Dermatology Medical Billing: Are You Leaving Money on the Table?

Four Key Metrics to Note in Your Healthcare Revenue Cycle Process

As a medical practice, your goal is to serve patients and provide the highest level of care possible. Yet you’re also in business to make money, and therefore need to drive revenue. But before adding new services, physicians, products or treatments to boost your income—all of which comes with increased overhead—it’s wise to try to maximize the revenue you’re already taking in. After all, practices are losing thousands, even millions, of dollars annually simply due to poor dermatology medical billing and collection performance.

So how do you know if you’re collecting what you’re owed? There are four medical billing key performance indicators that could help give you some peace of mind knowing you’re not leaving money on the table. Here are four essential dermatology billing performance metrics to note:

Net Collection Ratio: Maximize Your Reimbursement

The first key metric in analyzing your dermatology medical billing performance is net collection ratio, which measures your effectiveness in collecting all legitimate reimbursements.

While many providers think they’re doing just fine in this area, you could be leaving a significant amount of money on the table. This is largely due to a lack of understanding around contractual vs. non-contractual adjustments (e.g., bad debt, write-offs, timely filing, etc.). It begs the question, is your current dermatology billing process pursuing every dollar you’re entitled to?

Industry benchmarks indicate that a “healthy” net collection ratio for most practices is greater than 95 percent, with some top-performing practices achieving up to 99 percent.¹ This higher amount of collections adds up to a significant increase in cash flow and bottom-line results.

So how’s your practice doing? Do you have an accurate analysis of your net collection ratio?

Days in A/R: Don’t Sit on Your Accounts Receivable

The second key metric in analyzing your dermatology billing performance is days in accounts receivable (A/R), which measures how quickly you’re collecting your payments.

Often without realizing it, many providers have a significant amount of their collections tied up in A/R, which can dramatically impact your monthly cash flow—and overall bottom line. What is your average number of days in A/R? And equally important, do you know how much is sitting in the various age buckets (e.g., 0-30 days, 31-60 days, 61-90 days, and 120+ days)?

Yes, many practices have collections past due more than 120 days, which becomes very difficult to collect. Therefore, you must work to:

1. Keep medical claim rejection/denial rates down to a minimum
2. Track your A/R early and aggressively pursue payments owed (both private and third-party reimbursement)
3. Actively pursue patient collections at the time of service and through direct patient follow-up.

Industry benchmarks indicate that an “ideal” number of days in A/R (insurance only) for most practices is 45 days or less.¹

A lower number of days means you’re collecting your money from both the insurance plan and the patient even sooner. This faster payment adds up to much-improved cash flow and financial results.

Wouldn’t you rather be receiving that money instead of it sitting in A/R?

Denial Rate: Maximize Insurance Payments

The third key metric in analyzing your dermatology billing performance is denial rate, which measures the percentage of claims being denied by your insurance payors.

A higher denial rate reflects lack of payment for your work—and who wants that? There are many reasons an insurance carrier may deny a medical claim.Often times the denial is the result of inaccurate medical coding or claims submission. How confident are you that your current medical insurance billing process is keeping denials to a minimum and, more importantly, aggressively reworking and seeking payment on any denied claims?

The industry average/benchmark for denial rate is 5 to 10 percent.² A lower percentage means you’re receiving quicker and more accurate payment from third-party insurance carriers, ideally the first time through.

Don’t simply accept denied claims. Work to reduce them, seek every payment you’re entitled to and enjoy a better bottom line.

Rejection Rate: Get a Better First Pass Claim Acceptance Rate

The fourth key metric in analyzing your dermatology medical billing performance is rejection rate, which measures the percentage of claims being rejected by the clearinghouse or payor prior to processing and is typically related to input errors or invalid data. Denial rates can also impact your practice in the same fashion, especially when services performed are deemed unpayable.

A higher rejection rate indicates that your medical claims are being submitted incorrectly for the work you’ve performed. Ultimately, this results in delayed payments, as well as inefficiency and lost time by your medical billing staff—neither of which you can afford. Are your healthcare claims being submitted correctly the first time, or are you experiencing a high rejection rate?

The industry benchmark for rejection rate is 5 percent or less.³ A lower percentage means your claims are being processed in a timely, accurate manner and being paid accordingly, while eliminating your staff from having to follow up and touch (or submit) the claim more than once.

A solid medical insurance billing process will help keep your rejected claims to a minimum and help your cash flow remain steady.

Leverage Professional Medical Billing Services to Help Your Dermatology Billing

When it comes to managing your practice, it’s not about collecting every dollar; it’s about collecting every penny. Your business—and peace of mind—depend on it. By understanding your dermatology billing performance and supporting it with a strong revenue cycle process, your practice will be on its way to reaching its full revenue potential, instead of leaving money on the table. With advanced business operations services and technology, learn more about how to boost your practice to the next level.

1. Feltenberger GS, Gans DN; MGMA. Key Performance Indicators. Benchmarking Success: The Essential Guide for Medical Practice Managers, 2nd Edition. 2017:67-78.
2. American Academy of Family Physicians. Your Revenue Cycle: Denial Rate. Practice Management: Ownership, Administration, & Staffing. 2019. https://www.aafp.org/practice-management/administration/finances/denial-rate.html
3. American Academy of Family Physicians. Your Revenue Cycle: Denial Rate. 2020. https://www.aafp.org/practice-management/administration/finances/denial-rate.html