Understanding downstream service profitability generated by dermatology faculty in an academic medical center: a key driver to promotion of access-to-care

Abstract

Hiring new dermatology faculty at academic medical centers (AMCs) can be a difficult process. Academic dermatology departments, however, must have the financial freedom to nimbly respond to the needs of their community. To determine the downstream revenue and profitability produced by dermatology faculty, a retrospective review of charges and expenses downstream of professional services was performed to assess dermatology faculty and nurse practitioners from January 2019 to December 2020 at a single AMC in the southern United States. The downstream revenue per dermatology faculty was calculated using institutional data based on the number of services performed and the exact compensation per service. When this was not possible, the Medicare Allowable Charge was used to estimate the compensation for the service provided. Revenue was included from internal referrals to dermatopathology, Mohs surgery and repairs, chemistry and microbiology labs, radiology, and phototherapy. Profitability was calculated using institutional cost data to estimate the expense of each additional unit of services performed. The most valuable source of downstream income was dermatopathology services, which generated $85,395/provider in 2019 and $102,746/provider in 2020. Mohs surgery was also a significant source of downstream revenue contributing $92,715 in 2019 and $96,599 in 2020. Repairs after Mohs surgery internal referrals generated $30,036 in 2019 and $36,507 in 2020. The total contributions of chemistry and microbiology labs, radiology, and phototherapy were considerable but less impactful overall. The total downstream revenue calculated from these services for 2019 was $228,304/provider and $255,549 in 2020. The total downstream profitability for these services was calculated to be $112,597/provider in 2019 and $92,344/provider in 2020. In conclusion, faculty of academic dermatology departments produces a great deal more revenue and profitability for AMCs than the sum of their professional charges.

Keywords: Academic dermatology; Downstream income; Fee for service; Managed care; Value-based care.