Todd is the Chief Executive Officer of VitalSkin Dermatology, a world-class dermatology and aesthetics practice management firm., Mr. Petersen has over two decades of C-suite experience, including CEO, COO, CFO, and CHRO roles. He is a growth expert with a passion for new entrepreneurial challenges, revenue growth, improving operations, and building teams and partnerships.
Dermatology Practices Face Flat or Declining Reimbursement Rates
As we talk to physicians across the country, revenue pressure is consistently identified as one of the most challenging aspects of running an independent physician practice today. For many independent physician practices, revenue pressure is caused by flat or declining Medicare and health insurance company reimbursement rates.
For those smaller independent physician practices who elected early on to forgo necessary investments to comply with Medicare’s Merit-based Incentive Payment System (MIPS), the 5% penalty for 2018 will show up in this year’s 2020 reimbursement and the 7% penalty from 2019 will show up in next year’s 2021 reimbursement. Because Medicare reimbursement can make up between 30- and 60% of a dermatology practice’s revenue, a 5% penalty means the practice is likely going to face declining total practice revenue for the same amount of production.
In the last two decades, the health insurance industry has largely consolidated. Meanwhile, consolidation in the physician space has lagged behind. As a result, most dermatology practices lack the scale to negotiate with large health insurance companies on an even playing field. This means dermatology practices tend to sign standard contracts that have favorable terms for the health insurance companies. These terms set year-over-year reimbursement rates and allow the insurance company to set billing, coding and utilization management rules. Consequently, nominal year-over-year increases can be largely offset by increased denial rates and tighter billing and coding rules.
Mounting pressure across all business lines requires dermatology practices to reconsider their approach to Medicare MIPS involvement and health insurance contracting strategies.