Learn why net collection ratio is one of the first key performance indicators we evaluate, how it reflects the overall health of your revenue cycle, and what dermatology practices should review before year-end.
Half the Year Is Gone. How Healthy Is Your Revenue Cycle?
With half the year already behind us, now is a good time for dermatology practices to take an honest look at their financial performance. Most practices review patient volume, provider productivity, and collections, but one question often doesn’t get asked:
How much revenue is quietly slipping through the cracks?
A full schedule and busy providers don’t automatically lead to strong financial performance. We’ve worked with dermatology practices that appeared to be doing everything right, yet collections still fell short of expectations. More often than not, the problem wasn’t a lack of patients. It was revenue getting lost somewhere between the patient visit and the final payment.
Those losses rarely come from a single issue. More often, they’re the result of smaller problems that build over time. A payer underpays a procedure, and the discrepancy goes unnoticed. A claim is denied because documentation is incomplete. Charges aren’t entered promptly. Accounts receivable continue to age. Individually, each issue may seem small. Together, they can materially impact cash flow, profitability, and ultimately the percentage of revenue a practice collects.
After nearly 30 years of working exclusively with dermatology practices, we’ve found that these patterns are remarkably consistent. Whether a practice has one provider or several locations across multiple states, the underlying challenges in dermatology billing are often the same.
The middle of the year offers something practices don’t have in December: time. Time to identify problems, improve operational processes, strengthen revenue cycle performance, and maximize collections before year-end.
One of the first things we evaluate during a mid-year revenue cycle review is whether a practice is collecting everything it has earned. That starts with reviewing key performance indicators like net collection ratio, but it also means evaluating the operational processes that influence financial performance. Some of what you review may confirm your revenue cycle is performing as expected. Other findings may uncover opportunities that have been quietly affecting your practice for months.
Net Collection Ratio: One of the Most Important Revenue Cycle KPIs
One of the first key performance indicators we evaluate when reviewing a dermatology practice is the net collection ratio. Simply put, it helps answer one important question: Is the practice collecting the revenue it has earned? While every practice receives claim denials, denial rates alone don’t determine the overall health of the revenue cycle. What matters is how effectively the practice resolves those issues, identifies underlying problems, and ultimately collects the revenue it has earned.
If a practice’s net collection ratio is lower than expected, one of the first reports we review is the denial report. We want to understand what’s being denied and, more importantly, why. It doesn’t take long for patterns to emerge. One payer may repeatedly deny a particular procedure. Modifier 25 may require closer review. Prior authorizations may be falling through the cracks. Once those patterns become clear, it’s much easier to correct the process instead of continuing to address the same problems.
That’s where many practices lose time and money. Correcting a denied claim may recover the payment, but it doesn’t stop the next claim from being denied for the same reason. Until the underlying issue is addressed, the work simply repeats itself.
CMS regularly publishes educational resources to help providers improve documentation, coding accuracy, and clean claim submission. The goal is straightforward: reduce preventable billing errors before a claim is ever submitted. We see the value of that approach every day. It’s far more efficient to prevent a denial than to spend weeks correcting it after reimbursement has already been delayed.
There’s another cost that often gets overlooked. Every denied claim requires someone to stop what they’re doing and work the account. A billing specialist researches the denial. A provider may be asked to review documentation or answer a coding question. Clinical staff may need to locate records or supporting information. Someone has to correct the claim, submit an appeal if necessary, and continue following the account until payment is received. By the time the process is finished, several people may have spent time on a claim that could have been paid correctly the first time.
Resolving a denied claim can require additional staff time, administrative work, and follow-up before reimbursement is received.
That’s why we encourage practices to look beyond the denial itself. The goal isn’t simply to resolve the denial. It’s to identify why it happened, correct the underlying issue, and improve overall revenue cycle performance.
