Managing a dermatology clinic requires juggling multiple tasks — from patient care and medical procedures to handling operational logistics. One critical area often overlooked is accounts receivable (AR) management for dermatology. While AR reviews are crucial for maintaining cash flow, they can also impose a significant administrative burden on dermatology clinics.
With the increasing complexity of insurance claims, patient payment responsibilities, and regulatory requirements, the process of tracking, reviewing, and following up on unpaid bills is becoming more time-consuming than ever. For many dermatology practices, the administrative load of AR reviews adds stress, reduces efficiency, and may even affect the quality of patient care. In this article, we’ll explore why AR reviews contribute to the administrative burden and what clinics can do to alleviate this.
What is AR Management, and why should Dermatology Clinics Care?
AR management is the systematic tracking of unpaid invoices from patients, insurance companies, or other payers. In dermatology clinics, these receivables stem from a variety of services, such as routine skin checks, biopsies, cosmetic procedures, and more. Once services are rendered, clinics bill payers or patients, but receiving the full payment on time is not always guaranteed.
AR reviews help clinics monitor outstanding payments, identify delinquent accounts, and follow up on overdue bills. Clinics typically categorize unpaid accounts by aging — that is, how long they’ve been outstanding (e.g., 30, 60, or 90+ days). Regular AR reviews are crucial for ensuring cash flow stability, reducing write-offs, and improving overall financial health. However, the process is time-intensive, particularly for clinics without robust revenue cycle management (RCM) systems.
Why Are AR Reviews So Time-Consuming?
There are several reasons why AR reviews add an administrative burden to dermatology clinics:
1.Complex Billing and Coding Requirements
Dermatology billing can be highly complex. The range of services offered, such as skin cancer screenings, Mohs surgery, laser treatments, and aesthetic procedures, involves detailed and ever-changing medical codes. Dermatology practices must use correct Current Procedural Terminology (CPT) and International Classification of Diseases (ICD-10) codes when submitting claims to payers. Mistakes in coding, such as using the wrong code or omitting necessary documentation, can result in claim denials or underpayments, which prolong the AR process.
As a result, clinic staff may need to dedicate significant time to identifying coding errors, correcting them, and resubmitting claims. This additional work can strain administrative teams, especially in smaller clinics with limited resources.
2.High Claim Denial Rates
Denied claims are a common issue in dermatology, with many claims being rejected due to coding errors, insufficient documentation, or lack of medical necessity. According to industry reports, the average claim denial rate for medical practices can be as high as 5-10%, and dermatology practices are no exception.
Handling denied claims requires staff to manually review each denial, determine the reason, and take corrective action. This process may involve retrieving medical records, resubmitting claims, or appealing the denial. Reworking denied claims is not only time-consuming but also delays payment collection, thereby increasing the number of accounts in AR and the overall workload for staff.
3.Patient Payment Responsibilities
As high-deductible health plans (HDHPs) become more common, dermatology clinics are increasingly relying on patient payments for a significant portion of their revenue. This shift adds complexity to AR management. Unlike insurance companies, which have structured systems for payment processing, patients may delay or fail to pay their bills for various reasons, such as confusion about their responsibilities or financial constraints.
Tracking down unpaid patient balances often requires multiple follow-ups, including phone calls, emails, and mailed invoices. Clinics may also need to offer payment plans or work with third-party collections agencies, further increasing the administrative load.
4.Aging Accounts and Revenue Leakage
One of the greatest risks associated with delayed AR reviews is the potential for revenue leakage. As accounts age, the likelihood of successful collection diminishes. For example, after 90 days, the chances of collecting an unpaid invoice drop significantly. If a clinic is not reviewing its AR regularly, old accounts may go unnoticed, leading to missed revenue opportunities.
Aging accounts also create additional administrative work, as older accounts often require more aggressive collection tactics or may need to be written off as bad debt, both of which require substantial time and resources to manage.
5.Lack of Automation
Many smaller dermatology clinics rely on manual processes or outdated systems for AR management. Manually reviewing claims, following up on outstanding balances, and generating AR reports can be slow and error-prone. Without modern RCM software, clinic staff may spend hours on tasks that could otherwise be automated, further contributing to the administrative burden.
