Dermatology practices could see their Medicare payments drop by about 11% in 2027, according to the American Academy of Dermatology Association (AADA). And the cuts could grow to 15–18% as additional changes take effect in the years ahead.
The impact could be especially significant for skin cancer care. According to the AADA, roughly 90% of the top 50 procedure codes targeted for cuts are used regularly to diagnose and treat skin cancer.
CMS released its proposal in July, with a final rule expected in early November. If finalized, the changes would take effect January 1, 2027. And because most of the reductions come from changes to how Medicare values services, a Congressional adjustment to payment rates alone wouldn’t undo them.
In this second installment of our specialty-by-specialty series, we’ll break down what the proposed cuts mean for dermatology practices—plus what they can do now to protect revenue.
What CMS is proposing for 2027
The proposed 2027 Medicare cuts would affect dermatology payments in several ways. Here are three major changes to keep on your radar.
1. Changes to how Medicare accounts for practice expenses
CMS wants to change how it calculates the cost of running a medical practice, including expenses like rent, equipment and administrative staff. Specifically, it would phase out an adjustment used to estimate indirect practice expenses, removing half in 2027 and the rest in 2028. It would also change how those expenses are distributed across services.
The AADA estimates these changes alone could reduce dermatology payments by about 6% in 2027. And because CMS would limit how much certain payment values can change in a single year, some reductions could continue into 2028 and beyond.
2. Lower payments for office visits and procedures performed on the same day
This change could have a particularly big impact on dermatology practices, where it’s common to evaluate a suspicious skin lesion and perform a biopsy during the same appointment.
Under the proposal, when a patient receives a separately billable office visit and a qualifying procedure on the same day, Medicare would pay for the more expensive service in full and reduce payment for the other service by 50%. This applies when the same physician or physicians in the same practice perform the services.
An analysis by Milliman, commissioned by the AADA, estimates this change alone could reduce dermatology’s Medicare payments by about 7%, or roughly $291 million annually based on 2024 payment levels.
CMS has also asked for feedback on whether a smaller, 25% payment reduction would be more appropriate. The final rule will determine how much, if at all, these payments change.
3. A reduction in Medicare’s payment conversion factor
CMS also proposes lowering the conversion factor, which is the dollar amount used to calculate Medicare physician payments. For clinicians who aren’t qualifying alternative payment model participants, it would fall from $33.4009 to $32.8409, a 1.68% decrease.
Unlike some previous years, a Congressional adjustment to the conversion factor wouldn’t address most of dermatology’s proposed cuts. That’s because the larger reductions come from changes to how Medicare values individual services and practice expenses.
Why dermatology faces outsized exposure
Dermatology is tied with otolaryngology (ENT) for the largest proposed Medicare payment reduction of any specialty in 2027, according to CMS. And the way dermatologists deliver care makes the specialty particularly vulnerable.
For one, dermatology practices perform a high volume of office-based procedures, often during the same appointment as a skin exam. As outlined above, that means they could feel the effects of both the changes to practice expense calculations and the proposed cuts to same-day payments.
The proposed changes could also affect patient access. If more evaluations and procedures need to be scheduled as separate appointments, patients could face additional copays, extra trips to the office and longer waits for diagnosis or treatment.
Timely care is especially important for patients with suspected skin cancer, where early detection can make a major difference. Per the American Cancer Society, the five-year relative survival rate for melanoma is more than 99% when caught before it spreads, compared with about 36% once it reaches distant parts of the body.
These cuts would also come on top of years of reimbursement pressure. According to the American Medical Association, Medicare physician payments have already fallen 33% since 2001, after adjusting for inflation in practice costs. Lower payments in 2027 could put even more pressure on practices already working to balance rising costs with patient access.
There’s also concern that private insurers could follow Medicare’s lead. That’s happened before: In 2022, Horizon Blue Cross Blue Shield of New Jersey announced a 50% payment reduction for certain office visits performed alongside procedures. Anthem proposed a similar policy in 2017, though it ultimately reversed course. If more insurers adopt these cuts, the financial impact on dermatology practices could extend well beyond Medicare patients.
The one positive: Expanded coding for excimer laser treatment
Not every change coming in 2027 is a cut. Starting January 1, three CPT codes for excimer laser treatment (96920, 96921 and 96922) will be expanded to include inflammatory and autoimmune skin conditions beyond psoriasis. That could give dermatology practices more flexibility in how they code these treatments.
