The Hidden Costs of Dermatology Practice: What Clinicians Should Know Before They Grow

Running a dermatology practice comes with obvious expenses, including payroll, supplies, equipment, and overhead. However, some of the costs with the greatest impact on a practice’s financial and operational health may be less visible. Time spent managing the business, employee turnover, inefficient collections, inadequate training, and investments that take months to generate a return can all affect whether a practice grows sustainably.

For clinicians considering practice ownership or taking on a larger leadership role, understanding these expenses early can help provide a more realistic picture of what it takes to operate a dermatology practice.

Dermatology Times spoke with Justin Love, MPAS, PA-C, executive director for PA administration, clinical instructor, and lead physician assistant in the Department of Dermatology at Loma Linda University Health, about the expenses clinicians may overlook, common financial challenges that emerge during periods of growth, and the metrics practice leaders should understand. Love also shared considerations for NPs and PAs interested in eventually pursuing practice ownership or taking on greater leadership responsibilities.

The Cost That Does Not Appear on a Balance Sheet

For Love, one of the biggest hidden costs of practice ownership is not necessarily a line item in a budget. It is the clinician’s own time and energy.

“Of all the ‘hidden’ costs, I think the most important is going to be a dermatology NP or PA’s time and energy,” Love said.

Launching and operating a practice comes with numerous direct expenses, but owners may attempt to reduce those expenses by assuming additional responsibilities themselves. Administrative work, staffing issues, training, billing concerns, and day-to-day operations can therefore become another form of cost.

To save money in one area, Love explained, the entrepreneur may ultimately absorb that expense through their own time.

Staffing Can Make or Break the Budget

When considering the expenses with the greatest effect on profitability, Love pointed to staffing costs and payer mix and billing or collections efficiency.

Staffing costs extend well beyond an employee’s salary. Recruiting, benefits, onboarding, training, and the time required for a new team member to become productive can all contribute to the true cost of maintaining a dermatology workforce.

Those expenses become even more significant when a practice struggles with retention.

“The inability to retain staff, and being known as an office that has high turnover, can be a sign of an unhealthy practice in general,” Love said. “It can be very costly to hire, train, orient, and provide any benefits to employees, and the financial cost can be great if a practice cannot retain staff.”

Cutting Staffing Costs Can Have Consequences

Reducing labor expenses may appear to be a straightforward way to control overhead, but Love cautioned that certain cost-cutting strategies can ultimately hurt efficiency and the patient experience.

He pointed to inadequate compensation or benefits for providers and support staff, overloading employees with responsibilities outside their skill sets, and failing to dedicate enough time to training and education.

These decisions may lower immediate expenses but can create other operational challenges, particularly if they contribute to burnout, turnover, workflow inefficiencies, or insufficiently trained staff.

Practices Should Expect Growing Pains

Another common financial mistake is assuming growth will immediately translate into additional revenue.

Love said practices should account for the “growing pains” associated with hiring employees or introducing new services. Adding a staff member, for example, creates upfront expenses before the practice begins benefiting from that employee’s work.

Practices should therefore establish realistic timelines for onboarding and training and determine when a new employee is expected to reach proficiency. If remediation is necessary, leaders should also have a defined process and timeline for addressing it.

The same concept applies to adding services. Equipment, supplies, training, and other expenses may arrive well before the service generates enough revenue to offset the investment.

Look Beyond the Latest Technology Trend

Dermatology practices have no shortage of opportunities to invest in new treatments, devices, and technologies. Love advised clinicians building a practice to distinguish between innovations with long-term clinical value and short-lived trends.

“I would avoid short-term trends and stick with items that have a long history while trying to build a practice,” he said. “Once you have an established patient base, then you can start exploring newer treatments [and] technology.”

Although a new treatment may initially attract patients, Love said evidence and consistency are particularly important when considering long-term investments.

“Newer trends can be fun and get patients in the door, but it’s the procedures [and] treatments that have good clinical trials [and] studies and consistent outcomes that keep patients coming back,” he said.

Training Is Part of the Investment

Purchasing a device or offering a new procedure is only part of the financial equation. Love emphasized that practices also need to account for the education necessary to use new treatments appropriately.

Providers should understand not only how to perform a procedure but also how to recognize and manage potential complications and adverse effects.

“In my opinion, that’s what separates good from great—the ability to handle situations when it doesn’t go as planned,” Love said.

Adequate training may require additional time and expense, but it is an important consideration when evaluating the true cost of introducing a new service.

The Numbers Dermatology Leaders Should Watch

Beyond individual expenses, Love identified several metrics that clinicians should understand when evaluating the financial health of a practice.

Among them are payer mix, reimbursement rates, collections compared with billed services, break-even volume, contribution margin, and the reimbursement associated with different procedures. He also recommended monitoring changes in health care laws and reimbursement policies that may affect practice operations.

Payer mix can be particularly important because patient volume alone does not determine revenue. The insurers represented within a practice and their respective reimbursement rates can influence how much the practice ultimately collects for the care it provides.

Similarly, comparing billed services with actual collections can give leaders a clearer picture of whether the practice is efficiently converting provided care into revenue.

Practice Ownership Starts With State Requirements

For PAs and NPs considering ownership, Love said the first step should come before establishing the business itself: understanding what is legally permitted within their state.

“Know what your state requires in order for you to be in business,” he said.

Requirements surrounding ownership, supervision, collaboration, and practice structure can vary depending on jurisdiction and professional license. Love encouraged clinicians to research applicable state laws and professional board requirements before forming a business entity or obtaining an employer identification number.

“Do your due diligence in researching this,” he said.

Know When to Bring in an Expert

Love’s second recommendation for prospective owners is straightforward: Find a good accountant.

“I will admit I don’t know tax law and how to file,” he said. “Most of us in the medical field don’t know this stuff.”

For clinicians accustomed to developing expertise in patient care, practice ownership can require recognizing when another professional’s expertise is necessary. Accounting, taxes, business formation, contracts, and regulatory requirements may require guidance beyond a clinician’s own training.

Building a Practice for the Long Term

Taken together, Love’s insights highlight how the economics of dermatology practice extend beyond revenue and traditional overhead. A practice may also be investing in clinician time, employee development, retention, training, regulatory compliance, and the period between spending money on growth and seeing a return.

For clinicians interested in ownership or leadership, understanding these less visible costs can help create more realistic expectations about the business side of dermatology. Rather than focusing solely on opportunities to generate revenue or reduce expenses, Love’s perspective emphasizes the importance of considering how financial decisions affect staff, workflows, patient care, and the practice’s ability to grow sustainably.

Editor’s note: The perspectives expressed in this article reflect the interviewee’s experiences and discussions with colleagues and are provided for informational purposes only. They should not be construed as business, financial, tax, or legal advice. Practice ownership and regulatory requirements vary by jurisdiction and individual circumstances. Clinicians should consult appropriate legal, accounting, and other professional advisers.

References

1. Medical Group Management Association. DataDive Cost and Revenue. MGMA. Accessed September 17, 2026. MGMA DataDive Cost and Revenue
2. American Medical Association. Private practice. AMA. Accessed September 17, 2026. AMA Private Practice Resources