It’s important to remember that every dermatology practice receives claim denials. They’re a normal part of the reimbursement process and, by themselves, aren’t an indication of revenue cycle performance. What ultimately matters is whether the practice collects the revenue it has earned. That’s why we place so much emphasis on net collection ratio. It reflects the combined effectiveness of documentation, coding, billing, follow-up, payment posting, and collections. Industry organizations such as MGMA and HBMA publish net collection ratio benchmarks that many practices use to evaluate financial performance. At IEBC, our goal is always to maximize each practice’s collectible revenue based on its unique payer mix, contractual adjustments, and operational workflows.
How Net Collection Ratio Impacts Practices of Every Size
Like many KPIs, net collection ratio is easy to overlook until you see what even a small difference can mean financially. A percentage point or two may not seem significant on paper, but over the course of a year, it can represent a meaningful opportunity to improve financial performance.
Consider a smaller dermatology practice collecting approximately $1 million each year. That might be a solo dermatologist with a handful of medical assistants, front office staff, and either an in-house biller or an outsourced billing company. It’s the type of practice where everyone wears multiple hats and owners keep a close eye on expenses because there isn’t much room for waste.
For many independent practices, even modest improvements in revenue cycle performance can create opportunities to reinvest in the business. Additional collections may help fund another employee, new equipment, office improvements, or future growth. As practices become larger and more complex, those opportunities often become even more significant.
Solo Dermatology Practice Collecting Approximately $1 Million Annually
For a solo practice, recovering even a portion of that revenue can make a meaningful difference. It may provide flexibility to hire additional staff, invest in new technology, purchase equipment, or simply improve cash flow heading into the final months of the year.
That is why mid-year reviews matter. With six months still remaining in the year, practices have time to identify denial trends, address underlying issues, and improve revenue cycle performance before year-end.
Growing Dermatology Practice Collecting Approximately $3 Million Annually
Now consider a practice collecting around $3 million a year. That might be a two or three-provider practice with a larger clinical team, additional front office staff, a practice administrator, and dedicated billing support. As practices grow, so does the complexity of managing the revenue cycle. More providers mean more claims, more payer interactions, and more opportunities for small issues to become expensive ones if they aren’t identified early.
This is where we’ve consistently seen practices underestimate the financial impact of seemingly minor operational issues.
As patient volume increases, it’s also common for responsibilities to become more specialized. Front office staff focus on registration and insurance verification. Clinical teams support providers throughout the day. Billing teams concentrate on claims and collections. While that division of responsibility creates efficiency, it can also make it more difficult to recognize when a process breaks down. A small issue at the front desk, in clinical documentation, or during claim submission may not become apparent until it begins affecting overall revenue cycle performance weeks later.
Looking at the calendar, there’s still time to change the outcome. That’s why we encourage practices to perform a mid-year revenue cycle review rather than waiting until year-end. Evaluating key performance indicators, identifying operational issues, and making process improvements now gives your team time to strengthen financial performance over the remainder of the year.
For many growing practices, even modest improvements in revenue cycle performance can influence hiring decisions, equipment purchases, technology investments, or expansion plans. Identifying opportunities to strengthen the revenue cycle now gives leadership an opportunity to improve financial performance while there’s still time to benefit from those improvements before the end of the year.
Multi-Provider Dermatology Group Collecting $5 Million or More
Larger dermatology organizations often operate across multiple locations with four or more providers, supervisors, centralized billing personnel, dedicated management teams, and increasingly complex payer relationships.
At this level, small problems rarely stay small. A documentation issue affecting one provider today can affect five providers tomorrow. A registration error repeated across multiple locations can quickly affect hundreds of claims before the underlying issue is identified and corrected.
As organizations grow, maintaining consistency becomes just as important as managing volume. Providers may document differently, front office teams may follow different registration processes, and payer requirements can vary across locations and states. Without standardized workflows and ongoing oversight, even small inconsistencies can affect thousands of claims over the course of a year.
At this level, even modest improvements in revenue cycle performance can produce a meaningful financial return. Improving collections, reducing preventable rework, and strengthening operational processes can create opportunities to reinvest in staffing, technology, additional providers, or future growth initiatives.