But there’s an important distinction: Expanded coding doesn’t automatically mean expanded Medicare coverage. Whether Medicare pays for treatment of a particular condition will still depend on its coverage policies.
5 operational levers practices can pull now
Dermatology practices can’t control Medicare reimbursement rates, but they can take steps to protect the revenue they already earn. Here are five areas to focus on:
- Collect more at check-in: Make it easy for patients to pay copays, outstanding balances and other amounts due before they leave the office. Collecting earlier means less time spent chasing payments later, helping practices capture more of the revenue they’re already owed.
- Verify insurance before the visit: Check eligibility, benefits and any referral or authorization requirements ahead of time. That gives staff a chance to resolve coverage issues before the patient arrives, and fewer preventable denials can help protect revenue when reimbursement is already tightening.
- Keep appointment schedules full: Make it easy for patients to cancel or reschedule, and use automated reminders, waitlists and outreach to fill openings quickly. Tracking no-shows and how quickly canceled appointments are filled can also help practices identify opportunities to see more patients without adding staff.
- Reduce repetitive administrative work: Look at how much time staff spend entering patient information, checking coverage, answering routine calls and following up on payments. Automating tasks and connecting workflows can free up staff for more complex needs. When reimbursement per visit falls, reducing the time and cost required to support each appointment can help protect margins.
- Review coding and documentation practices: Make sure teams are accurately coding high-volume dermatology procedures, including biopsies, lesion removals and destruction procedures. For example, biopsy codes depend on the technique used, while excision codes depend on lesion size and margins. Clear documentation and accurate coding can reduce avoidable denials, rework and missed reimbursement to make sure the practice receives everything it’s entitled to collect.
What high-performing dermatology practices are already doing
Many practices are already seeing results from these revenue-protecting efforts.
Today, 1 in 6 dermatology patient visits starts with Phreesia. The best-performing dermatology practices using the platform have reported improvements in several areas:
- $30,000 in monthly revenue recovered by filling open appointment slots
- 79% fewer no-shows, helping practices keep schedules full and avoid lost revenue
- 87% fewer calls and a 30% decrease in patient billing calls, freeing up staff time for other priorities
One dermatology group using Phreesia offers another example. By making it easier to fill canceled appointments and connect with patients, the practice:
- Accelerated more than 200 appointments per month
- Generated more than $30,000 in additional monthly revenue
- Saved more than 300 staff hours per month
- Achieved an appointment reminder response rate above 80%
These results don’t tell us exactly how much of the proposed Medicare cuts a practice could offset. But they do illustrate how improving day-to-day operations can help dermatology groups capture more revenue and reduce costs overall.
Frequently asked questions
CMS is proposing changes to how it calculates practice expenses, lower payments for certain office visits and procedures performed on the same day and a reduction in the Medicare payment conversion factor. If finalized, these changes could significantly reduce dermatology reimbursement starting January 1, 2027.
CMS projects a 9% reduction in dermatology payments from changes to RVUs alone. Including the proposed conversion factor decrease, the AADA estimates an overall reduction of about 11% in 2027 (potentially growing to 15–18% in subsequent years). A practice’s actual revenue loss will depend on its Medicare patient volume, services and payer mix.
Unlike in previous years, most of dermatology’s proposed cuts come from changes to how Medicare values services and calculates practice expenses, rather than the conversion factor. That means a Congressional adjustment to the conversion factor alone wouldn’t reverse most of the reductions.
Roughly 90% of the top 50 procedure codes targeted for cuts are routinely used in skin cancer care, like biopsies, excisions and lesion destruction. Practices could also receive less reimbursement when they perform an office visit and a qualifying procedure on the same day.
Start by reviewing how the proposed changes could affect your most common services. Then look for opportunities to collect patient payments earlier, verify insurance before appointments, fill canceled slots and reduce repetitive administrative work. Accurate coding and documentation can also help prevent avoidable denials and missed reimbursement.
Not necessarily. Congress could adjust Medicare’s conversion factor, as it has in previous years, but that wouldn’t address the proposed changes to relative value units and practice expense calculations. Practices should prepare for potential reimbursement reductions rather than relying on a Congressional fix.
Conclusion
As Medicare reimbursement tightens in 2027, how much revenue dermatology practices collect—and how efficiently they operate—will matter more than ever. As reimbursement tightens, practices that collect more of what they’re owed, keep schedules full and reduce administrative costs will be better positioned to protect their margins.
Next up: how the 2027 CMS proposals affect ENT practices.
