What Exactly Is a Dermatology Fee Schedule?
Think of your fee schedule as the “menu of prices” for all the services you offer your patients. But unlike a restaurant menu, it’s not just a list of what you charge. It’s a complex framework that dictates how much you’re actually reimbursed by different insurance payers for each CPT (Current Procedural Terminology) code – those universal codes that represent every service, from a simple skin biopsy (CPT 11100) to a complex Mohs micrographic surgery (CPT 17311-17315) or an office visit (CPT 99213). Each CPT code has a specific rate assigned to it by various insurance companies, including Medicare, Medicaid, and private commercial payers like Aetna, Blue Cross Blue Shield, and UnitedHealthcare. These rates aren’t uniform. They vary based on:
- The specific CPT code: A common E/M (Evaluation and Management) code for a follow-up visit will have a different rate than a complex surgical procedure.
- The payer: Each insurance company has its own negotiated rates with your practice.
- Geographic location: Reimbursement rates often differ based on where your practice is located due to factors like cost of living and practice expenses. This is why Medicare’s Physician Fee Schedule, for instance, has geographic adjustments.
- Modifiers: Special codes that can be added to CPT codes to indicate unique circumstances (e.g., bilateral procedures, multiple procedures, or professional vs. technical components of a service) and impact reimbursement.
Why Your Fee Schedule Isn’t a “Set It and Forget It” Item
Many dermatology practices set their fee schedule years ago and rarely revisit it. The assumption is often, “If we’re busy and claims are being paid, we must be doing fine.” But this passive approach is precisely how those hidden revenue leaks occur. Fee schedules need regular, active management because the healthcare landscape is constantly shifting:
- Annual Medicare Updates: Every year, the Centers for Medicare & Medicaid Services (CMS) updates the Medicare Physician Fee Schedule (PFS). These changes can include adjustments to CPT code values, new codes, deleted codes, and changes to geographic practice cost indices. These updates directly impact your Medicare reimbursement and often influence private payer rates as well. If you’re not aware of these changes, you could be underbilling for services.
- Payer Contract Renegotiations: Your contracts with private insurance companies aren’t set in stone forever. They often have expiration dates or clauses that allow for renegotiation. If you’re not actively reviewing and renegotiating these contracts based on current market rates and your practice’s unique value, you’re likely losing out.
- New Technologies and Procedures: Dermatology is an evolving field. New treatments, diagnostic tools, and cosmetic procedures emerge regularly. Ensuring these are properly coded and priced in your fee schedule, and that your payers are contracted to reimburse for them, is crucial.
- Changes in Practice Costs: The cost of running your dermatology practice – staff salaries, rent, supplies, technology – doesn’t stay static. Your fee schedule should reflect these realities to maintain profitability.
The Invisible Drain: How Outdated Fee Schedules Steal Your Profit
When your fee schedule isn’t optimized, it creates several “silent drains” on your practice’s revenue:
1. Underpayment for Services You’re Already Providing
This is the most direct loss. If your fee schedule rates are too low compared to what payers are actually willing to pay or compared to what similar practices in your area are receiving, you’re leaving money on the table for every single service. This is particularly true for high-volume dermatology procedures like biopsies, excisions, and common E/M visits.
2. Increased Claim Denials and Rejections
An unoptimized fee schedule often goes hand-in-hand with billing errors. If your fee schedule doesn’t align with payer policies, or if your team isn’t up-to-date on correct coding practices and modifiers, you’ll see more denials. These denials cost time and resources to appeal and often result in lost revenue.
3. Missed Opportunities for New Services
If you introduce a new dermatology service but don’t properly add it to your fee schedule or understand how to bill for it under existing payer contracts, you might hesitate to offer it widely, missing a valuable revenue stream and opportunity to better serve your patients.
4. Operational Inefficiencies and Staff Burnout
When your practice is constantly battling underpayments and denials, your administrative staff spends valuable time chasing down payments, resubmitting claims, and appealing rejections. This takes away from time they could spend on patient care, scheduling, and other essential tasks, leading to burnout and decreased productivity. To learn more about streamlining your practice’s financial health, consider exploring resources on effective revenue cycle management.
Your DIY Fee Schedule Health Check: A Starting Point for Dermatologists
You don’t need to be a billing expert to start understanding if your fee schedule needs attention. Here’s a practical, step-by-step guide to conduct a preliminary self-assessment:
Step 1: Gather Your Data
Pull reports from your practice management system for the last 6-12 months. You’ll want to look at:
- All claims submitted: Your total charges, payments received, and adjustment amounts.
- Payer-specific data: How much each insurance company has paid you for specific CPT codes.
- High-volume CPT codes: Identify the top 10-20 services you perform most frequently. These are your biggest opportunities for optimization. For dermatologists, this might include CPT codes for office visits (99203, 99213), biopsies (11100), excisions (e.g., 11400-11600 series), destruction of lesions (e.g., 17000, 17110), and potentially Mohs surgery (17311-17315).
Step 2: Benchmark Your Rates
Once you have your high-volume CPT codes and the average reimbursement you’re receiving from different payers, compare them to benchmarks:
- Medicare Physician Fee Schedule (PFS): The CMS website is publicly accessible and provides detailed information on national and geographically adjusted Medicare rates. While private payers rarely pay exactly Medicare rates, they often use Medicare as a baseline for their negotiations.
- Regional Averages: Look for industry data or consult with peers (within legal and ethical boundaries) to get a sense of what other dermatology practices in your area are charging and being reimbursed for similar services.
