Several variables may be to blame for drop in practice revenues

Reimbursement

Payment for physicians' services has not been consistent year after year. In fact, it has declined. To pinpoint this culprit, you'll need to dig into a report displaying your top procedure codes and payment from your main insurance payers for each. Changes in the per-unit reimbursement can result from a multitude of factors. If a modifier is used with the code, or the code is used in a series, the payer could have made a pricing decision about its payment that impacts the reimbursement when used in these scenarios; the payer could have made a routine change in the fee schedule at the beginning of the calendar year; or a change in participation can move you from out-of-network to in-network rates. Because mistakes happen, furthermore, it pays to cross-match this report with your contracts to determine if a payer is adjudicating your claims at incorrect rates.

Even if your per-unit reimbursement hasn't seen a decline, the mix of payers your patients represent may benefit - or impair - your financial position. To evaluate a shift in your payer mix, pull two reports - one from the most current period, and then one from last year - displaying your payer mix as represented by the percentage of gross charges received by each payer. The high-level report your system may generate may need some further review if the categories are too general ("commercial" and "managed care"), so be prepared to dig deeper into these categories.

If your payer mix has slipped, even slightly, from a payer with higher-than-average reimbursement to one with lower-than-average, that could be your culprit. Remember, your payer mix is often out of your control; consider the impact, for example, of a major employer in your area switching its employees from one plan to another.

Coding

The number of patients recorded on your appointment book may not correlate to collections simply as a result of how you code each encounter. A dermatologist/cosmetic surgeon who is an astute coder - defined as someone who appropriately provides a service, but knows both how to document and code for it - can easily generate 10 percent more per day than a physician who is ignorant about coding.

Even a small change, such as appropriately coding for consultations instead of declaring every encounter an office visit, can exact significant financial rewards. Pull several days' worth of charge tickets from last year, and compare your choice of codes to a set of tickets from the current period.

New patients

The often-overlooked factor of a decline in collections, particularly for new dermatology/cosmetic surgery practices, is the change from billing encounters as "new" to "established." Depending on the level of the code, a new patient visit or consultation can generate up to 30 percent more in revenue per encounter than an established patient.

Most consider the variance justified - new patients do indeed take longer than established - but the fact is that a schedule of 30 new patients represents a lot more money than a schedule of 30 established patients. Scan your appointment records or charge tickets from last year and the current period to determine if the shift from new to established visits may be the culprit.