Dermatologists Use Production Pay, Expand Cosmetic, Cancer Care Services

Physician Compensation Report, Sept 27, 2000

RELATED ARTICLE: Dermatology at a Glance

Pay range (MGMA 25th and 75th percentiles, 1998): $158,O00 to $242,000. (Note: MGMA will release 1999 data in late September.)

Pay direction: Many partners in physician-owned groups and clinicians paid on production are seeing fairly sizable income jumps as both major sides of practice -- skin cancer and cosmetic -- show rapid rise in procedures. Many dermatologists are extremely busy.

Number (nationwide): Approx. 8,200. (Current figure based on American Academy of Dermatology data; AAD has 7,800 members, and claims to have 95% membership among dermatologists.)

Entries to field per year: 700 entrants (AAD has about 650 new members this year).

What dermatologists do/subspecialties: Deal with all skin conditions, including cancer, acne, hair loss, etc. Serve rapidly growing cosmetic market, including removal of hair, varicose veins, tattoos and scars. Considerable in-office MOHS surgery, which is layered removal of melanomas to remove cancer.

Common reimbursement methods: Discounted fee-for-service is top method, but capitation is also fairly common. Monthly pmpm cap rates for one California practice range from as low as eight cents to as high as 46 cents for non-seniors. Precise figure depends on: scope of practice contracted for, and any procedures "carved out" of dermatologists' responsibility; who is payer (medical group or insurer); how payer is paid (by production or by capitation); and other factors. FFS reimbursement for MOHS surgery is much higher than for most other procedures. Cap rates are more than twice as high for seniors as non-seniors because of prevalence of skin cancer. Most cosmetic work is self-pay.

Common group structures: Full array of groups, from physician-owned single specialty to multispecialty owned by hospitals, academic centers or physicians.

Professional society: American Academy of Dermatology in Schaumburg, III. (847) 330-0230; www.aad.org.

RELATED ARTICLE: Pay Plan Mixes Production, Time Worked and Equal Shares

The compensation system for the three partners Rehlen Bartlow & Goodman MDs, a single specialty dermatology practice in Southern California, is based primarily on days worked, but also has important elements of production and equal shares.

As explained by administrator Glenn Lawson, CMPE, here's how the plan works.

Step 1: Add up each partner's "man-days." This is primarily the number of days each has worked in a month, and varies widely because of vacations and other factors. There are also two internally developed upward adjustments, the larger one for conducting in-office skin cancer surgery, and the smaller one for performing hospital consults. A physician working 20 days in a month and performing a lot of surgery can end up with 27 man-days.

Step 2: Separately, take the month's collections and subtract overhead. This includes the pay for employed physicians, but not partner pay draws.

Step 3: Calculate a dollar value for each manday as follows. Every quarter, add the practice profit as determined in Step 2, and divide it by the partners' total of man-days as tabulated in Step 1. Man-day values in recent quarters have been around $2,000.