Larger practices usually have access to more reporting, but reports by themselves don’t solve problems. They simply tell you where to look. The real value comes from reviewing that information consistently, identifying trends, and making changes before small issues begin affecting collections.
One thing has become clear over the years: practice size doesn’t determine financial performance. Some of the strongest revenue cycles we’ve seen belong to smaller practices that consistently monitor their revenue cycle key performance indicators (KPIs), evaluate operational performance, and address issues before they become larger financial problems.
Regardless of practice size, the goal is the same: identify problems early, understand why they’re happening, and make improvements before they begin affecting financial performance. That’s where a comprehensive revenue cycle review becomes one of the most valuable tools available to practice leadership.
As dermatology practices grow, increasing provider count, claim volume, locations, and payer complexity make consistent revenue cycle oversight increasingly important.
Using Your Revenue Cycle Data to Improve Financial Performance
When evaluating a dermatology practice’s revenue cycle, we don’t rely on a single report or KPI. We begin by reviewing the data as a whole to understand where opportunities for improvement may exist. One of the most valuable tools in that process is the denial report because it often reveals the underlying issues affecting overall revenue cycle performance.
Why?
A denial report is more than a list of unpaid claims. It’s one of the quickest ways to identify patterns that may be affecting reimbursement. The same denial reason appearing month after month usually points to a process that deserves a closer look.
Industry organizations such as the Healthcare Billing and Management Association (HBMA) and the Medical Group Management Association (MGMA) publish revenue cycle benchmarks that many healthcare organizations use to evaluate financial performance. Those benchmarks provide valuable context, but they are only part of the picture. Every dermatology practice has a unique payer mix, contractual adjustments, procedural volume, and operational workflow. That’s why we believe the most meaningful insights come from understanding the data behind the benchmarks rather than relying on any single benchmark alone.
A recurring denial for modifier usage may indicate a documentation issue. Frequent authorization denials may point to front-end workflow gaps. Medical necessity denials could suggest opportunities for provider education or coding review. When the same denial reason appears month after month, the denial itself is no longer the problem. It is simply the symptom.
When reviewing a denial report, don’t stop at the denial reason. Look for trends. Is one payer responsible for a disproportionate number of denials? Are the same CPT codes appearing repeatedly? Is one provider or one location generating more denials than the rest of the practice? Those patterns often reveal where additional training, workflow improvements, or coding reviews can have the greatest impact.
Denial reports can help identify recurring patterns in documentation, coding, authorizations, payer activity, and workflows that may warrant closer review.
The American Academy of Dermatology regularly provides guidance on coding, documentation, and payer policy changes, while CMS continues to publish educational resources aimed at improving claim accuracy and reducing preventable billing errors. For dermatology practices, staying current with that guidance can help reduce avoidable denials and improve reimbursement.
Practices that review denial trends only after reimbursement has slowed are often reacting to issues that have been developing for months. Practices that consistently monitor their revenue cycle KPIs—including net collection ratio, first-pass claim acceptance, accounts receivable aging, and denial trends—are in a much stronger position to identify issues early and improve financial performance before those issues begin affecting cash flow.
The question isn’t whether your practice receives denials.
The question is whether those denials are teaching you something about your revenue cycle that you’re currently missing.
A mid-year revenue review doesn’t have to uncover major problems to be worthwhile. Sometimes identifying one recurring denial trend or correcting one workflow issue is enough to improve cash flow, reduce staff rework, and strengthen financial performance during the second half of the year. The key is taking the time to look before another six months pass.
Every dermatology practice receives claim denials. The difference is how those denials are used. When viewed alongside key performance indicators and other revenue cycle data, they become valuable insights that can help strengthen operational processes, improve collections, and support long-term financial performance.
If you’d like an experienced dermatology billing and revenue cycle management team to evaluate your practice’s revenue cycle performance, IEBC can help identify opportunities that often go unnoticed and provide practical recommendations to strengthen your financial results.