- Your Own Charges vs. Payments: For your top CPT codes, calculate your average payment as a percentage of your total charge for that code. If you’re consistently receiving 30% or 40% of your listed charge, it’s a clear indicator that your charges might be too high (leading to excessive write-offs) or your reimbursement is too low.
Step 3: Calculate Your Potential Revenue Gap
This is where the “aha moment” often happens. For your top 10-20 high-volume CPT codes:
- Identify your average reimbursement rate from your major payers (e.g., Medicare, your top 3 private payers).
- Compare it to the benchmark rates you found.
- Calculate the difference per procedure.
- Multiply that difference by the volume of times you performed that procedure in a month or year.
Even a small difference per procedure can quickly add up to thousands of dollars when multiplied by your patient volume.
Decoding Denials: How Your Fee Schedule Impacts Billing Success
It might not seem obvious, but your fee schedule is closely linked to your denial rates. An unoptimized or misunderstood fee schedule can lead to specific types of denials:
- Medical Necessity Denials: If your documentation doesn’t clearly support the CPT code billed (which is linked to your fee schedule), or if a service is deemed “not medically necessary” by the payer, it will be denied. This isn’t directly a fee schedule problem, but understanding what payers will reimburse for within your fee schedule helps you prevent these.
- Incorrect Modifiers: Dermatology often uses specific modifiers (e.g., Modifier 25 for a separate E/M service on the same day as a procedure, or Modifier 59 for distinct procedural services). Incorrectly applying or missing these can lead to denials, even if the underlying CPT code is correct and on your fee schedule.
- Underpayments due to Contractual Allowances: Sometimes, a denial isn’t a “denial” in the traditional sense, but an underpayment because your fee schedule charges are so far off from the payer’s contracted rate that the system automatically adjusts it down. Regularly reviewing your old accounts receivable can reveal these subtle losses over time.
For comprehensive strategies on improving claim acceptance and payment, explore resources on effective denial management.
Beyond the DIY: When to Seek Expert Help
While a DIY health check is a crucial first step, a comprehensive fee schedule optimization goes much deeper. It involves:
- In-depth Payer Contract Analysis: Expert billing partners can meticulously review every clause in your payer contracts, identify opportunities for negotiation, and understand the nuances that impact your specific dermatology services.
- Proprietary Benchmarking Data: Specialized billing companies have access to vast databases of reimbursement rates across different specialties and regions, allowing for more precise and impactful comparisons than publicly available data.
- Strategic Negotiation: They can leverage data and industry insights to negotiate better rates with payers on your behalf, often achieving increases that individual practices struggle to secure alone.
- Ongoing Monitoring and Adjustment: Fee schedule optimization isn’t a one-time event. It requires continuous monitoring of industry changes, payer policies, and your practice’s performance to ensure you’re always maximizing your revenue.
The goal isn’t just to catch up on lost revenue, but to establish a proactive approach that ensures your dermatology practice is always compensated fairly for the invaluable care you provide. Partnering with a specialized medical billing company, like Derm Care Billing Consultants, that offers deep expertise in dermatology fee schedule analysis, can transform your financial outlook, allowing you to focus on what you do best: caring for your patients.
Frequently Asked Questions About Dermatology Fee Schedules
Q1: What’s the difference between my “charges” and my “reimbursement”?
Your charges are the prices you list for your services on your fee schedule. Your reimbursement (or payment) is the actual amount an insurance company pays you for those services after applying their negotiated rates, deductibles, co-pays, and co-insurance. The goal of fee schedule optimization is to ensure your charges are set strategically so that your reimbursement is maximized according to your payer contracts.
Q2: How often should I review my dermatology practice’s fee schedule?
Ideally, you should conduct a thorough review and analysis of your fee schedule at least annually, tied to the annual Medicare Physician Fee Schedule updates and your major payer contract cycles. However, it’s wise to continuously monitor your top-performing CPT codes and keep an eye on denial patterns throughout the year.
Q3: Do cosmetic dermatology procedures have fee schedules?
Yes, for services that are purely cosmetic and not covered by insurance, you still have a fee schedule – it’s your self-pay fee schedule. While insurance doesn’t typically reimburse for these, it’s important to have clear, competitive, and consistent pricing for all your services, including cosmetic ones. Some cosmetic procedures might also have CPT codes that could be billed if a medical necessity existed (e.g., laser treatment for a medical condition that also has a cosmetic benefit), making the distinction crucial.
Q4: Can I just increase all my fees across the board?
While you can increase your fees, simply raising them without a strategic analysis can be counterproductive. If your fees are too high, insurance companies will simply “write off” the difference to their contracted rates, leading to large contractual adjustments and potentially making your practice appear financially weaker than it is. If they are too low, you’re losing money. Optimization is about aligning your fees strategically with payer rates, market value, and your cost of doing business, rather than arbitrary increases.
Q5: What is RBRVS and how does it affect my dermatology fee schedule?
RBRVS stands for Resource-Based Relative Value Scale. It’s the system Medicare uses to determine how much to pay for physician services. It assigns relative value units (RVUs) to each CPT code based on physician work, practice expenses, and malpractice insurance. These RVUs are then multiplied by a conversion factor and adjusted for geographic location to arrive at the Medicare payment amount. Many private payers also use RBRVS as a basis for their own fee schedules and negotiations, so understanding it is crucial for maximizing your dermatology practice’s reimbursement.