Dermatology is a rapidly evolving specialty, with innovations in treatments, diagnostics, and cosmetic procedures. However, despite the growth, practices face a significant hurdle in the form of claim rejections. Industry research shows that approximately 14% of vclaims are rejected—a rate higher than many other specialties. These rejections can slow cash flow, strain staff resources, and negatively impact the patient experience.
Understanding the reasons behind these rejections and adopting strategic billing practices is essential for dermatology clinics to ensure financial sustainability and efficient operations. This article breaks down the common reasons for dermatology claim rejections and offers practical, actionable strategies to reduce denials and increase reimbursements.
Lack of Medical Necessity Documentation
One of the leading causes of claim denial in dermatology is the failure to adequately document medical necessity. Payers often reject claims for procedures such as mole removal or skin tag excision if there’s no clear documentation indicating the medical need.
What to Do: Ensure your physicians document detailed notes explaining why a procedure is medically required. Include symptoms, clinical findings, prior treatments attempted, and outcomes.
Incorrect Use of Modifier Codes
Dermatology billing frequently involves complex procedures that require precise coding with modifiers to indicate circumstances that affect payment. Incorrect use or omission of these modifiers can lead to automatic claim denials.
What to Do: Invest in ongoing training for your billing team and regularly review CMS guidelines. Use coding audits to ensure that modifiers such as -59 (distinct procedural service) are correctly applied.
Unbundling of Procedures
Some dermatology services are bundled under a single CPT code, meaning they are not reimbursed separately. Billing these as individual procedures—known as unbundling—can result in denials or audits.
What to Do: Use the Correct Coding Initiative (CCI) edits to determine which services can and cannot be billed together. Billing software with CCI logic can flag unbundling errors before submission.
Outdated or Incorrect CPT Codes
Using outdated CPT codes or selecting the wrong codes is a common issue in dermatology billing. With changes to CPT and HCPCS codes annually, failing to stay updated can lead to claim denials.
What to Do: Ensure that your team accesses the most current codebooks or electronic coding tools. Schedule quarterly updates and review coding changes every January when CMS releases updates.
Failure to Verify Insurance and Coverage
Insurance eligibility issues remain a top contributor to claim rejections. Dermatology practices often treat both medical and cosmetic conditions, and cosmetic services are not covered by most insurance plans.
What to Do: Verify coverage and benefits before every patient visit. Clearly explain to patients what is covered and what will be their out-of-pocket responsibility.
Poor Coordination with Credentialing
A provider not being properly credentialed with an insurance payer can result in outright denial of claims. Credentialing errors often go unnoticed until payments stop coming in.
What to Do: Track credentialing timelines closely and maintain an updated database. Outsourcing credentialing can also reduce administrative delays.
Incorrect Patient Demographics
Something as simple as a misspelled name, incorrect date of birth, or wrong insurance ID number can cause a claim to bounce back.
What to Do: Use digital intake forms with automatic validation to reduce human error. Have front-desk staff review insurance cards and patient info thoroughly during every visit.
Delayed Claim Submission
Each insurance provider has a claim submission window (e.g., 90 or 120 days from the date of service). Missing that deadline can result in non-payment.
What to Do: Set up automated alerts in your billing system to track submission timelines. Submit claims daily to avoid bottlenecks.
Pre-Authorization Requirements
Certain dermatological procedures—especially biologics, laser treatments, or expensive pathology services—require pre-authorization. Skipping this step can lead to total rejection.
What to Do: Develop a checklist of procedures that require prior approval by insurance companies. Train staff to secure authorizations ahead of time.
Lack of Follow-Up on Denied Claims
Often, denied claims are never followed up on, resulting in lost revenue. Practices without a structured denial management process see greater long-term financial losses.
What to Do: Assign a dedicated team or billing partner to manage denials. Track rejections, identify patterns, and re-submit or appeal denials promptly.
Insufficient Dermatology Coding Expertise
Unlike general practice, dermatology billing requires knowledge of both medical and cosmetic coding, including skin biopsies, Mohs surgery, and laser therapy. Non-specialized coders may miscode or undercode services.
What to Do: Hire certified coders with experience in dermatology or outsource to a firm specializing in your field.
Incomplete or Inaccurate Chart Notes
Claims are often denied if the provider’s documentation does not align with the CPT codes used. Payers review clinical notes to determine if the service was justified.
What to Do: Conduct regular chart audits to ensure alignment between documentation and billing codes.
Failure to Differentiate Between Cosmetic and Medical Services
Dermatology often straddles both cosmetic and medical realms. Payers need clear documentation to distinguish services that are medically necessary from those that are elective.
What to Do: Always code and document based on medical necessity. Maintain separate documentation for cosmetic services and obtain patient consent for self-pay services.
Lack of Patient Communication Regarding Charges
When patients are unaware of what is covered or what they owe, they may delay or refuse to pay their bills, creating cash flow issues.
What to Do: Use clear, transparent, and friendly patient billing statements. Offer estimates before service and explain financial responsibility.
Inadequate Use of Technology
Relying on manual processes for eligibility checks, claim submission, and follow-ups can result in avoidable errors and missed revenue opportunities.
What to Do: Implement billing software or RCM platforms with automation features like eligibility verification, claim scrubbing, and denial tracking.
Not Keeping Up with Payer Policy Changes
Insurance policies and payer rules frequently change, including coverage guidelines, coding edits, and documentation requirements. Practices that don’t keep up face increasing denials.
What to Do: Subscribe to payer newsletters and updates. Hold monthly staff meetings to review and adapt to changes in policies.
Submitting Claims with Wrong POS Codes
Place of Service (POS) codes must accurately reflect where the service was rendered—clinic, hospital, telehealth, etc. Mismatched codes can trigger rejections.
What to Do: Train staff to correctly assign POS codes and regularly audit for accuracy.
Lack of Clear Appeals Process
Many practices don’t appeal denied claims due to time constraints or lack of know-how. This results in lost revenue that could otherwise be recovered.
What to Do: Establish a streamlined appeal process with templates and trained staff. Track appeal success rates and refine strategies.
Not Tracking Common Denial Reasons
If you don’t know what’s causing your denials, you can’t fix the problem. Many practices lack denial analytics.
What to Do: Use RCM analytics software or reporting tools to track trends in rejections. Create a denial reason dashboard and train teams accordingly.
Underutilization of Preventive Coding Strategies
Dermatology practices can prevent many rejections with pre-submission checks, chart reviews, and coding audits.
What to Do: Invest in preventive strategies rather than reactive ones. Conduct quarterly reviews of coding accuracy and claim patterns.
Conclusion
The 14% dermatology claim rejection rate is not just a number—it represents revenue lost, patients frustrated, and staff overwhelmed. But with the right systems, training, and tools in place, dermatology practices can dramatically reduce denials, improve reimbursements, and ensure a healthier revenue cycle.
Stay informed, stay prepared, and prioritize billing excellence—because your financial success depends on it.