6.Regulatory Compliance
Keeping up with constantly evolving healthcare regulations adds yet another layer of complexity to AR reviews. Dermatology clinics must ensure that their billing practices comply with the latest insurance guidelines, Medicare and Medicaid requirements, and industry coding standards. Failure to stay compliant can result in claim denials, audits, and even fines, all of which add to the administrative workload.
7.Time Taken Away from Patient Care
Perhaps the most significant impact of the administrative burden from AR reviews is the time and energy diverted from patient care. In dermatology clinics, where the focus is on providing high-quality skin care, devoting too much time to administrative tasks can affect the patient experience. Physicians and staff may become overwhelmed by the administrative demands, which can lead to burnout, reduced efficiency, and even lower patient satisfaction.
Poor AR Management Can be Disastrous for Clinics
When AR reviews are not conducted regularly or efficiently, the consequences can be severe. Some of the problems with poor AR management include:
1.Cash Flow Problems
A slow or poorly managed AR process can result in cash flow issues, making it difficult for clinics to cover their operational expenses. Staff salaries, medical supplies, rent, and other overhead costs must be paid regularly, regardless of whether payments have been collected. If receivables are delayed or overlooked, clinics may face financial strain, which can affect their ability to invest in new equipment, hire additional staff, or expand services.
2.Increased Write-Offs
When accounts are not followed up on in a timely manner, clinics may have to write off unpaid balances as bad debt. While some level of bad debt is inevitable, poor AR management can lead to higher-than-necessary write-offs, reducing overall profitability.
3.Negative Patient Experiences
Patients who receive confusing or incorrect bills may feel frustrated or dissatisfied with their experience. Additionally, aggressive collection tactics for overdue accounts can damage the patient-provider relationship. Effective AR management includes clear communication with patients regarding their financial responsibilities, timely billing, and offering flexible payment options when necessary.
4.Burnout and Reduced Efficiency
The administrative burden of AR reviews can lead to staff burnout, especially if they are overwhelmed with other responsibilities. Burnout can reduce productivity, lead to errors, and ultimately impact the quality of care provided to patients. Clinics that do not address the administrative load risk reduced efficiency, which can have long-term consequences for both revenue and patient satisfaction.
Reducing the Administrative Burden of AR Management for Dermatology Clinics
Given the challenges associated with AR management, how can dermatology clinics reduce the administrative burden? Here are some strategies to consider:
1.Invest in Advanced RCM Software
Modern RCM software can automate many aspects of AR management, including claim submission, denial tracking, patient billing, and payment reminders. Automation reduces the need for manual intervention, allowing staff to focus on higher-value tasks. Additionally, RCM software provides real-time visibility into outstanding accounts, enabling clinics to stay on top of receivables more effectively.
2.Outsource Revenue Cycle Management
For clinics struggling to manage their AR internally, outsourcing revenue cycle management to a specialized provider can be a viable solution. Outsourcing allows dermatology clinics to offload the administrative burden of billing, coding, claim follow-up, and collections to experts who have the technology and expertise to streamline the process. RCM Workshop, for example, specializes in managing AR for healthcare providers, helping clinics reduce denials, improve collections, and enhance cash flow.
3.Enhance Staff Training
Investing in staff training can help improve the accuracy and efficiency of the AR process. Training staff on proper coding practices, denial management, and patient communication can reduce the occurrence of errors and ensure that receivables are followed up on in a timely manner. A well-trained team is better equipped to handle the complexities of dermatology billing and reduce the administrative load associated with AR reviews.
4.Implement a Proactive Patient Communication Strategy
Clear and proactive communication with patients can help reduce the time spent chasing down unpaid balances. Providing patients with detailed, easy-to-understand billing statements and offering online payment options can encourage timely payments. Additionally, sending friendly reminders for outstanding balances can prompt patients to pay their bills without the need for aggressive collection tactics.
5.Schedule Regular AR Reviews
Establish a routine for conducting AR reviews, rather than letting them pile up over time. Scheduling regular reviews, such as weekly or bi-weekly, ensures that outstanding accounts are identified early and followed up on promptly. By staying on top of receivables, clinics can reduce the aging of accounts and minimize the administrative burden.
In a competitive healthcare environment, effective AR management is not just a financial necessity but a critical component of operational efficiency and long-term success. By addressing the administrative challenges of AR, dermatology clinics can improve cash flow, reduce write-offs, and improve both staff and patient satisfaction.
