party billing and collections, patient collections and patient communication.

1. Third party billing and collections: It is estimated that the average practice gives up $35 per claim. An analysis of processes should be performed to identify steps where revenue is lost.
2. Patient collections: Because debt becomes more uncollectible as time passes, co-pays or card numbers of Health Savings Accounts (HSAs) should be collected at the time of service.
3. Patient communication: Introduce the use of an online interface where patients can schedule appointments, pay bills, request prescription refills, ask medical questions, etc. This lowers demands on staff and allows patients to access the practice 24/7.

While the impact of changes related to health reform cannot be specifically anticipated for dermatology reimbursement, there a number of steps which dermatologists can actively take to prepare for future change. Practices which will continue to flourish are those which can combine effective practice management techniques, adapt to changes in coding and billing, and build efficiencies in care delivery.

Christopher Lee is a research analyst with Medical Practice Appraisers (MPA) and Transition Consultants. He specializes in the research and analysis of reimbursement trends, the private practice environment, and medical economics. Mr. Lee has contributed to multiple projects involving the appraisal of dermatology practices (including medical dermatology, Mohs surgical, and cosmetic practices).